Purpose: This IRM provides guidance to Appeals Technical Employees (ATEs) working individual income tax liability cases with related Shared Responsibility Payment (SRP) issues to assist in:

Audience: Appeals Technical Employees

Policy Owner: Director, Case and Operations Support

Program Owner: Director, Policy, Planning, Quality and Analysis.

Contact Information: Appeals employees should follow established procedures on How to Contact an Analyst. Other employees should contact the Content Point of Contact (POC) shown on the Product Catalog Information page for this IRM.

Appeals will not accept a pre-assessed non-docketed income tax (MFT 30) or SRP (MFT 35) liability case if the number of days remaining on the ASED for a new receipt is less than 365 days. Follow the procedures in IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE), that require the ATE to complete initial case actions within 45 days of receiving a newly assigned or transferred case. See IRM 8.21.3.2.1, New Receipts and Transfers, for Appeals’ case acceptance criteria and IRM 8.7.20.2.1, Protecting the Assessment Statute Expiration Date, for guidance on protecting pre-assessed income tax and SRP liabilities.

When an SRP MFT 35 case file is associated with an income tax case, APS will establish a separate ACDS record for the MFT 35 using the same work unit number (WUNO) as the MFT 30. See IRM 8.20.5.3.1.6, Workunit Number (WUNO). Verify the case for both liabilities is correctly carded-in on ACDS, as described in IRM 8.20.3, Appeals Centralized Database System (ACDS), and IRM 8.20.5.32, Shared Responsibility Payment. Validate all critical data fields on ACDS and make the necessary changes following procedures in IRM 8.20.3. Verification includes confirming on ACDS that:

Appeals can determine whether Compliance raised the SRP issue, along with the income tax liability issues, by reviewing the following:

SRP liability determinations are not reviewed by the United States Tax Court. Therefore, an SRP associated with an individual’s docketed income tax deficiency case must be assessed by Compliance before forwarding the case file to Appeals. If Compliance has not assessed the SRP amount associated with the docketed income tax case, take the necessary actions depending on whether the examiner’s manager signed Form 8278, Assessment and Abatement of Affordable Care Act (ACA) Assessable Payments.

For non-docketed income tax cases, mail Letter 5157, Non-docketed Acknowledgement & Conference, with required enclosures. See IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE).

For docketed income tax cases, mail Letter 3808, Docketed Acknowledgment and Conference (To Petitioner), or Letter 3808-A, Docketed Acknowledgment and Conference (To Counsel of Record). See IRM 8.4.1.8, Preliminary Review of Assigned Docketed Case.

There may be instances when an MFT 35 account needs to be mirrored using MFT 65. An MFT 65 requires a related ACDS record with the same WUNO as the key case to control the MFT 65 for the separate spouse. If mirroring is required, Compliance may or may not have established the MFT 65. For more information, see IRM 21.6.8.2, Split Spousal Assessments Overview.

MFT 65 is created when the module meets one or more of the following conditions:

For tax years 2014 - 2018, individuals must either have minimum essential coverage, have a health coverage exemption, or make a shared responsibility payment (SRP) with their income tax return. The SRP is the penalty imposed under IRC 5000A, Requirement to Maintain Minimum Essential Coverage, if an applicable individual in a tax household lacks minimum essential coverage for any month. Taxpayers will either:

When the taxpayer checks the full-year coverage box on their return or if it is added from an amended return, IDRS CC TXMOD displays "1" for full year coverage in the COVERAGE-IND field. See IRM 2.3.11, TXMOD and SUMRY. If this is later changed or adjusted, a TC 290.00 with item Reference Number 869 may be present.

The SRP amount is reported on Form 1040, Schedule 4, line 61 (Tax Year 2018), and is posted to MFT 35 as a TC 240 with penalty reference number (PRN) 692. A TC 971 Action Code (AC) 530 will post to MFT 30 with the SRP amount in the memo field. This amount is not included in the TC 150 amount shown on MFT 30.

When a taxpayer reports an exemption post-processing, the exemption is recorded on MFT 30, on CC TXMOD with a TC 971. Since the exemption can be for the entire family, individual members of the family, different reasons, for the entire year, or just part of the year, multiple TC 971 action codes may be needed.

A tax household generally includes the taxpayer, their spouse (if filing a joint return), and any individual they claim as a dependent on their tax return. It also generally includes each individual the taxpayer can, but does not, claim as a dependent on their tax return. If more than one taxpayer may claim an individual as a dependent in the same calendar year but no one claims the individual as a dependent, the taxpayer with priority under the rules of IRC 152, Dependent Defined, to claim the individual as a dependent is liable for the SRP for the individual. See 26 CFR 1.5000A-1(c)(2).

For more information, see IRM 21.6.4.4.20, Individual Shared Responsibility Provision.

Appeals has primary responsibility for resolving disputes without litigation to the maximum extent possible. For guidance on conference procedures, preparing an Appeals Case Memo (ACM) and settlement options, see the following IRM guidance:

Appeals will consider an SRP (MFT 35) issue if Compliance made an adjustment to the SRP. Appeals will not raise new issues.

If a taxpayer raises SRP as a new issue on a non-docketed case, follow the procedures in IRM 8.6.1.7.4, Taxpayer Raises New Issue.

Follow normal procedures for requesting computations. See IRM 8.2.1.8, Requesting Work from Tax Computation Specialist. In addition, provide the following information for TCS to compute the SRP:

See also IRM 8.17.3.3.9, Shared Responsibility Payment (SRP), and IRM 8.17.3.5, Tax Court Jurisdiction of Interest, Certain Penalties, and the SRP.

This section provides information on documents needed for closing an SRP liability issue. Every ACDS work unit requires an Appeals Case Memo (ACM) and a Form 5402, Appeals Transmittal and Case Memo. The ACM must adequately explain and support the basis on which a work unit is disposed. The exception to the requirement for an ACM is where disposition, including all ACM comments and rationale about the case, can fit in the Remarks section of the Form 5402.

Use Form 5402 to alert the ATM and/or APS employee of significant items in the case to be addressed. See IRM 8.6.2.3.2, Using Form 5402 as the Appeals Case Memo (ACM), and IRM 8.6.2.3.3, Using Form 5402 as an Alert. Alerts could include information on the following:

Form 5402 for Income Tax liability - Complete a Customized Form 5402 for the MFT 30 income tax liability following normal procedures. Locate Form 5402 instructions by visiting Appeals’ ACDS SharePoint page, clicking on "Customized 5402 Instructions and Contacts," and selecting "Customized - EXAM INCOME TAX."

Form 5402 for SRP liability - Complete a second customized Form 5402 for the MFT 35 SRP liability following normal procedures.

For each tax period controlled on AIMS, prepare Form 5403 instructions. The assigned APS Tax Examiner will use these instructions to prepare Form 5403, Appeals Closing Record, for processing IDRS account adjustments and closing the AIMS module. Use IDRS command code AMDIS to determine if the account module is on AIMS. See IRM 2.8.3, AIMS Command Code AMDIS. Campus-sourced claims are generally not controlled on AIMS.