4.22.5  Campus Compliance Operations Site

Manual Transmittal

October 14, 2014

Purpose

(1) This transmits IRM 4.22.5, Examination of National Research Program Cases Campus Compliance Operations, procedures for tax returns selected as part of the National Research Program and assigned to Correspondence Examination.

Material Changes

(1) 4.22.5.3.1(1) - Replaced 2008 and 2009 with 2008 - 2012.

(2) 4.22.5.3.1(5) - Added bullets:

  • TY2010 - 7710

  • TY2011 - 7711

  • TY2012 - 7712

(3) 4.22.5.4(3) - Edited: This includes taxpayers who were audited during the prior 1040 NRP Studies (TYs 2001 and 2006-2012) and the EITC Compliance Study audits.

(4) 4.22.5..4.1(1) - Edited: NRP results will be used to develop the Discriminant Function (DIF) formula; therefore, it is essential that examinations be thorough.

Effect on Other Documents

None

Audience

This IRM is to be used by SB/SE Cincinnati Campus Compliance Operations (CCCO)

Effective Date

(10-14-2014)


Janice Hedemann, Director of Research

4.22.5.1  (10-01-2014)
Background

  1. The following explains the NRP process as it pertains to Correspondence Examination activities at the Cincinnati Campus Compliance Operations.

  2. NRP replaced the TCMP examinations that were previously conducted to measure compliance. NRP examinations enable the Service to determine what key areas of noncompliance to address and what treatments to apply to maximize the use of its limited resources. As the Service's ability to detect noncompliance deteriorates, audits become less effective and compliant taxpayers continue to be burdened by unnecessary audits.

  3. The NRP approach is a hybrid of options for validating return information that maximizes use of data available to the IRS and, to the extent possible, minimizes intrusiveness and taxpayer burden while collecting data. The NRP approach to measuring reporting compliance balances research quality, efficiency and taxpayer burden.

  4. In moving forward with this concept, the following examination guidelines have been established for conducting NRP correspondence examinations. The returns selected for correspondence examinations were classified following the guidelines in the NRP IRM 4.22.3.

4.22.5.2  (10-01-2014)
Program Responsibility

  1. The following provides the program responsibilities for NRP Headquarters and the Campus Examination Operations.

4.22.5.2.1  (10-01-2014)
Headquarters

  1. The National Research Program (NRP) Office manages and monitors NRP operations and provides guidance and assistance as needed.

4.22.5.2.2  (10-01-2014)
Campus Compliance Operations

  1. The Director of Campus Compliance Operations in the designated Campus has overall responsibility for NRP Correspondence examinations.

  2. The Operations Manager, Examination (OME) may delegate the responsibilities of the Campus NRP Coordinator to an appropriate person. The Campus NRP coordinator will coordinate and control the receipt and assignment of NRP returns to groups. They monitor and report the status of the compliance campus program, approve transfer of cases and have second line authority for approval/disapproval of exclusion requests.

  3. The Department Managers have overall responsibility for the NRP program within their departments.

  4. The Team Leader, PAS, in conjunction with the OME, are responsible for ensuring tax examiners' compliance with Auditing Standards found in IRM 4.19.13 and the scope and depth of NRP examination requirements. They are responsible for the quality of the final review of NRP cases. They are also responsible for appointing local NRP reviewers. These reviewers must be familiar with all the technical aspects of NRP and informing the OME of any problems encountered.

  5. The Team Leaders are responsible for NRP cases within their teams, including the timely and priority assignment of NRP returns, counseling examiners on the scope and high quality requirements (see Auditing Standards in IRM 4.19.13 and the scope and depth of NRP examinations in this IRM below). They are responsible for maintaining a workflow throughout the entire examination cycle that will ensure timely completion, minimizing the number of submissions based on estimated information. This will require NRP training. See Training Modules Correspondence Examination Guidelines, Module I, Correspondence Examination Refresher, Module J and IRM 4.22.5.4.1.

