4.71.17  Non-Return Unit Examinations

Manual Transmittal

June 06, 2012

Purpose

(1) This transmits revised IRM 4.71.17, Employee Plans Examination of Returns, Non-Return Unit Examinations.

Background

IRM 4.71.17 provides guidance and information to assist agents in working Non-Return Unit examinations.

Material Changes

(1) The October 2011 version of RCCMS has the ability to interface with AIMS for NMF cases, regarding the command code AMSTU. As a result, status code updates for cases on NMF can be processed on RCCMS and flow through to AIMS. IRM 4.71.17, published September 27, 2011, is being updated to incorporate this ability to update AIMS through RCCMS.

(2) IRM 4.71.17.4 has been revised to allow for the statute of limitations expiration date (Statute Date) for SEP, SARSEP and SIMPLE IRAs to be updated to alpha "EE" when:

  1. The related Form 1040 discrepancy adjustment is actually established on AIMS and RCCMS, or

  2. It has been determined by the agent and group manager that the SEP/SARSEP is in compliance with IRC 408(k) or the SIMPLE IRA is in compliance with IRC 408(p).

(3) IRM 4.71.17.4 has been revised to allow for the Statute Date for IRC 403(b) and IRC 457(b) examinations to alpha "EE" when it has been determined by the agent and group manager that FSLG or EO is controlling the statute for the Form 941 return.

(4) IRM 4.71.17.6 was added to include examination procedures for SEP, SARSEP and SIMPLE IRAs that are found to be in noncompliance.

  1. This IRM incorporates the procedures found in the June 23, 2003 memo covering, Unagreed SEP/SARSEP Examination Procedures, from the Manager, EP Examinations Mandatory Review.

  2. This IRM incorporates the procedures found in the September 12, 2005 memo covering, Simple Plan Examination Procedures, (SCP), (CAP) and Unagreed, from the Manager, EP Exam Planning and Programs.

(5) 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 4.71.17 dated September 27, 2011. This IRM also makes obsolete the two memos referenced in paragraph (4) of the Material Changes section above.

Audience

TEGE, Employee Plans

Effective Date

(06-06-2012)


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

4.71.17.1  (06-06-2012)
Overview

  1. TEGE, Employee Plans often examines retirement plans for which no return is filed. These are called Non-Return Units (NRU).

  2. This IRM provides procedures for examining NRU cases.

  3. An EP analyst will be designated to oversee specific NRU projects.

    1. The analyst will typically have specific procedures and guidelines for each type of NRU case.

    2. These procedures will normally be provided to the agent when the case is assigned.

    3. The analyst should be consulted when specific questions arise.

  4. The AIMS Non-Master File (NMF) is programmed to include MFT 74 for the following types of NRU cases:

    1. IRC 403(b) plans

    2. IRC 457(b) plans

    3. IRC 457(f) plans

    4. IRC 401(a) Governmental plans

    5. Simplified Employee Pensions (SEP IRA)

    6. Salary Reduction Simplified Employee Pensions (SARSEP IRA)

    7. Simple Retirement Accounts (SIMPLE IRA)

  5. The AIMS NMF is programmed to include MFT 99 for the following types of NRU cases:

    1. Non-Bank Trustee/Custodian Investigations

    2. Promoter Penalty Investigations

    3. Return Preparer Penalties

    4. Non-Filer Cases

    5. Penalties for Failure to Disclose a Reportable Transaction - IRC 6707A

    6. Other plans for which no return was filed and there is not enough information available to determine if there is a filing requirement

    7. Any other plan with no filing requirement not listed in 4.71.17.1(4)

4.71.17.2  (06-06-2012)
Establishment of NRU examinations

  1. All NRU cases are established on NMF AIMS and on the Reporting Compliance Case Management System (RCCMS).

  2. All NRU cases will be established by EP Classification, although the decision to examine specific plans is made by EP Examinations, Planning and Programs and by the EP examination Areas.

  3. MFT 99 has been programmed on the AIMS NMF for the Non-Bank Trustee/Custodian Investigations, Promoter Penalty Investigations, Return Preparer Penalties, Non-Filer Cases, and Penalties for Failure to Disclose a Reportable Transaction - IRC 6707A.

