Part 4. Examining Process

Chapter 24. Excise Tax

Section 17. Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures

4.24.17  Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures

Manual Transmittal

March 29, 2012

Purpose

(1) New IRM. This transmits new IRM 4.24.17, Excise Tax, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures.

Material Changes

(1) Content from IRM 4.24.9 relating to the ExSTARS program has been moved into this new IRM section. See table below for details.

IRM Description
4.24.17.1 Introduction to Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examinations New content
4.24.17.2 ExSTARS Workload Classification, Selection, and Assignment Relevant content from 4.24.9.12 moved here and new content added
4.24.17.3 ExSTARS Report Filings New content
4.24.17.4 ExSTARS Statute Control and Extensions New content
4.24.17.5 ExSTARS Examination Return Control System (ERCS) Procedures Relevant content moved from 4.24.9.17 and updated
4.24.17.6 ExSTARS Information Provider Initial Contact Relevant content moved from 4.24.9.13 and updated
4.24.17.7 ExSTARS Examination Issues New content
4.24.17.8 ExSTARS Information Report Accuracy Issues Relevant content moved from 4.24.9.14 and new content added
4.24.17.9 Overview of ExSTARS Compliance Examination and Penalty Case Closing and Appeals Procedures New content
4.24.17.9.1 ExSTARS Compliance Examination Case Closing Result Letters New content
4.24.17.9.2 ExSTARS Compliance Examination – No Penalty Case File Documentation Relevant content moved from 4.24.9.18 and new content added
4.24.17.9.3 ExSTARS Penalty Case File- Agreed Case Closing Documents Relevant content from 4.24.9.16 and 4.24.9.19 moved here and new content added
4.24.17.9.4 ExSTARS Penalty Case File-Information Provider Agrees with Penalty Proposal Relevant content from 4.24.9.19 moved here and new content added.
4.24.17.9.5 ExSTARS Penalty Case File- Unagreed Case Closing Information Relevant content from 4.24.9.19.1 moved here and new content added
4.24.17.9.6 ExSTARS Penalty Case File- Unagreed Case Closing Documents New content
4.24.17.9.7 ExSTARS Penalty Case File- No Response from ExSTARS Information Provider New content
4.24.17.10 Instructions for Completing Form 8278, Computation and Assessment of Miscellaneous Penalties, Non-Return Related Civil Penalties Content moved from Exhibit 4.24.9-1

Effect on Other Documents

SBSE 04-0811-071 Interim Guidance on Scheduling Form 720-TO Terminal Operator Report Examination Appointments dated 8-9-2011 and SBSE 04-1211-106 Reissuance of Interim Guidance on Scheduling Form 720-TO Terminal Operator Report Examination Appointments dated 12-06-2011 have been included in this IRM section.

Audience

Small Business/Self-Employed (SB/SE) Excise Exam Managers, National Quality Reviewers and Excise Employees.

Effective Date

(03-29-2012)



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

4.24.17.1  (03-29-2012)
Introduction to Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examinations

  1. All ExSTARS compliance examinations are worked using Issue Management System (IMS) and related Notebook administrative workpapers.

  2. ExSTARS serves as a means to gather information that is used for analytical purposes to determine if proper excise tax liabilities are reported to federal and state governments.

  3. IRC 4101(d) requires terminal operators and bulk carriers to file monthly ExSTARS information reports to account for the receipt and disbursement of all liquid products to and from approved terminals. The terminal operators file Form 720-TO,Terminal Operator Report. Bulk carriers file Form 720-CS, Carrier Summary Report. Electronic ExSTARS filing is required for each report that has 25 or more transactions in a month.

  4. ExSTARS information is analyzed for tax compliance purposes. The submission of erroneous data will negatively affect classification efforts, which in turn diminishes work-plan selection, taxpayer service, and program asset utilization. To support accurate reporting, compliance examinations are conducted by excise tax examiners and Excise Fuel Compliance Agents (FCA) in the Fuel Territories.

  5. ExSTARS compliance examinations are separate and distinct from Form 720, Quarterly Federal Excise Tax Return, examinations. The scope of an ExSTARS compliance examination is limited to ExSTARS filing requirement issues concerning:

    1. failure to make a report on or before the date prescribed,

    2. failure to include required information, or

    3. the inclusion of incorrect information.

