4.24.18  Excise Operations Support

Manual Transmittal

April 09, 2014

Purpose

(1) Updated IRM. This transmits updated IRM 4.24.18, Excise Tax, Excise Operations Support.

Material Changes

(1) Updates made to the way inventory is controlled, classified and delivered to field.

(2) Removed content relating to exam case feedback formerly at 4.24.18.13.

(3) Remaining cites were renumbered and updated as needed to add clarity. Hyperlinks and IRM cites also updated. The Table below lists the 6-14-2012 IRM cites and changes made to this revision.

IRM Subsection Number Nature of Change
4.24.18.1 Excise Operations Support (EOS) Overview No changes.
4.24.18.1.1 Overview of the JOC No changes.
4.24.18.1.2 Role of PSP WIC No changes.
4.24.18.2 EOS Compliance Initiatives and Charters No changes.
4.24.18.2.1 Coordination of Approved Compliance Initiatives No Changes.
4.24.18.2.2 Charter Compliance Initiatives and SBSE Compliance Initiative Projects (CIPs) No Changes.
4.24.18.2.3 Return Preparer Program Added new (1) regarding the Return Preparer Coordinator Position.
4.24.18.3 The EOS Inventory System No changes.
4.24.18.3.1 Types of Leads No changes.
4.24.18.3.2 Initiative Leads Made minor edits to add clarity.
4.24.18.3.3 Priority Leads Remove Project Code for Informant Leads cases. Remove 2 days turnaround requirement.
4.24.18.3.4 Claims Leads Added new Push Code 51 procedures for paid claims where no return filed.
4.24.18.3.5 Fed/State Agreement and State RAR Leads No changes.
4.24.18.3.6 Specialist Referral System (SRS) Leads Minor edits for clarity.
4.24.18.3.7 Other Leads No Changes.
4.24.18.4 EOS Group Mailbox Receipt Leads Minor edits and updated titles for clarity. Added new Request for Information forms be sent to mailbox.
4.24.18.4.1 Form 5346, Examination Information Report Added new requirements for leads to be uploaded to IMS. Added requirements for non-excise leads be routed to EOS for processing. Made edits for clarity.
4.24.18.4.2 Headquarters (HQ) Excise Staff Requests Eliminated need for formal charter.
4.24.18.4.3 Data and Assistance Requests Added new Request for Information (RFI) form and edited procedures for clarity.
4.24.18.4.4 Income/Employment Tax Referrals Content modified and moved to 4.24.18.4.1(9) and (10). Referrals now routed directly to EOS.
4.24.18.4.5 Other Leads Deleted as not required.
4.24.18.5 Processing New Leads from Inventory Minor edits for clarity. Updated IRM cites.
4.24.18.5.1 Validating Entity Information Minor edits for clarity.
4.24.18.5.2 Matching Leads to Other Data Minor edits for clarity.
4.24.18.5.3 Prioritizing Leads Updated (3) to remove reference to electronic spreadsheet or paper leads.
NEW 4.24.18.5.4 Reopening Previously Examined and Closed Case Added procedures and references.
4.24.18.6 Overview of Workload Classification Minor edits for clarity.
4.24.18.6.1 Classification Dispositions Updated Forward leads IMS procedures.
4.24.18.6.1.1 Joint Audits with States Minor edits for clarity.
4.24.18.6.1.2 State-Only Audits No changes.
4.24.18.6.2 Research for Classification of Leads No changes.
4.24.18.6.2.1 CIC No changes.
4.24.18.6.2.2 ERCS Status Updated to include IMS control procedures.
4.24.18.6.2.3 Audit History/Prior Classification Dispositions Clarified procedures and eliminate need to review IMS file.
4.24.18.6.2.4 Related Entities Information No changes.
4.24.18.6.2.5 Other Research Information No changes.
4.24.18.6.3 Substantial Non-Compliance Factors (SNiF) Criteria Minor edit for clarity.
4.24.18.6.4 Reopening Previously Examined and Closed Case No changes.
4.24.18.6.5 Documenting Classification Dispositions on the Classification Checksheet Minor edits for clarity.
4.24.18.7 Case Coding Procedures Update source codes above 44 and status code 99 in table.
4.24.18.7.1 ERCS/AIMS Controls Procedures Update to incorporate IMS case control procedures.
4.24.18.8 Coordination of Case Controls-Multiple Employee Assignments No changes.
4.24.18.9 Managing Inventory Update to include IMS procedures and create new tables .
4.24.18.9.1 Work Order Request Tracking System (WORTS) Update to remove E case and paper file requirement.
4.24.18.10 Casebuilding Update to remove E case file requirement.
4.24.18.10.1 Correspondence Audits No changes.
4.24.18.11 Overview of Disclosures of Federal Tax Information (FTI) No changes.
4.24.18.11.1 Guidance on Disclosures of Federal Tax Information to Non-Participating and Participating State Partners Minor edit for clarity.
4.24.18.11.1.1 Disclosures of FTI to Non-Participating and Participating State Partners with Taxpayer Consent 00 No changes.
4.24.18.11.1.2 Disclosures of FTI to Non-Participating State Partners No changes.
4.24.18.11.1.3 Disclosures of FTI to Participating State Partner Non-JOC Employees No changes.
4.24.18.11.1.4 Disclosures of FTI to Participating State Partner JOC Employees No changes.
4.24.18.11.2 Disclosure Accounting Package No changes.
4.24.18.11.2.1 Instructions for Completion of Form 5466-B No changes.
4.24.18.11.2.1.1 Narrative Accounting for Disclosure Updated name and address to whom memo is to be forwarded.
4.24.18.11.2.2 Instructions for Completion of Form 3210 No changes.
4.24.18.11.3 Release of Information No changes.
4.24.18.11.4 Disclosure Scenarios No changes.
4.24.18.11.5 Unauthorized Disclosures No changes.
4.24.18.12 Overview of EOS Quality Review Minor edits for clarity.
4.24.18.12.1 Quality Review of Leads Classification Minor edits for clarity and remove requirement for completion of Form 5126.
4.24.18.12.2 Quality Review of Data Used in EOS Initiatives No changes.
4.24.18.13 Exam Case Feedback Deleted as not needed since feedback embedded into IMS.
4.24.18.14 Manager/Employee Security Responsibilities for NDC Information Moved to 4.24.13. Minor edit for clarity.
4.24.18.14.1 Data Transfers to and from the NDC Moved to 4.24.13.1.
4.24.18.15 JOC Partner Administrative Processes Moved to 4.24.14.
4.24.18.15.1 New Partner Requirements Moved to 4.24.14.1.
4.24.18.15.2 Partnership Coordination with Privacy, Governmental Liaison, and Disclosure Office (PGLD) Moved to 4.24.14. Minor edits for clarity.
4.24.18.15.3 State Partner Disclosure Requirements Moved to 4.24.14.3.
4.24.18.15.4 State Partner Safeguards Requirements Moved to 4.24.14.4.
4.24.18.16 EOS Shared Site Moved to 4.24.15. Edit list of items available on shared site.
4.24.18.17 EOS Program Monitoring Moved to 4.24.16. Minor edits for clarity.

