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DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
SMALL BUSINESS/SELF-EMPLOYED
DIVISION
February 10, 2014
Control Number: SBSE-05-0214-0007
Expiration: February 10, 2015
Impacted: IRM 5.11.1
IRM 5.7.9
MEMORANDUM FOR DIRECTORS, FIELD
COLLECTION AREA OPERATIONS DIRECTOR, ADVISORY AND INSOLVENCY
FROM: Dretha Barham /s/ Dretha
Barham
Director, Collection Policy
SUBJECT: Interim Guidance
Memorandum for Federal Contractor Levies Issued by Field Collection
The purpose of this memorandum is
to provide guidance for Field Collection revenue officers about federal
contractor levies (referred to as FEDCON levies) and related Collection Due
Process (CDP) issues. Please ensure this information is distributed to all
affected employees within your organization.
Background
The Small Business Jobs Act of
2010 amended IRC section 6330(f) and (h), to permit the IRS to issue any levy
on a taxpayer prior to providing them with their Collection Due
Process (CDP) notice and hearing if the taxpayer is a federal contractor.
In addition, FEDCON levies may be served during a timely requested pre- or
post-levy CDP hearing or judicial review of such hearing to collect
liabilities for all outstanding balance due periods including periods that
are the subject of the hearing.
Federal contractors are any person
or entity who currently has a contract with the federal government to sell or
lease property, goods or services. This does not include a taxpayer who was
in the past a federal contractor but currently is not involved in any
contractual relationship with the federal government. A contract is a
mutually binding legal relationship obligating a person or entity to furnish
property, goods, or services and the federal executive agency to pay for
those property, goods, or services. Attached are guidelines for FEDCON levy
and CDP issues for status 26 cases.
ICS Considerations:
Field Collection (FC) revenue officers
may begin to issue FEDCON levies in ICS on the issuance date of this
memorandum to collect any IMF or BMF liability, for which the IRC 6331(d),
Notice of Intent to Levy (CP 504 notice) period has expired, if the taxpayer
is a federal contractor.
- ICS Cases in which there is
an unreversed Federal Contractor Indicator (FCI) are flagged with a red
literal (FCA) on the Case Summary screen.
- ICS will block revenue
officer issuance of the FEDCON levy unless the revenue officer answers
“yes” when ICS prompts with the following: “Final Notice Delivery Date
is not 30 days prior to levy. Is this a FEDCON levy? (Yes or No)?” This
is a requirement because there would be no TC 971 AC 069 on the module.
- See changes listed in ICS
User Guide.
See the following attachments for
additional information on Federal Contractor Levies issued by Field
Collection:
- Attachment 1, Guidance to be
included in IRM 5.7.9, Federal Contractors.
- Attachment 2, Guidance to be
included in IRM 5.11.1, Background, Pre-Levy Actions, Restrictions on
Levy & Post-Levy Actions.
IRM 5.11.1 and 5.7.9 will be
updated to incorporate these guidelines. If you have any questions, please
contact me, or a member of your staff may contact Kathleen Morton, Senior
Program Analyst or James Maslanka, Senior Program Analyst. Territory
personnel should direct any questions, through their management staff, to the
appropriate Area contact.
Attachments
cc: Director, Enterprise
Collection Strategy
Director, Field Collection
www.irs.gov
Attachment
1, Guidance to be included in IRM 5.7.9, Federal Contractors
Decision Point: How to Recognize a
Federal Contractor for FEDCON Levy Purposes:
If there is an unreversed TC 971
AC 647, also known as a Federal Contractor Indicator (FCI), on the taxpayer's
Master File (MF) record, and the taxpayer has a current federal contract
consider the taxpayer a federal contractor. See IRM 5.7.9.2.1, Federal
Contractor Indicator (FCI). Often, this indicator is systemically input
based on a Form 8596, Information Return for Federal Contracts , filed
with the IRS. The indicator may also be manually input. If you determine
during a case investigation that a taxpayer is a federal contractor and has
been awarded a contract, request input of the TC 971 AC 647.
