4.10.2  Pre-contact Responsibilities (Cont. 1)

4.10.2.6 
Pre-Contact Planning of Examination Activities

4.10.2.6.5 
Referrals for Specialists

4.10.2.6.5.2 
Referral Forms

4.10.2.6.5.2.3  (01-17-2012)
Art Appraisals

  1. Art Advisory Service (AAS) - provides assistance with valuing art. Until the AAS is incorporated in to the SRS a manual referral will be used.

  2. A mandatory referral is required for an object of art and/or cultural property valued at $20,000 or more.

  3. The examiner should submit the mandatory referral to AAS as soon as practicable, but no later than 30 days of either the initial appointment or the group manager concurrence meeting, whichever occurs first. See IRM 4.48.2, Valuation Assistance for Cases Involving Works of Art.

  4. The examiner should complete a Form 5202, Request for Engineering Services, or a memorandum. IRM 4.48.2.3.1, Information Needed for Art Evaluation Request, provides a description of the information that should be included in the referral.

4.10.2.6.5.2.4  (04-02-2010)
Technical Guidance

  1. Headquarters analysts and technical advisors (TA) provide training, tools, and assistance to enhance examiners’ skills and use of audit techniques to respond to the unique business practices of a particular industry, entity, or issue. They also mentor through field facilitators and assist in providing information to trade associations and professional communities as well as developing legal positions to ensure consistent taxpayer treatment.

  2. Visit the various Business Units web pages for additional information.

    1. Large and Midsize Businesses (LMSB): http://lmsb.irs.gov/

    2. Small Business and Self Employed (SBSE): http://mysbse.web.irs.gov/

    3. Wage and Investment (W & I): http://win.web.irs.gov/

    4. Tax Exempt and Government Entities (TE/GE): http://tege.web.irs.gov/templates/TEGEHome.asp

4.10.2.6.5.2.5  (04-02-2010)
Other Referrals

  1. Request for informal advice from Area Counsel, request for Field Service Advice, and request for technical advice should be submitted to the Technical Coordinator in Technical Services. Technical Services also acts as a liaison between the area and tax law specialists in responding to examiners’ technical questions. See IRM 4.8.8.12, Technical Coordination, for information on how to secure this information.

  2. Fraud, if the case has indications of fraud, the examiner will discuss the facts with his/her group manager and contact a fraud technical advisor (FTA) if the manager concurs. If the FTA agrees that there are sufficient indicators to warrant fraud development, the examiner will complete Form 11661, Fraud Development Recommendation – Examination. All parties will follow the fraud development procedures prescribed in IRM 25.1.2.

4.10.2.6.5.3  (08-01-2007)
Control of Referrals

  1. SRS referrals are automatically tracked. This system will automatically follow up with the manager if a response has not been made.

  2. For referrals made outside of the SRS, a log of referrals from the examination group should be maintained.

    1. Referrals not acknowledged within 30 days should be followed up with a request for assignment or rejection.

    2. Referrals not assigned or rejected after the follow-up should be brought to the field examination territory manager for resolution.

4.10.2.6.5.4  (04-02-2010)
Specialist’s Role in Examination

  1. When a specialist is involved in a case, the examiner maintains control of the income tax return and its management. The specialist may take control of non-income tax returns.

  2. Specialist(s) assigned to the case should meet with the examiner and the taxpayer (if appropriate) to discuss the issue, information required, time for information to be presented, and an estimated completion date of the report.

  3. Coordination with the specialist is required to ensure issues are material to the return and time charged is commensurate with the issue.

  4. Disagreements on proposed adjustments between the examiner and specialist should be elevated to their respective managers for resolution.

4.10.2.6.5.5  (08-01-2007)
Subsequent Referrals

  1. Rejected cases may be referred again if substantial information is developed during the examination. If the case was rejected due to workload priorities, a specialist may be made available on a consulting basis for significant issues. For those specialist groups available through SRS, informal questions should be submitted using SRS. For specialist groups not available through SRS, arrangements for consultations should be made with the approval of both managers.

4.10.2.6.5.6  (08-01-2007)
Documentation of Referral

  1. Documentation of consideration of referrals should be made for all entities meeting the mandatory referral criteria. See IRM 4.10.2.6.5.1. If a case is referred, a copy of the referral is sufficient. If the case was not referred, the reasons for not referring a case should be documented in the workpapers or the activity record.

4.10.2.7  (04-02-2010)
Initial Contact: Overview

  1. The term "initial contact" is defined as the first contact with the taxpayer after the pre-contact analysis and before the initial interview. Generally, the initial contact is for the purpose of arranging the initial interview.

  2. Examiners must locate the taxpayer to make the initial contact. It is important that the examiner locates the proper taxpayer.

  3. Clerical personnel may be used to provide assistance with locating the taxpayer.

4.10.2.7.1  (04-02-2010)
Determining the Proper Person to Contact

  1. Initial contact is usually made with (but not limited to) the following:

    1. For individual income tax returns, Form 1040, U.S. Individual Income Tax Return, the taxpayer(s) who signed the return.

    2. For corporate returns, Form 1120, U.S. Corporation Income Tax Return, or Form 1120-S, U.S. Income Tax Return for an S Corporation, the officer who signed the return or other corporate officer.

    3. For partnership returns, Form 1065, U.S. Return of Partnership Income, the partner who signed the return or the tax matters partner listed on the return.

    4. For other returns, the person who signed the return.

    5. For electronic file returns, the taxpayer or an officer of the entity.

      Reminder:

      If a valid Form 2848, Power of Attorney and Declaration of Representative, is on file for the year(s) and the type of tax under examination, the power of attorney must be contacted. A copy of all correspondence sent to the representative must be sent to the taxpayer.

  2. If a return or the case file indicates that a power of attorney is on file, examiners will determine if there is, in fact, a valid power of attorney on file with the Service, and what restrictions are applicable. For additional information regarding a Power of Attorney see IRM 4.11.55, Examining Officer's Guide (EOG) - Issues Involving a Taxpayer's Representative.

4.10.2.7.2  (04-02-2010)
Locating the Taxpayer

  1. Once the examiner has determined who to contact, the person must be located. The taxpayer’s address and telephone number reflected on the return must be verified by using one or more of the steps below:

    1. Check the local telephone directory for a current telephone number and address. Compare it to the information reflected on the tax return.

    2. Check IDRS or other internal data for the last known address. See IRM 4.10.2.7.2.4.

    3. If the taxpayer cannot be located from the above steps, query the various sources within the Service's current asset locator service at http://rnet.web.irs.gov/rs/index.htm. If an employee does not have a password to an asset locator service, they should contact their business unit's ID administrator listed at http://rnet.web.irs.gov/rs/idadmin_Lexis_West.asp/

  2. If the taxpayer's address has changed, the examiner must immediately submit Form 2363, Master File Entity Change, to update internal information with the correct address, but only if clear and concise notification has been received.

  3. Prior to submitting Form 2363, ensure the change is being made as the result of "clear and concise notification" in accordance with Revenue Procedure 2001–18. Verbal notification by the taxpayer constitutes clear and concise notification.

  4. Treasury Regulation 301.6212-2 and Revenue Procedure 2001-18 provide guidance regarding the procedures for making a change of address and they define "clear and concise notification."

  5. Master File data should NOT be updated based solely upon third party information, such as a new address reflected in the letterhead or return envelope of a taxpayer's correspondence. Corroborating information should be obtained in these situations.

