4.24.6  Technical Guidance and Procedures for Excise Issues

Manual Transmittal

August 05, 2014

Purpose

(1) Revised IRM 4.24.6, Excise Tax, Excise Tax Examiner Responsibilities.

(2) IRM section title changed to Technical Guidance and Procedures for Excise Issues to better reflect updated content.

Material Changes

(1) Significant Changes made throughout this section. Report writing and case processing content moved to IRM 4.24.10. Editorial changes have been made throughout this IRM to add clarity and consistency. Hyperlinks and IRM references were reviewed and updated as necessary. See table below for detailed list of changes made.

IRM Section Description of Change
4.24.6.1 Overview of Excise Tax Examiner Responsibilities Updated and expanded to include key excise IRM cites. Updated hyperlink.
4.24.6.2 Excise Issue Management System (IMS) Revised content to reflect changes made to IMS. New or content added at 4.24.6.2.1 through 4.24.6.2.9 to expand procedural guidance relating to IMS.
4.24.6.2.1 Lead Sheets and the Notebook Job Aid Content moved to 4.24.6.2.4 and updated for clarity. Title changes to Notebook Job Aid.
4.24.6.2.2 IMS Time Reporting Content moved to 4.24.6.2.7 and 4.24.6.2.9 and updated for clarity.
4.24.6.3 Mandatory Administrative Forms For Revenue Agent Examinations Title changed to Mandatory Administrative Forms. Table created listing each form and specific IRM subsection. New or updated content found in subsections 4.24.6.3.1 through 4.24.6.3.12 which discuss in detail the forms and their use.
4.24.6.3.1 A105 Administrative Check Sheet Updated and expanded to include PDT and CUC guidance.
4.24.6.3.1.1 Pre-Audit Issues Collectibility Content moved to 4.24.6.3.1.2 and updated to reflect role of PSPWIC with regards to collectibility indicators. Retitled Processing Power of Attorney (POA) and new content added.
4.24.6.3.1.2 Specialist Referral System Content moved to 4.24.6.4.
4.24.6.3.1.2.1 International Case Referrals for Foreign Insurance Excise Tax Content moved to 4.24.6.9.1.1 and procedures updated. Added hyperlink.
4.24.6.3.1.3 Extending the Period of Limitations for Assessment of Tax Content moved to 4.24.6.3.12 and updated to include Form 895 procedures and new Form 872-EX procedures.
4.24.6.3.1.3.1 Extending the Period of Limitations for Form 720-TO and Form 720-CS Information Reports Content moved to 4.24.6.3.12 and revised.
4.24.6.3.1.3.2 Extending the Period of Limitations to Assess Air Transportation Taxes Content moved to 4.24.6.3.12.1 and updated.
4.24.6.3.1.3.3 Extending the Period of Limitations to Assess Communications Taxes Content moved to 4.24.6.3.12.2 and updated.
4.24.6.3.1.3.4 Six Year Period of Assessment under IRC 6501(e)(3) for Substantial Omissions of Excise Taxes Content moved to 4.24.6.3.12.3.
4.24.6.3.1.4 Issue Resolution and Risk Analysis Content moved to 4.24.6.3.8.1 and subsection retitled to Risk Analysis.
4.24.6.3.1.5 Third Party Contacts Content moved to 4.24.6.5 and updated notification procedures.
4.24.6.3.1.6 Inadequate Records Notice Content moved to 4.24.6.6.
4.24.6.3.2 A110 Excise Tax Plan to Close Check Sheet Updated for clarity.
4.24.6.3.3 A115 Group Manager Concurrence Meeting (GMCM) Check Sheet Updated to allow 30 business days for GMCM. Incorporated content from SBSE Exam IGM SBSE-04-1213-0098.
4.24.6.3.4 A120 Initial Appointment Check Sheet Updated for clarity.
4.24.6.3.5 A125 Initial Interview Questions and Notes Updated for clarity. Include information on tour of business at 4.24.6.3.5.1.
4.24.6.3.6 B200-1 Multi-Period and Related Returns Check Sheet and B200-2 FET Check Sheet Retitled to required Filing Checks (RFC). Added new content at 4.24.6.3.6.1 titled Exam Information Reports.
4.24.6.3.7 C300 Books to Returns Reconciliation Check Sheet Added hyperlink to books to return job aid.
4.24.6.3.8 C305 Internal Controls Check Sheet Title changed to C305 Internal Controls. New content added at 4.24.6.3.8.1 titled Risk Analysis.
4.24.6.3.9 C310 Fraud Awareness Check Sheet Updated fraud procedures. New content added at 4.24.6.3.9.1 titled Suspicious Activity Reports (SAR).
4.24.6.3.10 E500 Penalty Check Sheet and Managerial Approval for Penalty Assessments Content moved to 4.24.6.3.11. Section retitled D400 Initial Taxpayer Contact Sheet and new content added.
4.24.6.4 Case File Documentation Content moved to 4.24.6.2.7 and updated.
4.24.6.5 Conversion of QuickBooks Accounting Software Content moved to 4.24.6.7.
4.24.6.6 Source Codes, Examination Activity Codes, Project and Tracking Codes Content moved to 4.24.6.8 and updated for clarity.
4.24.6.6.1 Use of Excise Project and Tracking Codes Content moved to 4.24.6.8.1 and updated to reflect current PSPWIC procedures. Add requirement to verify project codes on all ACA case work.
4.24.6.6.2 Excise Lead Feedback Form Obsolete as now incorporated into IMS. IGM 04-0813-0070 is obsolete.
4.24.6.7 Procedural Guidance for Certain Types of Excise Examinations Content moved to 4.24.6.9.
4.24.6.7.1 Excise Examinations with International Issues Content moved to 4.24.6.9.1.
4.24.6.7.2 Excise Examinations of Federal Agencies Content moved to 4.24.6.9.2.
4.24.6.7.3 Excise Examinations with Wagering Issues Content moved to 4.24.6.9.3 and updated to reflect Collection ATAT procedures.
4.24.6.7.4 Excise Examinations Relating to Facilities and Services Taxes Under IRC 4251, 4261 and 4271 Content moved to 4.24.6.9.4..
4.24.6.7.5 Excise Examinations of an Air Collector for Taxes Imposed Under IRC 4261 Content moved to 4.24.6.9.5.
4.24.6.7.6 Direct Assessment Procedures Under IRC 4251, 4261, and 4271 Content moved to 4.24.6.9.6 and updated to reflect changes made to Letter 898.
4.24.6.7.7 Excise Examinations Relating to Structured Settlement Factoring Transactions Content moved to 4.24.6.9.7.
4.24.6.7.7.1 Examples of Closing Procedures for Excise Tax on Structured Settlement Factoring Transactions Content moved to 4.24.6.9.7.1.
4.24.6.7.7.2 Disposal Codes for Excise Tax Cases on Structured Settlement Factoring Transactions Content moved to 4.24.6.9.7.2.
4.24.6.7.8 Product Testing Procedures for Ozone Depleting Chemicals (ODCs) Content moved to 4.24.6.9.8.
4.24.6.7.9 Executing Blanket Export Exemption Certificates Content moved to 4.24.6.9.9.
4.24.6.7.10 Jeopardy Assessment Transferor/Transferee Cases Content moved to 4.24.6.9.10.
NEW 4.24.6.9.11 Procedural Guidance Relating to Doubt as to Liability (DATL), Offer in Compromise Cases New content added per SBSE-04-0813-0071.
4.24.6.8 Processing of Excise Substitutes for Return Relevant content moved to 4.24.10 since related to case processing procedures. This includes procedural guidance found in Interim Guidance memos SBSE-04-1013-0085 and SBSE 04-1013-0086.
4.24.6.9 Overview of SFR Action on Non-Filer Cases Content moved to 4.24.6.10 and retitled as Establishing SFR Controls on Non-Filer Cases.
4.24.6.9.1 Examples of SFR Action on Non-Filer Cases Relevant content moved to 4.24.10 since related to case processing procedures.
4.24.6.10 Substitute for Return (SFR) No Examination Action Taken Relevant content moved to 4.24.10 since related to case processing procedures. Retitled to Establishing SFR Controls on Non-Filer Cases. Content from 4.24.6.9 moved here and updated.
4.24.6.11 Delinquent Return No-Examination Action Taken No Changes made.
4.24.6.11.1 Processing of Excise Delinquent Returns Secured by Compliance Examination Relevant content moved to 4.24.10 since related to case processing procedures.
4.24.6.12 Procedures for Securing Memorandums of Understanding (MOU) for Joint Audits Between IRS and State Taxing Agencies Content moved to 4.24.6.14. Section retitled to Reopening a Disposal Code 36 Case. Content added relating to reopening criteria for SFR cases.
4.24.6.13 Requesting Excise Subject Matter Expert (SME) Assistance Content moved to 4.24.6.15. Section retitled to Excise Program Memorandums of Understanding (MOU) and new content added relating to MOU with Excise Program. Deleted mailing address information as all MOU to be submitted via e-mail.
4.24.6.13.1 Coordinated Excise Issues Content moved to 4.24.6.15.1.
4.24.6.13.2 Coordination of Excise Technical Advice and Guidance Content moved to 4.24.6.15.2.
4.24.6.13.3 Excise Technical Advise Memorandum Procedures Content moved to 4.24.6.15.3.
NEW 4.24.6.16 Executive Order Prohibiting Texting While Driving New content added.
Exhibit 4.24.6-1 Statute of Limitations Chart Updated note relating to Form 2290 due date and statute.

