The Internal Revenue Service (IRS) is granted the authority to determine that some accounts are CNC. The IRS balances the potential for collection against the costs and its ability to collect.

The decision to suspend collection action is made with an awareness that the IRS also is charged with fair and equitable enforcement of tax laws.

Policy Statement 5-71 (aka P-5-71) provides the authority for reporting accounts CNC. See IRM 1.2.1.6, Policy Statements for the Collecting Process. Currently uncollectible accounts can be removed from active inventory after taking the necessary steps in the collection process.

The procedures described in this IRM for determining economic hardship are based in part on Treasury Regulation 301.6343-1(b)(4)(ii).

IRC 6343(e) requires the release of a levy on salary or wages payable to or received by a taxpayer, upon agreement with the taxpayer that the tax is currently not collectible.

The Director, Collection Policy is responsible for overseeing policy and procedures regarding determinations to report accounts currently not collectible.

The program manager, Case Resolution Alternatives (CRA), is responsible for developing and delivering policies, procedures and practices within the currently not collectible program.

Field Collection group managers and territory managers are responsible for ensuring the guidance and procedures described in this IRM are complied with.

Revenue officers (RO), appeals officers (AO), and settlement officers (SO) may report accounts as CNC.

Tax examiners in Field collection (FC) and Centralized Case Processing (CCP) may report as CNC those accounts that meet existing criteria subject to the limitations shown below:

Bankruptcy specialists may report as CNC corporate liabilities when a corporation has been through a liquidating bankruptcy.

Advisory employees may report accounts CNC when a local probate office indicates that a proof of claim will not generate funds. Transferee issues should be considered. See IRM 5.16.1.2.4, Decedent and Decedent Estates for additional information.

The ICS/Entity Quality Analysts (IQAs), have the authority to shelve cases/modules in accordance with IRM 1.4.50.9.1.1, Shelving Erroneously Assigned Cases/Modules, and to recess modules in accordance with IRM 5.16.1.3.6, MFT 35 Shared Responsibility Payment (SRP) and MFT 65 Mirrored Shared Responsibility Payment.

The Inventory Delivery System (IDS), may shelve IMF accounts where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡ and BMF accounts where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡.

Accounts and related dollar amounts closed as currently not collectible are reported monthly and quarterly, and monitored by Collection Policy. See IRM 5.2.4, Reports, Collection Reports.

CNC dispositions are reported monthly on the Taxpayer Delinquent Account (TDA) Monthly Report, Part 1 (Report Symbol Number NO-5000-1). Data is tabulated by both the business operating division (BOD) of the taxpayer and the BOD where the TDA is assigned. Each TDA report is separated into segments: All-National Office, Organizational BOD and Area. The Taxpayer Delinquent Account Cumulative Report (Report Symbol NO-5000-2) contains the same data elements as the NO-5000-1. The report provides information from the beginning of the fiscal year through the end of the current reporting month.

The Recap of Accounts Currently Not Collectible Report (CNC-149) reflects the results of operations during the quarter. The report contains the number of closures related to TC 530 for this fiscal year and related dollar amounts posted to the Master File, inventory and activity data.

The Recap of Accounts Currently Not Collectible Report (Report Symbol NO-5000-149) consists of two reports (Regular and BOD). The regular report includes all the cases reported CNC regardless of the BOD of the taxpayer. The BOD report lists cases by BOD of the taxpayer. Both reports contain the same data elements. Each report is broken out into Main and Minor Parts.

Program Effectiveness: Reviews by group managers, territory managers, Collection Policy analysts and National Quality reviewers are conducted to measure consistency, effectiveness in case action, and compliance with policy and procedures. The results of these reviews are used to promote and improve program effectiveness.

CNC recommendations generally require the review and approval of the immediate manager to ensure the investigation meets established standards of thoroughness and integrity. See also IRM 5.16.1.5, Managerial Approval. Managerial review criteria of completed work is located in IRM 1.4.50, Collection Group Manager, Territory Manager and Area Director Operational Aid, Exhibit 1.4.50-2.