  6. Form 2363 is used by examination to make changes (names, addresses, dates, etc.) to the Business Master File (BMF) and Individual Master File (IMF). The completed form is forwarded to CCP. Form 2363 can be faxed or mailed to CCP for input. See IRM 4.4.11.2, Name, Address, and Marital Status Change. On joint returns, prepare a Form 2363 for each spouse whose address changed.

4.10.2.7.2.1  (04-02-2010)
Undeliverable Initial Contact Letters

  1. If the initial contact letter is returned, additional steps must be taken to determine if a more current address or contact information can be obtained. Many of the internal and external sources are updated daily. The following steps should be taken:

    1. Attempt to contact the taxpayer by telephone;

    2. Re-check for a current address using the Service's asset locator service. If an employee does not have a password to an asset locator service, they should contact their business unit's ID administrator listed at http://rnet.web.irs.gov/rs/idadmin_Lexis_West.asp/

    3. CFOL/ IDRS research - IRM 4.10.2.7.2.4.

    4. Review AIMS Weekly Update Report if available - Codes 18 and 19 show new addresses updated to Master File.

  2. The National Change of Address Linkage (NCOALink) attempts to match the Master File address with any change of address form filed in the past 48 months to the USPS. If a match is identified, Master File is updated with the correct address. Therefore, it is not necessary to verify the taxpayer's Master File address with a postal tracer, Form 4759, Address Information Request - Postal Tracer. The NCOALink does not eliminate the need for using postal tracers. Use a postal tracer to:

    1. Obtain the physical address of a post office box holder, or

    2. Verify an address that does not appear on the Master File

  3. If the taxpayer’s correct address is identified, the correspondence will be re-addressed and re-mailed.

  4. If the steps set forth in (1) above do not result in securing a current address or telephone number, see IRM 4.10.2.7.2.2. This section provides the mandatory steps that must be taken and documented on Form 1900-B, Unlocatable Taxpayer Checksheet.

  5. If the steps set forth above do not result in securing a current address for the taxpayer, a report may be prepared with proposed adjustments to the specific items questioned and mailed to the taxpayer’s last known address as reflected on IDRS. See IRM 4.10.2.7.2.7.

4.10.2.7.2.2  (04-02-2010)
Unlocatable Taxpayers - Mandatory Steps to Locate

  1. If a taxpayer cannot be located via telephone or by mail, the examiner must follow the steps listed in this section to attempt to locate. The examiner must use Form 1900-B, Unlocatable Taxpayer Check Sheet, to document actions taken. The examiner must take the following actions:

    1. Perform internal research using some of the CFOL commands listed in IRM 4.10.2.7.2.4.

    2. Research the last known address and telephone number using the Service's asset locator service. Perform a broad search if available. If not available, perform specific searches for address, telephone, real property, and professional licenses. If an employee does not have a password to an asset locator service, they should contact their business unit's ID administrator listed at http://rnet.web.irs.gov/rs/idadmin_Lexis_West.asp/

    3. Send a postal tracer using Form 4759, Address Information Request - Postal Tracer. See IRM 5.1.18, Locating Taxpayers.

    4. Contact the taxpayer’s employer, return preparer, representatives (use CFINK), or third parties, such as banks, brokerage houses, mortgage companies and other third party payor(s), if known.

    5. If contact is made by mail, the following forms should be used: Form 3242, Request for Information from Employer (To Locate Person), when writing to the taxpayer’s employer, Form 2223, Request for Information From Military, when requesting information from military service, and Form 3241, Request for Information to Locate Person, when writing to a third party.

      Note:

      IRC 7602(c) notification must be given prior to making a third party contact. This notification may be made by sending the initial appointment letter and Publication 1 to the taxpayers last know address. See IRM 4.11.57.7, Impact of Third Party Contact Procedures on Case Building and Return Selection, Unlocatable Taxpayers, Congressional Inquiries.

    6. Check the Internet to perform a search of the taxpayer’s name, business name, or phone number to determine if they have web-page listings or an E-Business presence on the internet. See http://mysbse.web.irs.gov/exam/tip/default.aspx for additional information associated with E-Business.

    7. Check for an address using the Currency Banking Retrieval System (CBRS). CBRS is an online investigative tool that is available for researching a taxpayer's address, bank accounts, and other assets.

4.10.2.7.2.3  (04-02-2010)
Additional Resources for Locating Taxpayers (Optional)

  1. The following resources maybe helpful in locating taxpayers:

    1. Business licensing information - available through the Service's asset locator services online or through national, state, and local licensing agencies.

    2. City and county permits / licenses; for example, real estate agents, building permits, etc.

    3. Use online news databases through the Service's asset locator service or electronic tax law research service.

    4. Contact Federal/State Coordinator to determine if other governmental entity may have more current address information. For example, some states provide information from unemployment insurance records.

    5. Visit the last known residences and addresses. Speak with neighbors and neighborhood postal employees.

    6. Consult IRM 5.1.18, Locating Taxpayers, for other methods of locating the taxpayer.

4.10.2.7.2.4  (01-17-2012)
IDRS / CFOL Command Codes Useful in Locating a Taxpayer

  1. Use IDRS command codes IMFOL with definers (I and T) and INOLE with definers (X and S) to identify the last known address. Both the primary and secondary SSNs should be searched:

    1. To determine any change in address.

    2. To determine any filings and pending assessment activity by other entities within IRS.

  2. When a transcript shows a substitute for return was filed by the Service (TC150-0 and SC 24 or 25), additional internal and external research will be needed to locate the taxpayer.

  3. Review the IDRS print for any cross reference to other related TINs:

    1. Spouse

    2. Dependent

    3. Business

    4. Filing Status changes

  4. Request IDRS research for the taxpayer’s phone number using command code TELER.

  5. AIMS weekly update report - This report will be generated only when a change occurs at Master File that affects a case in a group status. A description of this report, with instructions, appears at IRM 4.4.27. The report informs the group of a change which has occurred on the taxpayer's account or other information which the group needs to know. A code 18 and 19 on this report indicates master file has been updated with new address information. Whenever an AIMS weekly update report is received, the examiner should review the report and determine what has changed. If the address has changed, the examiner needs to ensure it is the most current address for the taxpayer and note the new address on Form 3198, Special Handling Notice for Examination Case Processing. The table listed below contains frequently used IDRS command codes to locate a taxpayer.

  6. Determine if the taxpayer has any tax module(s) in any of the following collection status codes:

    1. Status 60 – Installment Agreement;

    2. Status 22, 24, 26 (Open TDA indicator) with a TC 530, CC 24-32 (Currently not Collectible) that has not been reversed; and

    3. Status 71 – Offer in Compromise, TC 780.

    Note:

    If a case is in one of these status codes, the taxpayer may still be locatable. Contact the Collection Division to secure the address.