Conditions, which support a RO finding
that a taxpayer is a federal contractor subject to FEDCON levy, include:
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1.
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Unreversed TC 971 AC 647 and
current federal contract.
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2.
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Taxpayer interview confirms they
are currently a federal contractor. See IRM 5.7.9.2.3, Federal
Contractors Identified Through Case Investigation . Request input of
the TC 971 AC 647.
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3.
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Certain FPLP cases annotated
with TC 971 AC 062. The FPLP TC 971 AC 062 DLN may indicate if the taxpayer
is currently receiving federal contractor or vendor payments. See IRM
5.7.9.2.2, further research may be necessary to confirm whether the
taxpayer is a current contractor or vendor. Request input of TC 971 AC 647
if confirmed.
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4.
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Taxpayer answers “yes” to
question 55, Is the business a Federal Contractor on Form 433-A,
Collection Information Statement for Wage Earners and Self-Employed
Individuals or question 15, Is the business a Federal Government
Contractor , on Form 433-B, Collection Information Statement for
Businesses. Request input of the TC 971 AC 647.
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Manual Input of TC 971 AC 647
(FCI):
Revenue officers should request
input of TC 971 AC 647 (FCI) if the case investigation reflects that a
taxpayer is currently in a contractual relationship with the federal
government and:
- You have confirmed that the
TP has been awarded a federal contract.
- The master file does not yet
contain an unreversed FCI.
Exception: TC 971 AC 647 should
not be input for Medicare providers/suppliers. This is because these
providers/suppliers are not federal contractors under IRC section 6330.
Use the Form 4844 template in ICS
to request input of the FCI. The input requires an entry in the field for
“contract end date.” If the contract end date is known, request input of that
date. If the contract end date is not known, select a date 1 year from the
input request date. Conduct further research to ascertain the correct end
date.
Note: There is no requirement that
an unreversed TC 971 AC 647 be present on an account before a FEDCON levy is
issued but the taxpayer must currently be a federal contractor when the levy
is initiated. Request input prior to issuing levy.
Reversing the TC 971 AC 647 :
A systemic process posts reversals
of the FCI to the Master File once a year for BMF accounts (January) and
twice a year for IMF accounts (January and June) based on the expiration of
the contract end date. TC 972 AC 647 is posted when the FCI indicator is
reversed. Reversals may also be manually input at any time by requesting
input of TC 972 AC 647.
A manual reversal would be appropriate
if you determine that the taxpayer federal contract has been completed or the
end date has expired. For example:
- Case investigation and
verification supports a finding that the taxpayer has not received any
federal payments during the current year.
- Most recent contract end date
has expired.
- RO determines that the FCI
was erroneously input because the taxpayer was never a federal
contractor.
Federal Payment Levy Program
(FPLP) Considerations/FPLP Block:
FPLP incorporated the post-levy
CDP FEDCON levy process starting in January 2012. See IRM 5.11.7.2.3.4(4), Levy
Service Process , for more information about those cases. FPLP
systemically identifies accounts with unreversed FCI annotations, including
those accounts in stats 22, 24 and 26. This automated levy program may issue
FEDCON levies on cases that are in ACS, the Queue and in RO inventories.
Generally it may be more effective
to allow FPLP to levy the federal payment source under the provisions of IRC
6331(h)(3) rather than using a paper levy under the provisions of IRC 6331(a)
because, in federal contractor cases, levies under IRC 6331(a) are not likely
to be of continuing effect. FPLP would be the more effective method since IRC
section 6331(h)(3) allows for continuous levy of up to one hundred percent
(100%) of any specified payment due to a vendor of property, goods or
services sold or leased to the Federal government
Even if FPLP remains in place,
consider using a paper FEDCON levy to reach other sources.