  6. IRC 6725 imposes a penalty for failure to file a report or furnish required information pursuant to IRC 4101(d) . The penalty is $10,000 per failure with respect to each vessel or facility (e.g., a terminal or other facility) for which information is required to be furnished. No penalty is imposed if reasonable cause is established.

  7. Entities required to report under the ExSTARS system must be properly registered. IRC 6719 imposes a penalty for failing to register or reregister as required by IRC 4101. The penalty is $10,000 for each initial failure and $1,000 for each day that the failure to register or reregister continues. This penalty does not apply if reasonable cause is established.

  8. Tax issues identified during an ExSTARS compliance examination that may impact the Form 720 liability of the ExSTARS report filer or any other entity should be referred to Excise Operations Support by preparing Form 5346, Examination Information Report.

  9. ExSTARS compliance examinations that identify Form 637 registration issues, including consideration of failure to register or reregister provisions under IRC 6719, require group manager concurrence. Excise tax examiners will submit Form 5346 to the Form 637 Registration Program Manager for registration issues affecting entities not under examination.

  10. ExSTARS compliance examination primary objectives:

    • Identify large, unusual, and questionable (LUQ) items.

    • Ensure report data is accurate, timely, and filed as per IRC 4101(d).

    • Develop fraud issues.

    • Improve the probability of future reporting compliance.

    • Impartial and consistent application of IRC 6719 and 6725 penalties.

4.24.17.2  (03-29-2012)
ExSTARS Workload Selection, and Assignment

  1. Excise tax examiners should take a role in improving classification, workload selection, and assignment by providing information to Excise Operations Support regarding industry trends, developments, arrangements, and preferences within their jurisdiction.

  2. IRM 4.24.4.5 provides workload stratification guidance specific to fuel related examination activities.

  3. IRC 4101 compliance case work, includes:

    1. Form 720-TO/CS ExSTARS compliance examinations,

    2. Form 637 Registration initial applications and compliance reviews, and

    3. IRC 6719 and 6725 penalty cases,

  4. An IRC 4101 compliance exam is assigned at journey level or below grade.

  5. Grade level assignments may differ between IRC 4101 compliance case work and Form 720 examinations. Group manager assignment of a related Form 720 exam as a part of the IRC 4101 compliance exam will require an adjustment from the journey level or below status to match that of the Form 720 case grade.

  6. The primary IRC 4101 compliance case plus any subsequent and/or prior periods, or any related IRC 4101 compliance case work, controlled by an examiner, will carry the same grade level.

  7. A related registrant that is examined by other excise tax examiners will be graded separately.

  8. To expand the scope of IRC 4101 compliance case work to a Form 720 examination or Form 8849 claim for refund, the excise tax examiner or FCA must submit a referral using Form 5346, Examination Information Report, to their manager.

4.24.17.3  (03-29-2012)
ExSTARS Report Filings

  1. Terminal Operators or Carriers with more than 25 transactions in any month are required to file electronic ExSTARS reports. The system validates specific data field syntax and string structure, as described in Pub 3536, Motor Fuel Excise Tax EDI Guide. The validation process does not verify accuracy or identify omitted transactions.

  2. The excise tax examiner conducts a compliance examination to determine report information accuracy. A working knowledge of Pub 3536 and ExSTARS report paper instructions is a prerequisite.

  3. Examples of situations that would generate error reports are:

    • Invalid EINs will generate "must fix" errors.

    • Use of 777777777, 888888888, or 999999999 as an EIN is not allowed when identifying terminals operators, position holders or bulk carriers.

    • The TIN 777777777 is not allowed when the carrier or consignor is the Department of Defense (DOD).

    • The TIN 888888888 is not allowed to report a foreign-flagged vessel as a carrier.

    • The TIN 999999999 can only be used to report rail or truck carriers when EIN is unknown.

    • Social security numbers are not permitted

  4. Upon submitting monthly data, information providers receive an acknowledgment for the receipt of every electronic information report:

    1. Transmission acknowledgement (ACK) (997) file, and

    2. Validation (151) ACK file.

  5. The ACK files are placed in the electronic participant’s mailbox that was set up as part of the EDI testing.

  6. Filing date evidence is the receipt date of a 997-A (accepted) ACK and a 151 ACK. The TS-997 ACK file is created every time an ExSTARS Information Provider or Approved Excise Third Party Transmitter submission is successfully transmitted.