Effect on Other Documents

This material supersedes IRM 4.24.6, dated 10-07-2011. This updated IRM section includes procedural guidance found in the following Interim Guidance Memos; SBSE 04-1213-0098, Reissue Interim Guidance on Group Manager Concurrence Meeting (GMCM) Requirements dated 12-18-2013. Please note this is an SBSE Exam wide memo and should remain in force until the Exam IRM is updated. This updated IRM section includes procedural guidance found in SBSE 04-0813-0071, Excise Field Exam Procedural Guidance Relating to Doubt as to Liability, Offer in Compromise Cases, dated 8-23-2013. This guidance was originally scheduled to be incorporated into IRM 4.24.10. Due to the nature of the guidance, this memo is incorporated into this IRM section. Guidance relating to the Excise Lead Feedback Form has been removed from this IRM section and as a result Interim Guidance Memo SBSE 04-0813-0070, Completion of Excise Lead Feedback Form is no longer necessary. Procedural guidance found in the following Interim Guidance Memos, SBSE 04-1013-0085, Reissue Interim Guidance Procedures for Closing No Liability Substitute for Return (SFR) Non-Filer Cases dated 10-21-2013 and SBSE 04-1013-0086, Reissue Additional Interim Guidance Procedures for Closing No Liability Substitute for Return (SFR) Non-Filer Cases dated 10-21-2013 that originally indicated would be incorporated in to this IRM section will now be incorporated into IRM 4.24.10.

Audience

This section is for SBSE Excise Managers, Excise Tax Examiners, and Specialists.

Effective Date

(08-05-2014)



/s/ John H Imhoff Jr.
Director, Specialty Programs
Small Business/Self Employed

4.24.6.1  (08-05-2014)
Overview of Excise Examiner Responsibilities

  1. This section provides general excise tax examination procedural guidance and examination procedures specific to certain types of excise examinations.

  2. The procedures found in IRM 4.10 Examination of Returns shall apply to excise examiners (referred throughout this IRM to include both excise revenue agents and excise fuel compliance agents) and their managers unless otherwise noted in IRM 4.24 Excise Tax.

  3. See IRM 4.24.4, Excise Fuel Taxes Workload, Policies and Procedures for fuel related examination procedures.

  4. See IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement for claim procedures.

  5. See IRM 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures for ExSTARS procedures.

  6. The Excise Issues and Procedures section on the Examining Excise Taxes web page located at http://mysbse.web.irs.gov/Specialty/excise/issues/default.aspx contains guidance, procedures, law and regulations on a wide variety of excise related audit issues.

4.24.6.2  (08-05-2014)
Excise Issue Management System (IMS)

  1. Issue Management System (IMS) is a computer-based system that is used to manage the excise examiner’s workload and complete timekeeping for all excise tax case workload. IMS is designed to retain examination information in a centralized location on the IMS Server.

  2. Excise examiners are required to utilize IMS and the Notebook Job Aid, which contains a standard library of excise tax forms, letters, lead sheets and templates, many which will pre-populate with the text entered. The Notebook Job Aid is used to generate lead sheets, workpapers, reports, letters, and some closing forms (if not generated by IMS), which are organized in a logical manner for import to IMS into the applicable Entity issue being worked.

    Note:

    Excise examiners will be required to periodically update their Notebook Job Aid when new or updated library information becomes available.

  3. Job Aids and other IMS related guidance may be found at the IMS Team web page on the Examining Excise Taxes website at http://mysbse.web.irs.gov/Specialty/excise/prog/imsnotebook/default.aspx

  4. Refer to IRM 4.24 sections 13 through 16 for specific IMS guidance relating to fuel compliance inspections.

  5. Information is uploaded to the IMS Server through synchronizations. See IRM 4.24.6.2.9 for synchronization procedures.

  6. IMS is an issue driven system that consist of three parts:

    • The IMS Client (application resides on the excise examiners laptop or desktop computer)

    • IMS Team Web site

    • Issue Based Management Information System (IBMIS) which is the reporting component used by management.

  7. The IMS Client will be used by the excise examiner to:

    • Set up and perform their duties from an ordered checklist.

    • Complete and store case results and workpapers for various taxpayers.

    • Scan in documents received while in the field.

    • Account for their direct and indirect time.

  8. Excise employees should use the Activity Code that Policy has specified when problems using IMS and/or Notebook result in a loss in productivity caused by time spent on non-case related activities. The following requirements must be met before charging time to report this activity.

    1. A help ticket has been submitted and remains open.

    2. The excise examiner is actively engaged in fixing the problem or issue.

    3. The help ticket number is annotated in the Comments section of the Activity Record for the time charge.

4.24.6.2.1  (08-05-2014)
Creating a Case in IMS Client

  1. A new case can be created in IMS through the Examination Returns Control System (ERCS) Case Inventory or through a manual case entry.