  6. The Correspondence Exam Technicians assigned NRP cases must be thoroughly familiar with the NRP program procedures. This will require NRP training.

4.22.5.3  (10-01-2014)
NRP Examination Cycle

  1. Each NRP cycle has a specific time frame for completion. The Form 1040 cycle time frame is 18 months.

  2. Campus Compliance Operations Examination officials must ensure that NRP examinations are completed promptly. Team Leaders play the leading role in ensuring that examinations are initiated and completed promptly without sacrificing quality.

4.22.5.3.1  (10-01-2014)
Receipt of NRP Returns

  1. For TY 2007, a copy of the selected tax return or transcript, if electronically filed, Forms 5546 (Examination Return Charge-Out), MACS prints, CBRS, ChoicePoint data, IRP transcripts and other case building information will be packaged into an NRP case file by the Campus Case Building Team. For TY 2008 -2012, the case building material will be contained in a PDF file within the RGS case file. In addition, the electronic RGS Case file will be forwarded to the applicable Campus RGS group. Within the electronic RGS case file, an imaged copy of the return will be in the RGS Case File Document. The NRP case file will be forwarded to the designated Campus NRP Coordinator.

  2. Upon receipt of an NRP case file, the NRP Coordinator immediately verifies that the package is complete and agrees with the accompanying transmittal list. If the case is incomplete, secure missing data to complete the case file.

  3. After verification, the original and one copy of the transmittal lists must be signed and dated on each page by the NRP Coordinator. Receipt of returns must be acknowledged within three workdays after receipt in the Examination Operation. Receipt acknowledgment is to be sent to the Case Building Team.

  4. Criminal Investigation (CI) receives copies of transmittal lists from the Case Building Team and will notify the NRP Coordinator within ten workdays of any examination that is to be coordinated. Any case that CI places controls on at any point during the NRP process will be immediately transferred to the field. (See transfer procedures in IRM 4.22.5.4.3.).

  5. All cases will be opened on AIMS in Source Code 80, Project Code 0674. Tracking codes will be added as follows:

    • TY 2007 - 7707

    • TY 2008 - 7708

    • TY 2009 - 7709

    • TY2010 - 7710

    • TY2011 - 7711

    • TY2012 - 7712

4.22.5.3.2  (10-01-2014)
Control of NRP Returns

  1. The NRP Office has an on-line Case Tracking System (CTS).

  2. The NRP Coordinator will reconcile any discrepancies between the NRP on-line CTS and AIMS status workload inventory report as well as any local reports.

  3. Contact will be made to any NRP coordinator to resolve discrepancies, as required.

4.22.5.3.3  (10-01-2014)
Processing of Returns

  1. NRP returns are processed under existing procedures as found in IRM 4.19.13 unless otherwise specified herein. If conflicts arise with existing examination guidelines, NRP guidelines will take precedence.

4.22.5.3.4  (10-01-2014)
Assignment of Returns in Campus Exam

  1. NRP Coordinators should promptly assign NRP case files to the NRP Team Leaders after receipt from the Case Building Team.

  2. After receipt of the returns, NRP Team Leaders should promptly assign cases to the NRP examiner. Examiners should initiate taxpayer contact as quickly as possible.

  3. NRP managers and examiners will receive NRP training to ensure quality examinations are conducted, correct and complete NRP examination record data are entered.

  4. NRP returns should only be assigned to examiners that have completed all applicable NRP training modules.

  5. NRP selections are not a basis for reopening a previously examined return or for expanding the scope of the examination that was in process prior to its designation as an NRP return.

  6. The NRP Coordinator should review the Partnership Control System (PCS) if AIMS has a Partnership Investor Control File (PICF) code present and ensure that examiners are notified when a NRP return is under a related return's PCS control.

  7. If a taxpayer's return selection was already under examination and is subsequently identified as an NRP examination, the case will be completed and the results will be included in the NRP tracking reports.

4.22.5.4  (10-01-2014)
Examinations in Campus Exam

  1. Examinations must be initiated on all NRP returns and there will be no surveys before or after assignment.

  2. An exclusion should be requested if any of the following conditions apply as outlined in IRM 4.22.4.4, Exclusions from NRP Examination.