Effect on Other Documents

This material supersedes IRM 4.24.18, dated 6-14-2012. The following Interim Guidance memo has been incorporated into this IRM section; SBSE 04-0813-0070, dated 8-29-2013, Completion of Excise Lead Feedback Form.

Audience

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

Effective Date

(04-09-2014)

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

4.24.18.1  (04-09-2014)
Excise Operations Support (EOS) Overview

  1. Excise Operations Support (EOS) promotes collaboration and innovation to develop effective excise tax compliance strategies to support field compliance operations. EOS employs state-of-the-art technology to:

    1. conduct insightful analysis on internal and external data about the excise tax population and

    2. to assess the impact of trends and legislative proposals on excise program.

  2. EOS activities include:

    1. Planning, monitoring, selecting, and assigning excise tax workload for examination.

    2. Identifying new compliance initiatives and reviewing existing initiatives for continuance.

    3. Conducting data analysis to identify and develop compliance anomalies as case leads.

    4. Coordinating case building for selected leads.

    5. Developing case background information and instructions for related compliance activities.

    6. Ensuring establishment case controls and delivery workload to the field.

    7. Monitoring inventory requisitions.

    8. Supporting field compliance activities.

    9. Classifying case leads.

  3. EOS consists of two main groups:

    1. Joint Operations Center (JOC) and the National Data Center (NDC), and

    2. Planning and Special Programs Workload Identification and Classification (PSP WIC).

    Both groups collaborate to identify and deliver appropriate excise tax related compliance workload. Both groups work to address Policy Statement P-4-21 which states, "The primary objective in selecting returns for examination is to promote the highest degree of voluntary compliance on the part of taxpayers."

4.24.18.1.1  (04-09-2014)
Overview of the JOC

  1. The JOC is a partnership between federal and state motor fuel taxing authorities. Its mission is to:

    • Enable state and federal motor fuel tax compliance activities.

    • Foster interagency and multi-national cooperation.

    • Provide strategic analyses of domestic and foreign motor fuel distribution trends and patterns.

  2. The JOC creates a technical foundation for a common excise tax data repository. It provides for the innovative use of technology to:

    • Collect, analyze, and share information to facilitate the access of real-time and historical tracking of fuel movement and fuel supply chain dynamics.

    • Develop and depicts trends and anomalies to establish situational awareness over the national fuel marketplace and supply chain.

    • Investigate anomalous behavior to identify leads for excise compliance follow-up activity.

  3. The JOC National Data Center (NDC) identifies, acquires, and integrates federal, state, and other commercial third party data sources that bear on the national fuel inventory. Compiled data is used to track and trend fuel movement for the purpose of:

    • Developing improved baselines for measuring fuel supply, distribution, and consumption.

    • Enabling the JOC to identify suspicious activities and tax evasion schemes using data mining technologies, predictive analytic technology, link analysis tools, and other forensic type tools and techniques identified as appropriate for JOC purposes.

    • Performing analysis using economic indicators.

    • Demonstrating the benefits of enhanced contributions to the Highway Trust Fund and the economic benefits to participating states.

    • Identifying additional information for distribution of Highway Trust Fund receipts to the states.

    • Identifying areas resistant to compliance that require systemic or legislative changes.

    • Using its tools and resources to identify leads for tax law compliance activities.

4.24.18.1.2  (04-09-2014)
Role of PSP WIC

  1. PSP WIC is responsible for:

    • Identifying and developing field examination leads.

    • Classifying field leads.

    • Selecting workload for field operations based on examination potential.

    • Coordinating the case building, case control, and delivery of workload to the field.

    • Monitoring inventory requisitions.

4.24.18.2  (04-09-2014)
EOS Compliance Initiatives and Charters

  1. EOS compliance activities generally begin with the development of a charter. Charters will ensure that the:

    • Appropriate offices collaborate for technical expertise and understanding of the compliance issues involved.

    • People who will do the work are included in the planning of the work.

    • Deliverables with dates are identified.

    • Objectives meet the workplan.

  2. Charters often require informal managerial approval to begin the initial brainstorming and hypotheses formation prior to expending significant resources on their creation. This may be as simple as an e-mail request seeking permission to move forward or a verbal discussion presenting the idea.

  3. Communication with appropriate Subject Matter Experts (SME) is required before an initiative charter is put forward for approval. See the contact listing on the Examining Excise Taxes web page at http://mysbse.web.irs.gov/Specialty/excise/default.aspx for a list of excise SME. Research with affected offices is required to determine viability and creation of the draft charter.

