When the Internal Revenue Service (IRS) issues a notice of deficiency, the notice must be sent by certified or registered mail.

When taxpayers disagree with a tax determination, they may petition the United States Tax Court (Tax Court) for a judicial determination of the tax liability after receiving a notice of deficiency, without prior payment in full of the tax at issue. This section outlines procedures used by Technical Services' staff for preparing, reviewing, and issuing statutory notices of deficiency under IRC 6212, Notice of Deficiency.

This section does not include procedures for preparing, reviewing, and issuing notices of determination of worker classification under IRC 7436, Proceedings for Determination of Employment Status. Those procedures are contained in IRM 4.8.10, Notice of Employment Tax Determination Under IRC 7436.

The Director of SB/SE Examination Operations, Field Examination is the Executive responsible for providing policy and guidance to Technical Services employees.

Examination Area Directors in Examination Field with Technical Services territories have executive responsibilities for the preparation and issuance of Statutory Notices of Deficiency.

The following table lists the acronyms used throughout this IRM section:

Audience-The employees responsible for preparing the statutory notice of deficiency, or who require knowledge about the program, process, or activity.

Reviewer-The local reviewer assigned to complete the various required procedures for preparing the statutory notice of deficiency.

Defaults-Refers to notices of deficiency for which neither a petition, or agreement was received during the 90-day (or 150) period. The IRS is required to ensure the assessment of the deficiency on any defaulted notice of deficiency is made within the statutory period of assessment.

Notice of Deficiency-Waiver-Form 4089-B, Notice of Deficiency - Waiver, is included in the notice package to allow the taxpayer to agree to the assessment of the proposed deficiency on Form 4549, Report of Income Tax Examination Changes.

The following table lists the references used throughout this IRM section:

TS group managers are responsible to check ERCS in-Transit Report or weekly Tableau Pivot Tables for any new electronic incoming cases. Electronic cases are identified on these reports with an "E" . Managers can use CEAS View Cases to view the electronic case file.

Once the TS group manager identifies the ECF, they will e-mail the administrative support staff member or the tax examiner (TE) and direct them to assign the ERCS and RGS records to the:

The TE will use the RGS to perfect the Form 5344, if necessary, and use AMCLS to update AIMS to Appeals. The AIMS record must be updated to status code 81 on or close to the same date the electronic case is sent to Appeals through the Appeals Electronic Case Receipts SharePoint Site.

The TE accesses the Appeals Electronic Case Receipts SharePoint Site and selects New Case. The TE completes the online referral form and include the docket number in the required field only on a docketed case. The TE attaches the following documents:

If applicable, the following documents must be attached to the referral as well. Account and Processing Support (APS) uses these documents to determine proper routing to Appeals:

If Appeals determines that a case has been referred prematurely, they will send an e-mail to the TS group manager who completed the AMCLS. The e-mail should include Form 5402 and an explanation for the premature referral determination.

The TS reviewer reviews the electronic case file in RGS.

The TS reviewer prepares Letter 531, Notice of Deficiency, and signs on behalf of the TS Territory Manager. Refer to IRM 4.8.9.11, Signing and Dating the Notice of Deficiency. The TS reviewer will prepare Form 4089-B, Notice of Deficiency-Waiver, Form 4549-A, Report of Income Tax Examination Changes, Form 5278, Statement - Income Tax Changes, Form 886-A, Explanation of Items and other notice attachments, based on the facts of the case. Documents prepared by the reviewer are saved to the RGS Case File Documents or Office Document (OD) folder with the category "TS" . Each document that makes up the statutory notice in a case file is saved separately in the RGS CFD folder. Alternatively, a SNOD file may be created, and each document saved separately and indexed.

The TS reviewer documents all actions and any contact with taxpayers, representative, Counsel, Appeals, CCP, etc., on the activity record and saves it to the CFD folder as "TS-100-01 Form 9984 Activity Record" . The TS reviewer specifies in the activity record the documents that make up the SNOD.

Once the statutory notice is prepared by the TS reviewer the TE prints, date stamps and issues the SNOD and places the case in the 90-Day suspense period.

A dated copy of the SNOD including the certified or registered mail numbers must be saved to RGS CFD folder or in IMS.

When a SNOD requires Counsel review, the reviewer prepares the following documents:

If the notice needs Counsel approval, the TS reviewer must contact their applicable Counsel contact to request a link to the Counsel Client Referral SharePoint Site or e-mails the request for a SNOD review. Reviewers must follow the guidance in IRM 4.8.9.10.2.4 (4) and (5) for updating ERCS when sending and getting cases back from Area Counsel.

Counsel reviews the SNOD and case documents in CEAS View Case (for RGS cases) or IMS Team Website, SAIN 090 (for IMS cases) and responds to the TS reviewer with a determination. Counsel’s determination is documented on the activity record and saved in the case file electronically.

With the exception of Memphis CCP, Cincinnati and Ogden CCP are no longer accepting paper case files. All cases closing to Cincinnati and Ogden CCP should be electronic or virtual case files unless a case is excluded from electronic closure. Refer to Cases Excluded from Paperless Electronic Closure in the virtual library for a current list of cases excluded from paperless electronic closure.

For any paper case files, TS will continue to follow CCP virtual case file closure procedures. Before the paper case file can be closed, TS needs to monitor the taxpayer’s account for the TC 421 to post. Once TC 421 is posted and if Form 9856 is not received TS may need to fill out the Form 9856, Attachment Alert to close the paper case files to Kansas City Files or Ogden Files (for LB&I cases) timely.

If the taxpayer does not petition Tax Court before the end of the 90-Day suspense period, the TE closes the case to CCP.

If the taxpayer provides a signed agreement the TE uploads the agreement form to the RGS file, updates Form 5344 and any other necessary case information in RGS before closing to CCP.

Before the TE closes the electronic case to CCP, the TE checks the following:

If the electronic case indicator and block number 40X are present, the TE updates ERCS and the RGS record to CCP. If either of these are missing, the TE returns the case to the field group and e-mails the field group manager and administrative support explaining what is missing. The field group makes the corrections and closes the ERCS record back to TS.

The ERCS "E" Indicator will appear on Quality Review’s ERCS Cases Selected report to identify electronic cases. There are no actions required to be completed by the TS employee for electronic cases that have been selected for a sample review that are closed to CCP.

TEs prepare statutory notices of deficiency for the following:

Cases that should not be reviewed by TEs include:

Delegation Order 4-8 in IRM 1.2.2.5.8 delegates the authority to sign statutory notices of deficiency to TS managers, revenue agent reviewers GS-12 and above, or tax compliance officers GS-09 and above. TEs are not authorized to sign notices. See IRM 4.8.9.11.1, Signing Notices.

TCO/TA reviewers prepare statutory notices of deficiency for all other unagreed TCO cases that are not reviewed and prepared by TE reviewers.

RA reviewers prepare statutory notices of deficiency for the following:

When the case is received, the contents of the file are reviewed to ensure the following:

Obtain current IDRS prints to verify the following information about the case:

Copies of all IDRS prints should be included in the case file.

Reviewers must ensure correct technical conclusions were reached. To do so, reviewers must verify the following:

All appropriate penalties should be asserted and computed correctly.

The penalty lead sheet should comment on the assertion or non-assertion of applicable penalties, including reasonable cause situations.

The negligence portion of the accuracy-related penalty should not be applied automatically in a no-show case per IRM 20.1.5.8.1(5), Negligence.

The substantial understatement portion of the accuracy-related penalty should be properly considered in a no-show case as discussed in IRM 20.1.5.9.2(6), Penalty Assertion.

The return filing date should be correctly input in RGS to ensure correct delinquency penalty computation, if applicable.

The case file should include a copy of the group manager's written approval for the assertion of any penalty other than Failure to File (FTF), Failure to Pay (FTP), or estimated tax penalties. The signed Penalty lead sheet must be included in the paper case file and saved to the electronic case file. For Field Examination the Lead Sheet 300, Civil Penalty and Approval Form must be saved in the RGS case file.