  2. IMS has features that allow the user to customize the information that is displayed on several of the screens. Once the screen is customized, IMS will show the information for all cases in that format. Refer to the IMS Job Aid User Guide, Customizing Grids in IMS, section for more information.

4.24.6.2.1.1  (08-05-2014)
IMS Case Menu at the Team Website

  1. The IMS case menu consists of the following:

    1. Case Attributes- enter Team Manager, Cycle, Begin Year, and Cycle End Year information.

    2. Case Entities- contain the case and period. May add additional quarters/returns, etc. to get those returns on IMS before they are established on ERCS.

    3. Team Members- input contact information which will self-populate forms and letters.

    4. Issues- create administrative and case issue and where all mandatory administrative forms and case workpapers are maintained.

    5. Feedback Forms- where case feed back information is entered.

    6. Useful Links -links to internet websites for research.

4.24.6.2.1.1.1  (08-05-2014)
Case Level Activities Requirements

  1. Excise managers and support staff (for example Form 637 Registration Group personnel) shall document case actions on Case Level Activities.

    Note:

    For all IMS cases except 637 cases, the group manager may use the Case Comments feature of the IMS Timesheet, found in the IMS Client.

4.24.6.2.1.2  (08-05-2014)
IMS Case Documents Menu at IMS Team Web Site

  1. IMS case documents consist of:

    1. Information Document Requests (IDR Documents)

    2. Workpaper Documents

    3. Form 5344 Documents

    4. Form 5351 Documents

    5. Form 8278 Documents

4.24.6.2.2  (08-05-2014)
IMS Client Entities – Related Returns

  1. The Entities section of the case is used to show the returns in the case.

    1. By default in IMS, this screen will initially show returns without an Actual Closed Date on the return.

    2. The Entities Screen is where the excise examiner can add additional quarters/returns to the IMS case file, create ERCS update forms, and export taxpayer data from IMS into the Notebook to be used to set up workpapers and prepare reports.

  2. The Return section of the case is used to view all returns in a case.

    1. This screen shows all related returns in a case – even those with an Actual Closed Date.

    2. From this screen the examiner will generate the closing documents for each return included in the IMS case.

4.24.6.2.3  (08-05-2014)
IMS Client Team Members and Taxpayer Contacts

  1. The IRS Team Members screen is used to add, edit, and remove Team Members from the case. While IRS Team Members can be added here, Team Coordinator permissions are not automatically given to IRS Team Members. These permissions may be granted to each Team Member as appropriate. Team Coordinator Permissions are managed from the Case Attributes screen. These permissions may be granted to each Team Member as appropriate, by either the Primary Team Coordinator or the Team Manager.

  2. The Taxpayer Contacts portion of IMS is where authorized company personnel and taxpayer representatives (POA) contact information is added. The contact information will be displayed on the Form 9984, Examining Officer’s Activity Record. Only one contact can be listed on the Form 9984 as the taxpayer and the taxpayer’s Power of Attorney.

4.24.6.2.4  (08-05-2014)
Administrative Issue Subfolders in the IMS Client Record

  1. IMS automatically creates an excise administrative issue labeled EX080 for every excise IMS case. Within the administrative issue folder there are five additional folders:

    1. Tax Return Data: Limited to return information such as scanned returns.

    2. Admin Forms: Mandatory Forms and Lead Sheets, Correspondence, other Examination Workpapers, and Documents and Information provided by the taxpayer. This also would include forms that relate to disputed or unagreed issues.

      Note:

      All lead sheets and workpapers from Notebook should be uploaded to IMS at the beginning of the examination and worked on in IMS.

    3. Closing Data: Upload all Notebook closing documents and report forms, and any other case closing data files as appropriate. See the Notebook folder "Deployed Form/TP/Report Forms" .

    4. Correspondence: Sent to and received from the taxpayer.

    5. 637 Data: Contains information relating to Form 637 registrations if applicable.

    Note:

    An existing administrative file from outside IMS such as an .xls, doc., or pdf. file can be uploaded into EX080 administrative issue folder.

4.24.6.2.5  (08-05-2014)
Notebook Job Aid

  1. The Notebook Job Aid is used by excise examiners to generate mandatory administrative forms , lead sheets, reports, letters, and closing forms.

  2. The Notebook Job Aid which is to be utilized in all excise case work contains a standard library of:

    • excise tax forms

    • letters

    • mandatory and discretionary administrative forms

    • lead sheets

    • templates

    and pre-populates many of the headers and footers with the text entered. These documents are also organized in a logical manner so that they can easily be imported in IMS into the applicable Entity issue being worked by the excise examiner.

  3. Forms and letters found in the Notebook will be updated quarterly or as needed. Excise examiners need to open the Notebook Update Manager and select on the Update Forms Library, Update Notebook Front End, the Update Administrative Features and then select on Perform Notebook Updates. Once update is complete the excise examiner needs to open the Notebook and verify Notebook version number is correct.

4.24.6.2.6  (08-05-2014)
Standard Audit Index Number (SAIN) Codes

  1. Issues identified in the "Entity/Returns Issues" are classified in two ways:

    • Administrative Issue (EX080), and

    • Entity/Return Issues (Classified Issues for Issue Tracking and Feedback Form purposes). Time is only charged to the one Entity/Return established SAIN based issue.

  2. Generally, the SAIN relates to how an issue is reported on a return. Each Excise SAIN issue begins with EX and represents the IRS number or CRN listed on excise tax forms such as the Form 720.

  3. All returns must have an Administrative Issue (EX080) which is created automatically as a case issue created for the return.

  4. Administrative and Entity/Return Issues will be established for the Team Coordinator and/or assigned to other team members. From the Add Issue screen, select the team member to be assigned to the issue from the drop-down list. IMS defaults to the user adding the issue and can be changed by clicking the drop-down list and selecting and assigning a different Team Member on the case.

4.24.6.2.7  (08-05-2014)
Establishing Issue Open and Close Dates in IMS Client

  1. A case may have multiple entities and each entity or return can close at a different time. There are two types of "Actual Closed Dates" -one date for the case and another date for each entity on the case. For the return that has been closed, the excise examiner will close the Entity/Return on the “Edit Entity” screen.

  2. A Form 5344 is required to be generated before most excise tax cases can be closed. Refer to the current excise IMS Job Aids for more information.

    Note:

    Depending on the MFT on the Entity/Return, different types of closing forms may be required to be completed before the status of an IMS case file can be changed to Closed.

4.24.6.2.8  (08-05-2014)
Time Sheet and Form 9984 Examining Officer’s Activity Record in IMS Client

  1. The Time Sheet window allows the IMS user to enter the various categories of time applied. Time may be entered as direct examination time or below the line time.

    Note:

    Time can be in increments of 0.3 = 15 minutes, 0.5 = 30 minutes 0.7 = 45 minutes, or in hourly increments.

  2. The Form 9984 is used to document each action taken on the Entity/Return issues. Documentation should include the date, location, time charged, and an explanation of each activity or contact. The activity record should provide a complete and concise case history. Recordation of events should be made by examiners or other employees responsible for activity on the case as warranted (e.g., group managers, engineers, clerical staff, team members, actions taken by group secretaries, etc.)

