The notice letter is one of the following letters.

Most of these letters are available on the Appeals Centralized Database System (ACDS) through the Appeals Generator of Letters and Forms (APGolf). Use ACDS to generate the notice letter when possible because the letters are updated regularly with the latest language and Commissioner information.

APGolf generates the name and address in all capital letters, without punctuation, per the IRS Addressing Standards (Document 12019). It also generates the SSN or EIN, and power of attorney information. Ensure the information is correct.

When an error is found on the ACDS information, tell the AO so corrections can be made.

The deficiency notice must advise taxpayers of their right to contact the local office of the Taxpayer Advocate and must provide the location and telephone number of the appropriate office.

Include the type of tax in the notice of deficiency letter, if the letter has an appropriate field. When the letter used has a heading that includes a line entitled "In Re" , enter the type of tax in a format similar to "In Re: Income Tax" .

If the notice of deficiency letter includes a field for "Form Number" , complete it with the return form number - Form 1040, Form 1120, Form 1042, etc.

Show the details of the tax period(s) and the deficiency for tax and penalties (or additions to the tax) above the salutation line on the notice letter. Insert the code section for each penalty or addition to tax.

Do not date the notice of deficiency letter. The date is added when the notice is issued.

Whoever issues the notice must enter the date on the "Last Date to File a Petition with the United States Tax Court" line.

Include the Appeals Officer’s name, telephone number, and unique identifying number. In Appeals, the unique identifying number is the Appeals Officer’s badge number.

It is recommended that notice letters use the guidelines outlined in the IRS Addressing Standards ( Document 12019) when preparing the notice letter:

Carefully check the name of the taxpayer.

For corporations, use the name of the corporation as shown on the tax return. If the name of the corporation has changed, address that corporation as follows on the letter: "ABC Corporation, formerly known as XYZ Corporation."

For married persons filing joint returns:

If it is determined that the taxpayer used more than one name, include both names on the notice letter with "also known as" or "AKA" . For example, "John T. Smith, also known as J. Thomas Smith"

The mailing address for a notice of deficiency must be the taxpayer’s last known address.

Carefully check the address of the taxpayer. Several large deficiencies have been lost because of typographical errors in the address or because the last known address of the taxpayer was not used. Section 301.6212-2(a) of the Treasury Regulations defines the taxpayer's last known address as the address on the most recently filed and properly processed tax return unless the taxpayer clearly and concisely notifies the IRS that there is a change in address.

A deficiency notice can be considered invalid if it is not sent to the taxpayer's last known address. The Tax Court lacks jurisdiction over a case that is based upon an invalid notice.

Use only one address on the letter, Form 4089 (or Form 4089-A), etc. For example, if there are two alternative addresses for a taxpayer, prepare two Notices of Deficiency using one of the addresses on each. See IRM 8.17.4.6 for information about duplicate original notices.

Address information must be obtained from IDRS by accessing the following command codes in the order listed:

Review the administrative case file for documentation to help determine if the taxpayer's address has changed since the return was filed. (While some of this documentation does not officially update the taxpayer's last known address, it puts the Service on notice to research whether the taxpayer's address was updated.) Examples of documentation include:

For any case where the last known address is in doubt, review a transcript for any year that is within three years of the period(s) included in the notice of deficiency.

If a taxpayer is represented by a duly authorized Power of Attorney (POA) and the Form 2848 is appropriately annotated, a copy of the notice mailed to the taxpayer(s) will be sent to the representative by regular mail.

Letter 937, Transmittal Letter For Power of Attorney, is used as the cover letter to transmit the copy of the notice. Generally the TCS will prepare the Letter 937 when preparing the notice, but local procedures may vary.

Effective with the March 2004 revision, Form 2848 no longer provides the taxpayer an option to have the representative receive the original of all correspondence (including notices of deficiency).

Effective with the October 2011 revision, Form 2848 requires an affirmative action by the taxpayer to check a box to indicate that a copy of notices and other written communications will be sent to the representative. The taxpayer may elect to have copies of notices and other written communications routinely sent to up to two representatives listed in section 2 of the Form 2848.