  7. If the information provider receives a TS-997 ACK with an “A” in the AK501 segment, followed by a TS-151 ACK Level 1 error, then the transaction set has been rejected in its entirety. The information provider is required to correct the problem and resubmit the transaction set as an original file.

4.24.17.4  (03-29-2012)
ExSTARS Statute Control and Extensions

  1. The statute of limitation is the allowable time period in which the IRS may make an assessment regarding an ExSTARS report. A report must be filed to commence the statute of limitation provision. A failure to file a report permits the statute of limitations to remain open indefinitely.

  2. ExSTARS information reports do not post to IDRS therefore a statute of limitation (SOL) date will not automatically post to the master file. The ExSTARS report filing date can generally be found in the case file building material or through a Joint Operation Center (JOC) information request. Visit the JOC Issues and Procedures web page at http://mysbse.web.irs.gov/Specialty/excise/issues/joc/default.aspx for requesting additional case file data.

  3. The statute of limitations of a filed ExSTARS information report is generally the later of 3 years from the required time to file or the actual report file date.

  4. In general, an examination of an ExSTARS report must be completed timely and within the statute of limitation provisions. In cases where a compelling business reason exists, Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, may be solicited. Examples of when to secure a Form 872-B extension include:

    1. Penalty issue(s) that require the compliance examination to remain active.

      Note:

      Civil penalties under IRC 6719 and 6725 may be imposed exclusive of an examination.

    2. Statute of limitation period will expire within 180 days

    3. There is insufficient time to complete and process the case. For example, an examination with less than 12 months remaining on the statute of limitations, cannot be initiated without group manager approval.

  5. The excise tax examiner must secure group manager concurrence prior to a statute extension solicitation.

  6. IRM 4.24.6.3.1.3, Extending the Statute of Limitations for Form 720 Terminal Operator (TO) Report and Form 720 Carrier Summary (CS) Report Returns, describes the extension procedures.

  7. Excise tax examiners must submit Form 5348, AIMS/ERCS Update, upon securing a statute of limitations extension for the system to reflect the new statute date.

4.24.17.5  (03-29-2012)
ExSTARS Examination Return Control System (ERCS) Procedures

  1. ExSTARS information reports are not established on the Audit Inventory Management System (AIMS) and therefore do not post to the Integrated Document Retrieval System (IDRS). ExSTARS compliance examinations and associated penalties are controlled on ERCS.

  2. Terminal operators may operate multiple approved terminal facilities under a single Taxpayer Identification Number (TIN). The use of a substitute "TIN" , reflecting the facilities specific terminal control number is used for ERCS purposes. See IRM 4.24.17.5(4)(d) .

  3. Bulk carriers use actual taxpayer identification numbers.

  4. ExSTARS compliance case files will generally be established on ERCS. If a case is not established on ERCS, the excise tax examiner must submit Form 5345-D, Examination Request-ERCS (Examination Returns Control System) Users, to the group manager with the following information:

    1. Enter entity's name and address

    2. Check the "Control Penalty Investigation" box

    3. Carrier Summary Tax Identification Number (TIN).

    4. Terminal Operator TIN - use a substitute TIN to identify the specific facility. The TIN format for ERCS control is 00-0 plus the 6 digits from the entities TCN. Example: The TCN for ABC Terminal is 61-KY-1234; therefore the substitute TIN is 00-0611234.

    5. Form Type - Form 720-TO or 720-CS

    6. MFT – B1

    7. Tax Period – period under exam is identified in the classification package

    8. Activity Code – 547 Form 720TO/CS

    9. Source Code – 20 Regular Classification

    10. Status Code – 10 Unstarted

    11. Statute Date – Contact the JOC for filing date information to calculate the statute date

    12. Tracking Code – Form 720-TO case will use Tracking Code 7664 (Form 720-TO Penalty Case; Form 720-CS cases will use Tracking Code 7770 (Form 720-CS Penalty Cases)

    13. Project Code – 0063 Fuel Terminal

  5. Prior and/or subsequent compliance periods require the excise tax examiner to submit Form 5345-D which should include the following data field information:

