It is a source document for tax amounts on agreement forms, Form 5402, Appeals Transmittal and Case Memo, and Form 5403, Appeals Closing Record;

It informs the taxpayer of adjustments resulting from Appeals' disposition of the case; and

It serves as a guide for subsequent years’ adjustments.

The findings of Compliance are completely reversed by Appeals.

The findings of Compliance are sustained in full by Appeals.

A statutory notice of deficiency is issued which adequately covers all adjustments.

The determination in the notice of deficiency is agreed in full either during the 90-day period or after filing a petition.

Generally, unagreed docketed cases.

Cases where the only issues involve exempt status, private foundation classification, or employee plan qualification questions.

Cases involving Appeals Specific Dollar Settlements.

Generally, if the cases involve similar type returns, prepare one settlement computation to cover all cases. For example, if a taxpayer files a Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents one year, a Form 1040A, U.S. Individual Income Tax Return the next year, and a Form 1040, U.S. Individual Income Tax Return the third year, all three years may be included on one settlement computation.

If there are years involving both joint and separate returns, prepare one settlement computation for joint return years and another settlement computation for separate return years. ("Separate" can mean filing single, head of household or married filing separate.)

If there are years involving both consolidated corporate and non-consolidated corporate return years, the facts and circumstances of each case will determine if one settlement computation may be prepared, or if separate settlement computations (one for the consolidated corporate return years and another for the non-consolidated corporate return years) will be needed.

Do not combine fiduciary returns, Form 1041, U.S. Income Tax Return for Estates and Trusts, with individual returns, Form 1040, U.S. Individual Income Tax Return, in the settlement computation.

Do not combine Form 1120, U.S. Corporation Income Tax Return years with the taxpayer’s Form 1120-S, U.S. Small Business Corporation Income Tax Return, unless the Form 1120-S is being converted to Form 1120.

Treat Forms 1120-S as cases only when additional tax is due (IRC 1378) or an overassessment is determined.

A current transcript is generally determined to be one in which no more than two weeks have elapsed since it was secured.

If there are indications that transactions may have occurred since the date of the last transcript, request an updated transcript, regardless of how many weeks have elapsed.

See IRM 8.20.2.1, Integrated Data Retrieval System (IDRS) Transcripts of Account, for further information.

If instructions are unclear or are incomplete, make a note of the questionable items.

If an answer is not found during examination of case file, ask the requester to complete or clarify the request.

Consider the effect of proposed adjustments on other items (so-called automatic adjustments).

Compute tax at rates in effect for the taxable year, period, etc.

Recompute, if necessary, other taxes and credits.

For more information about Form 3610, Audit Statement, requirements for specific types of cases, click on the TCS Website and then see the TS Audit Statement Notations and Form 3610 folder.

Form 3610, Audit Statement, is not prepared for Rule 155 cases. See IRM 8.17.2.12.1 for information about the Summary Page (Face Sheet) that is required instead for Rule 155 computations.

In the first column of Form 3610, Audit Statement, list the tax years or periods covered by the Appeals or Counsel determination in the case. If the year is less than 12 months, or a 52–53 week year, include the beginning and ending dates. Additional columns are provided for listing deficiencies or overassessments in tax, additions to tax, and penalties. If necessary, alter columns to fit the circumstances but make sure they are properly identified.

Enter the tax deficiency or overassessment amount in a column to the right of the tax year or period listed.

Specify applicable penalties or additions to tax by IRC section in the column headers and enter any amounts in the columns to the right of the tax deficiency or overassessment column for the particular tax year.

Form 3610, Audit Statement, does not need to be prepared just to show penalty/addition to tax information.

If Form 3610, Audit Statement is prepared, no penalty or addition to tax information is required to be included on the Form 3610, Audit Statement for penalties/additions to tax no longer asserted in the settlement computation (they are conceded in full or no longer applicable). Information such as the penalty code sections, and zeroes or "None" for amounts is not required.

Unassessed advance payments: When there are multiple years, multiple payments, or payments that have been separated by the taxpayer into categories, i.e. tax, penalty and interest, it is recommended that an explanation similar to the example shown below be provided on Form 3610, Audit Statement.

Unassessed advance payments in docketed cases: A notation in the settlement computation stating the date and amount of an unassessed advance payment is recommended in docketed cases. Sample language is shown below:

The deficiency shown above for __(enter tax year) does not take into account a payment of $__ made on __ (enter date of payment).
 

Recomputation not necessary for one or more years: If a tax computation is not necessary for one or more years and a Form 3610, Audit Statement is prepared, the following optional statements may be added at the discretion of the TCS or an ATE: "No change to prior determination" ; "No change to determination in statutory notice of deficiency" ; "Prior determination reversed in full" ; or "Determination in statutory notice reversed in full" .

Number of pages or schedules: In lengthy settlement computations where it would be useful to the taxpayer or helpful in assembling copies, the total number of pages or schedules in the settlement computation may be noted. (This is optional and at the discretion of the TCS or an ATE.)

The tax computation forms have lines designated for the entry of additions to tax and/or penalties. Enter any additions to tax or penalties that still apply based on the settlement. When annotating the information on the tax computation form, a format similar to the following should be used to show the code sections and amounts:

If an addition to tax or penalty previously asserted in the Revenue Agent Report (RAR) or statutory notice is not being asserted in the settlement computation (it is being conceded or is no longer applicable), then it is not necessary to enter any addition to tax or penalty information on the tax computation form prepared for the settlement computation.

If the tax liability per the return was adjusted, a computation of "Tax as previously adjusted" similar to the following may be included in the settlement computation. This can be shown at the bottom of the tax computation form or on an attachment.

Does the taxpayer need an explanation to understand the adjustment or to adjust their books?

Would an explanation help the ATE or Counsel?

Is an explanation needed to adjust other years?

This discussion of Rule 155 computations uses the word "deficiency" . Employment tax determination cases under IRC 7436 do not involve a deficiency (as defined in IRC 6211). The discussion in this IRM section however, applies to IRC 7436 cases as if the IRC 7436 notice of determination were a notice of deficiency.

In addition, Rule 155 computations in certain post assessment proceedings such as interest abatement, spousal relief, and collection due process cases do not determine "deficiencies" . Often, such cases determine "liabilities" , or determine periods of interest abatement or other forms of relief.

The Rule 155 computations may be modified, as appropriate, to fit these types of cases.

Counsel will submit the Rule 155 computation request through the Appeals Support SharePoint site using Form 3608, Request for TCS Service. All documents needed to complete the computation should be attached to the request in SharePoint. The TCS manager assigns the Rule 155 computation to a TCS. Counsel delivery of the documents/administrative file needed to complete the computation will vary by the location of the Counsel office and the TCS office.

Be alert for automatic adjustments not included in the Counsel request. Handle any other issues in accordance with the notice of deficiency or pre-session settlement. Rely upon the Counsel request and administrative file (if available) and not the legal file or decision for information. When ambiguities exist seek clarification from Counsel.

Counsel should receive computations from TCS within 45 days of the opinion. When necessary, give priority to these computations. Unless otherwise directed by the court, Counsel must file Rule 155 computations promptly with the court within 90 days from the date of the court’s opinion. However, the CCDM provides that Rule 155 computations should be filed within 60 days.