  4. Charters must be completed on the current, approved template which contains instructions for completion and approval routing.

  5. Once a charter is approved, a compliance initiative number will be assigned for inventory tracking.

  6. Whenever compliance initiatives are revised, the corresponding charter needs to be revised and forwarded for management approval.

4.24.18.2.1  (04-09-2014)
Coordination of Approved Compliance Initiatives

  1. EOS employee must coordinate compliance initiatives with Excise Policy, SMEs, state partners with an approved JOC Memorandum of Understanding (MOU), and any affected offices. Coordination must include agreement on the:

    • charter hypotheses,

    • data analysis,

    • expected outcomes,

    • case assignment information,

    • anomaly detail data to include in case files, and

    • any non-standard, initiative-specific information required in case files such as Customs import transaction data or administrative information.

4.24.18.2.2  (04-09-2014)
Charter Compliance Initiatives and SBSE Compliance Initiative Projects (CIPs)

  1. SBSE Compliance Initiative Projects (CIP) apply to any activities involving contact with specific taxpayers and collection of taxpayer data within a group, using either internal or external data to identify potential areas of non-compliance within the group, for the purpose of correcting the non-compliance.

  2. CIP procedures apply to gathering taxpayer specific external data, whether or not taxpayers are contacted. See IRM 4.17, Compliance Initiative Projects, for additional information.

  3. CIP procedures apply to excise tax activities and are mandatory. Approved EOS compliance initiative charters will be assessed for continuance under CIP procedural guidance rules found in IRM 4.17. EOS employees must review CIP procedures to determine if the compliance initiative charter meets any of the CIP exceptions listed in IRM 4.17.1.3, Activities Not Subject to CIP Procedures. If a compliance initiative does not meet any of the listed exceptions, a formal CIP is required.

4.24.18.2.3  (04-09-2014)
Return Preparer Program

  1. The Excise Return Preparer Coordinator (RPC), based in the PSP group within EOS is responsible for coordinating excise tax return preparer penalty cases.

  2. EOS employee provide support to the Excise Return Preparer Coordinator in the development of preparer program action cases. A preparer program action case is a preparer penalty investigation in which clients of a questionable preparer are examined to determine whether preparer penalties and/or an injunction are warranted.

  3. See IRM 4.24.9.7, Return Preparer Penalty, for additional information relating to excise tax preparer penalty investigation procedures. EOS employees should also refer to IRM 4.1.10, Return Preparer Program, for additional procedures and information to develop preparer program action cases.

4.24.18.3  (04-09-2014)
The Excise Workload Management System (WMS)

  1. The excise WMS monitors all EOS lead-related inventory and is used to facilitate the case building process. The excise WMS contains:

    • a repository for all excise leads submitted to the EOS, and

    • a record all lead classification dispositions.

  2. EOS employee will follow current procedures regarding the use of the excise WMS.

  3. Leads may be removed from the excise WMS for various reasons including, but not limited to:

    • aging,

    • feedback on accuracy of data, and

    • materiality of an issue.

  4. When a lead is removed from the excise WMS, an indicator will be input identifying the lead as purged.

4.24.18.3.1  (04-09-2014)
Types of Leads

  1. New leads entered to the excise WMS include:

    • Initiative Leads

    • Priority Leads

    • Claims Leads

    • Fed/State Agreement and State Revenue Agent Report (RAR) Leads

    • Specialist Referral System (SRS) Leads

    • Other Leads

    • EOS Group Mailbox Receipt Leads

4.24.18.3.2  (04-09-2014)
Initiative Leads

  1. EOS employee will identify and review initiative leads to determine which, will be entered to the excise WMS as lead related inventory. Initiative leads usually relate to entities exhibiting anomalous behavior. Selection criteria for these leads are dependent on a variety of factors including, but not limited to:

    • materiality,

    • complexity,

    • tax potential and

    • significant or emerging issues.

  2. EOS employee will review the initiative lead and take the following actions:

    • Perform additional research including but not limited to research on Information Management System (IMS), Internet, Integrated Data Retrieval System (IDRS), Office of Secretary of State, YK1 Research, Analysis and Statistics, and Accurint asset locator tool.

    • Process lead as a joint audit with state partners if warranted.

    • Prepare informational report inquiries (not an audit).

  3. EOS employee will submit initiative leads for entry into the excise WMS using the current, approved template. Use of the approved template ensures that the appropriate data fields are included and that compatible system formatting is provided. A lead is specific to a Taxpayer Identification Number (TIN), Masterfile (MFT) Code, and tax period.

  4. EOS employee will post initiative lead anomaly data files to the current, approved location within the excise WMS and inform the WMS gatekeepers that new files are available.

  5. Initiative lead anomaly data files must be saved using the naming convention Initiative Number – YYYYMMDD. For example, 105-20130625 indicates an anomaly file for Initiative 105 created on June 25, 2013:

  6. EOS employee will provide transaction-level detail data that supports each anomaly submitted as a lead to the excise WMS. For the Initiative 105 example above, the anomaly detail data would be the transaction information from the Custom's Entry import records that were matched to the Form 720 filing data to identify whether a taxpayer filed the correct amount of 720 tax liability. The EOS employee will post the anomaly detail data files to the current, approved location under the initiative number, detail data folder, tax period and data source. The naming convention to save anomaly detail data is:

    • Initiative Number

    • Anomaly Detail

    • Data Source

    • Tax Period

      Note:

      For example 105- Anomaly Detail- CBP 201012.xls indicates Oil Spill Tax anomaly detail data from Custom's Entry transaction-level data for the tax period ending December 2010.