  4. Specific types of NRU cases are established as follows:

    Project Code Project Code Description Form Activity Code MFT EP Plan Type
    6040 EPTA IRC 403(b) Plan 5500 370 74 2
    6041 EPTA IRC 457(b) Plan 5500 370 74 2
    6044 EPTA IRC 457(f) Plan 5500 370 74 0
    6046 EPTA Governmental IRC 401(a) Plan 5500 383 74 DB=1; DC=2
    6048 EPTA (Reserved) 5500 370 74 2
    6213 IRC 403(b) Plan 5500 370 74 2
    6214 IRC 457(b) Plan 5500 370 74 2
    6215 IRC 457(f) Plan 5500 370 74 0
    6217 IRA Trust Compliance 5500 370 74 2
    6218 Governmental IRC 401(a) Plan 5500 383 74 DB=1; DC=2
    6219 Special Emphasis Governmental Plan 5500 383 74 DB=1; DC=2
    6221 Special Emphasis (Reserved)* 5500 370 74 0
    6433 SIMPLE Plans 5500 370 74 2
    6436 IRC 412(i) Plans 5500 412 74 1
    6452 Special Emphasis (Reserved) 5500 383 74 2
    6453 SARSEP IRA 5500 383 74 2
    6454 SEP IRA 5500 383 74 2
    6506 EPCU IRC 403(b) UA 5500 370 74 2
    6182 Non-Bank Trustee Investigation 8278 182 99 N/A
    6422 Promoter Investigation 8278 505 99 N/A
    6424 Promoter Investigation - Support 8278 505 99 N/A
    6436 IRC 6707A Penalty Case 8278 505 99 N/A
    Various Preparer Penalty 8278 501 - 505 99 N/A
    Various Non-Filer ATAT Case 8278 507 99 N/A
    Various Non- Filer Non-ATAT Case 8278 508 99 N/A

    Note:

    * Any IRC 401(a) NRU plan picked up as an examination for any reason without an established project code should be established under project code 6221.

  5. When establishing NRU cases, use the most applicable source code (e.g., source code 40 for a subsequent year pick-up). If a specific source code does not apply, use source code 26.

  6. On a Non-Filer case, if a filing requirement is determined and a return is secured:

    1. The case should be established on AIMS Master File for the applicable MFT.

    2. The AIMS NMF account (the NRU account) should be deleted using Form 10904, Request for Record Deletion from AIMS.

  7. When an agent picks up an additional year for an NRU case being examined, the agent should:

    1. Complete Form 5588, TE/GE Non-Master File Request (See IRM 4.71.17.2.1 below and IRM 4.71.17 Exhibit 1 at Employee Plans IRM Exhibits for an example of a completed Form 5588),

    2. Obtain group manager approval,

    3. Email Form 5588 to EP Classification to the following address: *TE/GE-EP-Classification.

      Note:

      The email should include the Statute Date of the related return that could be impacted by the NRU case. Classification will use this Statute Date in the RCCMS file for the NRU.

  8. When a 403(b)/457 Coordinator wants to establish the initial year for an IRC 403(b) or IRC 457 case, he or she should:

    1. Complete Form 5588, and

    2. Email Form 5588 to EP Classification to the following address: *TE/GE-EP-Classification.

      Note:

      The email should include the Statute Date of the related return that could be impacted by the NRU case. Classification will use this Statute Date in the RCCMS file for the NRU.

  9. Plan numbers should be utilized in the following manner:

    1. A plan number is required for MFT 74 NRU cases.

    2. MFT 99 NRU cases should not have a plan number.

    3. For Governmental IRC 401(a) plans, use plan numbers beginning with 201. Additional plans examined for the same entity should be numbered with the next successive number (e.g. 202).

    4. For IRC 403(b), IRC 457(b), and IRC 457(f) plans use plan numbers beginning with 301. Additional plans examined for the same entity should be numbered with the next successive number (e.g. 302).

