The EITC is a refundable credit administered by the IRS and designed to assist working taxpayers in lower income brackets.

EITC cases can present unique challenges due to the complexity of the IRC provisions and the varying circumstances of qualifying taxpayers. EITC taxpayers must frequently overcome numerous obstacles to obtain the credit, including limited education, communication and language barriers, difficulty documenting non-traditional family relationships or housing arrangements, and understanding the complexity of the EITC tax law.

Low-income taxpayers may not have bank accounts and conduct financial transactions using cash, limiting their ability to document expenditures. For this reason, low-income, self-employed taxpayers may have difficulty substantiating both income and support. Receiving IRS correspondence listing “acceptable” forms of traditional documentation can be daunting to taxpayers who know they cannot obtain the kinds of documents appearing on the IRS list. However, these taxpayers can use alternative documentation to prove both the Relationship Test and the Residency Test. See Exhibit 13.1.24-1, Alternative Documentation for Qualifying Child. (See also IRM 4.19.14.6.5, EITC - Personal Exemptions and Dependents, listing the traditional documentation to substantiate a qualifying child. This list is not all-inclusive.).

The IRS implemented interactive calculators and online self-help resources to assist taxpayers in determining their eligibility for EITC. Self-help resources include:

Research the taxpayer’s account using IDRS command codes (CC) (i.e., RTVUE, INOLE, DDBKD) to identify certain information about the qualifying child (e.g., name, date of birth, citizenship code, birth parent’s name, custodial data). See IRM 4.19.13.4, Researching Cases, for a list of other IDRS command codes and research tools.

Research the taxpayer’s account using IDRS CC TXMOD and request the following to obtain the examination history and explanation for denying the EITC:

Review the available documentation to identify what the taxpayer previously submitted.

Determine if the IRS properly considered the taxpayer’s documents.

If warranted, determine the type of additional documents (traditional vs. alternative) required to establish EITC eligibility.

Taxpayers generally need to only disclose personal information to the extent that it is relevant and necessary to the taxpayer’s case. If the taxpayer is concerned that the documents that prove EITC eligibility may indicate the taxpayer is in violation of a state or local law or other rules, explain that IRC 6103 significantly limits the circumstances under which the IRS can share information with other agencies.

Sharing or providing traditional documentation may be challenging for certain segments of the taxpayer public when they have been or are victims of domestic violence, abuse, poverty, and other situations that hinder their ability to provide specific information. Many such taxpayers have had to flee their homes without any records and seek housing in temporary shelter. It may be virtually impossible for them to prove EITC eligibility requirements through traditional documentation, and we must work with the taxpayers creatively to construct the best case possible.

Since Exam generally does not accept oral testimony from the taxpayer to prove that the child meets Relationship or Residency Tests, TAS employees must assist taxpayers in securing records not previously submitted to support EITC eligibility. Obtaining vital records, such as birth certificates, to satisfy the Relationship Test may be difficult for taxpayers in non-traditional relationships. However, these taxpayers can use alternative documentation to prove both the Relationship Test and the Residency Test. See Exhibit 13.1.24-1, Alternative Documentation for Qualifying Child. (See also IRM 4.19.14.6.5, EITC - Personal Exemptions and Dependents, listing the traditional documentation to substantiate a qualifying child. This list is not all-inclusive.)

Help the taxpayer identify acceptable documentation and:

A certain document alone may not verify relationship, residency, or support but in combination with other records may assist in advocating for the taxpayer. See Exhibit 13.1.24-1, Alternative Documentation for Qualifying Child, for examples of various types of documentation and Exhibit 13.1.24-2, Case Scenarios Identifying Alternative Documentation.

In any case, listen to the taxpayer and attempt to identify any challenges the taxpayer may encounter with obtaining documentation. Explain in plain language which specific eligibility requirement is at issue and suggest some ways the taxpayer can support their position. Listen for hesitation and try to determine if the hesitation is because the taxpayer doesn’t understand the requirement, they have concerns about the difficulty of getting a particular document, or they may not be eligible for the credit. To ensure that the taxpayer understands the requirements, ask the taxpayer to repeat back to you what they have agreed to provide.

Self-employed low-income taxpayers may not have bank accounts and may not use computer software programs or prepare invoices or contracts for services performed. However, these earnings are still taxable and count toward earned income, and the taxpayer should include them to prove eligibility for the EITC.

If the taxpayer is self-employed and proof of earnings is an issue, ask relevant questions about how the taxpayer receives payment for work performed and how the taxpayer keeps track of those payments.

If the taxpayer has not been keeping receipts of expenditures, they may be able to obtain printouts of purchases from a particular supplier to substantiate business expenses. If the taxpayer is unable to obtain printouts of purchases, ask the taxpayer if they are able to secure third-party affidavits from regular customers to help establish an income pattern.

When necessary, consult a RATA to assist with identifying acceptable alternative documents.

Once you receive all the taxpayer’s information, prepare an OAR to support TAS’s position to allow the EITC. Make your request specific and direct, include the supporting documentation as an attachment, and explain the purpose of any alternative documents.

Advocating for the taxpayer includes presenting the taxpayer’s position, supported by facts and the law, to the Operating Division (OD)/Function so they can arrive at the correct determination. Presenting nothing more than a request for the OD/Function to make a determination does not advocate for the taxpayer’s position or communicate the facts of the case. Refer to IRM 13.1.19, Advocating With Operations Assistance Requests (OARs), for more information on creating well-developed OARs.

Document the OAR using the following points:

If the OD/Function denies the EITC for lack of adequate documentation substantiating a qualifying child, and you believe the documentation established the taxpayer’s eligibility, elevate the case to your manager or the LTA for consideration of a TAO. See IRM 13.1.20, TAS Taxpayer Assistance Orders (TAOs).

Taxpayers may be eligible for EITC within the provisions of IRC 32, even if they don’t have a qualifying child. If the taxpayer is not eligible to claim EITC with a qualifying child, determine if the taxpayer qualifies for EITC as an individual without a qualifying child and request the OD/Function adjust the account and allow the EITC amount for an individual without a qualifying child.

Normally, the IRS conducts EITC audits by correspondence. TAS should help taxpayers seek other alternatives if the regular correspondence exam process for EITC audits present challenges that cannot be overcome through correspondence exam. Other options include helping the taxpayer get a face-to-face examination or if there is a dispute after the examination, educating the taxpayer on their appeal rights.

The IRS will consider a written request for an Examination Area Office interview. IRM 4.13.1.4.5.1(4), Transfers to an Area Office, provides guidance when taxpayers request a face-to-face interview. After you discuss with the taxpayer the type of alternative documents that will prove EITC eligibility, consider whether it might be helpful if the taxpayer could meet face-to-face with the IRS instead of having the audit conducted through correspondence. Advocating to get the taxpayer a face-to-face interview is an alternative to the correspondence examination process and may help the taxpayer overcome the challenges in proving EITC eligibility.

