Purpose: This IRM provides procedural guidance for Small Business/Self Employed (SB/SE) Campus Examination operation employees completing Employment Tax Non-Filer (ETNF) examinations. It provides instruction to help examiners accurately prepare Substitute for Return (SFR) employment tax returns and to ensure employers are in full compliance with all tax laws and regulation with regards to: filing compliance, making timely payments, and claiming valid credits.

Audience: IRS employees who are responsible for completing ETNF examinations in SB/SE Campus Exam

Policy Owner: Director, Small Business/Self Employed (SB/SE), Headquarters Examination - Field and Campus Policy

Program Owner: Program Manager, Campus Examination and Field Support

Program Goals: The program goals are to ensure all employers are in compliance with filing their employment tax returns and to educate the taxpayer about their legal obligations and rights.

If a valid delinquent return(s) is secured after establishing Substitute for Return (SFR) controls, but before the issuance of the Initial Contact Letter (ICL) the tax examiner must decide if the return submitted is correct or if additional information is necessary to properly reflect wages.

Update the case to Status 10 and create a RGS record for the taxpayer. Include tax periods of return(s) received and any other non-filed tax periods that will be addressed during the audit.

Review the return information/images on Correspondence Imaging System (CIS) and IDRS (BRTVU, TRDBV, etc.). If it verifies the information on file:

Review the return information/images on Correspondence Imaging System(CIS) and IDRS (BRTVU, TRDBV, etc.). If it only verifies a portion of the information on file:

Review the return information/images on Correspondence Imaging System(CIS) and IDRS (BRTVU, TRDBV, etc.). If it does not very any information on file:

After research, if the return information is unavailable:

In most instances, the Batch Leveraging Processing (BLP) Team will issue Letter 4107, Initial Contact Letter-No Employment Tax Returns Filed, with a 17-day suspense period.

Complete case history with appropriate examiner’s time and action taken.

The Power of Attorney (POA) must be on file for all periods under examination in order to receive a copy of the initial contact letter. See IRM 4.19.13.9, Power of Attorney and Other Third Party Authorizations.

Letters mailed on cases from Campus Correspondence Examination inventory will include the appropriate Business Unit corporate toll-free number, "Tax Examiner" as the person to contact, and the site-specific identification number.

Responses from a taxpayer to the Letter 4107, Initial Contact Letter-No Employment Tax Returns Filed, or the Letter 4108, 30 Day Letter to Taxpayer-No Employment Tax Returns Have been Filed, are handled in the same manner, provided no assessment is on the account.

All responses from a taxpayer must be examined; however, requesting additional information in response to Letter 4108 is limited to two attempts.

Attempt to contact the taxpayer or POA by telephone when the information provided is insufficient. Explain why the information sent was insufficient and what is still needed. Document the call in case history and include the date, time, and outcome of the phone call. If the taxpayer can e-fax the missing information, suspend the case for 5 business days. If the call attempt was unsuccessful or the taxpayer can’t e-fax the missing information, document in the case history.

Use the chart below as a guide to complete taxpayer pre-assessment responses.

If no response to Letter 4107, issue Letter 4108 with proposed examination report (Form 2504-S, Form 4666, Form 4667 and/or Form 4668) Send Form 13683 and Form 886-A, Explanation of Items. Include Form 12203, Publication 5146 and Publication 5 as enclosures with Letter 4108.

Input Social Security and Medicare wages/TIPS from IRPTR document.

Input Federal Income Tax Withholding from IRPTR document.

Input timely deposits.

Filed returns not under exam must be input. Do not include quick assessment or over reported federal income tax withholding.

Remove FUTA wages when not being pursued.

Document the actions taken in the Case History.

POA must be on file for all periods under examination to receive notices. See IRM 4.19.13.9, Power of Attorney and Other Third-Party Authorizations.

Letters mailed on cases from Campus Correspondence Examination inventory will include the appropriate Business Unit corporate toll-free number, “Tax Examiner” as the person to contact, and the site-specific identification number.

The SFR program was developed to contact taxpayers who have not filed tax returns voluntarily and for whom income information is available to substantiate a significant tax liability. IRC 6020(b) grants the IRS the authority to create a tax return for the taxpayer if the taxpayer fails to file the return by the time prescribed or files a false or fraudulent return.

IRC 6020(b) provides that a tax return is good and sufficient for all legal purposes. However, the 6020(b) return is not treated as a tax return filed by the taxpayer. Form 13496-A, IRC Section 6020(b) Certification for Employment Tax Returns is part of the SFR Employment Tax case file to establish that IRC 6020(b) criteria are met in order that the Failure to Pay (FTP) penalty under IRC 6651(a)(2) will be sustained in court. Be aware of the following:

Whenever the examiner revises a report of proposed adjustments that increases the total tax liability of the taxpayer (without regard to whether or not the revised report is reissued to the taxpayer), a recertification is required on another Form 13496-A dated on or after the date of the revised report.

If the report of proposed adjustments involves more than one tax period, a separate Form 13496-A for each tax period is created and attached to a copy of the report.

Refer to IRM 20.1.2.3.10.2, Processing When Deficiency Procedures Do Not Apply.

Research IDRS for a current address as per IRM 4.19.13.15. Clearly document the case history with the actions taken and research.

Follow the table below for actions to take when receiving undeliverable ETNF letters:

If taxpayers do not respond to the exam, close case default after Day 46. When the taxpayer responds, refer to IRM 4.23.26.4, Employment Tax Non-Filer Responses. Use the appropriate Disposal Code (DC) when closing the case:

On secondary tax periods, Priority Code 9 is not required on Business Master File (BMF) cases. See IRM 4.4.12.5.19, FTP for SFRs, paragraph (2).

