4.22.12  LB&I Examination of NRP C Corporation Returns.

Manual Transmittal

July 30, 2012

Purpose

(1) This is a new IRM. This transmits new IRM 4.22.12 - LB&I Examination of NRP C Corporation Returns

Material Changes

(1) To provide field guidance to LB&I for the National Research Program (NRP) C Corporation Reporting Compliance Study. To provide Revenue Agents and their managers with provisions for the C Corporation Study.

Effect on Other Documents

None

Audience

LB&I revenue agents, group/team managers and territory managers assigned NRP returns.

Effective Date

(07-30-2012)

Director of Research, Janice Hedemann

4.22.12.1  (07-30-2012)
Case Building for Corporate Returns

  1. The NRP approach maximizes the use of data available to the IRS and, to the extent possible, minimizes intrusiveness and taxpayer burden.

  2. Case building is the process of adding information to the case file from IRS internal sources prior to classification. Use of this information during the classification process will identify or eliminate potential issues prior to contacting the taxpayer.

  3. NRP case files for the Corporate Study will be completely electronic as noted in IRM 4.22.12.2. This includes all case building material discussed in this IRM.

  4. Agents should supplement the case building material included in the file as necessary. Any supplemental material should be in an electronic format.

4.22.12.1.1  (07-30-2012)
LB&I Case Building Tools for Corporate Returns

  1. The following are the electronic case building items that will be included in the Corporate NRP case files. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making.

    1. The corporate key case tax return image

    2. Taxpayer Information Gateway (TIG) Reports

    3. NRP letters and related publications

    4. Examiner Case Closing Check Sheet

    5. Shareholder Summary

    6. IDRS prints for specific command codes for the NRP key case that provide taxpayer return and financial data. These include:

      AMDISA – Displays whether or not the return is established on AIMS and if it is currently assigned.

      BMFOLE – Displays filing requirements such as current name and address.

      BMFOLI – Displays filing history and module balances (if any).

      BMFOLT – Displays a list of posted transactions to a specific period.

      BMFOLU – Displays employment tax information.

      BRTVU – Displays return items from the Form 1120 as filed and as changed during processing.

      BMFOLZ – reflect prior audit history.

      PMFOL – Displays Payer Master File Information such as whether the entity filed W-2s and 1099s.

      TXMODA- (Tax Module) – more detailed information than on BMFOLT of taxpayer’s tax liabilities, payments and posted transactions.

  2. Twenty percent (20%) or greater shareholder IDRS prints. These include:

    RTVUE – Displays return items from the 1040 as filed and as changed during processing.

    INOLES – Displays filing requirements such as current name and address.

    IMFOLI/T – Displays filing history, module balances and a list of posted transactions to a specific period.

  3. Agents will receive a case file folder along with an NRP label for each return assigned. The rest of the case file information will be provided electronically in the NRP IMS case file.

4.22.12.2  (07-30-2012)
Electronic Case Files for the Key Case and Related Returns

  1. The NRP C Corporation Study will involve completing fully electronic case files. Agents will receive a case file which consists of a folder with a label. This folder and label should be retained and used when the case is ready to close. Everything else (return, classification items, work papers, lead sheets, letters, case building, etc.) will be included in the IMS file. Agents will complete all work electronically in IMS.

  2. All lead sheets, check sheets, and work papers used to support the conclusion reached on the issue being examined are required to be completed in the electronic case file. This includes mandatory lead sheets and check sheets that may contain answers to administrative items. Everything must be entered electronically; no pen or pencil additions.

  3. Anything that is critical to the case or that supports an adjustment should be included in the final IMS case file including lead sheets, created work papers that support adjustments, and documents that support unagreed issues/cases.

  4. NRP related returns (1040, 1120, 1120S, 1065 etc.) should also be completed electronically in IMS following the same procedures outlined in this IRM and training.

4.22.12.2.1  (07-30-2012)
Case File Assembly

  1. The NRP 1120 Corporate Study will parallel other LB&I examinations in that all issues, work papers and other relevant documents will be contained in the IMS case file. In addition, as with a non-NRP closure, the closed case will also include a paper case file. The paper case file assembly should follow existing LB&I procedures contained in LB&I Case Closing procedures. Documents contained in the paper file will depend upon the type of closure i.e. agreed, unagreed etc. Normal procedures for LB&I Case File Assembly should be followed. The folder and label sent at the start of the examination should be used to hold the printed forms and reports, and to ensure the case is identified as an NRP closure.