Encourage the taxpayer to cooperate fully during the examination process. If the taxpayer and the IRS cannot reach an agreement, educate the taxpayer on their appeal rights and, as appropriate, assist the taxpayer to ensure Examination forwards the case to the Independent Office of Appeals. Appeals uses various conference methods to resolve tax disputes; it holds most conferences by telephone or correspondence. The Appeals technical employee has discretion on the conference method in accordance with guidance found in IRM 8.6.1, Conference and Settlement Practices, Conference and Issue Resolution. Appeals can consider hazards of litigation, including the credibility of the taxpayer as a witness if the case were to go to court. For more information on assisting taxpayers in getting their EITC case to Appeals, see IRM 13.1.24.7, Introduction to Appeal Issues.

IRS employees make NFTL filing determination decisions in accordance with IRM instructions, including cases where installment agreements may be appropriate. IRM 5.19.1.6.4, Installment Agreements (IAs), (starting in paragraph (8)), and IRM 5.19.4.5.1, Notice of Federal Tax Lien Filing Determinations, describe the situations when the IRS makes an NFTL determination when it grants installment agreements.

For field collection installment agreements, see IRM 5.14.1.4.3, Notice of Federal Tax Lien and Installment Agreements.

In situations where the taxpayer’s individual facts and circumstances meet the criteria in IRM 5.12.2.4, Determination Criteria for "Do-Not-File" or Deferring the NFTL Filing, or one of the IRC 6323(j)(1) criteria for an NFTL withdrawal, TAS employees should advocate against the filing or for a deferral of filing of an NFTL.

When making the decision to request that the Operating Division not file or defer filing an NFTL, you must carefully evaluate all of the facts and circumstances including the following:

The following situations are examples where TAS employees should advocate for the IRS to defer filing the NFTL:

In analyzing your case, consider all the factors and determine whether the IRS NFTL filing is appropriate. Remember that this is not a complete list of factors, and you should consider other relevant factors depending on the facts of your case.

If at any time you need assistance in determining whether it is appropriate to request that IRS defer or not file the NFTL or whether the taxpayer owns assets, contact a ROTA to discuss the individual facts and circumstances of your case. ROTAs have access to the asset locator services on Accurint.

If after considering all facts and circumstances of your case you have determined that TAS needs to advocate for the IRS to not file or to defer filing an NFTL, forward the OAR to the Operating Division (OD) requesting acceptance of the Installment Agreement (IA), OIC, or Currently Not Collectible (CNC) and deferment of filing an NFTL. In all cases, the OAR should request an OD manager’s review of any determination denying TAS’s recommendation to defer filing the NFTL.

Include language in the OAR to support your recommendation, clarify the issue, and explain how the non-filing or deferral protects the taxpayer rights to privacy and confidentiality. Example: Due to the above taxpayer's financial situation, it is TAS’s position that [insert - the IRS should place the account into CNC status/the IRS should accept the OIC/the IRS should accept the IA]. Due to the amount of the liability, the IRS should perform an NFTL determination. TAS recommends deferring the filing of the NFTL in support of the taxpayer right to privacy based upon the following factors [explain how the taxpayer meets the criteria for deferred filing of the NFTL].

If the OD does not agree to defer filing the NFTL, evaluate the reasons given in support of filing the NFTL. If you still disagree, elevate the case to the LTA to consider issuing a TAO. If the LTA decides to issue a TAO, follow the procedures in IRM 13.1.20, TAS Taxpayer Assistance Orders (TAOs). The TAO should order the IRS to defer filing the NFTL and explain why, based on the law and the facts of the case, the filing is not appropriate. When preparing the TAO, consider language in the following example.

TAS should help taxpayers seek other alternatives if the regular process for resolving NFTL issues does not meet the taxpayer’s needs.

The first step in a CAP appeal is for the taxpayer to contact the Collection employee’s manager. This conference should take place within two business days. A verbal warning of a lien or levy action can trigger the right to a CAP appeal.

If the taxpayer is not able to resolve the matter after discussing it with the manager, they complete Form 9423, Collection Appeal Request. To avoid resumption of collection activity, IRS must receive the completed Form 9423 (or postmarked Form 9423) within three business days of the conference with the manager. This deadline relates to resumption of collection activity, not a deadline for the right to a CAP appeal. Advocate for the IRS to honor “late” CAP requests.

Collection will forward the appeal to the appropriate Appeals office. Refer to IRM 5.19.8.4.16.4, How the Taxpayer Appeals an IRS Action Using CAP.

The Appeals decision is binding on both the taxpayer and the IRS. However, in TAS cases that are in Appeals jurisdiction, Appeals has agreed to provide TAS the proposed determination in advance and give TAS five workdays to elevate any concerns. See IRM 25.30.2, Service Level Agreement between the IRS Independent Office of Appeals and the Taxpayer Advocate Service. Collection must comply with Appeals’ decision. If the taxpayer defaults with any agreement made by Appeals, Collection is no longer bound by the terms of the agreement.

The taxpayer may not appeal the same issue for which they have already submitted a CAP appeal request and Appeals has made a determination. Form 9423 instructions also inform the taxpayer that providing false information, failing to provide all pertinent information, or having an indication of fraud will void Appeals decision. See IRM 5.1.9.4.4, CAP Process, for additional information.

For every PDC inquiry, verify the collection contact received by the taxpayer is not a scam. Research IDRS to determine (based on the presence of a TC 971 AC 054) whether the IRS assigned any taxpayer modules to a PCA. The associated PDC ID number found on ENMOD or IMFOLE identifies the PCA (see IRM 5.19.1.5.21.2.1, Private Debt Collection Account Identification). If the IRS assigns the taxpayer’s module to a PCA and the taxpayer wants to work with the PCA (i.e., does not want TAS to open a case):

Create a TAS case for every inquiry received by TAS employees from taxpayers (or their representatives) assigned to a PCA.

Similar to suspending collection as an initial case action, removing taxpayer modules from PCA inventory prevents the PCA from making further taxpayer contact and averts conflicting actions on the account.

Within two to four weeks of creating the TAS case, a batch process will recall the taxpayer’s modules from the PCA.

Because the PCA may continue to call the taxpayer during this two to four week period, encourage the taxpayer to send by certified mail a written request to their assigned PCA stating that the taxpayer does not want to work with the PCA. Refer the taxpayer to the “Do Not Contact” sample letter located on the Private Debt Collection Program – What You Need to Know webpage at https://www.taxpayeradvocate.irs.gov/news/taxtips-private-debt-collection-program-what-you-need-to-know/. If the taxpayer does not have access to the internet, offer to mail the taxpayer two copies of the letter (one to keep for their records).

If the taxpayer does not want to mail the letter or wants contact from the PCA to stop immediately, suggest the taxpayer call the PCA and tell the PCA they are working with TAS. The PCA will cease contact for 60 days, allowing time for the IRS to recall the module.

Inform the taxpayer they do not need to make payments requested by the PCA unless they want to do so; TAS will work with the taxpayer to determine their reasonable collection potential during the course of the case.

If the IRS assigned a taxpayer module to a PCA that meets a statutory exclusion per IRM 5.19.1.5.21.3.1, Legislative Exclusions to Private Debt Collection Criteria, or the IRS designated the module CNC hardship before assignment, report the example on SAMS with the TAS case number.