  3. There are several systemic exclusions that will preclude certain taxpayers from the NRP sample. This includes taxpayers who were audited during the prior 1040 NRP Studies (TYs 2001 and 2006-2012) and the EITC Compliance Study audits.

  4. Procedures for requesting an exclusion of NRP returns are in Exhibit 4.22.5-1 of this IRM.

  5. If the examiner finds that an examination cannot be completed for other than those listed in (2) or (3) above, the NRP Coordinator should be notified for coordination with the NRP Office.

  6. If indications of fraud are discovered during the examination of an NRP or related return, referrals should be made in accordance with IRM 4.19.10. The referral must be labeled as an NRP case. If the Campus/Exam Fraud Coordinator accepts the referral and the case cannot be completed with a reasonable estimate of adjustment results, a request for exclusion should be submitted.

  7. NRP returns having related returns are given priority in examination to ensure timely completion. When establishing an AIMS control for a related return pick-up, Source Code 91 is to be used.

  8. When AIMS show a Partnership Inventory Control File (PICF) code indicating an NRP return is being controlled by the Partnership Control System (PCS), the NRP Coordinator should contact the agent working the related case to find out when reliable information can be expected concerning adjustments that affect the NRP examination. Follow-up should be made periodically to ensure that reliable information will be provided timely.

  9. Examinations of the NRP return and/or any related return that cannot meet the program completion date should be brought to the attention of the NRP Coordinator for resolution with the NRP Office.

  10. All situations or problems that arise which are not covered in this section should be brought to the attention of the NRP Coordinator for resolution with the appropriate HQ analyst, and the Office of NRP.

  11. Following the conclusion of the NRP Studies, the Campus, in coordination with the NRP Coordinator, will communicate comments on the study to the NRP Office. These comments should include any recommended changes for future studies, taxpayer reaction and examiner burden.

4.22.5.4.1  (10-01-2014)
Scope and Depth of Examination

  1. NRP results will be used to develop the Discriminant Function (DIF) formula; therefore, it is essential that examinations be thorough. Effective DIF formulas must reflect the actual error patterns found on tax returns regardless of amount and must, to the extent possible, be free of any bias resulting from judgmental errors on the part of the examiner.

  2. Examiners must use their professional judgment concerning the depth of examination required for any particular item on the tax return while bearing in mind the research nature of the examination. The depth is the same as is used on operational audits. Therefore, taxpayers are not held to a higher standard. Issues should be pursued to the depth necessary to reach a supportable conclusion.

    1. Every classified item must be examined.

    2. Additional items may be examined with approval from the Team Leader in accordance with established procedures. Such approval, when given, must be documented on the electronic workpapers contained in RGS.

    3. At a minimum, some inquiry or inspection of records or documents supporting reported or possible underreported income, deductions and credits must be made.

  3. The examiner must state on the workpapers what actions were taken to fulfill the requirements of the NRP examination.

    1. Audit procedures and conclusions for each issue audited must be supported by written comments in the workpapers. This is necessary to ensure that the statistical data gathered by NRP is accurate and complete.

    2. Examiners must describe what inquiry or inspection of records or documents was made to verify unreported income, deductions or credits.

  4. Beginning with TY 2008 returns, the issues of EITC without a Qualifying Child and Head of Household filing status, will require a lead sheet to be completed. Beginning with TY 2011 returns, the issue of 1040 Dependents will require a lead sheet to be completed. All lead sheets must be prepared electronically and included in the RGS case file as an attachment to the applicable issue. Lead sheets must contain the adjustment amount, audit procedures and conclusion.

4.22.5.4.2  (10-01-2014)
Initiating Examinations

  1. Letter 3624(SC) (07-2007) should be used as the initial contact letter to notify the taxpayer their return has been selected for an NRP examination. This letter and the attached 886A, Explanation of Items, requests the supporting records or information needed from the taxpayer for the issues identified in the letter.

