This subsection is used by Small Business/Self Employed (SB/SE) and Taxpayer Services (TS) Campus Examination and Contact Employees for toll-free calls or to review and process audit reconsideration cases. Other IRM chapters will be referenced throughout this IRM to provide specific guidance for individual topics. Examination employees are responsible for researching and utilizing information contained in all reference materials. Legal citations, form and letter references, and IRM references are reviewed and updated as necessary.

The Internal Revenue Service has the discretionary authority to abate an assessment of any tax if it is excess of the taxpayer's liability per IRC 6404(a) and Treas. Reg 301.6404-1. IRM 1.2.1.5, Policy Statements for the Examining Process.

Liability Determination - Discretionary Programs is used in Campus Examination Operations by managers, coordinators, examiners, and clerical staff to work, control, and monitor inventory for discretionary tax issues in both SB/SE and Taxpayer Services.

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see the Taxpayer Bill of Rights.

Program Reviews:

Program Reports:

Integrated Data Retrieval System (IDRS).

Report Generation Software (RGS) is used for Campus Exam’s: open case control, monitoring incoming taxpayer’s correspondence, and manual review of case files.

Follow proper retention and disposition requirements when utilizing Form 3210, Document Transmittal, as outlined in Document 12990, Records Control Schedules.

Commonly used acronyms that may be within IRM 4.13.1 are shown in the table below.

Other IRM’s referenced within IRM 4.13.1 are

Helpful information can be found on the Exam Research Portal, located on SERP at:http://serp.enterprise.irs.gov/databases/portals/compliance/exam/exam.html.

Exam Project Codes can be found on SERP in the Exam Project Code Search.

To request an audit reconsideration:

BMF Reconsideration cases will be routed through AM to follow IRM 21.5.10.4.3

See IRM 4.13.1.2.1, Criteria for Reconsideration, to ensure request meets reconsideration criteria.

If all criteria are met, then see IRM 4.13.1.3.2, Function Responsible and Routing Instructions, to identify where the reconsideration request should be routed.

If criteria are not met:

To determine an Automated Substitute for Return (ASFR) reconsideration, research Integrated Data Retrieval System (IDRS) for the following transaction code(s) (TC). (All must be present).

To determine an Automated Underreporter (AUR) reconsideration, research Integrated Data Retrieval System (IDRS). The assessment will be a TC 290 preceded by a TC 922. The originating campus may be determined from the address in the upper left corner of the CP 2000 (if available) or from the first two digits of the TC 922 DLN. Correspondence requesting AUR reconsideration will be sent to the Campus where the assessment originated. A listing of addresses and contact phone numbers are available on SERP at SERP - AUR Reconsideration - Who/Where (irs.gov).

To determine an SB/SE Exam Substitute for Return (SFR), research Integrated Data Retrieval System (IDRS). SFR Examinations are identified by the following IDRS transaction codes:

To determine Campus Exam and Area Office (AO) Exam, research Integrated Data Retrieval System (IDRS). A TC 420 followed by a TC 300 and TC 421 indicates a previous audit was performed by Campus or Area Office Exam. Exam reconsiderations can be identified by a TC 300 with an amount or a TC 300 for zero with an adjustment to a refundable credit, such as the earned income credit (TC 765). The PBC of the TC 420 (or PBC is 6XX Appeals use TC 424) will assist with determining the correct campus for routing.

If a reconsideration request is generated from a phone call, or walk in and the taxpayer knows what issue is being contested or the contact employee can identify the disputed issues:

If a reconsideration request is generated from a phone call, or walk in and the taxpayer does not know the disputed issues or the contact employee cannot identify the disputed issues: the employee will request that a copy of the Examination Report and Pub 3598 be sent to the taxpayer from the area that performed the examination via Form 4442, Inquiry Referral, see IRM 21.5.10.4.4, Requests for Copies of Audit Reports. Advise the taxpayer to follow procedures in Pub 3598 when requesting reconsideration.

Do not input a collection hold at this time. Advise the taxpayer that collection activity will continue until we receive the requested documentation.

If the taxpayer states they previously received a Letter 3338-C and it has been 3 weeks or more since they sent in the requested documents.