4.22.12.3  (07-30-2012)
Initiating Examinations

  1. All possible efforts should be made to contact taxpayers whose cases have been identified for examination.

  2. Initial contact Letter 2205-B (10-2010) for revenue agents was developed for NRP key case examinations. This letter will be used to arrange the appointment for all NRP Corporate key case examinations. This letter requests a taxpayer to call the revenue agent to schedule an appointment.

  3. Field examination cases should be scheduled using telephone contact. During the initial telephone contact it is important that the revenue agent ensures that the taxpayer knows that this is an NRP examination and covers the items discussed in Letter 2205-B. This should be documented in the case file. When the initial appointment is made by telephone, a follow-up letter will be mailed to the taxpayer confirming the time/place of the examination.

  4. Any other letters or correspondence to taxpayers or their representatives should utilize standard examination letters. This would include but not be limited to confirmation letters, appointment letters for related returns, no-change letters, and no change with adjustment letters.

  5. Notice 1332 (1-2007), Notice 609 (9-2009) and Publication 1 (5-2005) will be used as enclosures to the initial contact letters or the confirmation letter if the revenue agent makes the initial contact by telephone. Notice 1332 explains to the taxpayer how and why their return was selected for an NRP examination.

  6. If no contact is made, see the following IRM sections for guidance:

    1. IRM 4.10.2.7.2 – Locating the Taxpayer

    2. IRM 4.10.2.7.2.1 – Undeliverable Initial Contact Letters

    3. IRM 4.10.2.7.2.2 – Unlocatable Taxpayers - Mandatory Steps to Locate

    4. IRM 4.10.2.7.2.3 – Additional Resources for Locating Taxpayers

    5. IRM 4.10.2.7.2.4 – IDRS/CFOL Command Codes Useful in Locating the Taxpayer

    6. IRM 4.10.2.7.2.5 – Using Credit Bureau Information to Locate a Taxpayer

    7. IRM 4.10.2.7.2.6 – Third Party Contacts

4.22.12.4  (07-30-2012)
C Corporation Examination Guidelines

  1. NRP research and accurate data gathering require that all issues be examined as outlined in IRM 4.22.4. In addition, information contained in the NRP training modules must be followed to insure accurate examination and data capture. The following training modules are required for all NRP managers, agents, and Tax Computation Specialists (TCS) as indicated:

    1. Course One – Beginning the NRP Form 1120 Examination (Required for all LB&I agents & managers) – ELMS #43389

      Lesson 1 – Introduction to the NRP Form 1120 Examination

      Lesson 2 – Conducting the Pre-Audit

      Lesson 3 – Examination Guidelines

    2. Course Two – Conducting the NRP Form 1120 Examination (Required for all LB&I agents & managers) – ELMS #46981

      Lesson 1 – Mandatory Lead Sheets

      Lesson 2 – Technical Issues and Issue Specific Lead Sheets

    3. Course Three – Examining 1120 Returns in IMS – (Required for all LB&I agents & managers) -ELMS #46982

      Lesson 1 – Starting the NRP Examinations

      Lesson 2 – Data Collection

      Lesson 3 – Case Closing Procedures

    4. Course Four – NRP 1120 Manager Case Review (Required for all LB&I managers) ELMS # 48566

    5. Course Five – NRP Tax Compliance Specialist-ELMS # 48572

4.22.12.5  (07-30-2012)
Case Management and NRP Monitoring

  1. This section contains information about Case Management and NRP Monitoring.

4.22.12.5.1  (07-30-2012)
Case Assignment

  1. NRP cases should be assigned to examiners that have completed all applicable training courses and is proficient in C Corporation tax law and procedures.

4.22.12.5.2  (07-30-2012)
NRP Program Office and Operating Division Program Monitoring

  1. Analysts from the NRP Office, Small Business/Self Employed Operating Division, and Large Business and International Operating Division will analyze the data gathered from sample reviews and take appropriate action to ensure the quality of NRP examinations.

