Source: http://www.irs.gov/irm/part5/irm_05-016-001r.html
Timestamp: 2014-04-19 07:24:20
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Internal Revenue Manual - 5.16.1 Currently Not Collectible Part 5. Collecting Process
Chapter 16. Currently Not Collectible
Section 1. Currently Not Collectible 5.16.1 Currently Not Collectible 5.16.1.1
Currently Not Collectible Policy and Procedure Overview
Currently Not Collectible Conditions
5.16.1.3
5.16.1.4
Requesting Currently Not Collectible Input for Assessed and Pre-assessed Tax Periods
5.16.1.5
Managerial Approval
5.16.1.6
Mandatory Follow-Up
5.16.1.7
Quality Review of Currently Not Collectible Accounts
Exhibit 5.16.1-1
Form 53 Report of Currently Not Collectible Taxes — Part 1 (Front)
Exhibit 5.16.1-2
Report of Currently Not Collectible Taxes — Part 1 (Reverse) Manual Transmittal
(1) This transmits revised IRM 5.16.1, Currently Not Collectible.
(1) IRM 5.16.1.1(4) Removed OUO restriction from lien filing criteria since it is no longer OUO material. Added CAP program
for appeal rights. (2) IRM 5.16.1.1(16) Note: Changed note for clarification on use of systemic process in transmitting Parts 2 & 3 of Form 53
(3) IRM 5.16.1.2.1(1) Added information to clarify use of UTL.
(4) IRM 5.16.1.2.1(4) Added information to clarify when an in-person courthouse check is necessary. Added requirement to conduct
CBRS research if IRPTR information reflects that the taxpayer has filed an FBAR form.
(5) IRM 5.16.1.2.1 (6) Added information to verify check utility companies for additional information for possible levy sources.
(6) IRM 5.16.1.2.1(12) Added TC 130 cross-referencing on UTL and UTC BMF accounts. (7) IRM 5.16.1.2.2.1 Added reminder that Designated Payment Code must be entered on all payment documents.
(8) IRM 5.16.1.2.2.4 Clarified when filing of a suit extends the CSED. (9) IRM 5.16.1.2.6(11) Added list of items to check when confirming that a corporation/LLC is no longer operating based on
third party sources and a trust fund liability may or may not exist.
(10) IRM 5.16.1.2.6(12) Added information that all adjustments and any amended returns must be submitted prior to reporting
an account CNC.
(11) IRM 5.16.1.2.7(7) and (8) Added information on when CCP will reactivate and reassign accounts.
(12) IRM 5.16.1.2.9(4) Added information to conduct CBRS research when IRPTR reflects a FBAR form was filed.
(13) IRM 5.16.1.2.9(7) Added information regarding releasing of levies. (14) IRM 5.16.1.2.9(11) 3rd Bullet Added information for clarifying input of TC 130 when reactivating BMF accounts closed
as hardship.
(15) IRM 5.16.1.2.9(11) Added a fourth bullet and a reminder. The information in the bullet clarifies when to request a TC
130 input on IMF for refund offsets with the choices for selection on ICS. The reminder clarifies when manually preparing
Form 53 and making appropriate TC 130 selections.
(16) IRM 5.16.1.2.9(13) Clarifies procedures for generating Letter 4223.
(17) IRM 5.16.1.2.10(2) Added note to clarify a passport check does not provide historical travel information.
(18) IRM 5.16.1.3.2.1(6) Added information to clarify the IMF name control and additional bullet on CSED imminent modules
that cannot be referred for the mirroring process.
(19) IRM 5.16.1.3.2.3(2) Added additional information that RO needs to include on Form 3210 when forwarding to CSCO.
(20) IRM 5.16.1.3.2.3 Removed OUO restricted address from IRM. This address is for internal use only and will now reside on
the MySB/SE web site.
(21) IRM 5.16.1.3.4(7) Removed case resolution actions for both taxpayers from table. Removed both notes in the third right
hand box in the table. This information is no longer applicable. (22) IRM 5.16.1.4(1) Note: Changed note for clarification on use of systemic process in transmitting Parts 2 & 3 of Form 53
(23) IRM 5.16.1.6(4) Removed second example in paragraph based on current economic climate--not a good example.
(24) IRM 5.16.1.6(5) (c) Added IMF since this is applicable to both IMF and BMF.
(25) Exhibit 5.16.1-1(5) Added IRM references for criteria for reactivation.
(26) Exhibit 5.16.1-1(6) and (10) Added information on transmitting Parts 2 and 3 of Form 53 to CCP either systemically or
(27) Exhibit 5.16.1-1(16) Corrected item numbers to agree with Form 53. Added lien selections to be used on Form 53.
(28) Various editorial changes were made throughout the IRM.
(29) Corrected various links to web sites throughout the IRM.
IRM 5.16.1 dated April 29, 2011 is superseded.