    5. For SIMPLE, SARSEP, and SEP IRA plans use plan numbers beginning with 901. Additional plans examined for the same entity should be numbered with the next successive number (e.g. 902).

    6. For NRU cases that were established with a plan number that does not follow the guidelines in paragraphs c) through f), the plan number initially assigned will continue to be utilized.

    7. For consistency, if an additional year is picked up, the same plan number or plan number series of the initial case should be used.

  10. Establishments will be input using command code AMNON by EP Classification. See IRM 4.71.17 Exhibit 2 at Employee Plans IRM Exhibits for AMNON Input Instructions.

    1. After the data has been entered on the IDRS AMNON input screen, the "Page Up" key should be depressed.

    2. If no error is encountered, the message "REQUEST COMPLETED" will appear on line 23.

  11. The NMF AIMS establishment is instantaneous.

    1. Since none of the data is systemically retrieved from Master File, there are no skeletal accounts.

    2. A full account record can immediately be viewed through command code AMDIS (e.g., AMDIS 70-1234567N).

4.71.17.2.1  (06-06-2012)
Preparation of Form 5588

  1. Form 5588 should be used to establish NRU cases on RCCMS and AIMS NMF.

  2. Complete the following line items on Form 5588 (if utilized) as noted.

    1. Line 2 (P1-35): Enter the Taxpayer’s name.

    2. Line 3 (P1-35): Enter the Taxpayer's street address.

    3. Line 4 (P1-25): Enter the Taxpayer's city.

    4. Line 5 (P1-2): Enter the Taxpayer's state.

    5. Line 5 (P4-15): Enter the Taxpayer's zip code.

    6. Line 5 (P17-28): Enter the Taxpayer Identification Number (TIN) and File Source "N" .

    7. Line 6 (P1-6): Enter the tax period being examined.

    8. Line 6 (P8-13): For MFT 74 cases enter "5500" . For MFT 99 cases enter "8278" .

    9. Line 7 (P1-8): Leave blank for MFT 74 cases. Enter the Statute Date for MFT 99 cases.

    10. Line 8 (P1-2): Enter the applicable source code.

    11. Line 8 (P4-6): Enter the applicable activity code. See paragraph (4) of IRM 4.71.17.2 above.

    12. Line 9 (P1-2): Enter the applicable MFT code (MFT 74 or 99) as detailed in paragraph (4) of IRM 4.71.17.2 above.

    13. Line 9 (P4): Enter "3" .

    14. Line 10 (P1-2): Enter the applicable status code (either "10" or "12" ).

    15. Line 10 (P4-6): Enter the applicable plan number. See paragraph (9) of IRM 4.71.17.2 above. Leave blank for MFT 99 cases.

    16. Line 10 (P8): Enter the applicable plan type definer code. See paragraph (4) of IRM 4.71.17.2 above. Leave blank for MFT 99 cases.

    17. Line 11 (P1-3): Enter the Primary Business Code.

      Primary Business Code Area
      401 Northeast
      402 Mid-Atlantic
      403 Great Lakes
      404 Gulf Coast
      406 Pacific Coast
      410 Exam Programs and Review

    18. Line 11 (P11-14): Enter the group number in which the case is being worked.

    19. Line 12 (P1-4): Enter the four character name control.

    20. Line 12 (P6-9): Enter the special project code. See paragraph (4) of IRM 4.71.17.2 above.

    21. Reason for Request: Enter "Establish NMF AIMS" .

    22. Requester/Date: Enter the examiner's name and current date.

    23. Approved By/Date: Enter the approving manager's name and current date.

  3. See IRM 4.71.17 Exhibit 1 at Employee Plans IRM Exhibits for an example of a completed Form 5588.

4.71.17.3  (06-06-2012)
Locating the Taxpayer

  1. Obtaining current contact information for the taxpayer can be an issue since NRU examinations are cases where no return has been filed.

  2. For the majority of NRU examinations, AIMS research will be completed by EP Classification and included in the case file.