Confirm the examination case file reflects timely written supervisory approval of a penalty by following the Timely Supervisory Approval of Penalties for Notices of Deficiency Job Aid. If approval was not obtained timely, the penalty must not be included on the SNOD. When a penalty is removed, and the case is not returned to the field, an advisory report (Form 3990 Reviewer’s Report) must be prepared to advise the field group manager of non-compliance with the timing standard. A copy of signed Penalty Lead Sheet 300, Civil Penalty and Approval Form (page 2) or similar, must be attached to all SNOD issued to the taxpayer where penalties requiring supervisory approval are asserted. .

Refer to the following for guidance:

RGS must be used to revise examination reports and explanatory standard paragraphs, to the extent possible.

The reviewer will ensure the computation of the tax deficiency is correct. To accomplish this, reviewers should verify the following:

Reviewers should ensure procedural items are properly completed by the field examiner:

Managerial involvement during an examination is a significant contributor to case quality and efficiency. In the following situations, written managerial involvement must be included in the file prior to issuance of the SNOD:

If the case file does not reflect written managerial approval, the reviewer must not include the penalties in the SNOD. The Form 5344 and Form 3198, must be corrected by removing the penalties. A Form 3990, Reviewer’s Report will be prepared and sent to the Field exam group manager regarding the lack of written managerial approval of the applicable penalties per IRC 6751(b), Approval of Assessment.

Reviewers must ensure the taxpayer's rights have been protected by considering the following:

Reviewers must remember to protect tax information when communicating electronically with the taxpayer by using a fax machine or EEFax or any other approved method of communication. IRC 6103 provides details on the confidentiality and disclosure rules that must be followed when working with taxpayer return or taxpayer return information. Refer to IRM 4.10.1.3.6, Use of Fax Machine or Enterprise e-Fax (EEFax) for Outgoing Taxpayer Communications for guidance. For additional information refer to IRM 21.2.3.5.5, Using Electronic Fax Services.

When reviewing the case, the reviewer must ensure the following:

While reviewing the file, reviewers must also take the following steps:

The taxpayer's name and address appears throughout the notice of deficiency. It is extremely important that the taxpayer is correctly identified since even minor typographical errors in the name or address may affect the validity of a notice of deficiency.

For corporations, use the name of the corporation as shown on the corporate seal. If unavailable, use the name shown on the tax return. In corporate reorganizations, include both the current and the former name. Similarly, if the corporation changed its name since filing the return, address the corporation on the letter, schedules, and attachments as "Dove Corporation, formerly known as Owl Corporation."

For individual married filing joint returns:

For individual married filing joint returns where one spouse has died since the joint return was filed, then take the following actions:

If "also known as" is used, it should be included in the name and spelled out (e.g., "John Perch, also known as Jack Perch)."

The name on the front of the return, not the taxpayer's signature, is the name to be used in the notice. If the taxpayer's signature is different from the name on the front of the return, the signature name may be used as an "also known as" (e.g.), "John Tuna, also known as John C. Tuna)."

When in doubt, use the IDRS command code NAMEE or NAMES for verification.

The mailing address for a notice of deficiency must be the taxpayer's last known address.

Letter 531, Notice of Deficiency is the notice letter used most often in income tax cases. The most current version of the letter should be used.

The reviewer should not date the notice of deficiency letter. The date will be added when the notice is issued.

The notice must include the name, telephone number, and the unique identifying number of the person to contact.

The "Last Day to File a Petition with the United States Tax Court" date should not be inserted when the notice is prepared by the reviewer. The date is entered when the notice is issued.

The notice of deficiency letter should specify the amount of tax and penalty for each tax period but should not include the interest amount. An attachment to the letter may be used if space does not permit the tax and/or all applicable penalties to be listed for all years. The letter will be notated with "SEE ATTACHED." The attachment to the letter is a separate page behind the letter in the notice that is titled "Attachment to the Letter" and includes a chart of all tax and penalties by year.

The deficiency notice must advise taxpayers of their right to contact the local office of the Taxpayer Advocate and must provide the location and telephone number of the appropriate office.

Form 4089-B, Notice of Deficiency-Waiver, or Form 4549, Report of Income Tax Examination Changes, is included in the notice package to allow the taxpayer to agree to the assessment of the proposed deficiency. The waiver should contain the following:

Since Form 4089-B is used as a waiver, then Form 4549-A, Report of Income Tax Examination Changes (Without Taxpayer Signature), or Form 5278, Statement of Income Tax Changes, should be used for all individual, corporate, and fiduciary income tax returns to reflect the list of adjustments and the computation of the proposed deficiency. The layout is similar to the Form 4549 and the instructions for completing Form 4549 are applicable.

An explanatory paragraph in a notice of deficiency has two purposes:

The adjustments should be explained in the order in which they appear on the report to the extent possible. However, it is not necessary for items to be in order when it is not expedient to change them. Reviewers should not rearrange the explanations, nor should the case be returned to the examination group to comply with this requirement. The order in which the explanations appear will not render a notice invalid.

Use applicable standardized language as published in IRM Exhibit 4.10.10-2, Standard Explanations, or language previously approved by Area Counsel. These explanations may be modified to address specific facts of the case.

When adjustments to Non-TEFRA partnerships, BBA Elect Out Partnerships or Sub-chapter Opal corporations are involved, the notice should include specific details on the adjustments being passed through. The following procedures should be followed:

"Duplicate original" notices, a term used throughout this text, means an originally signed Letter 531, Notice of Deficiency that is sent by certified or registered mail. The "Duplicate" notice may reflect a different address for the taxpayer than the "Original" notice.

Before a statutory notice is issued, the proposed notice should be double checked to ensure it is legally sufficient and free of typographical errors.

This last check is limited to the following:

The authority to issue a notice of deficiency rests with those IRS officials delegated the authority by Servicewide Delegation Order 4-8, as outlined in IRM 4.8.9.5, Authority to Issue Notices of Deficiency. The role of Area Counsel in the notice of deficiency process is to provide advice on whether a notice of deficiency should be issued, and if so, to make recommendations concerning the issues asserted and the wording of the determination.

The notices of deficiency that are required to be reviewed by Area Counsel are listed in IRM 4.8.9.10.2.1, Mandatory Area Counsel Review. However, the mandatory review may be waived if the area director and Area Counsel concur.

Other communications, whether formal written inquiry or informal verbal contact, with Area Counsel are encouraged to resolve questions while notices are being prepared. Area TS offices may seek informal advice for any case for which TS feels Area Counsel advice is warranted.

Servicewide Delegation Order 4-8 in IRM 1.2.2.5.8 delegates authority to sign notices of deficiency to other IRS officials. See IRM 4.8.9.5, Authority to Issue Notices of Deficiency.

As it relates to Technical Services, Servicewide Delegation Order 4-8 delegates the authority to sign statutory notices of deficiency to TCO and TA reviewers GS-09 and above for office audit cases and RA reviewers GS-12 and above for field (RA, TA, and TCO) examination cases.

Delegated individuals may sign the notices in any of the following ways:

Signature stamps are locally procured with only the delegated officials having access. Proper security procedures should be used to prevent unauthorized use.

Two dates are included on the notice letter:

The date the letter is issued. This is the same date the letter is mailed to the taxpayer. See IRM 4.8.9.12.3, Records of Mailing.

The last day the taxpayer can file a petition with the Tax Court. This date is 90-days after the notice is issued (150-days if either the taxpayer is outside the United States when the notice is mailed, or the notice is mailed to an address outside the United States). See Exhibit 4.8.9-2, Computation of Last Day to File a Petition with Tax Court and Computation of Default Date, for details of how to compute this date.

The reviewer preparing the notice of deficiency does not complete the date the letter is issued or the last day the taxpayer can file a petition. These dates are completed by the person who mails the notice of deficiency.

