4.8.4  Mandatory Review

Manual Transmittal

May 17, 2012


(1) This transmits a revision for IRM 4.8.4, Technical Services, Mandatory Review.

Material Changes

(1) This transmittal reissues existing procedures which outline the guidelines for the evaluation of mandatory review cases. Changes made include:

  1. Minor editorial changes have been made throughout this IRM. Website addresses, legal references, and IRM references were reviewed and updated as necessary.

  2. Procedures for employee audits have been revised to reflect the centralized review of these audit files in the Baltimore Technical Services office.

  3. References to Form 2677, Request for Account History and Tax Audit, previously used when processing employee audits of new hires have been removed.

Effect on Other Documents

This material supersedes IRM 4.8.4, dated 08/21/2009.


Small Business/Self-Employed Technical Services employees.

Effective Date


Rodney M. Kobayashi
Director, Technical Services SE:S:E:TS
Small Business/Self-Employed  (05-17-2012)

  1. This section provides guidelines for the evaluation of cases that must be reviewed.  (05-17-2012)
Cases Subject to Mandatory Review

  1. Cases subject to mandatory review include:

    1. Joint Committee (see IRM 4.36, Joint Committee Procedures),

    2. Employee audits (see IRM 4.2.6, Examination of Employee Returns), and

    3. Jeopardy and Termination see IRM, Jeopardy and Terminations.

  2. Although there are a limited number of identified mandatory review categories, Field Compliance Areas have the discretion to designate any type or group of cases as a 100% review category if reviews are considered essential.

  3. National research program (NRP) cases are not mandatory review but may meet other mandatory review criteria. Normal processing procedures should be followed. Reviewers may be requested to conduct in-process reviews.  (05-17-2012)
Case Identification

  1. Examiners identify case files subject to mandatory review on Form 3198, Special Handling Notice for Examination Case Processing. The applicable mandatory review category should be indicated.  (05-17-2012)
Subject to EQMS Sampling

  1. Mandatory review cases are subject to EQMS sampling. When a case subject to mandatory review is selected for EQMS sample review, follow the regular procedures outlined in IRM 4.8.3, Examination Quality Measurement Staff (EQMS).  (05-17-2012)
Joint Committee Cases

  1. Overpayment in excess of $2,000,000 must be reported to and approved by the Joint Committee on Taxation as required by IRC 6405, Reports of Refunds and Credits.

  2. Both Large Business and International (LB&I) and Small Business/Self-Employed (SB/SE) field groups should send agreed, no change, and surveyed Joint Committee cases to the centralized LB&I Joint Committee Review site for case review and preparation of all required reports. Groups should update cases to Status Code 21, using Technical Services Code 901. SBSE should archive Report Generation Software (RGS) records.

  3. Unagreed Joint Committee cases are sent to Technical Services and processed in the same manner as non-Joint Committee cases.

  4. Complete instructions for processing and review of Joint Committee cases are included in IRM 4.36.

  5. See the Joint Committee home page located at http://lmsb.irs.gov/hq/pqa/4/home.asp.  (05-17-2012)
Employee Audits

  1. All examinations, cases accepted upon classification, or surveys of an employee return are subject to mandatory review. Service employees, regardless of grade or position, are subject to the same initial screening and classification process. The general rules relating to examinations, proposed changes, appeal rights, etc. will apply to the same extent that they apply to all individual income tax returns. Once the case file is selected for examination, it is identified as an employee audit on Form 5546, Examination Return Charge-Out Sheet.

  2. Survey procedures are applicable only to new employee examinations and regularly classified returns. Treasury mandates (TIGTA referrals) and executive selections cases cannot be surveyed.

  3. Review of employee audits, including surveys, are centralized in the Baltimore Technical Services office. The employee audit cases are closed to their local Technical Services office. The local Technical Services office can forward cases to Appeals directly and the remaining cases are sent to the Baltimore Technical Services office via Form 3210, Document Transmittal.

  4. The RGS records on correspondence examination automation support (CEAS) should be updated to the centralized Technical Services RGS group identification number for the local territory.  (05-17-2012)
IRM References

  1. Refer to IRM, Employee Audits, for classification, selection and procedures related to all types of employee return examinations.

  2. IRM 4.2.6, Examination of Employee Returns, provides guidance on the examination of employee returns, audit reconsiderations, closing an employee examination, surveying an employee return and other related procedures.

  3. IRM, Case Return Criteria, provides guidance on the criteria for limiting the number of cases returned to the group for re-work. The criteria for "substantial error" under IRM, Substantial Error, does not apply to employee audits.

  4. IRM, Exceptions for Program Requirements, states the reviewer must give consideration to the proper completion of procedures and requirements associated with employee audits.

  5. IRM, Policy Statements for the Examining Process, Policy Statement 4-9, provides standard IRS examination procedures relating to Service employees.  (05-17-2012)
Audits of New Employees

  1. Refer to IRM, New Employee Examinations. Once the case is closed from Technical Services, Centralized Case Processing (CCP) will forward the required information to the requesting official, such as the Labor/Employee Relations, Treasury Inspector General for Tax Administration (TIGTA), National Background Investigations Center. Refer to IRM, Closing an Employee Examination.

  2. For executive or political appointment audits, the reviewer will complete a cover memorandum notifying the Director, Executive Leadership Services Division in headquarters that the examination has been completed, reviewed and approved. The memorandum is signed by the territory manager and then mailed by the reviewer in Technical Services.  (05-17-2012)
Key Points for Reviews

  1. The reviewer should follow general case review procedures per IRM, General Case Review Procedures, for employee audit case reviews. In addition, consider these key points for review of employee audits:

    1. Confidentiality must be strictly observed.

    2. The Quality Attributes will provide the basis of the technical review of the examination. Refer to IRM Exhibit 4.8.3–1, Quality Attributes, and Document 12354, Field Compliance Embedded Quality, Field and Office Examination Job Aid.

    3. The review should consider whether or not the employee complied with the Service's ethics program and rules of conduct (see IRM, Violations of the Code of Conduct).

    4. The return of an employee's spouse who has filed separately should be inspected to determine if it should be examined. A copy, RTVUE, or Compliance Data Environment (CDE) print of the spouse's return must be included with the employee's return if it is not examined. See IRM, Examination of Spouse’s Separate Return.

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