If correspondence is received without supporting documentation: Employee must complete and send Letter 3338-C selecting the appropriate paragraphs that correspond with the disputed issues identified by the taxpayer and include Form 12661. Put in the return address code of the Centralized Reconsideration Unit (CRU) to whom the response should be directed.

If correspondence is received with supporting documentation or the walk-in taxpayer has documentation, check TXMOD/IMFOL for the collection statute (CSED)

If a call is received from the taxpayer requesting an audit reconsideration, research account to verify taxpayer meets reconsideration criteria. See IRM 4.13.1.2.1, Criteria for Reconsideration.

If taxpayer meets audit reconsideration criteria and CEAS/ TXMOD does not show an open reconsideration case:

The CEAS Status Codes can identify the actions taken on the audit reconsideration case. Refer to IRM 4.13.1.4.1.7, Controlling the Case, for Status Code Table and explanations.

If the taxpayer does not know what information is specifically needed; review the CEAS/ RGS workpapers, and, advise the taxpayer what documentation is needed. If the case is not on CEAS, review IDRS for adjustments and/or Project Codes to assist in advising what is needed.

The taxpayer states that they have already sent in everything requested in the Form 886-H or previously issued Letter 3338-C, the CET will review the CEAS Audit Reconsideration workpapers to ascertain if the information previously sent was determined by the examiner, to be complete and correct. If CEAS indicates that more information is needed:

If the case is open on CEAS as Recon and the taxpayer insists on talking to the assigned examiner after a full explanation was provided follow existing phone procedures in IRM 4.19.19, Campus Examination Telephone Contacts, to send CEAS Action Note.

If the taxpayer is under a 2 or 10 year ban (PC 0697 & 0698) and requesting a reconsideration advise them to request an audit reconsideration for the year the ban originated and submit documentation showing their entitlement.

This subsection discusses the role of the Central Reconsideration Unit (CRU). The CRU works reconsideration cases for individual income tax returns previously worked by the Area Office or Campus Examination function.

Reconsideration requests must be screened within 5 workdays of receipt to ensure they will be accepted and worked in CRU prior to opening in CEAS in Status Code 7100. The account will be reviewed to determine what function made the original assessment generating the reconsideration.

For Audit Reconsideration requests received without documentation, the case will not be suspended waiting for documents follow IRM 4.13.1.4.6.1, No Documentation.

If a request is received and a prior or subsequent year reconsideration is being worked in your campus, do not route the case. Assign the year(s) received to the examiner who is already working the case. If the audit reconsideration is generated from a program that was centralized, send the request(s) to the campus where the program was worked. See IRM 4.13.1.3.2.1, Routing Instructions for Multiple Year and/or Assessments Reconsideration Requests.

If the reconsideration is generated from a different Campus assessment:

If the reconsideration is generated from an Area Office assessment and:

If the reconsideration is generated from an Appeals assessment and:

Requests for an audit reconsideration submitted by IRS Employees will not be worked in the CRU. The CRU will screen the requests but will not assign or work the employee audit reconsideration cases. CRU employees will follow IRM 4.13.1.4.2(5), First Read Procedures, and IRM 4.13.1.4.5, Area Office Reconsiderations, in establishing AIMS controls and preparing the case. All employee reconsideration cases will be transferred to the appropriate PSP based on the current address of the employee/taxpayer. To ensure expeditious handling, use a delivery service that provides tracking capability when sending information to the Area office.

Form 3870, Request for Adjustment, case referrals for audit reconsideration received from Collection revenue officers will be started within 14 days of receipt in the campus CRU.

-W Freeze: If the module reflects a TC 520 with closing codes 70-77 or 80-82, the case is in litigation status. If the case is in litigation status, contact the applicable litigation contact based on the 520 closing code. See IRM 21.5.6.4.46, - W Freeze.

When a reconsideration request is accepted for inventory in the CRU:

When routing a reconsideration case from one CRU to another, the following procedures apply:

All cases must first meet reconsideration criteria as defined in IRM 4.13.1.2.1, Criteria for Reconsideration.

Route cases meeting the following criteria to the Area Office (AO):

Original examination was conducted by an Area Office:

If case is on CEAS, establish the audit recon record by retrieving the case from archive in Status Code 7100. If the case is not archived on CEAS, it will be necessary to manually create, archive and retrieve the case. The case must also be controlled on IDRS (TXMOD). Check to make sure the case is assigned and the collection hold has been input, if needed.

