4.19.18  Quality Review Program

Manual Transmittal

December 02, 2014

Purpose

(1) This transmits revised IRM 4.19.18, Liability Determination, Quality Review Program.

Scope

This section contains information on Examination general procedures for administrative matters and provides a reference for common issues and related items that might be found on tax returns. Throughout this revision are references to other IRMs which may contain related information needed when working cases.

Material Changes

(1) Editorial changes have been made throughout this IRM

(2) IRM 4.19.18.3 Reviewer Reports and Responsibilities, Added more IRM references to para (2) and new procedure to para (5)

(3) IRM 4.19.18.6.2 Mandatory Review, Removed para (2) and (4) and renumbered

(4) IRM 4.19.18.6.3 Notice of Deficiency Review, Renumbered to 4.19.18.6.2.1 and retitled Notice of Deficiency, Exam Paper Discretionary, Exam Paper EIC and Exam Paper Pass-Through Entities

(5) IRM 4.19.18.6.4 Disposal Code 20 Review, Renumbered to 4.19.18.6.2.2 and retitled Disposal Code 20 - Exam Paper Discretionary and Exam Paper EIC

(6) IRM 4.19.18.6.2.3 Deficiencies more than $50,000 - Exam Paper Discretionary, and Exam Paper Pass-Through Entities, Added new section and procedure

(7) IRM 4.19.18.6.2.4 Deficiencies More Than $20,000 - Exam Paper EIC, Added new section and procedure

(8) IRM 4.19.18.6.2.5 Investor Cases - Full Closings, Exam Paper Pass-Through Entities, New section and procedures

(9) IRM 4.19.18.6.2.6 Mail Outs and Closing Packages - Exam Paper Pass-Through Entities, New section and procedures

(10) IRM 4.19.18.7 Area Office Support Case Review, Deleted entire section

(11) IRM 4.19.18.9 Clerical Review, Renumbered section to 4.19.8.7

(12) IRM 4.19.18.10 Telephone Reviews, Renumbered to 4.19.18.9, Removed para (1)

(13) IRM 4.19.18.11 Management Identified Review, Renumbered to 4.19.18.8

(14) IRM 4.19.18.12 Quality Review Sampling Plan, Removed entire section

Effect on Other Documents

IRM 4.19.18 dated November 26, 2013 (effective January 1, 2014) is superseded.

Audience

This IRM is intended for the use of the Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) Campus Examination Operations.

Effective Date

(01-01-2015)

Steven C. Klingel
Director, Reporting Compliance
Wage and Investment Division

4.19.18.1  (01-01-2014)
Burden of Proof

  1. Restructuring and Reform Act of 1998 (RRA 98), Section 3001, produced significant changes to the Burden of Proof in tax litigation. To support the IRS’s position, it is mandated that during any type of review performed, the case is reviewed to ensure that the work papers are fully and accurately documented for each action taken during the Examination process.

    1. Review case file to determine what actions were taken, such as letters/reports sent, correspondence or telephone calls received or returned, and determine if there is a corresponding annotation on the history sheet including all required information (date, time, explanation of actions taken).

      Note:

      Correspondence Examination Automation Support (CEAS) notes are sufficient for work paper documentation requirements when the case is not assigned to the examiner adding the case note.

4.19.18.2  (01-01-2014)
Policy Statement 21–3 Review

  1. Policy Statement P-21-3 criteria will be considered in all case reviews when taxpayer correspondence is in the case file. See IRM 21.3.3.1.1, Policy Statement P-21-3 (formerly P-6-12), for details.

4.19.18.3  (01-01-2015)
Reviewer Reports and Responsibilities

  1. Reviewers will apply the applicable IRM program procedures in conjunction with the Seven Auditing Standards to determine whether a quality Examination has been performed and if any further Examination action is necessary.

  2. Reviewers are responsible for the Quality Review procedures outlined in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Compliance Services, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Correspondence Service (RICS) - Integrity & Verification Operations, and Electronic Products and Services Support, in conjunction with Examination procedures outlined in IRM 4.19.10, Examination General Overview, through IRM 4.19.21, Clerical, and in IRM 4.29, Partnership Control Systems (PCS), IRM 4.31, Pass-through Entity Handbook, IRM 4.31.3, TEFRA Examinations - CTF Procedures, and IRM 4.31.6, NonTEFRA Examinations - CTF Procedures. These IRM's describe different types of case reviews and how they are to be treated on Embedded Quality Review System (EQRS)/National Quality Review System (NQRS).

