4.71.16  Employee Plans Team Audit (EPTA) Program

Manual Transmittal

August 24, 2015

Purpose

(1) This transmits revised IRM 4.71.16, Employee Plans Examination of Returns, Employee Plans Team Audit (EPTA) Program.

Background

The procedures herein are mandatory for EPTA examinations.

General program agents should refer to the following processes and procedures as an audit tool for examining large case Taxpayers and support activity with Large Business and International (LB&I) and Exempt Organizations (EO).

This IRM section provides supplemental information for procedures specific to EPTA cases.

Material Changes

(1) Exhibit 4, Letter 1346-I, Notice of Examination Letter - Plans Identified and Exhibit 5, Letter 1346-H, Notice of Examination Letter - Plans Not Identified have been revised.

(2) Other minor editorial changes, including revisions to reflect plain language requirements, were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.16 dated July 31, 2014.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(08-24-2015)


Robert S. Choi
Director, Employee Plans
Tax Exempt and Government Entities

4.71.16.1  (08-24-2015)
Overview

  1. Employee Plans Team Audit (EPTA) examinations involve the largest qualified retirement plans.

    1. Most of the plans selected by the EPTA Case Selection Committee (CSC) have at least 2500 participants.

    2. Occasionally, managers assign a plan with less than 2500 participants when the smaller plan is associated with a Large Business and International (LB&I) taxpayer or for training purposes.

  2. EPTA generally conducts focused examinations of large and complex employee plans.

  3. EPTA evaluates and analyzes the plan sponsor's internal controls, systems and processes to help them identify the examination areas, such as eligibility, participation, coverage, vesting, assets, distributions, accruals, forfeitures, and other compliance issues.

  4. The EPTA agent always verifies that the plan is qualified in form for all years under examination. Therefore agents must review the plan document and all amendments in effect for the year(s) under examination.

  5. EPTA procedures and guidelines:

    1. Promote uniformity and consistency in administering EPTA examinations.

    2. Help the EPTA case manager and EPTA coordinator with their examination responsibilities.

    3. Help orient prospective EPTA members to EPTA examination concepts and techniques.

  6. The general examination procedures found in IRM 4.71, Employee Plans Examination of Returns, apply to EPTA examinations.

4.71.16.2  (08-24-2015)
Definitions and Acronyms

  1. Case Identification Specialist (CIS) is responsible for identifying the EPTA universe. The EPTA case selection committee (CSC) reviews these cases during the case selection process.

  2. Employee Plans Team Audit (EPTA) is an examination team made up of:

    1. The EPTA case manager

    2. The EPTA coordinator

    3. EPTA agent(s)

    4. Any additional EPTA members as needed: Computer Audit Specialists (CAS), the Area Actuary, Employee Plans (EP) Counsel, and other agents working under the direction of the EPTA case manager.

  3. EPTA Analyst is responsible for ensuring that the EP Examination Areas conduct the EPTA examination program consistently.

  4. EPTA Audit Plan is a written document containing the examination scope, distribution of work assignments, examination procedures, time estimates, and special instructions.

  5. EPTA Case Manager refers to the EPTA group manager. They are responsible for organizing, controlling, and directing EPTA field agents in conducting the EPTA examinations.

  6. EPTA Case Selection Committee (CSC) is composed of two Area Managers, three EPTA group managers, a field actuary and the EPTA Analyst. The CSC uses an objective process to select examination cases for the EPTA groups.

  7. EPTA Coordinator is an EPTA member who, in addition to being responsible for specific examination assignments, coordinates duties in planning and executing a team examination.

  8. EPTA Engagement Agreement is a written document containing agreements made with the taxpayer, information for taxpayer and IRS personnel and the examination’s estimated completion date. Preparation of the EPTA Engagement Agreement is optional unless the case manager requires it. See IRM 4.71.16.10.4, The EPTA Engagement Agreement.

  9. EPTA Examination File consists of all the documents prepared and secured during an examination. Examples of examination file documentation include:

    1. The closing letter

    2. Revenue Agent Reports (RARs) including specialists’ reports

    3. Closing agreements (Form 906), Audit CAP checksheet and Maximum Payment Amount

    4. Self-Correction Program (SCP) checksheet

    5. Correspondence and correspondence log

    6. Information Document Request (IDRs) and IDR log

    7. IDR responses

    8. Plan documents and amendments

    9. Forms 5500

    10. Checksheet for Employee Plans Compliance Activities (CECA checksheet)

    11. Examination workpapers and supporting exhibits

    12. Minutes of conferences held with the taxpayers and representatives

  10. ESAIN – Employee Plans Standard Audit Index Numbers

  11. Focused Examination is a process agents use to determine if the plan is operating with the provisions of the Internal Revenue Code. EPTA examines pre-selected issues, placing emphasis on evaluating the overall compliance level of the plan using specific examination techniques, and pursuing the examination to a point of reasonable assurance that the plan is qualified.

  12. IDR - Information Document Request (Form 4564)

  13. IDR Log - A document used to track the status of IDRs issued. See IRM 4.71.16.8, Responsibilities of the EPTA Coordinator.

  14. Internal Controls are the taxpayer's policies and procedures used to identify, measure and safeguard plan operations to avoid material misstatements of plan information.

