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Part 4. Examining Process

Chapter 8. Technical Support (Exam)

Section 3. Examination Quality Measurement Staff (EQMS)

4.8.3  Examination Quality Measurement Staff (EQMS)

4.8.3.1  (02-01-2007)
Introduction

  1. The purpose of this chapter is to provide an overview of the Examination Quality Measurement Staff (EQMS).

  2. EQMS is SB/SE's mechanism for the collection of information, measurement of examination quality and assessment of long term trends of system performance, in keeping with the balanced measures.

  3. EQMS reviews a statistically valid sample of closed SB/SE cases against the quality attributes.

  4. A quality audit is defined as one that was conducted to determine the substantially correct tax at the least cost and in a manner that promotes public confidence in the Service.

  5. Quality data will be used by management to assess program performance and is an indicator of SB/SE's ability to apply the tax law with integrity and fairness to all.

  6. Quality data will also be used to identify system changes, training and educational needs, and to improve work processes.

4.8.3.1.1  (02-01-2007)
Purpose

  1. The primary purpose of EQMS is to support SB/SE's quality improvement program. EQMS is a quality-driven program, and will be included as a component of the business results. Its prominence as part of the "business results" measurement will require management to focus on systemic processes and results and look for improvement opportunities as a daily business practice.

  2. Quality data is used to establish baselines and provide an understanding of how the current system is operating, to analyze causes for failures and assess the feasibility of possible solutions, and to measure the success of quality improvement efforts.

  3. Case reviews are conducted to collect information from individual audits. The data collected from the reviews are input into the National Quality Review System (NQRS), which is a web based system that provides the basis for analysis at the territory, area, and national level.

4.8.3.2  (02-01-2007)
Technical Services/EQMS Responsibilities

  1. At the direction of the EQMS Territory Manager, EQMS responsibilities include:

    1. establishing and providing guidance for program objectives,

    2. ensuring consistent application of the quality attributes,

    3. recommending updates to the quality attributes, and process measures, and

    4. maintaining instructional guides.

  2. EQMS activities also include providing management with accurate information regarding case quality and the examination process in SB/SE throughout the country.

4.8.3.3  (02-01-2007)
EQMS Review Site Responsibilities

  1. EQMS conducts reviews of completed SB/SE examination cases and provides data to the Area offices.

  2. To accomplish these objectives, the responsibilities of EQMS include:

    1. timely completion of EQMS case reviews,

    2. accurate and consistent application of the quality attributes,

    3. accuracy of NQRS database input,

    4. providing data analysis to the Area offices, and

    5. conducting presentations on quality results.

4.8.3.4  (02-01-2007)
Area Office Responsibilities

  1. Area office responsibilities include:

    1. identifying opportunities for improvement, and

    2. conducting improvement initiatives to impact on the quality results.

  2. To accomplish this objective, EQMS should ensure:

    1. proper sampling of completed SB/SE examination cases,

    2. proper preparation of reports and analysis,

    3. coordination with the Area offices to ensure program objectives are met, and

    4. participation in Area quality improvement initiatives.

4.8.3.5  (02-01-2007)
Quality Attributes

  1. The quality attributes are concise statements of SB/SE's expectations for quality examinations and are guidelines to assist examiners in fulfilling their professional responsibilities. See Exhibit 4.8.3–1 of this handbook. The quality attributes provide objective criteria against which case quality is evaluated.

  2. The quality attributes complement the Service’s modernization efforts.

  3. Each quality attribute is defined by elements representing components that are present in a quality examination.

  4. Twenty-two quality attributes are used to define quality. They are categorized into the following attribute groups:

    1. Planning,

    2. Income Determination,

    3. Investigative/Audit Techniques,

    4. Timeliness,

    5. Customer Relations/Professionalism, and

    6. Documentation/Reports.

4.8.3.5.1  (02-01-2007)
Measurement Categories

  1. The attributes are also grouped into four organizational measurement categories: Timeliness, Professionalism, Regulatory Accuracy, and Procedural Accuracy.

  2. The quality of case work can be described in several different ways. The measurement categories allow quality scores to be generated according to priorities as defined by stakeholder input from the customer, employee and the business.

4.8.3.5.2  (02-01-2007)
Scoring System

  1. The scoring system provides equal rating for all attributes.

  2. Each attribute is rated as "yes," " no," or in some instances "not applicable."

  3. The quality score is computed as a percentage of total " yes," ratings divided by total "yes," and "no," ratings. A total score of 100 is possible for each case.