All Operating Divisions and Functions
Signed byScott D Reisher Director, Collection PolicySmall Business/Self Employed 5.16.1.1 (05-22-2012)Currently Not Collectible Policy and Procedure Overview
Policy Statement 5-71 (aka P-5-71) provides the authority for reporting accounts currently not collectible (CNC). See IRM
1.2.14.1.14, Policy Statements for the Collecting Process. Accounts can be removed from active inventory after taking the necessary steps in the collection process.
Accounts may be reported CNC for a variety of reasons using transaction code (TC) 530. It is a requirement that TC 530 be
defined by the appropriate closing code (cc). The most commonly used closing codes are displayed in the table below. Currently Not Collectible Closing Codes
partial expiration of the assessment prior to issuance
complete expiration of the statutory period for collection or suit initiated to reduce tax claim to judgment
for use by revenue officers on international casework, where a taxpayer can pay but the service is unable to collect a liability
because the taxpayer resides in a foreign country
a corporation, exempt organization, or Limited Liability Company (LLC), where the LLC is identified as the liable taxpayer,
liquidated in bankruptcy
death of an individual with no collection potential from the decedent/decedent estate 09
accounts below tolerance; see IRM 5.16.1.2.5(1) and (2) Tolerance, for additional information
corporations, certain limited liability partnerships, exempt organizations, or LLCs, where the LLC is identified as the liable
taxpayer, which are inactive and defunct with no assets
inability to contact a taxpayer although the address is known and there is no means to enforce collection
a corporation, exempt organization, limited partnership, or LLC, where the LLC is identified as the liable taxpayer, remains
in business and is current but is unable to pay back taxes 14
when suspending collection of BMF balance due accounts when the key individual is deployed to a combat zone; see IRM 5.1.7.9.1,
Business Masterfile (BMF) Accounts of Taxpayers Deployed to a Combat Zone, for additional information 15
obsolete - this was formerly used for corporate income tax liabilities owed by a financial institution certified as insolvent
by the Office of the Controller of the Currency or the Office of Thrift Supervision
inability to locate the Single Member Owner (SMO) or assets of the SMO who is liable for taxes assessed under an LLC Employer
inability to contact a Single Member Owner (SMO) who is liable for taxes assessed under an LLC EIN when the SMO address is
known, and there are no means to enforce collection
accounts below tolerance that are assessed under an LLC EIN, but owed by SMO; see IRM 5.16.1.2.5, Tolerance, for additional information
collection of the liability would create a hardship for taxpayers by leaving them unable to meet necessary living expenses
Hardship closing codes can only be used for individual or joint IMF assessments, sole proprietorships, general partnerships, and LLCs, where an individual
owner is identified as the liable taxpayer.
See IRM 5.16.1.1(17) for a list of the Integrated Collection System (ICS) literals used to close CNC cases.
A single member LLC that is classified as a disregarded entity will, nevertheless, be treated as an entity separate from its
owner for employment tax purposes (effective for wages paid on or after January 1, 2009) and for certain excise tax purposes
(effective for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008).
The regulations are not retroactive.
The investigation required to establish a CNC condition varies with the dollar amount and type of case. Generally, a Collection
Information Statement (CIS) will be secured prior to reporting an account CNC. The CIS supporting a CNC determination is considered
current if it is less than twelve months old. Note:
Appropriate procedures must be followed when making third party contacts. (See IRM 5.1.17, Third Party Contacts)
In general, a Notice of Federal Tax Lien (NFTL) should be filed on accounts being reported CNC when the aggregate unpaid balance
of assessments equals or exceeds $10,000.00. See IRM 5.12.2, Lien Filing Requirements for criteria and exceptions to lien filing. If a taxpayer subsequently requests a Collection Due Process (CDP) or Collection
Appeal Program (CAP) hearing concerning the NFTL filing, the Revenue Officer (RO) must follow the procedures in IRM 5.1.9,
Collection Appeal Rights, to forward the case to Appeals. To avoid potentially prohibited ex parte communications, be particularly familiar with IRM
5.1.9.5, Communications with Appeals.
Conduct a compliance check and document the results in the case history in circumstances when the taxpayer is contacted. See
IRM 5.1.11.2.3, Full Compliance Check. Compliance checks are not required when the taxpayer cannot be contacted.
All open filing requirements or Delinquent Return (Del Ret) modules must generally be resolved and closed appropriately when
reporting an account CNC. For further instructions see IRM 5.16.1.2.9.
Document all actions to support the CNC determination. The last history entry will be a summarizing statement supporting the
CNC decision. Address any assets owned by the taxpayer in the summarizing statement. If a mandatory follow-up is requested,
include the reason in the summarizing statement. See IRM 5.16.1.6 for information on mandatory follow-up.
Only certain CNC cases can be reactivated systemically. Systemic follow-up is limited to hardship, unable to locate and unable
to contact cases. Unable to locate and unable to contact cases will reactivate if a new levy source posts to Integrated Data
Retrieval System (IDRS). Unable to locate cases will also reactivate if a new address posts to IDRS. Hardship cases can be
reactivated if it appears there is a change in the taxpayer's ability to pay indicating collectibility. See IRM 5.16.1.2.9I.