Quality control is accomplished through mandatory and sample reviews through Embedded Quality (EQ).

Collection Policy conducts program reviews of CNC closures to monitor compliance with IRM requirements.

The table in Exhibit 5.16.1-6, Common Acronyms, lists common acronyms used in this IRM.

The following table lists the primary forms used by the CNC program:

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 https://www.irs.gov/taxpayer-bill-of-rights

If neither the taxpayer nor assets can be located, use cc 03 to report the account uncollectible. For Single Member Owners (SMO), where the SMO is liable for taxes assessed under an LLC EIN, and the SMO, and assets of the SMO are unable to locate, use cc 17 to report the SMO modules uncollectible. If all asset locators show the taxpayer is still at that address, but attempted contact confirmed the house is vacant or someone else lives there, the case would be closed UTL.

When the taxpayer's ability to pay cannot be determined because they cannot be contacted and income and assets cannot be identified, use cc 12, Unable to Contact. For SMOs, where the SMO is liable for taxes assessed under an LLC EIN, use cc 18 if the SMO is unable to contact, although the SMO address is known, and there is no means to enforce collection.

Revenue officers should not close accounts as UTL or UTC if the taxpayer is known to have a current address outside the United States, and the revenue officer can confirm an address or a country of residence for the taxpayer. For accounts having a current address outside the United States, follow procedures in IRM 5.1.8.1.4, Account Transfers to International, to transfer the account to SB/SE International. For taxpayers known to be living outside the country, but with an unconfirmed address, request a courtesy investigation in accordance with IRM 5.1.8.2, Originating Office Procedure. Taxpayers residing in U.S. possessions and territories (aka insular areas), are treated the same as those residing in the United States.

Asset checks for UTL/UTC must be completed within one year of closing the case as CNC. Prior to reporting domestic accounts as UTL or UTC, when the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ employees will:

For domestic accounts where the aggregate unpaid balance of assessments is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, or more, attempt to develop leads by researching the following additional sources:

In addition to the requirements above, for accounts with an aggregate unpaid balance of assessments greater than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , the following is required:

For accounts where the aggregate unpaid balance of assessments is greater than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the following additional verification is required:

Local management may require that additional information sources be checked, for example U.S. Coast Guard and local licensing agencies where boat ownership is common. Revenue officers should also consider other available tools including CDW Knowledge Graph Environment (CKGE) and FATCA data early in the investigation, to locate the taxpayer and their assets.

The following sources are not required, but should be considered prior to closing a case as UTL or UTC:

Consider a mandatory follow-up if there is a definite indication that contact should be made in the future.

Federal Employee/Retiree Delinquent Investigation (FERDI) cases cannot be reported as UTL. Follow procedures in IRM 5.1.7.8, Federal Employee/Retiree Delinquency Initiative (FERDI). A FERDI case may be closed CNC as Unable to Contact (cc 12), when the taxpayer's ability to pay cannot be determined because they cannot be contacted and all required asset checks per IRM 5.16.1.2.1 reveal no income or assets to collect from. In addition, all levies, including levies on the taxpayer's federal salary or retirement benefit, must result in no proceeds available to pay the tax liability.

Restitution modules cannot be closed unable to contact or unable to locate if there is an open probation NF OI in Advisory. If the taxpayer cannot be located or contacted, the RO must follow guidance in IRM 5.1.5, Balancing Civil and Criminal Cases, for reporting noncompliance with conditions of probation. If the taxpayer has fulfilled all conditions of probation and release, and cannot be located or contacted, the RO can request through the group manager that the “restitution” program name be removed on ICS to allow the closure.

When a business taxpayer is being closed UTL or UTC, address the trust fund recovery penalty (TFRP) when the liability meets the criteria in IRM 5.7.4, Investigation and Recommendation of the TFRP. If a potentially responsible person cannot be located, follow guidance in IRM 5.7.5, Collectibility Determination, to address the TFRP. Nonassertion of the penalty should be recommended if a responsible person cannot be located, nor can any assets or income sources be located. Assertion of the penalty should be recommended if the responsible person cannot be located, but assets or income sources for the responsible person can be located.