  2. ) Notice 1332 (01/2007) Why Your Return is Being Examined, should be used as an enclosure to Letter 3624 (SC). This publication explains to the taxpayer how and why their return was selected for a NRP examination. In addition, Publication 4134, Low Income Tax Clinic List and Publication 3498A, The Examination Process (Examinations by Mail) must be included as an enclosure.

  3. After the issuance of the ICL, follow normal procedures as outlined in IRM 4.19.13.

  4. In most instances, the ICL will prepared and delivered to the Campus ready to be dated and mailed at the campus discretion. Only those cases need special attention should be assigned for immediate preparation of the ICL.

4.22.5.4.3  (10-01-2014)
Transfers to Area Offices

  1. Taxpayers are sent an initial contact letter asking them to reply within 30 days of the date of the letter. An additional 15 days is afforded prior to any further action in order to allow correspondence examination additional time to associate responses received on or shortly before the 30th day. If the taxpayer fails to respond to the 30 day letter and the additional 15 days have expired, follow normal procedures as outlined in IRM 4.19.13, issue 525 Letter and F4549, Income Tax Examination Changes, disallowing all classified issues.

  2. If the initial contact letter has been returned undeliverable, research for another address and telephone number will be conducted at that time. Any research for a new address, as well as telephone number, must be documented on the electronic workpapers. If neither can be found, the case will be transferred to the appropriate Area Office NRP Coordinator. If a new address is located, the ICL will be remailed, the 30 day period will begin again.

  3. Any taxpayer that requests an extension of time to respond will be granted additional time, up to 30 additional days, if needed. The request along with the additional time period granted must be documented on the electronic workpaper.

  4. Any taxpayer who requests a face to face examination or an employee return selected under the NRP program should be transferred to the appropriate Area NRP Coordinator.

  5. Prepare Letter 528 (SC) and mail to taxpayer prior to transferring the case.

  6. AIMS & RGS will be updated accordingly on all transfers as well as RGS from the Campus Examination to an Area NRP Coordinator in PSP. The transfer package must be routed through the NRP Coordinator for review and update of control records. The NRP Coordinator should establish local procedures, with appropriate management approval, for expediting transfers, both into and out of the area.

  7. A completed Form 3210 (Document Transmittal) with the NRP cycle clearly entered in the "Comments" section should be used to transfer NRP case files and any related data from Campus Exam to the Area NRP Coordinator. The Form 3210 should be addressed to the attention of the Area NRP Coordinator in PSP.

  8. Upon receipt of an NRP case file package, the Area NRP Coordinator must acknowledge receipt by updating the NRP Case Tracking System (CTS) and acknowledging the Form 3210. The NRP Coordinator should review the Forms 3210 periodically to see if the "Acknowledgment Copy" of the Document Transmittal (Form 3210) has been received. If it has not been received, within 10 business days, follow-up action should be taken by contacting the receiving NRP Coordinator to ensure transfer completion.

  9. Transfers should be completed early in the NRP cycle as a convenience to the receiving area office.

  10. The cut-off for shipping an NRP case to an Area NRP Coordinator is six-months prior to the program completion date unless permission for a different period is obtained from the transferee Area NRP Coordinator. If the Area NRP Coordinator determines that the examination process cannot be completed by the program completion date, an exclusion should be requested (see IRM 4.22.5.4(2)). It is important to start all examinations promptly in order to avoid transfers that may occur within the six-month cut-off.

  11. Formal discussions between transferor and transferee areas are strongly recommended, particularly prior to the six-month transfer cutoff. This will eliminate questionable transfers.

  12. If the Area Office NRP Coordinator does not acknowledge Form 3210 within a reasonable period of time, the Campus NRP coordinator will contact the area office by telephone.