  3. If the taxpayer's full address and contact phone number are not in the case file, the agent will need to do additional research to locate the taxpayer and obtain a contact phone number. The following steps can be taken to find the taxpayer's phone number if not provided in the case file:

    1. Review local phone directories by Internet and other means,

    2. Conduct research on Accurint,

    3. Research the company name on the internet,

    4. Utilize directory assistance, and

    5. Conduct additional research on IDRS as described in paragraph (4).

  4. The following additional IDRS research can be helpful in finding a current address and phone number for the taxpayer:

    1. IDRS command code ERTVU may give the taxpayer phone number or plan sponsor phone contact.

    2. Command code INOLE with a definer "T" gives information for both business and employee plan information and requires only one input because the "P" is not entered after the EIN.

    3. Command codes PMFOL and IRPTR also show address and phone numbers. This information is generated from information documents such as Forms W-2 or 1099.

    4. Command code NAMEE provides an EIN if only the Taxpayer name and at least a city and state are known. Information obtained from this command code will show EIN used for both business returns and employee plan returns.

  5. If a letter issued to a taxpayer comes back as undeliverable, a postal tracer can be done with the postal service by completing Form 4759, Address Information Request - Postal Tracer, with the "agency return address" filled out on the form.

  6. If the taxpayer can still not be located, the agent should discuss the issue with the group manager to determine if there are other avenues to locate the taxpayer or if the case should be surveyed in accordance with IRM 4.71.7.

4.71.17.4  (06-06-2012)
Monitoring the Statute of Limitations Expiration Date (Statute Date) on an NRU Case

  1. NMF AIMS is not programmed to allow the input of the Statute Date for MFT 74 cases.

  2. Although a Non-Return Unit specifically does not have a Statute Date (because no return was filed), there are returns with statute of limitations affected by the NRU plan under examination.

  3. RCCMS must be utilized to track the Statute Date of the affected related return.

    1. On the RCCMS NRU case, enter the Statute Date of the related Form 941, Form 1120, Form 1120S, Form 1065, or Form 1040 affected by the NRU examination.

    2. The Statute Date will assist the agent and group manager in monitoring the case for a timely referral or pursuit of a Form 1040/1120 discrepancy adjustment, or pursuit and assessment of applicable penalties, when necessary.

  4. For IRC 403(b) and IRC 457(b) examinations, the affected related return will be the last quarterly Form 941 for the tax year examined.

    Note:

    The last quarterly Form 941 return is due by 1/31 and has a three year Statute Date from 4/15 (e.g., the Statute Date for the Form 941 for the quarter ending 12/31/2009 is 4/15/2013).

    1. Initially, EP Classification uses the normal Statute Date of the related Form 941 for IRC 403(b) and IRC 457(b) examinations for control purposes on RCCMS.

    2. The Form 941 return for IRC 403(b) and IRC 457(b) examinations will not be controlled on the AIMS system.

    3. Even though the Form 941 Statute Date will not be controlled through AIMS for the tax years reviewed, the examiner should take the proper steps to protect the government’s interests for any potential tax adjustments to that return before the statute of limitations expires.

    4. Steps to protect the government's interest may include working with Exempt Organizations or Federal State Local Government business units to ensure the Form 941 Statute Date is protected for any adjustments being proposed.

    5. The Statute Date for the IRC 403(b) and IRC 457(b) examination may be updated to alpha "EE" in RCCMS and NMF AIMS when it has been determined by the agent and group manager that FSLG or EO is controlling the statute for the Form 941 return.

    6. A copy of the Form SS-10 should be kept in the EP case file regardless of whether the form is secured by another Business Operating Division.

  5. For SEP, SARSEP, SIMPLE IRAs, and IRC 457(f) examinations, the related return(s) affected will normally be Forms 1040 for the tax years under examination for the individual participants.

    Note:

    The related Form 1120 can be a return of concern for a SEP, SARSEP, or SIMPLE IRA plan sponsor if potential discrepancy adjustments are proposed as a result of an improper deduction for employer contributions to the IRA accounts of participants.

    1. Initially, EP Classification uses the normal Statute Date of the related Form 1040 for SEP, SARSEP, SIMPLE, and 457(f) examinations for control purposes on RCCMS.

    2. If the related Form 1040 discrepancy adjustment is actually established on AIMS and RCCMS, the Statute Date for the SEP, SARSEP, SIMPLE IRA, or IRC 457(f) examination may be updated to alpha "EE" .

    3. The Statute Date for the SEP, SARSEP, or SIMPLE IRA examination may also be updated to alpha "EE" in RCCMS and NMF AIMS when the agent and group manager determine that the SEP/SARSEP is in compliance with IRC 408(k) or the SIMPLE IRA is in compliance with IRC 408(p).

  6. Because related Form 941, Form 1040 and Form 1120 can be affected by NRU examinations, agents should follow the IRM 4.71.9.4(5) time frames on the year worked when beginning an examination.

    1. Unless group manager approval is obtained, agents should not start an NRU examination for a given year if the Statute Date for the related tax return will expire within 12 months.

    2. For example, an agent should not start a SIMPLE IRA examination for the 2009 calendar tax year any later than April 15, 2012 (if the related Form 1040 was timely filed and there were no extensions), since starting the examination after that date would leave less than one year on the related Form 1040 Statute Date.

  7. For NRU examinations, the Statute Date for related tax returns should be closely monitored in accordance with IRM 4.71.9.

4.71.17.5  (06-06-2012)
Updates to an NRU Case

  1. Updates to an NRU case will be done through RCCMS at the group level.

    Note:

    Updates will be done by the receiving group if a case is transferred.

  2. It is important that both RCCMS and NMF AIMS are updated and mirror each other as much as possible.

  3. When an update to a case is requested on RCCMS, check the AIMS box so that the update is also done on NMF AIMS.

4.71.17.6  (06-06-2012)
Examination Procedures for SEP, SARSEP and SIMPLE IRAs Found to Be in Noncompliance

  1. When the examining agent determines that an examined SEP/SARSEP does not satisfy IRC 408(k) or a SIMPLE IRA does not satisfy IRC 408(p):

    1. The agent and the group manager must decide whether or not the violation can be corrected through the Closing Agreement Program (CAP) or through the Self-Correction Program (SCP).

    2. Any closing agreement will be coordinated with the Area CAP Coordinator. Rev. Proc. 2008-50, IRB 2008-35, provides examples of acceptable correction methods for SEP, SARSEP, and SIMPLE violations. This is not an all-inclusive list, and other reasonable methods of correction should be discussed with the CAP Coordinator.

    3. If the examination is resolved through SCP, the examination will be closed using Letter 1744-A.

      Note:

      Letter 1744-A contains an option under "Type of Plan" that allows the agent to select the type of plan (SEP, SARSEP or SIMPLE IRA).

    4. If the violation is corrected through CAP, the examination will be closed using Letter 1744-G or Letter 1744-H.

      Note:

      Letter 1744-G and Letter 1744-H contain an option under "Type of Plan" that allows the agent to select the type of plan (SEP, SARSEP or SIMPLE IRA).

    5. If the IRC 408(k) violations are serious and cannot be resolved through CAP, the SEP is considered to not be in conformity with IRC 408(k).

    6. Likewise, if the IRC 408(p) violations are serious and cannot be resolved through CAP, the SIMPLE IRA is considered to not be in conformity with IRC section 408(p).

  2. Appeal rights are not offered to the employer in conjunction with the NRU examination of the SEP, SARSEP or SIMPLE plan that are found to be in nonconformity and not resolved through CAP.

    1. The agent should not prepare a 30-Day letter with an RAR for the NRU examination.

    2. With group manager approval, taxable adjustments will be proposed as discrepancy adjustments on the related Forms 1040 of plan participants (normally highly compensated participants) and/or the Form 1120 of the plan sponsor, and appeal rights are provided for any related Form 1040 and/or Form 1120 discrepancy adjustment. See paragraphs 8 through 10 below.

      Note:

      The procedures of IRM 4.71.4 should be followed for Form 1040 or Form 1120 picked up in conjunction with the SEP, SARSEP or SIMPLE examination.

  3. SEP, SARSEP and SIMPLE NRU cases are not subject to mandatory review, but should accompany any related unagreed discrepancy adjustment case when they are closed to Mandatory Review.

