4.7.3  Statute of Limitations

4.7.3.1  (01-26-2010)
Introduction

  1. This section contains information regarding the establishment of and requirements for control of the Assessment Statute Expiration Date (ASED) for returns controlled on ERCS.

  2. Updating and controlling the ASED on ERCS is important to ensure that there is no loss to the taxpayer or the government from erroneous abatements or barred assessments. Because ERCS provides reports to assist in the control of the ASED, it is imperative that the correct ASED is recorded on the system.

  3. IRM 25.6, Statute of Limitations, is the Service's primary and ultimate authoritative resource for providing policy and procedures and contains additional information regarding control of the ASED on AIMS and ERCS and responsibilities for controlling the statute of limitations date.

4.7.3.2  (01-26-2010)
Roles and Responsibilities

  1. Any individual handling a return has the responsibility to ensure the ASED for that return is correctly reflected in the case file and on ERCS. In the group or function, the manager and the examiner or individual assigned control of the return are jointly responsible for the control of the ASED.

  2. When a Form 895, Notice of Statute Expiration, is generated on ERCS, the program automatically indicates on the " Correct or Display Records" screen that a Form 895 has been issued. The "Date Returned" is reflected on the " Correct or Display Records" screen after the secretary or clerical personnel inputs the date on ERCS. This date indicates the Form 895 has been returned by the examiner and approved by the manager. These dates are used by headquarters analysts to monitor statute controls in the field, so it is imperative ERCS is updated to reflect the correct dates the Forms 895 are generated and returned.

4.7.3.2.1  (01-26-2010)
Manager Responsibility

  1. Responsibilities of the group manager or support manager in regards to statute control include, but are not limited to:

    • Ensuring the correct ASED is properly reflected on the case file and on ERCS

    • Ensuring Form 5348, AIMS/ERCS Update (Examination Update) , is completed, reviewed and signed for ASED updates

    • Processing (approving or disapproving) all ASED updates on ERCS timely

    • Ensuring Forms 895 are generated and returned timely

    • Monitoring the ERCS statute reports

  2. The manager or support manager must verify the ASED is correct before approving a new requisition on ERCS.

  3. If the ASED is incorrect on a requisition, the manager should skip the return on the ERCS approval screen and instruct the secretary or clerical personnel to update the ASED. Then the requisition can be approved.

  4. When a return is received from the campus or other function with an incorrect ASED, the manager or support manager is required to ensure a Form 5348 is completed. The manager or support manager is required to review and sign the form and give the form to the secretary or clerical personnel to update the ASED on ERCS.

  5. Managers and support managers are required to ensure a managerially-approved Form 895 is in place for all returns requiring them no later than 180 days prior to the ASED (120 days for Centralized Case Processing (CCP)). The ERCS 895 Report and the ERCS Pending Statute Report are used to monitor returns needing Forms 895.

  6. Once the Form 895 is generated, the manager or support manager is required to ensure the examiner completes the form and returns it to the manager for approval within 10 calendar days.

  7. When the manager receives the Form 895 from the examiner, the manager or support manager has an additional 10 calendar days (or 20 calendar days from the date the form was issued) to review the form for accuracy, sign it, and give it to the secretary or clerical personnel for input into ERCS.

  8. When a prompt assessment ASED is input on ERCS, the manager is required to notify the secretary or clerical personnel as soon as the update is approved so a Form 895 may be printed for the return.

  9. The manager or support manager is required to monitor the Statute Override Report to verify the ERCS ASED is correct.

4.7.3.2.2  (01-26-2010)
Examiner and Other Technical Staff Responsibility

  1. Responsibilities of the revenue agent, tax compliance officer, tax examiner, or audit accounting aide, etc. (hereinafter referred to as technical employee) in the group or function in regards to statute control include, but are not limited to:

    • Ensuring the correct ASED is properly reflected on the case file and on ERCS

    • Ensuring all returns in the technical employee's inventory requiring a Form 895 have a managerial approved form on the case file

    • Ensuring the Form 895 is completed timely

  2. If the ASED is not correct, the technical employee is required to prepare Form 5348 for review and managerial signature approval of the ASED update.