    Note:

    Entries on Form 9984 should not be so brief as to be meaningless such as "worked on case" .

  3. The excise examiner should include information recorded on Form 9984 such as but not limited to:

    • All substantive actions taken on the issues. Meaningful action should occur at least every 45 days.

    • Reason for all delays and time gaps.

    • The examination start date.

    • The appointment letter mailing date.

      Note:

      Group manager approval is required in order to schedule an initial interview appointment beyond 45 days of first action.

    • Document when the taxpayer was provided Pub 1, Your Rights As A Taxpayer, and Notice 609, Privacy Act and Paperwork Reduction Act Notice upon initial contact. The excise examiner should also document discussions with the taxpayer regarding their rights.

    • Work performed prior to, during, and subsequent to taxpayer contact.

    • Outline all research activities conducted.

    • Significant travel time to and from audit location.

    • If a tour or site visit of the taxpayers business or real property was conducted.

    • Brief summaries of telephone conversations. However, lengthy telephone conversation notes need to be documented as a case workpaper and imported.

    • All contacts with taxpayers, representatives, and third parties.

    • Causes for any delays by the Service (training, details, etc.), the taxpayer, and/or representative. Excise examiners must ensure that they have notated and explained any delays, causes of delays, and whether or not delays were communicated to any of the affected parties (explain any lack of communication).

    • When collateral requests and referrals are made, accepted, when work begins, and when progress reports are received.

    • All actions with respect to the statute of limitations (e.g., verification, steps to protect the statute of limitation, Form 895 completion date(s), and consents to extend) should be fully documented in the Form 9984.

    • Date the report was issued and the signed report received date. Confirm a Pub 3498, The Examination Process was issued if required in order to close the case.

    • Date when the excise examiner notified the taxpayer of their recommendation to close the examination as a No Change, when appropriate.

    • Dates the examination was closed to the group manager.

  4. Documentation of group manager involvement such as but not limited to:

    • Formal and informal discussions,

    • in-process case reviews,

    • on-the-job visitations and workload reviews,

    • plan to close meetings,

    • fraud awareness discussions,

    • approval regarding penalty assessments/abatements, etc.)

    • date case closed by the group manager and or group secretary.

    Note:

    Group managers may use the Case Level Activities feature under the Case Menu at the left on the IMS Team Website. For all IMS cases except 637 cases, the group manager may also use the Case Comments feature of the Timesheet, found in the IMS Client, which will be posted on the Managers Examining Officers Activity Record. the group manager should be consistent and use one method or the other for each case.

  5. The Team Coordinator may view copies of other team members' (other examiners assigned to the case, etc.) Forms 9984, at the IMS Team Website.

4.24.6.2.9  (08-05-2014)
Uploading Documents

  1. In IMS, workpapers are issue specific and can be created in IMS or they can be uploaded from previously created files.

  2. Workpapers can also be added to either an open or closed case file at the team website.

  3. For additional workpaper upload and sorting instructions refer to the IMS Job Aid User Guide located on IMS web page of Examining Excise taxes website.

4.24.6.2.10  (08-05-2014)
IMS Synchronizations

  1. Synchronization is the process of transferring specific material to/from the excise examiner’s computer and the IMS Server. Once the synchronization is complete, any material synchronized on the excise examiner’s computer will be identical to the material on the IMS Server. There are five types of synchronizations performed in IMS:

    • Summary,

    • Examination Returns Control System (ERCS),

      Note:

      This may be changing in the future because this sync is now performed automatically when the user opens IMS and connects to the server.

    • Case,

    • Timesheet, and

    • Reminder.

  2. Summary − A Summary Synchronization downloads basic case information for all cases for which the user is a team member or manager.

  3. ERCS − An ERCS Synchronization will download return data assigned to the user in ERCS. IMS receives a download from ERCS nightly.

    1. ERCS changes made in IMS will not appear in ERCS. If information from ERCS is incorrect, the excise examiner should complete Form 5348, AIMS/ERCS Update, to change the data on ERCS. A new ERCS record will then be created and will be downloaded through ERCS synchronization.

    2. If the recorded Taxpayer Identification Number (TIN) is incorrect in ERCS, the excise examiner must complete Form 5351, Examination Non-Examined Closings, to dispose of the wrong record on ERCS. Excise examiners can also establish a new record on ERCS with the correct TIN using Form 5345-D, Examination Request − ERCS (Examination Return Control System Users).

  4. Case - Case Synchronization allows the excise examiner to ensure that all uploaded work is saved to the IMS Server in the event of computer failure. Case specific information includes

    • Issues,

    • Information Document Requests (IDRs),

    • Workpapers

    • Case returns

    • Case closing records such as Form 5344, 5351, and/or 8278

    • Team members (both IRS and taxpayer contacts

    and should be uploaded and downloaded using the Case Synchronization process.

  5. Timesheet − The IMS timekeeping system will track time charged to an issue, miscellaneous direct examination time (MDET), and below-the-line (BTL) time. To input time on a return, the excise examiner must have created issues for the return. All direct examination time applied on IMS is by Standard Audit Index Number (SAIN).

    1. The time needs to be on the IMS Server by Thursday at 8:00 PM EST.

    2. The excise examiner user must synchronize their timesheet at least once a week (usually Thursday).

    3. The need to synchronize time more than once a cycle will be at the discretion of management.

    Note:

    Time entered in IMS and not entered in ERCS will transfer. Corrected time does not transfer from IMS to ERCS after time for that period has been synched and transferred. The excise examiner must communicate any timesheet correction made to a time charge in IMS that has transferred to ERCS with their timekeeper.

  6. Reminder-The Reminder Synchronization menu is located on the IMS Toolbar. Users may view, edit, add, delete, activate, or deactivate reminders. Others cannot view the excise examiner's reminders. IMS also generates system reminders. The excise examiner should run a Reminder Synchronization to view the IMS generated reminders.

4.24.6.3  (08-05-2014)
Mandatory Administrative Forms

  1. Mandatory Administrative Forms are generated in the Notebook by the excise examiner and then imported into IMS as workpapers.

  2. These Administrative Forms will have information pre-populated with the common fields captured during the setup of a Taxpayer and User Details in the Notebook.

  3. The following table lists the excise examination Mandatory Administrative Forms deployed by the Notebook.

    Index Number Check Sheet Title IRM Cite
    A105 Administrative 4.24.6.3.1
    A110 Excise Tax Plan to Close 4.24.6.3.2
    A115 Group Manager Concurrence Meeting 4.24.6.3.3
    A120 Initial Appointment 4.24.6.3.4
    A125 Initial Interview Questions and Notes (including tour of business notes) 4.24.6.3.5
    B200-1 Multi Period and Related Returns 4.24.6.3.6
    B200-2 FET Checksheet 4.24.6.3.6
    C300 Books to Returns Reconciliation 4.24.6.3.7
    C305 Internal Controls 4.24.6.3.8
    C310 Fraud Awareness 4.24.6.3.9
    D400 Initial Taxpayer Contact Check Sheet 4.24.6.3.10
    E500 Penalty Check Sheet 4.24.6.3.11

    Note:

    Check boxes are found on several of these forms which serve many purposes such as a reminder or an action(s) completion list. Checking a box does not necessarily mean comments and workpapers are not required.