4.24.18.3.3  (04-09-2014)
Priority Leads

  1. Priority leads include:

    1. Chief, Excise Tax, Requests.

    2. Prompt Determinations. These are received through the Chief, Excise Tax, which require a review of the taxpayer’s account to determine next action. See IRM 4.27.5.2, Procedures on Prompt Determinations, and Revenue Procedure 2010-27 for processing information.

    3. Taxpayer Advocate Service (TAS) Referrals. See IRM 4.13.3.1.2, Taxpayer Advocate Service (TAS) Cases.

    4. Form 211, Application for Award For Original Information, receipts. See IRM 25.2.1, Information and Informants’ Rewards, for detailed procedures. PSPWIC is responsible for the assignment of informants cases. Use Tracking Code 7648, Form 211 Informant Claims, to monitor these leads. Form 211 applications are processed at the Ogden Campus where they may then be referred to the Excise Tax Program. Cases are referred both electronically and in paper format. Cases are initially screened by Excise Policy and then referred to PSPWIC who is responsible for the assignment of informants cases if appropriate.

    5. Congressional Cases. These are received through the Chief, Excise Tax, and referred to EOS management if appropriate. See IRM 11.3.4.4, Processing Requests for Disclosure, for additional information.

    6. Expedite Form 5346, Examination Information Report. These require a two business-day turnaround if possible. Any that are selected will result in a case file sent directly to the group.

    7. All other requests including requests to research news articles and Criminal Investigation (CI) cases.

  2. EOS employee will process priority leads as follows:

    1. Secure management approval and assignment.

    2. Classify for disposition and enter any lead selected into excise WMS.

    3. Provide prompt responses to any requests not completed, indicating the reason for not completing.

4.24.18.3.4  (04-09-2014)
Claims Leads

  1. Centralized classification of all excise tax claims and amended returns is conducted by Centralized Specialty Tax Operations (CSTO) at the Cincinnati IRS Campus. See IRM 4.24.8, Examination of Excise Claims for Refund or Abatement, for additional information. Claims related to a return assigned to a field group are not classified by CSTO but are forwarded to the field group for association with the return.

    Note:

    This pertains only to claims for which an original return was filed and not to quarterly claims or third party claims.

  2. EOS employees may process both discretionary and mandatory claims as leads and will coordinate their selection criteria with CSTO.

  3. Interest-bearing fuel claims from Form 8849, Claim for Refund of Excise Taxes, Schedules 2, 3, or 8 selected for field review will be paid before shipment to the field.

  4. Paid claims selected for field examination should be controlled with AIMS Source Code 31 as follows:

    1. Select the MFT 03 period that corresponds to the claim period.

    2. If no MFT 03 module is available, Substitute for Return (SFR) procedures found in IRM 4.24.6.11 will be initiated.

    3. Push Code 51 is to be used when establishing controls for SFR paid claims selected for field examination . Push Code 51 will allow input of a numeric statute date for the SFR, Excise return(s) which require a live statute.

      Note:

      The use of Push Code 51 does not remove the IRM 1.4.40.4.3(3) requirement for the manager to screen the return to determine the accuracy of the assessment statute information and to identify the need for establishing statute controls.

4.24.18.3.5  (04-09-2014)
Fed/State Agreement and State RAR Leads

  1. The IRS Fed/State Program partners with state government agencies to enhance voluntary compliance with tax laws. This includes facilitating the exchange of taxpayer data, leveraging resources, and providing assistance to taxpayers to improve compliance and communications.

  2. The IRS also assists state agencies by identifying and reporting information on emerging tax administration issues. This is accomplished through the IRS entering into agreements to share information with the state agencies.

  3. The Privacy, Governmental Liaison and Disclosure Program (PGLD) is responsible for the coordination of activities between the IRS and state and local governments as well as other federal agencies.

  4. Refer to IRM 11.3.32, Disclosure to States for Tax Administration Purposes, for more information.

  5. State audit reports will be received through a Governmental Liaison shared site. Leads will flow through the EOS classification process and should be considered for joint audit processing. Any that result in classification for case building should be included in the excise WMS.

4.24.18.3.6  (04-09-2014)
Specialist Referral System (SRS) Leads

  1. The Specialist Referral System (SRS) is an online, automated system that allows for all submissions and approvals for specialist assistance. It automates the referral request process for specialists in:

    • Large Business &International (LB&I),

    • Small Business Self Employed (SBSE),

    • Tax Exempt Government Entities (TEGE), and

    • Wage & Investment (W&I).

    See IRM 4.10.2.6.5.2.1, Specialist Referral System (On-line Referrals), and 4.24.5.3, Specialist Referral System (SRS) - Overview, for additional guidance.

  2. SRS is used to provide mandatory excise lead referrals on Coordinated Industry Cases (CIC) from LB&I.

4.24.18.3.7  (04-09-2014)
Other Leads

  1. Other leads are usually derived from non-fuels data analysis that may or may not be documented with a charter. Leads should be monitored through the excise WMS but are not linked to an initiative number. Theses leads may be tracked by abstract number, tracking code, TIN, or other identifier for results monitoring.

4.24.18.4  (04-09-2014)
EOS Group Mailbox Receipt Leads

  1. The EOS group mailbox located at *SBSE Excise EOS provides an avenue for excise employees to submit requests for information and/or data assistance. The mailbox is a secure Outlook mailbox that requires permission to view received messages.

  2. Submissions to the EOS group mailbox include the following:

    • Form 5346, Examination Information Report , including "Time-Sensitive" Form 5346 requests,

    • HQ staff requests,

    • Request for Information (RFI) forms

    • Data and assistance requests,

    • Income/employment tax referrals,

    • Exam feedback forms,

    • other requests such as requests for new initiatives.

  3. EOS group mailbox receipts will be monitored through the EOS Task Tracker database to ensure timely completion and accurate reporting. Receipts that result in classification for case building will also be included in the excise WMS.

  4. EOS employees will:

    1. Complete all requests within ten business days if possible.

    2. Review the EOS Task Tracker database weekly to ensure timely completion of requests and take action as needed.

    3. Provide an explanation back to the requestor for any rejected requests.

4.24.18.4.1  (04-09-2014)
Form 5346, Examination Information Report

  1. The excise employee will complete Form 5346 whenever information is obtained of sufficient compliance value to warrant enforcement follow-up concerning a return filed or to be filed by a taxpayer. Submit completed Form 5346 to the manager for approval. Once approved, send to the EOS group mailbox for action.

  2. "Time-Sensitive" leads such as jeopardy assessments or wagering cases involving coordination with law enforcement agencies that require priority processing should be processed as follows:

    1. The group that discovered the lead should clearly mark the Form 5346 as "Time-Sensitive."

    2. Upon EOS approval, the group will establish ERCS controls and begin working the case.

    3. EOS will create an electronic file for any related data for group consideration.

  3. EOS employee will record receipts of all Form 5346 leads from the EOS group mailbox and forward for classification.

  4. All other Form 5346 requests have a 10 business-day turn-around time. EOS employee will monitor completion of leads to determine timely actions are taken and delays are documented.

  5. EOS employee should process Form 5346 as follows:

    1. Ensure all fields are completed properly, the "Other Information" section clearly indicates the reason for the referral, the tax period is for a current period, and the form is approved by the manager.

      Note:

      A separate Form 5346 for each TIN, MFT and tax period involved is required.

    2. If Form 5346 does not contain sufficient information and EOS employee cannot determine the missing information or is unable to determine appropriate information, the Form 5346 will be returned via secure messaging e-mail to the originating group manager with the reason for rejection.

    3. EOS employee will complete an EOS Classification Checksheet for all selected information reports and provide a copy to excise WMS gatekeeper to record the receipt and begin the process for case controls and creation of the case file.

    4. A-case file containing any related initiative data and/or data requested by the EOS employee on the Classification Checksheet will be created and posted to the EOS shared site..

    5. EOS employee will monitor case control establishment through CSTO.

  6. The completed case resulting from the Form 5346 lead including the EOS Classification Checksheet and results of the research will be uploaded into the Information Management System (IMS).. Generally all non-filer leads have a five-week turn-around time from the time the lead is received in PSP WIC to the time the case is controlled and released to the excise field group.

  7. If third party issues are present, EOS employee will follow procedures in IRM 4.11.57, Third Party Contacts.

  8. If the Form 5346 request indicates that the case be transferred outside of the Excise Program, a collateral examination request should be completed. See IRM 4.2.2.1, Collateral Examinations for additional information.

  9. Excise group managers should send all non-excise tax referrals directly to the EOS group mailbox.

  10. EOS employees will forward the referrals to the appropriate Business Unit PSP for processing.

4.24.18.4.2  (04-09-2014)
Headquarters (HQ) Excise Staff Requests

  1. All HQ staff requests must be approved by EOS management before assignment and tracking.

4.24.18.4.3  (04-09-2014)
Data and Assistance Requests

  1. Excise employees may also submit data and assistance requests to the EOS group mailbox. EOS employees will respond to requests for data and assistance with data analysis.

  2. Data and assistance requests should be submitted on the Request for Information (RFI) form, following the prompts embedded in the form. The RFI is sent to the manager for approval, before being submitted to the EOS group mailbox.

  3. EOS employee will

    1. Route the data or assistance requests to the appropriate employee for completion. This may involve directing the request to management for assignment of data analysis or extraction.

    2. Create new data extract process if appropriate.

    3. Ensure that the data is provided in an acceptable format for field use.

    4. Compile all related case data and send the data directly to the requestor.

    5. Update the request as completed on the EOS Task Tracker database.

4.24.18.5  (04-09-2014)
Processing New Leads from Inventory

  1. EOS employees will process new inventory leads as follows:

    1. Prioritize the lead to identify ones that will require classification.

    2. Validate entity information from the lead.

    3. Match lead data to other data to assist with the prioritization and classification processes.

  2. Leads are classified and prioritized as:

    1. Select,

    2. Forward,

    3. Reject,

    4. Suspense, or

    5. Purge.

    See IRM 4.24.18.6.1 for more information.

  3. The EOS employee will create an electronic case file for Selects and Forwards and ensure the establishment of case controls.

  4. The EOS employee will provide case files for compliance action and update WMS on dispositions of inventory.

4.24.18.5.1  (04-09-2014)
Validating Entity Information

  1. EOS employee will validate all new leads entered to inventory before posting to ensure:

    • Information of the correct taxpayer , and

    • Proper formatting of data.

4.24.18.5.2  (04-09-2014)
Matching Leads to Other Data

  1. Available leads (including those in Suspense status) may be matched to other data that will provide information to assess the lead potential for cases. Other data includes information from the following:

    1. Coordinated Industry Case (CIC) Indicator which is located on the Issue Based Management Information System (IBMIS) listing of Open Cycle cases for current fiscal year.

    2. 637 Registration Information ( where available).

    3. IMS Information (where available).

  2. Data matching against the Examination Returns Control System (ERCS) should show if there is a current audit or investigation open for the taxpayer for the same or other tax periods. The match may be only for Primary Business Code (PBC) 214 for TIN, Name, Address, MFT, TXPD, EGC, Employee Name and Status.

  3. Any prior inventory dispositions which are the historical classification dispositions by TIN can be viewed using the excise WMS.

  4. Related Entities are tied to a single EIN. For example, a Form 720 filer tax contact may file for multiple terminal/facilities, each with its own TIN, indicating a relationship among the entities. Related entities may also show where there are multiple EIN’s that are related such as parent-subsidiary relationships. This will provide information on leads that require case control coordination on multiple employee assignments.

4.24.18.5.3  (04-09-2014)
Prioritizing Leads

  1. Available leads require prioritization to assess what will move forward for classification. Examples of lead prioritization criteria may be based on:

    • geographic location,

    • initiative,

    • workload need,

    • resource availability, and

    • annual workplan.

  2. EOS management lead prioritization decisions will address the following:

    • the potential for joint compliance action with states,

    • selection of the referral for classification,

    • identification of the type of compliance activity for the selected leads,

    • compliance action addressed in the field or by correspondence,

    • consideration of the appropriate MFT for case controls, and

    • whether cases will be included in wall inventory or posted for field download.

  3. Selected leads should be made available for classification.

4.24.18.5.4  (04-09-2014)
Reopening Previously Examined and Closed Case

  1. Examination cases that were previously closed may be reopened under certain circumstances.

  2. See IRB 2005-23 for guidance on:

    1. when an IRS examination is considered closed,

    2. when a closed examination may be reopened (to include reinspecting a taxpayer’s books of account), and

    3. who may approve a reopening.

    The procedure also describes by category certain IRS contacts with taxpayers and other actions taken that are not examinations, inspections of books of account, or reopenings. See also IRM 4.4.26, AIMS/Processing Handbook, Reopening/Reclosing/Reinputting Records, for additional information.

4.24.18.6  (04-09-2014)
Overview of Workload Classification

  1. Classification is the process of determining whether a lead should be selected for examination.

  2. EOS employee should inform the PSP WIC manager of leads where the type, industry or potential issue is unfamiliar to the EOS employee. EOS employee should be alert to fraudulent refund schemes and/or potential preparer project returns.

  3. Leads prioritized by EOS management will be assigned for classification via spreadsheet listing by TIN. The listing will be used by EOS management to monitor the status of the leads in:

    • classification

    • case building

    • date of extraction from inventory.

  4. EOS employee will:

    1. Update the listings with dispositions for each lead including the reason why leads were not selected.

    2. Complete a current, approved EOS Classification Checksheet for all Selects.

      Note:

      EOS Classification Checksheets are used to update excise WMS with the classification dispositions and also to request CSTO establish case controls.

    3. Conduct a quality review on the first two Select/Forward -case files built and provide prompt feedback on any needed corrections.

4.24.18.6.1  (04-09-2014)
Classification Dispositions

  1. Lead classification results will be one of the following:

    • Leads identified as Select are in need for further compliance action. They require completion of the EOS Classification Checksheet to create case controls for all new uncontrolled tax periods. Case coordination should be conducted when multiple employees are involved.

    • Leads identified as Forward have a match to a current open ERCS control for the same TIN, MFT, and tax period. They do not require additional case controls. EOS employee will forward the lead data information for that TIN, MFT and tax period to the field group manager. When the case has a same TIN but different MFT and tax period on ERCS and IMS, ERCS controls will be established by EOS employee using an EOS Classification Checksheet. No IMS case file will be established. The data information for the new period will be secure e-mailed to the group manager/employee in charge of the existing IMS case. .

    • Leads identified as Reject have been rejected for a variety of reasons. The reason for rejection must be documented in the excise WMS database.

      Note:

      Currently, all fuel cases require rejection documentation in the excise WMS.

    • Leads identified as Suspense are not selected temporarily due to various factors such as but not limited to freeze codes, CIC off-cycle, Appeals, etc. Reason for suspense must be documented in the excise WMS database so that the lead can be classified again after the suspense period expires.

    • Leads identified as Purge are to be removed from the excise WMS for future consideration. This will likely be due to invalid entity information.

  2. Leads classified as Selects and Forwards should also be reviewed for potential as joint audit cases with partner states or as state-only leads.

4.24.18.6.1.1  (04-09-2014)
Joint Audits with States

  1. Leads selected for joint audit require EOS management involvement prior to any compliance action taken by the excise field group.

  2. Joint audit cases approved for a compliance action in the field require coordination between the excise group manager, state managers, and their respective excise employees and state auditors. See IRM 4.24.18.11 for procedural guidance.

  3. EOS employees will process joint audit cases as follows:

    1. For Selects and Forwards, include documentation on joint audit case process and guidance on disclosures of federal tax information from EOS activities to non-participating and participating state partners. This documentation should be listed as the first workpaper in the -case file . Include state manager contact information.

    2. On the EOS Classification Checksheet, include a statement that the case is recommended for joint audit processing. If the case is currently open, recommend joint audit processing as appropriate for the status of the case.

    3. Update inventory to reflect joint audit case.

  4. Joint audits are worked as federal excise audits. Federal excise and state managers and their agents must be familiar with and understand the federal disclosure requirements which should be included in case files. The following steps should be completed for all leads selected as joint audit cases:

    1. The federal excise territory manager should ensure the excise group manager and assigned excise employee are notified that the case is being assigned for joint audit.

    2. The federal excise group manager should contact the state manager to obtain a comprehensive understanding of the case file, discuss the scope of the audit and next steps.

    3. The federal excise group manager is the lead on all joint audit cases and directs the scope of the exam unless notified otherwise by their territory manager.

  5. Federal excise and state manager coordination is required and should include the following:

    1. Discussing case strategy/audit plan.

    2. Responding to excise employee and state auditor recommendations to expand or contract cases. All federal procedures and protocols apply. States assist on the "joint" portion of the exam and make state self-disclosures at the appropriate time if applicable.

    3. Ensuring excise employees and state auditors work together to determine what records should be requested to reach a conclusion about the audit issues.

    4. Revising audit plans as appropriate pursuant to initial taxpayer meeting including mutual commitment date(s).

    5. Issue Letter 3253, Taxpayer Appointment Confirmation Letter, by either the excise employee or state auditor. Letter 3253 is modified to inform the taxpayer that a state auditor will be participating in the examination and list both the excise employee and state auditor names under the "Person to Contact" .

    6. Approval of Letter 3253 is required by the excise group manager. Letter 3253 will also contain an optional paragraph to include the following two statements, "(insert name of state auditor), (insert state audit or title) with the (insert state office title) will be assisting (inset excise employee name and title) with the examination. If the examination results in a federal excise tax liability, this may also result in a liability for the (insert state)." Immediately following this sentence should be "As we discussed, please have the items listed on the attached Form 4564, Information Document Request, available at our first appointment" .

    7. Coordinating any interviews conducted by both the federal excise tax employee and state auditors.

    8. Ensuring audit reports are completed as appropriate to the issues. Federal excise audit reports can only be issued by the excise employee. State auditors issue any state audit reports but only after the state agent has performed a self-disclosure.

4.24.18.6.1.2  (04-09-2014)
State-Only Audits

  1. State audits parallel the federal excise tax issue and are determined from the same information; however, if at any time the state needs to acquire different information to make a state determination, they must conduct a state-only examination with an approved disclosure completed prior to beginning any activity. See IRM 1.1.1.14, Disclosure, and IRM 4.24.18.11, Overview of Disclosures of Federal Tax Information (FTI), for procedures.

  2. The IRS may not provide information to states that may impair federal tax information. The excise tax manager must determine there is no federal tax impairment when sharing this information, including cases with Criminal Investigation (CI) freezes or in which there is an active criminal investigation.

4.24.18.6.2  (04-09-2014)
Research for Classification of Leads

  1. Leads have multiple data points that should be reviewed prior to determining disposition including:

    • CIC,

    • ERCS Status,

    • audit history/prior classification disposition,

    • related entities/multiple controls, and

    • other research information.

  2. Other research information includes:

    • entity validation,

    • filing requirements,

    • employment codes,

    • income tax controls,

    • filing history,

    • freeze codes,

    • industry type,

    • collectibility issues,

    • statutes,

    • grade of case,

    • IMS documentation, and

    • 637 status.

4.24.18.6.2.1  (04-09-2014)
CIC

  1. Coordinated Industry Cases (CIC) are selected annually for examination by Large Business &International (LB&I). CIC cases require coordination between Excise and LB&I employees.

  2. To facilitate coordination, an MOU was signed by the Commissioners of LB&I and SBSE. The MOU is in effect from October 1, 2012, through September 30, 2015, and outlines the responsibilities of the excise employee in assisting the LB&I examiner.

  3. The MOU provides that referrals to the excise tax group are mandatory for all CIC cases. To facilitate this requirement, the Specialist Referral System (SRS) has been adapted to require an entry for an excise referral. See IRM 4.24.18.3.6, Specialist Referral System, and IRM 4.24.5.3, Specialist Refer System Overview, for additional information.

  4. EOS employee will process CIC inventory in accordance with current excise workplan guidance.

4.24.18.6.2.2  (04-09-2014)
ERCS Status

  1. EOS employee will review ERCS match information to identify related names and/or multiple employee controls.

  2. EOS employee will review ERCS information to determine dispositions.

  3. If ERCS TIN/MFT/TXPD match and the status code is under 14, case disposition is Forward. This type of forward does not require further case controls. . EOS employee will process the Forward as follows:

    1. If the case is in status 08, update the IMS wall inventory case file with new information.

    2. If above status 08, secure e-mail controlling excise group manager with a cc to excise employee assigned to the case (if known) providing the additional case data for their open examination.

    3. Provide coordination instructions when there are multiple MFT or excise employees if applicable.

  4. If ERCS TIN/MFT/TXPD match and if the status code is higher than 13, the EOS employee will:

    1. Perform standard classification to determine disposition in conjunction with current ERCS status.

    2. Use professional judgment on materiality of issues identified.

    3. If selected and case has been closed, the EOS employee should refer to reopening procedures found at IRM 4.24.18.5.4.

  5. If ERCS TIN matches but TXPD or MFT differ, the EOS employee will:

    1. Perform standard classification to determine disposition.

    2. All Selects require new ERCS case controls but will not have a new IMS case established.

    3. Once the ERCS controls exist on the new TXPD or MFT then EOS employee will secure e-mail controlling excise group manager with a cc to excise employee assigned to the case (if known) providing the additional case data for their open examination

  6. If no ERCS match exists, perform standard classification review to determine disposition.

4.24.18.6.2.3  (04-09-2014)
Audit History/Prior Classification Dispositions

  1. Audit history and prior classification dispositions for the same entity may assist with classification dispositions. EOS employee shall review Command Code BMFOLZ to identify audit results including closing codes.

  2. The following should not prevent selection of a case for examination for the same MFT and tax period:

    • audit indicator for income tax examination,

    • audit indicator for employment tax examination,

    • audit indicator for an excise tax penalty or terminal/carrier review examination closed over a year ago,

    • audit indicator for any other non-excise tax examination control.

  3. The following could prevent selection of a case for examination if occurring in the last 18 months:

    • audit indicator for an excise tax MFT 03 or other primary excise return MFT,

    • audit indicator for current fraud case; however, consider lead information for coordination with the Excise Fraud Coordinator.

  4. If a case is not selected based on the above guidelines, consider for selection if the potential adjustment exceeds the current tolerance set by EOS management or if indications of fraud exist.

4.24.18.6.2.4  (04-09-2014)
Related Entities Information

  1. Related entities require case control coordination. Information on related entities should be documented on the EOS Classification Checksheet to ensure excise employees are aware of the relationships and to allow for appropriate coordination.

  2. EOS employees will review available information to identify related entities. See IRM 4.24.18.8, Coordination on Cases with Multiple Employee Assignments, for more information.