    1. MFT – B1

    2. Tax Period – Applicable examination period

    3. Activity Code - 547

    4. Source Code – 40 Filed prior and/or Subsequent Year Pick-Up

    5. Status Code – 10, once time is applied status will update to 12

    6. Statute Date –Contact the JOC for filing date information to calculate the statute date

    7. Tracking Code – Form 720-TO case will use Tracking Code 7664 (Form 720-TO Penalty Case ; Form 720-CS cases will use Tracking Code 7770 (Form 720-CS Penalty Cases )

    8. Project Code – 0063 Fuel Terminal

  6. Penalty assertions resulting from IRC 4101 compliance case work requires a separate case file. The excise tax examiner must submit Form 5345-D to establish the case. Include all necessary information, including the following data field information:

    1. Entity's name and address

    2. Check the "Control Penalty Investigation" box

    3. The Tax Identification Number (TIN) – Penalty cases must use an accurate TIN – do not use terminal compliance exam substitute numbers.

    4. MFT– P9

    5. Tax Period – Period in which the events occurred

    6. Activity Code - 506 Information Return Penalty Case

    7. Source Code – 99 Non AIMS Miscellaneous Penalty

    8. Status Code – 10, once time is applied status will update to 12

    9. Statute Date – Enter the statute date provided by the JOC as reflected in the B1 case. )

    10. Tracking Code – Form 720-TO case will use Tracking Code 7664 (Form 720-TO Penalty Case ; Form 720-CS cases will use Tracking Code 7770 (Form 720-CS Penalty Cases )

    11. Project Code – leave blank

4.24.17.6  (03-29-2012)
ExSTARS Information Provider Initial Contact

  1. Prior to the start of an ExSTARS compliance exam the excise tax examiner must ask the group manager to perform an ERCS/AIMS review to identify other excise tax examiners auditing related entities, subsidiaries, and facilities.

  2. IRM 4.24.5, requires initial communication with the LB & I team coordinator prior to contacting an entity. Similarly, communication must first be held with other excise tax examiners auditing related entities, subsidiaries, and facilities to discuss and coordinate the exam process.

  3. Initial ExSTARS compliance exam communication must be made to the excise tax information contact person listed on the entity’s Motor Fuel Excise Tax Electronic Data Interchange (EDI) Letter of Application (LOA). This information should be part of the case building material. If it is not included, submit a guidance request memo (GRM) to the national facility control number coordinator. See IRM 4.24.6.13 for GRM procedures.

  4. If excise tax examiner telephone contact fails, the excise tax examiner will issue Letter 2205-A, Initial Contact Letter, to the LOA contact person. Identify the TCN, if applicable, under the header subsection titled "Form."

  5. If an excise tax examiner is unable to communicate with the LOA person or a principal officer, call the Form 637 registration application contact person.

  6. Upon scheduling an initial visit, the excise tax examiner must issue:

    1. Letter 4591, Appointment Letter,

    2. Form 4564, Information Document Request,

    3. Pub 1, Your Rights as a Taxpayer, and

    4. Notice 609, Privacy Act Notice.

4.24.17.7  (03-29-2012)
ExSTARS Examination Issues

  1. The accuracy of ExSTARS information is crucial to the Service’s ability to effectively measure compliance. Timely, complete, and accurate filing is essential. The examination issues described in this section emphasize potential errors that may result from noncompliant reporting. Excise tax examiners are reminded to always consider and document reasonable cause.

  2. Failure to File / Late Filed Reports: ExSTARS information reports must be filed monthly. The report is due on the last day of the following month.

  3. A 30 day automatic extension is granted to requests received in writing on or before the due date of a report. Additional 30-120 day extension requests may be granted if received timely and contain a valid explanation.

  4. Examiners may request ExSTARS extension information by submitting a guidance request memo (GRM) to the national facility control number coordinator.

  5. An excise tax examiner should consider all facts and circumstances in the consideration of a late filed report. Group manager concurrence must be obtained for all late filed report determinations.