4.22.5.5  (10-01-2014)
Disposition of All NRP Documents

  1. This section covers the disposition of all NRP documents.

4.22.5.5.1  (10-01-2014)
De minimis Adjustments

  1. Due to the research nature of NRP examinations, de minimis adjustments must be captured within RGS.

  2. A report must be generated showing the adjusted items with a zero tax liability amount.

  3. Issue Letter 1156 (Rev 08/2007) with report.

  4. No adjustments can be decategorized or de-minimus reason codes entered in RGS.

  5. Close the case using disposal code 01, Change No Change.

4.22.5.5.2  (10-01-2014)
Wrong Line Adjustments

  1. Due to the nature of the NRP examinations, wrong line adjustments must be captured within RGS.

  2. Wrong line adjustments include:

    1. Decreasing an amount that was reported on the return allowing the same amount on another line on the return.

    2. Decreasing an amount that was reported on the return and allowing that amount split among two or more lines.

    3. Use RGS reason code 10 or 14 to describe all Wrong-line adjustments.

4.22.5.5.3  (10-01-2014)
Completed Examination Reports

  1. RGS database will be sent to the NRP coordinator and put in RGS status 56.

  2. Case will be reviewed by NRP coordinator for completeness of data fields.

  3. Cases that pass the Detroit Computing Center validation run will be returned to the team leader and put in RGS status 51 for case closing actions.

4.22.5.5.4  (10-01-2014)
Transmission of Electronic Data to Detroit Computing Center

  1. NRP coordinator will transmit case data to Detroit Computing Center (DCC) for validation check.

  2. DCC will run validation overnight. Cases that do not pass will be annotated on NRP Case Tracking System (CTS).

  3. After completed DCC validation, RGS data base will be update to status 51.NRP coordinator will review the CTS. Cases that do not pass will be corrected and resubmitted by NRP coordinator to DCC.

  4. After completed DCC validation, RGS data base will be update to status 51.

4.22.5.6  (10-01-2014)
Case Management and Program Monitoring

  1. The NRP Office and the Operating Divisions will evaluate a sufficient number of NRP cases to ensure examiner compliance with examination requirements discussed earlier in this IRM. Cases selected for evaluation will be representative of those worked by Campus Exam. The evaluation will be completed during the early months of the NRP examination cycle, but not before sufficient cases are available for review so that the sample will include a representative mix of returns. This is necessary so that appropriate measures can be taken to improve quality if needed. Someone thoroughly familiar in NRP procedures and guidelines should evaluate these cases.

4.22.5.6.1  (10-01-2014)
Case Management

  1. Regular case management evaluation procedures should be followed, including the NRP objectives listed below:

    1. Determine the timeliness of assignment, examination and review of NRP returns, and whether the NRP examination records were promptly submitted to the DCC.

    2. Determine that the examiners have complied with the Auditing Standards found in IRM 4.19.13. The examiners must state in their workpapers what actions were taken to fulfill the requirements of the NRP examination. These workpapers, which include those items not otherwise commented on, should be general in nature and tailored to the taxpayer's individual examination.

    3. Determine whether the applicable NRP related case procedures were followed.

4.22.5.6.2  (10-01-2014)
NRP Program Monitoring - Cincinnati Campus Exam

  1. Campus Exam should establish sufficient monitoring procedures to control and manage the program including in-process and closed case reviews. The Director, Campus Compliance Operations, should establish in-process case review teams, consisting of Department Managers, Team Leaders, and reviewers. These teams are encouraged to conduct at least quarterly reviews until the completion of this project.

4.22.5.6.2.1  (10-01-2014)
Examples Of Items To Consider When Evaluating NRP In-Process Cases

  1. In-process reviews are critical in guaranteeing the highest quality development in all program cases. Completion of the in-process reviews will be documented in the manner set forth below.

  2. Reporting and control procedures:

    1. Prompt verification and acknowledgment of NRP return packages from the Case Building Team;

    2. Prompt assignment to examination units;

    3. Timely disposition and acknowledgment of transfer cases;

    4. Exclusion procedures are being followed and input by authorized personnel;

    5. Prompt reconciliation of control reports.

  3. Completion of NRP examinations:

    1. Timely assignment of cases to examiners;

    2. Prompt opening and continued priority treatment of NRP cases;

    3. Timely working of cases with correspondence, usually within 30 days of receipt.

  4. Timely processing of cases through Quality Review - Process Analysis Staff (PAS).

  5. Training

    1. Have all NRP team leaders received formal NRP training to ensure that quality examinations are conducted and that correct and complete NRP Report data have been entered?