For BMF accounts on sole proprietorships and partnerships where a general partner is personally liable for partnership liabilities, UTL and UTC accounts are systemically reversed by new address or new levy source information reported for the individual or general partner.

Ensuring that the proper action is taken on an account before the collection statute expires is a priority. The actions required to resolve short statute issues will depend on the circumstances. See IRM 5.1.19, Collection Statute Expiration and/or IRM 25.6.1.9, Statute of Limitations Processes and Procedures - Assessments.

If a corporation has been in a Chapter 7 or a liquidating Chapter 11 bankruptcy and no further proceeds will be received from the bankruptcy and anticipated collection from abandoned or after-acquired property is insufficient to warrant further collection efforts, use cc 07.

Closing code 07 may also be used for exempt organizations that have been through liquidating bankruptcy and LLC accounts (where the LLC is identified as the liable taxpayer) that have been through liquidating bankruptcy.

A NFTL should not be filed regardless of the dollar amount, if the taxpayer is a corporation, exempt organization or LLC (where the LLC is identified as the liable taxpayer), and the entity has gone through a liquidating bankruptcy or receivership. Document the proceeding number in the case history.

The trust fund recovery penalty (TFRP) assessment must be considered and Form 4183, Recommendation Re: Trust Fund Recovery Penalty Assessment, must be approved prior to reporting the trust fund liabilities CNC using criteria in IRM 5.7.4.5, Form 4183 Penalty Assessment Recommendation.

Corporations and liquidating LLCs (where the LLC is the liable taxpayer) that have filed a Chapter 7 bankruptcy petition and have been designated a "No Asset" case, being closed as TC 530 cc 07 by the Centralized Insolvency Operation (CIO) do not require managerial approval.

Use closing code 08 to report an account CNC on a decedent or decedent estate.

Closing code 08 is appropriate for IMF joint liabilities only when both taxpayers are deceased and a determination has been made that there is no collection potential from assets owned at death.

Closing code 08 may be used when the primary taxpayer is deceased and a determination has been made that there is no collection potential from the decedent's individual or business assets or persons in possession of such assets. Collection may also be pursued from the surviving spouse on joint liabilities using MFT 31 mirrored accounts. See IRM 5.16.1.3.2.1 for additional information.

Do not use cc 08 when only the secondary taxpayer is deceased. A TC 540 should be input on the secondary taxpayer's SSN, if it has not already posted to the account. Collection may be pursued from the decedent's individual or business assets or persons in possession of such assets. Collection may also be pursued from the primary taxpayer on joint liabilities. If the primary taxpayer is determined to be uncollectible, the account must be closed using a hardship closing code. A CIS must be secured from the primary taxpayer.

Closing code 08 also applies to BMF sole proprietorships and partnerships only if all of the partners are deceased and taxes were due at the time of death.

In situations where the owner of an LLC is identified as the liable taxpayer and is deceased, cc 08 is appropriate.

In all decedent and decedent estate cases attempt to secure the following:

Additional sources may be used to determine the date of death including:

Field employees will consult with Advisory for assistance in determining if a proof of claim is needed when there is an estate proceeding.

Consider a transferee assessment if circumstances warrant and document the ICS history.

When reporting accounts CNC using cc 08, do not request separate input of TC 540 to delete the master file filing requirements. TC 530 cc 08 generates a TC 540.

IRC 7345 requires the IRS to notify the State Department that an individual is certified as owing a seriously delinquent tax debt. The State Department generally will not issue or renew a passport to an individual after receiving the certification from the IRS. Section 7345 does not prohibit the IRS from exercising discretion to exclude certain debts from certification. The IRS has exercised discretion to exclude debts of a deceased taxpayer that are currently not collectible (CNC). See IRM 5.19.25.5(1), Discretionary Exclusions from Certification.

The following accounts may be closed as CNC, tolerance without further action, where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡:

The following accounts may be closed as CNC, tolerance, where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡:

When there are multiple periods where any one period exceeds the tolerance level, do not use cc 09. Close all periods using the appropriate CNC closing code such as unable to locate, hardship, etc.

