Part 4. Examining Process

Chapter 71. Employee Plans Examination of Returns

Section 14. EP Mandatory Review

4.71.14  EP Mandatory Review

Manual Transmittal

November 18, 2011

Purpose

(1) This transmits new text and Table of Contents for IRM 4.71.14, Employee Plans Examination of Returns; EP Mandatory Review.

Background

IRM 4.71.14 contains procedures for reviewing and processing EP exam cases for Reviewers in EP Mandatory Review.

Material Changes

(1) Many of the forms used in the processing of Forms 5500, 5330, 990-T examinations and Forms 1040/1120 discrepancy adjustments have been revised. Many of these revised forms referenced in the IRM are included as Exhibits.

(2) Internal procedures within EP Mandatory Review have been revised since IRM 4.71.14 was last published. This IRM contains those revised procedures.

(3) Completed forms and letters are posted as Exhibits on the Mandatory Review section of the Employee Plans web page at Employee Plans IRM Exhibits .

Effect on Other Documents

This supersedes IRM 4.71.14 dated July 1, 2003

Audience

TE/GE Employee Plans

Effective Date

(11-18-2011)

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

4.71.14.1  (11-18-2011)
Overview of EP Mandatory Review

  1. The principle objective of the EP Mandatory Review function is to evaluate EP examination cases, in order to ensure Service compliance with the Internal Revenue Code and related regulations.

  2. In pursuit of this objective, Reviewers will perform case reviews to determine whether cases were worked in accordance with the law, the Internal Revenue Manual (IRM) and other established procedures.

  3. The review process will serve to ensure that the taxpayer and all other affected parties are afforded courteous, impartial and professional service.

  4. To this end, Mandatory Review must continually strive for:

    1. Uniform and impartial treatment of all taxpayers, plan participants and sponsors,

    2. The protection of the government's interest,

    3. High quality standards when providing service to all of our internal and external customers including but not limited to the general public, the pension community and other Service personnel,

    4. Constant awareness of unfavorable patterns or trends, identification of problem areas and unique issues, and

    5. The timely dissemination of examination process guidance and relevant information, which can be utilized by management and other personnel to best achieve the mission of the IRS and TE/GE.

4.71.14.2  (11-18-2011)
Staffing

  1. Reviewers will be experienced and highly competent personnel who:

    1. Possess a comprehensive knowledge of generally accepted accounting and auditing principles, as well as, superior skill in the understanding and application of the tax law, regulations, rulings, court decisions, and other interpretative material,

    2. Are knowledgeable in Service policies and procedures,

    3. Are capable of performing a quality review of EP examination case files,

    4. Have a fair and impartial attitude,

    5. Merit the highest respect and cooperation of EP personnel,

    6. Have demonstrated an ability to assume responsibility and take positive action when warranted,

    7. Communicate ideas and opinions clearly, tactfully and objectively,

    8. Apply good judgment, and

    9. Exercise individual initiative.

  2. Agents are generally assigned to Mandatory Review for 3 years.

  3. Agents may be detailed to Mandatory Review, on an interim basis, due to an increase in review staff workload.

4.71.14.3  (11-18-2011)
Mandatory Review Duties

  1. Mandatory Review is responsible for:

    1. Reviewing unagreed EP examination cases,

    2. Providing technical and procedural assistance to agents and group managers working EP examinations still at the group level that have a high potential of becoming cases subject to mandatory review,

    3. Preparing Form 5456, Reviewer’s Memorandum, which will be issued to the agent when a reviewed case requires further documentation, correction or development. See IRM 4.71.14.6 below for additional information on Reviewer's Memorandum. See IRM 4.71.14 Exhibit 1 at Employee Plans IRM Exhibits for an example of Form 5456,

    4. Coordination of writing and updating the Employee Plans Examination Procedures portion of the Internal Revenue Manual (IRM 4.71), and

    5. Writing and reviewing various types of instructional materials and other guidance that impacts EP examiners.

4.71.14.4  (11-18-2011)
Cases Subject to Review

  1. Certain examination cases involving complex matters are subject to mandatory review. These type of cases are:

    1. Unagreed Form 1040/1120 discrepancy adjustments,

    2. Unagreed Form 5330 exams,

    3. Unagreed Form 990-T exams,

    4. Proposed revocation cases (both agreed and unagreed),

      Note:

      Cases with qualification issues that are resolved through closing agreements under EPCRS or Delegation Order 8-3 are not subject to mandatory review.

    5. Proposed non-qualification cases (both agreed and unagreed),

      Note:

      Cases with qualification issues that are resolved through closing agreements under EPCRS or Delegation Order 8-3 are not subject to mandatory review.

    6. Unagreed claims,

    7. Informant claims for reward cases,

    8. Requests for the review of a case by a group manager, and

    9. Management may identify other cases as being subject to mandatory review, as problems or other special needs arise.

4.71.14.4.1  (11-18-2011)
Definitions

  1. Unagreed Case– An unagreed case is an examination, discrepancy adjustment or claim in which the Service and the taxpayer are unable to resolve the issue(s). With regard to qualification issues the case cannot be resolved through Employee Plans Compliance Resolution System (EPCRS) or a Delegation Order 8-3 (formerly DO'97) closing agreement. Examples include but are not limited to:

    1. Form 1040/1120 discrepancy adjustments, Form 5330 examinations or Form 990-T examinations for which the taxpayer was notified that additional tax was due, but then failed to file amended returns, delinquent returns, or sign agreements (e.g., Form 4549-E or Form 870) within specified time frames.

    2. Form 5330 examinations involving excise tax under IRC 4971 where the funding deficiency is not corrected.

    3. Form 5330 examinations involving excise tax under IRC 4975 where the prohibited transaction has not been corrected.

    4. Form 5330 examinations for other types of excise tax like IRC 4972 and IRC 4980 for which the taxpayer failed to file to report excise tax that is due.

    5. Form 1040/1120 discrepancy adjustments, Form 5330 examinations or Form 990-T examinations for which the taxpayer was notified that additional tax was due and provided a response stating disagreement with the issue.

    6. A Form 5500 series examination with a qualification issue raised by the agent (whether or not disputed by the taxpayer) that is not resolved through a closing agreement.

    7. A claim disallowed in full or in part involving the failure of the taxpayer to sign and return Forms 3363 and 2297 within the specified time. See IRM 4.71.8 for procedures on claims.

  2. Proposed Revocation–A Proposed Revocation occurs when a qualification issue is raised by the agent during the examination of a plan that had previously received a favorable determination letter (in the name of the plan), and the issue is not resolved through a closing agreement. As a result, the agent proposes to revoke the favorable determination letter and treat the plan as not qualified.

  3. Final Revocation–A Proposed Revocation becomes a Final Revocation if the qualification issue raised by the agent:

    1. Is not challenged by the taxpayer during the 92 day time frame specified in Letter 1757 (90-Day Letter),

    2. Is upheld by Tax Court, or

    3. Is resolved through a Delegation Order 8-3 closing agreement.

  4. Proposed Non-qualification–A Proposed Non-qualification occurs when a qualification issue is raised by the agent during the examination of a plan that had not previously received a favorable determination letter (in the name of the plan), and the issue is not resolved through a closing agreement. As a result the agent proposes to treat the plan as not qualified.