If the power of attorney does not cover all years in the notice of deficiency, do not send a copy of the notice to the representative. It is recommended that the AO obtain a new Power of Attorney for any years not covered prior to issuing a notice of deficiency.

If a new Power of Attorney is not obtained, do not send a copy of the notice to the representative. Instead a copy of the notice of deficiency should be sent to the taxpayer with a separate letter explaining why the copy cannot be sent directly to the representative. Letter 4368, Statutory Notice Not Sent to Representative - Tax Periods Not Specified, may be used for this purpose.

The AO should use Command Code CFINK to verify the name and address of the Power of Attorney on the Centralized Authorization File (CAF) database. The AO must provide the TCS with the most current POA information when requesting preparation of the notice of deficiency.

Unenrolled return preparers and registered tax return preparers are not permitted to represent taxpayers before Appeals. Therefore a copy of a notice of deficiency will not be sent to an unenrolled return preparer or a registered tax return preparer.

Letter 4369, Statutory Notice Not Sent to Representative - Limitations to Practice Before the IRS may be used to notify the taxpayer that a copy of the notice was not sent to the unenrolled return preparer or registered tax return preparer.

Include the Taxpayer's Identification Number (TIN) on each notice of deficiency letter issued by Appeals.

Show the TIN, (SSN, ITIN, or EIN), as appropriate in the upper right portion of the letter.

Income tax cases:

See Exhibit 8.17.4-1.

Use the following salutations in the notice of deficiency letter:

Generally enclosures listed on the last page of the notice of deficiency letter include the following:

Because the notice of deficiency "Statement" consists of the Form 4089, (or Form 4089-A), the tax computation, the explanation of adjustments, and any attachments, you may simply list "Statement" rather than individually listing the Form 4089/4089-A, tax computation form such as Form 5278, paragraphs, etc.

Do not list "Audit Statement" or "settlement computation" as an enclosure since an Audit Statement or settlement computation is NOT included as part of the notice of deficiency.

Show the name and address of the taxpayer on Form 4089 (or Form 4089-A), exactly as it appears in the letter. There is an exception when preparing notices for transferee cases. See IRM 8.7.5, Transferee and Transferor Liabilities.

The captions on Form 4089 and Form 4089-A provide for the tax year and the deficiencies in tax.

Enter any additions to the tax or penalties in columnar form under and to the right of the Deficiency block.

Separately list each addition to the tax or penalty.

The following sections discuss additional information that may be required on the face sheet.

Show the additional information after the summary of the tax liability on Form 4089 or Form 4089-A, or on a continuation sheet attached to these forms.

Tax Court generally does not have jurisdiction over prepayment/refundable credit adjustments that are not part of the statutory deficiency per IRC 6211(b)(4). The most common example of this type of credit is withholding credits. Adjustments to this type of credit may require a special format on the face sheet (Form 4089 or Form 4089-A) depending on whether the credit is understated or overstated.

Refundable credits listed in IRC 6211(b)(4) such as earned income credit, first time homebuyer credit, etc. are included in the statutory deficiency, and so Tax Court does have jurisdiction over these refundable credit adjustments. Special formats on the face sheet are not required for adjustments to these credits.

Insert an explanation on the face sheet if an overpayment claimed on the return has not been refunded. (The term "frozen refund" is often used to refer to a claimed overpayment that has not been refunded.)

The explanation can be shown on Form 4089, Form 4089-A, or on a continuation sheet attached to these forms. Use the following format:

The statutory deficiency is the amount shown on line 21 of Form 5278. This amount ($5,000.00 in the above example) is used on Form 4089 (or Form 4089-A) and the notice of deficiency letter as the tax deficiency, not the underpayment amount ($3,800.00 in the above example).

Include the following paragraph on the face sheet (Form 4089, Form 4089-A, or on a continuation sheet attached to these forms) if the taxpayer has made a partial payment that has not been assessed:

The above paragraph is not needed for the following types of payments:

Include the following interest statement on Form 4089 or Form 4089-A:

The Form 4089 and Form 4089-A generated by ACDS includes this interest statement.

Subsequently information is provided on how to show interest in the notice of deficiency. See IRM 8.17.4.21.