  4. There are additional Mandatory Administrative Forms required for use in other case workload types. Refer to the table below for more information:

    Workload Type IRM Section
    Fuel Compliance Officer Inspections 4.24.13 through 16
    Coordinated Industry Examinations 4.24.5, Large Business and International (LB& I) Examination Program Procedures for Excise Employees
    Form 637 Registration Cases 4.24.2, Form 637 Excise Tax Registrations
    ExSTARS Compliance Examinations 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures

4.24.6.3.1  (08-05-2014)
A105 Administrative Check Sheet

  1. The purpose of the A105 is to provide a set of administrative guidelines for tasks that may arise during the examination. The examiner will complete the following portions of the A105 by addressing the following areas:

    1. Pre-Audit Issues, including Collectibility. See IRM 4.10.2, Examination of Returns, Pre-contact Responsibilities and IRM 4.24.6.3.1.2 .

    2. 637 Registration information if applicable. See IRM 4.24.2.

    3. Power of Attorney. See IRM 4.24.6.3.1.1.

    4. Initial taxpayer contact. See IRM 4.24.6.3.10.

    5. Initial appointment. See IRM 4.24.6.3.4.

    6. Referrals. See IRM 4.24.6.3.6.1.

    7. Statute of limitations. See IRM 4.24.6.3.12.

    8. Issue resolution and risk analysis. See IRM 4.24.6.3.8.1.

    9. Payment. See IRM 4.24.10.6 and IRM 4.20.3 for the tiered interview and levy procedures.

    10. Additional procedural items including Third Party Contacts, Inadequate Records Notice, and conversion of QuickBook accounting software. See IRM 4.24.6.5, 4.24.6.6, and 4.24.6.7.

  2. Excise examiners need to be aware of the Potentially Dangerous Taxpayer (PDT) and Caution Upon Contact (CAU) programs. Refer to IRM 25.4, Employee Protection for more information regarding PDT and CAU.

4.24.6.3.1.1  (08-05-2014)
Processing Power of Attorney (POA)

  1. The excise examiner should check Centralized Authorization File Inquiry Command Code CFINK to determine if a Power of Attorney (POA) exists for the taxpayer and for which periods. The box should be checked on the A105 and noted on Form 9984.

  2. The excise examiner will process the Form 2848, Power of Attorney and Declaration of Representative within five (5) days of receipt. Any delays should be documented. If the POA is not properly executed it must be returned to the taxpayer for corrections.

  3. The excise examiner will check CFINK to make sure the POA was processed.

  4. See IRM 4.11.55.1.8.2 for additional procedural guidance.

4.24.6.3.1.2  (08-05-2014)
Pre-Audit Issues- Collectibility

  1. Collectibility factors are utilized by Excise Planning and Special Projects Workload Identification and Classification (PSPWIC) to determine if a case should be selected for examination. Cases selected for field examination that have known collectibility issues will be identified on the Classification Checksheet included in the case file. The Classification Checksheet will also document how the collectibility problem was overcome (with PSPWIC Management support) to justify case selection for field examination.

  2. To lessen the size of unpaid assessments and increase the quality of assessments, excise examiners should consider collectibility when setting the scope of an examination. Collectibility will be based on today’s financial condition and not the tax return (which reflects the taxpayer’s past financial condition). Excise examiners are required to document their evaluation of collectibility during the preplanning phase of the examination using 105, Administrative Check Sheet.

  3. See IRM 4.20.2.2, General Collectibility Considerations, for a listing and definition of collectibility indicators, and steps to take when evaluating collectibility potential during the pre-planning phase.

  4. The excise examiner should request an Audit Information Management System (AIMS) Command Code AMDIS with definer A print which will display collectibility indicators such as:

    • BANKRUPTCY – Taxpayer is currently in bankruptcy or bankruptcy discharge in a prior period,

    • CURNOTCOLL - Prior period was closed as Currently Not Collectible,

    • COLLSTCD26 - Open Collection status (i.e. assigned to Revenue Officer, Automated Collection, or is in Collection queue),

    • Offer-In-Compromise (OIC)Pending.

  5. If collectibility indicators are present or there are reasons to believe that the taxpayer has liabilities outstanding for other tax periods, Integrated Data Retrieval System (IDRS) Command Codes SUMRY, IMFOLI or BMFOLI should be obtained. This will provide a list of any previous tax periods with account balances. A IDRS Command Code TXMOD can then be obtained on those years to determine account activity. If Transaction Code 480 is present on any of the modules, an Offer in Compromise is under consideration. The group and employee number of the revenue officer charged with the account will also be reflected on the TXMOD.

  6. Not all taxpayers lacking the means to satisfy additional tax liabilities will be identified. Excise examiners should be alert for indications in the file that collectibility may be a factor to consider; i.e., the taxpayer is deceased or the taxpayer is a defunct corporation and the issue of transferee liability is not present. Form 9439, Collectibility Evaluation Form may be used to help document collectibility.

  7. If collectibility is an issue in an assigned case, the group manager should be alerted as soon as the issue is discovered. Managers will make the final determination whether to survey the return or to limit the scope/depth of an examination. A tax return may be surveyed due to an absolutely uncollectible assessment or subjected to a limited scope examination where there is lack of collectibility.

  8. It should be emphasized, however, that returns should not be surveyed based solely on collectibility when a limited examination has the potential for developing leads to other non-compliant taxpayers or for cases involving fraud or special cases referred by Counsel.

4.24.6.3.2  (08-05-2014)
A110 Excise Tax Plan to Close Check Sheet

  1. The excise examiner will use the A110 as a guide for the exam planning phase. The A110 is a summary sheet of reminders to complete as part of the entire audit process.

  2. The A110 ensures the excise examiner:

    • Is focused on a plan to close.

    • Is organized.

    • Know the next steps that need to be completed.

    • Completes each step before proceeding to the next one.

    • Is prepared to go to the next step.

  3. The A110 consists of the following steps:

    • Review the case built file.

    • Develop the audit plan.

    • Establish initial taxpayer contact.

    • Import, prepare, and mail approved taxpayer appointment letter and initial IDR.

      Note:

      Generally when a call back appointment letter is used on a field examination case, the IDR should not be mailed until the appointment confirmation letter is sent to the taxpayer. See IRM 4.10.2.7.4.2(3). See IRM 4.24.6.3.4(5) for exception for International excise examination cases.

    • Conduct the initial appointment within 45 business days of initial contact.

    • Obtain GM audit plan concurrence within 30 business days after initial appointment if case not closed.

4.24.6.3.3  (08-05-2014)
A115 Group Manager Concurrence Meeting (GMCM) Check Sheet

  1. Within thirty (30) business days after the initial meeting with the taxpayer or the first receipt of information from the taxpayer in correspondence cases, the excise examiner and their manager will hold a discussion covering the following:

    • The initial appointment meeting with the taxpayer and reasonableness of the Mutual Commitment Date (MCD) established.

    • Accomplishments and planned actions for completing the case.

    • Issues currently identified.