  5. Final Non-qualification–A Proposed Non-qualification becomes a Final Non-qualification if the qualification issue raised by the agent:

    1. Is not challenged by the taxpayer during the 92 day time frame specified in Letter 1757-A (90-Day Letter),

    2. Is upheld by Tax Court, or

    3. Is resolved through a Delegation Order 8-3 closing agreement.

  6. Administrative Record–All documents submitted to the Service by the taxpayer, and all written correspondence between the Service and taxpayer. In cases subject to IRC 7476, the administrative record is the basis for any future Court proceeding. See 26 CFR 601.201(o)(8).

    1. For EP cases, an administrative record is required only for proposed revocation or proposed non-qualification of a plan as a result of a Form 5500 exam.

    2. Administrative records are not required for examinations of Forms 5330 or 990-T, or for Form 1040/1120 discrepancy adjustments.

    3. See IRM section 4.71.3.3.4 for details on how to properly prepare the administrative record.

4.71.14.5  (11-18-2011)
Technical Case Review

  1. Cases received in Mandatory Review will be assigned to a Reviewer by the Manager, EP Mandatory Review (or designee) and worked as soon as administratively feasible.

    1. Statute Clerk will verify the statute of limitations expiration date.

    2. Priority will be given to short statute cases and other cases given special expedited consideration.

  2. When a case first comes into Review, the case will pass through a "triage" process.

  3. A designated Reviewer will perform the following actions:

    1. Verify the statute of limitations expiration date and make arrangements to extend the statute of limitations if the statute is short.

    2. Conduct a quick case review to determine if the case is ready for review or must be sent back to the group for further development.

    3. Make sure the information in RCCMS and AIMS agree.

    4. May provide specific instructions or observations for the Reviewer to whom the case is assigned.

    5. If the case is a short statute case or special project case, the case will be assigned immediately to a Reviewer to work.

    6. Depending on workload levels, the case may be temporarily placed in an unassigned drawer.

  4. Once the case is assigned to a Reviewer, the Reviewer will make every effort to begin review of the case within 15 days of receipt of the case.

  5. When reviewing a case file, the Reviewer will determine and ensure:

    1. The agent/group manager properly considered and observed examination cycles.

    2. The time span to complete the case is reasonable considering facts and circumstances involved.

    3. The examined returns have been properly established on RCCMS and AIMS.

    4. Statutes of limitations have been properly protected.

    5. Examination issues have been adequately developed.

    6. The workpapers fully document exam procedures, identify and document issues, and are concise, well organized, indexed and cross-referenced to the pre-examination plan.

    7. The Revenue Agent Report (RAR) is adequate. See paragraph (6) below.

    8. That forms, letters and templates used are completed correctly.

    9. That the agent has made a reasonable effort to reach an agreement if the case is unagreed.

    10. The positions of the plan sponsor and the Service are presented in a manner leaving no doubt that there is a difference of opinion.

    11. Letters prepared for mailing to the taxpayer are correct.

    12. The examination was expanded to include all relevant years and related returns under EP jurisdiction.

    13. All necessary referrals were timely and properly made.

    14. The group manager's involvement in the case is adequate and properly documented.

    15. Service policies and procedures were followed.

    16. All required forms and letters were properly completed and are contained in the case file and saved in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  6. When reviewing the Revenue Agent Report (RAR) the Reviewer must verify that:

    1. Unagreed issues must be properly developed, clearly explained, and adequately supported by law, regulations, published rulings, court cases, as applicable.

    2. Both the government and the taxpayer positions must be clearly stated with proper references and citations.

    3. Supporting documentation has been included, and

    4. Tax and penalties are correctly computed and the amounts are listed in the RAR.

4.71.14.5.1  (11-18-2011)
Processing Unagreed Cases

  1. With the exceptions listed in paragraph (2) of this section, a 30-Day Letter package will be prepared if the case file is a:

    1. Form 5500 exam where the agent has proposed plan revocation or non-qualification.

    2. Form 1040/1120 discrepancy adjustment that results from proposed plan revocation or non-qualification.

      Note:

      Field agents do not issue 30-Day Letter packages when a discrepancy adjustment is a consequence of plan revocation or non-qualification.

    3. Form 5330 exam that is unagreed (meets the criteria of IRM 4.71.14.4.1).

    4. Form 990-T exam that is unagreed (meets the criteria of IRM 4.71.14.4.1).

    5. Unagreed claims.

      Note:

      See IRM 4.71.14.5.1.2 below for 30-Day Letter procedures.

  2. The Reviewer will skip the 30-Day Letter and go straight to the preparation of a 90-Day Letter package in the following situations:

    1. If technical advice was requested on an issue affecting the qualified status of the plan and the ruling is adverse to the plan sponsor, it will preclude any further appeal within IRS as to those issues. If this is the case, the Reviewer will not prepare a 30-Day Letter (Proposed Revocation or Proposed Non-qualification Letter), but will instead go directly to the preparation of a 90-Day Letter (Final Revocation or Final Non-qualification Letter) package to the plan sponsor.

      Note:

      If technical advice was requested on an excise tax or unrelated business income tax issue and the ruling is adverse to the taxpayer, it will not affect the appeal rights of the taxpayer. If this is the case, the Reviewer should prepare the 30-Day Letter package.

    2. If an unagreed case has less than 210 days remaining on the statute of limitations and the taxpayer refuses to extend the statute of limitations, the Reviewer will skip the 30-Day Letter and go directly to the preparation of a 90-Day Letter package.

    3. If there is a related examination in an Exam Functional Unit (e.g., SB/SE) with income tax adjustments that result from plan disqualification, and the SB/SE case is either docketed or SB/SE is in the process of issuing a 90-Day Letter on the related case, the Reviewer will go directly to the preparation of a 90-Day Letter package.

      Note:

      If any of these three situations arise, the Reviewer will discuss the situation with the Manager, EP Mandatory Review.

    Note:

    30-Day Letter procedures are discussed in IRM 4.71.14.5.1.2 and 90-Day Letter procedures are discussed in IRM 4.71.14.5.1.4.

  3. If a 30-Day Letter is being prepared and the Reviewer agrees with the agent’s conclusion and no major corrections are necessary:

    1. The Reviewer will make necessary corrections to the RAR or other portions of the 30-Day Letter package.

    2. The Reviewer will email the 30-Day Letter package to the Manager, EP Mandatory Review (or designee) for review prior to issuance of the 30-Day Letter.

    3. The Manager, EP Mandatory Review (or designee) will review the 30-Day Letter package, discuss issues with the Reviewer as needed, suggest or make any necessary revisions to the 30-Day Letter package, and email the revised 30-Day Letter package to the Reviewer.

    4. The Reviewer will mail the final 30-Day Letter package via certified mail to the taxpayer and POA (if applicable).

    5. Immediately after the 30-Day Letter is mailed to the taxpayer, the Reviewer will complete the Mandatory Review Update Form (See IRM 4.71.14 Exhibit 2 at Employee Plans IRM Exhibits ), email the form to the Group Statute Clerk and Group Management Assistant (with a copy to group manager or designee), and update the case to status 22 (30-Day) through RCCMS.

      Note:

      When the case is updated to status 22 in RCCMS, make sure the AIMS box is checked so that AIMS gets updated when the "update" request is made.

  4. If the case being reviewed is a 1040/1120 discrepancy adjustment for which the 30-Day Letter was issued by the agent, and in response to the 30-Day Letter, the taxpayer requested an Appeals hearing, the Reviewer will prepare the case to go to Appeals if there are no issues with the proposed tax assessment.

  5. If the case being reviewed is a 1040/1120 discrepancy adjustment for which the 30-Day Letter was issued by the agent, and the taxpayer did not respond or request an Appeals hearing, the Reviewer will prepare the 90-Day Letter package if there are no issues with the proposed tax assessment.