If the taxpayer files a claim for refund that has not been processed, and a notice of deficiency is being issued, notify the taxpayer in the notice of deficiency that the claim has been considered.

The Appeals Officer must inform the TCS when a claim is filed and what action to take with respect to it. Special language may be required on the face sheet, as discussed in paragraph (3) below.

Use the following paragraphs on the face sheet whenever applicable. (Show the explanatory paragraphs on Form 4089, Form 4089-A, or on a continuation sheet attached to these forms.)

If the taxpayers say they are entitled to additional deductions not claimed on the return, or that income reported on the return should be excluded in whole or in part, include the following paragraph on the face sheet:

The AO must notify the TCS that additional issues raised by the taxpayer were not allowed, and provide all required information so that the above paragraph can be completed and included on the face sheet.

Show the explanatory paragraph on Form 4089, Form 4089-A, or on a continuation sheet attached to these forms.

When the Power of Attorney (POA) authorizes the representative to receive copies, check the block "Copy to Authorized Representative" on Form 4089 (or Form 4089-A), and list the representative’s name and address to the right of the block.

If two representatives are authorized to receive copies, list both representatives on Form 4089 (or Form 4089-A). Generally all the POA's are listed on one Form 4089 or Form 4089-A. If additional space is needed, a continuation sheet may be used.

Effective with the October 2011 revision, Form 2848 requires that when a joint return is filed, each spouse or former spouse must submit a separate Form 2848. Any listed representative on the Form 2848 is permitted access to the tax information related to the joint tax return, but can only represent the authorizing spouse.

Form 4089 (orForm 4089-A) procedures when spouses submit separate Form 2848's are shown below.

The starting point for taxable income is usually the return as filed, the latest processed amended return, or an assessed partial agreement.

If the taxpayer did not file a return, Compliance should have followed substitute for return (SFR) procedures. The starting point for taxable income will be zero. Since no return was filed by the taxpayer, the notice of deficiency will be issued in an amount determined to be the correct tax liability for the year.

If a year was previously examined and there was a change in tax liability that was assessed, and now that year is open for recapture of a tentative allowance, the starting point is usually the taxable income shown on the previous examination report.

If a partial agreement has been secured and the tax assessed, then the starting point for taxable income in the notice of deficiency is either the taxable income from the partial agreement or the taxable income per the return:

If permitted by the computation software used, annotate the starting point regardless of whether it is the original return, a processed amended return, or an assessed partial agreement. Use a format such as "Taxable Income per Amended return," "Taxable Income as Previously Determined," etc.

List the adjustments to income on Form 5278. The adjustments should follow, as closely as possible, the sequence and wording used in the return. Label each adjustment with a letter of the alphabet.

It is recommended that the notice include a computation of the amount shown on line 19 of Form 5278, "Total tax shown on return or as previously adjusted" , if the liability per the return was adjusted.

Rules and guidelines for computing tax set out in IRM 8.17.2, General Settlement and Rule 155 Computations, apply equally to tax computations in notice of deficiency statements.

Sample paragraphs used in explaining adjustments may be found as outlined in this section. Modify these suggested or sample paragraphs to suit facts and circumstances.

RGS paragraphs - RGS may be used to generate paragraphs. TCS's may use the RGS paragraphs, when appropriate, in the statutory notice. If the RGS paragraphs are used, care should be taken to make certain that the paragraphs accurately and clearly explain the adjustments.

Appeals paragraphs:

Generally, the present tense is used in wording paragraphs rather than the past tense. This presents the Service’s position as of the issuance date and does not affirm a prior decision.

Use positive phrasing when possible. State that the "allowable amount is" rather than the "disallowance is" . However, the more basic principle that the position of the Service should be clearly stated should govern.

Do not use qualifying phrases such as "based on the information in our files" since it implies the Service is using information unknown to and withheld from the taxpayer.

Do not describe an item as a "deduction" and then disallow it because it does not qualify as an allowable deduction.

Avoid so-called "net adjustments" since they tend to be difficult to follow and may present a question as to the actual amount at issue.

The following phrases may be used at the end of a paragraph to clarify how the adjustment affects the tax return:

The length of the paragraphs should be sufficient to clearly state the conclusions. Additional information may be needed to show the detail of certain determinations.

