4.71.11  Office/Correspondence Examination Program (OCEP)

Manual Transmittal

July 08, 2014

Purpose

(1) This transmits a complete reprint with minor revisions for IRM 4.71.11, Employee Plans Examination of Returns, Office/Correspondence Examination Program (OCEP).

Background

IRM 4.71.11 contains procedures for conducting Office/Correspondence Examinations.

This revision makes minor editorial corrections to the July 12, 2013, published version of IRM 4.71.11.

Material Changes

(1) The links to the IRM Exhibits have been updated. The Exhibits are now posted on TE/GE Connect under the JOB tab at IRM 4.71 - Employee Plans Examination Exhibits.

Effect on Other Documents

This supersedes IRM 4.71.11 dated July 12, 2013.

Audience

TE/GE Employee Plans

Effective Date

(07-08-2014)


Robert Choi
Director, Employee Plans
Tax Exempt and Government Entities Division

4.71.11.1  (07-08-2014)
OCEP Overview

  1. The Office/Correspondence Examination Program (OCEP) is a program in which EP agents examine returns either by an office interview or through correspondence.

    1. Correspondence examinations are those in which information needed to resolve the classified issues can readily be furnished by the taxpayer through the mail.

    2. Office interview cases are those in which the issues cannot be resolved through correspondence and the agent requests that the records be reviewed in an IRS office.

    3. Reference to the term "taxpayer" includes a plan, trust, corporation and unincorporated associations.

  2. OCEP examinations are generally limited in scope (usually no more than three issues) and usually involve smaller or less complex plans.

  3. On occasion, a field examination may be converted to an OCEP examination with the approval of the group manager.

    Note:

    Group manager approval must be documented in the case chronology.

  4. Examination and closing procedures applicable to field examinations generally apply to OCEP exams.

  5. Package Audit procedures found in IRM 4.71.1.14, Package Audit Requirements, are not required for OCEPs.

  6. Letters in the 1474 series must be used for OCEP examinations.

    1. Letter 1474 is the standard letter used to initiate an OCEP examination of a Form 5500. See IRM 4.71.11 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1474.

    2. Letter 1474-B is the standard letter used to initiate an OCEP examination of a SIMPLE plan. See IRM 4.71.11 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1474-B.

    3. Letter 1474-C is the standard letter used to initiate an OCEP examination of a SARSEP or SEP plan. See IRM 4.71.11 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1474-C.

  7. Pub 1-EP, Understanding The Employee Plans Examination Process, and Pub 4325, EP Examination Bookmark, should accompany the applicable 1474 series letter when mailed to the taxpayer.

  8. An Information Document Request (IDR) should be used to request records for an OCEP examination.

    1. The IDR should be issued using paragraphs from the IDR template available in the RCCMS Letters Folder.

    2. The IDR should only be modified when supplemental information is required to complete the examination.

4.71.11.2  (07-08-2014)
Selection Criteria

  1. EP returns under this program are selected through RICS by EP Classification using specific selection criteria.

  2. General criteria for EP OCEP returns may include these and other additional criteria:

    1. Form 5500 series returns

    2. Plans with less than 25 participants and $500,000 in assets.

    3. Defined contribution plans and defined benefit plans that indicate a minimum funding deficiency (if the scope of the exam is limited to that issue)

    4. No ESOPs (i.e., plans designed to invest primarily in employer securities)

    5. Non-Return Unit (NRU) Individual Retirement Account (IRA) plans

4.71.11.3  (07-08-2014)
Classification Criteria

  1. In most instances, OCEP examinations are pre-determined under specific examination projects.

  2. Based on the criteria of the project, the classifier will consider the entire return as well as possible related items not reported on the return.

  3. A Classification Sheet or Project Lead Sheet will be attached to each return or NRU file, which identifies the classified issues.

4.71.11.4  (07-08-2014)
Office Examination Procedures

  1. An examination may take place in the agent’s office, or, under certain circumstances, in a nearby post of duty.

4.71.11.4.1  (07-08-2014)
Office Interview

  1. The agent will notify the taxpayer either by mail or telephone of the scheduled interview.

  2. If the initial contact is by phone, the agent will:

    1. Notify the taxpayer or a properly authorized representative of the time and location of the interview.

    2. Send the appropriate 1474 series letter, IDR, Pub 1-EP and Pub 4325 to initiate the OCEP exam, confirm the appointment and request records needed to conduct the examination.

  3. The 1474 series letter and IDR must be saved in the RCCMS Office Documents folder using the RCCMS Naming Convention.

4.71.11.4.2  (07-08-2014)
Interview Outside of POD

  1. If the agent is unable to conduct an interview at his/her post of duty, an interview will be scheduled at another IRS office suited to both the taxpayer and the Service.

  2. Travel distance for the taxpayer should not exceed 50 miles.

4.71.11.4.3  (07-08-2014)
Conversion to Field Examination

  1. If an examination cannot (due to complexity, geographical location, etc.) be satisfactorily completed under OCEP procedures, the group manager may change the examination technique to a field examination.

  2. The group manager’s decision noting the conversion must be evidenced in the case file either by email, electronic or written signature on the Case Chronology Record (CCR) or by another type of communication.

4.71.11.5  (07-08-2014)
Correspondence Examination

  1. In almost all instances, OCEP examinations are special project examinations with the issues pre-identified by EP Classification.

  2. OCEP examinations are generally limited in scope (usually no more than three issues) and usually involve smaller or less complex plans.

  3. Requested information should generally be limited to the issues pre-identified by EP Classification.

    Note:

    If there is clear indication for a need to add additional issues, the agent must first secure written group manager concurrence. Group manager approval to expand the issues must be reflected in the CCR.

  4. On occasion, a field examination may be converted to an OCEP examination with the approval of the group manager.

    1. In general, such conversions are strongly discouraged, as OCEP examinations do not provide the same level of verification of compliance as field examinations, especially in project cases.

    2. In the event that a conversion of a field exam to an OCEP does occur, the IDR should generally be limited to requests for information or documentation related to the focused examination's pre-identified focused issues.

    3. If there is clear indication for a need to add additional issues, the agent must first secure written group manager concurrence. Group manager approval to expand the issues must be reflected in the CCR.

  5. The agent will send the appropriate 1474 series letter, IDR, Pub 1-EP and Pub 4325 to the taxpayer to initiate the OCEP exam and to request records needed to conduct the examination.

    1. An IDR should be issued using paragraphs from the IDR template available in the RCCMS Letters Folder. The IDR should only be modified when supplemental information is required to complete the examination.

    2. The 1474 series letter and IDR must be saved in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  6. If the taxpayer does not provide complete information, or if the agent has additional questions as a result of the information submitted, send a follow-up letter.

  7. If the case cannot be satisfactorily completed by correspondence, the group manager may convert the case to an office or field examination. See IRM 4.71.11.4.3, Conversion to Field Examination, above.

  8. The agent will notify the taxpayer by letter if the exam is changed to an office interview. For this purpose, Letter 1475-A may be used.

  9. Original records submitted by the taxpayer must be returned as soon as possible.

4.71.11.6  (07-08-2014)
Failure to Respond

  1. If the taxpayer does not respond within 30 days, the agent will call the taxpayer or properly authorized representative (POA) and send the applicable 1477 series letter (or other pre-approved form letter) to the taxpayer.

    1. Letter 1477-A will be used if the OCEP involves a Form 5500 series return. See IRM 4.71.11 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1477-A.

    2. Letter 1477-B will be used if the OCEP involves a SIMPLE plan. See IRM 4.71.11 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1477-B.

    3. Letter 1477-C will be used if the OCEP involves a SARSEP or SEP plan. See IRM 4.71.11 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1477-C.

  2. If the taxpayer fails to respond to the follow-up letter, the agent will attempt to contact the taxpayer or POA by telephone and inform him/her of possible adverse action.

    Note:

    POA by-pass procedures can be considered per IRM 4.71.1.9.1.

    .

  3. If the taxpayer continues to fail to respond, evaluate closing the case based on the information on hand or consider converting the case into a field examination after managerial consultation.

    1. Before closing the exam, the agent must determine if there is enough information in the file to sustain the agent’s position. If additional information is still needed to properly develop the issue, the agent should consider issuing a summons as a means to securing the requested information.

    2. If closing actions are taken without the issuance of the summons, the group manager’s concurrence should be reflected on either the CCR with an actual or electronic signature or in a separate memorandum included within the case file.

  4. The failure of a taxpayer to respond to an OCEP examination may result in a revocation of the plan’s qualified status.

    1. The case file and examination report must provide clear support for this adverse action.

    2. Follow the unagreed Form 5500 examination procedures in IRM 4.71.3, Unagreed Form 5500 Examination Procedures and Delegation Order 8-3 (DO 8-3) Closing Agreements.

4.71.11.7  (07-08-2014)
Undeliverable Initial Contact Letter

  1. If the initial contact letter is returned to the Service by the Post Office as undeliverable, take the following steps to obtain the taxpayer’s current address:

    1. Check all possible sources on the EP/EO Determination System (EDS or its successor).

    2. Check telephone and/or city directories (if available) for names and addresses of officers, directors, trustees, or plan officials, as well as of the taxpayer.

    3. Request the current address by submitting Form 6882, IDRS/Master File Information Request (or at the discretion of the group manager, the group may use its own internal form) using IDRS Command Code INOLES. The information provided will be from the latest return module that posted to the master file and will include entity and address data. Instructions for completing Form 6882 are found on the back of the form.

    4. Contact the postmaster of the most recent address obtained under steps a through c above. Step d) must not be taken unless steps a) through c) have first been taken. The following certification statement is required by the postmaster and must be stamped or typed at the bottom of the request: "Change of address is required for official use. We have searched other known sources of information for the address." Form 4759, Address Information Request Postal Tracer, can be used to secure information from the Post Office.

    5. Use Accurint or other web based data bases.

    IF... Then...
    a. Able to locate Re-mail and follow OCEP Exam Procedures
    b. Unable to locate Survey using AIMS Disposal Code 32 (See IRM 4.71.7 for Survey Procedures); or propose revocation using the most recent address (See IRM 4.71.3 for Revocation Procedures). A key factor in the decision is the amount of information that can be obtained from other sources that will support issues that disqualify the plan.

    Note:

    Either decision requires group manager approval and must be documented in the case chronology.


More Internal Revenue Manual