  4. SEP/SARSEP compliance with IRC 408(k) and SIMPLE compliance with IRC 408(p) is determined on a year-by-year basis.

    1. Once it is determined that a SEP/SARSEP is not in conformity with IRC 408(k) in a given year, that year of nonconformity stands alone and remains in nonconformity until a closing agreement is entered into covering that specific year.

    2. SEP/SARSEP conformity with IRC 408(k) and SIMPLE conformity with IRC 408(p) must be made on a yearly basis.

    3. A SEP, SARSEP or SIMPLE IRA that does not conform in a particular year is not automatically considered to not conform in a subsequent year. In order to be considered not in conformity in the subsequent year, IRC 408(k) or 408(p) must also be violated in the subsequent year.

  5. The agent will prepare Letter 1758-A to close a SEP or SARSEP examination that is determined to fail to comply with IRC 408(k) and is not resolved through CAP.

    1. If the SEP/SARSEP is determined not to satisfy IRC 408(k) and a CAP is not entered into, the closing letter should reflect the year(s) the SEP does not meet IRC 408(k), and it should clearly state why the SEP does not meet IRC 408(k).

    2. It should also specify the consequences of failure to meet 408(k), including a list of participants with excess contributions and the amount of excess contributions.

    3. The closing letter should inform the SEP sponsor of the requirement to notify plan participants of their excess amounts and the applicability of IRC 4973 tax on the excess monies that are not withdrawn (plus earnings). See IRM 4.71.17 Exhibit 3 at Employee Plans IRM Exhibits for an example of Letter 1758-A.

  6. The agent should prepare Letter 1758-D to close a SIMPLE examination that is determined to fail to comply with IRC 408(p) and is not resolved through CAP.

    1. If the SIMPLE IRA is determined not to satisfy IRC 408(p) and a CAP is not entered into, the closing letter should reflect the year(s) the SIMPLE IRA does not meet IRC 408(p), and it should clearly state why the SIMPLE IRA does not meet IRC 408(p).

    2. It should also specify the consequences of failure to meet 408(p), including a list of participants with excess contributions and the amount of excess contributions.

    3. The closing letter should inform the SIMPLE IRA sponsor of the requirement to notify plan participants of their excess amounts and the applicability of IRC 4973 tax on the excess monies that are not withdrawn (plus earnings). See IRM 4.71.17 Exhibit 4 at Employee Plans IRM Exhibits for an example of Letter 1758-D.

  7. When a SEP/SARSEP is found to not conform to IRC 408(k) or a SIMPLE IRA is found to not conform to IRC 408(p), the primary recourse of addressing the issue(s) is through Form 1040 discrepancy adjustments.

    1. When a SEP/SARSEP does not conform to IRC 408(k) or a SIMPLE IRA does not conform to IRC 408(p), all contributions allocated to participant accounts become taxable to the individual in the year for which they are made, with the exception that the participant is still entitled to the traditional IRA contribution.

    2. The agent (with group manager involvement) will make a determination of whether or not to pursue Form 1040 discrepancy adjustments on the highly compensated participants or non-highly compensated participants with significant income tax adjustments.

    3. The procedures in IRM 4.71.4 should be followed when Form 1040 discrepancy adjustments are picked up. The SEP/SARSEP or SIMPLE IRA exam should be treated as an "Unagreed" case and the procedures in paragraph (7) of IRM 4.71.4.4.5 should be followed (the 30-Day Letter will be mailed out by Mandatory Review).

  8. When there is a SEP/SARSEP or SIMPLE IRA failure, there will normally be two tax issues on Form 1040 discrepancy adjustments:

    1. The addition to income of the amount of excess contribution in the current year (the amount allocated to the participant’s account in excess of the amount allowed as a traditional IRA contribution), and

    2. IRC 4973 excise tax on excess contributions for the current year and any excess contributions carried forward from prior years.

  9. The 6% excise tax under IRC 4973 is imposed on the individual participants, and applies to all excess contributions to an IRA until the excess amounts (plus earnings) are either distributed to the individual or absorbed as traditional IRA contributions in later years.

    1. An individual has until the due date of their Form 1040 (April 15 plus extensions) to distribute the excess to avoid the tax.

    2. There is no requirement that excess monies have to be removed, but they will be taxed accordingly until there is no longer an excess.

    3. IRC 4973 excise tax is reported on Form 5329, which may be filed along with Form 1040 or filed separately.

    4. The filing of Form 5329 starts the running of the statute of limitations for purposes of IRC 4973 excise tax. This means that the Form 5329 and IRC 4973 excise taxes have their own Statute Date that is not linked to the Statute Date of a Form 1040 if the Form 5329 was never filed.

    5. If the Form 1040 statute of limitations is open and the decision is made to pursue a discrepancy adjustment on the participant’s Form 1040, IRC 4973 excise tax should be addressed as a discrepancy adjustment issue through RGS and reflected on Form 4549-E.

    6. If the Form 1040 statute of limitations is not open or the Form 1040 statute of limitations is determined to be too short to pursue a discrepancy adjustment, IRC 4973 tax for these years can be referred to SB/SE or W&I on Form 5666 if the taxpayer did not previously file Form 5329.

    7. Alternatively, the EP agent may pursue IRC 4973 tax for these past years, but the case should not be worked through RGS on Form 4549-E if the Form 1040 is not being worked. See IRM 4.4.14 and contact EP Mandatory Review, if Form 5329 is being examined by the EP agent apart from Form 1040.

  10. IRC 72(t) tax applies to excess amounts distributed to individuals from a SEP, SARSEP or SIMPLE IRA to the extent that amounts distributed were not previously taken into income.

  11. If a SARSEP is determined not to be in compliance with IRC 408(k):

    1. IRC 4979 excise tax is imposed on the employer, and

    2. IRC 4979 excise tax applies to excess contributions determined for a SARSEP under IRC 408(k)(6)(A)(iii), if the SARSEP was qualified at any time.

    ,

    Note:

    The statute of limitations for IRC 4979 begins to run with the filing of Form 5330.

4.71.17.7  (06-06-2012)
Closing an NRU Case

  1. Form 5650, EP Examined Closing Record, should be completed for all MFT 74 NRU examinations. The following line items on Form 5650 should be completed as noted:

    1. P7-18: Enter the taxpayer’s EIN followed by an "N" .

    2. P21-22: Enter the MFT code.

    3. P24-29: Enter the tax period.

    4. P31-34: Enter the name control.

    5. P58-60: Enter the plan number.

    6. C: Enter the name of the taxpayer.

    7. Item 13: Enter the applicable disposal code. See IRM 4.71.1.22.3.

    8. Item 28: Enter the examiner’s time on the case.

    9. Item 30: Enter the Examination Technique Code. Enter 2 for an OCEP and 4 for a field examination.

    10. Item 31: Enter the examiner’s grade.

    11. Item 32: Enter the grade of the case in the blocks from left to right as two digits (i.e., Grade 9= 09).

    12. Item 33: Enter the examiner’s last name, leave a space and then enter the examiner's first initial.

    13. Item 40: Enter the current fiscal year project code. If there is none, enter 0000.

    14. Item 42: Enter the ARDI code if the disposal code is 15.

    15. Item 50: Enter the examiner’s group number.

    16. Item 600: Enter 512 (Revenue Agent) or 987 (Tax Law Specialist).

    17. Item 606: Enter deductions claimed for contributions to the plan. Must be at least $1.

    18. Item 607: Enter total trust assets as of the end of the plan year. Must be at least $1.

    19. Item 608: Enter the number of participants that were directly affected by the examination. Must enter 0 if none are directly affected (cannot be left blank).

    20. Item 609: Enter plan type (1) for a defined benefit plan, or; (2) for a defined contribution plan.

    21. Item 610: Enter the applicable Issue Code(s) that relate to the Disposal Code. Only one Issue Code for Disposal Code 02 (issue code 37Z) should be entered. Issue Codes should relate to the issues found during the examination. If a Disposal Code other than 02 is used then up to three Issue Codes can be entered. Any remaining spaces should be filled in with zeros. See Document 6476 for a list of Issue Codes.