Married filing jointly taxpayers are given separate notices of IRS actions that may affect their joint and several liability and collection thereof.

The IRS must send the joint notice of deficiency to each spouse even when they reside at the same address.

Either one or both spouses may file a petition to the Tax Court for joint returns. If both spouses want to petition, they can both sign a single petition, or they can each file a separate petition.

If a Form 2848, Power of Attorney and Declaration of Representative, is received by TS, the reviewer should check the status of the representative as described in IRM 4.11.55.2.1.2, POA Not Authorized to Practice Before the IRS.

If a taxpayer is represented by a duly authorized power of attorney and the Form 2848 is appropriately annotated, a copy of the notice mailed to the taxpayer(s) will be sent to the representative by regular mail. Letter 937 (DO), Transmittal Letter for Power of Attorney, is used as the cover letter to transmit the copy of the notice. The enclosure section of the letter should indicate Letter 531, Notice of Deficiency, or Letter 902, as appropriate.

If the power of attorney does not cover all years in the notice of deficiency, the notice should not be sent to the representative. Instead, Letter 4368, Statutory Notice Not Sent to Representative - Tax Periods Not Specified, should be included with the taxpayer's notice of deficiency. The letter advises the taxpayer, why a copy of the notice was not sent to the representative identified on Form 2848. If Form 2848 does not include all periods and a subsequent Form 2848 is submitted by the representative, a new page 2 must be signed by the taxpayer.

Effective with the March 2012 revision, Form 2848 requires a separate form for each taxpayer for married filing jointly taxpayers.

Effective with the October 2011 revision, Form 2848 requires an affirmative action by the taxpayer to check the box to indicate that a copy of all correspondence will be received by the representative.

Document the case activity record (Form 9984) for any actions taken regarding the power of attorney that may appear to be in conflict with the Form 2848 instructions, including but not limited to the following:

Each TS group manager must maintain a record of the dates the notices were mailed since:

The record of certified and registered mailing is kept on PS Form 3877 together with the certified or registered mail numbers, which are supplied by the United States Postal Service.

If the notice is incorrectly addressed and or mailed, the taxpayer may raise a challenge that the notice does not conform with statutory requirements.

A notice may be determined to be invalid if it is not mailed to the last known address or if it is not mailed by certified or registered mail, as required. Furthermore, a notice that is mailed utilizing a method that is not able to reach the address may be held to be invalid.

If the notice of deficiency is invalid and the assessment statute has expired, any assessments based on the notice cannot be made and, if already made, must be abated and a barred statute report, Form 3999 Statute Expiration Report must be prepared as per IRM 25.6.1.13.2.8.1, Procedures for the Submission of SB/SE Statutes Expiration Reports.

When adjustments are made to taxable gifts from prior periods and no deficiency is proposed for that period, the adjustment for the prior period and any explanations are included in the statement following the tax computation for the first taxable period covered by the notice of deficiency.

If sufficient time does not remain on the statute of an overassessment year to advise the taxpayer to file a claim for refund, the case will be coordinated with the estate and gift attorney who prepared the notice. The estate and gift attorney will review the case files and determine whether the statute may remain open under IRC 6511, Limitations on Credit or Refund, or IRC 6512, Limitations in Case of Petition to Tax Court.

The agreed or no-change year(s) is not required to remain with the unagreed year(s) if the issues raised in the unagreed year(s) are not related to or dependent on the issues raised in the agreed or no-change year(s).

According to IRM 4.10.8.7, Splitting Multi-Year Examination Cases, the Field group is generally responsible for closing the case to the appropriate function after it is split (e.g., agreed/no-change year is closed directly to CCP; the unagreed years are sent to TS in Status Code 21).

If after review of the case files, the reviewer determines the agreed or no-change year(s) should remain associated with the unagreed year(s) and if the multi-year case is not selected for Field Exam NQRS review, then the reviewer will e-fax the forms listed below to CCP. See Knowledge Management CCP Exam EFax Numbers. for current e-fax numbers for CCP.

Once the partial assessment has been made (CCP will e-fax back to TS the documentation for the assessment), the related case file(s) will be closed to Appeals via IDRS command code AMCLS, Disposal Code 07 and $1 in Item 18 of Form 5344 for the agreed case or retained in TS until the related case defaults.

If a multi-year case is selected for Field Exam NQRS, and the earliest statute of limitations of a return in the case file has 210 days or less remaining, the case will be excluded from the Field Exam NQRS sample.

The Field Exam NQRS selection sheets will be e-faxed, mailed, or sent via secured e-mail to the appropriate Field Exam NQRS site with the following explanation: "The YYYYMM year(s) of the (name and TIN of taxpayer(s)) case is excluded from the Field Exam NQRS sample as the SOL of the YYYYMM return has 210 or less days remaining."

The case file should then be closed using the procedures in IRM 4.8.9.16.1, Agreed/no-change Year Not Required to Remain Associated With Unagreed Year(s), or IRM 4.8.9.16.2, Agreed or no-change Years Required to Remain Associated With Unagreed Year(s), depending on whether the agreed or no-change year(s) should remain associated with the unagreed year(s).

If the multi-year case is selected for Field Exam NQRS and the statute of limitations of all returns is more than 210 days, the agreed or no-change file and unagreed file must remain together.

Field Exam NQRS will review the case within 10 business days and return the case to the originating office via ground service mail for preparation of the SNOD.

Once received back from the Field Exam NQRS review site, the case will be assigned to a reviewer who will determine if the agreed or no-change year(s) should remain associated with the unagreed year(s).

If the reviewer determines it would not be beneficial to Appeals or Area Counsel to have the agreed or no-change year(s) information associated with the unagreed year(s) issues, the agreed or no-change year(s):

If the reviewer determines it would be beneficial to Appeals or Area Counsel to have the agreed or no-change year(s) information associated with the unagreed year(s) issues, the agreed or no-change year(s):

When there is a proposed overassessment in one year (resulting from a related issue or adjustment from the deficiency year), the taxpayer will be advised in the notice of deficiency of the right to file a claim for refund within the time provided by law.

The following paragraph should be used and included in the explanation of adjustments/items if the taxpayer has not filed a claim for refund to protect the overassessment.

The following paragraph should be used and included in the explanation of adjustments if the taxpayer has filed a timely claim for refund to protect the overassessment.

In cases involving claims for refund, protests, or hearings, taxpayers could contend that they are entitled to deductions that were not claimed on their return or that items of income reported on their return should be excluded in whole or in part from taxable income.

If the examination of a return and the claim for refund filed for the same year result in a deficiency and the taxpayer does not exercise any appeal rights, a Letter 531, Notice of Deficiency is issued. The following actions will be taken regarding the claim for refund issues.

If additional deductions or reduction in income requested in the claim for refund is not allowed a clear and adequate explanation of why they are not allowed will be included in the explanation of adjustments. The following paragraph may be used in the explanation of adjustments when the additional issues raised in the claim are not allowed.

If a taxpayer invokes the jurisdiction of the Tax Court in redetermining the amount of the deficiency, the taxpayer is precluded from instituting suit at a later date in the courts on a claim for refund filed for the same kind of tax for the same taxable year.

A claim for refund filed for the same kind of tax in the same taxable year raising an additional issue, which cannot be conceded, must be included in the petition.

If the claim issue is not being litigated by anyone in any court, the following paragraph should be included at the beginning of the explanation of adjustments/items.

Upon default of a notice of deficiency that includes a claim where the language in IRM 4.8.9.17.2 (2)(b), Disallowed Claims for Refund and Examination Results in Deficiency, is not included in the notice of deficiency, Letter 906, Final Full Claim Disallowance Letter, must be sent by certified mail (or registered mail if mailed to a person outside of the United States) to the taxpayer.

Generally, the time to file a claim for refund related to a net operating loss or capital loss carryback is 3 years after the due date of the return (including any extension of time to file) for the tax year of the loss.

