4.71.15  EP Special Review

Manual Transmittal

June 06, 2012

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 March 11, 2011 published version of IRM 4.71.15.

Effect on Other Documents

This supersedes IRM 4.71.15 dated March 11, 2011.

Audience

TE/GE Employee Plans

Effective Date

(06-06-2012)


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

4.71.15.1  (06-06-2012)
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 Service 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 Service's overall mission by assessing organizational performance through a few 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 exams

    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 exam cases in Appeals and Tax Court

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

    7. Increase consistency in examinations

4.71.15.2  (06-06-2012)
Explanation of Tax Exempt Quality Measurement System (TEQMS)

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

  2. Separate standards are required due to the complex nature and scope of Large Case examinations.

  3. The Service’s increased awareness of the need to focus on customer service and satisfaction is another reason for implementing specific quality standards applicable to each program.

  4. The population of EP exam cases is divided in two segments:

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

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

  5. Large Case TEQMS addresses six (6) quality standards for Large Case exams.

  6. General Program TEQMS addresses eight (8) quality standards for General Program exams.

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

    1. These standards are subdivided into elements and, in some instances, the elements are subdivided into aspects.

    2. Elements and aspects are sub-categories 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 standard.

  8. Some elements and aspects are considered so important to meeting the standard, that they have been designated as "key" elements and "key" aspects.

  9. If a "key" element or aspect is rated as not met by the reviewer, the entire standard will receive a "not met" rating.

  10. The reviewer is provided flexibility in the use of his or her professional judgment when reviewing non-key elements/aspects.

  11. If non-key elements/aspects receive a "No" rating, the reviewer has the discretion to mark the standard as pass or fail (provided all key elements/aspects received a "Yes" rating).

  12. Managers and agents should reference the Large Case and General Program TEQMS Student Guides in the Special Review section of the TE/GE intranet home page for a complete explanation. To go to the web address, click the following link: EP Examinations, Special Review, TEQMS.

4.71.15.3  (06-06-2012)
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 Exam'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 3 years.

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

  4. Agents may be detailed to SR due to an increase in workload. Generally, temporary details are for 90 days.

4.71.15.4  (06-06-2012)
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 reviewers include:

    1. Performing quality sample review of randomly selected, closed examination cases

    2. Compiling and analyzing quality review results

    3. Providing statistical and narrative feedback to area and national level management, examination managers and employees

    4. Assisting our customers in identifying quality improvement opportunities

    5. Increasing consistency in examinations

    6. Indirectly contacting customers through newsletters and our website

    7. Providing technical guidance/assistance and research for field agents, and technical support to management and other functions

    8. Developing written technical and procedural guidance

    9. Participating in the peer review process

    10. Directly contacting customers via feedback memos and group presentations

    11. Provide support to Compliance Planning Groups (CPG)

4.71.15.5  (06-06-2012)
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 exam cases is divided in two segments:

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

    2. General Program exams 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 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 exam files kept in the groups.

4.71.15.6  (06-06-2012)
Reviewer Duties

  1. Duties of SR reviewers include:

    1. Performing case reviews on TEQMS selected cases and completing the Quality Measurement System (QMS) survey in Reporting Compliance Case Management System (RCCMS)

      Note:

      Completed QMS surveys are captured and incorporated in TEQMS reports generated by RCCMS.

    2. Participating in outreach to EP personnel and providing confidential feedback memos to agents

    3. Editing and contributing to the EP&R Newsletter

    4. Participating in "Ask the Reviewer" (program that provides technical and procedural assistance to agents through e-mail request)

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

    6. Coordinating EP fraud examinations

    7. Coordinating third party contact disclosure requirements

    8. Reviewing EP training material

    9. Processing technical advice requests

    10. Processing technical assistance requests

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

4.71.15.7  (06-06-2012)
Review Procedures

  1. The TEQMS Student Guide provides 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 standards, aspects and/or 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.

4.71.15.8  (06-06-2012)
Case Return Criteria

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

    1. There is clear evidence that there has been an incorrect determination on 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 Service position existing at the time of the examination.

      Note:

      "Clearly defined" means the error is clearly apparent as opposed to being vague or uncertain.

      Note:

      "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 examiner.

    4. The case cannot be processed (e.g., 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 Service’s administration of the tax laws.

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

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

  2. Cases also assigned to MR will be returned to MR once the TEQMS review is completed.

    Note:

    Mandatory Review cases are part of the sample universe considered by TEQMS.


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