Open the CEAS Audit Reconsideration Information Screen and check to ensure that the Original TC "300" reflects the deficiency amount of the audit report. If incorrect, correct to the deficiency amount (tax and credits).

Verify/Input the correct tax period, and IRS and Exam received dates on the Audit Reconsideration Information Screen. Verify to ensure the "TC 300 or TC 290 (SFR)" dollar amount correctly reflects the deficiency amount of the report issued resulting from the audit that taxpayer is requesting reconsideration for. If SE tax and or credits are involved the assessment amount may be the credits or a net amount of the tax and credits reversed. If the TC 300 or TC 290 amount is not correct, change to reflect the deficiency amount.

Create a new issue under the De-Minimus IMF Code and rename it "MMDDYYYY 4700RECON". When creating their F4700, they must click on the "Audit Recon Notes" first, before clicking on the original "4700". This will ensure that the original 4700 is not overridden by the Audit Recon Issue. Subsequent Audit Recon requests can utilize the same notes saved under the previous Audit Recon Issue. No new 4700 or issue will have to be prepared.

Managerial approval must be obtained before ordering the administrative file. Managerial approval must be documented in workpapers.

If additional mail is received on open cases in Status Code 7100 or 7700, the Status Code will be updated to 7154 or 7754 (whichever is applicable) within 5 days of mail receipt.

When fully allowing the Reconsideration request, a new audit report is not needed. Adjust the taxpayer's account to tax liability prior to the correspondence audit. Document workpapers with your decision and make the appropriate adjustment.

When partially allowing the Reconsideration request, a new audit report must be generated and sent to the taxpayer. The Audit reconsideration report can be saved as "MMDDYYYYRECON4549". The examiner must check IDRS to ensure the starting point of the report reflects the taxpayer’s account including all prior adjustments.

Review applicable program procedures in IRM 4.19.13, General Case Development and Resolution, thru IRM 4.19.15, Discretionary Programs, when making determinations on Campus Exam cases. Examiners will seek technical assistance from the workgroup assigned to work specific discretionary programs, because special procedures have been developed to work the programs. (Example: PC 133, CI Referrals, PC 360/ 364-Tip Employees, PC 402/405/406- Education Credits, etc.)

The CEAS workpaper must be documented with the information requested on the original audit, subsequent documentation received with Reconsideration Request, and documentation still needed, and conclusion reached. Save as "RECON4700”.

When suspending the case on CEAS/RGS the examiner will update to Status Code 7700 and must move the case off their desktop back to suspense file server. This will allow for the Autoclose to work if there is no response.

On the Audit Recon Information Screen, record and validate the abatement amount to ensure population of the CEAS Reports. If no adjustment was made to the account input "0" in the Abatement Amount Field. If there was an adjustment to the account input the total adjustment to tax and credits.

Both CEAS/ RGS and IDRS controls must be closed when the case is completed. Ensure the CEAS case is sent to file server. Close the CEAS/ RGS control using the appropriate closed Status Codes (Do not check the "Update AIMS" box) outlined in the table below:

Process Adjustment to Master File by inputting TC 29X with the applicable Reconsideration Reason Codes as follows:

After the determination is made, follow the applicable closing procedures.

If the taxpayer provides further documentation in response to Letter 3340-C:

If the Taxpayer submits additional information that would result in a decrease to the Exam assessment after a disallowance letter has been issued, review CEAS to determine if the information sent is valid and adjust accordingly.

If the taxpayer submits additional/same information that would not change the former audit results, notate CEAS and send Letter 916-C. Use open selective paragraph to advise the taxpayer that the additional information submitted does not allow you to reverse the audit adjustment of the year they are contesting. Also inform the taxpayer to refer to the enclosed Pub 1 which explains the Appeals process and Claim Procedures for further consideration of their abatement request. Record the facts and circumstances that support your decision.

All cases must be reviewed to ensure protection of the statute, see IRM 25.6, Statute of Limitations for specific instructions.

Assessment Statute Expiration Date (ASED) normally expires three years from the date the original return was filed or three years from the due date of the return, whichever is later.