Depending upon the circumstances, a Tax Court proceeding may or may not affect a carryback-related refund claim. A Tax Court proceeding is conclusive with respect to an NOL or capital loss carryback that is an issue in the proceeding, even though the loss year itself is not before the court. However, taxpayers may still be entitled to refunds based on the carrybacks that were not at issue, even for deficiency years. For overassessment years, as with non-carryback-related claims, the limitation period for carryback-related claims is unaffected by the issuance of a deficiency notice. An application for tentative refund allowance (Form 1045, Application for Tentative Refund, or Form 1139, Corporation Application for Tentative Refund) is not a claim for refund and, therefore, does not protect the refund statute of limitation.

Because of the complex nature of cases with net operating or capital losses, any update of a carryback statute must be coordinated with, and the files reviewed by, the designated technical person. This is necessary to determine whether the statute may remain open under IRC 6511 and what actions are appropriate to protect the taxpayer's right of appeal.

If a claim for refund is denied and additional tax is due, a SNOD is issued for the additional tax due. If the language found in IRM 4.8.9.17.2, Disallowed Claims for Refund and Examination Results in Deficiency, is included in the notice of deficiency, then the notice also serves as the certified claim disallowance letter.

Per section 4.03 of Rev. Proc. 98-54, 1998-2 C.B. 531, "limitations regarding credits, refunds, and assessments relating to the rescinded notice are void and the rights and obligations of the parties that existed prior to the issuance of the notice of deficiency are reinstated." Based on this, if a notice of deficiency is subsequently rescinded (IRM 4.8.9.30), the certified claim disallowance included within the notice is also rescinded.

The IRS has not adopted procedures for rescinding a "stand alone" certified notice of claim disallowance. There is case law that suggests a "stand alone" certified claim disallowance may be rescinded. See Chadrecha v. United States, 104 Fed. Cl. 296, 302–3 (2012). Certified claim disallowance letters should only be rescinded with Area Counsel approval.

The taxpayer's two-year period for bringing suit may be extended by agreement in writing between the taxpayer and the IRS under IRC 6532(a)(2), Periods of Limitations on Suits. Form 907, Agreement to Extend the Time to Bring Suit, is used for this purpose. Refer to IRM 4.10.11.2.16.1.1, IRC 6532 Two-Year Period to File to File Refund Suit - Consideration and Examiner’s Responsibilities for guidance when a taxpayer files Form 907..

In a proceeding before the Tax Court involving accumulated earnings and profits, the burden of proof as to the allegation that earnings and profits have been permitted to accumulate beyond the reasonable needs of the business is on the Commissioner, unless notification is sent to the taxpayer under IRC 534(b), Burden of Proof.

If notification is sent to the taxpayer and (1) the taxpayer timely submits (within 60 days after the mailing of the notification, Treas. Reg. 1.543-2(d)(2)) the statement (i.e., the grounds on which the taxpayer relies to establish that there has been no accumulation of earnings and profits beyond the reasonable needs of the business) and (2) in the statement such grounds are supported by sufficient facts on which taxpayer relies to show the basis for the taxpayer's position that all or any part of the earnings and profits have not been permitted to accumulate beyond the reasonable needs of the business per IRC 534(c), Burden of Proof, then the burden of proof will be on the Commissioner as to the grounds given in the statement. See Treas. Reg. 1.534–2(a)(2), Burden of Proof on Commissioner.

Letter 572, Proposal to Issue a Notice of Deficiency for Excess Accumulated Earnings Under IRC 531, is the notification letter sent to the taxpayer and is sent by certified or registered mail. The letter is issued before the notice of deficiency unless the statute of limitations is imminent. Officials delegated to sign notices of deficiency pursuant to Delegation Order 4-8, Rev. 1 (formerly DO-4-8 and DO-77, Rev. 28), IRM 1.2.2.5.8, are also empowered to sign notifications under IRC 534(b), Burden of Proof.

The notice of deficiency is prepared using Letter 531, Notice of Deficiency. The sample paragraphs that may be used in the explanation of adjustments for accumulated earnings tax cases are contained at Exhibit 4.8.9-4, Accumulated Earnings Tax Sample Paragraphs.

Refer to IRM 4.8.8.2 for additional information regarding cases involving accumulated earnings tax under IRC 531.

Penalties exist to encourage voluntary compliance by supporting the standards of behavior required by the Internal Revenue Code.

Penalties encourage voluntary compliance by the following:

A penalty is subject to deficiency procedures if the related tax underpayment being assessed is subject to deficiency procedures. For example, if a taxpayer under examination files a delinquent return with the examiner, the tax shown on the delinquent return is not subject to deficiency procedures. Similarly, the associated delinquency penalties (Failure to File (FTF) and Failure to Pay (FTP), if applicable) are not subject to deficiency procedures. However, if an examiner later determines additional tax is due on the delinquent tax return, that additional tax is subject to deficiency procedures, as are the associated delinquency penalties, if applicable.

A return is considered timely filed if it is received on or before the due date (including extensions) of the return. If the return is postmarked by the United States Postal Service (or designated delivery service) on or before the due date (including extensions) it is also considered timely filed. When more than one United States Postal Service postmark date appears on the envelope; the earlier postmark date is considered the date the return was mailed. See IRM 20.1.2.2.1, When Timely Mailing Equals Timely Filing or Paying (Received Date vs. Filing/Payment Date), for more information on timely filing.

IRC 6081 and the related regulations provide for a reasonable extension of time to file a return. The "reasonable extension" is not to exceed 6 months (unless the taxpayer is abroad). If the taxpayer has a valid extension of time for filing a return, the taxpayer is not liable for the FTF penalty for the duration of the extension period. The computation of the FTF penalty begins immediately after the extended due date.

An extension of time to file is not an extension of time to pay.

The IRS may void a previously granted automatic extension where the taxpayer's Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return; Form 7004, Application for Automatic Extension to File Certain Business Income Tax, Information, and Other Returns; or Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, is invalid.

Reviewers should refer to IRM 20.1.2, Failure to File/Failure to Pay Penalties, for more details on these penalties.

If the case is an active criminal case, there are less than 210 days remaining on the statute, and a consent needs to be obtained or a notice of deficiency needs to be issued to protect the statute, follow the procedures in IRM 25.1.4.3.8, Statute Protection, to submit Form 10498-B, Intent to Commence Civil Action - Statute Protection, to the appropriate Special Agent in Charge (SAC).

If only one spouse is liable for the fraud penalty, separate notices of deficiency are issued. The fraud penalty will be included on the notice for the culpable spouse only. See IRM 4.8.9.18.6.

If the taxpayer is convicted (after trial or upon guilty plea) of a violation under IRC 7201, Attempt to Evade or Defeat Tax, the taxpayer is collaterally estopped from denying liability for a civil fraud penalty. Thus, the civil fraud penalty is automatic and cannot be conceded by Examination.

The doctrine of collateral estoppel does not apply if the taxpayer was convicted of a violation of IRC 7203, Willful Failure to File Return, Supply Information or Pay Tax, or IRC 7206(1), Declaration Under Penalties of Perjury. Thus, in these circumstances, the civil fraud penalty is not automatic.

The delinquency and fraud penalties can be asserted concurrently. If asserting the IRC 6651(f), Fraudulent Failure to File Penalty, and the IRC 6663, Fraud Penalty, on the same tax period of the taxpayer, see IRM 20.1.5.16.2, Penalty Assertion.

The accuracy-related penalty (IRC 6662) should be included in the explanation of adjustments as an alternative penalty to the civil fraud penalty except in the following situations.

The following alternative penalty explanation for the accuracy-related penalty may be used following the explanation of the civil fraud penalty.

Refer to IRM 4.8.9.18.2.4 (5), Penalty Explanations, for the alternative penalty explanation for the failure to file penalty following the explanation of the fraudulent failure to file penalty.