  7. IDRS command codes useful in locating a taxpayer's address or telephone number are listed in the table below:

    IDRS Command Codes Used to Contact a Taxpayer
    CFOL Command Address Unable to Locate Phone Description
    AMDIS X X   Displays general information about the taxpayer's account for a specific tax period. Identifies the cycle the address was last changed.
    BMFOL F X X   Identifies contact information for the person responsible for receiving Federal Tax Deposit (FTD) coupons including foreign address information.
    BMFOL E X X   Provides the BMF entity screen information. Parent EIN
    BRTVU X X X Displays BMF return information.
    ENMOD X X X Cross reference to spouses SSN. Includes prior name lines, cell phone, and collection case assignment.
    FINDE X     Researches the national Name Search Facility (NSF) for a business's name and address information, using the EIN.
    FINDS X     Indicates date of birth
    IMFOL E X X   Displays entity information. Indicates an electronic return has been filed.
    INOLE G   X   Displays name line information available for any account associated with the TIN. Identifies the area office code where the taxpayer's collection case is being worked.
    INOLE S X X   Provides current street address. Identifies the cycle the address was last affected. Identifies the date the SSA information was updated.
    INOLE T   X   Displays when cross-reference TIN information is present. Identifies the taxpayer's secondary name control.
    INOLE X   X   Displays SSA name controls, cross-reference, and merge transaction information.
    IRPTR L X     Identifies money summaries, the two best payee addresses, DOB, DOD, and filing status code.
    IRPTR O X     Provides online payee transcripts of income reported on various document types.
    LEVYS   X   Provides levy source data
    MFTRA X     Provides a complete account of all active modules.
    MFTRA U X     Provides entity information from SSA.
    RTVUE X X   Provides the transcribed line-by-line tax return information, which posted to IMF. Identifies third party representative.
    SPARQ X X   Provides the latest address information for primary and secondary joint filers when they no longer have the same address.
    SUPOL X X   Provides TDI information for individuals who have a Transaction Code (TC) 140 posted on IMF.
    TELER     X Provides a telephone number on the Taxpayer Information File (TIF).
    TRDBV X     Retrieves a summary of the available tax information on Tax Return Data Base (TRDB).
    UNLCER   X   Researches 100% penalty cross-reference information on the 100% Penalty File

  8. For additional information, see the CFOL/IDRS reference guide, CFOL Express at http://sbse.web.irs.gov/AIMS/docs/CFOLexpress.pdf is a tool that may assist the examiner in determining appropriate IDRS command codes to be researched when attempting to locate a taxpayer.

4.10.2.7.2.5  (01-17-2012)
Using Credit Bureau Information to Locate Taxpayers

  1. Examiners must be alert to the appropriate use of credit bureau reports. There are two types of reports:

    1. Full consumer credit report – This report contains all of the information in the short report plus loan, employment, financial and payment information.

    2. Short credit report – the short report contains consumer's name, address, former address, and places of present and former employment.

    3. Examination is prohibited by the Fair Credit Reporting Act (F.C.R.A.) from using full credit reports, if the reports were originally obtained for collection of a balance due. Therefore, examiners cannot request a full credit report through Collection. If examination needs a full credit report, a third party summons must be issued to the credit reporting agency. Refer to F.C.R.A 15 U.S.C. 1681b(a); and IRM 25.5.4.4.6(1).

    4. Examination employees can use their asset locator service to access information that is currently available in the short credit report. Consequently, there is no need to request this report from collection. If an employee does not have a password to an asset locator service, they should contact their business unit's ID administrator listed at http://rnet.web.irs.gov/rs/idadmin_Lexis_West.asp/

      Note:

      Examiners are required to perform an asset locator search whenever they are unable to locate a taxpayer. When available, clerical resources can pull the information for the examiner.

4.10.2.7.2.6  (01-17-2012)
Third-Party Contacts

  1. Examiners may need to make a third party contact in order to locate the taxpayer.

  2. When a third party contact is warranted, the examiner must provide notification to the taxpayer as required per IRC 7602(c). See IRM 4.11.57, Third Party Contacts, for third party procedures and what constitutes and what does not constitute a third party contact. Visit SBSE Examination’s Third Party Contact web page for a list of third party coordinators at http://mysbse.web.irs.gov/exam/tip/3rdparty/default.aspx/

4.10.2.7.2.7  (04-02-2010)
Case Closing Procedures if the Taxpayer Can Not be Located

  1. If the taxpayer can not be located, a decision must be made whether the audit will continue. The examiner and group manager must consider whether an assessment is appropriate when a taxpayer is not locatable.

  2. There are instances where non assessment would undermine voluntary compliance. The list below provides some examples but is not all inclusive:

    1. Frivolous returns;

    2. Unsupported tax avoidance arguments;

    3. Grossly overstated expenses; and

    4. Abusive tax avoidance transactions.

  3. If an assessment is deemed appropriate and the return has been filed, use available information to prepare the audit report and send correspondence to the last known address. Refer to the following for more information on determining the last known address:

    1. IRC 6212(b), Last Known Address (Notice of Deficiency);

    2. Treas. Reg. 301.6212-2, Definition of Last Known Address;

    3. Treas. Reg. 301.7602 - 2, Third Party Contacts;

    4. IRM 4.14.1.6.2.5, Establishing "Last Known Address" ; and

    5. Rev. Proc. 2001-18, 2001-8 I.R.B. 708, 2001-1 C.B. IV.

  4. All attempts to contact the taxpayer MUST be documented in the case file.

  5. If an assessment is deemed not appropriate based on the factors above, close the case using the following procedures:

    1. Nonfiled returns, use Non-examined Disposal Code 40 (No Return – Unable to locate). The case will close with TC 593 and Closing Code 57.

    2. Filed Returns - Close using Non-Examined Disposal Code 42, Return Filed - Unable to Locate. Complete Form 1900, Income Tax Survey After Assignment, and document the steps taken to locate the taxpayer on Form 1900-B, and attach it to Form 1900.

4.10.2.7.2.8  (04-02-2010)
Case Closing Procedures for No-Show Cases

  1. A "no-show" case is one in which a "deliverable" address exists, but the taxpayer is not responding to correspondence or does not "show" for any scheduled appointment.

  2. Follow-up attempts must be made to contact the taxpayer to encourage him/her to schedule and keep the appointment or to solicit an agreement.

  3. IRM 4.10.4, Examination of Income, addresses the Service's responsibility regarding when income confirmation is warranted per IRC.

4.10.2.7.3  (08-01-2007)
Making Initial Contact

  1. Generally, initial appointments for field examinations should be scheduled using telephone contact and a confirmation letter. Generally, office examination appointments will be scheduled using written communication.

  2. During the initial contact by telephone or in person, examiners will explain/discuss the taxpayer’s rights as outlined in Publication 1, Your Rights As A Taxpayer, and answer any questions the taxpayer may have concerning their rights. See IRC 7801.

  3. The examiner should use approved form letters to schedule and confirm examinations. The examiner can not create his own pro forma letters for routine use. All one time use letters must be approved by the group manager prior to mailing. When one time use letters are used:

    1. The group manager must ensure that any initial appointment letter developed by an examiner, does not require (or imply a requirement) that the taxpayer appear at the initial interview.

    2. Any letter, other than form letters must be checked for spelling and grammatical accuracy.

  4. For examinations involving a joint tax return, all correspondence must be sent separately to both parties at the appropriate address. See detail below for office and field examination appointment scheduling.

  5. When a valid unrestricted Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, has been received from the taxpayer, the initial appointment must be scheduled with the representative. It is advisable that the appointment be scheduled via telephone and followed up with a written confirmation letter. The taxpayer must receive a copy of all correspondence that is sent to the representative.

  6. When the initial contact is made by telephone, the examiner will immediately identify himself and state the purpose of the call. The examiner will also provide his telephone number and identification number.