If you contemplate using the FPLP
block see IRM 5.11.2.2, Releasing Levies , for guidance about when
levy release is appropriate. Document the ICS case history with the reasons
when an FPLP block is requested. Current procedures require GM approval of
FPLP block requests. See IRM 5.11.7.2.6(1 ) Blocking or Releasing FPLP
Levy.
Collection Statute Considerations:
When taxpayers file a timely
request for CDP hearing, the collection statute is suspended on the periods
that are the subject of the CDP even if FEDCON levy action continues for
those periods.
Attachment
2, Guidance to be included in IRM 5.11.1, Background, Pre-Levy Actions,
Restrictions on Levy & Post-Levy Actions
Post-Levy
Action - Federal Contractor Levy
(1) This section contains guidance
on post-levy actions for Stat 26 federal contractor levy cases in Field
Collection.
Levy
Authority Amended
The Small Business Jobs Act of
2010 (SBJA) section 2104, amended IRC section 6330(f) and (h)(2) to allow the
collection due process (CDP) notice and hearing to occur post-levy with
respect to “federal contractor levies.” This term is defined in section
6330(h)(2) as “…any levy if the person whose property is subject to levy is a
Federal contractor.”
Federal
Contractor Levy
(1) IRC section 6330(h)(2)
describes a federal contractor (FEDCON) Levy, as any levy if the person whose
property is subject to levy is a Federal contractor. When a FEDCON levy is
served, the taxpayer will be given post-levy CDP rights. The taxpayer may
seek Tax Court judicial review of the determination resulting from the
post-levy hearing.
(2) Federal contractors are any
person or entity who currently has a contract with the federal government to
sell or lease property, goods or services. This does not include a taxpayer
who was in the past a federal contractor but currently is not involved in any
contractual relationship with the federal government. A contract is a
mutually binding legal relationship obligating the person or entity to
furnish property, goods, or services and the federal executive agency to pay
for those property, goods, or services.
(3) Our computer systems identify
some federal contractor cases on the Individual Master File (IMF) and the
Business Master File (BMF). Indicators that a person or entity is a federal
contractor may include the following:
- Federal Contractor Indicator.
See IRM 5.7.9.2.1, Federal Contractor Indicator (FCI) (unreversed TC 971
AC 647).
- Federal Payment Levy Program
(FPLP), TC 971 AC 062 Document Location Number (DLN). See IRM 5.7.9.2.2
and Exhibit 5.11.7-5, TC 971 AC 062 (Document Locator Number (DLN)
Format, Miscellaneous Field, XREF Field).
- The Federal Payment Levy
Program (FPLP) can also issue Federal Contractor (FEDCON) Levies and can
be identified by a TC 971 AC 677 posted to the module. See IRM
5.11.7.2.3.4(4).
Note: Revenue officers can also
identify federal contractor cases. See Attachment 1, Identification and
General Instructions for FEDCON Levy. This information will be included in
IRM 5.7.9.
Note: The TC 971 AC 062 DLN
positions 11 and 12 are also designated with a ‘03’ in the payment position
for Medicare payments, and positions 7, 8 &9 will show the federal agency
code of ‘0306’ for HHS Medicare match, which are not FEDCON eligible.
(4) Only the federal contractor
may be listed on the FEDCON levy. For federal payments other than Social
Security or RRB benefit payments, a FEDCON levy may be issued to any payment
source on all BMF tax modules and IMF tax modules if the entity is identified
as a Federal contractor with an unreversed TC 971 AC 647 posted on the
entity. For BMF tax modules do not include or list the general partners and
members of a LLC on the FEDCON levy. For IMF tax modules only include the
spouse identified as the federal contractor on filing status 2, married
filing joint modules.
(5) A FEDCON levy may have
previously been issued by FPLP. A TC 971 AC 677 will post on the module with
the literals “SAL, OTH” displayed in the Miscellaneous Field. This will
generate a post-levy CDP notice CP 90C (or 297C) and post a TC 971 AC 069.
The taxpayer is provided their CDP appeal rights after the levy. See IRM
5.11.7.2.3.3, FPLP Notice Process (TC 971 AC 069 or AC 169).