  15. Opening Conference is a meeting of EPTA and the taxpayer’s personnel to discuss: internal controls, coordination, accommodations, and the general scope of the examination. Employees from Large Business and International (LB&I), Exempt Organizations (EO), or Federal, State and Local Governments (FSLG) may also be present.

  16. Planning Meeting is a meeting(s) with the EPTA case manager and EPTA members to discuss the scope of the examination and to review the case. At the conclusion of the meeting(s), the EPTA case manager and the EPTA coordinator will determine those areas that will be included in the EPTA Audit Plan. The LB&I coordinator, EO Team Examination Program (TEP) Coordinator, Support Specialist manager(s), etc. may also be invited to these meetings at the discretion of the EPTA case manager.

  17. Pre-contact Analysis is a study of available information to establish the initial scope and depth of the examination. This includes discussions with the taxpayer to obtain or clarify return information. Use information you gain at the opening conference to supplement your pre-contact analysis. This helps construct the EPTA Audit Plan.

  18. Risk Analysis is a process, which evaluates the potential benefit derived from examining an issue or a return, compared to the cost of resources required to perform the examination. The accuracy and reliability of the internal control systems and processes are important items to consider when completing a risk analysis.

  19. Status Meetings are scheduled meetings with the taxpayer to discuss case progress, items pending and time line for completion.

  20. Support Specialists are actuaries, commodity and financial products agents, engineers, excise tax agents, economists, international examiners, CAS, Exempt Organizations agents, Tax-Exempt Bonds agents, Indian Tribal Government specialists, and any other specialist necessary. Use of the Automated Specialist Referral System (SRS) to request their help.

  21. Support Specialist's Manager participates in managing the specialist(s)’ activities assigned to the EPTA case.

    Note:

    The EPTA case manager has primary responsibility for all matters pertaining to the audit.

    .

  22. Taxpayer refers to a business, person or trust that is associated with a qualified retirement plan(s). This would include Multiemployer plans (MAP) and IRC 403(b)/457 plans. There are three potential taxpayers in an EPTA examination: the sponsoring employer, the trust, and the plan participants or their beneficiaries.

  23. TE/GE – Tax Exempt and Government Entities

4.71.16.3  (08-24-2015)
Identification of EPTA Taxpayer

  1. An EPTA examination is an examination of an entity meeting the EPTA examination criteria as defined by the CSC.

  2. The CSC considers the following factors (among others) when selecting an examination:

    1. Emerging issues

    2. Market segment impact

    3. Securities and Exchange Commission (SEC) information

    4. Resource location

    5. Referral information

    6. Field input

    7. Tax shelter information

    8. Media attention

    9. Impact on plan participants

    10. Input from the Employee Plans Compliance Unit (EPCU)

4.71.16.4  (08-24-2015)
EPTA Jurisdiction

  1. The EP examination program ensures compliance with the qualification provisions of the Internal Revenue Code (IRC). See IRM 4.71.1.3, Examination Jurisdiction.

  2. EP has jurisdiction for these returns:

    1. Form 5500 series returns, Annual Return/Report of Employee Benefit Plan

    2. Non-return Units for IRC 403(b)/457 plans

    3. Form 5330, Return of Initial Excise Taxes Related to Employee Benefit Plans

    4. Form 990-T, Exempt Organization Business Income Tax Return (for unrelated business income)

    5. Form 1040/1120 discrepancy adjustments

4.71.16.4.1  (08-24-2015)
Examination Case Selection

  1. The EPTA CIS maintains a list of the RICS return(s) selected by the CSC.

  2. The CIS provides the EPTA case managers a selection listing of corporate, MAP, 403(b), and 457 taxpayers for examination in their geographic area.

  3. EPTA Case Managers, working in close coordination with the CIS, review their listing of Taxpayers as well as other factors and information available and determine the next EPTA case assignment.

  4. The EPTA coordinator will research plan information from available sources (Employee Benefits Security Administration (EBSA), the taxpayer's web site, Integrated Data Retrieval System (IDRS) etc.) and request RICS returns from the CIS.

  5. EPTA discussions and the review of available information lead to the selection of the specific plan(s) and plan years(s) for examination.

  6. The EPTA case manager will contact the CIS to request the assignment of plan(s) and year(s) to the group on the Reporting Compliance Case Management System (RCCMS) and Audit Information Management System (AIMS).

4.71.16.5  (08-24-2015)
Coordination with LB&I, EO, and FSLG

  1. The EPTA case manager will contact the responsible LB&I, EO, or FSLG manager when a selected case is assigned to an EPTA agent.

  2. The EPTA case manager may include the LB&I, EO or FSLG manager or coordinator during the pre-planning stages of the EPTA examination to enlist their participation in the EPTA planning process.

4.71.16.6  (08-24-2015)
Responsibilities of the EPTA Case Manager

  1. The EPTA case manager is responsible for the activities of all members assigned to the EPTA examination. The EPTA case manager must be personally involved in the progress of the exam.

  2. The primary responsibilities of the EPTA case manager are:

    1. Coordinating and planning the examination with the LB&I or EO team manager, if necessary

    2. Consulting with the EPTA coordinator to determine examination plans and plan years

      Note:

      These decisions will depend on program objectives, agent availability, and taxpayer resources.

    3. Conducting examination visits, as necessary, while the EPTA examination is in progress

    4. Facilitating and approving the EPTA Engagement Agreement (if prepared), the EPTA Audit Plan, and all substantial changes to the audit plan and examination procedures

    5. Ensuring that all financial and conflict of interest disclosures were made by each team member

    6. Conferring with the EPTA coordinator and EPTA members, on a continuing basis, to determine the progress of the examination

    7. Consulting with the EPTA coordinator when problems develop such as delays in responses to IDRs

    8. Participating in meetings with the taxpayer

    9. Reviewing the workpapers and reports of each EPTA member at various points during the examination process and at the conclusion of the examination

    10. Ensuring that the EPTA coordinator has obtained appropriate written contact authorization from the taxpayer

    11. Approving expansion or contraction of issues in the EPTA Audit Plan including expanding to other years and related returns

    12. Reviewing and approving Notices of Proposed Adjustments

    13. Approving Employee Plans Compliance Resolution System (EPCRS) checksheets (CAP & SCP)

    14. Reviewing and approving the closing letter(s)

4.71.16.7  (08-24-2015)
Responsibilities of the EPTA Coordinator

  1. The primary responsibilities of the EPTA coordinator are::

    1. Preparing the EPTA Audit Plan and the optional EPTA Engagement Agreement

    2. Obtaining proper disclosure written authorization and Form 2848, Power of Attorney and Declaration of Representative, signed by an authorized official of the taxpayer

    3. Coordinating the day-to-day activities of the examination

    4. Protecting the statute of limitations

    5. Coordinating the assignments, receipt of information and progress of EPTA members (including specialists assigned to the plan examination)

    6. Coordinating the correspondence between EPTA members and the taxpayer (help team members and specialists with IDR follow-up and timely involve all levels of management, if necessary)

    7. Serving as the focal point for the prompt and orderly flow of information

    8. Coordinating with the CAS to make sure the team receives records on time to conduct the examination, including record retention agreements, if necessary

    9. Reviewing Form 4764-B, EPTA Examination Plan, proposed by EPTA members

    10. Approving Form 5701-A, Notice of Proposed Issue/Adjustment, (see IRM 4.71.16, Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 5701-A) prior to EPTA case manager approval

    11. Advising EPTA members including LB&I, EO, or FSLG of developing issues

    12. Preparing a write-up of the history of the company, owners and plans

    13. Coordinating the review of the internal controls and preparing an analysis identifying the strengths and weaknesses in the systems and processes to consider when preparing the audit plan

    14. Advising and assisting EPTA members in complying and understanding agreements made at the opening conference

    15. Timely informing the EPTA case manager of any problems between the taxpayer and EPTA member or problems between EPTA members

    16. Receiving and reviewing EPTA member IDRs in order to ensure uniformity, clarity, and avoidance of duplication, (this includes coordinating the issuance of the IDRs with the LB&I, EO, or FSLG team coordinator)

    17. Maintaining files of retained copies of all IDRs and making timely follow-ups

    18. Maintaining the IDR Log (see IRM 4.71.16, Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an IDR Log)

    19. Participating in the development and resolution of issues

    20. Assimilating all EPTA members’ workpapers into one overall EPTA case

    21. Drafting the closing letter(s) for the EPTA case manager's approval

4.71.16.8  (08-24-2015)
Planning the EPTA Examination

  1. The planning process is one of the most important case activities.

  2. The taxpayer should be involved in the planning process.

  3. The EPTA case manager will take an active role in assisting the EPTA coordinator in this process.

  4. The EPTA case manager should consider other matters such as the prevailing economic factors.

  5. The EPTA case manager and the EPTA coordinator should evaluate the need for support assistance when planning the examination.

  6. EPTA will base examination and issue priorities on risk analysis.

  7. If the taxpayer is engaged in an issue identified for specialization and coordination (e.g., abusive tax avoidance transaction (ATAT) issues), the EPTA coordinator will contact the designated specialist for advice and help.

  8. The EPTA case manager and EPTA coordinator should become familiar with the taxpayer’s business operations. They will review and analyze the following to determine staffing requirements, specialists needed, and the general approach to the examination:

    1. Plan returns

    2. Prior EPTA Examination File (Historical File)

    3. Other planning sources (see IRM 4.71.16.8.5, Other Planning Sources)

  9. Upon completion of the preliminary review, the EPTA coordinator will summarize the following items:

    1. Issues which should take priority in the examination

      Note:

      The EPTA coordinator should consider the internal controls analysis when selecting the examination issues.

    2. Overall scope and approach to the examination

    3. Specialists and non-specialists members needed

    4. Estimated completion date

  10. The EPTA coordinator will notify all specialists who will be involved in the examination and advise them of:

    1. The date, time, and place of any scheduled meeting(s)

    2. The scheduled starting date of the examination

    3. The description of data available for review

4.71.16.8.1  (08-24-2015)
Review of Returns in the Planning Process

  1. The EPTA case manager and EPTA coordinator should review related returns to determine:

    1. The size and complexity of the case

    2. Comparison of items for the year(s) under examination with like items in prior and subsequent years as appropriate

    3. The existence of large or unusual questionable items

    4. Location of subsidiaries of the primary taxpayer(s)

4.71.16.8.2  (08-24-2015)
Review of the Prior EPTA Examination (Historical) File

  1. When there has been a previous EPTA examination, the prior examination file can provide helpful information for planning the current examination.

  2. The EPTA coordinator may obtain the prior EPTA examination file from the Federal Records Center or from the RCCMS Case Library.

4.71.16.8.3  (08-24-2015)
Requesting Support Staffing

  1. The EPTA case manager and the EPTA coordinators should evaluate the need for support assistance when planning the examination.

  2. EPTA’s first contact with a support group to obtain specialists to help is through SRS. The EPTA coordinator should forward the support request as soon as the need is determined.

  3. It is important to bring the CAS into the planning process as early as possible because they often provide valuable planning tools. The EPTA coordinator should request help from CAS through the SRS.

  4. The EPTA coordinator should request assistance from the Area Actuary or TE/GE Area Counsel when the need is determined.

4.71.16.8.4  (08-24-2015)
Other Planning Sources

  1. The EPTA case manager and the EPTA coordinator may wish to consult other sources such as:

    1. The taxpayer's web site (organizational structure, business activities, etc.)

    2. Trade associations

    3. Published media reports

    4. Governmental agency audit reports (e.g., SEC reports)

    5. IDRS

    6. Employee Plans Determination System (EDS)

    7. Accurint Service

    8. Yk1 Analysis Tool

    9. Other EPTA case managers and coordinators who have examined similar entities

4.71.16.8.5  (08-24-2015)
Time Planning

  1. The EPTA case manager and the EPTA coordinator will estimate the duration of the examination based on the following factors:

    1. Scope and complexity of examination areas selected

    2. Location and availability of records

    3. Extent of computer assisted examination techniques

    4. Coordination with LB&I, EO, or FSLG

    5. Experience of the EPTA coordinator and EPTA members

    6. Travel time (on-site vs. support)

    7. Taxpayer's staffing and cooperation

4.71.16.8.6  (08-24-2015)
Financial Interests and Disclosure

  1. The EPTA case manager will ensure that each EPTA member (including specialists, support examiners, and accounting aides) is aware of and understands the statute requiring disclosure of any financial interest or conflicts, which might create a real or apparent conflict of interest.

  2. At the start of every examination, each EPTA member will report any financial interests that are potential conflicts of interest.

    1. For this purpose, use the EPTA Financial Interest Disclosure Form. See IRM 4.71.16, Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Financial Interest Disclosure Form.

    2. Each EPTA member must complete and sign a separate form.

    3. See Policy Statement 4-6 found in IRM 1.2.13.1.4, Policy Statement 4-6, and Policy Statement 4-7 found in IRM 1.2.13.1.5, Policy Statement 4-7.

  3. The EPTA case manager will:

    1. Review each Financial Interest Disclosure form

    2. Determine whether a potential conflict of interest may exist

    3. Sign each form

  4. In instances where a potential conflict of interest may exist:

    1. The EPTA case manager and the applicable EPTA member will complete Form 6782, Certification of Financial Interest in a Work Assignment. As an example, a potential conflict of interest may exist if the EPTA member owns publicly traded securities of the taxpayer valued at more than $15,000. See the instructions to Form 6782.

    2. If the EPTA case manager determines that a financial interest (as defined in the Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. part 2635, subpart D) does not exist, the EPTA team member will remain on the team.

      Note:

      A key factor in this determination is whether the EPTA member's work on the case will cause others to question the member's impartiality and independence.

    3. If the EPTA case manager determines that a financial interest may exist, the EPTA manager will not permit the member to work on the case.

    4. The EPTA case manager may seek legal advice from the Ethics and General Government Law Branch of General Legal Services if they need assistance in making their determination. In such cases, the EPTA case manager will remove the member from the case until it is determined that there is no financial conflict of interest.

  5. The EPTA case manager will certify to their Area Manager that there is no conflict of interest with respect to their personal or financial interest using the EPTA Financial Interest Disclosure Form. See IRM 4.71.16, Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Financial Interest Disclosure Form).

  6. In instances where a potential conflict exists, the EPTA case manager will follow the disclosure procedures and complete the certification form discussed in the handbook for the Rules of Conduct.

4.71.16.9  (08-24-2015)
Conducting the EPTA Examination

  1. This section describes the following elements of the EPTA examination:

    1. Notice of Examination

    2. Opening Conference

    3. Internal Controls

    4. EPTA Engagement Agreement

    5. EPTA Audit Plan

    6. EPTA Workpapers

4.71.16.9.1  (08-24-2015)
Notice of Examination

  1. The EPTA coordinator signs the "Notice of Examination Letter" and mails it to the taxpayer early in the examination process, either before or with the initial IDRs.

  2. Use Letter 1346-I,"Notice of Examination Letter - Plans Identified" , when the specific plans under examination have been identified. Letter 1346-I identifies the specific plan(s) under examination. See IRM 4.71.16, Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a "Notice of Examination Letter."

  3. If it is not possible to identify the plan(s) initially under examination, use Letter 1346-H,"Notice of Examination Letter - Plans Not Identified" . Letter 1346-H identifies only the taxpayer and the year(s) under examination. See IRM 4.71.16, Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of this letter.

    Note:

    The risk of not identifying the plan is that the taxpayer remains eligible to make a voluntary submission to the Employee Plans Compliance Resolution System (EPCRS).

4.71.16.9.2  (08-24-2015)
Opening Conference

  1. The opening conference is a face-to-face meeting with authorized employees of the taxpayer. The purpose of the opening conference is to:

    1. Discuss the case selection process

    2. Verify the taxpayer’s size, dispersion, and all related entities

    3. Confirm the availability of the books and records

    4. Discuss the accounting system and compliance with Rev. Proc. 98-25, IRB 1998-19

    5. Arrange for review of information to be available at the start of the examination

    6. Arrange for flow of communications from the EPTA case manager and the EPTA coordinator to the taxpayer and vice versa

    7. Establish agreements as to accommodations for the team, including such items as locked file cabinets

    8. Establish agreement that the coordinator will raise, discuss, and resolve issues as the examination progresses

    9. Establish agreement that the taxpayer will prepare its protest to identified unagreed issues during the course of the examination

    10. Establish agreement regarding security of IRS and taxpayer documents maintained on the taxpayer's premises during the examination

    11. Establish agreement for response time frames of IDRs, Notices of Proposed Adjustments/Issues (NOPAs), etc.

    12. Discuss the scope and depth of the examination

    13. Plan a meeting with the taxpayer and appropriate staff to discuss the taxpayer's internal controls, processes and procedures for plan operations

    14. Provide an estimated completion date for the examination

  2. The EPTA coordinator will obtain a written authorization that lists the names and titles of those individuals who have the authority to provide information and enter into agreements. This will help avoid potential miscommunication or inadvertent disclosure.

    1. The EPTA coordinator may obtain the written authorization either at the opening conference or during the planning stages of the examination.

    2. An authorized official of the taxpayer must sign the written authorization.

    3. If the authorization identifies an individual other than an employee(s) acting within the scope of their employment, such form should be similar to Form 8821, Tax Information Authorization, and all of its restrictions.

    4. Because the EPTA authorization form’s use is limited, it may be necessary to obtain a properly completed Form 2848, Power of Attorney and Declaration of Representative, to address adjustments and negotiations. See paragraph (3) of IRM 4.71.1.9, Power of Attorney (Form 2848) and Tax Information Authorization (Form 8821).

  3. The EPTA case manager should ensure that:

    1. Taxpayer personnel designated to furnish information to EPTA members are those best qualified to give complete first-hand information.

    2. The EPTA coordinator explains the roles of EPTA members, including who have authority to secure information and discuss issues.

  4. After concluding the opening conference, the EPTA coordinator will prepare written minutes of the meeting in which all pertinent information developed and agreements made will be summarized.

4.71.16.9.3  (08-24-2015)
Internal Controls

  1. An analysis of the taxpayer’s internal controls is an important part of conducting an EPTA examination.

  2. EPTA agents will be responsible for examining the internal controls of the plan sponsor, taking appropriate actions and recording the results of their actions and analysis in the case file.

  3. Internal controls are, for administering a qualified plan’s operations, a system of procedures the taxpayer and the plan administrator use to:

    1. Ensure and promote the information’s reliability and accuracy to administer the plan and calculate benefits per the written plan document.

    2. Ensure that the plan operationally complies with plan provisions and the Internal Revenue Code (Code).

    3. Safeguard plan participant benefits and the trust assets from fraud, waste and abuse.

  4. These systems and processes support plan operations and include:

    1. The process for keeping plans qualified in form under IRC 401(a) and other applicable Code sections

    2. Day to day operations of the plan(s) (both qualified and non-qualified plans)

    3. Payroll systems used to capture compensation data for benefit and testing purposes (e.g., allocations)

    4. Human Resources and Benefits Department actions (e.g. determination of eligibility)

    5. Process for determining pension expenses and deductions

    6. Trust investment strategies

    7. Distribution responsibilities

    8. End of year testing responsibilities

  5. In the early stages of the EPTA examination, the EPTA coordinator will complete an appropriate analysis to determine the level of internal controls within the various systems and processes used by the taxpayer to administer their plan(s) and capture data.

  6. The objectives of the analysis of internal controls is to:

    1. Obtain an understanding of the various systems utilized by the taxpayer in the administration of their qualified retirement plan processes

    2. Obtain an understanding of how these systems work independently and how they interact with each other

    3. Verify the level of accuracy of the data input into the various systems

    4. Help develop the audit plan

  7. An effective analysis of internal controls will help the EPTA agent:

    1. Identify vulnerabilities in the plan sponsor's internal controls of their systems and processes

    2. Develop an audit plan that includes potential areas of non-compliance

    3. Obtain a confidence level in how well the internal controls are working in operation

    4. Revise the preliminary review and formulate an audit plan for the focused examination

    5. Expand or limit the scope of the examination

  8. Suggested methods and types of analysis include:

    1. Interviews of key personnel who exercise control over the various systems and processes

    2. Analysis of the information secured through interviews, internal control questionnaires and other resources

    3. Perform limited testing on systems and processes as appropriate

    4. Expand testing to areas identified for potential non-compliance

4.71.16.9.4  (08-24-2015)
The EPTA Engagement Agreement

  1. The EPTA Engagement Agreement has two purposes.

    1. To formalize the groundwork for an examination, which will be consistent with the concepts of the EPTA Program.

    2. To prevent misunderstandings of commitments and agreements made.

  2. The EPTA Engagement Agreement is optional. As an alternative, the EPTA coordinator may document all agreements discussed at the opening conference in the minutes. See IRM 4.71.16, Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Engagement Agreement.

4.71.16.9.4.1  (08-24-2015)
Preparation of the EPTA Engagement Agreement

  1. The EPTA coordinator will complete the EPTA Engagement Agreement following the opening conference, before the team does any substantial examination work.

  2. The pre-contact analysis, the preliminary survey of the plan sponsor’s records, and the opening conference should provide the information necessary for the preparation of the EPTA Engagement Agreement.

  3. The EPTA Engagement Agreement should clearly identify, in writing, the agreements made with the taxpayer.

  4. The EPTA case manager and the elected officer, or taxpayer’s delegate, should each sign the EPTA Engagement Agreement acknowledging the matters covered and agreements made at the opening conference.

4.71.16.9.4.2  (08-24-2015)
Commitments and Content of the EPTA Engagement Agreement

  1. Taxpayer and IRS commitments regarding examination activities should be realistic. Both EPTA and the taxpayer should make every effort to meet these commitments, particularly in the following areas:

    1. The date to begin field work on the examination

    2. The location of the examination

    3. Records required

    4. Space and equipment required

    5. Requests for information (IDR due dates)

    6. Requests for statute extensions

  2. In seeking commitments from the taxpayer, the EPTA case manager should make certain that the individual they are dealing with:

    1. Is an elected corporate officer, trustee, or delegate, who can provide information and enter into agreements regarding examination procedures

    2. Will be responsible for notifying primary individuals in the taxpayer’s organization of the arrangements affecting them

  3. Regarding lines of communication, the EPTA case manager should make certain that:

    1. The written authorization agreement lets EPTA members know the authorized individuals in the taxpayer’s organization who will furnish information, discuss tax matters, negotiate adjustments and approve adjustments to tax returns.

    2. Taxpayer employees designated to furnish information to EPTA members are the best-qualified persons to give complete first-hand information. This may include people responsible for preparing the examination documents.

4.71.16.9.5  (08-24-2015)
EPTA Audit Plan

  1. The purpose of the EPTA Audit Plan is to outline the scope, depth and special techniques of the examination and to provide information for EPTA members of their specific assignments.

  2. With this information EPTA members will:

    1. Be in a position to make the best use of their time.

    2. Know what their role is in the examination, how to proceed with the assignment and, if necessary, the information to develop for other EPTA members.

  3. Use Form 4764 (EPTA), or similar computer generated form. See IRM 4.71.16, Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an EPTA Audit Plan on Form 4764 (EPTA).

4.71.16.9.6  (08-24-2015)
Workpapers

  1. Use standardized workpapers and reports and create a single file or report.

  2. State procedures for labeling and controlling electronic data.

  3. Use the same workpaper standards as for general program examinations. See IRM 4.71.1.15.1, EP Workpapers for quality workpaper standards.

4.71.16.9.6.1  (08-24-2015)
Workpaper Indexing

  1. Consistently index workpapers by using the Employee Plans Examination Standard Audit Index Number (E-SAIN) system. See IRM 4.71.16, Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for a list of ESAIN numbers with descriptions.

  2. You can also use the E-SAIN system to:

    1. Assign work in the audit plan

    2. Develop standard examination procedures and workpapers (commonly done on Form 4764-B, EPTA Audit Plan. See Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764-B.

    3. Identify the subject and organize IDRs

    4. Link exhibits to the workpapers

  3. The EPTA case manager can approve another method of indexing workpapers in appropriate circumstances; however, the system used must be consistent for all EPTA members assigned to the case.

4.71.16.10  (08-24-2015)
Monitoring the EPTA Examination Progress

  1. This section describes the roles of the EPTA case manager and the EPTA coordinator in the examination process.

4.71.16.10.1  (08-24-2015)
Role of EPTA Case Manager

  1. The EPTA case manager must monitor the EPTA examination progress.

  2. The primary monitoring techniques are visits and meetings with EPTA members and the taxpayer.

  3. The EPTA case manager should plan visits, whether on-site or at any other location, with the following objectives in mind:

    1. Determine that communications are open

    2. Evaluate the effectiveness of the EPTA Engagement Agreement (if prepared) and the EPTA Audit Plan, making necessary adjustments when appropriate

    3. Check on progress

    4. Identify problems

    5. Provide instructions for corrective action

    6. Evaluate personnel

    7. Help resolve issues

  4. The EPTA case manager should maintain a case file which contains the information necessary to stay informed regarding the status of the case. Examples of items that may be included in the file are:

    1. EPTA Engagement Agreement (if prepared)

    2. Form 4764, EPTA Audit Plan and updates. See IRM 4.71.16, Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764, EPTA Audit Plan.

    3. List of Support Specialists involved in the examination

    4. Minutes from Status Meetings, and

    5. Status report of the examination

  5. The EPTA case manager is encouraged to maintain any other data that is useful in managing the case.

  6. The EPTA case manager should consider a risk analysis at various intervals during the examination to assess the viability of issues and appropriateness of the resources used.