  7. If the taxpayer wants representation prior to scheduling the initial appointment, the examiner should allow the taxpayer a minimum of 10 business days to secure representation before taking any follow-up action.

  8. Taxpayers may request that their representatives attend the initial interview. IRC 7521(c) states that when a taxpayer has executed a written power of attorney to represent the taxpayer in any interview, IRS can not require the taxpayer's presence without issuance of a summons. Therefore, when contacting a taxpayer's representative, it is advisable to telephone for an appointment ahead of time.

4.10.2.7.3.1  (01-17-2012)
Field Examination Initial Contact

  1. Field examination cases should be scheduled using telephone contact when ever possible. The advantages of using a telephone contact to schedule field examination cases are:

    1. It allows examiners to schedule the initial appointment at an appropriate time, which is agreeable to the taxpayer and reduce the number of rescheduled appointments.

    2. It allows the examiner to explain to the taxpayer what records should be available for the examination. Under no circumstances should the telephone conversation be used to verify items appearing on an income tax return; inspection of records or other data can not be made by telephone. But, if the taxpayer volunteers information during this initial contact concerning audit issues, the examiner should document the discussion.

    3. The pre-contact analysis should always be conducted by the examiner prior to contacting the taxpayer. This will ensure that the examiner is knowledgeable enough about the return to answer any questions the taxpayer may have when attempting to schedule the appointment.

    4. When the initial appointment is made by telephone, a follow-up Letter 3253, Taxpayer Appointment Confirmation Letter, will be mailed to the taxpayer confirming the time/place of the examination and the records which are to be available.

    5. Examiners must complete Lead Sheet 120, The Initial Taxpayer Contact Check Sheet. This mandatory lead sheet provides guidance in conducting the initial contact with the taxpayer.

    6. See IRM 4.10.2.7.4.1.

  2. If during the initial contact the taxpayer questions whether or not the examiner works for IRS, the examiner should discontinue the call. The examiner should advise the taxpayer that they will send them a letter confirming the examination. Letter 2205-A, Initial Contact Letter, should be used for this purpose.

  3. When the field examiner is unable to make initial contact by telephone due to factors outside of his control, the examiner should use Letter 2205-A to request the taxpayer call and schedule an appointment.

  4. If the taxpayer fails to respond to Letter 2205-A, the examiner must determine why the taxpayer is not responding and should reissue the appointment letter as registered return receipt requested.

    1. If the taxpayer is no longer at the address, follow the procedures in IRM 4.10.2.7.2.2.

    2. If the taxpayer is determined to be at the address and does not respond, then the examiner should consider issuing a summons.

    3. The examiner may issue Letter 2295, Initial Contact Letter, to advise the taxpayer that their tax liability will be changed based on information on hand or a summons may be issued.

  5. The following letters are used to schedule field examination appointments:

    1. Letter 2205-A, Initial Contact Letter: To request the taxpayer to call back to set the initial appointment for a field examination, and lists the initial issues to be examined.

    2. Letter 2205, Initial Contact Letter: To request taxpayer call-back to schedule an initial appointment. Issues being examined will not be reflected.

    3. Letter 3253, Taxpayer Appointment Confirmation Letter: To confirm the initial appointment for an examination scheduled with the taxpayer. It is appropriate for individual, corporate, partnership or other return types examined by Revenue Agents.

    4. Letter 3254, Representative Appointment Confirmation Letter: To confirm the initial appointment for a field examination scheduled when a representative is involved.

4.10.2.7.3.2  (04-02-2010)
Office Examination Initial Contact

  1. Office cases generally will be scheduled using written correspondence. However, in rare instances where an office examination is scheduled via telephone, the examiner should follow the appropriate procedures listed in IRM 4.10.2.7.4.1. The following letters will generally be used to schedule the initial appointment:

    1. Letter 2202 (DO), Initial Contact Letter - DO Firm Set Appointment Letter): A firm initial appointment date and time is set for the initial appointment.

    2. Letter 3572, SBSE Office Exam Call-Back Appointment Letter: Ask the taxpayer to call to schedule an appointment. Include Form 4564, Information Document Request, with the letter.

    3. Letter 3572-A, SBSE Office Exam Call-Back Appointment Letter for Forms 1120, 1120-S and 1065: Used by TCOs to ask the taxpayer to call to schedule an appointment for a corporate or partnership taxpayer. Include Form 4564 with the letter.

4.10.2.7.4  (04-02-2010)
Scheduling the Appointment: Overview

  1. The purpose of the initial contact, whether by telephone or by letter, is to:

    1. Schedule the initial appointment,

    2. Establish a reasonable time and place for the initial appointment and for conducting the examination,

    3. Identify the person(s) to be present at the initial interview,

    4. Discuss the examination process,

    5. Identify the initial issues to be examined,

    6. Discuss records needed, and

    7. Answer the taxpayer's questions or concerns regarding the audit process.

      Reminder:

      The taxpayer has the right to ask that the examination take place at a reasonable time and place that is convenient for them and the IRS. See Publication 1, Your Rights as a Taxpayer.

  2. Every effort should be made to schedule the initial appointment within 14 days of the first action on the case. In the event that the appointment must be rescheduled, see IRM 4.10.2.10.2, Rescheduling the Initial Appointment, for additional guidance. Rescheduling the initial appointment beyond 45 days from the first action on the case requires group manager’s approval. The group manager's approval should be documented in the case file.

4.10.2.7.4.1  (04-02-2010)
Contacting the Taxpayer by Telephone

  1. When initial contact is made by telephone, examiners will immediately identify themselves and state the purpose of the call. Examiners will also provide their telephone number and employee identification number. See IRM 4.10.1.6, Taxpayer Rights, for more information on employee identification procedures.

  2. During the conversation, the examiner will inform the taxpayer which returns are being examined and the tax period(s) involved.

  3. The examiner will briefly explain the examination process to the taxpayer, and ask the taxpayer if a power of attorney is involved or if they plan to secure one. If yes, the examiner will explain that a power of attorney and declaration of representative is needed.

  4. The examiner will determine whether the taxpayer's return has been examined in prior years. If so, the prior examination report should be requested in the initial Form 4564, Information Document Request.

  5. Generally, examiners should discuss the issues initially planned to be examined. The taxpayer will also be informed that additional issues may be examined depending upon the information obtained during the examination.

  6. If the taxpayer(s) state they will be represented, the examiner should not begin the examination through questioning in this initial contact. This may give the impression of attempting to by-pass the representative. If representation must be secured and the taxpayer does not want to schedule an appointment until after a representative is confirmed, allow the taxpayer a minimum of 10 business days to secure representation before taking any follow-up action to schedule the appointment (extensions can be granted on a case by case basis).

  7. Determine the type of business and records that are maintained. This will assist examiners in preparing the IDR.

  8. Determine if there are any indications of collectibility issues. See IRM 4.10.2.4.3 above for more information on collectibility determinations.

  9. Inform the taxpayer that a letter, confirming the scheduled appointment, along with a detailed Form 4564 will be mailed to them.

  10. Field examination: The examiner will mail confirmation Letter 3253 and include the following enclosures:

    1. Publication 1, Your Rights As A Taxpayer;

    2. Notice 609, Privacy Act and Paperwork Reduction Act Notice ; and

    3. Form 4564, Information Document Request.

  11. For examinations involving joint returns, a confirmation letter will be sent separately to each spouse.

  12. Either an appointment letter or a confirmation letter, with the appropriate attachments, is required for all taxpayers selected for examination (this applies to both office and field examination).