TAS will take additional steps to expedite relief for taxpayers who receive Social Security benefits and whose income is at or below 250 percent of the Federal Poverty Level. Refer to the LITC page on irs.gov for 250 percent Federal Poverty Level guideline thresholds.

Analyze the case and discuss options with the taxpayer. Once the taxpayer decides on the appropriate resolution option and TAS has gathered the necessary documentation to advocate for relief, TAS will issue an expedited OAR for the IRS to take the action necessary to provide relief. If the IRS fails to act appropriately on the OAR, TAS will immediately issue a TAO ordering the IRS to take the action.

While working through the steps discussed above, issue TAOs as needed to advocate for the taxpayer. TAS may issue TAOs to the IRS as necessary to advocate to reduce the taxpayer’s balance due or for collection alternatives. This is especially true when the IRS fails to act on an expedited OAR and the taxpayer’s financial circumstances indicate they are unable to meet basic living expenses.

TAS Also Has Authority to Issue a TAO Directly to a PCA.IRC 7811(g) provides that TAOs apply to PCAs. Issue a TAO to the PCA if the:

TAS will follow the normal IRM 13.1.20, TAS Taxpayer Assistance Orders (TAOs), procedures to determine where to issue a TAO to the IRS. TAS will secure email a TAO to a PCA to the IRS Technical Analyst assigned to that PCA. This will allow expedited secure communication with the PCA, especially if confidential documents need to be exchanged to resolve the TAO. TAS will also mail the TAO directly to the PCA. Use the PCA TAO Addendum to identify the correct IRS Technical Analyst, their IRS email address, and the PCA mailing address.

If the taxpayer wishes to file a complaint or report PCA employee misconduct, page 3 of IRS Pub 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency, explains how taxpayers file those complaints with TIGTA. If the taxpayer insists on filing the complaint with TAS, forward the details (taxpayer name, TIN, TAS case number, PCA, PCA employee name if known, and details of the complaint) via secure email to the PDC Rapid Response Team at *TAS PDC Questions. Document the case history with the details of the taxpayer’s complaint and the actions TAS took to forward the complaint.

If the taxpayer appears to meet income eligibility, educate the taxpayer about LITCs. LITC representation may be particularly helpful with ASFR/SFR reconsideration, audit reconsideration, or OIC applications. Refer the taxpayer to the Low Income Taxpayer Clinic Finder and IRS Pub 4134, Low Income Taxpayer Clinic List.

If you issue an OAR requesting an installment agreement, do so only after the IRS recalls the case from the PCA (posted TC 972 AC 054). This prevents the possibility of the PCA simultaneously setting up a payment arrangement and ensures the PCA will not receive a commission based on work performed by TAS.

If you can advocate for other case actions via the OAR process, such as penalty abatement or CNC status, it does not matter whether the IRS has recalled the modules from the PCA. PCAs cannot perform these actions, and these actions will not trigger commissions to the PCA.

If you are unable to advocate for a resolution to the balance due, explain in your closing contact that the IRS may reassign the balance due accounts to a different PCA once TAS closes its case. If this happens and the taxpayer does not want PCA contact, remind the taxpayer that they can write a Do Not Contact letter to the PCA.

Focus initial TAS case building on determining the extent of the problem and stopping similar problems from occurring in additional tax periods.

Determine the tax periods affected and which tax forms, tax deposits, and tax payments were late, insufficient, or missing. Use IDRS research to verify IRS records match the employer’s records in adjacent tax periods, and the employer address of record is accurate. Research Form W-2, Wage and Tax Statement, and W-3, Transmittal of Wage and Tax Statements, filings to determine if the third-party payer misconduct extended to those returns.

Identify proposed or assessed penalties and the enforcement actions the IRS took using IDRS, ICS, AMS, and ALS.

Secure supporting documentation from the employer about the third-party payer arrangement.

Initial TAS advocacy will stabilize the situation to give the employer and TAS time to propose a collection alternative to resolve the problem. These initial actions may include requesting suspension of collection action (see IRM 13.1.10.11, Suspending Collection Action) and recommending withdrawal of a Notice of Federal Tax Lien (see IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien).

When the facts show third-party payer bad acts caused failure to timely file or pay employment taxes, and the employer acted in a responsible and prudent manner, TAS will advocate for relief. The nature of TAS advocacy will vary for each tax period depending on certain facts.

If you identify a third-party payer misconduct case where the actions of the third-party payer affected multiple clients, notify your manager and submit to the Systemic Advocacy Management System (SAMS). The SAMS submission should include:

Reporting third-party payer misconduct via SAMS is important so the IRS (especially Field Collection) learns of all potential victims of third-party payer misconduct and can coordinate fair and equitable treatment of the third-party payer clients (especially those not in TAS). See IRM 5.1.24.5.1, Assignment of Third-Party Payer Client Cases. If third-party payer misconduct victims live in a particular location, Systemic Advocacy may contact the local LTA to coordinate help for non-TAS taxpayers.

If the employer receives a CP 148A or CP 148B notice of an unauthorized address change, advise the employer to contact the IRS immediately. The IRS sends a notice to both the old and new addresses to protect taxpayers from unauthorized address changes made by third parties. An incorrect address means the employer will not receive future notices about balances due, penalty assessments, or unfiled returns.

Recommend the employer monitor third-party payer withdrawals from their bank accounts and use their Electronic Federal Tax Payment System (EFTPS) Inquiry PIN to verify payments made by a third party on the employer’s behalf.

Find a summary of the steps the employer can take to protect themselves in the TAS Small Business website at Third Party Arrangements for Employment Taxes.

Find further information by searching for “outsourcing payroll duties” on https://www.irs.gov/.

IRC 6331 authorizes the IRS to collect tax by levy upon all property and rights to property, except property that is exempt under IRC 6334. IRC 6334 contains a list of property exempt from levy. A participant’s interest in a retirement plan is not exempt from levy under this section. Title 5 USC 8437(e)(3) provides that monies due or payable from the Thrift Savings Fund to a federal employee or member (or former employee or member) are subject to IRS levy for payment of delinquent taxes.

IRM 5.11.6.3(15) limits the amount of a retirement asset levy to exclude the amount subject to 20 percent federal income tax withholding per IRC 3405(c).

IRM 5.11.6.3, Funds in Pension or Retirement Plans, instructs IRS employees to conduct a three-step analysis to determine whether to levy assets in retirement plan accounts.

IRM 5.11.6.3 directs employees to use the standards in IRM 5.15, Financial Analysis, to establish necessary living expenses, and the tables in Pub 590-B, Distribution from Individual Retirement Arrangements (IRAs), to estimate how much the taxpayer can withdraw annually to deplete the retirement account over their life expectancy. Pub 590-B allows for the calculation of the taxpayer’s life expectancy, but it does not instruct the employee on how to estimate the annual withdrawals needed for the taxpayer to deplete the account. IRM 5, Collecting Process, contains no direction for the prediction of future growth, if any, of the retirement account and necessary living expenses. Use the steps described in the IRM 13.1.24.5.5 Supplement and Example to address this issue.