Refer to IRM 4.4.12, Examined Closings, Surveyed Claims and Partial Assessments, for further closing guidance.

Input TC 971/057 on all secondary tax periods.

Input TC 971/282 to set Assessment Statute Expiration Date (ASED) when return is received.

An SFR IRC 6020(b) report must be prepared before penalties can be considered. Penalties to be considered:

Failure to Pay penalty IRC 6651(a)(2) and interest is generated after the closing of examination. If tax is full paid, FTD penalty, FTF penalty, FTP penalty or interest will not generate. Refer to IRM 20.1, Penalty Handbook.

The Federal Unemployment Tax Act provides for cooperation between the federal and state governments in the establishment and administration of unemployment insurance programs. Under this dual system, the employer is subject to a payroll tax levied by the federal and state governments.

There are currently 53 participating state level entities, which include the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

The taxpayer may be allowed a maximum credit of 5.4 percent against the FUTA tax of 6.0 percent for payments made to the state. If the state receives payments after the due date (plus extensions) for the Form 940, the employer is allowed 90 percent of the credit that would have been allowed had the payments been timely. An employer's credit will also be reduced if the employer paid wages that are subject to the unemployment tax laws of a credit reduction state.

If state credit is filed on Form 940, see table below:

Return information on TRDB is considered a signed return.

An unsigned return is not a valid return. A faxed signature is acceptable.

Business returns must be signed by an authorized individual. See the table below for the authorized persons to sign the return for each type of business entity:

Businesses may also use an alternative signature method. Corporate officers or duly authorized agents may sign forms by rubber stamp, mechanical device, or computer software program. Authorized individuals include:

All documents must be saved electronically in RGS as a case file document. All documents will be saved at the time of creation. Letter 4107 will be created and attached in RGS upon initial contact. In most instances, BLP will issue Letter 4107 and attach in RGS, but in certain circumstances it may be necessary for the campus to perform these actions. Form 13496-A will be created and saved at closing.

To create documents in PDF format from SETA, print the documents in PDF format by changing the default printer setting to "Adobe PDF." These PDF documents can be saved to the RGS case file.

If more than one tax period is being examined, the last quarter of Form 941, Form 944, or Form 943 being examined is considered the "primary tax period." All other tax periods are considered "secondary tax periods."

The following documents must be saved in RGS as part of the primary tax period case:

The following documents must be saved in RGS to the secondary tax periods:

A closing packet will be sent to Files that includes a printed copy of Form 5344, Examination Closing Record, for every tax period. All original returns should be attached to the appropriate Form 5344. No other documents are needed in the closing packet because documents will be saved to RGS.

IRM 25.23.9.5, Identity Theft Case Building - BMF, provides Servicewide guidance on BMF Identity Theft (IDT) issues, including documentation and actions required for general processing of BMF IDT claims.

See IRM 25.23.9.2, Business Masterfile (BMF) Identity Theft - Overview, for general information about BMF identity theft.

BMF entity types include corporations, partnerships, estates, trusts, exempt organizations, or government entities.

Follow IRM 25.23.10, Compliance Identity Theft Case Processing, for functional guidance regarding controls, work paper documentation, acknowledgement, etc., unless noted otherwise below.

BMF IDT indicators are not applied until the IDT has been confirmed. Refer to IRM 25.23.9.4, BMF Identity Theft Research (Inquiry received via paper or phones), and IRM 25.23.9.6.1, Allegation or Suspicion of BMF Identity Theft - TC 971 AC 522 IDTCLM.

Follow normal controls until the IDT allegation has been verified. Once verified, open TXMOD controls using "TPPI " as the category code.

Account corrections will be performed within the Frivolous Return Program (FRP) team unless there is a lost refund. Cases meeting the lost refund criteria will be referred to Designated Identity Theft Adjustment in accordance with IRM 4.19.13.27, Campus Exam Identity Theft.

If the identity theft is substantiated, include an apology as part of the Letter 5317-C, BMF ID Theft Interim Closure, if a CP72 or Letter 3176 was issued.

Abate any penalties assessed based upon the identity theft return and remove all information on the taxpayer from the FRP Master Database.

If the taxpayer does not prove identity theft, a determination can’t be made using internal research tools (IRS identified), or provides information appearing to be fraudulent indicated by the same signature on the identity theft form and the tax return submitted, issue Letter 105-C disallowing the claim and reverse the IDT indicator in accordance with IRM 25.23.4.18.1, General IDTVA Letter Procedures. Continue processing the frivolous filing following normal procedures.

Once all actions have been taken, remember to close the identity theft issue. Refer to IRM 25.23.9.6.3, Closing BMF Identity Theft Issues - TC 971 AC 522 CLSIDT.

For Form 941, Form 943, Form 944, or Form 945, if taxpayer’s wages do not match Form W-2 wages, take the following actions:

For Form 940, if the taxpayer’s taxable wages do not match Form W-2 taxable wages, they are not able to send Form 940-B to the state agency, or are not eligible for state credit, take the following actions:

Taxpayers contact TAS for assistance in resolving problems when they:

For information on TAS cases, refer to IRM 4.19.13.25, Taxpayer Advocate Services (TAS) Procedures.

Campus Employment Tax Non-filer Program (PBC 296 and PC 0453) are worked by the Cincinnati Exam Reconsideration Team.