4.24.17.8  (03-29-2012)
ExSTARS Information Report Accuracy Issues

  1. Listed below are some of the ExSTARS information report terminal operator accuracy issues that the excise tax examiner may encounter during a compliance examination:

    • Carrier (receipt and removal)

    • Position holder product code

    • Mode code

    • Volume received/removed, bulk and non-bulk

    • 2-party exchanges

    • Gains/losses

    • Summary reporting

    • Information omitted or not required

  2. Listed below are some of the ExSTARS information report carrier summary issues that the excise tax examiner may encounter during a compliance examination:

    • Volume discrepancies

    • Erroneous terminal control number

    • Erroneous position holder/owner

    • Erroneous product code

    • Erroneous transaction dates

    • Information omitted or not required

4.24.17.9  (03-29-2012)
Overview of ExSTARS Compliance Examination and Penalty Case Closing and Appeals Procedures

  1. The ExSTARS compliance examination case file should contain all the information necessary to ensure a clear understanding of audit step actions.

  2. Examination reports (unlike work papers) are legally binding documents which serve as the basis for assessment and collection action. Excise tax examiners should take all necessary precautions to ensure the accuracy and proper execution of examination reports.

  3. Excise tax examiner contact information must be provided to the information provider upon issuance of a report. Refer to IRM 4.10.1.6.9, Providing Taxpayers with Employee Contact Information.

  4. The excise tax examiner is required to utilize management specified examination and report generating software for ExSTARS compliance examinations. The Issue Management System (IMS) with affiliated Notebook, (which provides lead sheet templates, reports, letters, and closing forms), is the current excise tax examination case file software system.

  5. The procedural guidance found in IRM 4.24.6, Excise Tax Examiner Responsibilities, and IRM 4.24.10 Excise Tax Examination Reports, Case Closing and Appeals Procedures generally apply to ExSTARS compliance examinations except where noted in this IRM section.

4.24.17.9.1  (03-29-2012)
ExSTARS Compliance Examination Case Closing Result Letters

  1. Results of an ExSTARS compliance examination may conclude as follows:

    • Substantially correct – no penalty, -A No Deficiency Found Letter 4574-A should be issued to inform the information provider that an examination has been completed and no further action is required.

    • Immaterial error(s) – no penalty, Letter 4574 should be issued to inform the information provider that an examination has been completed, but states the various deficiencies that require corrective action by the information provider

    • Material error(s) – penalty imposition, Letter 4599, Agreed Letter for Failure to Report Form 720 TO/CS should be issued

    • Material error(s) – penalty imposition. See IRM 4.24.17.9.5 for information regarding unagreed case closing guidance.

4.24.17.9.2  (03-29-2012)
ExSTARS Compliance Examination – No Penalty Case File Documentation

  1. Case file documentation:

    1. Form 3198, Special Handling Notice for Examination Case Processing

    2. Form 4318, ExSTARS Compliance Index

    3. Form 9984, Examining Officer’s Activity Record

    4. A105-Administrative Plan to Close

    5. A110-Pre-Plan Analysis

    6. A125 –Group Manager Concurrence Meeting Sheet

    7. A130-Initial Contact Check Sheet

    8. B205 Initial Interview Questions

    9. C300-Form 720-TO Review Lead Sheet

    10. E500 Penalty Check Sheet - Penalty Approval Form

    11. Index ZZ – Supporting Workpapers

    12. A copy of Letter 4574 or 4574-A

  2. In noncompliance cases, the excise tax examiner will associate a copy of the examination closing Letter 4574 and a summary of each deficiency with the Form 637 registration case file by sending a secure e mail to the appropriate Form 637 registration lead tech.

  3. Prepare Form 3198. Include the following information:

    1. ExSTARS information provider name,

    2. ExSTARS information provider address,

    3. ExSTARS information provider EIN,

    4. examiner contact information,

    5. period(s),

    6. time applied,

    7. MFT-B, and

    8. Disposal Code 02.

    Attach Form 3198 to the top outside cover of the case file.

  4. A completed case file is submitted for group manager review. Upon approval, the case is closed and the group clerk updates ERCS to status 90. The group manager retains custody of the physical file.