State the taxable year involved in each explanatory paragraph, except as discussed below:

In some situations it may be necessary to include a copy of a document as part of the notice. If this happens, refer to the document in the explanatory paragraph by stating "See Exhibit A" , "See Schedule 3" , "See attached schedule" , etc.

Cite code sections only to the extent necessary to inform the taxpayer of the real nature of the adjustment. Use of code sections can unnecessarily limit or narrow the Commissioner’s position. Make sure all applicable codes sections are cited.

As a general rule it is preferable to use exact Code language rather than attempt to paraphrase Code language. For example, the statement, "Since it has not been established that your farm was operated with the intention of making a profit, the amounts deducted are not ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." should be used rather than "You have not shown that such claimed deductions were connected with a business activity during your taxable year."

Include explanatory paragraphs for the additions to tax or penalties in the statutory notice of deficiency. See IRM 8.17.4.13.1 for available sample paragraphs.

The penalty paragraphs may be placed behind the paragraphs explaining the various adjustments to income, credits, etc. The penalty paragraphs may also be shown on Form 4089, Form 4089-A, or on a continuation sheet attached to these forms.

Generally the RGS penalty schedules or the TCS Excel penalty spreadsheets on the Technical Support SharePoint site are used for the statutory notice:

A tentative allowance is filed on a Form 1045 (individual) or a Form 1139 (corporation) and is identified by the presence of a TC 295 on the account module.

If a notice of deficiency is being issued and the examination of the unused loss/credit year is not complete, or if it cannot be determined if the unused loss/credit year is under examination, completely ignore the tentative allowance in the notice of deficiency.

Ignoring the tentative allowance means:

If it can be determined that there is no examination activity on the year giving rise to the tentative allowance, and the statute of limitations has expired on that year, include the tentative allowance in the notice in the amount previously allowed.

If it is determined that examination of the year giving rise to the tentative allowance has been completed, include the tentative allowance in the notice. Include the amount determined to be allowable based on the examination adjustments made to the loss/unused credit year.

If the notice of deficiency is being issued and both the tentative allowance year and the loss/unused credit year are under consideration in Appeals, include both years in the notice of deficiency.

Adjust the year with the tentative allowance (the carryback year) based on adjustments made to the loss/unused credit year.

If adjustments to the loss/unused credit year do not result in a deficiency, then:

Follow specific procedures if the adjustments to the loss/unused credit year result in an overassessment. See IRM 8.17.4.16.

Include explanations of adjustments for all adjustments to the loss/unused credit year as well as the carryback year.

This section discusses cases where a notice of deficiency is being prepared and a claim for credit or refund has been filed to carryback a loss/unused credit to one or more of the years included in the notice of deficiency. The claim is filed on an amended return Form 1040X (individual) or a Form 1120X (corporation).

An amended return is identified by the presence of a TC 291 or 299 on the account module.

If a notice of deficiency is being issued and the examination of the year of the loss/unused credit is not completed or if it cannot be determined if the year is under examination, do not ignore the prior allowance in the notice. Discuss the case with the Appeals Officer since the case may have to be returned to Compliance to examine the loss/unused credit year.

If it can be determined that there is no examination activity on the year giving rise to the carrybacks, and the statute of limitations has expired on that year, include the previously allowed claim amount in the notice.

If it is determined that examination of the loss/unused credit year has been completed, include the carryback claim in the notice. Include the amount determined to be allowable based on the examination adjustments made to the loss/unused credit year.

If the notice of deficiency is being issued and both the carryback claim year and the loss/unused credit year are under consideration in Appeals, include both years in the notice of deficiency.

The year with the carryback claim (the carryback year) should be adjusted based on adjustments made to the loss/unused credit year.

If adjustments to the loss/unused credit year do not result in a deficiency, then see below:

Include explanations of adjustments in the notice for all adjustments to the loss/unused credit year as well as the carryback year.

Tax Court has no authority to review or redetermine an overassessment.

The issuance of a notice of deficiency (and any subsequent petition filed with the Tax Court) for the deficiency year does not extend the statute of limitations for the overassessment year.