  6. As appropriate, the Reviewer will prepare an Advisory Memorandum on Form 5456, Reviewer’s Memorandum to the agent. The purpose of the Advisory Memo is to notify the agent of any procedures that the agent failed to follow or of significant changes made by the Reviewer. The case will not be returned when an Advisory Memo is issued. See IRM 4.71.14 Exhibit 1 at Employee Plans IRM Exhibits for an example of Form 5456.

  7. If the Reviewer does not agree with the agent’s conclusion, determines that items in the report require significant correction, or that the case needs further development, the Reviewer will discuss returning the case with the Manager, EP Mandatory Review. With approval, the Reviewer will:

    1. Prepare Form 5456, Reviewer’s Memorandum, as an Inquiry Memo stating his or her position on the issues and listing actions that need to be taken.

    2. Email Form 5456 to the Manager, EP Mandatory Review (or designee) for approval.

    3. Update RCCMS for transfer, update Form 5456 and mail the case to the Group Management Assistant to be returned to the agent through the agent’s manager.

    4. As a courtesy, the Reviewer will contact the originating group manager and/or agent before returning the case to the group.

  8. If the case involves unagreed IRC 4971 or IRC 4975 excise tax, a referral to the Employee Benefits Security Administration (EBSA ) of the Department of Labor (DOL) must be made prior to issuing the 30-Day Letter. See IRM 4.71.14.5.1.1.

    Note:

    If the case has less than 210 days remaining on the statute of limitations and the taxpayer will not extend the statute, and the 30-Day Letter is not being issued then the referral should be made prior to the issuance of the 90-Day Letter if there is sufficient time on the statute of limitations. Approval of the Manager, EP Mandatory Review is required to go straight to 90-Day.

4.71.14.5.1.1  (11-18-2011)
Referrals to DOL

  1. Per the IRS/DOL Coordination Agreement, for cases involving IRC 4971 or IRC 4975 excise tax, a referral to EBSA must be made by Mandatory Review at least 30 days prior to the issuance of the 30-Day Letter. After making the referral, the case will be suspensed for 30 days unless a response from EBSA is received. If EBSA responds indicating they are initiating participation, then it may be necessary to return the case to the field group for further development.

  2. The referral will consist of:

    1. A dated cover memo addressed to the applicable EBSA Regional Office,

    2. A copy of Letter 2005,

    3. A copy of the final Revenue Agent Report (RAR), and

    4. A completed Form 6212-B.

    Note:

    The "DOL Participation Requested" block must be checked on Form 6212-B.

  3. The referral will be sent directly to the EP Classification Unit in El Monte, CA.

    1. The referral can be mailed to:

      IRS - EP Classification
      9350 Flair Drive
      2nd Floor
      El Monte, CA 91731-2885

    2. The referral can be emailed to EP Classification at tege.ep.classification@irs.gov.

  4. The making of this referral to EBSA satisfies the requirements of IRC 4971(d) and IRC 4975(h) (i.e., no additional referral is required before the issuance of a statutory notice of deficiency).

4.71.14.5.1.2  (11-18-2011)
30-Day Letter Procedures

  1. The issuance of the 30-Day Letter gives the taxpayer 30 days to request a hearing with Appeals.

  2. If a 30-Day Letter is being issued and the Reviewer agrees with the agent’s conclusion and no major corrections are necessary:

    1. The Reviewer will make any necessary corrections to the RAR or other portions of the 30-Day Letter package.

    2. The Reviewer will email the 30-Day Letter package to the Manager, EP Mandatory Review (or designee) for review prior to issuance of the 30-Day Letter. The package for approval will include the draft 30 day letter, Form 870 (for Form 5330), RAR, IDRS research including a current AMDISA and INOLES.

    3. The Manager, EP Mandatory Review (or designee) will review the 30-Day Letter package, discuss issues with the Reviewer as needed, suggest or make any necessary revisions to the 30-Day Letter package, and email the revised 30-Day Letter package to the Reviewer.

    4. The Reviewer will mail (certified mail) the approved 30-Day Letter Package to the taxpayer and POA.

    5. Immediately after the 30-Day Letter is mailed to the taxpayer, the Reviewer will update the case to status 22 (30-Day) through RCCMS (with the AIMS box checked), complete the Mandatory Review Update Form and email the form to the Group Statute Clerk and Group Management Assistant. The Reviewer will also inform the Group Statute Clerk and Group Management Assistant of the date the case was sent to the Manager, EP Mandatory Review (or designee) and the date approval was received. See IRM 4.71.14 Exhibit 2 at Employee Plans IRM Exhibits for an example of the Update Form.

      Note:

      The group code of the group that conducted the exam will continue to be reflected on AIMS and RCCMS (the group code will not be updated to 7694).

  3. The 30-Day Letter package for a Form 5330 exam consists of:

    1. Letter 2005 (See IRM 4.71.14 Exhibit 3 at Employee Plans IRM Exhibits )

    2. Pub. 1, Your Rights as a Taxpayer,

    3. Pub. 594, The IRS Collection Process

    4. Pub. 1020, Appeals Procedures Employee Plans Examinations,

    5. Form 870 (See IRM 4.71.14 Exhibit 4 at Employee Plans IRM Exhibits ),

    6. Form 5438 (See IRM 4.71.14 Exhibit 5 at Employee Plans IRM Exhibits ),

    7. Revenue Agent Report (RAR), and

    8. Return Envelope.

  4. The 30-Day Letter package for a Form 990-T exam consists of:

    1. Letter 2005-A (See IRM 4.71.14 Exhibit 6 at Employee Plans IRM Exhibits )

    2. Pub. 1,

    3. Pub. 594,

    4. Pub. 1020,

    5. Form 870,

    6. RAR, and

    7. Return Envelope.

  5. The 30-Day Letter package for a proposed revocation/non-qualification consists of:

    1. Letter 1756 (for proposed revocation) or 1758 (for proposed non-qualification). See IRM 4.71.14 Exhibits 7 and 8 at Employee Plans IRM Exhibits )

    2. Pub. 1,

    3. Pub. 594,

    4. Pub. 1020,

    5. RAR, and

    6. Return Envelope.

  6. The 30-Day Letter package for a Form 1040/1120 discrepancy adjustment consists of:

    1. Letter 3605-A (See IRM 4.71.14 Exhibit 9 at Employee Plans IRM Exhibits )

    2. Pub. 1,

    3. Pub. 5,

    4. Pub. 504 (if Form 1040 and taxpayer is married),

    5. Pub. 594,

    6. Form 4549-E,

    7. RAR, and

    8. Return Envelope.

    Note:

    The 30-Day Letter for Forms 1040/1120 are mailed out by Mandatory Review when connected to a proposed revocation/non-qualification. If the taxpayer jointly filed a Form 1040, a separate letter is required to be mailed to each spouse.

  7. The 30-Day Letter package for claims consists of:

    1. Letter 3602-A (See IRM 4.71.14 Exhibit 19 at Employee Plans IRM Exhibits )

    2. Pub. 1,

    3. Pub. 594,

    4. Pub. 1020,

    5. Form 2297,

    6. Form 3363,

    7. RAR, and

    8. Return Envelope.

  8. If the taxpayer timely files a protest to Appeals, the procedures in IRM 4.71.14.5.1.3 will be followed.

  9. If the taxpayer concedes the issue, the Reviewer will coordinate processing of the case with the agent who worked the case.

  10. If additional information is provided by the taxpayer that changes the government’s position, processing of the case will be coordinated with the agent who worked the case and their manager, as applicable.