  5. Excise tax examiner will close case off of IMS after confirming case file was updated to status 90.

4.24.17.9.3  (03-29-2012)
ExSTARS Penalty Case File- Agreed Case Closing Documents

  1. In the event a penalty proposal is warranted, the excise tax examiner will prepare and submit the following documents to the group manager:

    1. Form 5345-D ERCS control request,

    2. Work-paper E500-Penalty Approval Lead Sheet, and

    3. Form 886-A, Explanation of Items.

    Note:

    Penalty assessments require an actual TIN. Form 5345-D must reflect the actual TIN of an approved terminal and not the substitute TIN used for controlling the ExSTARS compliance exam. Additionally, excise tax examiners should provide group managers with information regarding any other penalty proposals under consideration from other excise tax examiners, pertaining to the controlled TIN and any related TINs. Efforts must be made to coordinate the issuance of penalty reports.

  2. Upon approval, the group manager will establish the ERCS penalty period(s), and return the executed forms to the excise tax examiner. The original documents will be placed in the ExSTARS compliance examination case file with a copy of each document included in a newly established penalty case file.

  3. At this juncture, the ExSTARS compliance examination and penalty case files should be substantially documented. Upon receipt of the executed E500 Penalty Approval Lead Sheet, the excise tax examiner should discuss the penalty proposal with the ExSTARS information provider. If the contact person is unavailable, address the penalty proposal(s) with an entity principal or officer.

    Note:

    If the LOA contact person has changed, the excise tax examiner will secure a new LOA.

  4. Posting of the assessed penalty amount to IDRS is made using MFT 13, penalty reference number 667.

4.24.17.9.4  (03-29-2012)
ExSTARS Penalty Case File-Information Provider Agrees with Penalty Proposal

  1. The penalty case file should include and be assembled as follows:

    1. Form 3198, (attached to top cover of case file)

    2. Form 8278, Computation and Assessment of Miscellaneous Penalties, Non-Return Related Civil Penalties

    3. Form 5384, Excise Tax Examination Changes

    4. Form 886-A, Explanation of Items

    5. Form 4318, ExSTARS Compliance Index

    6. Form 9984

    7. E500 Penalty Check Sheet, Penalty Approval Form and all related workpapers

    8. Copy of Letter 4599, Agreed Letter for Failure to Report Form 720 TO/CS

      Note:

      Letter 4599 is used for both agreed and unagreed penalty cases

    9. Index ZZ – Supporting Workpapers

    10. Registrant written response, if applicable, (place behind Form 886-A )

    11. Form 3244-A, Payment Posting Voucher, (attach to Form 5384)

  2. Prepare Form 3198, include the following information:

    1. ExSTARS information provider name,

    2. ExSTARS information provider address,

    3. ExSTARS information provider EIN,

    4. examiner contact information,

    5. exam period(s),

    6. time applied,

    7. MFT-13 (not MFT P9), and

    8. Disposal Code 03, or 04 if agreement received after issuance of 30 day letter.

  3. Attach Form 3198 to the top outside cover of the case file. Check the "Other Instructions" box in the "Special Features" section and insert the following language: "6725 Penalty Case File – Assess using reference code 667 for month’s mm/yy through mm/yy."

  4. The excise tax examiner will forward the completed ExSTARS compliance exam and penalty case files to the group manager for approval.

  5. If the case is not approved, the group manager will return the case file to the excise tax examiner for further development or other actions. This activity is to be documented in the case file.

  6. Group manager approved ExSTARS penalty case files are sent to Centralized Case Processing (CCP) at the Cincinnati Service Center (CCSC). The group clerk updates the case to status 51 and mails the case to:

    Mail Case File To:
    IRS-Cincinnati Service Center
    IRS Case Processing- Exam
    CCP Team 205, Stop 8412G
    201 W. Rivercenter Blvd.
    Covington, KY 41011

  7. Place a copy of the Form 5384 in the Form 637 registration case file. If the excise tax examiner does not have the Form 637 registration file, send a secure e-mail to the appropriate Form 637 lead tech for case file association.

  8. Upon input of Form 8278, CCP will close ERCS database to Status 90. The excise examiner will close the case from IMS upon confirming that the status 90 has posted.

  9. As prescribed by IRM 25.6.23.8.1, Minimum Time Remaining to ASED, Minimum Time Remaining to ASED , unagreed cases received in Appeals must have a 180 day minimum remaining on the assessment statute of limitation.