    2. Have all the examiners working NRP returns received formal NRP training?

    3. Are there sufficient NRP examiners to handle the workload expeditiously?

  6. Scope and Depth of Examinations:

    1. Determine thoroughness of audit;

    2. Determine whether inquiry was made for possible unreported income, deductions and credits;

    3. Determine whether adequate comments were made in workpapers;

    4. Determine whether adequate consideration was given to substantiation documentation.

  7. Quality of NRP Examination Record:

    1. Review for technical correctness;

    2. Review for mathematical accuracy and completeness in entering and categorizing adjustments and accuracy of input to the EOAD fields;

    3. Review of procedural requirements.

  8. Verify that trends in error patterns on the quality of the examinations and NRP Examination Records are being transmitted periodically to NRP office.

4.22.5.7  (10-01-2014)
Review of NRP Cases

  1. All closed cases examined in the NRP program will be reviewed for quality.

    1. NRP cases will be subject to sample PAS review procedures in accordance with existing guidelines.

    2. NRP cases that are not part of the regular sample will be reviewed by the NRP Coordinator, Team Leader, or PAS for accuracy.

    3. Special attention must be given to cases with a de minimis adjustment. See IRM 4.22.5.5.1(2).

  2. NRP PAS success rates can be segregated by running QRDB reports using the source code 80 as a discriminating factor.

4.22.5.7.1  (10-01-2014)
 Managerial Responsibilities

  1. The Team Leader or assistant will play a pivotal role by conducting in-process reviews for all aspects of case development.

  2. In-process reviews are critical in guaranteeing the highest quality of NRP cases. At a minimum, an evaluative in process review is required on the first case assigned each NRP examiner. The In-process reviews must take place after the first taxpayer correspondence has been received and evaluated. Other in-process reviews should be conducted either before the case is put into 90-day or the case is closed. Completion of the in-process reviews will be documented as follows below.

    1. Evaluative and Non-evaluative reviews will be performed and documented on each examiner at various stages of the exam process to ensure the overall quality of the examination.

    2. The review will consist of having the Team Manager or Lead review for accuracy. The objective of the reviews is to ensure the overall quality of NRP examinations.

    3. If any error trends or concerns are noted, additional reviews will be considered.

  3. The Team manager will complete a 100% non-evaluated closed case review on all NRP examinations. The object of the review is to ensure the overall quality of the NRP examination. The manager is required to complete the NRP 1040 Group Manager Closed Case Review Checksheet. (See Exhibit 4.22.5-2) By checking "yes" to many of these items, the manager is indicating the case was worked properly. The 100% closed case review will focus on the following:

    1. Technical correctness of the examination.

    2. Adherence to the NRP examination guidelines, procedural requirements and case closing/data accuracy requirement.

    3. Review of the NRP Questionnaire for accuracy, completeness and inclusion in the case file.

4.22.5.7.2  (10-01-2014)
Documentation of In-Process Reviews

  1. All NRP In-process Reviews will be documented using EQRS. When completing the review the following items should be considered:

    1. Thoroughness of audit work

    2. Adequate documentation exists to support audit techniques and conclusions

    3. Activity record is appropriately documented

    4. Action items are identified

  2. If any deficiencies are found during the case review. The manager should provide explicit written guidance as to what measures must be taken to rectify any weaknesses in the case. The manager will ensure that corrective actions are taken.

4.22.5.7.3  (10-01-2014)
In-Process Review Assistance

  1. Managers may request assistance from Process Analysis Staff (PAS). Requests will be made through PAS and assistance will be furnished based on availability of personnel trained in NRP procedures.