On a joint return the fraud penalty per IRC 6663 does not apply to a spouse unless some part of the underpayment is due to civil fraud on the part of that spouse. See IRC 6663(c).

If only one spouse is liable for the fraud penalty, separate notices of deficiency are issued. The fraud penalty will be included on the notice for the culpable spouse only. See IRM 21.6.8, Split Spousal Assessments (MFT 31) and IRM 4.4.12.5.44.5, MFT 31 for MFT 31 procedures to make the assessments for each spouse. See IRM 4.8.9.18.6.1 for procedures for the spouse liable for IRC 6663. See IRM 4.8.9.18.6.2 for procedures for the spouse not liable for IRC 6663.

A notice of deficiency with a deficiency from income tax required to be withheld at source under Chapter 3 of the Internal Revenue Code will include the following opening paragraph in Letter 902:

Taxes withheld on a foreign partner’s income under IRC 1441, IRC 1442, and IRC 1446 are considered partnership items. An examination of a TEFRA partnership with respect to these withholding tax sections is subject to the TEFRA partnership procedures. See IRC 6231(a)(3), Treas. Reg. 301.6231(a)(3)-1(a)(1)(v), and IRM 4.31.2.3.19, Foreign Withholding Tax.

An informational notice should be sent to the taxpayer with the notice of deficiency when tip income is adjusted, and FICA tax and penalties are assessed. The notice informs the taxpayer that a separate notification will be (or has been) sent from the campus for the FICA tax and penalties. The notice will lessen the confusion regarding the receipt of two separate bills for income tax and FICA tax and penalties.

The informational notice is not actually part of the notice of deficiency. Therefore, the following actions must be taken when the notice is sent with the notice of deficiency:

When there is an understatement of prepayment credits, a statement must be included with the notice of deficiency after the computation statement. Exhibit 4.8.9-6, Prepayment Credit Adjustment, contains the statement that should be used to set forth the adjustment to prepayment credits. This statement does not apply to adjustments listed in IRC 6411, Tentative Carryback and Refund Adjustments, such as earned income tax credit (EITC) and fuel tax credits.

The notice of deficiency waiver will show the full statutory deficiency before adjustments to the prepayment credits.

In no case will the informational statement accompanying the notice of deficiency reflect an adjustment decreasing the prepayment credits claimed by the taxpayer. Under IRC 6201(a)(3), Erroneous income tax prepayment credits, assessments based on such adjustments are not subject to deficiency procedures.

Adjustments to earned income tax credit (EITC), additional child tax credit (ACTC), fuel tax credits and other credits listed in IRC 6211 (b)(4), are included in the deficiency amount for tax computation purposes. However, separate assessments are made for EITC, ACTC, fuel tax credits and other deficiency amounts due when assessed.

The special handling notice should indicate which credit is includible in the deficiency amount and on the waiver form.

This section discusses the notice of deficiency procedures for cases where one or both spouses requested relief from joint and several liability on a joint return(s) under IRC 6015, Relief From Joint and Several Liability on Joint Return.

Under IRC 6015 there are three kinds of relief from joint and several liability:

Household employment taxes included on Form 1040 are subject to normal employment tax procedures. Relief under IRC 6015 is not available as it applies only to income taxes under Subtitle A of the Internal Revenue Code.

Under certain circumstances, a notice of deficiency will be issued to only one spouse for a married filing joint return. Examples of this include, but are not limited to:

The notice letter will be addressed to both spouses as shown on the return. However, the salutation will be directed only to the spouse to whom the notice is being sent. The letter will also reflect the primary SSN as shown on the return.

The computation statement (i.e., RAR) will contain the names of both spouses as shown on the return. It will also reflect the primary SSN as shown on the return.

The waiver will reflect only the name, address, and SSN of the spouse to whom the notice is being sent.

If a deficiency represents the consolidated income tax liability of an affiliated group of corporations, a reference to the consolidated group is used in the taxpayer's name line of the Letter 531, Notice of Deficiency such as corporation X and subsidiaries (a consolidated group).

The summary of the tax liability will show the returns examined on a separate statement following Form 4089-B, Notice of Deficiency Waiver, illustrated as follows:

Figure 4.8.9-1

Attachment to Form 4089-BLine one states, Statement. Line two states, Name (Parent Company). Line three states, Address. Line four states, Returns Examined. The table below is the remainder of the document. Company NameFormTINTaxable Year EndedA Company1120XX-111111112/31/0812/31/06Subsidiary CompaniesFormTINTaxable Year EndedB Company112000-XXXXXXX12/31/08C Company112000-0XX123412/31/0212/31/09D Company1120XX-11110XX12/31/08

Please click here for the text description of the image.

The following statements will be added after the summary of the tax liability.

All jeopardy and termination assessments have a common characteristic: prior to assessment, a determination is made that collection will be endangered if regular assessment and collection procedures are followed because certain conditions exist regarding those conditions, see IRM 4.15.1.8, Identifying Cases.

All jeopardy and termination assessments must be in full compliance with Policy Statement 4-88, Jeopardy assessment to be used sparingly and assessment to be reasonable in amount, IRM 1.2.1.5.27, or Policy Statement 4-89, Termination assessment of income tax to be used sparingly and assessment to be reasonable in amount, IRM 1.2.1.5.28.

A notice of deficiency is required to be mailed to the last known address of the taxpayer within a 60-day period, as prescribed in the jeopardy and termination provisions. Refer to IRM 4.15.1.10, Post Assessment Procedures, for more information.

If the jeopardy and termination assessment exceeds the corresponding deficiency, the excess amount remaining unpaid should be abated. If all or part of the excess amount has been paid; no refund should be made until the case is closed.

For jeopardy and termination assessments, Form 3198 should be annotated that restricted interest is required to be computed by CCP.

Collection Insolvency Support notifies examination of bankruptcy petitions filed within the area.

Examination ensures the information is matched with AIMS to identify open examination controls.

Examiners and reviewers who become aware of bankruptcy proceedings through other avenues must ensure Insolvency is notified of any potential assessment or refund that is not yet reflected on AIMS in order for a proof of claim to be timely filed with the bankruptcy court. This should be completed at least 30-days before the bar date, if possible.

If indications of bankruptcy are in the file, the reviewer should check with the area examination bankruptcy coordinator to determine the current status of the bankruptcy case. Bankruptcy indicators include AIMS "X" freeze on AMDISA, a Transaction Code 520 and/or a freeze code "-V" on master file. IRM 4.8.2.11.4.8, Bankruptcy Statutory Notice of Deficiency.

Letter 531, Notice of Deficiency is issued in all years. Notice 1421, How Bankruptcy Affects Your Rights to File a Petition in Tax Court in Response to a Notice of Deficiency is included when the Bankruptcy stay will affect a U.S. Tax Court petition. The Bankruptcy Coordinator will provide instructions for issuance of the notice.

The notice of deficiency should be prepared in accordance with established procedures contained in this IRM and should be issued to the debtor. The Bankruptcy Coordinator will notify the reviewer if there are pre-petition and post-petition years. If the case includes both pre-petition and post-petition years the case must be separated into two separate files. One file for the pre-petition years, and one file for the post-petition years. Do not include pre-petition and post-petition years on one notice of deficiency.

A bankruptcy case may involve a debtor who filed a joint return with a taxpayer who is not in bankruptcy (e.g., where a joint tax return was filed, and a bankruptcy case is commenced by only one spouse). Issue a Letter 531 to both spouses and include Notice 1421 with the copy to the bankrupt spouse. Once the notice of deficiency has defaulted on the non-bankrupt spouse who files a joint return, the assessment should be made using MFT 31 procedures. For cases with six months or less on the assessment statute, the reviewer will complete the split spousal assessment using the MFT 31 Creation Exam / Appeals / AUR Process. See IRM 4.8.2.11.4.8.15.3, MFT 31 Creation, Exam / Appeals / AUR Process for procedures. For cases with more than six months left on the assessment statute, the case will be sent to the bankruptcy coordinator to complete the split spousal assessment using the MFT 31 mirroring process. See IRM 4.8.2.11.4.8.15.4, MFT 31 Creation, Mirroring Process.