4.24.17.9.5  (03-29-2012)
ExSTARS Penalty Case File- Unagreed Case Closing Information

  1. Appeals has jurisdiction over penalties provided by Chapter 68, Subchapter B (Additions to the Tax, Additional Amounts, and Assessable Penalties). These penalties are subject to a reasonable cause determination, provided that the ExSTARS information provider has requested appeals office consideration and, if required, has either made a small case request (total amount of penalties for each tax period is $25,000 or less) or filed a formal written protest. See Pub 3498, The Examination Process. The excise tax examiners will close appeal protest cases using disposal code 07.

  2. Appeal of a reasonable cause penalty may be made before or after payment, but it must be made before a claim for refund is filed.

  3. See IRM 20.1.1.4, Methods of Appealing Penalties, and Rev. Proc. 86-10, 1986-1 CB 534 regarding establishing procedure on a trial basis for appeal of reasonable cause penalty assessments. Appeals case routing procedures found in IRM 4.24.10.7.1 also apply to ExSTARS penalty cases.

  4. Letter 4599 is used to transmit the report and all required letter enclosures to the ExSTARS information provider.

    Note:

    Letter 4599 is used for both agreed and unagreed penalty cases

  5. In general, no penalty will be imposed if reasonable cause is established. Penalty assertion requires careful consideration of the facts and circumstances of each case. Excise tax examiners will consider and document the exam issue and any reason, as it relates to the issue, furnished by the information provider.

  6. If the ExSTARS information provider does not agree with the penalty assessment, they can request:

    • A managerial conference,

    • Appeals consideration, or

    • Pay the penalty and file a claim for refund or petition the court.

  7. Penalty case files where information providers fail to respond, or wish to pay the penalty and file a claim for refund or petition the court, will be closed unagreed and forwarded to CCP at the address notated in IRM 4.24.17.9.4(6) .

  8. Appeals request requires the group clerk to update the case to Status 21 and forward the case to Technical Services. Pub 3498 provides details regarding a small case request versus a formal written protest.

  9. As prescribed by IRM 25.6.23.8.1, Minimum Time Remaining to ASED , unagreed cases received in Appeals must have a 180 day minimum remaining on the assessment statute of limitation.

  10. Unagreed penalty assessments prior to closing a case file require group manager approval. Assessments are made by faxing the following forms to CCP: Form 3198, 5385, and 8278 for each period.

4.24.17.9.6  (03-29-2012)
ExSTARS Penalty Case File- Unagreed Case Closing Documents

  1. In cases where the ExSTARS information provider does not agree with proposed penalty, the penalty case file should include and be assembled as follows:

    1. Form 3198 attached to top cover of case file

    2. Form 4665, Report Transmittal

    3. Form 8278

    4. Form 5385, Excise Tax Examination Changes and Consent to Assessment & Collection

    5. Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment

    6. Form 886-A

    7. ExSTARS Information Provider’s written responses

    8. Form 4318, ExSTARS Compliance Index

    9. Form 9984

    10. E500 Penalty Check Sheet, Penalty Approval Form and all related workpapers

    11. Copy of Letter 4599

      Note:

      Letter 4599 is used for both agreed and unagreed penalty cases

    12. Index ZZ – Supporting Workpapers

    13. Form 3244-A if applicable

4.24.17.9.7  (03-29-2012)
ExSTARS Penalty Case File- No Response from ExSTARS Information Provider

  1. In cases where an information provider fails to respond to a proposed penalty issued under a 30 day letter, excise tax examiners will follow procedures prescribed under IRM 4.24.17.9.5(7).

4.24.17.10  (03-29-2012)
Instructions for Completing Form 8278, Computation and Assessment of Miscellaneous Penalties, Non-Return Related Civil Penalties

  1. Form 8278 is an adjustment document used by CCP to make a manual assessment or abatement of miscellaneous civil penalties not subject to deficiency procedures.

  2. A separate Form 8278 is required for each tax period and penalty code section.

  3. Multiple facilities that are controlled by the same TIN are to be combined by period on the Form 8278 whenever possible.

  4. Refer to the instructions to Form 8278 which provides specific excise related penalty fields.

  5. The case file should only include the relevant penalty assessment page, not all pages of Form 8278.

  6. If necessary, the excise tax examiner must complete Form 5348 to update the statute date on ERCS.

  7. Both the excise examiner and the manager are required to sign the Form 8278. Failure to have both signatures will cause CCP to return the case to the field, causing delay of input.


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