    • Location of the audit work.

    • Concerns or barriers to closing the case.

    Note:

    In situations where it takes more that one meeting with the taxpayer to complete the planning tasks, the GMCM should be scheduled 30 business days after the completion of those tasks, which may not necessarily be after the initial meeting with the taxpayer.

  2. GMCM are required for all excise examiners GS-12 and below.

  3. GS-13 excise examiners are encouraged to utilize a GMCM process in order to provide updates on cases and obtain guidance from managers.

  4. In situations where the thirty (30) business day requirement cannot be met, reasons for the delay must be documented. Only in rare circumstances should the meeting occur prior to the initial meeting with the taxpayer or the initial receipt of information from the taxpayer.

  5. Group managers are to acknowledge completion of the GMCM by initialing and dating the A115.

  6. See IRM 1.4.40.7.6 Group Manager Concurrence Meeting (GMCM) for Field Examination for more information.

    Note:

    If the case is closed to the manager within 30 business days of the initial appointment, a GMCM is not required.

4.24.6.3.4  (08-05-2014)
A120 Initial Appointment Check Sheet

  1. The A120 provides guidance in conducting the initial contact with the taxpayer.

  2. Initial contact procedures found in IRM 4.10.2.7 Initial Contact: Overview apply.

  3. When the initial contact is made by telephone, the excise examiner will immediately identify themselves, provide their identification number, state the purpose of the call, and provide their telephone number.

  4. Generally, initial appointments for field examinations should be scheduled using telephone contact and a confirmation letter. This will allow the excise examiner to schedule the initial appointment at an appropriate time, which is agreeable to the taxpayer/POA and reduce the number of rescheduled appointments.

  5. Initial contact by telephone may be impractical for excise International examinations due to time zone, language and culture in foreign countries. The excise examiner may issue Letter 2205-A Initial Contact Letter, and IDR where warranted.

  6. During the initial contact by telephone or in person, the excise examiner will explain/discuss the taxpayers rights as outlined in Pub 1,Your Rights as a Taxpayer and answer any questions the taxpayer may have concerning their rights.

  7. The excise examiner must explain to the taxpayer what records should be available for the examination during the initial contact. If the taxpayer volunteers information during this initial contact concerning audit issues, the excise examiner should document the discussion.

  8. When the initial appointment is made by telephone, a follow-up Letter 3253, Taxpayer Appointment Confirmation Letter, and/or Letter 3254, Representative Appointment Confirmation Letter, will be mailed to the taxpayer/POA confirming the time/place of the examination and the records which are to be available and include the following enclosures:

    • Pub 1

    • Notice 609, Privacy Act Notice

    • Form 4564, Information Document Request

  9. When the excise examiner has been assigned an International excise examination or is unable to make initial contact by due to factors outside of their control, Letter 2205-A, Initial Contact Letter, is used to request the taxpayer call and schedule an appointment.

  10. If the taxpayer fails to respond to Letter 2205-A, the excise examiner must determine why the taxpayer is not responding and will reissue the appointment letter as registered return receipt requested. Refer to IRM 4.10.2.7.2.1Undeliverable Initial Contact Letters for additional guidance.

  11. The excise examiner will develop and document a Mutual Commitment Date (MCD)with the taxpayer during the first appointment.

    Note:

    If date is later changed by more than 30 days, the excise examiner must discuss new date with the group manager and the taxpayer.

4.24.6.3.5  (08-05-2014)
A125 Initial Interview Questions and Notes

  1. Interviews provide information about the taxpayers financial history, business operations, and books and records that are not available from other sources. Interview questions are planned to address items specific to the taxpayer under examination. The type of return and relevant facts and circumstances need to be considered in the interview plan.

  2. Interviews should be documented in sufficient depth to give a clear understanding of the taxpayer and the taxpayer's operations and in sufficient detail so that no unanswered questions remain.

  3. Interviews should obtain information needed to make informed judgments about the scope and depth of the examination and correctly resolve issues.

  4. Interviews will be documented on A125. Questions that are specific to the abstracts should be incorporated into the A125. Complete abstract questionnaires can be found in the Notebook Job Aid forms library.

    Note:

    The completion of the A125 does not necessarily constitute a complete interview.

  5. Appropriate follow up questions should be asked. The person interviewed should have sufficient knowledge to answer questions.

  6. Adequate narrative and specific abstract commentary is essential. Excise examiners need to follow the interview guidance contained in IRM 4.10.3.2, Interviews: Authority and Purpose for more information.

4.24.6.3.5.1  (08-05-2014)
Tour of Business

  1. Tours of business sites should be conducted during examinations of all business entities. Generally, the principal location, and any locations acquired during the period under examination, should be visited. However, consideration should be given to the cost effectiveness and practicality of conducting the tour. When appropriate, alternatives should be considered. Touring the business as part of the initial interview process helps the excise examiner obtain a better understanding of the taxpayer's operations and business flow. The excise examiner needs to document all findings and conclusions on the A125.

  2. Treasury Regulation 301.7605-1(d) (3) (iii) states; "regardless of where an examination takes place, the service may visit the taxpayer’s place of business to establish facts that can only be established by direct visit."

  3. See IRM 4.10.3.3, Tours of Business Sites, for more information.

4.24.6.3.6  (08-05-2014)
Required Filing Checks (RFC)

  1. Required Filing Checks (RFC) are necessary to ensure voluntary compliance. The following IMS workpapers are utilized by the excise examiner for RFC:

    • B200-1 Multi Period and Related Returns Checksheet

    • B200-2 FET Checksheet

  2. Excise examiners should perform taxpayer filing verification checks to determine that taxpayers are in compliance with all federal tax return filing requirements and that all returns reflect the substantially correct tax. See IRM 4.10.5, Required Filing Checks for more information on RFC.

  3. The excise examiner will:

    1. identify all prior, subsequent and related returns,

    2. include a summary of the analysis performed,

    3. document the conclusions reached.

  4. The excise examiner will indicate why a prior or subsequent return is not being picked up when an adjustment is being proposed in the current year.

  5. The excise examiner needs to support decision to either expand the examination to that return, or that the return does not warrant examination.

  6. RFC include the analysis of prior, subsequent and related returns and when warranted, the expansion of the examination to include additional returns. The analysis and pick up of prior, subsequent and related returns, when warranted, is an excise examiner’s primary responsibility in every examination.

  7. Limited scope examinations do not eliminate the need to perform RFC.

  8. The inspection of a return is essentially the same as classifying a return for examination potential. No records should be examined as part of this process. The excise examiner may question the taxpayer concerning items on the return in an attempt to understand how or why they occurred. The inspection of a return is not an examination. Examiner may not request documentation concerning items on the return. If documentation is requested, an examination has been opened.

  9. Whenever possible, excise examiners should use internal sources of information, e.g., Corporate Files on Line (CFOL), Modernized e-File (MeF), and Compliance Data Environment (CDE), to complete RFC. Filing should be verified for prior and subsequent year returns, related returns, information returns, employment tax returns, gift tax returns, other excise tax returns, pension plan returns, etc.

