4.71.15  EP Special Review

Manual Transmittal

July 25, 2014

Purpose

(1) This transmits revised IRM 4.71.15, Employee Plans Examination of Returns, EP Special Review.

Background

This manual section discusses Special Review's (SR) responsibilities in the implementation of quality measurement standards for Employee Plans (EP) examinations.

Material Changes

(1) This revision makes minor clarifying corrections to the June 6, 2012 published version of IRM 4.71.15.

Effect on Other Documents

This supersedes IRM 4.71.15 dated June 6, 2012.

Audience

TE/GE Employee Plans

Effective Date

(07-25-2014)


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

4.71.15.1  (07-25-2014)
Overview of EP Special Review

  1. This manual section discusses Special Review's (SR) responsibilities in the implementation of quality measurement standards for Employee Plans (EP) examinations.

  2. In addition to applying quality standards to the review of closed EP cases, SR also provides educational services designed to improve overall quality in EP examinations.

  3. The IRS Restructuring and Reform Act of 1998 (RRA) required the IRS to change its performance measures to balance customer service with overall tax administration responsibilities.

  4. Treasury Regulation Part 801, Balanced Measurement System for Measuring Organizational and Employee Performance, implemented the IRS Balanced Measurement System. This system supports the IRS's overall mission by assessing organizational performance through key output measures.

  5. SR is charged with reviewing examination cases and reporting the results.

  6. Case reviews are expected to result in the following benefits:

    1. Provide feedback to management regarding the quality of EP examinations

    2. Help identify improvement opportunities in case quality

    3. Improve customer service and satisfaction

    4. Reduce the frequency of cases returned from EP Mandatory Review (MR) and Appeals for additional development

    5. Help improve the sustention rate of EP examination cases in Appeals.

    6. Identify possible training/continuing professional education (CPE) needs

    7. Increase consistency in examinations

4.71.15.2  (07-25-2014)
Explanation of Tax Exempt Quality Measurement System (TEQMS)

  1. Employee Plans has five distinct quality standards for Large Case and General Program cases.

  2. Large Case and General program share the same standards’ titles for four out of five standards. The exception is Large Case has a standard called "Proposal of Issue" , and General Program has a standard called "Application of Law & Issue Resolution."

  3. Separate elements are required for Large Case examinations due to the complex nature and scope.

  4. Each quality standard is an essential part of an examination.

    1. These standards are subdivided into elements and each element is rated individually.

    2. Elements are written as questions that pertain to the specific standard.

    3. The responses to the questions determine if the examination case file has met or failed the element.

  5. The reviewer is provided flexibility in the use of his or her professional judgment when rating each TEQMS element.

  6. Managers and agents should reference the Large Case and General Program TEQMS User Guides located in the Special Review section of the TE/GE intranet home page for a complete explanation of TEQMS ratings. To go to the web address, click the following link: EP Exam Tax Exempt Quality Measurement System (TEQMS).

4.71.15.3  (07-25-2014)
Staffing

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

    1. Possess a comprehensive knowledge of accounting and auditing principles, and possess superior skill in interpreting and applying tax laws, regulations, and court decisions.

    2. Are knowledgeable in EP Examination's policies and procedures.

    3. Are capable of performing managerial review of cases.

    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; communicate ideas and opinions clearly, tactfully and objectively; apply good judgment; and exercise individual initiative.

  2. Agents are generally assigned to SR for three years.

  3. Large Case reviewers generally work on a collateral duty assignment, not to exceed 25% of the agent’s time during a three year period.

  4. Assignments may be extended as needed to meet the workload demands.

  5. Agents may be detailed to SR in order to handle an increase in workload. Generally, temporary details are for 90 days.

4.71.15.4  (07-25-2014)
Responsibilities of EP Special Review

  1. The principle objective of SR staff is the fair, impartial, courteous and professional administration of tax laws.

  2. The role of SR is to advise management of areas requiring attention and to recommend quality improvements wherever necessary.

  3. To accomplish these objectives, reviewers should review the managerial, technical and procedural aspects of examination cases.

  4. The reviewer must strive for high quality standards, uniform treatment and be constantly aware of unfavorable patterns or trends to identify problem areas, unique issues and novel techniques used by agents.

  5. The responsibilities of SR include:

    1. Performing quality reviews of randomly selected, closed examination cases

    2. Compiling and analyzing quality review results

    3. Providing statistical and narrative feedback to the Area Managers, managers, employees and national level management

    4. Assisting our customers in identifying quality improvement opportunities

    5. Indirectly contacting customers through newsletters and our website

    6. Developing written technical and procedural guidance

    7. Participating in consistency reviews

    8. Directly contacting customers via feedback memos and group presentations

    9. Providing support to Compliance Planning Groups

    10. Participating in "Ask the Reviewer" (program that provides technical and procedural assistance to agents through email request)

    11. Providing informal EP technical assistance to non-EP functions

    12. Coordinating EP fraud examinations

    13. Coordinating third party contact disclosure requirements

    14. Reviewing EP training material

    15. Processing technical advice requests

    16. Processing technical assistance requests

    17. Assisting EP Mandatory Review in writing and editing the Internal Revenue Manual (IRM)

4.71.15.5  (07-25-2014)
Case Selection

  1. SR only reviews closed examinations.

  2. Cases to be reviewed are sample-selected by TE/GE Reporting Compliance Case Management System (RCCMS).

  3. The population of EP examination cases is divided in two segments:

    1. Large Case examinations consist of all EPTA examinations, examinations that support the LB&I Coordinated Industry Program (CIP) and examinations that support the EO Team Examination Program (TEP), where at least one 401(a) qualification issue is being examined.

    2. General Program examinations are all other examinations not considered in the Large Case population.

  4. SR will determine the number of cases selected for review by applying the selection rate to the case closures in RCCMS.

  5. EP examination cases will be selected for sample review when they are closed by the group to status 51 or status 20 on RCCMS.

  6. EP Examination Special Support & Processing (ESSP) will process the closed case and forward selected case files to SR.

  7. SR will coordinate with MR to secure cases selected for the TEQMS review that are also in MR.

  8. SR will coordinate with group managers to secure Large Case examination files kept in the groups.

4.71.15.6  (07-25-2014)
Review Procedures

  1. The TEQMS User Guides provide the procedures for evaluating cases.

  2. Consistency reviews are conducted to ensure that reviewers are evaluating the cases in a consistent manner.

    1. In a consistency review, each reviewer reviews the same case.

    2. These reviews are compared and discussed.

    3. Discrepancies in the evaluation of the TEQMS elements, with respect to the case, are discussed to develop a uniform standard for evaluating cases based on a specific set of facts and circumstances.

  3. General Program reviews are conducted by the reviewer at his or her post of duty (POD).

  4. Large Case reviews may be conducted at the reviewer’s POD, at the group manager’s or agent’s POD, or at the taxpayer’s place of business.

4.71.15.7  (07-25-2014)
Case Return Criteria

  1. Cases may be returned to the group for any of the following reasons:

    1. There is clear evidence that an incorrect determination was reached about the qualification of a retirement plan.

      Note:

      An underdeveloped case will not be returned unless the case file shows evidence that the plan is not qualified.

    2. There is a clearly defined substantial error based on an established IRS position existing at the time of the examination.

      Note:

      "Clearly defined" means the error is clearly apparent as opposed to being vague or uncertain. "Substantial" refers to the dollar amount of tax that would not be assessed if the case was not returned (regardless of the number of years involved). Penalties and interest are not factors in making this determination. Any proposed change should involve net additional tax of at least $10,000 to be considered substantial. A case may be returned without an exact dollar amount of the anticipated deficiency as long as it appears at the outset to meet the dollar return criteria.

    3. There is evidence of fraud, malfeasance, collusion, concealment or misrepresentation by the taxpayer or representative which was not addressed by the agent.

    4. The case cannot be processed (for example, the case requires AIMS establishment or a mandatory examination checksheet was not completed).

    5. The adjustment is favorable to the taxpayer, and SR staff cannot readily correct the report.

    6. The error will likely result in serious criticism of the IRS’s administration of the tax laws.

    7. The error will likely establish a precedent that would seriously hamper subsequent attempts by the IRS to take corrective action.

    8. The error will likely result in inconsistent treatment of similarly situated taxpayers.

  2. Cases also assigned to MR (for example, unagreed cases in status 20) will be returned to MR once the TEQMS review is completed.

    Note:

    MR cases are part of the sample universe considered by TEQMS.


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