Closing code 10 applies to any corporation or exempt organization that is no longer operating and from which all assets have been dispersed. Closing code 10 may be used to close Form 1041, U.S. Income Tax Return for Estates and Trusts, assessments on trusts or estates, if there are no assets to collect from and transferee issues have been considered for all transfers of assets or distributions to beneficiaries or grantors.

Closing code 10 may also be used for limited liability partnership cases when the partnership agreement limits the liability of the partners under local law, when the business is no longer operating and from which all assets have been dispersed.

Closing code 10 may also be used for LLC cases (where the LLC is identified as the liable taxpayer) when the business is no longer operating and from which all assets have been dispersed.

When there is limited collection potential from a corporation with corporate income tax liability, investigate and consider the following collection actions against shareholders, successor entities or others receiving corporate property:

When a corporation has been dissolved under state receivership proceedings or other dissolution actions, and there are no other assets, use closing code 10. A CIS is generally not required in these situations. See IRM 5.9.20, Non-Bankruptcy Insolvencies.

Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment, must be approved before reporting the employment and/or excise taxes CNC when the liability meets the criteria in IRM 5.7.4, Investigation and Recommendation of TFRP. Form 4183 will also include the additional TFRP liabilities from any unassessed returns. See IRM 5.7.4.3, Calculating the TFRP.

If the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡:

In addition to the requirements above, if the aggregate unpaid balance of assessments is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡, the following additional verification is required:

In addition, if the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡,

Regardless of the aggregate unpaid balance of assessments, in cases where neither a corporation/LLC, nor the officers can be located, and third-party sources (i.e., neighbor/landlord/current resident) indicate the business is no longer operating, the case may be closed defunct without a CIS. Confirm that the business is defunct and there are no assets to collect from by checking the following:

If there are no trust fund liabilities due, the accounts can be closed as defunct using cc10. If trust fund taxes are due, or the revenue officer cannot confirm the business is no longer operating, the accounts should be closed as unable to locate. Prior to reporting the accounts unable to locate, see IRM 5.7.5.3.1, Nonassertion Based on Collectibility, for TFRP recommendations when the potentially responsible person cannot be located.

If the corporation or LLC is chartered in a state that permits corporate or LLC reactivation or reinstatement, and it appears likely that the same entity will resume business, consider a mandatory follow-up.

Any amended returns or necessary adjustments to the tax assessments must be submitted prior to reporting the account CNC.

Accounts may be reported CNC using cc 13 when an operating corporation, exempt organization, or limited liability partnership can pay current taxes but cannot pay its back taxes and enforcement cannot be taken because the business has no distrainable accounts receivable or other receipts or equity in assets.

Closing code 13 may also be used for LLC cases (where the LLC is identified as the liable taxpayer) when an operating business can pay current taxes but cannot pay its back taxes and enforcement cannot be taken because the LLC has no distrainable income or equity in assets.

Secure a complete CIS. The CIS must support the CNC recommendation. If the taxpayer has equity in assets, the reason collection is not being pursued must be documented in the ICS history. Assets that should be viewed and verified include:

The income and expense analysis must show that the taxpayer can make current tax deposits, but cannot make payments on the back taxes. The income and expenses must be verified against:

The taxpayer must be current with all filing and paying requirements and must demonstrate an ability to remain current prior to closing as cc 13. The case will be monitored for filing and paying compliance and if the taxpayer does not remain current, the case will be reactivated. The officers’ full compliance with filing and paying requirements must also be verified and documented, including estimated tax payments if applicable. The officer of a corporation or LLC (where the LLC is identified as the liable taxpayer) is often an employee of the corporation or LLC, and therefore should be reporting a wage from the corporation or LLC and filing employment tax returns. An officer is not considered to be an employee of the corporation if the officer does not perform any services or performs only minor services; and the officer is not entitled to receive, directly or indirectly, any remuneration. Therefore, the only time a corporation or LLC closed as in-business CNC would not be filing employment tax returns is when it is inactive with no business activity, but not yet defunct.