4.22.5.7.4  (10-01-2014)
Review of NRP Closed Cases

  1. PAS reviewers and their managers will receive NRP training to ensure that PAS reviews are conducted.

4.22.5.7.4.1  (10-01-2014)
Review Process

  1. The Team Leader should forward NRP cases to tax examiners for closing, including Statutory Notice cases at the end of the required suspension period.

  2. All NRP cases and checksheets must be completely reviewed, including mathematical verification. Any errors noted on the NRP checksheet will be corrected by the examiner that worked the case.

  3. After review, all NRP cases will be sent to the NRP Coordinator for transmittal to Detroit Computing Center and for final disposition of the case and approval by the manager.

  4. The clerk will then forward all NRP closed cases to PAS for review as part of the sample closed case review. Cases should be listed on a Form 3210.

  5. Adequate records should be maintained on NRP cases reviewed with respect to the following information:

    1. Number of cases reviewed

    2. Number of cases accepted

    3. Number of cases awaiting review

    4. A record of incorrect items showing areas corrected and number of corrections made; and

    5. Other records as requested by the Campus Compliance Operations Director

4.22.5.7.4.2  (10-01-2014)
NRP Technical and In-Process Reviews

  1. All in-process and closed case reviews should be utilized as a guide for trend analysis and feedback to NRP, see Exhibit 4.22.5-2.

4.22.5.8  (10-01-2014)
Narrative Report Program Operations

  1. Following the conclusion of NRP cycles, the NRP Coordinator, in coordination with the NRP team leaders, must submit written comments on the survey cycle and should include any recommended changes for the upcoming surveys. Taxpayer reactions to the program and ways of accomplishing the task with even less burden in the future are to be specifically addressed.

Exhibit 4.22.5-1 
Requesting Exclusion of NRP Returns (Form 4981)

The NRP Exclusion Request form is used for returns that meet exclusion criteria. The form can be found on the IRWeb in the Forms/Pubs/Productions Repository at: http://publish.no.irs.gov .

  1. For returns that meet exclusion criteria (See IRM 4.22.4, section 4.22.4.4.6 - Exclusions), the examiner completes items 1, 2, 3, 4, and 6 of Form 4981 (NRP Exclusion Request). Type or print in Item 1 the Document Locator Number (DLN), Taxpayer Identification Number (TIN), taxpayer's name and NRP sample code. List in item 6 (Reason for Exclusion) sufficient information for Headquarters to properly evaluate the request. For example, if a request is made because the taxpayer could not provide adequate documentation due to a disaster, give an explanation of the substantiation of the disaster the taxpayer suffered. The Form 4981 is forwarded to the Campus NRP Coordinator along with a legible copy of NRP tax return, the original NRP report, and any supporting documentation. A copy of Form 4981 is retained at the group level.

  2. The Campus NRP Coordinator completes item 8 after the exclusion package is reviewed. If exclusion is not approved, the exclusion package is returned to the Examination Group for appropriate action. If exclusion is approved, the package is forwarded to NRP Office for final review. A copy of Form 4981 is retained at the Campus.

  3. The NRP Headquarters Office will indicate approval or disapproval of exclusions by completing item 8 of Form 4981. If exclusions are not approved by NRP Headquarters Office, the exclusion package will be returned to the Campus NRP Coordinator who will in turn forward the package to the examination group for action. If the exclusion is approved, NRP Headquarters Office will complete item 8 and fax a copy of the Form 4981 to the Campus NRP Coordinator who will inform the examination group of the acceptance of the exclusion.

  4. If a group retains an excluded return for examination, rather than being surveyed, Source Code 80 should be retained, however the project code and tracking code should be changed so the case is no longer included as part of the NRP Study.

  5. When a return is excluded, all reference to NRP must be removed from the return and case file.

Exhibit 4.22.5-2 
NRP 1040 Group Manager Closed Case Review Checksheet

The NRP 1040 Group Manager Closed Case Review Checksheet is used by managers to certify they have reviewed the case for technical accuracy.


More Internal Revenue Manual