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IRC 6212(d) states that the Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Whether or not a notice is rescinded is discretionary on the part of the Secretary. A notice of deficiency may only be rescinded with the consent of the taxpayer.

This provision allows the Service, through a rescission agreement, to treat a case as if a notice of deficiency was never issued for purposes of -

Limitations regarding credits, refunds, and assessments relating to the rescinded notice are void and the rights and obligations of the parties that existed prior to the issuance of the notice of deficiency are reinstated. A notice of deficiency may later be reissued for the same, or a greater or lesser amount.

A taxpayer may exercise all administrative and statutory appeal rights from a reissued notice of deficiency. However, the taxpayer has no right to file a petition with the Tax Court based on a rescinded notice.

The determination to rescind a notice of deficiency should be made on a case-by-case basis. Both parties must agree to the rescission.

A rescission will not be entered into if:

If the notice of deficiency was issued to both husband and wife, the rescission agreement must be signed by both parties or authorized representative(s) for both parties.

The rescission agreement must cover all of the same tax periods shown in the notice of deficiency.

The rescission agreement must reflect the same tax deficiency and penalties as the notice of deficiency.

If the Service does not agree that a notice of deficiency should be rescinded, the taxpayer will be notified in writing and the notice will remain in effect.

All questions regarding the propriety of a rescission agreement on any case should be discussed with Counsel.

There are basically three reasons that a notice is rescinded. They are as follows:

When an administrative error has occurred, the notice may be rescinded. The following are examples of administrative errors:

If a notice of deficiency has been issued for an incorrect or insufficient amount, the notice may be rescinded. However, the taxpayer must be advised that another notice, for a greater amount, may be subsequently issued.

If a taxpayer specifically requests a conference with Appeals for the purpose of entering into settlement negotiations, the notice may be rescinded. However, the notice will be rescinded only if Appeals is confident the case will result in an agreement. Appeals may request that the taxpayer submit, in writing, a protest or similar document that explains his or her position on the unagreed issues. See IRM 8.4.1, Processing Docketed Cases, for further 90-day case procedures.

If the normal three year period of limitations for assessment has expired do not enter into an agreement to rescind the notice.

If, on the date of rescission, 90 days or less remain before the expiration of the period of limitation on assessment the notice may be rescinded but only if the taxpayer and the Service execute a Form 872 to extend the limitation period. When determining how many days remain on the statute, do not consider the additional time created by the issuance of the notice of deficiency.

Generally, a notice of deficiency will not be rescinded if there is an outstanding Form 872-A, Special Consent to Extend the Time to Assess Tax; however, see Rev. Proc. 98–54, 1998–2 C.B. 531 clarifying Service position on situations in which notice revocations may be considered.

Form 8626, Agreement to Rescind Notice of Deficiency, will be used to secure an agreement between the taxpayer and the Government. When preparing Form 8626, care must be exercised to ensure the accuracy of the information contained within the document and its timely execution by the taxpayer and the Government.

The rescission agreement form will be prepared in duplicate. Once executed, one copy of Form 8626 will be secured to the return for the latest year covered by the agreement. The second copy will be sent to the taxpayer by mail or given to the taxpayer in person. Copies of the executed rescission agreement will be attached to all other returns covered by that agreement.

One Form 8626 may be used as a rescission agreement for all years contained in the rescinded notice of deficiency. All years covered by the agreement will be entered below the first paragraph under "Tax Year Ended." The deficiency and additions to tax, as shown on the notice of deficiency, will be entered below the appropriate column headings.

The effective date for a rescission agreement is the date on which the Commissioner or delegate signs the rescission form.

A taxpayer who believes that a notice of deficiency should be rescinded because they wish to enter into settlement negotiations should contact Appeals and request Form 8626.

Authority to rescind notices of deficiency is granted to the Secretary by IRC 6212(d). Delegation Order No. 4-8 (as revised) delegates this authority to Appeals Area Directors, Team Managers, and to Appeals Team Case Leaders on their respective cases.

The authority to rescind does not apply to a Notice of Final Partnership Administrative Adjustment (FPAA) or to a Notice of Final S Corporation Adjustment (FSAA).

Delegates listed in Delegation Order No. 4-8 (as revised) will manually sign their own name.