Refer to IRM 4.8.2.11.4, Bankruptcy Suspense, for detailed instructions regarding suspension of notices of deficiency in bankruptcy cases.

Transferee liability substantive law - Transferee liability is based on rights provided to the IRS under federal, state or contract law. See IRM 4.10.13.3.2, Types of Transferee Liability and Burden of Proof.

Transferee liability procedural law:

Fiduciary liability substantive law - Fiduciary liability is based on 31 USC 3713(a), which entitles the government to have its claims paid first when a debtor is insolvent (the federal priority statute); 31 USC 3713(b) imposes personal liability on a fiduciary who pays others on behalf of the debtor before paying the government's claim.

Fiduciary liability procedural law:

For transferor-transferee liability cases, Form 3198 should be annotated that restricted interest is required to be computed by CCP.

Munro computations (Munro v. Commissioner, 92 T.C. 71 (1989), are to be used in statutory notices of deficiency when preparing notices to the TEFRA investor (with open TEFRA proceeding(s)) for the non-TEFRA issues, except when the returns involved are determined to be over sheltered.

When preparing a statutory notice on a case with an open TEFRA proceeding, the following paragraph should be included on a supplementary attachment to Form 4089 or other waiver:

The following sample paragraph is included in the explanation of items:

When an indirect adjustment has been made to the QBID by the Field examiner the TS reviewer needs to ensure the taxpayer has been made aware of the indirect adjustment to their QBID and been allowed the opportunity to provide documentation to the examiner.

Knowledge Management: IRC 199A - Qualified Business Income Deduction and Chapter 4 - Policy and Exam Guidance outlines policies when and how examiners should address an indirect QBID adjustment on an examined return. Under various circumstances, examiners are required to either communicate directly with taxpayers regarding an updated QBID computation or to issue Form 14997, Adjustment to the Qualified Business Income Deduction with the report to raise taxpayer awareness of the issue and allow for an opportunity to provide information supporting a QBID recomputation.

When unagreed cases are sent to TS for issuance of the SNOD, often reviewers find there is no communication noted in the case activity record or there is no documented evidence Form 14997 was issued with the report. The TS reviewer will complete the following action(s) depending on the time remaining on the assessment statute when a case does not document consideration of Form 14997 or a comment in the activity record:

An examination can be conducted on a copy of a taxpayer's return or with a BRTVU/RTVUE print. Accordingly, if a statute is imminent, it may be necessary to issue a notice of deficiency based on copies of returns or BRTVU/RTVUE prints. If so, the following steps are to be taken.

In multi-year examinations when there is an original return for the initial year and copies or BRTVU/RTVUE for prior and/or subsequent years:

If the fraud penalty is asserted on a copy of a return, immediate attempts must be made to secure the original tax return. Such attempts need to be documented and made part of the case file. The case may be returned to the field to secure the original return.

Upon issuance of a notice, a case is updated to Status Code 24 and the statute of limitations is recomputed to reflect the maximum tack on time permitted by law for assessment (i.e., as if the notice defaults - 90 or 150-days, plus 60 days for processing). Generally, Exhibit 4.8.9-2, Computation of Last Day to File a Petition With United States Tax Court and Computation of Default Date should be used as a guide to recompute the assessment statute of limitations. Form 5348 should be prepared to update the recomputed statute.

If an agreement is received before the end of the 90-day (150-day) period, the statute should be recomputed a second time. Agreed cases should be a high priority item and closed as soon as possible to avoid having a barred assessment statute. Generally, Exhibit 4.8.9-3, Assessment Statutes: Agreed Case Without Form 872–A Consent, Agreed Case With Form 872–A Consent, Defaulted 90-Day Letter Without Form 872–A Consent, Defaulted 90-Day Letter With Form 872–A Consent, (whichever is applicable), should be used as guidance to recompute the final assessment statute. Form 5348 should be prepared to update the recomputed statute.

If a case is petitioned, the statute should remain as the updated assessment statute noted in paragraph 1 above. Under no circumstances will the ASED for a petitioned case be updated back to the original normal statute.

The statute expiration reports in ERCS allow the user to print statute expiration notices and create reports to check for pending statutes. See IRM 4.7.3, Examination Return Control System (ERCS), Statute of Limitations, and IRM 4.7.6, Examination Return Control System (ERCS), Reports, for detailed information on the ERCS reports.

The pending statute report lists returns with numeric statute expiration date falling within a variable number of days as entered by the user. This report is useful in calling attention to returns with short statutes and determining if a Form 895 should be issued. The report also has a section containing a summary of employees with returns with short statutes.

The 895 report generates a listing of returns in review statuses which meet any of the following criteria:

TS should review the pending statute report on a weekly basis during peak times and bi-weekly during the rest of the year. Suspense personnel should ensure that all cases with notices of deficiency are properly in Status Code 24 and have updated ASEDs, as previously discussed.

Identify and monitor as a "Statute Case" as follows:

If a consent to extend the statute is received after the SNOD is issued, it should not be executed by the IRS if the normal statute has already expired. Refer to IRM 25.6.22.5.13(1) (i), Manager’s Responsibilities When Signing Consents and Treas. Reg 301-6501))-1(d)

While the case is in suspense, the taxpayer may:

Any communication with the taxpayer regarding notices of deficiency should clearly state that reconsideration of the case will in no way serve to suspend or extend the 90 or 150-day period in which a petition may be filed with the Tax Court.

If the taxpayer's representative calls or comes in to discuss the taxpayer's account, a valid Power of Attorney (POA) or Tax Information Authorization (TIA) must be in the file or no information can be furnished. A request may be made to the taxpayer to obtain a completed POA or TIA. Without a POA or TIA on file, a general explanation of the notice of deficiency procedures may be provided.

Review the AIMS weekly update report for address changes. Codes 18 and 19 show new addresses updated to Master File.

Request CFOL and IDRS research on both SSN's using command codes INOLES, SPARQ, IRPTRO, IMFOLE, ENMODA and TELER (taxpayer's telephone number) to call the taxpayer.

Contact collection (insolvency function) if the taxpayer is in bankruptcy.

If a new address is obtained and there is sufficient time remaining on the regular assessment statute, the notice of deficiency should be reissued. The reviewer should document the file stating how the reviewer obtained a new address for the taxpayer and followed the search recommendations in IRM 4.8.9.9.2.5 to obtain a new last known address.

If sufficient time is not remaining on the regular assessment statute to reissue the notice of deficiency, then upon expiration of the 90-day period the deficiency will be assessed as a result of the taxpayer's default (absent a petition or agreement).

The address on master file will be considered the taxpayer's last known address if the taxpayer cannot be located, or a new address is not provided or verified by the taxpayer. If research shows no later address, the envelope in which the letter was originally mailed and the notice will be securely stapled in the taxpayer's file as evidence that the 90-day letter was sent by certified or registered mail to the taxpayer's last known address along with documentation explaining what efforts were taken to determine the taxpayer's last known address. However, the case should not be defaulted until the 105th or 165th day.

If a taxpayer requests a copy of the notice after refusing to accept a notice, it will be mailed with a cover letter by regular mail. The following is suggested language to be used in the cover letter to the taxpayer:

The basic minimum requirements for a notice of deficiency are the following:

Cosmetic changes to the RAR, such as deleting the examiner's name on the second page or changing the office location

Commissioner's name missing from page 2 of Letter 531:

Incorrect date on Letter 531:

Incorrect "last day to file petition" noted on Letter 531: Use of the incorrect date for filing petitions with the Tax Court does not invalidate a notice of deficiency. Section 3463(a) of the IRS Restructuring and Reform Act of 1998 requires the IRS to include the last day on which the taxpayer may file a petition with the Tax Court on the notice of deficiency. After the passage of the Reform Act, IRC 6213 (a) was amended to include the following:

The deficiency amount shown on the Letter 531 or attachment to the letter is not the same as the amount shown on the waiver and/or RAR:

The IRS is not precluded from issuing a second notice of deficiency as long as the taxpayer has not yet filed their Tax Court petition. See Jones v. United States, 889 F.2d 1448, 1450-1451 (5th Cir. 1989), Gmelin v. Commissioner, T.C. Memo 1988-338. However, the issuance of a second notice does not rescind the first. This is because rescission of a notice of deficiency is discretionary on the part of the Secretary and such notice of deficiency will be rescinded only with taxpayer consent. Section 4.01 of Rev. Proc. 98-54, 1998-2 C.B. 531. Also see IRC 6212(d), Notice of Deficiency.