  3. The Embedded Quality Review System (http://eq.web.irs.gov) is comprised of NQRS, the non-evaluative quality review portion, and EQRS, the evaluative quality review. EQRS is performed by managers and leads to monitor an employee’s action on a work product. NQRS reviews are performed by specialized teams, and these reviews take into account the entire process.

  4. Reviewers will input all completed national and local reviews in NQRS, selecting the applicable SPRG (Specialized Product Review Group). The case type is based on the applicable Examination program. When a case does not fit under any of the Examination programs, "Other" will be used as the case type.

  5. The Quality Staff will ensure that the Examination Operations Manager receives a copy of the NQRS accuracy report and reports for the top 5 defects with supporting analysis on a monthly/quarterly basis. The analysis will breakdown the NQRS attribute to identify the root cause of the defect.

    Example:

    Paper: The NQRS attribute is Form 5344 Input Items and the root cause identified is an incorrect technique code on the Form 5344, Examination Closing Record.

  6. The monthly analysis of the top 5 defects on the Examination Cases will assist in identifying error trends. When an error trend is identified, the Quality Staff will issue a Quality Alert to all Examination Team Managers for implementation of corrective action and/or dissemination of information to employees. The Quality Alert will identify the error trend and outline the correct procedures to follow.

4.19.18.4  (01-01-2013)
Quality Review Procedures

  1. Examination cases should be assigned and reviewed within 10 work days of receipt in the Quality function.

  2. When the normal review process is interrupted because of special assignments, work will be promptly reassigned to other reviewers.

  3. If errors are found upon review of an Examination case, the case will be returned to the Operation for correction.

  4. The following types of cases are examples which will receive priority handling if they are selected for quality review during the sample selection process:

    1. Short statute expiration cases. If the statute is 120 days or less, the Form 895, Notice of Statute Expiration, should be attached. It is recommended that these cases be hand carried to the Quality Review Manager for expedite handling.

    2. Agreed unpaid deficiencies of $10,000 or more.

    3. Cases that have been identified for an Appeals conference per taxpayer request.

    4. Other special feature cases as designated by the Examination Operations Manager.

4.19.18.5  (01-01-2014)
Sample Selection Process

  1. All types of closed cases are included in the sample selection process for quality review. This includes: agreed cases; 90 day defaults; no change cases and transaction code (TC) 29X inputs for audit reconsiderations. All Appeals transfer cases will be considered "closed" for purposes of quality review and subject to the sample selection process. All Examination programs are to be included in the sample selection process.

    1. A "case" is defined as any group of related returns and/or multiple years that are closed together as a case. A case can also be one return. In any case containing related returns, the "key" return must be clearly identified. The "key" return is the one that brought about the Examination.

  2. All incoming calls will be included in the selection process.

  3. Each quarter, SOI (Statistics of Income) will reevaluate the sampling plan and issue a memo outlining the sample size for each campus. For additional information refer to IRM 21.10.1.3.2, Quality Review Sampling Guidelines.

4.19.18.6  (01-01-2014)
Closed Case Review

  1. Cases will be categorized by SPRGs.

  2. After closing, the Examination Operation will ensure that all closures are available for the sample selection process.

  3. A designated employee will pull the sample and release the remaining cases.

  4. For Appeals closures, the reviewer must also:

    1. Review the case file to determine if the examiner attempted phone contact to secure an agreement or resolve any factual tax differences through the correspondence Examination process. Ensure the history sheet/work papers are documented with the date, time, and a brief explanation outlining the conversation. If no contact was made, the history sheet/work papers must be documented with the reason no contact was made.

    2. Ensure the Examination Team Manager signed the history sheet/work paper, or document CEAS with approving the transfer of the case to the area office as an Appeals transfer.

  5. Reviews will be entered on NQRS as a National review.

4.19.18.6.1  (01-01-2012)
Manually Computed Interest

  1. If normal or restricted interest was manually computed, consider the computation in the closed case review. These cases will be flagged with Form 3198, Special Handling Notice for Examination Case Processing.

4.19.18.6.2  (01-01-2015)
Mandatory Review

  1. Mandatory reviews take first priority in the sampling selection process. Mandatory reviews are further separated by Management-Identified and Transfer cases. The balance of cases should be released to the next processing function.

