TC 520: Litigation or Bankruptcy Freeze

What the code actually does

TC 520 sets a litigation freeze. IRM 25.3.8.2 explains that these freezes "are shown on IDRS transcripts for the purpose of identifying those accounts with active litigation or an ongoing Collection Due Process hearing," and states the structural point that governs everything else on this page: "litigation freezes are identified with either a -W freeze or a -V freeze. Both are initiated through posting a TC 520 to a module with a two-digit closing code. The closing code associated with the TC 520 posting defines the type of litigation and the actions the freeze will prevent or suspend."

The code itself, in other words, carries no meaning. It is a container. Everything a practitioner needs is in the two digits beside it.

Which manual applies depends on the closing code

This is the part that is easy to get wrong and expensive to get wrong. IRM 25.3.8 is the chapter most practitioners are pointed to for TC 520, and it covers only part of the code’s range. Its own scope note says: "not covered in this IRM are -V Freezes: The -V freeze and its closing codes relate specifically to bankruptcy and are not a part of this IRM," directing readers to the IRM 5.9 bankruptcy series instead.

IRM 25.3.8 states that "the -W freeze closing codes are 70-82 and 84," with the reminder that "closing codes 78 and 79 are currently not in use and blocked." A bankruptcy posting sits outside that band — IRM 5.1.19.3 records the bankruptcy closing codes as "cc 60-67, 83, 85-89." Citing the litigation chapter at a caseworker about a bankruptcy freeze is citing the wrong manual.

Within the -W range, the chapter identifies the type of proceeding: closing codes 71 and 73 are refund litigation, 72 and 74 are Tax Court, 76 and 77 are collection due process, 70, 75, 80 and 82 are suits initiated by the Service and referred to the Department of Justice, and 81 and 84 are Collection Insolvency work associated with bankruptcy.

Not every closing code suspends the statute

The IRM publishes a table of what each band actually does, and the four rows do not overlap neatly. Closing codes 70, 73, 74, 76, 77, 80, 81 and 82 "move modules into Status 72 and out of the Collection Stream." A slightly narrower set — 70, 74, 76, 77, 80, 81 and 82 — "prevents Balance Due Notice Issuance." Only 76, 77, 80, 81 and 82 "suspend Collection Statute (CSED)."

So a TC 520 can take an account out of active collection and stop the notices without stopping the clock. A practitioner who assumes every litigation freeze tolls the statute will overstate a client’s remaining exposure, sometimes by years. This is worth computing rather than assuming, which is what the collection statute calculator is for.

A fourth row governs how the freeze can be closed: closing codes 73, 76, 77 and 81 require a matching closing code on the reversing transaction. That constraint is what makes the closing code worth recording at the outset rather than looking up later.

What TC 520 gets confused with

It gets confused with its two reversals, which are not interchangeable. TC 521 closes the freeze because the underlying matter resolved; the correction code unwinds it because the freeze should not have been there, or the case was withdrawn or deemed non-processable. IRM 25.3.8.2.2 is emphatic that they cannot be substituted for one another — to fix an incorrect closing code, "DO NOT INPUT TC 521," in the manual’s own capitals.

It is also confused with a collection hold generally. Status 72 is not currently-not-collectible status, and a client in litigation is in a different posture from a client in hardship — TC 530 is that code, and it does not suspend the statute at all.

And where the freeze rests on a collection due process request, the underlying event is the hearing right created by the levy notice rather than anything the transcript shows: the LT11 or Letter 1058 levy notice is what starts that clock, and the TC 520 is only its shadow on the account.

The practitioner’s actual next step

Get the two-digit closing code before saying anything else about the posting; without it the code means nothing.

Use the closing code to decide which manual governs — the litigation chapter or the bankruptcy series — before quoting authority.

Check the closing code against the suspension list rather than assuming the statute stopped.

Note whether the closing code is one of the four that require a matching code on the reversal, because that constrains how the freeze can be lifted.

Confirm the posting and its reversal as a sequence on the module with the IRS Transcript Decoder rather than from correspondence.