Refund Statute Expiration Date (RSED) is generally, 3 years from the time the original return was filed or 2 years from the time the tax was paid, whichever is later. When a claim disallowance letter was issued the Service may reconsider a disallowance during the 2 year period in which the taxpayer may file a refund suit. The 2 year period being with the date on the certified letter of claim disallowance, see IRM 25.6.1.10.2.5.5, Reconsideration of a Disallowed Claim.

If an adjustment is made to a taxpayer’s account and the result is an overpayment that cannot be refunded in full or in part due to the RSED the examiner is required to take the following actions:

This section discusses appeal rights. The Appeals mission is to resolve Federal tax controversies without litigation on a basis which is fair and impartial to both the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS.

An audit reconsideration case will be forwarded to Appeals, if requested following procedures in Publication 5, Your Appeal Rights and How to Prepare a Protest if You Disagree, if:

An audit reconsideration case will not be forwarded to Appeals in the following circumstances:

If the taxpayer does not wish to appeal, but still wishes to dispute the audit reconsideration determination.

The taxpayer’s new information must be considered before the case is sent to Appeals. In some instances, the taxpayer may provide Appeals with new information or new evidence related to a disputed issue that the taxpayer did not previously share with the examiner. If the Appeals Technical Employee believes the information merits additional analysis or investigative action by Examination, Appeals will release jurisdiction and return the case to the examiner to evaluate and make an audit determination. See IRM 8.6.1.7.5, Taxpayer Provides New Information.

See IRM 4.13.1.4.11.1, Request for Appeals, for case building and routing instructions.

Overview: IRC 32(k), allows the IRS to prohibit a taxpayer from claiming EITC for a period of time if the IRS determines that the taxpayer intentionally or recklessly disregarded the rules for claiming EITC (2 year ban) or fraudulently claimed EITC (10 year ban). When the 2 or 10 year ban is applied to a tax year, the taxpayer is notified that the ban is being asserted no later than the Statutory Notice process. The letter must advise the taxpayer of the ban and describe the taxpayer’s conduct giving rise to the ban in the determination year. The original case file must also document managerial approval to impose the ban prior to Statutory Notice of Deficiency issuance per IRM 4.8.9.8.7, Proper Managerial Involvement. IMFOLE and ENMOD will carry an EITC-recertification Indicator “2” (2 year ban) or “4” (10 year ban) along with the year the Ban originated and the Ban expires. For additional information see IRM 20.1.5.3.5, Two and Ten Year Bans on Claiming the Earned Income Tax Credit (EITC), IRM 4.19.14.7.1, 2/10 Year Ban - Correspondence Guidelines for Examination Technicians (CET), and IRC 32(k) (1) (B).

Evaluating 2 of 10 year ban Audit Reconsideration: The taxpayer needs to address the conduct that was cited in the workpapers for the originating year the ban was imposed. In some cases, the taxpayer will request a reconsideration of the denial of the EITC for a year under the ban instead of the originating year. In that situation, send Letter 3338-C or Letter 3339-C to advise the taxpayer that they must address the imposition of the ban on the originating year before the IRS can consider the more current year when EITC was denied because of the ban. The Audit Recon examiner must request the administrative file or secure the CEAS workpaper and statutory notice, if available, to ascertain the taxpayer’s conduct giving rise to the assertion of the ban. A 10 year ban was imposed; refer reconsideration to the applicable Area Office or Campus that asserted the ban to be worked.

No Documentation - 2 year ban: If a request for reconsideration of the Ban is received without any documentation, send Letter 3338-C or Letter 3339-C, if applicable, and advise the taxpayer that they must provide documentation to show they were not reckless or intentionally disregarded the EITC rules for the year the Ban was imposed. Cite the taxpayer conduct as documented in the administrative file or the CEAS work paper. Follow procedures under IRM 4.13.1.4.6.1, No Documentation.

If Audit Reconsideration allowed: Remove 2 year ban & Allowance of EITC. If the taxpayer provided information on the ban to substantiate allowance of EITC, removal of the 2 year ban, the examiner will:

Removal of 2 year ban and Disallowance of EITC: If the determination is made that the Ban was imposed in error, or other facts and circumstance dictate that the Ban should not be enforced, and the taxpayer did not provide information to support the reversal of the EITC disallowance:

Disallow Audit Reconsideration: If the taxpayer failed to present any information to substantiate EITC entitlement for the year that triggered the ban and also fails to present any information to address the conduct that led to the imposition of the ban, the audit reconsideration will be disallowed. Follow instructions outlined in IRM 4.13.1.4, Central Reconsideration Unit, when disallowing reconsideration. Notate CEAS and IDRS with appropriate reason and status codes.