(6) The FEDCON (TC 971 AC 677)
levy processes occur after the expiration of the 30-day notice required by
IRC 6331(d). The issuance of the CP 504 meets the 30-day pre-levy requirement
of IRC 6331(d)
Issuing
Notice of Intent to Levy and Notice of Your Right to a Hearing in Field
Collection FEDCON Case
(1) When warranted, the Service
may exercise its discretion to issue a pre-levy CDP notice on modules
eligible for FEDCON levy based upon the unique case factors.
Examples of unique case factors:
- The issuance of a pre-levy
notice might be advisable if there no contact with the taxpayer within
the last 180 days. See IRM 5.11.1.2.2.7, Timeliness of Notice.
- When the Letter 1058 is
issued on initial contact with a BMF or combination BMF/IMF taxpayer
when a deadline is set for the taxpayer to take specific action. See IRM
5.11.1.2.2(3), Satisfying the Notice Requirement.
- When the Letter 1058 will be
issued during initial contact on IMF case but a FEDCON levy is not yet
appropriate. See IRM 5.11.1.2.2(4).
Note: The federal contractor
exception in IRC 6330(f) applies to a FEDCON levy. Similar to a DETL levy, a
FEDCON levy can be served during a timely requested pre or post-levy CDP
hearing or judicial review of such hearing to collect tax liabilities (FEDCON
tax periods) subject to the hearing. Prior to levying, you are required to
determine if Appeals or Counsel has information that prohibits levy (OIC, IA
etc.) or may affect the decision to levy. Follow the guidance in IRM
5.1.9.3.15(7) for contacting Appeals or Counsel. FEDCON levies may be issued
for any levy source, not just federal payments.
(2) If the tax period meets the
criteria for issuing a FEDCON levy and levy action is determined to be
appropriate:
- Make sure the IRC 6331(d),
Notice of Intent to Levy, was properly issued at least 30 days prior to
levy action
Note: This refers to the CP 504
notice or the “Status 58” notice. If the CP 504 notice was not issued, issue
the pre-levy CDP notice, L1058. This meets the IRC 6331(d) and IRC 6330
requirement. FEDCON levy can only be issued 30 days after issuance of the
L1058 per IRC 6331(d).
- Document the ICS case history
regarding the FEDCON determination.
Note: When there is no TC 971 AC
069 on the module, ICS will block revenue officer issuance of the FEDCON
unless the revenue officer answers yes when ICS prompts with the following:
“Final Notice Delivery Date is not 30 days prior to levy. Is this a FEDCON
levy? (Yes or No)?”
(3) Include Letter 1058-F, Post
Levy Federal Contractor Collection Due Process with the taxpayer's copy
of a FEDCON levy for post-levy CDP notices.
Caution: If the taxpayer was
issued a pre-levy CDP notice (L1058) for the FEDCON tax period(s) being
levied, do not issue a post-levy CDP notice (L1058-F).
(4) Both the post-levy or pre-levy
CDP notice must be:
- Given in person,
- Left at the taxpayer's home
or business, or
- Sent to the taxpayer's last
known address by certified or registered mail return receipt requested.
Note: Use registered mail only if
the taxpayer is outside the United States. There is no international
certified mail.
Note: Where L1058-F has been
correctly sent to the taxpayer's last known address and another address is
subsequently found, do not send an additional L1058-F, relating to the same
tax liability, to the new address.
Note: If L1058-F is mistakenly
sent to an address other than the last known address, immediately send a new
L1058-F to the correct last known address.
(5) Include a copy of the levy,
Publication 594, Publication 1660 and Form 12153 with the L1058-F.
(6) If the L1058-F is issued more
than 10-days after issuing the FEDCON, document the reason in the ICS
history.
(7) FEDCON post-levy hearing
requests are processed similarly to other hearing requests. Refer to IRM
5.1.9 , Collection Appeal Rights , for guidance in processing hearing
requests.
212-588-1113
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