  11. If the taxpayer does not respond or chooses not to appeal, then the case will proceed for 90-Day processing in accordance with IRM 4.71.14.5.1.4.

4.71.14.5.1.3  (11-18-2011)
Cases to Appeals

  1. If the plan sponsor, taxpayer or Power of Attorney (POA) files a timely protest to appeal the issues reflected in the 30-Day Letter, the Reviewer will evaluate all new facts or arguments presented.

  2. If the protest does not alter the original conclusion, the Reviewer should:

    1. Review the protest letter received from the taxpayer or POA to insure that it is a valid protest and notify the Manager, EP Mandatory Review (or designee) that a protest was received.

      Note:

      See Pub. 1020 for Form 5500 and Form 5330 protests and Pub. 5 for Form 1040/1120 protests for all the items needed for a valid protest.

    2. Verify there is sufficient time on the statute of limitations for the case to be sent to Appeals. All cases moving to Appeals require a minimum of 12 months remaining on the statute of limitations.

    3. Update the RAR to address the protest and send a copy to the taxpayer. This correspondence will become a part of the administrative record for Forms 5500.

    4. Complete the Appeals transmittal sheet (Form 12209) to send the case to the Appeals at:


      Internal Revenue Service
      Boston Appeals Office
      10 Causeway
      Room 493
      Boston, MA 02222-1047

      Note:

      See IRM 4.71.14 Exhibit 10 at Employee Plans IRM Exhibits for an example of Form 12209.

    5. Complete the Appeals routing slip (Form 1725) for the case to go to the Appeals Office in Boston, MA (Office Code 121). See IRM 4.71.14 Exhibit 11 at Employee Plans IRM Exhibits for an example of Form 1725 for a case going to Appeals.

    6. Complete Form 13496, IRC Section 6020(b) Certification, if the return is a Form 5330 or Form 990-T Substitute for Return (SFR) and IRC 6651 penalties are being asserted. See IRM 4.71.14 Exhibit 22 at Employee Plans IRM Exhibits for an example of Form 13496.

    7. Complete Form 3198-A, TE/GE Special Handling Notice selecting the box, "Forward to Appeals" .

    8. Complete the Mandatory Review Update Sheet and email it to the Group Statute Clerk and Group Management Assistant with a copy to the group manager or designee) to update the status code to 80.

      Note:

      The Reviewer should not actually update the case to status 80, but should complete the Update Sheet. The case will be updated to status 80 when it is closed from Review.

    9. Verify that the administrative record is properly prepared (in the case of a proposed revocation or non-qualification). See IRM 4.71.3.

    10. Save all of the prepared forms and Letters in the RCCMS Office Documents folder us using the RCCMS Naming Convention.

    11. Assemble the case file in accordance with IRM 4.71.12.

    12. Internal group guidance on the complete processing of Appeals cases is available from the Manager, EP Mandatory Review (or designee).

  3. Make sure the closing documents are properly completed:

    1. The disposal code in item 13 should be 07.

    2. The appeals code in item 16 should be updated to 121.

    3. The Reviewer should sign and date the closing document.

  4. Transfer the case on RCCMS to the Manager, EP Mandatory Review.

  5. Before going to Appeals the case will be reviewed by the Manager, EP Mandatory Review or their designee. Unless otherwise instructed, forward the properly assembled case file to:


    IRS
    c/o Manager, EP Mandatory Review
    801 Broadway
    Room 397, MDP 13
    Nashville, TN 37203.

  6. Once it is determined that the case is adequate for Appeals review, the case will be mailed to Appeals through EP Examinations, Support Processing.

  7. If information is received in Mandatory Review while the case file is in appellate review, the Appeals Office will be notified of such information immediately.

4.71.14.5.1.3.1  (11-18-2011)
Cases Returned From Appeals

  1. Periodically, cases may be returned to Mandatory Review from Appeals for further development.

  2. Until Appeals begins using RCCMS, cases returned from Appeals will be on AIMS, but there will be no corresponding RCCMS record that will accompany the case when it is received from Appeals.

  3. As is the normal procedure for cases coming to Mandatory Review, the case will pass through the "triage" process.

  4. A designated Reviewer will perform the following actions:

    1. Research Mandatory Review records to determine who the original Reviewer was.

    2. Notify the Group Statute Clerk (or other designee) that the RCCMS records need to be pulled out of the RCCMS case library.

    3. Assign the case immediately to a Reviewer. If the original Reviewer is still in Review, the case will be assigned to him or her to work. If the original Reviewer is no longer in Review, the case will be immediately assigned to another Reviewer.

    4. The designated Reviewer may provide specific instructions or observations for the Reviewer to whom the case is assigned.

  5. When the Reviewer receives the case, it will be given high priority to work.

  6. After reviewing addition information received from Appeals, the Reviewer will determine whether or not the case needs to be returned to the original agent for further development.

    1. If the Reviewer can easily remedy the Appeals Officer's concerns, the Reviewer will address the issue and process the case in the appropriate manner.

    2. If the case needs to be returned to the original agent, the Reviewer will prepare Form 5456 and follow the procedures in IRM 4.71.14.5.1(7) above.

4.71.14.5.1.4  (11-18-2011)
90-Day Letter Procedures

  1. If no response is received to the 30-Day Letter, the Reviewer will prepare a 90-Day Letter package (Final Revocation Letter, Final Non-Qualification Letter, or Statutory Notice of Deficiency).

    Note:

    The Reviewer should allow an additional seven days beyond the 30-Day period (to account for mail delays) before issuing the 90-Day Letter, unless a statute is pending.

  2. The following 90-Day Letters should be used:

    Use Letter
    Forms 5330 or 990-T 531-B
    Final Revocation 1757
    Final Non-Qualification 1757-A
    Forms 1040/1120 - discrepancy adjustments 531-A

  3. Area Counsel approval:

    1. Must be secured before issuance of the 90-Day Letter for Forms 5500, 990-T and 5330.

    2. Is optional for Forms 1040/1120 discrepancy adjustments.

    3. Should normally be solicited from the Area Counsel office that has jurisdiction over the area where the taxpayer resides.

      Note:

      Specific Counsel attorneys may be assigned to special project cases such as ATAT cases (abusive transaction projects such as 412(i) or Management S Corp. ESOP exams) or Promoter project cases. In those instances, case project procedures should be reviewed to determine designated Counsel attorneys.

  4. Before sending a case to Counsel for 90-Day Review, the Reviewer will:

    1. Prepare a draft of the applicable 90-Day Letter as follows:

      Note:

      All parts of the 90-Day Letter to the taxpayer (and POA, if applicable) should be completed but left undated.

    2. Prepare a Summary Revenue Agent Report (Summary RAR);

      Note:

      The Summary RAR is generally a one to four page summary of the Issues, Facts & Analysis, and Conclusion. In some instances (like ATAT projects), Counsel may want to prepare the Summary RAR. See IRM 4.71.14 Exhibit 20 at Employee Plans IRM Exhibits for an example of a Summary RAR.

    3. Ensure that the Administrative Record is correctly prepared in accordance with IRM 4.71.3.3.4 for Form 5500 cases involving revocation or non-qualification. See IRM 4.71.14 Exhibit 12 at Employee Plans IRM Exhibits for an example of an Administrative Record Index.

      Note:

      Unagreed Forms 5330, 990-T or 1040/1120 do not have an Administrative Record. With these types of cases, copies of all correspondence and relevant documents will be included in the correspondence section of the case file.

      Note:

      Additionally, an "agreed" Form 5500 that comes to Review as a companion case to an "unagreed" Form 5330, 990-T or 1040/1120, does not need an Administrative Record.

    4. Email the 90-Day Letter(s), Full RAR, Summary RAR, Administrative Record Index (if applicable), and Form 870 (if applicable) to the Manager, EP Mandatory Review (or designee). Approval must be obtained before sending the case to Counsel for 90-Day approval.

    5. The Manager, EP Mandatory Review (or designee) and the Reviewer will discuss any necessary actions that should be taken or necessary revisions to the 90-Day package that need to be made prior to sending the case to Counsel.

    6. Any disagreements will be resolved by the Manager, EP Mandatory Review.

  5. Once approval is received from the Manager, EP Mandatory Review (or designee), the Reviewer will:

    1. Send the entire paper case file (with the Administrative Record for Forms 5500) to Counsel for review, and

    2. Email the 90-Day Letter(s), Full RAR, Summary RAR, Administrative Record Index (if applicable), and Form 870 (if applicable) to the Counsel attorney conducting the 90-Day review.

  6. Generally, Counsel has 45 days to review and return the case file to the Reviewer.

    Note:

    While the case is in Counsel, the Reviewer is responsible for protecting the statute of limitations.

  7. After the case is returned from Counsel, the Reviewer will follow any recommendations from Counsel, get the case ready to transfer to the 90-Day Reviewer, and document that the changes were either made, or if not, why.

  8. Occasionally, there may be a valid reason not to follow a Counsel recommendation.

    1. In these instances, written approval of the Manager, EP Mandatory Review must be obtained.

    2. When the case is sent to the 90-Day Reviewer, a full explanation along with documentation of the Manager's approval must be provided.

  9. Before sending the case to the 90-Day Reviewer, the final 90-Day Letter, the Counsel approved Summary RAR, and the Counsel Approval Memo will be emailed to the Manager, EP Mandatory Review (or designee) for approval.

  10. The Manager, EP Mandatory Review (or designee) will email the approved 90-Day Letter package to the 90-Day Reviewer, making sure the correct letter is properly prepared and addressed. The 90 Day Letter package includes:

    1. The applicable 90-Day Letter properly completed and addressed to the taxpayer and POA (if applicable);

      Note:

      The "Person to Contact" on the letter is the 90-Day Reviewer. Their ID number and telephone number should also be listed.

    2. Summary RAR;

    3. Final Full RAR;

    4. Area Counsel Approval Memo;

    5. Form 870 (Forms 5330 and 990-T);

    6. Administrative Record Index (Form 5500).

  11. A hard copy of the applicable 90-Day Letter package will be printed and included in the Lead Exam File or Primary Related Exam File (as defined by paragraph 5 of IRM 4.71.12.2).

  12. If the case is a Final Revocation, the 90-Day Letter package will include:

    1. Letter 1757 (See IRM 4.71.14 Exhibit 14 at Employee Plans IRM Exhibits )

    2. Summary RAR (Explanation of Revocation)

    3. Pub. 1

    4. Pub. 1020

  13. If the case is a Final Non-Qualification, the 90-Day Letter package will include:

    1. Letter 1757-A (See IRM 4.71.14 Exhibit 16 at Employee Plans IRM Exhibits )

    2. Summary RAR (Explanation of Non-Qualification)

    3. Pub. 1

    4. Pub. 1020

  14. See IRM 4.71.14.5.1.4.1 entitled, Statutory Notice of Deficiency, for additional guidance related to the issuance of 90-Day Letters for Forms 5330, 990-T, or 1040/1120.

  15. Once the 90-Day Letter package is approved, the Reviewer will prepare the case to be sent in overnight mail to the 90-Day Reviewer. See IRM 4.71.14.5.1.5 for procedures to be followed by the 90-Day Reviewer.

  16. The case file must be completely assembled in accordance with IRM section 4.71.12 when sent. All documents must be uploaded to RCCMS Office Documents folder using the RCCMS Naming Convention before transferring the case.

  17. Once the 90-Day Letter is issued by the 90-Day Reviewer, the case will be placed in a suspense drawer for the earlier of 90 days or the time the taxpayer petitions tax court or the taxpayer files the appropriate waiver.

    Note:

    The case should actually be suspensed for 7 to 10 days past the 90-Day expiration date to allow for time lags in mailing and inputting information.

  18. Mandatory Review will receive a daily docket listing from the Director, Legal Processing Division, Procedure and Administration Office of Chief Counsel, which should be carefully checked to determine if the U.S. Tax Court has been petitioned. The Reviewer may also conduct research at www.ustaxcourt.gov (select "Docket Inquiry" ) to determine if the taxpayer has petitioned the Tax Court.

  19. If the recipient of the Final Revocation Letter or Statutory Notice of Deficiency files a petition with the U.S. Tax Court, the case will be routed through EP Examinations, Support Processing (EP Closing Unit) to the appropriate Appeals Office.

    Note:

    Examination cases will be forwarded to the appropriate Appeals Office which will subsequently be forwarded to Area Counsel offices handling the same.

    1. The Appeals Office Code is 221 for cases going to Tax Court.

    2. The disposal code is 11 (Unagreed - Petition to Tax Court) on AIMS and 603 on RCCMS.

    3. Form 12209, Transmittal of Cases to Appeals, will be completed by the 90-Day Reviewer and placed on top on the outside of the case file. The Appeals address is:


      Internal Revenue Service
      Boston Appeals Office
      10 Causeway
      Room 493
      Boston, MA 02222-1047

      Note:

      See IRM 4.71.14 Exhibit 10 at Employee Plans IRM Exhibits for an example of Form 12209.

    4. The 90-Day Reviewer will complete the Appeals routing slip (Form 1725) for the case to go to the Appeals Office in Boston, MA (Office Code 221).

      Note:

      See IRM 4.71.14 Exhibit 11 at Employee Plans IRM Exhibits for an example of Form 1725 for a case going to Appeals.

    5. The case will be forwarded to the Group Management Assistant to route the case to EP Examinations, Support Processing. EP Examinations, Support Processing will then route the case to the Appeals Office listed on Form 12209.

  20. If a Tax Court petition is not timely filed:

    1. The case is prepared for closing as a defaulted case,

    2. The disposal code is 10 on AIMS and 604 on RCCMS, and

    3. The case file will be forwarded to the Group Management Assistant to route the case to EP Examinations, Support Processing for final disposition and tax assessment.

4.71.14.5.1.4.1  (11-18-2011)
Statutory Notice of Deficiency

  1. For practical purposes, 90-Day Letters issued for Forms 5330, 990-T and 1040/1120 discrepancy adjustments are Statutory Notices of Deficiency.

  2. The same general 90-Day procedures (including the pre and post Counsel approval procedures) discussed in the previous section (IRM 4.71.14.5.1.4) should be followed with regard to Notices of Deficiency.

  3. A Statutory Notice of Deficiency is a legal determination whereby the Commissioner, as a delegate of the Secretary, determines the tax liability of the taxpayer.

  4. Director, EP Examinations and Area Managers are authorized to sign the Statutory Notices of Deficiency, on behalf of the Commissioner.

  5. A taxpayer must file a Tax Court petition within 90 days (150 days if the taxpayer is outside the United States) after the Statutory Notice has been mailed.

    Note:

    All references in this Manual to the 90-Day Letter shall be read to include the 150-Day Letter when applicable.

  6. All Statutory Notices of Deficiency must specify the date the IRS has determined to be the last day for filing a petition with the Tax Court.

  7. A Statutory Notice of Deficiency for Form 5330 or Form 990-T consists of the following:

    1. Letter 531-B (See IRM 4.71.14 Exhibit 15 at Employee Plans IRM Exhibits )

    2. Form 870

    3. Summary RAR

    4. Notice 1214

    5. Pub. 1

    6. Pub. 594

    7. Return envelope

  8. A Statutory Notice of Deficiency for Forms 1040 and 1120 consists of the following:

    1. Letter 531-A (See IRM 4.71.14 Exhibit 13 at Employee Plans IRM Exhibits )

    2. Form 4089

    3. Form 4549-E

    4. Summary RAR

    5. Notice 1214

    6. Pub. 1

    7. Pub. 594

    8. Return envelope

  9. The Statutory Notice of Deficiency must be sent by certified mail to the taxpayer's last known address. If the taxpayer’s current address is not known, an AIMS INOLES print must be secured to determine the last known address.

  10. Where the Statutory Notice relates to a jointly filed Form 1040, a duplicate copy of the Statutory Notice must be sent by certified mail to each spouse at his or her last known address, even if they reside at the same residence.

4.71.14.5.1.4.2  (11-18-2011)
90-Day Reviewer

  1. The 90-Day Reviewer is a Reviewer who is designated by the Manager, EP Mandatory Review to issue 90-Day Letters and to monitor cases while in 90-Day suspense.

  2. When the 90-Day Reviewer receives the case file and the 90-Day Letter package, he or she will:

    1. review the 90-Day Letter package immediately if the statute of limitations will expire within 45 days.

    2. review the 90-Day package within ten workdays of receipt if more than 45 days remain on the statute of limitations.

  3. The 90-Day Reviewer can make minor changes to the 90-Day Letter Package.

  4. If it is determined that any substantive changes need to be made, the 90-Day Reviewer will contact the Reviewer who worked the case.

    Note:

    The Manager, EP Mandatory Review will resolve any differences.

  5. The 90-Day Reviewer will prepare final hard copies of the 90-Day Letter package(s) addressed to the taxpayer and POA (if applicable) for the Area Manager, EP Examinations Programs and Review, to sign and mail out.

    1. Each 90-Day Letter (complete with all attachments) should be placed in a separate file folder.

    2. A mailing envelope should be prepared for each 90-Day Letter, completely addressed and prepared with completed certified mail forms (PS 3800 and PS 3811) placed on the envelope. The completed envelope should be placed within the associated file folder.

    3. Form 1725 should be attached to the outside of each folder containing a letter addressed to the taxpayer. See IRM 4.71.14 Exhibit 21 at Employee Plans IRM Exhibits for a completed Form 1725 when obtaining a signature on a 90-Day Letter.

    4. The Counsel approval memo (or email) should be included in each file folder with the letter addressed to the taxpayer.

    5. Each file folder should contain a complete file copy of the 90-Day package. On the bottom of the copy of the 90-Day Letter write, "Copy of letter sent to taxpayer" .

    6. Pull off the completed originator's portion of PS Form 3800 (certified mail) and attach it to the bottom left of the first page of the file copy of the 90-Day Letter. If possible, it should first be stamped by the post office.

    7. If there are any representatives receiving copies of the letter they would each go in a separate folder with nothing on the front (except post it note saying "rep" ). The inside of the folder would contain Letter 937 and the same items as the folder containing the letter to the taxpayer.

  6. Once completed, the 90-Day Letter folders discussed in paragraph (5) will be transmitted to the Manager, EP Mandatory Review.

  7. After reviewing the 90-Day Letters, the Manager, EP Mandatory Review, will forward the folders to the Area Manager, EP Examinations Programs and Review, to sign, date and mail out.

  8. Signed and dated file copies of the 90-Day Letters will be returned to the 90-Day Reviewer to be placed in the Administrative Record (Form 5500) or case file (Forms 5330, 990-T or 1040/1120).

  9. The 90-Day Reviewer will process the case in accordance with paragraphs (17) through (20) of IRM 4.71.14.5.1.4 above.

4.71.14.5.1.4.3  (11-18-2011)
Statute Considerations

  1. Generally, the issuance of the 90-Day Letter suspends (in effect extends) the statute of limitations 150 days (90 days to petition tax court plus an additional 60 days to process the case) for taxpayers in the United States and 210 days (150 days to petition tax court plus an additional 60 days to process the case) for taxpayers outside the United States.

  2. However, by signing Form 870 or Form 4089 the taxpayer waives his/her right to petition tax court.

    1. As a result, the additional time by which the statute of limitations was "extended" (by the issuance of the 90-Day Letter) is shortened by the amount of time remaining from the date Form 870 or Form 4089 was signed to the deadline to petition tax court.

    2. Example: Assume a Statutory Notice of Deficiency is issued on June 1, 2010 on a Form 5330 return with a statute expiration date of July 31, 2010. The taxpayer has 90 days (until August 30, 2010) to petition tax court. The statute of limitations would be "extended" to December 28, 2010 by the issuance of the 90-Day Letter (150 days are added to the original statute date). However, if the taxpayer signs Form 870 on June 21, 2010 (with 70 days remaining in the 90 day period), the statute of limitations would be "shortened" by 70 days to October 19, 2010.


  3. The 90 day Reviewer will update the statute of limitations on AIMS and RCCMS when the 90-Day Letter is mailed.

  4. If Form 870 or Form 4089 waiver is received prior to the expiration of the 90-Day period, the statute of limitations will need to be updated on AIMS and RCCMS to reflect a shorter statute date.

4.71.14.5.1.4.4  (11-18-2011)
Rescinding Statutory Notices Of Deficiency

  1. The Secretary may, with the consent of the taxpayer, rescind any Statutory Notice of Deficiency mailed to the taxpayer.

  2. The taxpayer or the Service may initiate rescission of a Statutory Notice of Deficiency.

  3. A Statutory Notice of Deficiency may only be rescinded with the consent of the taxpayer.

  4. Whether or not a notice is rescinded is discretionary on the part of the Secretary.

  5. The Manager, EP Mandatory Review must be consulted by the Reviewer when the potential need arises to rescind a Notice of Deficiency that has been issued on a case in Review.

4.71.14.5.1.4.4.1  (11-18-2011)
Criteria for Rescinding

  1. The determination to rescind a Statutory Notice of Deficiency is made on a case-by-case basis. A rescission may be agreed to if:

    1. A Statutory Notice of Deficiency has been issued for an incorrect amount. The taxpayer must be advised that, once rescinded, another Statutory Notice of Deficiency may be issued for a different amount.

    2. The Statutory Notice of Deficiency was issued to the wrong taxpayer.

    3. The Statutory Notice of Deficiency was issued for the wrong tax period.

    4. The Statutory Notice of Deficiency was issued without considering a properly filed Form 872, Consent to Extend the Statute of Limitations.

    5. The taxpayer submits information establishing the actual tax due is less than the amount shown in the Statutory Notice of Deficiency.

  2. A rescission will not be entered into if:

    1. It has been 90 days (150 days) since the Statutory Notice of Deficiency was issued.

    2. The taxpayer has petitioned the Tax Court.

4.71.14.5.1.4.4.2  (11-18-2011)
Statute of Limitations Considerations Before Rescinding Notice

  1. Since the rescission agreement returns the case back to its original state before the Statutory Notice of Deficiency was issued, careful consideration must be given to the statute before such agreement is entered into. However, the rescinded Statutory Notice of Deficiency suspends the statute for the period of time the Statutory Notice of Deficiency was outstanding.