  13. Examiners should ask for clear directions to the audit site for timely arrival at the initial appointment.

  14. Do not attempt contacts with the taxpayer before 8:00 a.m. or after 9:00 p.m. as prescribed by the Debt Collectors Act.

  15. Always ask the taxpayer if they have any questions.

  16. Office examiners will fully document contact or efforts to contact the taxpayer on Form 9984. Field examination agents will indicate their contact or efforts to contact the taxpayer on Form 9984 and provide the detail concerning the contact on Lead Sheet 120-1. The Initial Taxpayer Contact check sheet, Lead Sheet 120-1 will assist the field examiner in conducting their initial conversation with the taxpayer.

4.10.2.7.4.2  (04-02-2010)
Contacting the Taxpayer by Letter

  1. When making the initial contact by telephone is impractical, the examiner will send the taxpayer the appropriate appointment letter listed in IRM 4.10.2.7.3.1 (field) and IRM 4.10.2.7.3.2 (office).

  2. A detailed Form 4564 may be mailed with the appointment letter listing all the information needed at the initial appointment. See IRM 4.10.2.9, Requesting Information: Overview.

  3. When a call back appointment letter is used on a field examination case, the Form 4564 should not be mailed until the appointment confirmation letter is sent to the taxpayer.

  4. The following documents must be mailed to the taxpayer with the initial letter sent to the taxpayer:

    1. Publication 1, Your Rights As A Taxpayer

    2. Notice 609, Privacy Act and Paperwork Reduction Act

  5. Appointment letters will be sent separately to each spouse for joint filers.

  6. Either an appointment letter or a confirmation letter, with the appropriate attachments, is required for all taxpayers selected for examination (this applies to both office and field examination).

  7. Office examiners will fully document this contact on Form 9984. Field examination agents will indicate on Form 9984 that the contact was made and provide the detail concerning the contact on Lead Sheet 120-1, Initial Taxpayer Contact Check Sheet. Lead Sheet 120-1 will assist the field examiner in conducting their initial conversation with the taxpayer.

4.10.2.7.5  (08-01-2007)
Scheduling Appointment with the Taxpayer and/or Representative

  1. Usually the initial appointment will be scheduled with the taxpayer. Examiners can not require the taxpayer’s presence at the initial interview per IRC 7521(c). The examiner must be willing to talk to anyone who is authorized by the taxpayer. That person must commit to having first hand knowledge of the information requested and affirm that the examiner can rely on the information provided. In addition, the representative should agree to provide follow-up information timely if information requested at the initial interview is not available.

    1. If the taxpayer requests representation, proper authorization is required. Form 2848, Power of Attorney and Declaration of Representative, can be used to authorize an attorney, certified public accountant, enrolled agent/actuary, and individual with certain special relationships. See IRM 4.11.55.1.2, Practice Before the Internal Revenue Service (IRS), for detail information regarding authorization to practice before the Service.

    2. Form 8821, Tax Information Authorization, authorizes any individual, corporation, firm or partnership the taxpayer designates to inspect and/or receive confidential information for the type of tax matters listed on the form. See IRM 4.11.55.1.7.2, Form 8821 - Tax Information Authorization.

    3. If any other form is submitted to request representation or tax authorization, written approval by the group manager is required before relying on the authorization. See IRM 4.11.55.1.7.3, Non-IRS Power of Attorney Document.

    4. If at any time during the examination the taxpayer requests representation, the examiner should allow the taxpayer a minimum of 10 business days to secure representation before any follow-up actions.

      Caution:

      The examiner must ensure that they take no actions that would violate or give the perception of violating the taxpayer’s right to representation.

    5. The person authorized to represent the taxpayer must be sufficiently knowledgeable to engage in dialogue concerning the taxpayer’s business and personal affairs.

    6. Examiners will use their judgment to determine whether an authorized representative is sufficiently knowledgeable; however, examiners should take all reasonable steps to work effectively with authorized representatives. See IRM 4.11.55.2.2.1, Taxpayer's Presence Required.

    7. Procedures for handling assertions of accountant/client privilege can be found in IRM 4.11.55.2.3, Privileged Communications, and IRM 4.10.20, Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers.

    8. See IRM 4.11.55.3, By-Pass of a Representative, for additional guidance.

4.10.2.7.6  (04-02-2010)
Place of Examination

  1. IRC 7605(a) states, in part, that "the time and place of examination shall be such time and place as may be fixed by the Secretary and as are reasonable under the circumstances." It is the Service's goal to set the time and place for the examination to maximize the convenience of the taxpayer within the constraints of sound and efficient tax administration.

  2. Office examination cases: Generally, examinations will be conducted in the IRS office closest to the taxpayer’s residence in the assigned area, providing that office has appropriate office examination personnel.

    1. In extenuating circumstances, the examiner may meet with the taxpayer at the taxpayer’s home or place of business. This situation could occur due to the nature of the taxpayer’s business or due to the incapacity of the taxpayer.

    2. If an individual under examination or a representative requests an accommodation for a physical or mental disability, examination personnel should make every effort to accommodate the request. The provisions of Policy Statement 1-47 (P-1-47), regarding requests for reasonable accommodation by taxpayers or representatives with disabilities must be considered when scheduling the appointment. See IRM 1.2.10.1.11, Reasonable Accommodations for People with Disabilities, for a copy of the policy statement.

      Example:

      If a taxpayer has a physical disability that limits their mobility, a reasonable accommodation should be granted to hold the examination at a location that is readily accessible to the taxpayer. If necessary, the examination may be conducted by correspondence if the issues are conducive to being worked using that technique.

    3. The location of a taxpayer’s representative will generally not be a consideration in determining the place of the examination.

  3. Field examination: Generally, an examination will be conducted at the location where the original books, records, and source documents are maintained. This includes all phases of the examination, the initial interview, review of books and records, fact finding, issue resolution, report writing, and the closing conference, etc. This location is usually the taxpayer's principal place of business. If the location of the audit is not at the taxpayer's place of business or at the representative's office, the examiner must document on the Form 9984 the reasons for conducting the audit at an alternative location.

  4. The definition of books and records means not only the bookkeeping and accounting records, but also the vouchers, invoices, canceled checks, and other source documents usually maintained at the business site. Examiners must not copy taxpayer records only to continue the case work at an alternative location. This practice may increase the burden on the taxpayer, prolong the examination, and discourages communication with the taxpayer and/or representative.

  5. Regardless of where an examination takes place, the examiner should visit the taxpayer's place of business or residence to establish facts that can only be established by direct visit, such as inventory or asset verification.

  6. In cases where specialists are involved, the examiner will request enough space to accommodate the specialist’s needs.

  7. In extenuating circumstances, if the examiner does not feel safe in the taxpayer’s place of business, leave the examination site and call your manager or contact TIGTA. Request the taxpayer to come to the IRS office for subsequent appointments. For further information concerning Potential Dangerous Taxpayers refer to IRM 25.4.1, Employee Protection, Potentially Dangerous Taxpayer.

4.10.2.7.6.1  (04-02-2010)
Requests to Change the Examination to other than the Place of Business

  1. Revenue agents have the responsibility to determine the most reasonable place to conduct the examination based on the circumstances.

