4.71.20  Employee Plans Large Case Support Examination Procedures

Manual Transmittal

July 24, 2013

Purpose

(1) This transmits revised IRM 4.71.20, Employee Plans Examination of Returns, Employee Plans Large Case Support Examinations Procedures.

Background

The procedures herein are mandatory for all EP Large Case Support Examinations coordinated with Large Business & International (LB&I) Coordinated Industry Program (CIP) and Exempt Organization (EO) Team Examination Program (TEP).

IRM 4.71.20 provides guidance and information to assist agents in working EP Large Case Support Examinations.

Material Changes

(1) This revision makes minor clarifying corrections to the September 30, 2011 published version of IRM 4.71.20.

(2) Exhibits are posted on the Employee Plans web page at IRM 4.71 - Employee Plans Examination Exhibits.

Effect on Other Documents

This IRM section is intended to provide supplemental information for procedures specific to EP Large Case Support Examinations and it is not intended to replace IRM 4.71.1, Overview of Form 5500 Examination Procedures or IRM 4.71.16, Employee Plans Team Audit (EPTA) Program.

Audience

TEGE, Employee Plans

Effective Date

(07-24-2013)


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

4.71.20.1  (09-30-2011)
Overview of EP Large Case Support Examinations Procedures

  1. These procedures apply to EP Large Case Support Examinations coordinated with Large Business & International (LB&I) Coordinated Industry Program (CIP) and Exempt Organizations (EO) Team Examination Program (TEP).

  2. EP Large Case Support Examinations may be assigned to Employee Plans Team Audit (EPTA) Agents, or EP General Program Agents.

  3. These procedures do not pertain to independent EPTA examinations of CIP or TEP taxpayers.

  4. This IRM section outlines procedures for EP Large Case Support Examinations involving:

    1. Deduction Only Examination Support: examination support to LB&I or EO for income tax issues only,

    2. LB&I Support Involving Plan Audits: IRC 401(a) qualification support (may also include deduction) to LB&I, and

    3. EO Examination Support: IRC 401(a), IRC 403(b) and IRC 457 support (may also include deduction) to EO.

  5. AIMS Source Code 47 is mandated for all EP Large Case Support Examinations.

  6. Every EP Large Case Support Examination with LB&I or EO requires the completion and inclusion of an Audit Plan in the EP case file, which at a minimum should describe the extent of the EP examination activity.

  7. This IRM section is intended to provide supplemental information for procedures specific to EP Large Case Support Examinations and it is not intended to replace IRM 4.71.1, Overview of Form 5500 Examination Procedures or IRM 4.71.16, Employee Plans Team Audit (EPTA) Program.

4.71.20.2  (07-24-2013)
Definitions and Acronyms

  1. Benchmark Events refers to target dates and/or timelines for specific actions; for example, case start and completion dates, timing of issuances and responses to Information Document Requests (IDRs) and Notices of Proposed Adjustments (NOPAs), frequency of case progress meetings and other events.

  2. CIP (Coordinated Industry Program) includes CIC (Coordinated Industry Cases) and IC (Industry Cases) usually identified by LB&I using specific activity codes generally for cases with over 10 million in assets.

  3. Deduction Only Examination refers to the EP examination associated with Deduction Only Examination Support.

  4. Deduction Only Examination Support refers to all EP examination support assignments with LB&I or EO, restricted to an EP agent’s investigation of one or more income tax related issues.

  5. EO Examination Support refers to all EP examination support assignments with EO involving at least one IRC 401(a), IRC 403(b) or IRC 457 compliance issue, regardless of the scope of such activity, and regardless of the deduction analysis aspects of the assignment.

  6. EP Audit Plan is a written document prepared by the examination team (usually the EP team coordinator or agent) which serves as a map for the audit process.

    1. The EP Audit Plan sets forth the scope, depth, and audit procedures for each issue examined.

    2. It describes work assignments, examination procedures, time estimates and special instructions.

      Note:

      For Deduction Only Examinations with only one EP agent, the EP Audit Plan may be very brief. It should summarize the scope and depth of the assistance being provided.

  7. EP Large Case Support Examinations are EP examinations that are coordinated with Large Business & International (LB&I) Coordinated Industry Program (CIP) and Exempt Organization (EO) Team Examination Program (TEP). The three types of EP Large Case Support Examinations are:

    1. Deduction Only Examinations,

    2. LB&I Support Involving Plan Audit Examinations, and

    3. EO Examination Support.

  8. EPTA (Employee Plans Team Audit) is the EP examination program directed at the largest qualified retirement plans having at least 2,500 participants.