The combination of (1) and (2) above could cause taxpayers to lose the refund to which they may be entitled if the statute on the overassessment year(s) expires before the deficiency year is resolved. Therefore, if the taxpayer has not filed protective claim(s), at the Appeals Officer’s option a claim invitation letter may be prepared by the TCS and issued along with the notice.

If a return is not timely filed, IRC 6651(a)(1) provides for a penalty of 5% if the failure is for not more than one month, with an additional 5% for each month or fraction thereof during which the failure continues, but not in excess of 25%. This penalty is computed on the net amount due as defined in IRM 8.17.7.3, Failure to File, IRC 6651(a)(1).

If the taxpayer files a late return, only the IRC 6651(a)(1) failure to file penalty attributed to the amount of the deficiency should be asserted in the notice of deficiency. The amount used to compute the penalty is the tax required to be shown on the return that is not paid on or before the date prescribed for payment.

The IRC 6651(a)(2) failure to pay penalty cannot be asserted in a notice of deficiency when the taxpayer has filed a return, because this penalty applies only to tax shown on a filed return, not to a deficiency.

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IRC 6651(c)(1) provides that the penalty for filing late under IRC 6651(a)(1) must be reduced by the amount of any penalty for paying late imposed under IRC 6651(a)(2) for any month during which both penalties apply.

If the failure to file the tax return is due to fraud, the FFTF penalty imposed by IRC 6651(f) may be asserted rather than the regular FTF penalty under IRC 6651(a)(1).

For late filed returns, the FFTF penalty under IRC 6651(f) that is based on the tax per the return is not subject to deficiency procedures. The notice of deficiency will not reflect an IRC 6651(f) penalty on the portion of total corrected tax attributable to the return as filed (delinquent return).

The portion of the IRC 6651(f) penalty that is attributable to the tax deficiency is subject to deficiency procedures. Reflect this portion of the IRC 6651(f) penalty in the notice of deficiency.

When the IRC 6651(f) penalty is proposed on an SFR, the penalty is based on the total corrected tax per the examination. The IRC 6651(f) penalty asserted on an SFR is subject to deficiency procedures and is included in the notice of deficiency.

See IRM 20.1.2.2.7.5, Fraudulent Failure to File - IRC 6651(f), for additional information.

When the FFTF penalty under IRC 6651(f) is asserted, the AO will instruct the TCS if the IRC 6651(a)(1) failure to file penalty should be included in the notice of deficiency as an alternative issue.

If the AO instructs that the failure to file penalty should be included in the notice of deficiency as an alternative issue to the FFTF penalty, then an explanation for the failure to file penalty must be included in the notice following the explanation of the fraudulent failure to file penalty.

See below for sample format for the language to use for the alternative issue:

If the RGS or Excel IRC 6651(a)(1) penalty schedules are used, the paragraph for the alternative issue shown above in paragraph (3) can be added to those schedules, or included on a separate schedule.

The IRC 6651(a)(1) failure to file penalty is not shown on the letter, Form 4089 (or if prepared, Form 4089-A and Form 870) or on Form 5278. The penalty is only mentioned in the paragraph for the alternative issue discussed above.

The IRC 6662 accuracy related penalty and IRC 6662A accuracy related penalty on reportable transactions:

See IRM 8.17.7.9, Accuracy-Related Penalty, IRC 6662, and IRM 20.1.5, Return Related Penalties, for more information.

The IRC 6663 fraud penalty applies only if a return is filed. It cannot be asserted if the taxpayer did not file a return.

The IRC 6663 fraud penalty cannot be asserted on a substitute for return (SFR) prepared by the IRS under IRC 6020(b).

The IRC 6663 fraud penalty cannot be asserted on the same underpayment (or portion of an underpayment) on which accuracy related penalties are asserted. Only one penalty can be applied to any portion of an underpayment of tax.

Either IRC 6663 or IRC 6663 with a subsection such as 6663(a) may be used in the notice of deficiency.

The delinquency and fraud penalties can be asserted concurrently.

Although there is no specific prohibition against asserting penalties under both IRC 6651(f), Fraudulent Failure to File Penalty, and the IRC 6663 fraud penalty, the court is not likely to sustain the assertion of both penalties unless compelling facts support the IRS’s position. Area Counsel should be consulted before asserting both IRC 6651(f) and IRC 6663 on the same return. (Also see IRM 20.1.5.14.2, Penalty Assertions, for additional information.)

