Tax Help: The IRS Office of Chief Counsel has updated the procedures it will follow in Tax Court cases where the Code Sec. 6651(a)(2) addition to tax has been determined on the basis of a substitute return. Today's guidance updates and modifies CC-2007-005, providing Chief Counsel employees with updated telephone numbers to call to obtain a copy of an Automated Substitute for Return. Guidance was also provided regarding what to do when a Code Sec. 6020(b) return was filed, but the return is missing from the administrative file.


June 22, 2007

Chief Counsel Notice: CC-2007-14: Addition to tax: Substitute return.



Department of the Treasury



Internal Revenue Service



Office of Chief Counsel



Notice CC-2007-014



June 18, 2007

Subject: Contact Information for Obtaining Section 6020(b) Returns

Cancel Date : Effective until further notice



Purpose

This Notice updates and modifies Notice CC-2007-005, Litigating Position for Returns Prepared under Section 6020(b), issued February 4, 2007, regarding the Service's litigating position and the procedures to be followed in Tax Court cases in which the section 6651(a)(2) addition to tax has been determined on the basis of a substitute for return. Notice CC-2007-005 lists Service telephone numbers to call to obtain a copy of an Automated Substitute for Return (known as a section 6020(b) ASFR Certification). This Notice updates those telephone numbers and provides more detailed information on obtaining documentation for section 6020(b) returns from the campuses when the documentation is not in the administrative file.



Background

As explained in Notice CC-2007-005, the Service prepares two types of section 6020(b) returns: (1) Forms 13496, and (2) ASFR Certifications. Both the Form 13496 (when packaged with Forms 4549 and 886-A) and the ASFR Certification (with accompanying 30-day letter) can be a valid section 6020(b) return if they identify the taxpayer's name and TIN and contain adequate information to compute the taxpayer's tax liability. See Temp. Treas. Reg. §301.6020-1T; Notice CC-2007-005. To meet the burden of production with respect to the section 6651(a)(2) addition to tax for a non-filer, the ASFR Certification or Form 13496 package that satisfies these elements should be put into evidence. When it is apparent that a section 6020(b) return was prepared (e.g., a transcript of the taxpayer's account shows a TC 150 with $0.00 assessed), but the section 6020(b) return is missing from the administrative file, all reasonable efforts should be made to obtain the necessary documentation.



How to Obtain Documentation



Determine the Type of Return

The contacts for obtaining documentation differ depending on the type of section 6020(b) return involved. The first step is to determine whether an ASFR Certification or a Form 13496 was prepared. The answer will be evident from the administrative file or a transcript of the taxpayer's account. If TC 494 appears on the transcript, an ASFR Certification was most likely, but not invariably, prepared (the return could have been incorrectly coded on the account). If the transcript shows "SFR" at the far right on the TC 150 line or shows a TC 420 or 424 followed by "SPCL-PROJ>0277," then a Form 13496 return was prepared.



ASFR Certifications

ASFR Certifications are generated electronically and archived for seven years. The system on which the returns are stored allows certain Service personnel in any of the campuses that currently prepare ASFR Certifications (Andover, Austin, Brookhaven, and Fresno) to access any archived ASFR Certification.

The three phone numbers listed in Notice CC-2007-005 for Counsel to call to obtain ASFR documentation (the certification and the 30-day letter) are no longer current. After the release of the notice, the responsibilities of contact personnel in the campuses changed. As a result, to obtain an ASFR Certification, Counsel should now contact a Supervisory Tax Examining Assistant at (978) 474-1423 or (978) 474-1392 or a Tax Examining Technician at (559) 454-6598. The employees at these numbers are only able to provide information on ASFR Certifications and do not have access to returns prepared on Form 13496.



Form 13496 Returns

Forms 13496 are prepared either electronically or manually by Examination personnel. The campus where a return was prepared may be able to provide documentation of the return when all or part of a Form 13496 package is not in the file. Counsel should contact the originating campus, which is designated on the lower right-hand portion of the Form 13496, if available, and by the first two digits of the Document Locator Number on the transcript (a key can be found at page 4-3 of Document 6209, IRS Processing Codes and Information (2007)). Current phone numbers are below:





______________________________________________________________________

Atlanta (678) 530-5632 Cincinnati (859) 669-2023



______________________________________________________________________

Austin (512) 460-0198 Fresno (559) 454-6206



______________________________________________________________________

Brookhaven (631) 447-4748 Kansas City (816) 325-8012 (or

or -8015)

(631) 654-6134

(631) 654-6618



___________________________________

Memphis (901) 395-1608



___________________________________

Philadelphia (215) 516-3581



___________________________________

Ogden (801) 620-2058



______________________________________________________________________



Obtaining the documentation, however, could be difficult as well as time-consuming and may not be possible in some cases. Form 13496 documentation is likely to be less readily available than ASFR documentation. If, despite best efforts, the documentation cannot be obtained in time to meet litigation deadlines, the section 6651(a)(2) addition to tax should be conceded.

For further guidance on section 6020(b) returns, please contact Branch 1 or 2 of Procedure & Administration at (202) 622-4910 or (202) 622-4940, respectively.