The issuance of a second notice prior to expiration of the time the taxpayer has to petition the Tax Court (for the original notice) gives the taxpayer the option to petition either notice. G.C.M. 33366, In re: Statutory Notice of Deficiency, I-2166 (November 3, 1966), at 6. While it may be legally sound to reissue a notice of deficiency, the determination to issue a new notice of deficiency should be made on a case by case basis in consultation with local Area Counsel.

IRC 6503(a), Suspension of Running of Period of Limitation, Issuance of Statutory Notice of Deficiency, provides that the statute of limitations for a tax year is suspended during the time the IRS is prohibited from making an assessment (i.e., during the time a notice of deficiency is outstanding).

No exception is made in IRC 6503(a) for invalid statutory notices of deficiency or notices which contain an error.

If a notice is considered invalid due to an error and the normal statute of limitations is expired, the IRS is prohibited from taking action. This means that the errors cannot be corrected in order to issue a new notice of deficiency and no assessment can be made.

If a notice is considered invalid due to an error and the normal statute of limitations is still open, a new notice of deficiency should be issued in order to correct the defects and in order to permit assessment of the deficiency. The issuance of a new notice of deficiency will begin a suspense period and the taxpayer will have 90-days (150-days) to file a petition in Tax Court.

Following acknowledgement, the valid protest will be transmitted with the administrative file to the appropriate IRS Independent Office of Appeals serving the area making the determination of the tax liability as prescribed in IRM 8.2.2.2, Appeals Jurisdiction on a Compliance Issued Statutory Notice of Deficiency . The designated notice reviewer must coordinate with Appeals before forwarding the case to Appeals.

The foregoing will not apply in the following situations:

Following acknowledgement, the correspondence will be associated with the case file. The case file will be returned to the designated technical person for consideration of the additional information.

The designated technical person will determine the action to be taken based on the correspondence and requests for interview/conference submitted by the taxpayer.

When a signed agreement or waiver form is received, the 90-day or 150-day suspense period is terminated from the date of the agreement. An assessment must be made within 60 days, plus the days remaining on the statute at the time the SNOD was issued.

The following forms are considered agreements:

If the taxpayer(s) waives the restrictions upon assessment and collection of the deficiency in whole during the 90-day period, the case will be transmitted immediately to CCP for assessment of the deficiency. The notice clerk will take the following actions:

If the waiver used by the taxpayer to agree to the deficiency is Form 4549 (also known as "agreed report," ) Letter 987, Agreed Income Tax Change Letter, will be prepared. The letter should not be dated but will be signed by the TS group manager. CCP will date and mail the letter to the taxpayer.

If the taxpayer waives the restrictions upon assessment and collection of the deficiency in part (i.e., partial agreement), the waiver and the return will be transmitted to CCP for assessment of the agreed portion of the deficiency.

The taxpayer must be clearly informed that reconsideration of the case will in no way serve to suspend or extend the period for filing a petition with the Tax Court.

If sufficient time remains during the 90 or 150-day period, the taxpayer will not be denied a hearing before Appeals, if an appeals conference is specifically requested by the taxpayer. The request for an appeals conference will be coordinated with Appeals on a case-by-case basis to determine if Appeals will conference the case or release jurisdiction to the area office.

If additional information is received that would decrease the deficiency amount on the notice of deficiency, a supplemental report to the notice of deficiency will be prepared. Refer to IRM 4.8.9.25.2.3, Information Results in Decrease to Deficiency.

When a waiver or agreement is received, the case can be closed as outlined in IRM 4.8.9.25.3.1, Receipt of Waiver of Agreement.

Generally, IRC 7502 does not apply unless the document is mailed in accordance with the following requirements:

Occasionally, the taxpayer or representative mails a petition to the IRS, (specifically to the office that issued the notice of deficiency) rather than to the Tax Court. In such a case, the petition is not considered "properly addressed to the office with which the document is required to be filed," and thus, the petition must be received by the Tax Court by the 90th day (150th day if either the taxpayer is outside the United States when the notice is mailed, or the notice is mailed to an address outside the United States).

If the petition is received by the IRS before the expiration of the 90-day (150-day) period, the petition should be mailed by TS to the Tax Court using regular mail that is postmarked on or before the 90-day (150-day) period expires. The petition should be sent under cover of transmittal Letter 4370, Petition Transmitted to the US Tax Court, to the Tax Court. The taxpayer should also be sent a letter to inform him or her the petition was forwarded. Letter 4371, Petition Forwarded to the Tax Court, is used for this purpose.

If TS receives the petition past the 90-day period (even if the petitioner's envelope is postmarked before the 90th day) or it cannot be postmarked by the IRS prior to the expiration of the 90-day period, TS will return the petition to the taxpayer using Letter 4372, Petition Returned to the Taxpayer, to indicate that the document was mistakenly mailed to the wrong entity.

TS should not forward a petition to the Tax Court if the 90-day period has already expired.

The United States Tax Court requires the filing of an "answer" by the Commissioner of the IRS in all docketed cases.

Employees responsible for monitoring the docket list must be aware of and take all necessary actions to ensure counsel receives docketed administrative files with sufficient time remaining to meet the due date established by the Tax Court to answer the petition.

The "answer due date," or the time within which the petition must be answered, is set by the Tax Court at sixty (60) days from the date the petition is served on the IRS. The answer due date for small tax case petitions is the same as it is for regular tax case petitions.

Counsel needs time to prepare its answer. Therefore, Appeals must ensure the cases are received in counsel no later than twenty (20) days prior to the answer due date.

In order to meet these time frames, it is imperative that TS employees timely identify, locate and process petitioned cases to the appropriate IRS Independent Office of Appeals office within ten (10) calendar days from receipt of the docket list.

The docket list is a list of cases docketed by the United States Tax Court.

Once a petition is received by the Tax Court, it is given a number, processed, and then served on the IRS.

TS 90-day suspense unit personnel are expected to use the DIMS generated docket list to pull up docket lists in numerical (and consequently, chronological) order. DIMS is the preferred method because users can sort the list so that it contains only the cases they control or need to locate. This, in turn, reduces the overall time to identify petitioned taxpayers.

Upon retrieval, the docket list will be date stamped.

Determine the taxpayer(s) who have filed petitions. Perform research on all taxpayers containing the unique office code, as well as those with "unknown" office codes.

The unknown cases are taxpayers without a pre-determined area office code. These taxpayers should be researched to determine the office to which they are assigned.

Within ten (10) calendar days of receiving the docket list, the cases must be located, processed for closing and transmitted to Appeals.

After closing the case, it must be forwarded immediately to Appeals via Form 3210.

At the end of each month, the tickler file for Form 3210 will be checked and follow-up action taken on any Form 3210 for which part 4 has been outstanding for 30-days or more. This is done to determine whether the cases were received by Appeals or why Part 4 was not returned.

When the Appeals acknowledgment copy is received from Appeals, destroy the tickler file copy and replace it with the Appeals acknowledgement copy. The Appeals acknowledgement copy will be kept for one year from the date of receipt.