See IRM 8.17.7.10, Fraud Penalty, IRC 6663, and IRM 20.1.5.14, IRC 6663, Civil Fraud Penalty, for more information.

It is recommended that the IRC 6662 accuracy-related penalty should be included in the explanation of adjustments as an alternative penalty to the civil fraud penalty under IRC 6663 except in the following situations:

Remember that IRC 6663 and IRC 6662 cannot be asserted if the taxpayer did not file a return.

When the fraud penalty is asserted, the AO will instruct the TCS that the IRC 6662 penalty must be included in the notice of deficiency as an alternative issue.

If the AO instructs that the IRC 6662 penalty should be included in the notice of deficiency as an alternative issue to the IRC 6663 civil fraud penalty, then an explanation for the IRC 6662 penalty must be included in the notice following the explanation of the civil fraud penalty.

See below for sample format for the language to use for the alternative issue:

If the RGS or Excel IRC 6663 penalty schedules are used, the alternative paragraph shown above can be added to those schedules, or included on a separate schedule.

The IRC 6662 penalty is not shown on the letter, Form 4089 (or if prepared, Form 4089-A and Form 870), or on Form 5278. The alternative issue is only shown in a paragraph that follows the explanation of the civil fraud penalty.

The IRC 6651(a)(1) failure to file penalty is not shown on the letter, Form 4089 (or if prepared, Form 4089-A and Form 870) or on Form 5278. The penalty is only mentioned in the paragraph for the alternative issue discussed above.

Former IRC 6621(c), pertaining to substantial underpayments attributable to tax motivated transactions (TMT), was repealed for returns with due dates (determined without regard to extensions) after December 31, 1989. However, some TMT cases are still active, and/or still in collection status and TMT rates continue to apply to those balances. For detailed information on former IRC 6621(c), refer to the historical IRM 8.17.2 archived on the Publishing web site.

IRC 6621(c) provides for a two-percent increased interest rate on the underpayment of a tax by a "C" corporation if the underpayment exceeds $100,000. For a complete discussion of large corporate underpayments, see IRM 8.17.6.6, Large Corporation Underpayment Interest (LCU) under IRC 6621(c).

If the requirements of IRC 6621(c) are met, interest accrues at the higher rate for all tax periods after December 31, 1990.

If the taxpayer is subject to the increased rate of interest under this section, the notice of deficiency letter should include a paragraph similar to the following:

A paragraph concerning this section should be shown on Form 4089, Form 4089-A, or on a continuation sheet attached to these forms. Recommended language is as follows:

The paragraph shown in (4) should be modified if there are carrybacks allowed in the notice of deficiency.

Form 5403 Instructions to APS Spreadsheet:

If Form 8857, Request for Innocent Spouse Relief, has been filed and shows a new name or address for the requesting spouse, the new name or address cannot be disclosed to the non-requesting spouse.

The AO must inform the TCS that a Form 8857 has been filed and provide the new name or address.

See IRM 8.17.4.28.3, paragraph (5) for an example of how to address the notice of deficiency in a case where a Form 8857 with a new name has been filed.

See IRM 25.15.12.23, Notice of Deficiency Under IRC 6015, for procedures when preparing notices of deficiency for cases where innocent spouse relief is requested.

A fiduciary is a person to whom property or power is entrusted, for the benefit of another. A fiduciary for income tax purposes is a person who holds in trust an estate to which another has the beneficial title or in which another has a beneficial interest, or receives and controls income of another. This relationship occurs most often in cases involving:

Form 56, Notice Concerning Fiduciary Relationship, is used by an individual to notify the IRS of a fiduciary relationship. Other legal documents establishing fiduciary relationships can be substituted for the Form 56.

When a taxpayer is deceased or under a legal disability, and the IRS has not been notified of a fiduciary relationship, an attempt should be made by the AO to obtain the name of the fiduciary as long as there is sufficient time remaining on the statutory period of limitations. Once the name is obtained, the fiduciary should be asked to give notice in accordance with the existing Internal Revenue laws (e.g. IRC 6903).