Revenue Officers (RO), Appeals Officers (AO), and Settlement Officers (SO) may report accounts as CNC.
Tax examiners in Collection Field function (CFf) and Centralized Case Processing (CCP) may report as CNC those accounts that
meet existing criteria subject to the limitations shown below:
IMF, Non-Masterfile (NMF), or out of business BMF sole proprietors or partners, with less than ≡ ≡ ≡ ≡ ≡ ≡ aggregate unpaid
balance of assessments.
BMF taxpayers (other than accounts for trust fund taxes owed by corporations, LLCs, or limited partnerships) with less than
≡ ≡ ≡ ≡ ≡ aggregate unpaid balance of assessments.
Bankruptcy specialists may report as CNC corporate liabilities where the aggregate unpaid balance of assessments is less than
≡ ≡ ≡ ≡ ≡ ≡ ≡ when a corporation has been through a liquidating bankruptcy. Advisory employees may report accounts CNC when a local probate office indicates that a proof of claim will not generate funds.
Transferee issues should be considered. See IRMIRM 5.16.1.2.4 for additional information. The Inventory Delivery System (IDS), may shelve IMF accounts where the aggregate unpaid balance, including accruals, is less
than ≡ ≡ ≡ ≡ and BMF accounts where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ .
CNC recommendations generally require the review and approval of the immediate manager to ensure the investigation meets established
standards of thoroughness and integrity. See IRM 5.16.1.5. Managerial review criteria of completed work is located in IRM 1.4.50, Collection Group Manager, Territory Manager, and Area Director Operational Aid, exhibit 1.4.50-2.
Quality control is accomplished through mandatory and sample reviews through Embedded Quality (EQ).
Attach the following supporting documents, whenever applicable, to the case file: Collection Information Statements (CIS)
Approved Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment
Copies of transferee assessment recommendations
Copies of suit recommendations to reduce the tax claim to judgment
Replies to Courtesy Investigations
Other documentation to support the CNC determination Reminder:
If the account is being reported CNC based on a suit recommendation to reduce the tax claim to judgment, forward the entire
case file to Advisory for association with the suit file after the group manager approves the CNC.
Parts 2 and 3 of Form 53 on ICS will be transmitted to CCP via a systemically generated E-mail after GM approval of the CNC.
When Form 53 is manually prepared, Parts 2 and 3 of the paper Form 53 , which show "For processing as Form 3177"
at the bottom, should be sent by secure E-mail or mailed separately from the closed case to CCP for input.
Select the following literals when closing cases as CNC using ICS. The related closing codes (cc) are in parentheses: A. Defunct Corp., Exempt Org., Ltd. Ptr., or LLC (10)
B. Unable to Pay/Hardship (24-32)
C. Bankrupt Corp., Exempt Org., or LLC (07)
D. Unable to Locate (03)
E. UTL for LLC-SMO Liable (17)
F. Unable to Contact (12)
G. UTC for LLC-SMO Liable (18)
H. In-Business Corp., Exempt Org., Ltd.Ptr., or LLC (13)
I. Tolerance (09)
J. Tolerance for LLC-SMO Liable (19)
K. Decedent/Decedent Estate (08)
L. Statute Expired Prior to Issuance (04 )
M. Statute Expired After Issuance or Suit Initiated (05)
N.. Resolution Trust Corp. Related (15)
O. Surveyed (39)
P. International - No Field Visit (06)
Q. Combat Zone (14)
5.16.1.2 (04-29-2011)Currently Not Collectible Conditions
When the LLC is the liable taxpayer for some tax module(s) and the owner of the LLC is the liable taxpayer for other tax module(s),
separate collection determinations must be made for each liable taxpayer. Select the appropriate tax module(s) for each closing
code when utilizing TC 530 for both liable taxpayers. If only one liable taxpayer meets conditions for reporting CNC, and
a different collection action is required for the other taxpayer, report the appropriate tax module(s) CNC before proceeding
with collection action on the remaining tax module(s). See IRM 5.16.1.3.4.(7) LLC tables for additional information. See IRM
5.1.21, Collecting From Limited Liability Companies.
5.16.1.2.1 (05-22-2012)Unable to Locate and Unable to Contact
If neither the taxpayer nor assets can be located, use cc 03 to report the account uncollectible. For Single Member Owners
(SMO), where the SMO is liable for taxes assessed under an LLC EIN, and the SMO, and assets of the SMO are unable to locate,
use cc 17 to report the SMO modules uncollectible. If all asset locators show the taxpayer is still at that address, but attempted
contact confirmed the house is vacant or someone else lives there, the case would be closed UTL.
When the taxpayer's ability to pay cannot be determined because they cannot be contacted and income and assets cannot be identified,
use cc 12, Unable to Contact. For SMOs, where the SMO is liable for taxes assessed under an LLC EIN, use cc 18 if the SMO
is unable to contact, although the SMO address is known, and there is no means to enforce collection.
For domestic accounts, where the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ research of the following
resources is required: Telephone directories
Information Return Program (IRP) data, using Corporate Files On-Line (CFOL) command codes SUPOL or IRPTR