A TFRP investigation must be completed and a recommendation on Form 4183 must be approved prior to disposition of the account. See IRM 5.7.4, Investigation and Recommendation of TFRP, for further information.

Consider issuance of Letter 903 to prevent accrual of additional liabilities and document the decision. For additional information, see IRM 5.7.2.2, Issuance of Letter 903.

There is no systemic follow-up on cc 13. Initiate a mandatory follow-up 18 to 24 months after the date of the Form 53. Requests that exceed 24 months must include an explanation in the history or CCP will limit the time to 24 months. The mandatory follow-up will include securing a new CIS, conducting a full compliance check, and reviewing the latest income tax return for the business. This review will determine whether the account will be reactivated or scheduled for additional mandatory follow-up. CCP will reactivate and reassign the CNC accounts to the field if the mandatory follow-up is not worked timely.

If the taxpayer has incurred subsequent liabilities while collection on a prior liability was suspended, the taxpayer must be investigated to verify the taxpayer's financial condition, a NFTL determination made, and a TFRP recommendation made on applicable taxes. The additional liabilities should not be closed as in-business CNC, unless the liability was incurred prior to the date of the original CNC and inadvertently did not get reported CNC. If additional liabilities incurred after the date of the original CNC are not resolved, the CNC accounts will be reactivated for collection action. See IRM 5.7.4, Investigation and Recommendation of TFRP.

TC 530 cc 15 was formerly used for corporate income tax liabilities owed by a financial institution certified as insolvent by the Office of the Controller of the Currency or the Office of Thrift Supervision and is now obsolete.

Follow the procedures in IRM 5.15.1, Financial Analysis Handbook, to determine the correct resolution of the case based on the taxpayer's assets and equity, income and expenses:

Restitution based assessments may be closed CNC due to hardship. Restitution based assessments will appear on MFT 31 with a TC 290 and/or 298. The module will contain a TC 971 AC 102 and a TC 971 AC 180-189. If a taxpayer is making restitution payments in accordance with a court order, the restitution payments are an allowable expense. Court ordered restitution payments are allowable expenses.

When a court orders restitution paid to federal as well as nonfederal victims, the IRS will not pursue enforced collection actions until the nonfederal victims are paid in full. In those instances, the account may be closed as a CNC hardship using a closing code calculated in accordance with IRM 5.16.1.2.9(13), with a mandatory follow-up date based on information contained in the court order. The government may take steps to protect its interest, such as filing a NFTL.

There may be cases where the taxpayer cannot full pay a Restitution Based Assessment (RBA) and an MMIA or PPIA will be established for related civil assessments, exclusive of the RBA (that is, the RBA is not included as part of the IA). In these cases, the RBA modules may be closed as a CNC hardship using closing code 32. Refer to IRM 5.14.4, Withdrawals and Installment Agreements with Special Circumstances , for guidance on establishing an MMIA or PPIA for these accounts.

Schedule an interview at the taxpayer’s last known address using appointment Letter 725-B. Secure a Collection Information Statement (CIS) . The CIS must support the CNC recommendation to report the account as hardship. If the taxpayer has equity in assets, the reason collection is not being pursued must be documented in the history. See IRM 5.15.1, Financial Analysis - Financial Analysis Handbook. Verification of a CIS is not required if the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the information on the CIS appears reasonable.

Under certain conditions, a CIS is not required before reporting an account CNC. The aggregate unpaid balance of assessments, including any prior CNCs, must be less than ≡ ≡ ≡ ≡ ≡ ≡ and at least one of the following conditions must exist:

The following verification is required for accounts when the aggregate unpaid balance of assessments is between ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡:

For accounts where the aggregate unpaid balance of assessments is greater than ≡ ≡ ≡ ≡ ≡ ≡ the following additional verification is required:

For accounts where the aggregate unpaid balance of assessments is greater than ≡ ≡ ≡ ≡ ≡ ≡ ≡ the following additional verification is required:

IRC 6343(e) requires the release of a levy on salary or wages payable to or received by a taxpayer, upon agreement with the taxpayer that the tax is currently not collectible. See IRM 5.11.2.3.1.4(6) , Economic Hardship. Steps should be taken to accomplish the release immediately. Case histories must be reviewed to ensure that wage levies are released prior to declaring an account uncollectible under hardship closing codes. The case history must be documented.