    Note:

    The EPTA case manager and the EPTA coordinator determine the format and timing of the risk analysis.

  7. The EPTA case manager will regularly communicate with the EPTA coordinator to monitor the progress of the examination.

4.71.16.10.2  (08-24-2015)
Role of the EPTA Coordinator

  1. The EPTA coordinator is the first EPTA member selected by the EPTA case manager.

  2. During the examination, the EPTA coordinator is the focal point for communication with the EPTA members.

  3. The EPTA coordinator is responsible for:

    1. Planning the examination including the analysis of the internal controls

    2. The assignment of examination responsibilities to EPTA members

    3. Regularly reporting the issues found and the progress of the examination to the EPTA case manager

    4. Meeting with the taxpayer to discuss issues and the progress of the examination

4.71.16.10.3  (08-24-2015)
Visits

  1. On-site visits and meetings are important elements of the EPTA case manager's involvement in the case. The EPTA case manager should avoid delegating this responsibility to others.

  2. During a visit, the EPTA case manager may address these specific areas:

    1. Determine whether the team is working examination issues in priority order and whether modifications to the audit plan altering the scope and depth of the examination are appropriate and timely

    2. Review progress on action items generated during previous reviews

    3. Review examination issues in process and discussing with the EPTA coordinator the need to expand, contract, or redirect examination activity

    4. Review examination issues not in process and determining what, if any, impact subsequent events have had on their potential for adjustment

    5. Review Form 5701-A, Notice of Proposed Issue/Adjustment, for completeness and accuracy prior to issuing

    6. Review Form 4764-B and other in-process and completed workpapers to ensure that the audit trail is well documented and issues are being properly developed

    7. Review IDR log and IDR turnaround time

  3. There are several types of visits, depending on the stage of examination. These include:

    1. Planning visits to develop the EPTA Engagement Agreement (if prepared) and the EPTA Audit Plan

    2. Monitoring visits with EPTA members and the taxpayer while the examination is underway

    3. Status Meetings

    4. Problem-solving visits with EPTA members and the taxpayer

    5. Visits with EPTA members to develop a uniform presentation of proposed issues to the taxpayer

  4. During a visit to an examination site, the EPTA case manager may need to meet with the appropriate levels of company management to discuss the progress of the examination and to resolve any potential problems.

4.71.16.10.4  (08-24-2015)
Information Document Request (IDR) Process

  1. The IDR process gives EPTA a structured process to use when gathering information during an examination.

  2. During the opening conference, the EPTA case manager and EPTA coordinator will discuss the process for IDR management and meet with the taxpayer to determine the IDR response times. The resulting agreement will be included in the opening conference minutes and the EPTA Engagement Agreement.

  3. The EPTA coordinator should maintain an IDR log to monitor IDR status and follow up when an IDR response is delinquent. See IRM 4.71.16, Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the IDR Log.

  4. The EPTA coordinator should contact the taxpayer to discuss problems that exist and reasons for the delay.

    1. If necessary, the EPTA case manager should be involved.

    2. The EPTA coordinator should document these discussions for future tracking.

  5. Subsequent discussion actions include:

    1. Evaluating other means or sources for obtaining the requested or needed information

    2. If necessary, preparing and issuing a follow-up IDR to the delinquent IDR. The response date for the follow-up IDR should be a reasonable date based on discussions with the taxpayer. In many instances, the follow-up IDR should include the original IDR attached.

  6. If the responses to requests for information continue to be delinquent, EPTA will consider serving a summons where pursuit of the issue is necessary and insufficient facts exist to develop or resolve the issue. The EPTA coordinator should consult with Area Counsel for guidance in the preparation and issuance of the summons.

4.71.16.10.5  (08-24-2015)
Documentation of Management Actions

  1. The EPTA coordinator should document significant EPTA case management activity, which may modify the approved EPTA Audit Plan. Examples of significant modifications are:

    1. Expansion of the examination scope that will require a significant increase in planned time

    2. Contraction of the examination with a significant reduction in staff time

    3. A redeployment of personnel

    4. A change in emphasis of the examination areas regardless if the overall planned time is significantly changed

    5. Any other changes not previously identified

4.71.16.10.6  (08-24-2015)
Delinquent Returns Secured

  1. EPTA members are responsible for securing and processing:

    1. Delinquent Forms 5330 in accordance with the procedures in IRM 4.71.5, Form 5330 Examinations

    2. Delinquent Forms 990-T in accordance with the procedures in IRM 4.71.10, Form 990-T Examinations

    3. Delinquent Forms 5500 in accordance with the procedures in IRM 4.71.1.21, Amended, Substitute and Secured Forms 5500

4.71.16.11  (08-24-2015)
Completing the EPTA Examinations

  1. When an individual EPTA member completes his or her portion of the examination, the following actions are required:

    1. Prepare Form 5701, Notice of Proposed Adjustment (NOPA), Form 886-A, Explanation of Items, or other report and discuss any pending proposed issues with the EPTA coordinator and EPTA case manager to obtain their concurrence.

      Note:

      The EPTA coordinator should raise issues throughout the examination per agreements made during the opening conference or per the EPTA Engagement Agreement.

    2. Discuss proposed issues directly with the appropriate taxpayer official per the protocol list discussed during the opening conference (generally with the EPTA coordinator or the EPTA case manager present).

    3. Complete his or her portion of the workpapers and forward them to the EPTA coordinator.

    4. Report case time to the EPTA coordinator if the case is not ready to close.

    5. Close the case on WebETS (Form 6490) when all EPTA members have completed their examination segment and the case is closed

      Note:

      Each EPTA member will close the case on their individual WebETS.

  2. The workpapers should support the conclusions reached in each segment of the examination. See IRM 4.71.1.15, Workpapers.

  3. EPTA members will forward all supporting workpapers to the EPTA coordinator for assimilation into the final examination case file.

  4. NOPAs or other EPTA member reports must be included as a part of the examination case file.

  5. After the EPTA coordinator completes and assembles the examination case file, he or she will forward it to the EPTA case manager for review.

  6. When examining a taxpayer in conjunction with LB&I, EO, or FSLG, the EPTA coordinator will prepare a closing coordination memo and forward it to the appropriate LB&I, EO, or FSLG case manager when the case is closed. See IRM 4.71.16, Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for a sample report to LB&I.

  7. The closing coordination memo should include the following:

    1. A summary of the examination results

    2. Plans for any future examinations, if any

    3. A copy of closing letter(s)

    4. A copy of a closing agreement

    5. Any other information needed or requested by LB&I, EO, or FSLG

4.71.16.11.1  (08-24-2015)
Closing Conference

  1. The purpose of the closing conference, if held, is to discuss the results and the effectiveness of the EPTA examination.

  2. Those attending the closing conference typically include the EPTA coordinator, any designated EPTA member, and any individual designated by the taxpayer.

  3. The EPTA coordinator will prepare minutes of the closing conference and include them in the EPTA examination case file.

4.71.16.11.2  (08-24-2015)
Review of the EPTA Case

  1. The EPTA case manager is responsible for review of the case to:

    1. Determine compliance with IRM procedures and guidelines

    2. Evaluate potential Tax Exempt Quality Measurement System (TEQMS) deficiencies

    3. Review closing documents

    4. Review examination closing letter(s)

  2. Managers of specialty groups will be responsible for issue development and documentation of any separate specialty reports issued. Specialty reports will also be included in the EP case file.

4.71.16.11.3  (08-24-2015)
Closing the EPTA Examination

  1. Follow the Form 5500 examination closing procedures (unless noted differently) in IRM 4.71.1.22.1, Closing Procedures for Agreed Form 5500 Examinations.

  2. Prepare a closing letter for each return and non-return unit (NRU) examined.

    Note:

    Closing letter(s) for an EPTA case are the same as for any other EP examination.

  3. Closing letter(s) will be mailed at the group level or hand delivered to the taxpayer.

    Note:

    Document your Form 5464, Case Chronology Record, with the date the letter was mailed or delivered.

  4. The EPTA coordinator will coordinate with LB&I, EO, and FSLG on the issuance of the closing letter(s).

  5. The EPTA case manager will document the review of closing letter(s) on the file copy of the closing letter(s) or on Form 5464.

  6. To the Extent possible, the EPTA coordinator must save all workpapers, forms and letters generated by the EPTA members in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    Note:

    If the EPTA coordinator cannot save any portion of the EPTA examination file within RCCMS, they must maintain it in hard copy or saved on a secured CD.

    Note:

    Form 5772 and Form 5773 are optional for EPTA examinations.

  7. For all "unagreed" cases, follow the "unagreed" examination procedures found in IRM 4.71.

    1. Process "unagreed" Form 5500 examinations in accordance with IRM 4.71.3, Unagreed Form 5500 Examination Procedures and EP Exam Closing Agreements.

    2. Process "unagreed" Form 5330 examinations in accordance with IRM 4.71.5.9, Unagreed Cases.

    3. Process "unagreed" Form 990-T examinations in accordance with IRM 4.71.10.5, Unagreed Cases.

  8. If the case is selected for TEQMS review, the EPTA case manager will forward the examination case paper files to Special Review; otherwise, the EPTA case manager will forward the paper files to the Federal Records Center (FRC).

4.71.16.12  (08-24-2015)
Record Retention Requirements

  1. See IRM 1.15.4, Records and Information Management, Retiring and Requesting Records, for the authority, criteria and instructions for preparing and processing Standard Form 135, Records Transmittal and Receipt, for retiring and requesting records from the FRC.

  2. See IRM 1.15.4.6, Retiring Tax-Related Records Protected by Internal Revenue Code Section 6103 or Classified Records, for instructions for retiring tax-related records to the FRC.

  3. Follow proper procedures to enable retrieval of prior EPTA examination files (Historical Files) from the FRC.

    1. The Treasury Inspector General for Tax Administration (TIGTA) or the Governmental Accounting Office may need previously closed EPTA cases for post closure reviews.

    2. Taxpayers may file claims for various federal tax issues previously closed by examination or appeal and IRS may need to retrieve the documents.

4.71.16.13  (08-24-2015)
Assessment of Specialist Team Members Performance

  1. At the conclusion of each EPTA examination involving personnel from a supporting area, the EPTA case manager will consider whether to submit written comments regarding the EPTA members' work to the appropriate manager.

  2. The EPTA case manager should present the performance assessment of an EPTA member in a detailed narrative form.


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