In cases involving a retirement asset levy, determine whether the IRS accurately applied the three-step analysis required in IRM 5.11.6.3, Funds in Pension or Retirement Plans. For step three, review the calculation used to determine the taxpayer’s need for retirement account assets.

Use the process outlined in IRM 13.1.24.5.5 Supplement and Example to evaluate the IRS determination. The process uses today’s dollars in both the retirement asset and necessary living expense categories. Attempting to estimate the future growth of either of these contains too many variables to ensure a consistent application for all taxpayers.

If the taxpayer did not request the levy on retirement assets, or ICS notes show the taxpayer requested the retirement asset levy, but the taxpayer later informs TAS that the IRS compelled the request to levy by warning of future enforcement actions, and the taxpayer wants the levy released or levy proceeds returned:

If the taxpayer is considering requesting a retirement asset levy, educate the taxpayer about:

After educating the taxpayer in (4), if the taxpayer wants to request a retirement asset levy, see IRM 5.11.6.3 and secure a signed written request to the IRS to levy the assets in the retirement account, consider a referral to a ROTA, advocate for the taxpayer’s request ensuring the IRS accurately applies the three-step analysis required in IRM 5.11.6.3, and provide CDP rights.

TAS employees can share the IRM 13.1.24.5.5 Supplement and Example with taxpayers and tax professionals to direct them to public calculators and provide them with a methodology to challenge IRS calculations.

The Reasonable Cause Assistant is a decision-support software program designed to help IRS employees determine penalty relief for Individual Master File (IMF) Failure-to-File (FTF), IMF Failure-to-Pay (FTP), and Business Master File (BMF) Failure-to-Deposit (FTD) penalties through the Accounts Management Services (AMS) desktop application. See IRM 20.1.1.3.6, Reasonable Cause Assistant (RCA), for the RCA categories available for penalty abatement. The IRS requires its employees (including Revenue Officers but excluding Appeals employees) to use the program where available for penalty abatement requests. RCA programming applies reasonable cause standards against the reasonable cause categories chosen by the user and the answers selected and dates entered in response to the questions posed by the RCA. To reach the correct determination, users must choose the applicable categories and answers based on the information provided by the taxpayer.

TAS maintains access to the RCA for its employees, but it is not a substitute for analysis of the taxpayer’s facts, supporting documentation, and the law. Instead, TAS employees use the RCA to help determine how the IRS will evaluate the request for penalty abatement, which can assist TAS employees making OAR recommendations. See IRM 13.1.24.6.1.1.1.

In some cases, RCA will require documentation to support the taxpayer’s request before reaching a conclusion. The RCA will reach one of five possible conclusions for the MFT and tax period reviewed (listed in order of priority):

The user can abort an incorrect conclusion. See IRM 20.1.1.3.6.10.1, Overriding (Aborting) RCA’s Conclusions. The abort conclusion requires an explanation, which the Office of Servicewide Penalties reviews. If the case includes unique individual facts and circumstances that the RCA cannot consider, users must carefully analyze those elements and ensure to show, in accordance with the reasonable cause guidelines, that despite the exercise of ordinary business care and prudence, the taxpayer was unable to comply within the prescribed time. A determination to abort/override the RCA’s conclusion cannot conflict with law or IRS policy.

TAS employees will generally follow these steps to advocate in penalty relief cases:

TAS employees will analyze the taxpayer’s information to determine how best to advocate for penalty relief based on their knowledge of the reasonable cause abatement provisions and the facts of the case prior to using the RCA. If the penalty is an IMF Failure-to-File, IMF Failure-to-Pay, or BMF Failure-to-Deposit penalty, TAS employees will use the RCA to analyze whether penalty relief may be appropriate due to reasonable cause, statutory exception, or administrative waiver. However, TAS employees should not base their determination to advocate for penalty relief based only upon the results of the RCA analysis. Rather, the TAS employee should decide whether to advocate for relief based on the penalty relief standards as applied to the taxpayer’s individual facts and circumstances.

TAS employees have access to the RCA because use of the RCA helps build our case, even when TAS disagrees with the answer provided by the RCA. TAS employees using the RCA will determine what category or categories (if any) will result in abatement. If the RCA decides to sustain the penalty, TAS employees should review the facts and circumstances to determine if an RCA override is appropriate and should consult ITAP if they need help making this determination.

TAS employees may encounter “in between” cases where it may be difficult to determine the proper OAR recommendation as described in IRM 13.1.24.6.1 (5) and IRM 13.1.19.5, Operations Assistance Request (OAR) - Preparation.

In these situations, TAS employees must use their good judgment and discretion to determine if a follow-up request to the taxpayer for more information would be beneficial. The follow-up contact could point out the weaknesses in the information received and suggest additional information that would strengthen the case. TAS employees should ask themselves the following questions when deciding whether to make a follow-up contact for additional information:

After careful consideration of these questions, TAS employees will again use their good judgment and discretion to determine whether to:

When the IRS disagrees with an OAR relief recommendation and sustains the penalty, TAS employees should review the reasons given to determine if and how TAS should dispute the determination. If TAS employees agree with the IRS’s explanation, then TAS employees will close their OARs without further action (or if the IRS suspended the request pending TAS review, TAS employees should advise the employee assigned the OAR to proceed with sustaining the penalty). The taxpayer can still exercise appeal rights per the denial letter. TAS employees will advise the taxpayer of their appeal rights provided in the denial letter during the closing contact per IRM 13.1.21.2.1(2), Closing Actions.

At any level of OAR disagreement, if the TAS employee believes that the IRS OD/Function was incorrect in its rejection of an OAR, they should elevate the case for TAO consideration. Discuss appeal rights and options with the taxpayer or their representative if OAR elevation efforts are not successful at the OD/Function level. Appeals can consider hazards of litigation. Discuss this with the taxpayer or their representative, and if the taxpayer decides to go to Appeals, the taxpayer must file an appeal to the denial of penalty relief. Once the taxpayer’s penalty appeal package is in Appeals, TAS employees can use the OAR process to advocate for penalty relief to Appeals. There are no administrative appeal rights on the IRS's denial of a request for a reduction of an IRC 6702 penalty. See Rev. Proc. 2012-43 to provide taxpayers with information on eligibility and the procedures for filing a request for a reduction of an IRC 6702 penalty. TAS employees will keep the TAS case open until Appeals makes its penalty relief decision. See IRM 13.1.21.2.2.2(1)(b), Appeals, for more information.

See IRM 13.1.24.5.4 for advocacy information for employers affected by third-party payer misconduct, including penalty relief and relief through offers in compromise.

A taxpayer may request penalty relief if they received a notice in standard print format requiring a taxpayer action, but the taxpayer did not timely respond because the notice was inaccessible. If the taxpayer informs the TAS employee they are subject to penalties due to a delay in responding to a notice, consider whether a reasonable cause exception might apply in the taxpayer’s situation. See IRM 20.1.1.3.2.2.8, Inaccessible Notices, and IRM 13.1.6.10, Assisting Taxpayers Who Need Documents in an Alternative Media Format, for more information.