  4. One overall quality score for both field exam and office exam is reported as the Business Results (Quality) measure for SB/SE.

  5. For analysis purposes, quality scores can be derived by individual attributes, attribute groups, and measurement categories at the territory, area and national levels. See Exhibit 4.8.3-1 of this handbook for the individual attributes that are included in the various attribute groups and measurement categories.

4.8.3.6  (02-01-2007)
Process Measures

  1. Process Measures are used to describe how the examination was performed and the efficiency of the examination process. These measures are not evaluative on a pass/fail system like the quality attributes. They provide a " snapshot in time." The purpose of process measures is to provide information on specific tasks performed during examinations which should be analyzed in conjunction with the quality attributes.

  2. Data regarding specific tasks performed, how the tasks were completed, key dates, delays in activities, hours associated with the case, etc. are collected.

4.8.3.7  (02-01-2007)
Case Selection

  1. The ERCS Sample Review program automates the process of selecting a valid sample of closures for EQMS review. The sample size is statistically valid at the Area level.

    Note:

    (the sample plan is developed annually and is based on prior year closures.)

  2. Each Area has a sample rate based on closures that is used to select field and office audit cases.

4.8.3.7.1  (02-01-2007)
Case Selection Procedures and Requirements

  1. Cases meeting the sample criteria are selected by the ERCS Sample Review program at the proper rate for the Area. Cases are subject to the sample at the point they move from Status 51 or 21 on ERCS. When a case is selected for the sample, the ERCS user is notified to print the Sample Selection Sheet to place on the file.

  2. Centralized Case Processing (CCP) is responsible for updating sample selected cases to Status 90 and sending to the appropriate EQMS site for review. Cases updated to Status 90 are forwarded to the appropriate EQMS site using routine procedures.

  3. Technical Services is responsible for sending protested cases that are selected for sample review to the appropriate EQMS site. Protested cases are "open" and time sensitive. Expedite procedures have been established to ensure timely review of these cases.

  4. Technical Services is responsible for sending unagreed cases with at least one agreed/no-change year that are selected for sample review to the appropriate EQMS site. These cases are also"open" and time sensitive. Expedite procedures have been established to ensure timely review of these cases.

  5. If the statute for any "open" year is 210 days or less, Technical Services will contact the EQMS site to exclude the case.

  6. When "open" cases are transmitted to the EQMS site by Technical Services, they should be updated to Status 23, Sample Review and Review Type 33 on ERCS.

  7. See Exhibits 4.8.3–2, and 3 for additional case selection procedures.

4.8.3.8  (02-01-2007)
Cases Subject To EQMS Sampling

  1. The following cases are included in the EQMS sample:

    1. SB/SE field examination and office audit income tax cases (corporations, partnerships, and individual returns),

    2. agreed, partially agreed, unagreed, no-change cases and protested to Appeals,

    3. secured delinquent returns not accepted as filed,

    4. training cases,

    5. form 1041, 1042 and 1120F income tax returns examined by revenue agents,

    6. correspondence cases examined by revenue agents and tax compliance officers,

    7. pre-assessment innocent spouse cases,

    8. claims (excludes surveyed claims-disposal code 34),

    9. audit reconsideration cases,

    10. employment tax cases are included if they are closed as related cases to an income tax case; the entire related case package is included.

  2. Cases excluded from EQMS sample include:

    1. secured delinquent returns accepted as filed,

    2. pure penalty cases not included as part of an examination case,

    3. surveyed returns,

    4. offers in compromise,

    5. post-assessment innocent spouse cases,

    6. excise,

    7. estate and gift,

    8. employment tax cases are excluded only when there is no related income tax case,

    9. surveyed claim cases (disposal code 34),

    10. no show/no response cases,

    11. tax examiner cases.

4.8.3.9  (02-01-2007)
Case Review Procedures

  1. EQMS reviewers are responsible for evaluating examination case quality and collecting process measures data. It is important that reviewers have an in-depth understanding of the quality attributes, process measures and definitions.

4.8.3.9.1  (02-01-2007)
Field and Office Examination Job Aid

  1. The Job Aid includes complete instructions, definitions, and examples of how cases should be evaluated. Refer to the Job Aid on the Embedded Quality web site: http://sbse.web.irs.gov/EQ/default.htm

4.8.3.9.2  (02-01-2007)
Completion Of Data Collection Instrument (DCI)

  1. The DCI is used as a guide for the review process, to capture statistical data to be incorporated into the NQRS database.