If the IRS has been notified as to the existence of a fiduciary relationship, a notice of deficiency must be mailed to the fiduciary's mailing address. Sample formats are discussed below:

If the name of the fiduciary cannot be obtained or if there is not sufficient time remaining on the statutory period of limitations, address the notice of deficiency for a deceased taxpayer as follows:

When a fiduciary relationship cannot be established on a case involving a taxpayer under legal disability, address the notice of deficiency as follows:

In the case of a joint return, if the Service has been notified by either spouse that separate residences have been established, then instead of the single joint notice, duplicate originals of the joint notice will be sent by certified mail to each spouse at the last known address.

Each notice will carry only the address of the spouse to whom the notice is sent. It is very important not to disclose the new addresses of the spouses to each other. The duplicate notices should be addressed as shown below:

If a spouse’s surname has changed, address that individual as follows on all letters, schedules and attachments: Alice Jones, formerly known as Alice Smith. The name can also be shown as follows: Alice Jones (formerly known as Smith). The "formerly known as Alice Smith" or "formerly known as Smith" will be deleted on the mailing envelope.

In the following example, a notice of deficiency is being prepared for the 2008 return of Alice and John Smith. Alice Smith has remarried and changed her name to Alice Jones. (The new name was not obtained from Form 56 - No Form 8857 has been filed.) Duplicate original Notices of Deficiency are required for 2008 as shown below:

In the following example, a notice of deficiency is being prepared for the 2008 return of Alice and John Smith. Alice Smith has remarried and changed her name to Alice Jones. The IRS is aware of the wife’s new name because it is shown on the Form 8857 that was filed. Therefore, the wife’s new name should not appear on any letters or forms being sent to the husband. Duplicate original Notices of Deficiency are required for 2008 as shown below:

The necessary number of photocopies may be made of the remaining parts of the notice (Form 5278, explanation of adjustments, etc.) and associated with the separately typed notice of deficiency and waiver. Make sure that if there is a new name for one spouse obtained from Form 8857 that this name is not disclosed to the non-requesting spouse on any of these schedules. Also, the new address of one spouse should not be shown on any copies of these schedules sent to the other spouse.

Statements attached to duplicate original notices will be computer generated originals, typed originals, or photocopies.

Under certain circumstances, a notice of deficiency will be issued to only one spouse for a married filing joint return. Examples of this include, but are not limited to:

If a notice of deficiency will be issued to only one spouse for a married filing joint return, prepare the notice letter as follows:

The Form 4089 will reflect only the name, address and social security number of the spouse to whom the notice is being sent.

Prepare Form 5278 as follows:

Example: John and Jane Doe timely file a joint return for 2006 reflecting John's social security number as the primary. The 2006 return was examined and a deficiency of $5,000.00 is proposed. The taxpayers filed a protest for an Appeals hearing. John Doe signed a waiver in Appeals. Jane Doe did not sign a waiver and does not agree to the tax. Consequently, an MFT 31 assessment is made for John Doe and a notice of deficiency must be issued to Jane Doe.

Letter 901(cg) is used for notices issued to consolidated corporations. In these cases the taxpayer is determined to be the parent company and its subsidiaries or affiliates.

It is recommended that the letter be addressed to the taxpayer in a manner similar to "ABCD Corporation and Subsidiaries" , "ABCD Corporation and Affiliated Companies" , or "ABCD Corporation and Affiliates" .

Letter 901(cg) is a letter on APGolf:

Form 4089 or Form 4089-A should contain the name and address of the taxpayer, and a summary of tax liability for each year. It must also contain an annotation that states, "Affiliations Statement Attached" .

Prepare an affiliations’ statement listing the names of the parent and subsidiaries, and the years each was affiliated with the consolidated group.

Form 5278 should list all companies with proposed adjustments.

List separately any automatic adjustments not attributable to any particular company. List them on the second line under "Adjustment to Income" on Form 5278.

The explanation of adjustment schedule (Schedule 2) should provide a detailed explanation for each issue proposed against the companies listed on Form 4549-B. Check to make sure the total of the issues listed for each company equals the adjustment amount shown on Schedule 1A for that company.