Under certain limited circumstances where hardship exists, the IRS may issue a manual refund without first satisfying outstanding federal tax liabilities. These refunds are known as OBRs. Generally, TAS has the delegated authority to issue OBRs if the account does not have an open control for the tax year of the overpayment. However, TAS is subject to the same rules followed by other IRS employees with similar authority. Similarly, TAS can only reverse an offset when there is legal authority to do so – and the legal authority that TAS must follow is the same legal authority applicable to the IRS. As with any other case, TAS must perform an analysis of the facts and applicable legal authorities when deciding whether to issue an OBR or reverse an offset that has already occurred.

OBRs are extremely time-sensitive, particularly with the improvements in return processing made possible by CADE 2. As a result, it is imperative that TAS employees be mindful of deadlines for requesting an OBR. If an employee will be on leave, is out of the office unexpectedly, or has a large volume of work, it is the employee’s responsibility to bring any case involving an OBR to the attention of their manager immediately for reassignment. (See IRM 13.1.16.8.1, Immediate Elevation of Emergency Cases, and the example in IRM 13.1.18.4(1), Time Frames for Taking Case Actions.)

The following sections summarize OBR law and authorities.

IRM 21.4.6.5.7.1, Offset Bypass Refund (OBR), provides that a request for an OBR must be worked immediately upon receipt. An OBR must be issued before the overpayment has been offset. If the offset has already occurred, the IRM instructs IRS employees to tell the taxpayer that the overpayment has been applied to the balance due account and the IRS cannot reverse the offset. Refer to IRM 21.4.6.5.7.1(6), Offset Bypass Refund (OBR), and IRM 3.17.79.3.16(5), Offset Bypass Refunds.

As described above, if a taxpayer has an IRS debt and a nontax debt for which IRC 6402 authorizes the offset (e.g., child support, student loan, unemployment compensation, state income tax debts). IRM 3.17.79.3.16(2)(Note) prohibits the IRS from bypassing either debt. The IRS debt must be paid.

Once the offset takes place, the IRS will not reverse the offset unless a clerical error occurred that prevented processing of the request. See IRM 21.4.6.5.7.1(11), IRM 3.17.79.3.16(5), and IRM 3.17.79.3.2(18), Processing Manual Refunds.

Per IRM 3.17.79.3.3(3), Issuing Hardship Refunds, a TRDBV print can be used when issuing a direct deposit hardship manual refund into a RAC/RAL account of an original electronic filed return.

When TAS receives a case involving a refund request, TAS must determine whether an OBR is permissible. TAS must research the status of the current year return (if already submitted for processing) and the taxpayer’s previous attempts to communicate the necessity for an OBR prior to receipt of the case in TAS (generally accomplished through review of the Accounts Management System (AMS)).

If the offset is imminent when TAS receives the request for relief (it generally is), TAS must recognize the short window for providing relief and act quickly. TAS must consider whether there is an outstanding federal tax debt (in which case an OBR is permissible) and whether there is an outstanding child support debt, federal agency nontax debt, state income tax obligation, or unemployment compensation debt (in which case an OBR is not permissible).

Currently, CADE2 processing generally results in the tax assessment (TC 150 or 23C date) reflecting the same date as the posting of the offset (TC 826), but the cycle dates of those transactions may appear on IDRS prior to the actual assessment and offset. Legally, an overpayment does not exist until the IRS assesses tax and the taxpayer’s payments or credits exceed the amount of the assessment. Therefore, until the return processing is complete including assessment of the tax (identified by the TC 150 or 23C date, not the cycle date), there is no overpayment available for offset. Legally, the offset cannot occur prior to the assessment. An OBR can be initiated prior to assessment but no later than the date of offset as reflected by the transaction codes (TC 150 for assessment of tax, and TC 826 for offset of the resulting credit).

If the TC 826 offset took place in a later cycle than the TC 150, research Document 6209 Section 16 - IDRS Online Input Table to determine the 23C date of the cycle of the offset to determine if an OBR can still be issued.

Once the tax is assessed (the 23C date), the overpayment is created and offset occurs, there is no longer any overpayment to refund, and the OBR cannot be initiated. However, if a freeze code or other condition exists on the account preventing the overpayment from offsetting to the outstanding liability, an OBR can be initiated because the overpayment is still available on the module. (See IRM 21.4.6.5.7.1(6), Offset Bypass Refund (OBR).)

If a clerical error occurred in the processing of the OBR, it may be possible to reverse the offset based on the clerical error doctrine and then issue the OBR.

In the legal context, a clerical error results from a minor or inadvertent mistake in writing or copying something on the record and not from judicial reasoning or determination. For example, a clerical error includes:

TAS should advocate for an OBR where the following occurs before the offset:

If an IRS or TAS employee makes a clerical, inadvertent or ministerial error (as opposed to a substantive error in judgment) that prevented the processing of the OBR request prior to the date of offset and resulted in harm to the taxpayer, TAS should advocate by requesting the IRS reverse the offset and provide TAS with written authorization to issue a manual refund. If the Operating Division (OD)/Function disagrees with TAS’s recommended actions, then the TAS employee should elevate the issue to the LTA for possible issuance of a Taxpayer Assistance Order (TAO).

TAS employees must always approach each case involving an OBR request with an advocacy perspective, reviewing the individual facts and circumstances to determine the best approach for providing relief or alternatives.

Refund offsets may be the only avenue for the IRS to collect from some taxpayers. Without the application of refund offsets, those outstanding liabilities continue to accrue more interest and penalties, so the taxpayer’s indebtedness to the government grows, potentially subjecting the taxpayer to enforcement actions like the filing of a Notice of Federal Tax Lien (NFTL) or a levy. TAS should educate taxpayers seeking OBRs about alternatives to resolving their outstanding liabilities, such as installment agreements or offers in compromise.

Many taxpayers facing refund offsets may not have sufficient resources to meet necessary living expenses and make payments toward their liabilities. It is not unusual for such taxpayers to experience economic hardship year after year, which may lead them to seek TAS assistance more than once. In these situations, TAS can advocate by exploring with the taxpayer the feasibility of adjusting withholding exemptions to reduce tax withholdings, thus resulting in increased take-home pay, that improves the taxpayer’s financial situation. Just because a taxpayer has requested an OBR in one or more prior years is not, in and of itself, a reason to deny an OBR request in a current year.

TAS employees do not have authority to solicit unprocessed original or amended tax returns. The IRS does not consider a TAS office a “designated filing location” for tax returns, and the IRS has not delegated TAS employees the authority to accept hand-carried returns. In general, the only exception for acceptance of returns by TAS employees is when the return is time-sensitive and the failure of TAS to accept the return would be detrimental to the taxpayer. The IRS does not consider the return received or filed, however, until a TAS employee transmits it to the proper IRS filing location or hand-carries to an IRS employee who has the delegated authority to accept hand-carried returns.

In rare circumstances the taxpayer may send the unprocessed original return to TAS when requesting an expedited refund. Examples of these rare circumstances are:

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, changed the CTC beginning in tax year 2018. The changes included requiring a SSN and increasing the credit amount to $2,000 per qualifying child. It also created a new credit called the Credit for Other Dependents (ODC) which provides a non-refundable credit of $500 for certain other dependents.