  2. The rescinded Statutory Notice of Deficiency suspends the running of the statute of limitations only for the period during which the Statutory Notice of Deficiency is outstanding. A new statute date must be determined for purposes of issuing another Statutory Notice of Deficiency, if necessary, and making assessments.

  3. If there are at least ninety days remaining on the statute, a rescission may be entered into. If less than ninety days remains on the statute, the Statutory Notice of Deficiency will be rescinded only if the taxpayer executes a Form 872 or Form 872–A to extend the statute.

  4. If there was a Form 872–A on the case prior to the issuance of the Statutory Notice of Deficiency, the rescission will not be granted unless the taxpayer signs another Form 872–A prior to rescission.

4.71.14.5.1.4.4.3  (11-18-2011)
Agreement to Rescind Notice of Deficiency

  1. Form 8626 will be used to secure an agreement between the taxpayer and the government to rescind a Statutory Notice of Deficiency.

  2. The originator of the Statutory Notice of Deficiency is responsible for the control, preparation, and execution of the form.

  3. Regarding the rescission agreement:

    1. It must apply to the same tax periods as the Statutory Notice of Deficiency.

    2. More than one year can be entered on the rescission agreement form.

    3. The agreement must contain all taxable years covered in the Statutory Notice of Deficiency. All tax years covered will be entered below the first paragraph under "Tax Year Ended" .

  4. The rescission agreement must reflect the same deficiency and penalties as the Statutory Notice of Deficiency.

  5. If the Statutory Notice of Deficiency was issued to both a husband and wife, the rescission agreement must be signed by both spouses or authorized representative(s) for the parties.

  6. Form 8626 will be prepared in duplicate.

    1. Once executed, one copy of the form will be attached to the front of the Statutory Notice of Deficiency.

    2. The second copy is sent to the taxpayer.

  7. The rescission agreement is effective on the date the Commissioner or delegate countersigns the Form 8626.

  8. Letter 2264 (DO) is used to request the taxpayer’s concurrence to rescind by signing Form 8626.

  9. Letter 2262 (DO) is used to send a copy of the executed rescission agreement to the taxpayer.

  10. Letter 2263 (DO) is used to advise the taxpayer that the rescission is not being granted and the Statutory Notice of Deficiency will remain in effect.

4.71.14.5.1.5  (11-18-2011)
Picking Up Additional Years

  1. If the Reviewer determines that the pursuit of a qualification issue, excise tax issue, or UBI tax issue is warranted in an additional year, the Reviewer will first discuss the need to add an additional year(s) with the Manager, EP Mandatory Review.

  2. If the Manager, EP Mandatory Review agrees that an additional year(s) should be picked up, the Reviewer will do the following:

    1. If the case is a Form 5330, or Form 990-T, the Reviewer will follow the procedures in IRM 4.71.14.5.1.7.1 below.

    2. If the case is a Form 5500, the Reviewer will contact the manager of the group that conducted the exam to discuss the issue and to discuss coordination with EP Classification to get the additional year(s) established on RCCMS and AIMS.

      Note:

      If Form 5500 is due but not filed, the procedures in IRM 4.71.1.21 should be followed.

    3. If an additional year is picked up, the taxpayer must be informed of the exam in writing.

    4. If the decision is made to pick up an additional year(s) after the 30-Day Letter has been issued, advice from Counsel should be solicited to determine if the 30-Day letter needs to be re-mailed.

4.71.14.5.1.5.1  (11-18-2011)
Substitute for Return Procedures for Forms 5330 or 990-T

  1. IRM 4.71.5.9.2 provides that when a Form 5330 excise tax issue is unagreed, the agent is instructed to prepare a substitute for return (SFR) package, establish the SFR on RCCMS and AIMS, and mail the SFR package to the Ogden Service Center.

    Note:

    Substitute for Return Procedures for Forms 990-T are found in IRM 4.71.10.5.3 and are similar to Form 5330 procedures.

  2. With approval of the Manager, EP Mandatory Review to add an additional year(s), the Reviewer will prepare a SFR package and mail it to the Ogden Service Campus at the address in paragraph (8) below if the agent has not already done so.

    Note:

    The substitute for return must be sent to the Service Campus because the return must be fully established before the case can be closed to Appeals or before the excise tax can be assessed following a Statutory Notice of Deficiency. A return does not become fully established until the Service Center processes the return.

  3. The substitute for return package consists of:

    1. Form 3210, Document Transmittal,

    2. Form 13133, Expedite Processing Cycle,

    3. Form 3198-A, TE/GE Special Handling Notice, and

    4. Form 5330 or 990-T.

  4. Form 5330 should be prepared as follows:

    1. The words "Substitute for Return Prepared by TEGE: Employee Plans" are to be entered on the top margin on the face of the Form 5330 (or Form 990-T for UBI).

    2. Only the top portion of the substitute Form 5330 sections are to be completed including the tax year's beginning and ending dates, and items A through G (and H, if applicable).

      Note:

      Likewise for Form 990-T, only the entity information should be completed.

    3. Form 5330/990-T dollar amount spaces should be left blank.

  5. Form 3198-A should be completed for each Form 5330/990-T and stapled on top of each return:

    1. Complete the applicable lines in the "Required Entries" section of the form.

    2. Select the SFR (Substitute for Return) entry in the "Special Features" section of the form.

    3. Include the following notation in the Special Instructions section of Form 3198-A: "Substitute for Return; Please process immediately."

  6. Form 13133 should be completed for each SFR and stapled on top of Form 3198-A.

    1. Include your name, phone number and mail code.

    2. Hand write these words: "Substitute for Return" .

  7. Form 3210 should be prepared in triplicate. Two copies (an acknowledgement copy and a recipient copy) should be included in the package mailed to Ogden, and one copy should be maintained in Mandatory Review.

  8. Make a copy of the SFR package for the case file before mailing.

  9. The substitute for return package will be mailed to:

    • IRS
      1973 N. Rulon White Blvd., Mail Stop 6052
      Ogden, UT 84404

  10. The Reviewer will contact the group manager and agent who initially worked the exam to have them establish the new year on RCCMS and AIMS and then close the year to Mandatory Review.

    Note:

    This action is done by the originating group on RCCMS and AIMS only. There is no need for the originating group to set up a paper file; this will be done by the Reviewer.

  11. The Reviewer should verify that the Form 5330/990-T has been properly established on RCCMS and AIMS.

  12. Excise or UBI tax will be assessed from Forms 5599 when the case is closed to EP Examinations, Support Processing.

    Note:

    Form 5599 becomes the assessment document since there was no delinquent return forwarded to the Service Center containing dollar amounts.

    1. The Reviewer will make sure tax and penalty amounts are listed on item 12 of Form 5599.

    2. The Reviewer will write instructions regarding the assessment of tax (and penalties) in the remarks section of Form 5599.

4.71.14.5.1.6  (11-18-2011)
AIMS Processing Codes

  1. The following unagreed disposal codes will be used, as applicable, in block 13 of Forms 5650 or 5599 when closing cases out of Mandatory Review:

    1. 07 Unagreed - Protest to Appeals

    2. 10 Unagreed - Without Protest

    3. 11 Unagreed - Petition to Tax Court

  2. When closing cases to Appeals, the correct Appeals codes should be entered, as applicable, on line 16 of Forms 5650 or 5599: The current Appeals code is 121 or 221 in Boston (depending on the destination of the case). See IRM 4.71.14 Exhibits 17 and 18 at Employee Plans IRM Exhibits for examples of Forms 5599 and 5650 for a case going to Appeals.