  2. Case files subject to mandatory review will be identified by the Examination function on Form 3198, Special Handling Notice for Examination Case Processing. Form 3198 should include taxpayer's name, social security number (SSN)/employer identification number (EIN), year(s), and cite the reason(s) for the mandatory review.

4.19.18.6.2.1  (01-01-2015)
Notice of Deficiency - Exam Paper Discretionary, Exam Paper EIC and Exam Paper Pass-Through Entities

  1. All Notices of Deficiency will be subject to a sample selection for quality review, prior to mailing out. Manually prepared Notices of Deficiency will be subject to a 5% review rate. Appropriate skip intervals should be determined and used when selecting cases for review.

  2. Review the Notice of Deficiency to ensure the entity, deficiency, and penalty amounts have been transferred from the report correctly. The tax and penalty amounts will not be recalculated but will be reviewed to ensure they appear in-line with the adjusted items on the report. If an apparent error is found, use the Seven Auditing Standards in conjunction with the IRM procedures for the applicable program.

  3. This review will be entered on NQRS as a Local review. On the DCI in the Local Use field, specify the type of review, i.e., 90D.

4.19.18.6.2.2  (01-01-2015)
Disposal Code 20 - Exam Paper Discretionary and Exam Paper EIC

  1. All Disposal Code (DC) 20 cases are subject to a 5% review.

  2. This review will be entered on NQRS as part of the Local review. In the DCI Local Use field, specify the type of review, i.e., DC 20 Review.

4.19.18.6.2.3  (01-01-2015)
Deficiencies More Than $50,000 - Exam Paper Discretionary, Exam Pass-Through Entities

  1. All cases closed with deficiencies more than $50,000 must be reviewed. Local management may decide to conduct mandatory reviews on closures of a lesser tax deficiency. On Tax Equity and Fiscal Responsibility Act (TEFRA) cases only, this review may be conducted prior to the final input.

4.19.18.6.2.4  (01-01-2015)
Deficiencies More Than $20,000 - Exam Paper EIC

  1. All cases closed with deficiencies more than $20,000 must be reviewed. Local management may decide to conduct mandatory reviews on closures of a lesser tax deficiency.

4.19.18.6.2.5  (01-01-2015)
Investor Cases - Full Closings, Exam Paper Pass-Through Entities

  1. All TEFRA/Non-TEFRA investor cases that are full closings on Audit Information Management System (AIMS) are subject to the closed case sample selection process.

4.19.18.6.2.6  (01-01-2015)
Mail Outs and Closing Packages, Exam Paper Pass-Through Entities

  1. All TEFRA Key Case mail outs and TEFRA/Non-TEFRA Key Case closing packages processed will be subject to a 5% review of completed packages. This review will be entered on NQRS as a Local review. In the DCI Local Use field, specify the type of package, i.e., NOL - Net Operating Loss (NOL), and AMT - Alternative Minimum Tax (AMT).

4.19.18.7  (01-01-2015)
Clerical Review

  1. This includes, but is not limited to: unpostables, 90-day letter preparation and Form 5600, Statutory Notice Worksheet, claim openings, estate letters, AIMS terminal work (long and short closing), updates, hash totals completed by AIMS tax examiners, etc.

4.19.18.8  (01-01-2015)
Management Identified Review

  1. The Examination Operations Manager may request reviews for a specific case category, issue, clerical, disposal code, or call category to identify problems or trends.

  2. Management will ensure that the appropriate paper case files are identified and transmitted to the Quality Review function.

  3. The Quality Review function will perform the analysis with recommendations to the Examination Operations Manager for corrective action.

  4. This review will be entered on NQRS as a Local review. In the DCI Local Use field, specify the type of review, i.e., Management Identified Review (MIR).

4.19.18.9  (01-01-2014)
Telephone Reviews

  1. The case type used for this review should be taken from the Examination programs based on the applicable SPRG and can be found in the Quality Job Aid posted on the EQ website http://eq.web.irs.gov.

  2. Based on the statistically valid sample plan from SOI, the Review Staff will utilize Contact Recording to randomly select calls. The Review Staff will select the correct SPRG for the type call, complete the review using Contact Recording, and input the DCI on the NQRS.

  3. This review will be entered on NQRS as a National review.


More Internal Revenue Manual