A compliance check will be made and the results documented in the case history for all hardship determinations per IRM 5.16.1.2(4). All open filing requirements or Del Ret modules must generally be resolved and closed appropriately when reporting an account CNC.

Open Del Ret modules may be resolved by closing as little or no tax due, or income below filing requirement (P-5-133), if warranted by the facts of the case. See IRM 5.1.11, Delinquent Return Investigations, for options to resolve delinquent return accounts. If the taxpayer is required to file and refuses, a referral or summons may be appropriate. See IRM 25.5, Summons Handbook for summons procedures.

Use the hardship closing code that most closely corresponds to the taxpayer's total living expenses allowed. See Form 433-A (Rev 5-2020), Collection Information Statement for Wage Earners and Self-Employed Individuals; Section 5, Monthly Income and Expense Analysis; Line 49, Total Living Expenses. If the closing code chosen does not correspond to the taxpayer's allowed expenses, document the reason for the deviation in the summarizing statement for the CNC decision. Generally, do not select a code below the taxpayer's total living expenses allowed. Do not use a higher code simply to prevent re-issuance of the account.

The systemic process for reactivating hardship CNC accounts relies on an increase in TPI above a predetermined amount based on the hardship closing code when the case is closed as CNC:

Taxpayers must be advised that interest and penalties will continue to accrue on the account even though the collection action is suspended. In addition, before reporting an account CNC, other collection options such as Offer in Compromise should be discussed with the taxpayer.

Case Closing Letter 4223, Case Closed - Currently Not Collectible, will be issued to the taxpayer and/or Power of Attorney (POA) when a case is closed as CNC - hardship. The case closing letter will only be used when the collection investigation on the taxpayer entity is concluded. Letter 4223 is systemically generated on ICS after GM approval of the CNC. Follow procedures in IRM 5.1.1.5, Case Closing Letters. For cases not on ICS, Letter 4223 is available on the publishing web site located at http://publish.no.irs.gov/catlg.html.

IRC 7345 requires the IRS to notify the State Department that an individual is certified as owing a seriously delinquent tax debt. The State Department generally will not issue or renew a passport to an individual after receiving the certification from the IRS. Section 7345 does not prohibit the IRS from exercising discretion to exclude certain debts from certification. . The IRS has exercised discretion to exclude debts that are currently not collectible (CNC) due to hardship. The IRS will reverse the certification of seriously delinquent tax debt and notify the State Department within 30 days if a certified taxpayer is later determined to be currently not collectible due to hardship. In some situations, employees may need to request expedited decertification. See IRM 5.19.25.2, Passport Certification Overview.

Collection investigation and distraint actions by the IRS in cases involving taxpayers residing in foreign countries are not treated the same as those involving taxpayers residing in the United States. For taxpayers residing outside the United States, with no collection potential from assets in the United States, but there are indications of assets outside of the United States, and a field call is not practical, international revenue officers use TC 530 cc 06. International revenue officers should not close accounts as UTL (03) or UTC (12) if the taxpayer:

International revenue officers also use TC 530 cc 06 in instances where they have initiated an Outgoing Mutual Collection Assistance Request (MCAR) request and have no other collection avenues to pursue. The TC 530 cc 06 closure can occur prior to the resolution of the Outgoing MCAR request by the foreign country. Currently, there are only six countries with which the United States has treaties that provide for mutual collection assistance. These countries are Canada, Denmark, France, Japan, The Netherlands and Sweden. Taxpayers residing in U.S. possessions and territories (a.k.a. insular areas) are treated the same as those residing in the United States and are not appropriate for closing as TC 530 cc 06. See IRM 5.21.7.4.8, Outbound Mutual Collection Assistance Request.