  3. The technical employee has 10 calendar days from the date the ERCS Form 895 was generated to complete it and return it to the manager for review.

4.7.3.2.3  (01-26-2010)
Clerical Responsibility

  1. Responsibilities of the clerical personnel in the group or function in regards to statute control include, but are not limited to:

    • Ensuring the correct ASED is properly reflected on the case file and on ERCS

    • Generating Forms 895

    • Updating ERCS to indicate when the Forms 895 have been signed by the manager

    • Providing the manager with the ERCS statute reports

    • Maintaining the Form 895 Log Book

  2. When a return is received from the campus or other function, the secretary or other receiving individual is required to review the case and, if the ASED is improper, the return is to be given to the group manager or support manager for review.

  3. After receipt of a signed Form 5348 from the manager for an ASED update, the secretary or clerical personnel is required to immediately update the ASED on ERCS.

  4. The secretary or clerical personnel in each group or function must generate Forms 895 from ERCS with sufficient frequency so as to ensure that a managerially-approved Form 895 is in place not later than 180 days prior to the ASED (120 days for Centralized Case Processing (CCP)).

    Note:

    If the local area office is using 210 days or more for their locally defined number of days and the 895 forms are generated monthly, ERCS ensures a Form 895 is generated for returns that have at least 180 days left on the ASED. The phrase "locally defined number of days" is explained in IRM 4.7.3.7 paragraph (2).

  5. Upon receipt of the signed Form 895 from the manager, the secretary or clerical personnel has 3 calendar days to initial and date the Form 895 and input the date the manager signed the form into ERCS. This is the "Date Returned" field on the ERCS system. See the ERCS user handbooks on the ERCS Documentation website for instructions on updating the" Date Returned" field on ERCS.

  6. The secretary or clerical personnel has the responsibility to run the appropriate statute reports described in IRM 4.7.3.8, Statute Reports and take appropriate actions.

  7. The secretary or clerical personnel is required to place a copy of the completed Form 895 in the Form 895 Log Book. See IRM 4.7.3.9, Retention Requirements of Statute Related Management Information, for the retention requirements of the copy of Form 895.

4.7.3.3  (01-26-2010)
Permissions

  1. Access to ERCS for the purpose of updating the statute is limited to individuals with write (or update) permission. This is generally the secretary or other clerical personnel.

  2. Access to ERCS for the purpose of viewing the statute is limited to individuals with read (or view) permission. This is generally the group manager, support manager, secretary or other clerical personnel.

  3. Access to ERCS for the purpose of approving statute changes is limited to individuals with first or second level approval permissions.

    • First level approval permission is limited to the group manager, acting manager, or support manager.

    • Second level approval permission is limited to the next higher level manager. In most instances, this is the territory manager.

    • The AIMS/ ERCS analyst/manager may be given first or second level approval permission on a temporary basis to aide in resolving issues preventing the ASED update from being approved in a reasonable length of time.

      Caution:

      This permission should only be given as a last resort after all attempts to find another manager, support manager, etc. to approve the update have failed and/or in the event that problems such as program bugs, user access problems, computer or network problems, etc. are creating extended delays in getting the ASED updates approved on ERCS and sent to AIMS.

4.7.3.4  (01-26-2010)
Approval Authority on ERCS

  1. The purpose of approval authority on ERCS for updating the ASED is to ensure control over the proper use of statutes on cases established on ERCS.

  2. An acting manager may not approve an ASED change for a return in his/her own assigned inventory.

  3. An AIMS/ERCS analyst/manager may not update an ASED and then approve the change.

  4. ASED changes made by managers or acting managers on ERCS must be approved on ERCS by the next higher level manager.

    Reminder:

    Managers have the authority to request an ASED change without higher level approval on Form 5348. Manager are required to secure higher level approval electronically on ERCS due to controls embedded within this system. In the ERCS system, an initiator of a change to an ASED cannot approve the change.