  2. The DCI provides the principle documentation for the reviewer’s case evaluation and conclusions.

  3. One DCI will be completed for each case selected for EQMS review.

  4. The DCI includes the following sections:

    1. Administrative Information: data regarding the EQMS review process, case characteristics, and closing information.

    2. Evaluation of the quality attributes: each attribute is rated " yes" "no" , or "not applicable."

    3. Collection of Process Measures: identification of specific dates and completion of specific procedures relating to the examination phases.

  5. The reviewers will prepare narratives for each attribute rated "no." Narratives should be clear, concise and specific as to why the attribute was not passed.

  6. Upon completion of the EQMS review and the input of the data into the NQRS system, the original paper DCI is to be maintained in the EQMS review site until error processing has occurred.

4.8.3.10  (02-01-2007)
Consistency Checks

  1. The reviewer’s case evaluation and data collection must be accurate and consistent to provide reliable and meaningful results. Management should periodically perform consistency checks to ensure EQMS reviewers are uniformly applying the quality attributes and accurately inputting data.

4.8.3.10.1  (02-01-2007)
Types of Checks

  1. Consistency checks are performed in several ways:

    1. Reviewers independently evaluate the same case. They compare the consistency of the ratings for each attribute and the process measures data. Discuss the attribute ratings and the process measure data.

    2. EQMS managers should:

      • Critique completed EQMS reviews on a regular basis and provide meaningful feedback to reinforce expectations for EQMS case reviews.

      • Review narratives on a regular basis to ensure guidelines are followed and the end product is professional.

      • Use NQRS reports on a regular basis to evaluate and monitor consistency within the EQMS site and on a national basis.

      • Conduct group meetings to discuss specific attributes and case scenarios.

4.8.3.11  (02-01-2007)
EQMS Reviewer Responsibilities

  1. The DCI is the originating document for input into the NQRS database. Care must be exercised to ensure that entries are accurate and records are not duplicated.

  2. Reviewers are accountable for following guidelines and instructions for accurately applying the attributes, inputting accurate header information, selecting correct reason codes and writing quality narratives.

  3. Reviewers will review one case to completion before starting another case review.

  4. Reviewing a case to completion includes:

    1. Review the case.

    2. Input the data and narratives.

    3. Print the DCI and thoroughly review for data accuracy and narrative quality.

    4. Edit the DCI as necessary.

    5. Move on to the next case review.

4.8.3.12  (02-01-2007)
National Quality Review System (NQRS) Reports

  1. The NQRS web based system includes standard reports designed to assist in the analysis of the data collected through case reviews.

  2. AD HOC reports are also available in NQRS to allow a variety of queries to be made in order to analyze the data.

  3. Separate reports are available for field examination and office audit. They are distinct programs. Combining the data is not meaningful.

  4. Reports are available at the National, Area and Territory levels. The data are statistically valid to the Area level.

4.8.3.13  (02-01-2007)
Management Use of National Quality Review System (NQRS) Data

  1. NQRS data will be used to assess program performance, and will not be used to evaluate individual employee performance. Any feedback or other work products generated from NQRS will not be used as substitute for case reviews, case file reviews, on the job visits and workload reviews.

4.8.3.14  (02-01-2007)
Feedback to Examiners

  1. The fundamental purpose of EQMS is the gathering of data and identifying trends for management’s use regarding SB/SE examination case quality. The emphasis is on providing management with information and analysis to determine "root causes" of quality concerns.

  2. The case re-opening return criteria outlines the conditions under which cases will be returned to a group for additional work. See case return criteria at IRM 4.8.2.8.

Exhibit 4.8.3-1  (02-01-2007)
Quality Attributes


PLANNING

ATTRIBUTE DEFINITION
101 Pre-Plan Activity (Procedural Accuracy) This attribute measures if the pre-plan activity is appropriate.
102 IDR (Procedural Accuracy) This attribute measures if appropriate Information Document Requests were prepared. This includes the initial IDR and subsequent IDR(s) (if applicable).
103 LUQ (Other than Income) (Procedural Accuracy) This attribute measures if large, unusual and questionable items (other than income) were properly considered on the key return, after the pre-plan.
104 Prior/Subsequent Year and Related Returns (Procedural Accuracy) This attribute measures if prior, subsequent year and related returns were considered during the examination when warranted.
108 Verify Full Compliance (Procedural Accuracy) This attribute measures if Required Filing Checks were performed.


INCOME DETERMINATION

ATTRIBUTE DEFINITION
300 Exam Income Determination (Regulatory Accuracy) This attribute measure if appropriate techniques were used to determine income and the tax law applicable to income issues was properly considered.