    1. Case Type Appeals Codes
      Non-docketed case 121
      Docketed case 221

4.71.14.5.2  (11-18-2011)
Agreed Cases Reviewed Per Management Request

  1. From time to time management will provide special requests for certain open agreed cases to be reviewed. After reviewing these cases the Reviewer will:

    1. Provide requested feedback to management. This feedback can be in the form of Form 5456, Reviewer’s Memorandum, or any other form of communication as determined by the Manager, EP Mandatory Review.

    2. Close the case to EP Examinations, Support Processing, or return the case to the group, as applicable.

  2. An agreed issue will not be reopened nor should a new issue be of concern to the Reviewer unless the basis for such proposal is significant in nature, or the potential effect upon the tax liability is material.

  3. Cases will be returned to the group only with concurrence of the Manager, EP Mandatory Review.

4.71.14.6  (11-18-2011)
Form 5456, Reviewer’s Memorandum

  1. Form 5456, Reviewer’s Memorandum, is used by Mandatory Review to communicate necessary information related to reviewed cases with the agent who worked the case and their group manager. See IRM 4.71.14 Exhibit 1 at Employee Plans IRM Exhibits for an example of Form 5456.

  2. Form 5456 can be used in four ways:

    1. An Advisory Memorandum is used to apprise the group manager and the agent of errors of omission or commission that have been accepted or corrected by the Reviewer with no change in qualification or tax liability. When an Advisory Memorandum is issued, the case file is not returned.

    2. An Inquiry Memorandum is prepared when significant issues are present in the exam that warrant the return of the case to the group for further case development by the agent.

    3. A Correction Memorandum often emanates from an Inquiry Memorandum where the agent’s revised recommendations result in an incorrect tax liability, or other significant determination that is incorrect.

    4. A Commendatory Memorandum is issued when an agent does an exemplary job on an exam with difficult issues.

  3. Form 5456 will be addressed to the manager of the agent who worked the case.

  4. Each issue raised by the Reviewer will be clearly explained.

  5. If additional space is needed, Form 886–A can be utilized.

  6. Form 5456 will be emailed to the Manager, EP Mandatory Review (or designee) for approval.

  7. After approval:

    1. The case file will be forwarded to the Manager, EP Mandatory Review.

    2. If the Form 5456 is an Inquiry or Correction Memorandum, the original and a copy of Form 5456 will be returned with the case file to the agent’s group manager.

    3. If the Form 5456 is an Advisory or Commendatory Memorandum, the original Form 5456 (without the case file) will be sent to the agent’s group manager.

    4. A copy of Form 5456 will be retained by Mandatory Review.

  8. The group manager will be contacted by telephone before returning a case that has less than 180 days remaining on the statute. Such cases will be forwarded to the group by express mail (next day).

  9. When a case is returned to the group with Form 5456 (Inquiry of Correction Memo), the group manager will initially consider the Reviewer’s Memorandum as follows:

    1. If the group manager concurs with some or all of the contents of the memorandum, item 3 of the Form 5456 will be completed and both copies of Form 5456 will be forwarded with the case file to the agent.

    2. If the group manager disagrees with the Memorandum, he/she should prepare a written response on Form 5457 citing reasons for disagreement on Form 5457. The "No" block should be selected in item 3.

    3. The group manager should contact the Manager, Mandatory Review by phone to discuss the issue. If the issue cannot be resolved by phone, the case file should be returned to the Manager, Mandatory Review.

    4. The Manager, Mandatory Review shall review the response from the group manager. If he is in agreement with the group manager, the case will be returned to the Reviewer to complete. If the Manager, Mandatory Review cannot reach agreement with the group manager, the issue will be elevated to the Manager, EP Programs and Review, who will resolve any dispute.

  10. Upon receipt of the case file with Form 5456 (Inquiry or Correction Memo), the agent will:

    1. Reactivate the case on Form 6490 (EP Technical Time Report).

    2. Complete items 1–6 on Form 5457, utilizing Form 886–A if additional space is required.

    3. In completing item 5 of Form 5457, responses should correspond to the order of the Reviewer’s comments on Form 5456.

    4. If an item cited does not result in an adjustment, the additional information or an explanation will be provided on Form 5457.

  11. The group manager will reflect his/her concurrence with the responses to the items listed on the Form 5456 by completing item 7 on Form 5457.

  12. After group manager's approval, the case file, Form 5457 and two copies of Form 5456 (and 886-A) will be resubmitted to Mandatory Review.

  13. The Reviewer will consider the responses to the items enumerated on Form 5456, by completing items 8–10 on Form 5457 and if necessary, prepare another Form 5456.

  14. After the final review and acceptance of the case by Mandatory Review, dispose of Forms 5456, 5457 and Form 886-A as follows:

    1. Keep originals for the Administrative Case File, if applicable.

    2. Include a copy of each form in the case file, on the inside left.

  15. If after 60 days, no response has been received from the group to a Form 5456, the Reviewer will solicit a response from the group manager with a Form 5456 Feedback Memo.

    1. The Feedback Memo will be addressed to the group manager from the Manager, EP Mandatory Review.

    2. The Reviewer's mailing address will be listed in the memo as the address where the group manager will mail his response to the Feedback Memo.

    3. The Reviewer will forward a copy of the Feedback Memo to the EP Mandatory Review Statute Control Clerk when the Feedback Memo is mailed to the group manager.

    4. When the Reviewer receives a response to the Feedback Memo from the group manager, he/she will forward a copy of the response to the EP Mandatory Review Statute Control Clerk.

    5. If no response to the Feedback Memo is received from the group manager within 10 days, the Reviewer will contact the Manager, EP Mandatory Review who will in turn solicit a response from the group manager.

    6. The Reviewer will continue to solicit feedback from the group manager every 30 days thereafter until the case is returned to Mandatory Review.

4.71.14.7  (11-18-2011)
Special Notification Procedures

  1. The Reviewer should ensure that all required referrals have been made to other governmental agencies such as the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC). If there is no evidence that a referral was made, the Reviewer will make the referral.

  2. If issues involved in the case warrant a referral to an Examination Functional Unit (such as SB/SE), and the agent did not previously make a referral, the referral will be made by the Reviewer on Form 5666.

  3. If issues involved in the case directly impact a live examination of a related Form 1040, Form 1041 or Form 1120 in SB/SE or other Examination Functional Unit, the exam agent working the related cases will be contacted and updated with the status of the case.

  4. If issues in the case have an impact on a related case being litigated by Area Counsel, the attorney will be contacted and apprised of the status of the case.

  5. If third party contact is made, the third party notice requirements per IRC 7602(c) will be followed. For all third party contacts, Letter 3164F and Form 12175 must be prepared and processed in accordance with IRM 4.71.1.10 and the subsections thereunder.

    Note:

    A referral made to DOL for the purpose of satisfying IRC 4971(d) or 4975(h) is no longer treated as a third party contact.

4.71.14.8  (11-18-2011)
Monthly Reports

  1. At the end of each month, assigned case inventory will be validated by each Reviewer and a status report submitted to the Manager, EP Mandatory Review.

    1. The total number of cases on hand must be carefully appraised and appropriate measures taken to avert potential backlogs.

    2. The status of short statute and other high priority cases will be determined and appropriate measures taken.

  2. Status of special assignments will be reported by each Reviewer (if applicable) and submitted as part of the monthly report to the Manager, EP Mandatory Review.

  3. Speaking engagements and group presentations conducted during the month will also be included on the monthly report provided to the Manager, EP Mandatory Review.


More Internal Revenue Manual