  5. When the manager or acting manager approves a requisition, he/she is required to ensure the ASED is correct. There is a possibility that the ERCS ASED on a requisition may overwrite the AIMS ASED when the return is fully established on AIMS. Since the ERCS ASED is approved with the requisition, ERCS does not require the manager to approve the ASED a second time when the AIMS record is fully established, nor does ERCS notify the manager if the AIMS ASED is overwritten with the ERCS ASED. See IRM 4.7.3.5, Comparing the ASED on AIMS and ERCS, for a more detailed description of when the ERCS ASED overwrites the AIMS ASED.

    Note:

    The ASED on AIMS may be viewed using the Integrated Data Retrieval System (IDRS) command code AMDISA.

4.7.3.5  (01-26-2010)
Comparing the ASED on AIMS and ERCS

  1. ASEDs are created when the tax return is filed with a campus. This date is created on Master File and sent to AIMS.

  2. When a new requisition is established on ERCS or when collateral or penalty control records are added to ERCS, the ASED must be input at the time of the request.

  3. When the AIMS record changes from skeletal to a fully established record, the ASEDs on AIMS and ERCS are compared during the AIMS to ERCS processing (aka AMS7109 processing). If the AIMS and ERCS statutes are different, the format for each ASED is checked and either AIMS or ERCS is updated.

    Reminder:

    Master File is not updated in this process.

  4. The following shows the priority order used to determine which ASED to keep, starting with the highest priority:

    • Type 872 statutes

    • Alpha statutes, excluding "EE" statutes

    • Irregular numeric statutes (prompt assessments or late filed returns)

    • Numeric statutes based on a timely filed return

    • "EE" alpha statutes

    For example, if ERCS has a numeric ASED and AIMS has an " AA" ASED the AIMS ASED overwrites the ERCS ASED. Conversely, if AIMS has a numeric ASED and ERCS has an "AA" ASED, ERCS sends an update to AIMS.

  5. If both AIMS and ERCS fall into the same priority, the ERCS ASED is kept unless both AIMS and ERCS have irregular ASEDs, in which case the earliest ASED is kept.

  6. After the initial comparison of the AIMS and ERCS ASEDs when the AIMS record is fully established, all subsequent comparisons in the following weeks use the criteria below to determine which statute to keep.

    • If the ASED was updated on ERCS and the update is over 21 days old, another update is sent to AIMS.

    • If the ASED was updated on AIMS, the ERCS ASED is updated to match the AIMS ASED.

    • If the ASED was updated on ERCS and the update is less than 21 days old or the update is still waiting for managerial approval, no action is taken.

  7. If the AIMS ASED overwrites the ERCS ASED the return is listed on the Statute Override Report.

  8. If a return is listed on the AAC Difference Report, differences between AIMS and ERCS ASEDs are not resolved during AIMS to ERCS processing. AAC differences must be resolved timely to prevent delays in reconciling ASED differences between AIMS and ERCS.

  9. IRM 4.7.6, Reports, contains detailed descriptions of the reports mentioned in this section.

4.7.3.6  (01-26-2010)
Updating the ERCS ASED

  1. If the ASED needs to be updated after the record is established on ERCS, the update should be input on ERCS. There are several reasons a statute may need to be updated on the ERCS system. These include:

    • Updating to an alpha statute date when the ASED on the return is within 180 days of expiration (ERCS allows an alpha statute to be input if the ASED is within 210 days of expiration so the Forms 895 are printed with the alpha ASED)

    • Updating to a "ZZ" (AIMS Database Transfer – Temporary ASED Alpha Code) alpha statute in order to transfer a return out of the area

    • Updating to a numeric statute when a return has been transferred into the area with a "ZZ" ASED

    • Updating the ASED after securing Form 872, Consent to Extend the Time to Assess Tax

    • Updating an "EE" (No Return Filed – IRC section 6501(c)(3)) alpha ASED to a numeric ASED

    • Updating to an earlier ASED after a request for a prompt assessment

    • Adding or removing the statute restriction indicator

    • Correcting an incorrect ASED

  2. If the ASED is found to be incorrect for returns already established on ERCS, the receiving function must immediately prepare Form 5348. The completed form and all documents necessary to support the ASED update are to be given to the manager for his/her written approval.