If the return was electronically filed, Examination has the responsibility to request the signature document, Form 8453, and original Forms W-2 (if the electronically filed return required such forms to be submitted) before the case is forwarded to Appeals. See IRM Exhibit 4.4.1-1, Reference Guide, Form 8453 for information about requesting these documents. Make arrangements with the local Appeals Office as to the designated person (and address) to whom Form 8453 should be forwarded. Examination will print a copy of the ELFRQ or ESTAB request and attach it to the case file before forwarding the case to Appeals.

For electronically filed returns using PIN signatures, use command code TRDBV to research specific information on electronically filed returns and TRPRT to request prints of electronically filed returns.

If the case cannot be physically located within three days of receipt of the docket list, prepare Form 5348, AIMS/ERCS Update (Examination Update), to input freeze code "Q" on AIMS. Any area attempting to update the status of the "Q" freeze identified case will forward the case to TS' suspense file area upon notification of the freeze code. When the case is located, reverse the "Q" freeze code via a Form 5348.

The electronic RGS case should be retrieved from CCP if the case has been assigned or through your local RGS coordinator if the case is still in Status Code 51. A "dummy" case should be prepared and should include the most recent RAR and any of the examiner's workpapers available in the electronic file. The notice package should also be included in the dummy file if available in the electronic file. This "dummy" case should be annotated as a "dummy file" on the Form 3198 attached to the front of the file and forwarded via Form 3210 to the Appeals DIMS office at the address shown on the Appeals website at http://appeals.web.irs.gov/APS/caserouting.htm so counsel will be able to prepare a timely response to the petition. TS contact information should be annotated on the Form 3198 and if possible, provided on the DIMS Tracking system.

Once the original case file is located, the AMCLS should be input to process the original case to the Appeals office designated on the docket list to associate with the "dummy" case file in Appeals or counsel.

Occasionally, a case appearing on the docket list may have been defaulted, tax assessed and closed to the files area in the campus before the docket list was received. AIMS research will indicate Status Code 90. If this occurs, TS is responsible for preparing Form 3177, Notice of Action for Entry on Master File, to input CC STAUP (15 cycles) to prevent the issuance of balance due notices to the taxpayer.

When a docketed case that is in AIMS Status Code 90 is identified, a current print of a full AMDISA or TXMOD must be secured. This print will be attached to a copy of the appropriate page of the docket list and will be forwarded to Appeals via Form 3210. Appeals will also be notified that the STAUP has been input to stop the notices. APPEALS WILL BE RESPONSIBLE FOR MONITORING THE STAUP TO INCREASE/DECREASE THE NOTICE SUPPRESSION TIME FRAME AND RETRIEVAL OF THE CASE FILE FROM THE CAMPUS.

TS will take the necessary steps to reopen AIMS, provide dummy file information, and notify Appeals when controls are reopened. TS will submit the following to Appeals via the Electronic Case Receipts portal by selecting, Docketed - AIMS Status 90 and provide the following:

The reviewer/TE will prepare Form 5348 requesting CC AMSTUR, Status Code 24.

If no data is available, the file will include the following:

The Form 5348 will be given to the local AIMS/ERCS Unit to input an AMSTUR which will re-establish the case in Status Code 24. [NOTE: AMSTUR cannot be input in the same cycle that the case was closed to Status Code 90.]

Once the case has been established in Status Code 24, TS will take the following actions:

A non-petitioning spouse (NPS) case occurs when there is a return with a filing status of joint and only one spouse files a petition with the Tax Court or otherwise avails himself/herself of the appeal rights on a proposed joint return deficiency and the other spouse agrees to the deficiency or does not take any action (i.e., defaults).

Where it appears only one spouse has petitioned the Tax Court, forward the petitioning spouse and the case file to Appeals and prepare a dummy file for the non-petitioning spouse to suspend the non-petitioning spouse until the non-petitioning spouse defaults, agrees, or submits a petition.

When forwarding the petitioned spouse to Appeals include the following information on a routing slip attached to the case file:

After the non-petitioning spouse case has been assessed or the non-petitioning spouse files a separate petition, forward the dummy case file to Appeals and include the assessment documents or the petition information with the following noted on a routing slip attached to the file:

When duplicate original notices of deficiency are sent to addresses both inside and outside of the United States and the Commissioner does not know the location of the taxpayer's residence on the date the notices are mailed, and the taxpayer does not file a petition within 90-days, a "protective" assessment of the deficiency will be made after 105-days (90 +15). In such cases, all billing and collection activity should be suspended until the domestic-foreign address issue is resolved, e.g., the taxpayer agrees, files a petition within the 150-day period, or the notice defaults after 150-days. See Polo v. Commissioner, T.C. Memo. 1991–16.

Area Counsel should be consulted in all cases where there is doubt about whether the 90 or 150-day period for filing a Tax Court petition may apply.

If the non-extending spouse petitions the Tax Court, the case file will be forwarded to Appeals.

If the non-extending spouse defaults on the notice of deficiency, an assessment will be made for the non-extending spouse using MFT 31 procedures.

Any deficiency assessed for the extending spouse must be made using MFT 31. The extending spouse can separately request an Appeals hearing.

The determination to rescind a notice of deficiency is made on a case-by-case basis. A rescission may be agreed to if the following:

Under IRC 6212(d), a rescission of a notice of deficiency does not affect the suspension of the running of any period of limitations during the period during which the notice of deficiency was outstanding. For example, assume that six months remain on the statute of limitations with respect to a return when the IRS issued a notice of deficiency. The issuance of the notice of deficiency suspends the statute of limitations. If the IRS and the taxpayer agree to rescind the statutory notice, then as of the date the notice is rescinded, the statute of limitations again begins to run and (in this example) six months remain until the statute expires.

Since the rescission agreement returns the case back to its original state before the notice was issued, careful consideration must be given to the statute before such agreement is executed.

Since a valid notice that has been rescinded suspends the running of the statute of limitations only for the period during which the notice is outstanding, a new statute date must be determined for purposes of issuing another notice of deficiency, if necessary, and making assessments.

If there are at least ninety days remaining on the normal statute, a rescission may be entered into. If less than ninety days remains on the normal statute, the notice will be rescinded only if the taxpayer(s) executes a Form 872 or Form 872–A to extend the statute. The Form 872 or Form 872–A must be executed by both the taxpayer(s) and the IRS prior to rescission.

If there was a Form 872–A on the case prior to the issuance of the notice of deficiency, the rescission will not be granted unless the taxpayer signs another Form 872–A prior to rescission.

A rescission will not be entered into if the following:

Area directors and other delegated officials, as noted in Delegation Order 4-8 in IRM 1.2.2.5.8, are authorized to execute a rescission agreement on behalf of the Commissioner. As it applies to Technical Services, Delegation Order 4-8 reflects that the authority to execute a rescission agreement on behalf of the Commissioner is delegated to TS group manager. This authority may not be re-delegated below the group manager level.

The authority to rescind does not apply to notices of final partnership administrative adjustment (FPAA). Refer to IRM 4.31.9, Centralized Partnership Audit Regime (BBA) Field Examination Procedures.

The following information should be carefully checked.

Form 8626, Agreement to Rescind Notice of Deficiency, is used to secure an agreement between the taxpayer and the government to rescind a notice of deficiency. The notice of deficiency reviewer is responsible for the control, preparation, and execution of the form.

Form 8626 is prepared in duplicate. Once executed by both the taxpayer and the TS group manager, one copy of the form is attached to the front of the notice of deficiency. If more than one notice was issued, a photocopy is attached to each of the additional notices. An executed copy of the Form 8626 is also sent to the taxpayer for his/her records.

More than one year may be entered on the rescission agreement form. The agreement must contain all taxable years covered in the notice of deficiency. All tax years covered will be entered below the first paragraph under "Tax Year Ended."

The rescission agreement is effective on the date the Commissioner or delegate countersigns the Form 8626.

The following letters are used when considering a rescission:

While corresponding with the taxpayer pending a rescission agreement, all correspondence should state the following canned language as listed in the example below: