A field examination is an examination assigned by EP Classification to be worked at the taxpayer’s place of business. See IRM 4.71.1.7.1 regarding the place of an audit.

In extenuating circumstances, the group manager and agent may decide that it is not in the best interest of the government to make a field visitation (due to complexity, geographical location, etc.).

If such a decision is made, the case file must include documentation (such as a note from the group manager in Form 5464, Case Chronology Record, (CCR) and/or an email from the manager) of the manager’s decision for the agent not to conduct a field visitation.

The examination scope should not change even when there is no on-site visitation.

A case designated as a field examination requires the same examination procedures whether or not an examination is conducted at the taxpayer’s place of business.

OCEPs are specifically designated as such by EP Classification.

OCEP examination procedures are found in IRM 4.71.11, Office/Correspondence Examination Program (OCEP).

The Discrepancy Adjustment Program was established to reduce the number of referrals to W&I, SB/SE or LB&I. This program allows an EP agent to make certain line item adjustments to Forms 1040 and 1120 for issues connected to a Form 5500 (or other EP return).

The Discrepancy Adjustment Program does not entirely preclude EP exams from being referred to W&I, SB/SE, or LB&I. If the adjustment does not fall within the guidelines of the Discrepancy Adjustment Program, a referral may be made to W&I, SB/SE, or LB&I (whichever is applicable).

See IRM 4.71.4, Discrepancy Adjustments, for procedural guidance.

If a favorable determination letter has not been issued for the plan and trust or if amendments have been made subsequent to the last issuance of a favorable determination letter, determine if the amendments are correct and whether any additional amendments are necessary to make the plan and trust qualified.

For additional guidance on verification of prior plan documents, see the Interim Guidance on Examinations of Individually Designed Plans under Post-EGTRRA Provisions (second remedial amendment cycle) issued on October 21, 2011 by the Area Manager, EP Examinations Programs and Review and the Interim Guidance on Examinations of Adopters of Master and Prototype, and Volume Submitter Plans under Post-EGTRRA Provisions (second remedial amendment cycle) also issued on October 21, 2011 by the Area Manager, EP Examinations Programs and Review. This guidance can be found at Memorandums & Messages

If the plan was required to be amended in conjunction with a request for a favorable determination letter and proposed amendments were submitted, verify that the amendments were timely and appropriately adopted.

Ascertain that the appropriate amendments have been made to comply with subsequent statutory and administrative changes.

It is also strongly recommended that consideration be given to using the Cumulative Lists, published annually around November each year, to aid in your determination of the laws, regulations or other published guidance effective for the year under examination.

Determine whether the contributions, accruals and forfeitures are calculated correctly, in accordance with the plan provisions and IRC 411.

Verify that the plan's definition of compensation is being followed in operation.

Verify that the allocations and/or accruals are not discriminatory under IRC 401(a)(4).

Verify whether compensation, as defined in the plan, is used for computing plan benefits.

Verify that compensation is properly limited by IRC 401(a)(17) in operation.

Determine whether the plan’s definition of compensation results in prohibited discrimination.

Verify the plan's definition of compensation does not violate IRC 415 and is the compensation used to compute plan benefits. For this purpose, compare compensation as defined in the plan to total compensation paid to the participants.

Review and compare compensation reported on Forms 941, Employer’s Quarterly Federal Tax Return, Forms W-2, Wage & Tax Statement, Forms 1120 and payroll records.

If family members are participants in the plan, ensure that they actually work for the employer and verify that they did not receive favored eligibility, benefits, vesting upon separation, etc., as compared to other participants.

Determine whether the plan passes the ACP and ADP tests.

If the plan is intended to be a safe harbor 401(k) plan, make sure the plan satisfies IRC 401(k)(12) and IRC 401(k)(13).

See IRM 4.72.2, Cash or Deferred Arrangements, and 4.72.3, Employee Contributions and Matching Contributions, for technical guidance on auditing plans with IRC 401(k) and/or 401(m) provisions.

Determine whether the total amount of employer contributions are within the limits set by IRC 404, and that all contributions were timely paid per IRC 404.

Verify, in applicable defined benefit plans, that all gains or losses (such as cash surrender values, dividends, refund of premiums, etc.) are used to reduce the cost to the taxpayer in the current or next succeeding year, or are properly amortized.

See IRC 404 and IRC 412.

See IRM 4.72.15, IRC 404 Examination Guidelines , for technical guidance related to IRC 404.

Inspect the trust fund, balance sheet, the income and expense statement, and asset source documents to verify the existence and proper title of plan assets. Secure information as to whether the trust has engaged in any of the following: prohibited transactions under IRC 4975(c), (see IRM 4.72.11, Prohibited Transactions, for technical guidance); transactions that produce unrelated debt financed income under IRC 514; or an unrelated trade or business as defined in IRC 513.

Verify, in profit-sharing, stock bonus and money purchase plans, that assets were valued annually at fair market value; that participants’ accounts were debited or credited for the change in market value; and that participants were notified of the change in value.

Examine trust fund assets in order to determine whether the trust has invested in the stock and securities of the employer. If so, ascertain whether there were prohibited transactions and/or violations of the exclusive benefit rule.

Examine the income and expense schedules and records in detail to ascertain whether funds have reverted to the sponsor or have been used for purposes other than the exclusive benefit of employees or their beneficiaries.

Non-cash contributions by the employer (e.g., stocks, notes, or other securities including employer stock and securities) should receive special scrutiny before a deduction is allowed. In addition, with respect to defined benefit plans, money purchase plans and certain defined contribution plans, the agent should then determine whether such non-cash contributions constituted prohibited transactions. Refer to the U.S. Supreme Court decision in Commissioner v. Keystone Consolidated Industries, Inc., 508 U.S. 152 (1993), and issued DOL Interpretive Bulletin 94-3 dated 12/28/94.

Verify that distributions to participants (terminated or otherwise) have been made in accordance with the plan provisions relating to the form (lump sum, annuity, etc.) and the timing (paid immediately, after a break-in-service, etc.) of distributions, and that the amount distributed was correct.

Verify that spousal consent was secured when required by the plan and the Code.

If hardship distributions were made, verify that they are done in accordance with plan terms.

Verify that the minimum distribution requirement of IRC 401(a)(9), if applicable, are satisfied.

Verify that the eligible rollover requirements and mandatory distribution requirements of IRC 401(a)(31)(A) and IRC 401(a)(31)(B), respectively, are met.

Check that the employer or trustee has met the required reporting requirements, including filing Forms 1099-R, pertaining to those individuals, and that the correct tax under IRC 3405 has been withheld.

This methodology requires the agent to utilize the review of the Form 5500 return and all supporting information to determine the scope of the examination and which specific issues will be examined.

Under focused examinations, three issues will normally be identified by EP Classification that the agent must address in the examination. Based on the pre-audit review, the agent will normally determine if any additional issues need to be addressed. The agent may address up to two additional issues without managerial approval. Managerial approval is required if the total number of issues (Classification’s three issues plus any agent-identified additional issues) exceeds five.

Issues identified

Adequacy of the books and records

Existence of effective internal controls

Size of the entity, etc.

In deciding the extent to which an issue will be pursued, consider the amount of time necessary to develop the issue in light of all the facts and circumstances.

Extend the examination to include any unusual and questionable items. Remember to get the group manager's written approval if the audit is expanded to include more than five issues.

Indicate in the workpapers the scope and depth of each issue and the reason for termination or extension of its review.

Any issues found that impact the qualified status of the plan will be pursued until either the issue is corrected under Employee Plans Compliance Resolutions System (EPCRS) or a Delegation Order 8-3 (formerly DO 97) closing agreement; or, if the taxpayer will not correct the issue, the case is closed unagreed to Mandatory Review. See IRM 7.2.2, Employee Plans Compliance Resolution System (EPCRS). See IRM 4.71.3, Unagreed Form 5500 Examination Procedures.

In the end, a determination of qualification of the plan and exempt status of the trust (and tax liability where appropriate) will be made.

Integrated Data Retrieval System (IDRS) research should be conducted. A transcript of the taxable return can be requested using Form 6882, IDRS/Master File Information Request, or Form 5644, EP/EO Inquiry Request. A BMFOLT (for Form 1120) or IMFOLT (for Form 1040) transcript of the taxable entity will indicate whether the taxable return is under examination in W&I, SB/SE, or LB&I. Transaction code (TC) 420 indicates that the return is under examination, and TC 421 indicates that the examination has been completed. An AMDIS print should be secured to determine the current status and group number.

If a related income tax return is under examination, the EP examination should be coordinated with W&I, SB/SE or LB&I Operating Divisions.

If no related income tax return is under examination, the EP agent will proceed with the examination.

INOLES provides the most current name, address, and filing requirements for the entity. It may also indicate the Employer Identification Numbers (EINs) of subsidiaries.

INOLEX will produce cross referenced EINs that may lead to related entities.

INOLEP provides a list of all plans maintained by the employer.

INOLET provides both BMF and EPMF information of a particular EIN.

EMFOLI also provides a list of plans maintained by the employer along with the years for which a transcript can be requested, and the years for which the return can be viewed through IDRS.

EMFOLD shows the plan administrator information from Form 5500.

EMFOLL shows information regarding the plan sponsor such as business code and telephone number. It also includes information regarding the plan’s determination letter, the plan effective date, and termination date.

EMFOLT is a transcript of the Form 5500 filing for a particular tax period. The TC 150 posting date reflects when the return was filed. It is used to determine the statute date. A TC 154 posting indicates that a Form 5330 was filed for that period. The TC 154 posting will also show the IRC section and amount of the tax assessed on the Form 5330.

ERTVU shows the Form 5500 line items for a particular plan and tax period. You can review the Form 5500 series returns for the prior and/or subsequent year or for other plans maintained by the employer.

BMFOLI will provide a list of business returns filed by the taxpayer (e.g., Forms 940, 941, 1120, and 5330), the years for which a transcript can be requested, and the years for which the return can be viewed through IDRS using command code BRTVU.

BMFOLT (for Forms 5330, 990-T, 1120 and 1065) or IMFOLT (for Form 1040) shows the date that the employer’s taxable return was filed and whether any extensions of time to file were granted. It also reflects assessments of tax, penalties and interest.

BRTVU (for Forms 990-T, 5330, 1120 and 1065) or RTVUE (for Form 1040) shows line items on a specific return including the pension deduction claimed for a specific tax period.

AMDISA using a "P" after the EIN provides a listing of all Forms 5500 under examination. Using no file source code after the EIN provides a listing of other returns (e.g., Forms 5330 and 1120) under examination.

Request from the taxpayer a copy of the plan document in effect for the year under examination and all subsequent plan amendments. If the taxpayer has adopted a pre-approved plan (e.g., volume submitter plan), request the plan adoption agreement (if any), the basic plan document and the opinion letter or advisory letter for the pre-approved plan.

Review the return to determine if all required line items and attachments have been properly completed.

Determine that information on the return is consistent with the Employee Plans Master File (EPMF) data. If not, prepare appropriate input documents when examination is completed. See IRM 4.71.1.20 below.

Review the return for anything that would cause the agent to add other issues beyond the focused issues.

Review the financial information on the return for any unusual items.

Review income items on the return for indications of unrelated business income (UBI). See IRM 4.71.10.2, Unrelated Business Income, for help in determining if UBI exists.

Verify the statute of limitations date by securing an EMFOLT print or EP Classification Sheet and reconcile the date with an AMDIS print. Any errors should be corrected. A comment should be made in the workpapers stating that the statute date was confirmed. See IRM 4.71.9, Statute Control Procedures.

Review any prior examination reports, workpapers, technical advice or technical assistance memoranda and correspondence regarding the entity.

Check the EP/EO Determination System (EDS) for information regarding the status of pending requests for determination letters or caveats on determination letters that have been issued. If the agent discovers that a request for a determination letter is pending, the two cases should be coordinated. Do not close the examination without first ensuring that the determination request will receive favorable treatment. However, the group manager may approve closing the examination without waiting by indicating such approval on Form 5464. The determination file may be requested and worked concurrently with the examination, only with group manager approval.

Secure IDRS prints to verify that related returns were filed in accordance with the package audit requirements discussed in IRM 4.71.1.14 below.

The agent may request the plan document either during the initial phone call to the taxpayer or in the initial Information Document Request (IDR) attached to the appointment letter.

If the plan document is not provided in advance, in spite of the agent’s best efforts to secure it, the initial appointment date should not be postponed.

The IDR should be prepared subsequent to pre-audit analysis.

The IDR should be limited solely to the solicitation of information specific to the items that have been identified as having issue potential.

In the case of a focused examination, include a request for documentation concerning the pre-selected audit issues and any additional issues (limited to five total issues unless prior managerial approval is obtained) determined to have audit potential.

If a taxpayer insists upon such assurances, or provides a statement that the books and records are only being made available for limited purposes, find out the taxpayer’s reasons for refusing to furnish the records without restriction. Document the taxpayer's response in the case chronology.

If there is, in view of all known factors, including the taxpayers refusal to furnish records, an indication that fraud exists, consider whether to refer to Criminal Investigation (Cl). Discuss a possible fraud referral with your group manager. If the group manager concurs, contact the EP Fraud Coordinator in EP Special Review. See IRM 25.1.9.3, Fraud Handbook, for procedural guidance.

For example, RCCMS and AIMS should be updated to status code 12 when contact is first made with the taxpayer.

See Document 6476, Employee Plans Computer System Codes, for other status codes.

Two or more taxpayers (as evidenced by separate Taxpayer Identification Numbers) may not be included on the same Form 2848. For a joint return, each spouse (or former spouse) must submit a separate Form 2848 when the taxpayer(s) desire someone to represent them.

If a Form 5500 is being examined, the initial Form 2848 would normally only cover the Form 5500 returns for the years(s) under examination.

Soliciting information from the plan sponsor regarding information reported on a Form 5500 or related Schedule (e.g., Schedule H or Schedule I) does not, in itself, place the trust under exam, and thus does not necessitate the solicitation of two Forms 2848 (one for the plan and one for the trust).

It is necessary to get a separate Form 2848 for the trust when a decision is made to place the trust under examination (e.g., Form 990-T is picked up for exam).

If a Form 5500 is being examined, the name, address and EIN of the plan sponsor, and the plan name and three digit plan number must be listed in the Taxpayer Information section.

If a trust is being examined, the name, title, and address of the trustee, and the name and EIN of the trust must be listed in the Taxpayer Information section.

If Form 5330 for an individual is being examined, the name, address and Social Security Number (SSN) of the individual must be listed in the Taxpayer Information section.

If Form 5330 for a corporation, partnership, or association is being examined, the name, address and EIN of the entity owing the excise tax must be listed in the Taxpayer Information section.

If the Form 2848 relates to a Form 1040 discrepancy adjustment, the name, address and SSN of the individual must be listed in the Taxpayer Information section.

If the examination involves an NRU, the name, address and EIN of the entity being examined must be listed in the Taxpayer Information section.

Name, address, phone number and CAF number (if applicable) of the designated representative (POA) must be included in the Representative(s) section.

The type of tax (income, UBI, excise, employment, etc.) and the tax form number(s) must be listed in the Matters section.

For SEPs, SARSEPs, and SIMPLEs, the "Tax Form Number " should be Form 1040.

The year(s) or period(s) covered must be listed in the Matters section.

In order to be valid, the Taxpayer must sign and date the Form 2848.

If the applicable return is a Form 5500, the title of the individual (e.g., president) signing for the plan sponsor must be included next to the signature line.

If the applicable return is a Form 990-T or Form 1041, the trustee must sign and date the Form 2848 as the taxpayer and his/her title (trustee) must be included next to the signature line.

The representative(s) must sign and date the declaration (Part II) and enter his/her proper designation(s) (a-r) under which he or she is authorized to practice before the IRS.

Special attention should be given to Item 5 of Form 2848 to see if the taxpayer makes any restrictions or additions to acts automatically authorized by the Form 2848.

Attorney—The two-letter abbreviation for the state in which admitted to practice.

Certified Public Accountant—The two-letter abbreviation for the state in which licensed to practice.

Enrolled Agent—The enrollment card number issued by the Office of Professional Responsibility.

Officer—The title of the officer (e.g., President, Vice President, or Secretary).

Full-Time Employee—The title or position (e.g., Comptroller or Accountant).

Family Member—The relationship to taxpayer (must be a spouse, parent, child, brother, or sister).

Enrolled Actuary—The enrollment card number issued Enrolled Actuary by the Joint Board for the Enrollment of Actuaries.

Unenrolled Return Preparer—The two-letter abbreviation for the state in which the return was prepared and the year(s) or period(s) of the return(s) they prepared.

Registered Tax Return Preparer—registered as a tax return preparer under the requirements of section 10.4 of Circular 230.

Student Attorney or CPA (designation "k" on Form 2848) —receives permission to practice before the IRS by virtue of his/her status as a law, business, or accounting student working in LITC or STCP under section 10.7(d) of Circular 230.

Enrolled Retirement Plan Agent (designation "r" on Form 2848) — The enrollment card number issued by the "Office of Professional Responsibility" must be entered.

If the taxpayer’s place of business is located in Pacific Coast Area, North Dakota, South Dakota, Minnesota, Iowa, Nebraska, Kansas, Missouri, Texas or Oklahoma, the forms should be faxed to the Ogden Accounts Management Center. The fax number is 801-620-4249.

If the taxpayer’s place of business is anywhere else in the United States, the forms should be faxed to the Memphis Accounts Management Center. The fax number is 901-546-4115.

The agent should annotate on the top of the file copy of Form 2848 (or Form 8821) the date the form was sent to the Service Center and the Service Center to which it was sent.

The case chronology record should be annotated to indicate that the form (Form 2848 or 8821) was forwarded to the Service Center.

"REVOKE" must be written across the top of Form 2848.

The cover letter must include a written statement providing that the authority of the power of attorney is revoked and must list the name and address of each recognized representative whose authority is being revoked along with the applicable return(s), tax matter(s) and year(s) (or if the taxpayer is completely revoking a representative he/she may state: "remove all years/periods" ). The cover letter must be signed and dated by the taxpayer.

"REVOKE" must be written across the top of Form 2848.

The cover letter must include a written statement providing that he/she is withdrawing from representing the taxpayer. The name, TIN, and address of the taxpayer must be listed along with the applicable return(s), tax matter(s) and year(s) (or the Representative may indicate that they are withdrawing from "all years/periods" ). The cover letter must be signed and dated by the Representative.

Provide advance notice to the taxpayer that third party contacts may be made.

Periodically provide a list of all third party contacts to the taxpayer.

Provide a list of third party contacts to the taxpayer upon request.

With regard to Form 5500 examinations, the "taxpayer" is the plan sponsor concerning all records covered by an EP examination except for the assets held on behalf of the participants.

In some Form 5500 examinations, the "taxpayer" is the trustee when assets held on behalf of the plan participants becomes the concern.

With regard to an NRU, the "taxpayer" is typically the plan sponsor.

It helps insure the agent's time is efficiently used, by having access to source documents where they are stored.

It provides an opportunity for the agent to become familiar with the business operations by inspecting the premises.

It enables the agent to better evaluate the internal controls in the operation of the plan.

IRC 7521(b)(2) requires an agent to suspend an interview if the taxpayer states that he/she wishes to consult with a representative or otherwise seek advice. Agents will strictly observe the taxpayer’s right of consultation throughout the examination process and interviews will be suspended and rescheduled accordingly.

IRC 7521(c) states that an agent cannot require a taxpayer to accompany an authorized representative to an examination interview in the absence of an administrative summons. However, the taxpayer’s voluntary presence at the interview can be requested through the representative as a means to expedite the examination process. This does not affect the agent’s right to conduct an on-site inspection of the taxpayer’s facility.

Group manager approval is secured prior to the recording.

The taxpayer and/or representative furnish his/her own recording equipment.

The agent or group manager may also record the proceeding.

The recording takes place in a suitable location, ordinarily in IRS offices.

In all instances, the filing of Forms 5500 for the prior and subsequent year of the plan being examined should be verified. This can be verified by the review of an EMFOL print.

In all instances, the filing of Forms 940, 941 and the plan sponsors tax return (e.g., Form 1120) for the periods corresponding to the plan year under exam should be verified. For example, if the plan year ending 6/30/2010 is being examined, the agent must verify that Forms 941 for the last two quarters of 2009 and the first two quarters of 2010 were filed, and that Forms 940 for 2009 and 2010 were filed. Likewise, the filing of the Form 1120 for the 6/30/2010 tax year (or the tax year in which the plan year ends) should be verified. The filing of Forms 940, 941 and the plan sponsor's tax return can be verified by the review of a BMFOLI print.

The filing of the other forms listed above should be verified if they relate directly to one of the issues being addressed in the examination. For example, the filing of Forms 1099-R should be verified if plan distributions are being addressed as an audit issue.

Specify on Form 5773,EP Workpaper Summary Continuation Sheet, (or equivalent workpaper) that the package audit procedures were considered; list those returns/forms required to be filed and indicate whether they were filed by the taxpayer. See IRM 4.71.1.15.4(6)(e) below.

State any further action warranted and indicate the specific action(s) taken.