As discussed in the National Taxpayer Advocate 2020 Objectives Report, TAS Will Urge the IRS to Reconsider Its Position on the Application of the Religious Freedom Restoration Act to the Social Security Requirement Under IRC 24(h)(7), Which Has the Effect of Denying Child Tax Credit Benefits to the Amish and Certain Other Religious Groups and in a NTA blog post, The IRS’s Position on the Application of the Religious Freedom Restoration Act to the Social Security Requirement Under Internal Revenue Code 24(h)(7) Has the Effect of Denying Child Tax Credit Benefits to the Amish and Certain Other Religious Groups, (subsequently amended and edited during the current NTA’s tenure), some taxpayers with deeply held religious beliefs, most notably the Amish, do not obtain SSNs due to these beliefs. The IRS subsequently revised IRM 3.12.3.26.18.6(2)(a), TIN Requirements (EC 287), indicating it will not allow the CTC on returns where the dependent does not have an SSN due to the taxpayer’s religious beliefs. Most typically, these would include returns filed by Amish and Mennonite taxpayers. The NTA does not agree with the IRS’s position. The NTA and TAS will continue to assert, pursuant to Sherbert v. Verner, 374 U.S. 398 (1963), that the IRS’s position abridges the free exercise of religion and may be in violation of the Religious Freedom Restoration Act.

Since the IRS is disallowing the CTC where a qualifying child does not have an SSN, these taxpayers may pursue one of two options:

To advocate effectively for the position the taxpayer chooses, you will need to discuss both options with the taxpayer after you complete your initial research. Ensure the taxpayer understands that if they so choose you will advocate for the CTC despite the IRS’s position. We will advocate based on the NTA’s disagreement with the IRS’s position, as outlined above. Be aware that the Amish and Mennonites are averse to litigation. See CABIC 325, Invalid Dependent SSN/Name, for more information.

Consider contacting the TAS Attorney Advisor Group (AAG) manager for assistance with any legal issues. These issues and the advocacy is complex and he AAG has expertise in this area. See Attorney Advisory Group (AAG) for contact information.

It can be difficult to fulfill our role as advocates when we suspect a scheme. Worse, our experience in one potential scheme case can affect how we advocate in other cases. We need to find a way to use our common sense and good judgment to ensure we remain aware of potential schemes without losing our advocacy mindset. Keep these points in mind when reading the remainder of this chapter and working TAS cases.

TAS employees are not experts on schemes, and working these cases does not require you to be. Our primary focus is on a simple question: Can the taxpayer obtain adequate documentation to support the position taken on their return?

When a case involves a potential scheme, normal case advocacy procedures can be different depending on the nature of the scheme. The following subsections explain the general strategy for these cases:

TAS employees will identify cases or requests for TAS assistance involving potential schemes either by external indicators (IDRS codes added by various IRS functions) or internal indicators within TAS.

External indicators include but are not limited to:

Identifying potential schemes described in SERP Alerts and the Dirty Dozen can be more difficult when the taxpayer’s claim is on an amended return since the credit often does not appear on the account when TAS receives the request for assistance. Review the amended return for the source of the overpayment as follows:

TAS internal indicators include but are not limited to:

Upon identifying such mass TAS submissions, the discovery is elevated to the Local Taxpayer Advocate (LTA) and Deputy per IRM 13.1.16.15.3, Bulk Receipts. If deemed a potential scheme case, a case history entry specific to that potential scheme may be added to TAS cases to help Case Advocates identify them in their inventory. TAS managers or Welcome Screen articles will explain the meaning and purpose of these history entries to TAS employees. Per IRM 13.1.16.15.3, “BULK” will also be added to the TAMIS Local Use 2 field.

Remember, in most TAS cases the IRS is aware of the potential scheme and has already stopped the taxpayer’s refund. The reporting methods described below are for the situations where the IRS might not be aware of the scheme.

The reporting methods described in the bullet below informs TAS employees that may work the TAS case of the scheme.

When TAS receives an inquiry involving a potential refund scheme, TAS will determine if the taxpayer's issue meets TAS case acceptance criteria per IRM 13.1.7.3, TAS Case Criteria, and if it does, TAS will accept the case. TAS will not exclude taxpayers unless it determines the taxpayer's complaint or inquiry only questions the constitutionality of the tax system or when the focus of the taxpayer's inquiry solely involves frivolous tax strategies intended to avoid or delay the filing or paying of federal taxes. See IRM 13.1.7.4(1), (2), and (3), Exceptions to Taxpayer Advocate Service Criteria. TAS will not accept as cases inquiries related to returns filed with positions taken as described in IRM 25.25.10-1, Frivolous Arguments, (except a few near the bottom) as cases under the IRM 13.1.7.4(1), (2), and (3) exceptions, as they are not valid attempts to file a true tax return; the sole basis of the return filing is the frivolous tax strategy.

Often, taxpayers impacted by a potential scheme seek TAS assistance with receiving a refund based on the filing of an original or amended tax return. Third parties misled many of these impacted taxpayers. These third parties may include a practitioner, scheme promoter, a friend or family member. The impacted taxpayers may be unaware that they claimed credits for which they are not eligible under the law. TAS’s role is to help the taxpayer move forward, even if they weren’t a clean actor.

These cases give TAS employees the opportunity to protect the taxpayer rights to:

TAS has an opportunity to help these taxpayers by educating them about the proper method for calculating credits and the eligibility requirements and assisting them in bringing their account current and into compliance. Refer to CABIC 940, Potential Schemes, for additional guidance for working potential scheme cases.

IRM 13.1.24.6.4.2 explains how research in IRS systems and TAMIS will identify TAS cases involving potential schemes. Based on your research, educate the taxpayer, representative, or congressional aide about the eligibility requirements and proper method for calculating credits.

If a power of attorney exists for the module, contact the representative for this discussion. See IRM 13.1.23.2(3), Taxpayer’s Right to Retain Representation. However, see IRM 13.1.23.5, Taxpayer Complaints About Representatives, if the taxpayer contacts TAS with complaints about the POA. See also IRM 13.1.23.8, Power of Attorney Bypass, which describes situations when TAS may seek LTA and Deputy approval to bypass the POA.

TAS's ability to communicate and empathize with the taxpayer or representative is key. First and foremost, TAS must protect and clearly demonstrate the taxpayer’srights to be informed and to receive quality service. TAS will discuss the questionable return item(s) and educate the taxpayer or representative about why the IRS is reviewing the return and the potential consequences if the IRS determines the return is not accurate (e.g., refund delays, deficiency notice, civil penalties).

Whenever the taxpayer’s account includes an indication that the IRS is considering or has already made a Frivolous Return Program referral, include a discussion of the Frivolous Return or Frivolous Submission penalties as appropriate. See IRM 20.1.10.12, IRC 6702 - Frivolous Tax Submissions, and IRM 25.25.10.11, Frivolous Return Penalties Overview. Failure to substantiate the claim or amend/withdraw the questionable credit can result in the IRS assessing a $5,000 penalty on each return or submission.

If the taxpayer indicates a return preparer, promoter, or representative advised them to claim the credit and the taxpayer did not realize they do not qualify for the credit, see IRM 13.1.5.12, Disclosure Regarding Practitioner or Preparer Misconduct, and IRM 13.1.23.5, Taxpayer Complaints About Representatives.