When the taxpayer travels outside the United States frequently or there is reason to believe the taxpayer travels outside the United States frequently in accordance with IRM 5.1.18.12, United States Passport Office, request a passport check if the aggregate unpaid balance of assessments is:

If a transferee assessment has been recommended and the liability is not collectible from other sources, report the transferor account CNC under the appropriate closing code. See IRM 5.1.14.2, Transferee Liability and Fraudulent Conveyances, for further guidance.

Document the consideration of transferee liability prior to case disposition.

Assessments against more than one taxpayer can only be reflected as CNC on IDRS and ICS if all of the liable taxpayers are determined to be uncollectible. In order to request a CNC hardship closing code on a joint IMF liability, where the taxpayers are now divorced or separated, both taxpayers would need to be uncollectible.

If one taxpayer qualifies for CNC hardship on a joint liability, or one taxpayer on the joint assessment requests separate treatment from their spouse, proceed with the CNC mirroring process. See IRM 5.16.1.3.2.1, Joint Liability Separate CNC Requests - MFT 31/65 Mirrored Assessments for additional information.

An accepted offer in compromise will release the taxpayer who made the offer from the entire liability if the taxpayer complies with all terms of the offer. Offer credits are applied to the original liability reducing the overall debt. If the liability against the remaining taxpayer is determined to be uncollectible, the amount to be reported as CNC is the balance of assessments after credits.

If another delinquent module becomes due and owing after the initial CNC, the new module may be reported CNC without further investigation if the prior CNC determination is no more than twelve months old. If there are additional requirements for research based on the updated aggregate unpaid balance of assessments for all modules (the new module and prior CNC modules), the additional research must be conducted prior to reporting the new module CNC. A NFTL determination is required per IRM 5.12.2.3.2, Notice of Lien Determinations - Determination Requirements.

Exceptions are:

Combined Annual Wage Reporting (CAWR) assessments may be reported CNC without investigation if they meet the criteria in IRM 5.7.4, Investigation and Recommendation of the TFRP, and if the prior CNC cc is 10. If the prior cc is 07, contact Insolvency to determine collection potential.

Federal Unemployment Tax Act (FUTA) state matching assessments may be reported as CNC without further investigation if the prior CNC cc is 10. If the prior CNC cc is 07, contact Insolvency to determine collection potential.

Limited Liability Companies (LLCs) are business entities that are organized and established under state law which specifically limits the liability of the owners for debts of the LLC. The identity of the party liable for taxes is either the LLC or the owner of the LLC.

A single member LLC that is classified as a disregarded entity will, nevertheless, be treated as an entity separate from its owner for employment tax purposes (effective for wages paid on or after January 1, 2009) and for certain excise tax purposes (effective for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008). The regulations are not retroactive.

Prior to reporting any modules as CNC, ensure the appropriate TC 971 Action Codes 364/365/366 have been input to identify the liable taxpayer for each tax module.

Where the LLC is identified as the liable taxpayer, consider the following:

Where the SMO is identified as the liable taxpayer, consider the following:

Because state law specifies that the owner of an LLC has no direct ownership in LLC assets, the property of the LLC is not available for collection action when the owner is identified as the liable taxpayer. Consider the following:

If assessments in the name and EIN of an LLC include some tax periods where the LLC is identified as the liable taxpayer and other tax periods where the owner of the LLC is identified as the liable taxpayer, separate collection determinations must be made for each identified taxpayer.

There will be situations where one case resolution is appropriate for the single member owner and a separate case resolution is appropriate for the LLC, and special case processing is required. When modules, where the single member owner is liable, will be closed as UTL, UTC or tolerance, use cc 17, 18 or 19. Case resolution actions must be taken in a specific order as shown in the table below:

Counsel should be consulted whenever legal issues are encountered. Consider consulting Advisory prior to contacting Counsel.

Prior to reporting preparer, promoter, appraiser, material advisor and aiding & abetting penalties as uncollectible, additional research may be needed. Revenue officers can identify these civil penalties by reviewing IDRS CC TXMODA or IMFOLT/BMFOLT for the penalty reference numbers associated with each penalty.