4.22.12.5.3  (07-30-2012)
Headquarter NRP Program Monitoring

  1. Various processes will be utilized to ensure quality NRP cases. These include group/team manager evaluative case reviews, mandatory non-evaluative closed case reviews, and completion of a Headquarter electronic case review process. In addition, NRP cases assigned in LB&I will be subject to the same national sample LQMS reviews as any regular examination.

4.22.12.5.4  (07-30-2012)
Group/Team Manager Responsibilities

  1. Evaluative in-process case reviews are critical in guaranteeing the highest quality. One evaluative case review is required for each agent assigned a tax year 2010/2011 Form 1120. The evaluative in-process review should take place within 90 days of the first appointment on one of the earliest started cases for the newest tax year. The in-process evaluative review should take place after the initial appointment, and when enough audit work has been completed for meaningful feedback on the quality of the examination. If the agent was able to close the case within 90 days of the first appointment, the case can still meet this review requirement.

  2. To the extent possible, IRM 4.46, LB&I Guide to Quality Examination Procedures (QEP) should be utilized as a guide for the review. The review should include Information Document Requests, Required Filing Checks, Application of Tax Law, Work Papers, and Report Writing. The purpose of the reviews is to provide meaningful timely feedback. Any trends identified by the group manager should be shared with the LB&I NRP Coordinator.

  3. Group managers will complete a 100% non-evaluative closed case review within IMS on all NRP examinations. These reviews are in addition to the Manager checksheet completed for non NRP LB&I examinations. NRP 100% non-evaluative closed case reviews will focus on the quality of:

    1. Technical correctness of the examination.

    2. Adherence to NRP examination guidelines (all classified issues completed), procedural requirements, and case closing/data accuracy requirements.

  4. The non-evaluative closed case reviews will be completed electronically by the manager and documented on the NRP Group Manager Closed Case Review Checksheet (Non-Evaluative). This form must be completed on-line prior to case closure. By checking “yes” on the review checksheet, the manager is indicating that the item (Income Probe, IDR, etc.) was properly completed by the examiner. If a “no” is checked, the case should be returned to the examiner for clarification/corrections. A link to the on-line checksheet and instructions for completion will be provided during your training. A paper version of this document is also included in IMS workpapers to assist with your review. Once completed you can print a copy of the checksheet as an Adobe PDF file and include in IMS workpapers. Details on the Electronic Closed Case Reviews within IMS are contained in your training.

  5. Update the case on ERCS to Status 41 when forwarding for closing. Notify the NRP Coordinator that the case is ready for review. NRP Coordinator will notify Team Manager after review completed and case passed review. NRP Coordinator will remove Freeze Code and Team Manager may close case following normal case closing procedures.

4.22.12.5.5  (07-30-2012)
Headquarter Quality Reviews

  1. LB&I Coordinators and NRP Headquarters will complete NRP Quality Reviews using the following processes. Field participation in the review process is required. The reviews will utilize Quality Examination Procedures Guidelines.

    1. The quality process will involve (1) testing to see if LB&I group managers completed the required evaluative case review as specified in IRM 4.22.12.5.4(1) and (2) and reviewing the actual quality of the feedback provided in these reviews.

    2. Once sufficient Form 1120 inventory has been started, an ERCS listing that shows NRP Status 12 cases for each group will be generated.

    3. The IMS Team Website will be utilized to verify the electronic case file is in compliance with NRP requirements. Case reviews will be completed remotely using IMS and IBMIS. LB&I NRP Coordinators will select a sample of closed cases for review. The reviews will include managers in the process.

    4. To the extent possible, IMS/IBMIS data reviews will also be completed by NRP analysts and, if possible, the LB&I NRP Coordinator on the same closed cases. These reviews will also be done remotely.

    5. On-site field visitations by LB&I Headquarters analysts will be considered if the managerial reviews are not being completed in a quality manner and/or the cases reviewed consistently show errors or irregularities.

    6. Feedback from the completed reviews will be provided to agents and managers by the LB&I analyst.

4.22.12.5.6  (07-30-2012)
Large Business & International Quality Measurement System (LQMS)

  1. NRP Corporate cases and related returns will be subject to the same national review sample guidelines as other examinations.


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