  10. Documentation in the case file should include key or summary documents secured from CFOL system used to verify filing such as:

    1. BMFOLI

    2. BMFOLT

    3. SUMRY

  11. MeF is a web-based system that allows electronic filing of corporate, individual, partnership and other returns through the Internet. The MeF system provides the excise examiner original transmitted tax return data in various formats, including a Form View, which resembles a tax return. If a return was filed using MeF, an excise examiner can access the Employee User Portal (EUP) to view the return. For additional information on EUP go to http://mysbse.web.irs.gov/exam/mis/data/25671.aspx

4.24.6.3.6.1  (08-05-2014)
Examination Information Reports

  1. Form 5346, Examination Information Report, shall be prepared whenever information is received containing sufficient compliance value that would warrant another compliance action. Examples of when Form 5346 should be completed for:

    • related or non-related taxpayers who have similar audit issues present,

    • a referral of the taxpayer for non-excise related issues.

  2. Form 5346 should be submitted to the manager for approval and then sent to the Excise Operations Support (EOS) e-mail box at "*SBSE Excise EOS." See IRM 4.24.18.4 for more information.

4.24.6.3.7  (08-05-2014)
C300 Books to Returns Reconciliation Check Sheet

  1. C300 will be used to document the excise examiner's analysis and consideration of the entire operation and activities of the taxpayer to determine the proper scope and audit path.

  2. In the course of examining the Form 720, Quarterly Federal Excise Tax Return, it is often necessary for the excise examiner to verify the taxpayer’s total sales of relevant products for a tax period.

  3. The excise examiner will often review the total sales for a year shown on a taxpayer’s income tax return, look at any relevant adjustments to this total, and inquire into the purpose of an adjustment. This information helps establish the accuracy of all Form 720 returns filed during the taxable year.

  4. Conducting a books to return analysis is especially important when the taxpayer has not filed an excise tax return. Even if the taxpayer has not filed an excise tax return and there is no amount on the excise return to reconcile to, the excise examiner must still perform a books to return analysis and document the conclusions reached that address what sales/revenue should have been reflected on the non filed return.

    Note:

    The inspection of the year-end books and records to determine year-end adjustments and total sales for the year for excise purposes and tying the year end books and records to the reported sales on the income tax return, are categorized as part of an excise tax examination. There is no legal requirement to treat a thorough review of the annual sales receipts as well as any documents related to adjustments as reported on the annual return as a separate income tax examination. When the period under examination is the third quarter, the review of the year-end books and records for sales and adjusting entries does not constitute an examination of the fourth quarter Form 720 return.

  5. An examination is started whenever actual books and records of sales are requested and examined for a period that a return has been filed or is due to have been filed.

  6. The excise examiner will reconcile all sales/revenues that are shown on the excise tax return with those on the income tax return. The excise examiner will document the justification for any differences between the two amounts. In other words all sales and revenue (and sometimes use) are subject to excise tax until verified and proven otherwise. The excise examination should account for all revenue and sales (and sometimes use) and then through the examination process, verify and eliminate those sales and income that are not subject to excise tax. Any and all remaining items after the fact are then taxable.

    Note:

    Excise examiners who only verify the accuracy of the taxpayer prepared worksheets are not really considering all income and sales and uses that the taxpayers did not include on those schedules.

  7. The excise examiner will document any adjustments made by the taxpayer to the amounts shown for sales/revenue on the books of the taxpayer.

  8. An in-depth job aid covering books to return reconciliation may be found on the Examining Excise Taxes web site athttp://mysbse.web.irs.gov/Specialty/excise/default.aspx.

4.24.6.3.8  (08-05-2014)
C305 Internal Controls

  1. The C305 will be used to document the analysis of internal controls and assess the level of control risk.

  2. It is important to obtain sufficient competent evidence to determine the accuracy of the taxpayer’s return. The excise examiner must determine the appropriate amount of evidence to accumulate and establish the proper depth of the examination. This decision is a matter of judgment and important because of the prohibitive cost of examining and evaluating all available evidence. Factors to consider when establishing the depth of the examination include:

    1. The risk that the taxpayer has made errors that are individually or collectively material.

    2. The risk that the audit tests will fail to uncover material errors e.g. the examination techniques used, the nature of the errors (intentional or unintentional) and the reliability of available evidence.

  3. The excise examiner should either flowchart a step by step process of key business operations or document, in narrative form, sufficient detail which provides information comparable to that shown by flowcharting the process.

4.24.6.3.8.1  (08-05-2014)
Risk Analysis

  1. Excise examiners should compare the potential benefits to be derived from examining a return to the resources required to perform the examination.

  2. Excise examiners are expected to effectively manage their workload by prioritizing the issues so that the issues with higher audit potential are examined over those with lower potential. Issues with little or no audit potential should not be selected for examination.

  3. Excise examiners are expected to use their professional judgment to determine if it is in the government’s best interest to continue the examination and to document the excise examiner's risk based decisions with regard to depth and scope of their examination.

  4. At the mid point of the examination, using risk analysis, the excise examiner should determine whether the remaining classified/identified issues should be examined. This decision should be based on the facts and circumstances, evaluation of internal controls (see IRM 4.24.6.3.7.1) and the excise examiner’s judgment. For example, the resulting additional tax is not expected to be material, or the time to develop additional issues is not justified based on the potential for more tax.

  5. See IRM 4.10.2.4 Evaluation of Audit Potential for more information.

4.24.6.3.9  (08-05-2014)
C310 Fraud Awareness Check Sheet

  1. Excise examiners should familiarize themselves with the Fraud Handbook IRM 25.1.1 through 25.1.6 when developing a fraud case.

  2. IRM 25.1.7, Failure to File, discusses the various procedures concerning fraud in failure to file cases.

  3. To assist in the timely development of fraud cases, the excise examiner, with manager concurrence, should contact a Fraud Technical Advisor (FTA) and the Excise Fraud Analyst when the initial indicators of fraud are uncovered. A plan of action should be developed jointly to document firm indications of fraud. An integral part of the plan is establishing that sufficient affirmative acts exist to confirm fraud. The plan should be a joint effort of the excise examiner, the group manager, the FTA, and the Excise Fraud Analyst.

  4. The FTA and the Fraud Analyst will serve as a consultant during the development of the case.

  5. If a case is referred to Criminal Investigation (CI) and is accepted for a criminal investigation, the group manager will continue to monitor status code 18 cases through the use of the quarterly four-way conferences with CI.

  6. The excise examiner will use the C310 to document this action.

  7. The excise examiner will complete Form 11661, Fraud Development Recommendation, when they suspect fraud. The completed form should be electronically forwarded to the Fraud Technical Advisor (FTA) through the group manager for approval to place a case in fraud development status. Case should be updated to Status Code 17 (Fraud Development Status) and Status Code 18 (Accepted by CI).

  8. When the excise examiner, group manager, and FTA have agreed that the case contains sufficient evidence to prove the existence of firm indicators of fraud, the excise examiner (with the help of the FTA, if needed) should prepare Form 2797, Referral Report of Potential Criminal Fraud Cases to refer the case to CI. The excise examiner will route Form 2797 via e-mail to their manager, who will in turn send it to the FTA via e-mail.