Return Preparer Coordinators (RPCs) and Return Preparer Visitation (RPV) coordinators play a critical role in the assessment process of return preparer penalties and can be a very valuable resource for revenue officers. For example:

The IRC 6700 civil penalty is assessed against the promoters of abusive tax shelters. The IRC 6701 civil penalty is assessed against any person who aids and abets the understatement of a tax liability. See IRM 20.1.6.13, Penalty for Promoting Abusive Tax Shelters -IRC 6700, and IRM 20.1.6.14, Penalties for Aiding and Abetting - IRC 6701, for detailed descriptions of the IRC 6700 and IRC 6701 civil penalties. Persons against whom these penalties have been assessed often conceal assets and distort their financial picture through a wide variety of sophisticated means, making it difficult to immediately determine the true collection potential of promoter penalty assessment accounts with a high degree of confidence. Assets currently concealed or placed beyond the government's reach may be discovered or become available during subsequent investigations.

IRC 6700 and IRC 6701 can be identified by penalty reference number 628 and 631. IRC 6700 and IRC 6701 balance due accounts should be assigned to an Abusive Tax Avoidance Transaction (ATAT) trained RO. Contact the Area ATAT coordinator for reassignment of a promoter penalty assessment account. See IRM 5.20.8.4, Coordination with the Examination Function, for a web link to the Small Business/Self-Employed (SB/SE) Collection ATAT web site for a list of Area ATAT coordinators for collection. In addition to the requirements of IRM 5.16.1, the procedures in IRM 5.20.8, Abusive Tax Avoidance Transactions (ATAT) - Promoter/Preparer Investigations, should be followed prior to closing a promoter penalty assessment account as CNC.

Beginning in 2014, individuals must have health care coverage, have a health coverage exemption or make a shared responsibility payment with their tax return. The individual shared responsibility payment (SRP) is assessed because one or more members of a household didn’t have minimum essential health coverage, per Internal Revenue Code 5000A. This requirement does not apply to tax years after 2018.

The individual shared responsibility payment (SRP) module will be established separate from its federal income tax return filing MFT 30 and identified as follows:

An MFT 35 SRP module can be mirrored using MFT 65 due to the SRP being assessed on the joint return. The mirroring process will be the same as the MFT 30/31 mirroring. See IRM 5.16.1.3.2.3, Processing Actions for Mirroring Assessment. The mirrored SRP MFT 35 module will be identified as follows:

Mirroring is required when one taxpayer on a jointly filed return needs to be treated separately from the other taxpayer based upon the following triggering event(s):

A standalone SRP occurs when a balance due is created on a module with MFT 35/65 and there is no other balance due module(s) with a different MFT in Status 22, 24, or 26, nor a TDI module in status 03. If an additional SRP balance due occurs in a subsequent year, and there are still no other modules with a different MFT, it is (they are) still considered a standalone SRP.

If a standalone SRP module is not resolved in notice status, the module will be closed systemically (recessed) as CNC with a closing code 35.

In most cases, standalone SRP modules will be recessed systemically and will not be assigned to revenue officers. However, there may be cases where MFT 35/65 is assigned along with other IMF balance due modules (MFT 30, 31, 55, etc.) or joins previously assigned modules.

Standalone SRP modules with no related balance due or TDI modules will usually be recessed. However, revenue officers may have a situation where a taxpayer contacts IRS regarding a notice before the SRP modules are recessed. If the taxpayer indicates that they’re experiencing a hardship situation, secure the information to confirm the hardship, and close the standalone SRP modules CNC using a hardship closing code (cc 24-32).

A standalone SRP module can also be reported CNC if there are other balance due modules in CNC status. Use the same CNC closing codes for the SRP that was used to report the other modules as CNC.

If revenue officers are reporting IMF balance due modules (MFT 30, 31, 55, etc.) CNC and also have an SRP module, the SRP module will be closed with the same closing code as the other modules. SRP MFT 35 or mirrored SRP MFT 65 modules may be closed using the following closing codes:

It is important to remember that the MFT 65 is treated exactly the same as the MFT 35.