The example below shows how TAS can help the taxpayer or representative understand the issue and what they can do to resolve it.

After your discussion with the taxpayer or representative, you will have explained the taxpayer’s problem and what they need to do to resolve it. The taxpayer may wish to withdraw their case from TAS. The taxpayer may plan to provide documents to substantiate what is on their return or may plan to file an amended return to remove the disputed credit. The taxpayer might indicate they are the victim of a promoter. Based on the taxpayer’s response, work potential scheme cases in one of the four ways described below in paragraphs two through five:

If the taxpayer decides to withdraw the request for TAS assistance, close the case as a withdrawal (relief code 54). See IRM 13.1.21.2.1.1, Relief Codes.

If the taxpayer agrees to provide documentation to support the credits or file an amended return to remove the credits, keep the case open until TAS can review the documents or amended return.

If the taxpayer indicates they are the victim of a return preparer or promoter, direct the taxpayer to file Form 14157, Return Preparer Complaint, and Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit. See IRM 13.1.23.5, Taxpayer Complaints About Representatives.

For anything else, use the second request process to explain what we need to keep advocating. If the taxpayer’s response to the second request letter is not sufficient for TAS to advocate for the IRS to accept the original or amended return, close the case as no response per IRM 13.1.18.8.1.

In the second response letters referenced above, reiterate the importance of filing an accurate, valid return and the possible consequences if they fail to do so. Taxpayers determined to have filed a frivolous claim for refund may be subject to a civil penalty of $5,000 and may also face additional penalties for each subsequent frivolous return filed. The IRS does not base the penalty on tax liability, so a tax return with no tax due can still be subject to the penalty. If the taxpayers file a frivolous Married Filing Jointly tax return, the IRS can assess the penalty to each spouse individually. See IRM 20.1.10.12, IRC 6702 - Frivolous Tax Submissions, and IRM 25.25.10.11, Frivolous Return Penalties Overview.

TAS will never send neutral language OARs in these cases. See IRM 13.1.19.5(8), OAR – Preparation. Sending an OAR when a taxpayer has failed to support credits claimed on their return or failed to correct an inappropriately claimed credit will subject the taxpayer to significant penalties. If you have any doubts about whether the taxpayer has justified their position, make a referral to ITAP.

If the taxpayer agrees to file an amended return removing inappropriately claimed credits, monitor for IRS receipt of the amended return. Once the amended return is present on IDRS and CII or EUP research confirms the taxpayer removed the questionable credit, you can issue an Operations Assistance Request (OAR) to recommend the controlling function process the amended return to remove the credits. See IRM 13.1.19.5(8).

If the taxpayer provides TAS documentation that supports the claiming of the credit under review, send an OAR to the controlling function recommending they allow the credit amount supported and release any freeze related to review of that credit. Similarly, if the taxpayer files an amended return removing all questionable credits, send an OAR to the controlling function recommending they accept the amended return removing the credits. See IRM 13.1.19.5.

If the taxpayer neither amends nor provides documentation to support the credits claimed, do not issue an OAR, even though the IRS might still have a freeze on the account or returns remain unprocessed. If you have any doubts about whether the taxpayer has adequately supported the credits claimed, make a referral to ITAP.

If the function delays or refuses to take the recommended action because the function lacks procedures to do so, despite TAS providing taxpayer documentation that supports allowing the claim, the LTA may issue a TAO. See IRM 13.1.20, TAS TAO Process. If unsure whether the documentation supports issuing a TAO, make a referral to ITAP.

Advocate for a resolution that will remove the taxpayer from the criteria for the Passport Certification Program. For example:

Analyze the situation and discuss the options with the taxpayer. Once you have decided on an option, gather the necessary documentation to advocate for the selected relief. If the case is complex and may take time to fully resolve and the taxpayer has a need for a passport, discuss with the taxpayer the possibility of entering into an Installment Agreement or Partial Pay Installment Agreement while working on a longer-term resolution to have the IRS decertify the taxpayer. Ensure your case histories show the reason you selected the advocacy option and your efforts to secure the necessary documentation.

If the taxpayer has planned foreign travel within 45 days, lives abroad, or has another compelling reason for the passport, use expedited OARs with short requested completion dates to resolve the debt. If the IRS will not agree to your OAR, immediately elevate the situation to your LTA for issuance of a TAO.

If the taxpayer’s need for foreign travel relates to an emergency or humanitarian situation, IRM 13.1.24.8.6 explains the discretion the Department of State can exercise while the taxpayer remains certified.

Once the taxpayer meets a criterion for decertification under IRM 5.19.25.10, Reversal of Certification, review IRM 13.1.24.8.8 to determine if the account will require manual decertification. If so, send an OAR to the SB/SE Passport Office seeking manual decertification.

If the taxpayer has an imminent need for a passport as defined in IRM 5.19.25.10.1, Expedited Decertification, gather the supporting documentation described. If the IRS function that resolved the debt did not complete and sign page one of Form 14794, Expedited Passport Decertification, prepare the form for LTA signature on page 1.

Send an expedited OAR to the *SBSE Passport Group mailbox, requesting expedited certification; this will generally allow for decertification within 9-16 days. Processable expedited decertification generally takes the IRS three business days to review and transmit to the DOS. See IRM 5.19.25.10.1, Expedited Decertification. Include the signed Form 14794 and the required documentation. If the IRS does not timely comply with the OAR, or if you disagree with the response, immediately elevate the case to your LTA for issuance of a TAO.

Aside from the refund statute expiration date (RSED) under IRC 6511, Limitation on Credit or Refund, there is an additional statute under IRC 6532(a), Periods of Limitations on Suits, that might prevent a taxpayer from getting a refund when they dispute the IRS disallowance of a refund claim. This statutory period of limitations begins with the date the IRS mails a notice of claim disallowance to the taxpayer and ends two years after such mailing date. The IRS does not track the IRC 6532(a) two-year statutory period on the Integrated Data Retrieval System (IDRS).

When identifying an IRC 6532(a) statute issue, the key is the presence of a statutory notice of claim disallowance because the date on this notice begins the two-year statutory period. First, consider if the claim is a request for abatement. Requests for abatement under IRC 6404, Abatements, are not subject to IRC 6532(a) or IRC 6511 limitations on credit or refund. See IRM 25.6.1.10.1, Requests for Abatement, and IRM 21.5.3.4.6(3), No Consideration and Disallowance of Claims and Amended Returns. IRC 6404(b) states taxpayers shall not file requests for abatement of income, gift, or estate taxes, but IRS Policy Statement 3-15 says the IRS will consider such requests anyway. Requests for abatement can bring the amount owed (including tax, assessed penalty and interest, and accrued penalty and interest) down to zero, and the IRS should not deny a request for abatement based on statute expiration or because the taxpayer has not paid the tax.