All Taxpayer Services Exam SFR Reconsideration cases will be worked in the receiving campus.

Refer complex issues to Classification. Review IRM 4.19.11.2.1, Procedures for Screening Individual Returns, to identify issues that are not conducive to a correspondence audit. Follow the “Accepted” instructions below for all other cases.

The table below explains what action to take based on Classification’s determination:

The CEAS Audit Recon record will be updated accordingly.

If an unsigned return is submitted in response to an SFR notice, whether it is a claim for a refund or reports additional tax due, do not accept or process. The return is invalid. Reject to the taxpayer with Form 3531, Request for Signature or Missing Information to Complete Return. Review the return for other missing items and request all missing required information. Form 3531 will include instructions to the taxpayer that they may fax the return or mail back to the reconsideration unit. Ensure the correct fax number and address with Stop numbered is included.

An SFR reconsideration is the initial original delinquent return submitted by the taxpayer to contest a SFR assessment made by SB/SE Examination.

All IMF SB/SE Examination SFR Reconsiderations are worked in the Examination Operation at the Brookhaven Campus.

SBSE SFR reconsiderations are identified by the following IDRS transaction codes:

If the module contains multiple TC 300s and no Appeals code or a TC 971 AC-282 the taxpayer original return was received during the Non-filer examination and is not a SFR reconsideration. See IRM 4.13.1.3.2, Function Responsible & Routing Instructions.

If the module contains a TC 300 SFR assessment and subsequently has a TC 599 CC 89 followed by a TC 29X adjustment, the taxpayer original delinquent return (SFR reconsideration) has already been processed. Returns will be forwarded to Accounts Management. If return figures match TC 29X adjustments, it is a duplicate and will be sent to Files for association.

If the module contains a TC 290 SFR assessment see IRM 4.13.1.3.2, Function Responsible & Routing Instructions.

If TC 300 follows a TC 29X adjustment route to Centralized Reconsideration Unit (CRU) per TC 420 PBC.

Cases will be worked in IRS receive date order with the following priority exceptions:

When there are other open SFR tax modules on IDRS CC SUMRY, the returns must be worked together to provide better customer service.

Collection hold will be input to accounts using TC 470. Use REQ77 to input. No collection hold can be placed on module when in Status 12, 26, 60, 71 and 72. No collection hold will be placed on Form 3870 referrals from Revenue Officers unless specifically directed by them in writing.

The IAT xMend tool will be used to process the return.

An AMS history must be input to annotate actions taken on a case.

If there are no prior adjustments besides the original SFR assessment, blocking series 00 will be used unless stated otherwise. Blocking Series 05 will be used on joint filer back out.

Pull TXMOD to check Freeze codes.

Follow existing procedures to determine that SFR reconsideration return is the first original return submission from taxpayer such as verifying correct ASED, checking for TC 976 and viewing CEAS on Disposal code 10 with Technique Code 2 to ensure the first original return was not received during the Non-Filer examination. Check SUMRY for open controls to identify duplicate assignments and related tax years for primary taxpayer and when applicable secondary taxpayer.

Prior to adjusting account, verify initial first read screen and review account and return for:

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Check all necessary supporting schedule and forms are present prior to processing. Follow guidance in IRM 5.18.1.9.2.3.20, Math Errors.

Income will be verified for complete reporting on IDRS and also Form 4549 on CEAS. Follow guidance in IRM 5.18.1.9.2.3.21, Under/unreported Income.

Accept taxpayer’s figure for estimated tax penalty if present on return. If blank, compute the penalty.

If the Refund Statute Expiration Date (RSED) has expired, the allowable Rebate Recovery Credit (RRC) must be limited to the amount of any remaining tax due after all other credits have been applied to prevent any credit from refunding.

If Schedule M for the Making Work Pay (MWP) credit is not attached, do not correspond. Allow the credit for the primary taxpayer and secondary, if applicable, since the SFR assessment included the benefit of the credit.