    Note:

    Form 2797 is not required for civil fraud referrals

  9. CI has 10 working days after receipt of the referral to make contact with the excise examiner, group manager and FTA and set up a meeting to discuss the case. At the 10 day meeting, the excise examiner will provide CI with their entire case file and discuss the issues.

  10. For additional information regarding fraud see the Fraud Resources web page located at http://sbseservicewide.web.irs.gov/Fraud/ExamFraud/ExamFraudRes/default.aspx

4.24.6.3.9.1  (08-05-2014)
Suspicious Activity Reports (SAR)

  1. Excise Tax Policy Analyst has authority to electronically access SAR information or receive SAR data in connection with active and assigned cases, including those assigned to case-building functions within PSPWIC. SAR information may be helpful in examination and case building activities when:

    1. Excise examiner has exhausted routine means of locating banking information.

    2. Excise examiner has noted potential fraud indicators.

    3. Taxpayer appears to be utilizing cash transactions to avoid reporting of income.

    4. Taxpayer has made a voluntary disclosure and/or offshore bank accounts are suspected.

    5. Excise examiner is investigating a Whistleblower case involving unreported income, offshore bank accounts or activities.

    6. The WebCurrency and Banking Retrieval System (WebCBRS) reflects a Currency Transaction Report (CTR). A CTR is filed when a transaction occurs which involves currency exceeding $10,000.

  2. Refer to IRM 4.26.15, Bank Secrecy Act - General Program, for more information regarding SAR procedures.

4.24.6.3.10  (08-05-2014)
D400 Initial Taxpayer Contact Sheet

  1. The D400 contains action items to consider when making initial contact. It is used to document that the excise examiner:

    • Advised taxpayer that tax return has been selected for examination.

    • Discussed the audit process.

    • Discussed taxpayer rights.

    • Scheduled the initial appointment.

    • Addressed any questions or concerns of the taxpayer.

4.24.6.3.11  (08-05-2014)
E500 Penalty Issues Check Sheet and Managerial Approval for Penalty Assessments

  1. The E500 is used by excise examiners and managers to document the assertion or non-assertion of penalties.

  2. IRC 6751(b)(1) states that in general, no penalty under the Code shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.

  3. Notwithstanding the exception noted in paragraph 4 below, this approval requirement will also apply to the imposition of any fraud penalty including fraudulent failure to file penalty under IRC 6651(f).

  4. IRC 6751(b)(2) provides an exception to the managerial approval requirement for penalties calculated through electronic means. This exception applies to the following penalties:

    1. IRC 6651, Failure to File Tax Return or to Pay Tax,

    2. IRC 6656, Failure to Deposit, and

    3. any other penalties automatically calculated through electronic means.

    Note:

    Penalty automatically calculated through electronic means, is something more than merely an electronic device is used to perform arithmetic functions to determine the amount of a penalty. Instead, the assessment of a penalty qualifies as one calculated through electronic means if the penalty is assessed free of any independent determination by an IRS employee as to whether the penalty should be imposed against a taxpayer.

  5. For purposes of this section, the term "penalty" includes any addition to tax or any additional amount. See IRC 6751(c) and IRM 20.1.1.1.13.

  6. The manager must perform a meaningful review of the excise examiner's penalty determination prior to assessment. The manager should verify that the penalty impositions are accurate and the excise examiner properly documents the conclusions regarding assertion or non-assertion of penalties in the file. The manager must document the review and approval on the 300, when warranted. See IRM 20.1.5.1.6, Managerial Approval of Penalties.

  7. See IRM 4.10.6, Penalty Considerations for additional support/documentation for the assertion and non-assertion of penalties.

  8. See Penalty Handbook IRM 20.1.1.3 , Criteria for Relief from Penalties, for penalty relief based on reasonable cause.

  9. See IRM 4.24.9, Excise Penalty Procedures, and IRM 20.1.11, Excise Tax and Estate and Gift Tax Penalties, for more information.

4.24.6.3.12  (08-05-2014)
Extending the Period of Limitations for Assessment of Excise Tax

  1. The Internal Revenue Code limits the time in which the government may make an assessment of tax. Excise examiners have the primary responsibility for identifying and protecting the period of limitations for returns in their custody. IRM 25.6.1, Statute of Limitations Processes and Procedures, provides guidance for verifying statute dates. Failure to protect the period of limitations can result in disciplinary action.

  2. Form 895, Notice of Statute Expiration, is used to provide information, notification and statute update approval for statute of limitations for tax returns. Refer to the Form 895 Job Aid located on the Job Aids page of the Examining Excise Tax web site at http://mysbse.web.irs.gov/Specialty/excise/examcase/job/21187.aspx

  3. If the period of limitations for assessment of tax is due to expire, or if it has already expired on the assigned return, the return should be immediately brought to the group manager to determine the return’s disposal.

  4. A period of limitation to assess certain excise taxes can generally be extended with the taxpayer’s consent. Excise examiners must obtain the approval of the group manager before requesting a taxpayer to execute a consent. The need for a consent should be clearly identified before it is solicited and the group manager’s approval documented in the IMS case file. See IRM 25.6.22.2.1 (2), Assessment, for a listing of some of the conditions that allow for an extension of limitation to assess certain excise taxes.

    Note:

    An excise examiner cannot initiate an examination on any return with less than 12 months remaining on the period of limitations for assessment, without prior managerial approval.

  5. Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, is used to extend the statutory period of limitation on assessment of the excise taxes reported on:

    • Form 720, Quarterly Federal Excise Tax Return,

    • Form 2290, Heavy Highway Vehicle Use Tax Return,

    • Form 730, Monthly Tax Return for Wagers,

    • Form 11-C, Occupational Tax and Registration Return for Wagering,

  6. Form 872-EX, Consent to Extend the Time on Assessment of Information Report Penalty, is used to extend the statutory period of limitation on assessment of civil penalties relating to information reported on:

    • Form 720-TO, Terminal Operator Information Report,

    • Form 720-CS, Carrier Summary Information Report.

    See IRM 4.24.17.4, ExSTARS Statute Controls and Extensions, for detailed procedures.

  7. The consent agreement is signed by the taxpayer(s) and an IRS representative to extend, to a mutually agreed upon (new) specified date, the Assessment Statute Expiration Date (ASED) on assessment of excise taxes.

  8. Instructions for proper completion of Form 872-B are found in IRM 25.6.22.6.11, Excise Tax.Form 872-B may be signed on behalf of the Director of Specialty Programs by excise field group managers as specified in Delegation Order 25-2. See IRM 1.2.52.3 for more information.

    Note:

    When consent agreements are executed by excise field group managers, the name of the Director of Specialty Programs will be written, typed, or stamped on the signature line of the form. The excise field group managers will sign their own name and indicate their title and date on the line immediately below.

  9. Claims for refund of excise taxes filed on Form 8849, Claim for Refund of Excise Taxes and/or amended Form 720 returns present unique statute situations. Refer to IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement, for more information.

  10. See Exhibit 4.24.6-1. for a summary of the statutory period of limitations for excise returns.

  11. For additional information refer to the Form 872 and Form 895 Job Aids at http://mysbse.web.irs.gov/Specialty/excise/examcase/job/default.aspx.


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