  3. After approval by the manager, the secretary or clerical personnel must update the ASED on ERCS.

  4. The update and approval of the ASED on ERCS should be done immediately after the event occurs necessitating an ASED update. Approval of the ASED is covered in IRM 4.7.3.4, Approval Authority.

  5. Form 895, located on the case file or tax return, must also be updated to the new ASED, if applicable. General instructions on Forms 895 can be found in IRM 25.6, Statute of Limitations.

  6. After approval by the manager, the ASED updates are sent to AIMS. This is done daily by the AIMS/ERCS support personnel in each area.

  7. Audit trails are created when the ASED is updated on ERCS.

  8. Instructions on how to update the ASED on ERCS can be found in the ERCS user handbooks.

4.7.3.7  (01-26-2010)
Form 895 Requirements

  1. A Form 895 is required for all ERCS records requiring an ASED, including collateral and penalty controls, if the record meets one of the following conditions.

    • The statute on the return is expiring within the locally defined number of days.

    • The statute on the return is earlier than a generated statute date based on a timely filed return. (e.g. prompt assessments).

    • The return has an alpha statute, except for "ZZ" alpha statutes.

    • The return has a "ZZ" alpha statute and the generated ASED based on a timely filed return is expiring within the locally defined number of days.

    • The return has an 872 type statute.

  2. The locally defined number of days is set by each area. It must be at least 180 days but no more than 400 days for Exam groups and Planning and Special Programs (PSP). It is recommended that area offices use 210 days to make sure all returns have at least 180 days left on the ASED when the 895 forms are generated monthly.

  3. If the ASED is updated on ERCS prior to the statute falling within the defined time frame, a Form 895 will not generate until the ASED is again within the defined time frame.

  4. The number of days used to generate Forms 895 on ERCS for Technical Services is nationally defined at 210 days.

  5. The number of days used to generate Forms 895 on ERCS for CCP is nationally defined at 120 days.

  6. Forms 895 are not generated for returns with irregular statutes, including prompt assessments and late filed returns, unless the ASED falls within the locally defined number of days. If local management requires a Form 895 for returns with irregular ASEDs prior to the locally defined number of days until expiration, the Form 895 may be printed through the ERCS option " Reprint 895 Forms by TIN, MFT and Tax Period." Forms may be generated for these returns by selecting the ERCS option "Reprint 895 Forms by TIN, MFT, and Tax Period" .

  7. Returns with irregular statutes are not included on the Pending Statute Report, unless the ASED falls within the locally defined number of days. If local management requires all returns with irregular ASEDs to have a Form 895, a form should be printed as soon as it is known the return has an irregular ASED. The Statute Override Report may be used to identify returns where an irregular ASED from AIMS has overwritten the ERCS ASED.

  8. The secretary or clerical personnel is required to reprint 895 forms as necessary if the Form 895 has not been returned from the individual responsible for the return within a specified period of time. The secretary or clerical personnel can run the "Reprint Specific 895 Forms" option from ERCS for this purpose.

  9. IRM 25.6.23, Examination Process - Assessment Statute of Limitations Controls , contains additional information regarding the maintenance of Forms 895 and the requirements for completion and return of the form.