  2. On a case by case basis, examiners will consider requests by the taxpayer or representatives to change the place of the examination (Treas. Reg. 301.7605-1(e)). In considering these requests, the following factors should be considered:

    1. The location of the taxpayer's current residence and principal place of business.

    2. The location where the books and records and source documents are maintained.

    3. The physical restrictions at the place of business which could cause disruption of taxpayer's daily operations. It is generally not reasonable for the examination to be conducted at the place of business if the business is so small that the examination would essentially require the taxpayer to close.

  3. If the taxpayer states in writing that the examination would unduly disrupt business operations or force it to close, the examiner should verify this. Upon verification, the examiner will change the place of examination to a Service office within the Area where the taxpayer's books, records and source documents are maintained. See Treas. Reg. 301.7605-1(d)(3)(ii). Also, an alternative work place can be the representative's office.

  4. In most cases, the mere presence of a revenue agent on the premises would not disrupt a taxpayer's daily operations and does not warrant changing the location of the examination. When verifying that an examination would unduly disrupt a business, the agent should consider where the major issues can most conveniently be resolved by the agent; and other factors which indicate that conducting the examination at a particular location could pose undue inconvenience to the taxpayer.

  5. If the examination is conducted at a place other than the taxpayer's place of business, the examiner should inform the taxpayer and/or representative that the Service reserves the right to later change the place of the examination if it will promote the effective and efficient conduct of the examination. The examiner should ensure that the place of the examination does not hinder or delay the examination and does not adversely impact the examiner's time utilization.

    Note:

    Per Treas. Reg. 301.7605–1(d)(3)(iii), examiners retain the right to tour the taxpayer’s business to establish facts that can only be ascertained by a direct visit, regardless of where the examination takes place.

4.10.2.7.7  (04-02-2010)
Time of Examination

  1. Examiners will schedule examinations during normal business hours of the Service and without regard to seasonal fluctuations in the business hours of the taxpayer or his representative.

  2. Examiners will attempt to minimize scheduling problems for taxpayers and representatives. It is expected that examiners will accommodate taxpayers for religious or secular holidays.

4.10.2.8  (08-01-2007)
Scheduling Problems: Overview

  1. Examiners may encounter problems attempting to schedule the initial appointment during the initial contact with the taxpayer.

4.10.2.8.1  (01-17-2012)
Taxpayers Who Delay

  1. Examiners must attempt to accommodate the valid needs of the taxpayer(s) in scheduling the initial appointment. However, examiners must not allow the taxpayer(s) to delay or circumvent the examination of their tax return(s). See IRM 4.10.2.10.2, Rescheduling the Initial Appointment.

  2. When it is apparent that the taxpayer is attempting to delay the examination, examiners should discuss the situation with their group manager. Consideration will be given to the issuance of a summons. The discussion with the group manager and the considerations given will be documented on Form 9984.

4.10.2.8.2  (04-02-2010)
Appointments Scheduled During the Filing Season

  1. During the filing season, representatives are usually busy preparing the current year tax returns and will often request that the initial appointment be rescheduled until after the end of the filing season.

    1. If the initial appointment can be rescheduled within 45 days after the first action on the case, the examiner may treat the case as any other case and reschedule the appointment. The activity record will be documented regarding the reason for the rescheduling.

    2. If rescheduling the initial appointment would result in the appointment being more than 45 days after the first action on the case, then examiners should discourage the rescheduling of the appointment. If the taxpayer or representative persists, examiners should discuss the situation with their group manager. Group manager approval is required to reschedule the appointment beyond 45 days after the first action on the case. The examiner will document the activity record with the facts and the group manager’s decision.

4.10.2.8.3  (04-02-2010)
Transfers of Returns Prior to the Initial Appointment

  1. Generally, the examination of any income, estate, or gift tax returns is the responsibility of the area in which the taxpayer resides or conducts its business or maintains its principal office. The examination will generally be assigned to an examiner at the post-of-duty nearest to the taxpayer’s residence for a non-business return or place of business for a business return.

  2. Transfer of returns for examination from area to area and between posts-of-duty in the same area will be governed by Treas. Reg. 301.7605–1(e). By observing the regulatory guidelines on time and place of examination, the convenience of the taxpayer will be balanced with the requirements of sound and efficient tax administration.

  3. In addition to the general guidelines noted below, examiners must be familiar with all details of the regulation.

    1. No less than thirteen months will remain on the statute of limitations for assessment when the return is transferred from one area to another.

    2. Campus transfers to area offices will not be initiated with less than seven months remaining on the statute of limitations.

    3. Office examination: Taxpayers will be able to attend an audit interview at a service office closest to their residence in the assigned area providing that office examination has appropriate personnel.

    4. Field examination: The audit will be conducted at the location where the original books, records, and source documents are maintained, unless, in the case of a small business, doing so would significantly disrupt the taxpayer’s operation and require the business to close; this does not preclude on-site visits by the examiner.

  4. A taxpayer may request a transfer of an examination if they no longer reside or conduct business at the site shown on the original return. The taxpayer’s request to transfer the place of examination must be written and must take into account the following factors:

    1. Location of the taxpayer’s residence,

    2. Location of the taxpayer’s business,

    3. Where the taxpayer’s books and records are maintained, and

    4. Character and extent of inconvenience at origin of taxpayer’s request.

  5. The regulation provides further guidelines on time and place of examination with respect to incapacitated taxpayers; Service initiated transfers; location of representative’s office; seasonal fluctuations in the business of the taxpayer or representative; and requests for transfer to offices with insufficient resources.

  6. When an income return is transferred from one area to another area for examination, the following closing procedures should be followed:

    1. Form 3185, Transfer of Returns—Transfer of Administrative File, will be used as the transmittal notice.

    2. All cases will be routed to the Planning and Special Programs staff for review prior to transfer. This requirement will ensure that only those cases meeting appropriate criteria are being transferred.

    3. The transferring area will close out the return using Disposal Code 30.

    4. See IRM 4.4.33, Transfers, for additional guidance on processing the transfer.

  7. Examiners should strictly adhere to the "case by case" standard contained in the regulation for determining if a transfer is appropriate. No additional criteria should be developed by examiners or areas.

  8. If an examiner is assigned a case that was transferred from another area and it becomes clear that the books and records and other source documents needed to complete the examination are not available in that area, this case should be discussed with the group manager. If the group manager concurs, the group manager will contact PSP and request the return be returned to the originating area. If PSP concurs, the case will be returned to the local PSP. If the PSP staff and the examination group manager can not reach agreement, the examination territory manager should become engaged in the resolution of this examination. Under no circumstances should the case be returned to the transferring area without prior discussion.

  9. Taxpayers and/or representatives should be consulted as necessary during this process and should be advised expeditiously where the examination will be completed.

  10. The transfer procedures outlined in this subsection apply to transfer requests that are received at any time during the examination.

4.10.2.8.4  (04-02-2010)
Taxpayer in Prison

  1. If the taxpayer is confined in prison or otherwise detained by federal, state or local authorities, examiners will temporarily delay interviewing the taxpayer until the case has been evaluated for possible fraud potential.

  2. If the case has no fraud potential, the examination may be continued in the ordinary manner. The examiner may interview the taxpayer in custody without providing the taxpayer their constitutional rights in accordance with the rules of Miranda v. Arizona, 86 S. Ct. 1602 (1966).