4.24.18.6.2.5  (04-09-2014)
Other Research Information

  1. EOS employee should review other research information to determine disposition of lead. Examples of other research information are listed below.

  2. Review Entity Validation, Filing Requirements and Employment Codes. This information is found using Command Code INOLES to validate current name, address and filing requirements to gauge the type of entity.

    Note:

    Command Code BMFOLI may show the entity is filing forms not necessarily required to file by INOLES such as Employment Code (Non-profit, government, etc.) if unable to validate.

  3. If unable to validate:

    1. Research Command Code BMFOLE for name changes. This is usually shown on second or third page of the INOLES.

    2. Research Command Code NAMEE/ EINAD on geographic location for BMF and/or NAMEI for IMF.

    3. Consider Internet or Accurint business or people searches. The Internet can be used to develop further information about the taxpayer including alternate addresses and locations. Accurint may reflect name/address/TIN that are geographically or name-linked and may show employees at a given company or location. Research can then be conducted on those names via Command Code IRPTRO to identify W-2's, K1's and the correct TIN.

  4. If no EIN is identified but an SSN is available, verify the SSN, name, and address of the taxpayer. EOS employee will contact the Cincinnati Accounts Management Center (CAMC) Employer Identification Number (EIN) Program Entity Unit to obtain an EIN.

    1. EOS employee will send an secure e-mail to the EIN Entity Unit with the name, address and SSN (if applicable), the form for which the EIN is needed (Form 720, 730, 2290, etc.), and what filing year indicators are needed.

    2. Entity Unit will assign an EIN to the taxpayer and provide a completion message back.

    3. The new EIN will only be viewable on IDRS via Command Code ENMOD for the first two weeks. It is suggested that the account and new EIN be held for two weeks until fully established on IDRS.

      Note:

      See CAMC contact listing for EIN Program Entity Unit contact.

  5. If still unable to validate, reject the lead and provide Reject disposition.

  6. Review Income Tax Controls. This information is found using Command Code AMDISA to identify current income tax controls. Note that automated ERCS information is provided through the automated match to other internal data for PBC 214 only.

    1. Research Command Code AMDISA for income tax controls for coordination on CIC and other income tax controls.

    2. If CIC control exists, check with Excise CIC SME for team manager/team leader information.

    3. If other income tax controls exist, provide information in case file on assigned group.

  7. Review Filing History. This information is found using Command Code BMFOLI to identify filing history, whether taxpayer is current with filings, if they are filing forms not required, whether non-filer/stop filer, or collectibility issues are present. The filing history information will allow the EOS employee to make a professional judgement regarding the overall assessment of the taxpayer.

  8. Review Freeze Codes. This information is found using Command Code BMFOLI. IDRS and Document 6209, IRS Processing Codes and Information, must be researched for freeze codes to determine processing. See IRM 4.19.3.3.3.2, Freeze Codes, for additional information. Certain freeze codes require coordination with other offices before selecting leads. Some may require suspending leads for a time. Common freeze codes include:

    • C, Combat Zone Suspense. Examinations are not to be conducted during the period of time a taxpayer is deployed in a Combat Zone. See IRM 4.19.13.20, Combat Zone, for procedures.

    • –O and –S, Disaster Suspense. See O Freeze information in IRM 25.16.1.3.2,(1)(a)(4), and IRM 25.16.1.8.2.

    • Z -, Criminal Investigation Hold. See IRM 21.5.6.4.52, Z Freeze, for more information. Contact HQ Excise Tax Fraud Coordinator for instructions whether to continue processing or to transfer the case.

  9. Review for Industry Type, CIC, and Collectibility Issues . Use Command Code BMFOLE to determine:

    • North American Industry Classification System (NAICS) codes,

    • CIC or Coordinated Examination Program (CEP) indicator,

    • Collectible Hardship Closures (CNC) closing codes,

    • Form 637 indicator, and

    • previous names the entity may have used.

    For collectibility issues, see IRM 4.20, Examination Collectibility, and IRM 4.24.6.3.1.1, Pre-Audit Issues Collectibility, which contains a listing and definition of collectibility indicators and steps to take when evaluating collectibility potential.

  10. Review Statute of Limitation Periods (SOL). Use Command Code BMFOLT to determine SOL. See IRM 25.6.1, Statute of Limitations Processes and Procedures, for guidance on verifying SOL dates. Failure to protect the period of limitations can result in disciplinary action.

  11. Review Grade of Case. Use Command Code BRTVUE to identify grade of case. Grade of case is dependent upon the taxpayer's industry/occupation and size. Grade of case generally should be the same as the grade of the primary income tax return; however, see IRC 4.24.4.5.1, Assignment and Grade level of Form 637 Registration Initial Applications, Compliance Reviews, and Other IRC 4101 Case Work, and IRM 4.24.17.2, ExSTARS Workload Selection, and Assignment, for information on the standardization of IRC 4101 compliance case work. EOS employees will use Command Code BMFOLE to review the most recent income tax module to determine assets and gross receipts along with NAICS codes. See IRM 1.4.40.4.6.1, Grade Level of Work for Field Examiners, for additional information. If there is insufficient information to make a determination as to grade of case, it should be set as grade 11.

    Note:

    Group managers may change grade of case if local knowledge warrants.

  12. Review IMS Documentation if available. IMS closed case workpapers may help determine if the issue has been addressed before, or if potential fraud exists. For example situations where the taxpayer is continuing to collect excise taxes but intentionally fails to remit them to the IRS (pyramiding) or continuing in other non-compliant behavior.

  13. Review 637 Status if registered. EOS employee will review information on the Form 637 registration status. This information enhances overall knowledge of the entity and helps in the decision-making process. For example a company who imports trucks subject to the retail excise tax and does not have a registration suggests that the imported trucks may be non-taxable due to municipal sales.


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