See Exhibit 8.17.4-6. This exhibit is an example of the Affiliations Statement, Form 5278, Form 4549-B and explanations of adjustment schedules discussed above.

Form 1042Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is the annual taxable return used to report tax withheld on U.S. source income paid to foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts.

Adjustments to Form 1042 are subject to deficiency procedures. Statutory notice of deficiency procedures also apply to the failure to deposit penalty (IRC 6656) as it relates to Form 1042. See IRM 20.1.4.11.5, Deficiency Procedures Form 1042, for additional information.

Notice of deficiency letter

The rest of the notice is prepared as usual - prepare Form 4089 (or Form 4089-A and Form 870) Form 5278, explanations of adjustment, etc.

A statutory notice of deficiency may be issued only for penalties subject to deficiency procedures. The determination of whether a penalty will be subject to a statutory notice of deficiency procedure depends on whether the underlying tax is subject to deficiency procedures. See IRM 8.17.4.17 for additional information on penalties subject to deficiency procedures.

If it is determined that a penalty is subject to notice of deficiency procedures, a "penalty only" notice of deficiency can be issued just for the penalty in certain circumstances. See examples below:

Example 1: A notice of deficiency can be issued for a penalty when the underlying tax subject to deficiency procedures has been assessed and therefore can't be included in the notice of deficiency.

Example 2: A penalty only notice of deficiency can also be issued if the adjustments resulted in no tax but a penalty is applicable (for example, due to a loss or credit carryback).

When preparing a notice of deficiency involving open criminal aspects, Letter 894(cg) may be used, but it must be modified as outlined below:

Letter 531-C, Notice of Deficiency for Open Criminal Case, may be used instead of Letter 894(cg). No modifications are needed to the Letter 531-C.

No waiver or other form permitting the taxpayer to agree to a deficiency should be prepared. Therefore, do not include Form 4089 or Form 870 with the notice. Form 4089-A is prepared instead for a notice of deficiency prepared for an active criminal case.

Area Counsel's written approval of the notice of deficiency is required prior to issuance.

Notice of deficiency procedures are generally not used in TEFRA cases.

If any partner in a TEFRA partnership does not agree to the settlement, Appeals will prepare the notice of final partnership administrative adjustment (FPAA).

The FPAA is similar to a notice of deficiency; however, it contains only partnership adjustments rather than a tax deficiency. See IRM 8.19, Appeals Pass-Through Entity Handbook, for complete instructions on the preparation of the FPAA.

When preparing a notice of deficiency for a case with an open TEFRA proceeding, the notice of deficiency for non-TEFRA items is issued at the investor level and shows the deficiency in tax and penalties attributable only to the non-TEFRA adjustments.

An examination can be conducted on a copy of a taxpayer's return or with a BRTVU or RTVUE print.

If it becomes necessary for Appeals to issue a notice of deficiency, the original return must be requisitioned through Account and Processing Support (APS). The AO is responsible for requesting that APS order the original return.

If a statute is imminent, it may be necessary to issue a notice of deficiency based on copies of returns or BRTVU/RTVUE prints. If so, obtain a transcript to verify taxable income and tax per return.

If the fraud penalty is asserted on a copy of a return, immediate attempts must be made by the AO to secure the original tax return. Such attempts need to be documented and made part of the case file.

See IRM 4.8.9.19, Electronically Filed Returns Where the Civil Fraud is Asserted, for information about electronic returns.

When the administrative file is returned to APS with Counsel’s approval, APS will return the file to the AO for preparation of the statutory notice and signature:

If the administrative file is returned directly to the AO with Counsel’s approval, follow the procedures below:

ACDS Update Request Form:

Occasionally, a case referred to Counsel for consideration of the issuance of a notice of deficiency, EP or EO adverse determination letter, or for concurrence in the removal of a fraud penalty, is returned to Appeals with a memorandum stating the reason for withholding concurrence.

If the administrative file is returned directly to the AO by Counsel:

ACDS Update Request Form

When the Appeals Area Director and the Associate Area Counsel cannot agree on the actions recommended in Counsel's advice, the matter is resolved by the Director of the Appeals Operating Unit after consideration of the advice and the Deputy Area Counsel.