INVESTIGATIVE/AUDIT TECHNIQUES

ATTRIBUTE DEFINITION
400 Audit/Compliance Interview (Procedural Accuracy) This attribute measures if in-depth planned interviews were conducted throughout the examination. Sufficient questions should be asked to give a clear understanding of the taxpayer as well as the operations of the taxpayer. Evaluation of this attribute should include consideration of all interviews held with taxpayers, representatives, and third parties.
405 Interpreted/Applied Tax Law Correctly (Regulatory Accuracy) This attribute measures if the tax law was interpreted and applied correctly which includes all aspects of issue development.
407 Fraud Determination (Regulatory Accuracy) This attribute measures if indications of fraud were pursued and developed.
408 Civil Penalty Determination (Regulatory Accuracy) This attribute measures if correct determinations/computations for civil penalties were made.

TIMELINESS

ATTRIBUTE DEFINITION
500 Time Spent on Examination/Compliance Review (Timeliness) This attribute measures if the time spent on the examination is commensurate with the complexity of the issues.
501 Efficient Resolution and IRM Timeframes Met (Timeliness) This attribute measures if IRM timeframes were met and the case actions taken were done in the most efficient manner that did not result in any unnecessary delay to resolve the case.
National Standard Timeframes
Below are the recommended national standard timeframes for which action should be taken:
• 45 days to start the examination: first action to first appointment.
• 45 days between significant activities.
• 1 day (next business day) to return telephone calls to the taxpayer/representative.
• 14 days to follow-up to correspondence from the taxpayer/representative.
• 10 days for case closures for agreed or no-change examinations - from the date the report is received or the date the no-change status is communicated to the taxpayer to the date the case is closed from the group.
• 20 days for case closures for unagreed examinations-from the date the 30–Day letter defaults or the date the request for appeals conference is received to the date the case is closed from the group.

Note:

Days refers to calendar days. Reasonable delays will be taken into consideration. Expedite processing requirements per the IRM will take precedence over the above time frames.

CUSTOMER RELATIONS/PROFESSIONALISM

ATTRIBUTE DEFINITION
605 Clear/Professional Written Communication (Professionalism) This attribute measures if all correspondence/documentation is businesslike and professional in tone, appearance and content.
606 TP/POA Apprised (Professionalism) This attribute measures if the taxpayer/representative was kept informed throughout the examination process.
607 TP Rights (Regulatory Accuracy) This attribute measures if the TP/POA was advised of all rights.
609 Confidentiality (Regulatory Accuracy) This attribute measures if the confidentially of taxpayer returns and/or return information was protected.
612 Solicit Payment (Procedural Accuracy) This attribute measures if payment was solicited and/or installment agreement considered.
613 Managerial Involvement (Procedural Accuracy) This attribute measures if the level of managerial involvement is appropriate for the particular case. Managerial involvement can be appropriate at any time and is mandatory in certain instances.

DOCUMENTATION/REPORTS

ATTRIBUTE DEFINITION
702 Employee Case/History Documentation (Procedural Accuracy) This attribute measures if the activity record (Form 9984/9984D) was used to document examination activities and time charges throughout the audit.
707 Work Papers Support Conclusion (Procedural Accuracy) This attribute measures if workpapers (including scope, depth and techniques used) were appropriately prepared to support the conclusion of the case.
708 Report Writing (Procedural Accuracy) This attribute measures if applicable report writing procedures were followed.
710 Tax Computation (Regulatory Accuracy) This attribute measures if the proposed or actual assessment and/or abatement of tax was correctly determined/computed as required.

Exhibit 4.8.3-2  (02-01-2007)
Examination Quality Measurement Staff (EQMS) Procedures for Sample Review Case Selection: Centralized Case Processing Responsibilities

Centralized Case Processing will process cases for the EQMS sample. The ERCS Sample Review selection program will identify cases selected for EQMS review.
ERCS Sample Review Procedures

  1. Cases are subject to sample selection when Status 51 is updated to another 5X status.

  2. The ERCS user is notified when a case has been selected for EQMS review and a Sample Selection Sheet must be printed.

  3. The Sample Selection Sheet will be placed on top of the file.

  4. The Sample Selection Sheet contains the address of the EQMS site that will receive the case.

  5. If Centralized Case Processing has a question as to whether a case was selected by the ERCS system in error, the appropriate EQMS site manager should be contacted to resolve the situation.

  6. When a case includes multiple years for the same taxpayer and/or related returns closed together as a package, the entire package is considered selected for EQMS review regardless if all returns/entities are shown on the Sample Selection Sheet.