  3. If the case has indications of fraud, the examiner will discuss the facts with his/her group manager and contact a fraud technical advisor (FTA) if the manager concurs.

4.10.2.8.5  (01-17-2012)
Repetitive Examinations

  1. If a taxpayer (individual) responds to the initial contact by stating that an examination of the same issue(s) in either of the two preceding years resulted in no-change or a small tax change (deficiency or over assessment), the following action will be taken:

    1. Ask the taxpayer for information which may help to determine if repetitive examination procedures apply, such as the prior year(s) audit reports, where the return(s) were filed and where the examination(s) were completed.

    2. If an appointment has been set, advise the taxpayer that the appointment is postponed pending a review of our files to determine if the examination should be continued.

    3. Secure an IDRS command code I/BMFOLZ print of the taxpayer’s accounts. All individual returns closed as a no-change, require entry of an IMF no change issue code to allow AIMS to record the issues considered during the examination and no-changed. This print will display the no change issue(s). Classifiers will review this print if available during classification. See IRM 4.4.12 and visit http://wsep.ds.irsnet.gov/sites/co/dcse/sbse/exam/webdocuments/Document%20Library/1/AIMS/No%20Change%20Issue%20Codes%20-%20IMF%20Issue%20Codes.doc for a list of IMF Issue Codes.

  2. When the taxpayer provides records identifying the issues examined in prior years:

    1. If the issues are the same as in the current year examination, and the I/BMFOLZ print indicates either no change or a small change to the taxpayer’s liability, then the current examination can be closed. Send Letter 2681 (DO), Repetitive Exam Letter, to close the examination.

    2. If a substantive tax change is shown for either year, the taxpayer will be informed that repetitive audit procedures do not apply and the examination will be continued. Letter 2685 (DO), Repetitive Exam Letter, will be used to notify the taxpayer and reschedule the appointment.

  3. When the taxpayer does not furnish records to identify the issues examined in prior years, the examiner should pull a MFTRA and I/BMFOLZ print. The examiner should use the following techniques to determine whether repetitive audit procedures apply:

    1. If the MFTRA print indicates a no-change or small tax change for both years, or for one of the years and no examination activity for the other year and the no change issue codes on I/BMFOLZ print do not provide adequate information, then the return(s) and related files for the year(s) examined should be requisitioned. The requisitioned files should be reviewed to determine if the issues currently under examination are similar enough to the issues in the prior no change/small liability year(s) to warrant concluding the current examination.

    2. If a substantive tax change is shown for either year, the taxpayer will be informed that repetitive audit procedures do not apply and the examination will be continued. Letter 2685 (DO) will be used to notify the taxpayer and reschedule the appointment.

  4. In office examination, group manager approval must be obtained and documented on Form 9984 before applying repetitive audit procedures. In field examination, managerial approval is not required on repetitive audit cases.

  5. Cases qualifying for repetitive audit should be closed as follows:

    1. If the taxpayer’s records were not examined, even though contact was made, the case may be closed using "survey after assignment" procedures. See IRM 4.10.2.5.2.

    2. If the taxpayer’s records were examined, the case will be closed using regular no-change procedures.

4.10.2.8.6  (04-02-2010)
Taxpayer Identity Stolen

  1. If during the initial contact, the taxpayer advises that his identity has been stolen, the taxpayer will need to provide documentation to support the identity theft.

  2. The following documentation provides adequate proof of identity theft:

    1. Authentication of Identity - a copy of a valid U. S. federal or state government issued form of identification.

      Example:

      Drivers license, state identification card, social security card, passport, etc.)

    2. Evidence of Identity Theft. The taxpayer(s) must complete Form 14039, Identity Theft Affidavit, or provide a copy of a police report.

    3. Examiners must use professional judgment when accepting the taxpayer's documentation and explanation concerning the theft of their identity

    4. Documentation of identity theft discussions and actions taken should be made on the Form 9984 or other case history record.

    5. Documents received from the taxpayer and workpapers generated in the identity theft determination must retained in the primary case file.

    6. For further information concerning identity theft procedures, please see IRM 4.10.5.3, Identity Protection Program Program, and IRM 21.6.2.5.3Identity Theft Expanded Procedures.

  3. Once a taxpayer has submitted documentation to establish he/she is a victim of identity theft:

    1. The examiner must complete Form 3177, Notice of Action for Entry on Master File, and fax it to Centralized Case Processing (CCP) for input of Transaction Code (TC) 971 with an Action Code (AC) 501 on the IDRS Master File.

    2. The input of TC 971, AC 522 notifies all Service personnel who may access the taxpayer account that his/her identity was stolen. This will eliminate the need for the taxpayer to provide repeated verification to different Service personnel.

  4. If the taxpayer establishes his identity was in fact stolen, the facts and circumstances surrounding the case will determine if an audit is still warranted or if action should be taken against the person committing the identity theft. For instance:

    1. If the taxpayer establishes he did not earn income reported on an IRP document, and the IRP income is the sole reason the case was selected for examination, the case can be closed with no additional action. If no records were reviewed, close the case using survey after assignment procedures. If records were reviewed, close the case using no change case procedures. See procedures under repetitive audit when records were reviewed.

    2. If the examiner determines a related return audit is warranted, the examination should be expanded or Form 5346, Examination Information Report, prepared and submitted to the examiner's supervisor for approval. See IRM 4.10.5.4.3, Examination Issues.

4.10.2.9  (08-01-2007)
Requesting Information: Overview

  1. It is vital to the audit process that records reviewed are timely requested and received. Examiners should ensure records requested are for information necessary to perform the examination.

4.10.2.9.1  (01-17-2012)
Determine the Type of Books and Records Available

  1. When the initial contact is made by telephone, examiners will ask taxpayers what type of records are maintained so that Form 4564 can be prepared.

  2. Examiners will ask the taxpayer about any computer records so that a determination as to whether or not the services of a computer audit specialist are needed. If a computer audit specialist is needed or required, the request should be made at this time so that the specialist can attend the initial interview. Visit https://srs.web.irs.gov/help/MandatoryInfo.aspx for mandatory referral criteria.

4.10.2.9.2  (01-17-2012)
Requesting Information or Documents from the Taxpayer

  1. On office examination cases, the examiners will prepare the Form 4564 to mail to the taxpayer with the initial contact letter. On field examination cases the Form 4564 will generally be sent with the appointment confirmation letter. See IRM 4.10.2.7.3.1 and IRM 4.10.2.7.3.2.

    1. The Form 4564 and /or issues may be discussed with the taxpayer during the initial telephone call.

    2. During the discussion, the examiner will explain to the taxpayer that the examination will be facilitated by having the information and documentation organized before the initial interview.

  2. Form 4564 will be used to document all requests information and documents needed to support items being examined. The Form 4564 will list the specific records, information, and documents the taxpayer should have available at the initial interview. Examiners should always carefully consider what data is necessary. Requests should be specific and should avoid requesting more information than is essential to resolve the issues identified.

  3. Facts in each case will determine what is considered an adequate description of the requested data. A Form 4564 must sufficiently specify the books, papers, records, or other data. The request should also include the particular activity and time period. For example:

    1. Books, papers, records and other data of the XYZ Manufacturing Company pertaining to the depreciation expense on keypunch presses purchased in 2004, as claimed on its federal income tax returns for the taxable years ending March 31, 2005 and 2006.