    22. Item 612: Enter the applicable NAICS Code (see Doc. 6476).

    Note:

    See IRM 4.71.17 Exhibit 5 at Employee Plans IRM Exhibits for an example of a completed Form 5650.

  2. Form 5599, TE/GE Examined Closing Record, should be completed for all MFT 99 NRU examinations. The following line items on Form 5599 should be completed as noted:

    1. P7-18: Enter the taxpayer’s TIN followed by a "N" .

    2. P21-22: The MFT is 99.

    3. P24-29: Enter the tax period.

    4. P31-34: Enter the name control.

    5. C: Enter the name of the taxpayer.

    6. Item 12 – Penalties (+): Enter the applicable Penalty Reference Number and the amount of penalties that are being assessed (if applicable). See chapter 11 of Document 6209 for Penalty Reference Numbers.

    7. Item 13: Enter the applicable disposal code.

    8. Item 14: Enter the statute expiration date.

    9. Item 28: Enter the examiner’s time on the case.

    10. Item 30: Enter the technique code: 4 – Field examination, or; 2 – OCEP.

    11. Item 31: Enter the examiner’s grade.

    12. Item 32: Enter the grade of the case in the blocks from left to right as two digits (i.e., Grade 9= 09)

    13. Item 33: Enter the examiner’s last name; leave a space and then first initial.

    14. Item 40: Enter the applicable project code.

    15. Item 42: Enter the ARDI code, if applicable.

    16. Item 48: Enter the EP Special Project Code Definer, if applicable.

    17. Item 50: Enter the examiner’s group code.

    Note:

    See IRM 4.71.17 Exhibit 6 at Employee Plans IRM Exhibits for an example of a completed Form 5599.

  3. Complete all of the appropriate RCCMS closing actions, making sure the Update AIMS box is checked.

  4. Ensure the applicable paper forms have been completed: Form 5650 or Form 5599 (or Form 5596, TE/GE Non-Examined Closings, for surveyed cases).

  5. Prepare the applicable closing letter that pertains to the specific NRU case. The letter will be mailed out in accordance with general EP examination procedures.

  6. If the only paper documents are Form 5650, Form 5599, Form 5596, and/or a required checksheet, the case can be closed electronically (no paper file is necessary) as long as the applicable forms along with a Form 3210 (indicate in the remarks section that the case is 100% electronic) are faxed to Brooklyn 718-488-2332 or Baltimore 410-962-0650 depending on where the RCCMS case will be closed.

4.71.17.8  (06-06-2012)
Surveyed Cases

  1. Under certain circumstances, a group may make the determination to not examine a return initially selected for examination. These cases may be closed by survey.

  2. After appropriate coordination with Classification and their Area Manager, group managers may survey a return, before or after assignment, if no examination is warranted or if the number of returns assigned to the group exceeds the number that can be examined and processed in a timely manner.

  3. Complete Form 5596 when surveying a NRU case.

  4. Surveyed NRU cases are closed in the Closing Unit using command code AMSOC.

  5. See IRM 4.71.7 for survey procedures.

4.71.17.9  (06-06-2012)
NRU Cases Established in Error

  1. There are occasions when NRU cases are established on RCCMS and AIMS in error.

  2. If the NRU is established in error on AIMS:

    1. Complete Form 10904.

      Note:

      On Form 10904, make sure the box next to disposal code 33 is checked. See IRM 4.71.17 Exhibit 7 at Employee Plans IRM Exhibits for an example of a completed Form 10904.

    2. Obtain manager and Area Manager approval through electronic signatures on Form 10904.

    3. Fax or email Form 10904 to the EP AIMS Coordinator in Examinations Special Support and Processing (ESSP).

    4. Save the electronically signed Form 10904 inside the Office Documents folder in RCCMS for the case being deleted.

    5. The RCCMS account will be closed to Support Processing (EP Closing Unit) with disposal 901 (error account).

    6. The account will be deleted by the EP AIMS Coordinator when the RCCMS record is received.


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