    1. A case is defined as (1) an examination of one return for a taxpayer, or (2) any group of multiple year returns and/or related returns closed as a related package.

    2. Cases selected for EQMS review should include at least one key income tax return: Form 1040, 1041, 1042, 1065, 1120F, 1120S, or 1120.

  7. Cases will be updated to Status 90 then sent to the appropriate EQMS site.

  8. Form 2275 will be prepared for each tax period and stapled to the return. It should indicate that the return is being sent to the EQMS site (including address and telephone number). In the remarks area, note any related cases by taxpayer name, TIN and tax periods.

  9. If a case selected for EQMS review is required to be returned to a group by Centralized Case Processing function for correction, the case will be sent to the EQMS site after corrections have been made and updated to Status 90.

  10. Unagreed cases closing for issuance of statutory notice of deficiency are subject to sample selection in Technical Services. When an unagreed case is selected for EQMS review, Technical Services will place the Sample Selection Sheet on top of the case file and update all returns in the case with an "M" freeze code. When the case defaults it will be sent to Centralized Case Processing. Centralized Case Processing will send the case to the appropriate EQMS site when it is updated to Status 90. The "M" freeze code along with the Sample Selection Sheet will alert Centralized Case Processing that the case must be sent to EQMS. Due to the lengthy processing time for these cases the freeze code will act as a reminder that the case should be forwarded to the EQMS site. Centralized Case Processing will remove the "M" freeze code prior to sending the case to EQMS.

  11. When a case is returned to an exam group after the 90-Day Letter has been issued, ERCS will automatically "unselect" the case and it will not be sent for EQMS review.

Note:

If all tax periods submitted together as a case do not close or any of the tax periods are placed in Centralized Case Processing suspense pending resolution of a closing problem, then the entire case should be held in Centralized Case Processing until the case can be forwarded to the EQMS site as a complete package.

Transmitting Cases to the EQMS Site

Note:

All cases selected in Centralized Case Processing for EQMS review should be sent to the EQMS site after they are updated to Status 90.

  1. Update all tax periods to Status 90. Cases can be batched and sent weekly to the EQMS site.

  2. Attach AMDISA print to ensure this is done.

  3. Prepare Form 3210. Retain Part 4.

  4. The EQMS site will acknowledge receipt by returning Part 3 of the Form 3210.

  5. Discrepancies between items on Form 3210 and shipping contents should be resolved telephonically whenever possible or returned to the sender by the EQMS site.

Exhibit 4.8.3-3  (02-01-2007)
Examination Quality Measurement Staff (EQMS) Procedures for Sample Review Case Selection: Technical Services Responsibilities

Cases are subject to sample selection in Technical Services when they move from Status 21 to another 2X status.

Cases moving into a suspense status are excluded from sample selection. ERCS will "unselect" a case when updated to a suspense status.

Protested cases that are selected for the EQMS sample should be sent immediately to the EQMS site via overnight mail. EQMS will review protested cases within 5 business days and return to Technical Services via overnight mail. If the statute is 210 days or less, Technical Services will contact the EQMS site to exclude the case.

Unagreed cases with at least one agreed/no change year that are selected for the EQMS sample should be sent immediately to the EQMS site via overnight mail. EQMS will review these cases within 5 business days and return to Technical Services via overnight mail. If the statute is 210 days or less, Technical Services will contact the EQMS site to exclude the case.

Unagreed cases closing for issuance of statutory notice of deficiency are subject to sample selection in Technical Services. When an unagreed case is selected for EQMS review, Technical Services will place the Sample Selection Sheet on top of the case file and update all returns in the case with an "M" freeze code. When the case defaults it will be sent to Centralized Case Processing. Centralized Case Processing will send the case to the appropriate EQMS site when it is updated to Status 90. The "M" freeze code along with the Sample Selection Sheet will alert Centralized Case Processing that the case must be sent to EQMS. Due to the lengthy processing time for these cases the freeze code will act as a reminder that the case should be forwarded to the EQMS site. Centralized Case Processing will remove the "M" freeze code prior to sending the case to EQMS.

  • When an unagreed case is petitioned, ERCS will "unselect " the case when it is updated to Appeals. The "M" freeze code will be removed prior to updating the case to Appeals.

  • When an agreement is received for an unagreed case, the case will be closed to Centralized Case Processing and sent to EQMS when updated to Status 90.

When a case is returned to an exam group after the 90-Day Letter has been issued, ERCS will automatically "unselect" the case and it will not be sent for EQMS review.


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