_________/s/ __________

DEBORAH A. BUTLER

Associate Chief Counsel

(Procedure & Administration)



SEC. 6651. FAILURE TO FILE TAX RETURN OR TO PAY TAX.

6651(a) ADDITION TO THE TAX. --In case of failure --





6651(a)(1) to file any return required under authority of subchapter A of chapter 61 (other than part III thereof), subchapter A of chapter 51 (relating to distilled spirits, wines, and beer), or of subchapter A of chapter 52 (relating to tobacco, cigars, cigarettes, and cigarette papers and tubes) or of subchapter A of chapter 53 (relating to machine guns and certain other firearms), on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate;





6651(a)(2) to pay the amount shown as tax on any return specified in paragraph (1) on or before the date prescribed for payment of such tax (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on such return 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate; or



6651(a)(3) to pay any amount in respect of any tax required to be shown on a return specified in paragraph (1) which is not so shown (including an assessment made pursuant to section 6213(b)) within 21 calendar days from the date of notice and demand therefor (10 business days if the amount for which such notice and demand is made equals or exceeds $100,000), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.



In the case of a failure to file a return of tax imposed by chapter 1 within 60 days of the date prescribed for filing of such return (determined with regard to any extensions of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, the addition to tax under paragraph (1) shall not be less than the lesser of $100 or 100 percent of the amount required to be shown as tax on such return.



6651(b) PENALTY IMPOSED ON NET AMOUNT DUE. --For purposes of --



6651(b)(1) subsection (a)(1), the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return,



6651(b)(2) subsection (a)(2), the amount of tax shown on the return shall, for purposes of computing the addition for any month, be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return, and



6651(b)(3) subsection (a)(3), the amount of tax stated in the notice and demand shall, for the purpose of computing the addition for any month, be reduced by the amount of any part of the tax which is paid before the beginning of such month.



6651(c) LIMITATIONS AND SPECIAL RULE. --



6651(c)(1) ADDITIONS UNDER MORE THAN ONE PARAGRAPH. --With respect to any return, the amount of the addition under paragraph (1) of subsection (a) shall be reduced by the amount of the addition under paragraph (2) of subsection (a) for any month (or fraction thereof) to which an addition to tax applies under both paragraphs (1) and (2). In any case described in the last sentence of subsection (a), the amount of the addition under paragraph (1) of subsection (a) shall not be reduced under the preceding sentence below the amount provided in such last sentence.



6651(c)(2) AMOUNT OF TAX SHOWN MORE THAN AMOUNT REQUIRED TO BE SHOWN. --If the amount required to be shown as tax on a return is less than the amount shown as tax on such return, subsections (a)(2) and (b)(2) shall be applied by substituting such lower amount.



6651(d) INCREASE IN PENALTY FOR FAILURE TO PAY TAX IN CERTAIN CASES. --



6651(d)(1) IN GENERAL. --In the case of each month (or fraction thereof) beginning after the day described in paragraph (2) of this subsection, paragraphs (2) and (3) of subsection (a) shall be applied by substituting "1 percent" for "0.5 percent" each place it appears.



6651(d)(2) DESCRIPTION. --For purposes of paragraph (1), the day described in this paragraph is the earlier of --



6651(d)(2)(A) the day 10 days after the date of which notice is given under section 6331(d), or



6651(d)(2)(B) the day on which notice and demand for immediate payment is given under the last sentence of section 6331(a).



6651(e) EXCEPTION FOR ESTIMATED TAX. --This section shall not apply to any failure to pay any estimated tax required to be paid by section 6654 or 6655.



6651(f) INCREASE IN PENALTY FOR FRAUDULENT FAILURE TO FILE. --If any failure to file any return is fraudulent, paragraph (1) of subsection (a) shall be applied --



6651(f)(1) by substituting "15 percent" for "5 percent" each place it appears, and



6651(f)(2) by substituting "75 percent" for "25 percent".



6651(g) TREATMENT OF RETURNS PREPARED BY SECRETARY UNDER SECTION 6020(b). --In the case of any return made by the Secretary under section 6020(b) --



6651(g)(1) such return shall be disregarded for purposes of determining the amount of the addition under paragraph (1) of subsection (a), but



6651(g)(2) such return shall be treated as the return filed by the taxpayer for purposes of determining the amount of the addition under paragraphs (2) and (3) of subsection (a).



6651(h) LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO PAY FOR MONTHS DURING PERIOD OF INSTALLMENT AGREEMENT. --In the case of an individual who files a return of tax on or before the due date for the return (including extensions), paragraphs (2) and (3) of subsection (a) shall each be applied by substituting "0.25" for "0.5" each place it appears for purposes of determining the addition to tax for any month during which an installment agreement under section 6159 is in effect for the payment of such tax.

SEC. 6020. RETURNS PREPARED FOR OR EXECUTED BY SECRETARY.

6020(a) PREPARATION OF RETURN BY SECRETARY. --If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person.





6020(b) EXECUTION OF RETURN BY SECRETARY. --



6020(b)(1) AUTHORITY OF SECRETARY TO EXECUTE RETURN. --If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.



6020(b)(2) STATUS OF RETURNS. --Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.