    2. Bank records, including cancelled checks and bank statements, relative to income and expenses, as reported by the XYZ Corporation on its federal income tax return for the taxable years ending February 15, 2005 and 2006. Include the records for the month prior to this period and the month following this period.

  4. It is advisable to include a statement on the Form 4564 indicating that the examiner will probably request additional records as the examination progresses.

  5. Examiners may have access to pro-forma type IDRs that include a list of items which are commonly requested in examinations. Use of these pro-forma IDRs is acceptable; however, the examiner must be careful not to use a "shot-gun" approach and request everything on the list if some of it may not be relevant to the return under examination. The pro-forma Form 4564 must be modified to the particular return being examined.

  6. The examiner may use either the manually prepared three-part snap-out assembly or a computer generated IDR.

    1. If the three-part snap-out assembly version is used, Parts I and II will be issued to the taxpayer or representative; Part III will be retained by the examiner in the case file.

    2. If a computer generated version is used, two copies will be issued to the taxpayer or representative and a copy retained by the examiner in the case file.

  7. The Form 4564 must always include a date for submission of the requested information or documents.

  8. If it is necessary to make a second request for the same information or documents, the date(s) of previous request(s) will be entered in the appropriate space.

4.10.2.9.3  (01-17-2012)
Authority to Request Books, Records, and Accountant’s Workpapers

  1. IRC 7602, Examination of Books and Witnesses, Treas. Reg. 301.7602-1(a), Examination of Books and Witnesses, provide an examiner the authority to request and receive books, records, etc., necessary to properly examine an entity’s tax return.

  2. When a taxpayer indicates a reluctance to provide the necessary records, the examiner must be insistent, yet courteous, in requesting the records. The following suggestions can be adopted in handling this situation.

    1. Apprise the taxpayer of the appropriate requirements to produce books and records. To deny access to the records will only prolong the examination or investigation since third party inquiries will, by necessity, be initiated.

    2. Do not ever attempt to mislead or misrepresent the scope of the examination or investigation in an effort to secure records.

    3. Do not assert your authority in a manner that could be interpreted as a threat.

    4. Do not summons the records unless the action is first approved by the group manager. If the examiner is advised that the taxpayer is the subject of a criminal investigation, typically indicated by a 914 freeze code, the special agent assigned to the case should be contacted prior to issuing any summons.

  3. Accountant’s workpapers used in the audit of tax records or in preparation of a tax return are not the property of the taxpayer and are not privileged information. Therefore, the workpapers can be summoned.

  4. In general, there are three types of workpapers:

    • Audit

    • Tax accrual

    • Tax reconciliation

    See IRM 4.10.20.2 for a definition of these terms.

  5. The Service has different policies for seeking access to each of the three types of documents listed above. The different policies are set forth in IRM 4.10.20.3. Examiners should familiarize themselves with this section.

  6. If it is necessary to issue a summons to secure workpapers, IRC 7603 provides that the records should be described with reasonable certainty. This requirement can be satisfied if the description of the records is specific and unambiguous and the summoned party can reasonably identify the exact records sought.

  7. The fact that the accounting firm whose workpapers are needed did not prepare the tax return in no way diminishes the authority by IRC 7602.

4.10.2.10  (08-01-2007)
Follow-Up Contact Prior to Initial Interview

  1. After the initial contact and prior to the initial interview, follow-up contacts are made to confirm the initial appointment and/or to reschedule the initial appointment.

4.10.2.10.1  (08-01-2007)
Confirmation of the Initial Appointment

  1. In field examination cases where the initial contact was made by appointment letter and the taxpayer has not confirmed the appointment, the examiner should attempt to confirm the appointment with the taxpayer by telephone prior to the scheduled appointment date. This will reduce the potential lost time traveling to an appointment when the taxpayer is not prepared for the examination or may not be available.

  2. In cases where the initial contact was made by telephone, it is advisable to confirm the appointment with the taxpayer a day or two prior to the scheduled appointment date to ensure that the taxpayer is prepared for the appointment.

  3. Cases where the taxpayer fails to respond to the initial contact letter or telephone call are not classifiable as no-contact cases and, therefore, may not be surveyed as such.

  4. The examiner will issue an audit report on no show cases and will not issue another contact letter. See IRM 4.10.2.7.2.8.

4.10.2.10.2  (01-17-2012)
Rescheduling the Initial Appointment

  1. If the examiner finds that the initial appointment must be rescheduled, the examiner will attempt to contact the taxpayer by telephone to reschedule the appointment as soon as the conflict arises.

    1. If the examiner can not personally contact the taxpayer due to illness or other emergency, the group manager or group clerk will attempt to telephone the taxpayer to reschedule the appointment or to advise them that the examiner will contact them to reschedule the appointment.

    2. In office audit cases where the return has not yet been assigned to the tax auditor, the group clerk will contact the taxpayer.

  2. If the taxpayer asks to reschedule the initial appointment, the examiner will attempt to accommodate the taxpayer when the request is reasonable. However, examiners must not allow taxpayers to delay the examination by continually rescheduling the initial appointment.

    1. In field examination cases, the examiner has the authority to allow the rescheduling of the initial appointment for a valid reason one time. Any subsequent requests by the taxpayer to reschedule the initial appointment must be approved by the group manager. The group manager’s approval must be documented on Form 9984.

    2. In office examination cases where the examiner has performed the pre-contact analysis and scheduled the initial appointment, the group clerk will refer the taxpayer to the examiner whenever they request rescheduling of the initial appointment. The examiner may reschedule the appointment one time and will document the reason(s) in the case file. Any subsequent request(s) for rescheduling the initial appointment must be approved by the group manager. The reason(s) for the request(s) and the group manager’s decision must be documented on Form 9984 in the case file.

    3. In unassigned office examination cases, the group clerk may reschedule the initial appointment at the request of the taxpayer, one time. The group clerk will refer any subsequent requests by the taxpayer for rescheduling the initial appointment to the group manager. The group manager will consider the request and document the reason for the request and their decision on Form 9984.

  3. Whenever possible, the initial appointments will be rescheduled within 14 days from the previously scheduled appointment. If the appointment cannot be scheduled within 14 days, the examiner can extend this period. However, group manager approval is required in order to reschedule an initial appointment beyond the 45 day time frame. The examiner must document the reason(s) for rescheduling beyond the 45 day time frame on Form 9984. The group manager must document their concurrence on these forms.

  4. Examiners will document all rescheduled appointments and the reasons for the rescheduling on Form 9984.

  5. Whenever the initial appointment is rescheduled, a confirmation letter will be mailed to the taxpayer with the new appointment date and time unless there is not time for the taxpayer to receive the confirmation letter prior to the rescheduled appointment (i.e. appointment is rescheduled for the next day).

4.10.2.10.3  (04-02-2010)
Advising Taxpayers of the Reasons for Their Examination

  1. Section 3503 of the IRS Restructuring and Reform Act of 1998 (RRA 98) requires the publication of the general criteria and procedures for selecting taxpayers for examination. Publication 1 has been revised to provide a more comprehensive explanation of how returns are selected and providing this publication to the taxpayer will meet the requirements of the law.

  2. However, as a matter of policy, if a taxpayer under examination requests the specific reason for his/her examination, the examiner will provide the taxpayer with a response that is as accurate as possible, without revealing restricted use information. Examiners should engage their manager and a disclosure official if assistance is needed in determining what information can or cannot be released.


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