4.7.3.8  (01-26-2010)
Statute Reports

  1. There are four ERCS reports that provide statute information.

    • Pending Statute Report (group level)

    • Pending Statute Report (territory to area level)

    • 895 Report

    • Statute Override Report

  2. ERCS reports are only as accurate as the data that is used to create them. In order to use ERCS reports to ensure there are no barred assessments or erroneous abatements, it is imperative to verify the ERCS ASED is correct and updated timely.

  3. The Pending Statute Report (group level) is used to monitor impending statute returns to ensure that ASEDs will not expire on returns controlled on ERCS.

    • All groups and functions should run the Pending Statute Report monthly.

    • This report should be run for all ASEDs expiring within 210 days (180 plus 30 since it is run monthly) or more.

    • This report is to be compared to AIMS Tables 4.0 and 4.1. Discrepancies are to be noted and corrected.

    • The group manager or support manager must also ensure all returns shown on the Pending Statute Report have been issued a Form 895, the ASEDs are proper, and actions are being taken to ensure that the ASEDs will not expire.

    • The support manager can also run a Pending Statute Report for each AAC in his/her territory. This report alerts the field territory manager to all returns in his/her territory with impending ASEDs.

    • The field territory manager, and PSP support manager, can run a Pending Statute Report for all returns in the territory with impending ASEDs.

      Caution:

      The Pending Statute Report does not list any expired ASEDs, alpha ASEDs, or irregular ASEDs unless the irregular ASED falls within the locally defined number of days. Some alpha ASEDs represent an underlying ASED that can expire (for example, BB, DD HH, MM). Therefore, group managers and support managers should be aware the Pending Statute Report does not provide data on all ASEDs which are expiring within the time frame specified when the report is run. Group managers and support managers should use the 895 Report to identify alpha ASEDs expiring within a short period of time.

  4. The Pending Statute Report (territory to area level) is used by territory managers, Directors of Field Operations (DFOs), Area and Industry Directors, and PSP to monitor impending ASEDs on returns to ensure ASEDs will not expire on returns controlled on ERCS.

    • The Territory Pending Statute Report should be run monthly.

    • This report provides a count of returns expiring within 210 days and a listing of returns with expired ASEDs and returns expiring within 30 days.

      Caution:

      The Territory Pending Statute Report does not list expired ASEDs or alpha ASEDs.

  5. The 895 Report is used to monitor the issuance and receipt of Forms 895 on impending ASED cases, returns where the ASED is expired, and returns which have alpha ASEDs.

    • The 895 Report should be run monthly.

    • This report provides a list of all returns that require a Form 895 with the exception of returns with prompt assessment ASEDs that are not expiring within 210 days.

    • Returns which have a Form 895 issued are also included on the report even if the numeric ASED on the return is not expiring within 210 days.

    • The report also indicates whether or not a Form 895 has been issued and/or returned.

  6. The Statute Override Report is used to alert the manager when the ASED on ERCS is overwritten by the AIMS ASED.

    • The report may also be used to monitor returns where the ERCS ASED has been overwritten with an irregular ASED from AIMS.

    • The report must be run weekly as the data is overwritten each week during the AIMS to ERCS processing.

  7. IRM 4.7.6, Reports, contains detailed descriptions as well as recommended uses and frequency of generating reports available through ERCS.

4.7.3.9  (01-26-2010)
Retention Requirements of Statute Related Management Information

  1. The retention requirements for the statute related AIMS tables also applies to ERCS related statute management information which includes:

    • The Pending Statute Report (group level)

    • The 895 Report

    • The copy of the Form 895 contained in the Form 895 Log Book

  2. These documents are required to be destroyed after 5 years plus the current year, or after no further reference value, whichever is earlier; however the information must be retained for a minimum of two years by the responsible manager.

4.7.3.10  (01-26-2010)
Form 895 Log Book

  1. The Form 895 Log Book or file is a three ring binder or file folder where a copy of each managerially-approved Form 895 is retained in accordance with the retention period outlined in IRM 4.7.3.9.. The Form 895 Log Book can be retained in either alpha order or date order unless a local preference is established.


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