Generally, the IRS issues a Letter 105-C, Claim Disallowed, or Letter 106-C, Claim Partially Disallowed, when fully or partially disallowing a refund claim. The IRS also uses these letters (Letter 105-C and Letter 106-C) to deny requests for abatement. See IRM 13.1.24.10.1.1 (2), Identifying IRC 6532(a) Statute Issues, for information on determining whether the issue is a request for abatement or a claim for refund. The date the IRS mails the disallowance letter begins the running of a two-year period of limitation for the taxpayer to file suit under IRC 6532(a) with the U.S. District Court or U.S. Court of Federal Claims.

Claims for refund can appear in many forms, including (but not limited to) amended returns filed using an “X” series return (e.g., Forms 1040X, 941X, or 1120X) and informal claims. See IRM 25.6.1.10.3.2, Claims for Credit or Refund – Form and Content, IRM 8.7.7.2.3, General Information About Refund Claims and Overassessment Cases, and IRM 25.6.1.10.3.2.3, Informal Claims. Cases with Issue Codes 330, 620, 760, 912, or 919 may involve a taxpayer seeking TAS help to:

The IRS can consider a taxpayer's reconsideration or appeal request in response to a disallowance letter if the request has not exceeded the two-year deadline of the disallowance letter. Once the two-year limitation period expires, IRC 6514 prohibits the IRS from issuing a refund, even if an IRS function or Appeals determination would have allowed the claim/refund, as any refund issued after the expiration date of the two-year period under IRC 6532(a) is considered erroneous under IRC 6514.

IRC 6532 does not require that the notice include an application of the law; therefore, any incorrect application of the law in the notice would not deem it invalid and therefore still begin the two-year period.

It is possible to extend the two-year limitation before it expires. The taxpayer and the IRS must agree to extend the two-year statute under IRC 6532(a)(2) by using Form 907, Agreement to Extend the Time to Bring Suit.

Upon identifying a case where the IRC 6532(a) statutory period is running on a claim disallowance:

Statute cases are a priority, and as such:

If there are less than 90 days remaining on the two-year limitation period, immediately refer the case to a Revenue Agent Technical Advisor (RATA). Once the RATA completes their referral, with the recommendation that the Case Advocate work with the taxpayer to secure a signed Form 907, the RATA will close the referral. If the referral is closed the Case Advocate will submit a new referral to a RATA once they secure a Form 907 signed by the taxpayer. See IRM 13.1.24.10.1.5 (5), Advocacy Using the Form 907 Extension.

Determine if and when the IRS issued a Letter 105-C or Letter 106-C or other disallowance letter. The two-year statute begins to run on the day the IRS mailed the letter by certified or registered mail. See the Case Assistance by Issue Code (CABIC) 180 page, RSED, for IRS systems research information to help identify and locate a copy of the claim disallowance letter.

Document the IRC 6532(a) expiration date (two years later) for that tax period in the case history.

Ensure the taxpayer understands the right to appeal an IRS decision in an independent forum and the two-year statute to bring suit in court. The IRS does NOT suspend or extend this two-year statute because the case is in Appeals or active in TAS. To be timely, the refund issue date must be within the IRC 6532(a) statutory period. Once this two-year period under IRC 6532(a) expires, there are no refund options at all because any refund issued outside of the IRC 6532 statutory period is considered erroneous under IRC 6514 . The taxpayer will lose the right to challenge the IRS’s position and be heard, even if Appeals or the IRS BOD agree the taxpayer would otherwise be due a refund.

Determine the taxpayer’s intentions related to the disallowed claim. There is no need to track or discuss extending the IRC 6532(a) statutory period if the taxpayer does not intend to appeal the claim disallowance or file a refund suit in court. Document the taxpayer’s reply/intentions in the case history.

If the taxpayer wishes to pursue the disallowed claim, discuss the merits of the claim with the taxpayer. In all cases, explain what the law provides and discuss how to build a strong case to support the taxpayer's position. This conversation includes advising taxpayers when law does not appear to support their positions.

In cases where the taxpayer intends to appeal or otherwise contest a claim disallowance:

Some taxpayers may have no intention of asking for a reconsideration or appeal of the disallowance. If discussions with the taxpayer reveal this is the case, document this in the case history. Ultimately, taxpayers are responsible for protection of this statute and the initiation of Form 907.

Form 907, Agreement to Extend the Time to Bring Suit, extends the two-year period for filing suit in a U.S. district court or the U.S. Court of Federal Claims, but both the taxpayer and the IRS must agree to the extension. The extension also gives the IRS additional time to consider an administrative appeal for the taxpayer, even if the taxpayer has no plans to file a refund suit in court. TAS employees do not have delegated authority to sign Form 907 on behalf of the IRS. However, TAS may work with the taxpayer to prepare the Form 907 or may prepare the form on their behalf, because the IRS does not consider it a return.

See CABIC 180 for IRM references discussing use of the Form 907 and information about which IRS officials can sign Form 907. Each Form 907 (multiple extensions are possible) can extend the statute.

Because Form 907 is not a tax return or claim for refund, TAS can solicit, prepare, or help a taxpayer prepare Form 907 and receive a signed Form 907 from taxpayers using the Document Upload Tool (DUT), fax, or mail. However, as mentioned above, TAS case advocates do not have the authority to sign the Form 907 on behalf of the IRS. See Form 907 Request and Executed letters (Taxpayer and Power of Attorney versions) on the TAS Letters, Communications, and Forms site (English and Spanish versions). Per IRM 10.10.1.6.1, Accepting Images of Signatures and Digital Signatures in Certain Taxpayer Interactions, TAS can receive a Form 907 with a digital, photographic, or otherwise imaged taxpayer signature. Send an electronic copy of Form 907 via an OAR to the IRS for agreement and a digital signature of the appropriate IRS official.

If TAS receives a Form 907 signed only by the taxpayer or taxpayer’s representative (but not the IRS) as part of the taxpayer’s request for TAS assistance or at any time during the life of the case, document the case history and notify your Local Taxpayer Advocate (LTA) immediately.

Upon receipt of a processable Form 907, it is strongly recommended that employees refer the case to a RATA and forward the form to the RATA assigned to the referral. ITAP is responsible for securing the IRS signature on the extension request. Once all parties have signed the form, the RATA will return the executed form to the Case Advocate with instructions on how to proceed.

See the CABIC 180 page for current OAR routing information.

If the IRS disagrees with TAS analysis that the taxpayer timely filed the refund claim under IRC 6511 and refuses to sign Form 907, verify the IRS computed the RSED correctly (consult a RATA if needed). AMS or CII may provide evidence of an earlier (and timely) refund claim or the presence of an informal claim. Consider a TAO if appropriate to resolve any disagreements.

If the IRS refuses to consider the merits of a taxpayer appeal because the IRS contends the IRC 6532(a) statutory period has expired, verify the dates the IRS used and explore whether the IRS followed the proper procedure for issuing the disallowance letter.

In situations where there is ambiguity on whether the taxpayer received the statutory notice of claim disallowance, consider taking the following steps:

Even if a refund is not available due to the expiration of the period under IRC 6532(a), TAS has advocacy options available. Statute expiration should not preclude taxpayers from additional TAS assistance. Consider the following possibilities.

This section describes the TAS employee responsibilities when advocating for taxpayers who received a refund disallowance letter from the IRS.