  9. EPTA Agent is an EP exam agent assigned to a designated EPTA group.

  10. General Program Agent is an EP exam agent who is not an EPTA Agent.

  11. Information Document Request (IDR) refers to Form 4564 and all information and records requests regardless of the form used or the format.

  12. LB&I Support Involving Plan Audits refers to EP support assignments involving at least one IRC 401(a) compliance issue, regardless of the scope of such activity, and regardless of the deduction analysis aspects of the assignment.

  13. Taxpayer refers to all related entities, subsidiaries, and any other legal entity considered by LB&I or EO as a large case taxpayer.

  14. TEP (Team Examination Program) is the EO examination program designed to address the compliance of large and complex tax exempt organizations.

4.71.20.3  (09-30-2011)
Overview of Deduction Only Examination Support Procedures

  1. The scope of EP support to an LB&I large case examination is often limited to issues that affect the CIP taxpayer’s income tax liability. EP agents are asked to determine whether the CIP taxpayer’s IRC 404 deductions are proper.

  2. The LB&I case manager may want the scope of EP's involvement expanded to include other income tax matters requiring specialized EP assistance.

    1. For instance, EP agents are often asked to determine the proper income tax treatment of nonqualified deferred compensation plans.

    2. EP agents also may be required to develop income recognition and excise tax issues.

  3. For the purpose of applying these procedures, all examination activity restricted to an EP agent’s investigation of one or more income tax related issues has been categorized as Deduction Only Examination Support.

4.71.20.3.1  (09-30-2011)
Deduction Only Examination Support - Examination Planning and Protocol

  1. LB&I is responsible for:

    1. Notifying the CIP taxpayer of the Form 1120 examination,

    2. Apprising the taxpayer of its rights,

    3. Engaging the taxpayer in the examination planning process, and

    4. Explaining the examination process.

  2. The LB&I case manager negotiates all agreements as to benchmark events and processing time frames.

  3. The EP agent assigned to the team assists the LB&I case manager in explaining to the taxpayer EP’s role in the CIC or IC examination.

  4. The EP agent is generally required to provide the LB&I case manager with an EP Audit Plan in a format consistent with CIP procedures.

    1. At a minimum the EP Audit Plan should describe the extent of the EP examination activity.

    2. A copy of the EP Audit Plan should be kept in the EP case file.

    3. The EP Audit Plan should be reviewed and approved by the agent’s manager before it is submitted to LB&I.

    4. Significant changes to the EP Audit Plan should be approved by both the EP and LB&I case managers.

  5. When EP involvement is properly restricted to Deduction Only Examination Support, EP agents will not be required to explain the Form 5500, Annual Return/Report of Employee Benefit Plan, audit process or the taxpayer rights regarding any plan sponsored by the CIP taxpayer.

  6. Agents who adhere to these procedures will not be responsible for protecting the statute of limitations of any qualified plan maintained by the CIP taxpayer.

  7. For Deduction Only Examinations, EP agents will use alpha code "PP" with respect to a Form 5500 established on AIMS/RCCMS for the purpose of tracking time charges and examination results.

  8. When the scope of a Deduction Only Examination is expanded to include an IRC 401(a) compliance examination, the statute of limitations for the return/plan placed under examination must be protected in accordance with established procedures.

4.71.20.3.2  (09-30-2011)
Deduction Only Examination Support - Submitting Information Document Request(s) (IDRs)

  1. Absent any EP specific agreements that have been negotiated with the CIP taxpayer and LB&I case manager, EP agents will submit IDRs in accordance with the agreements between LB&I and the taxpayer.

  2. Since LB&I case managers approve the scope of the EP examination, IDRs should reflect the examination scope detailed in the EP Audit Plan.

    Note:

    Agents circumvent the case manager’s authority when they issue requests that exceed the scope of their LB&I support obligations.

  3. EP agents should include in their IDRs the income tax compliance rationale for requesting information. This will help avoid misunderstandings with the entity or entities being examined.

  4. CIP team leaders should review IDRs submitted by team members.

  5. Any dispute between a team leader and an EP agent as to the need for, or scope of, an IDR should be brought to the attention of the LB&I case manager and EP manager for resolution.

  6. EP agents should avoid submitting IDRs that may be construed as having initiated an examination of an entity other than the CIP taxpayer or related entities under examination.

    1. Requests pertaining to an unfunded nonqualified deferred compensation arrangement rarely give rise to a separate examination.

    2. Inquiries as to the nondeductiblity of Chapter 43 excise taxes do not constitute a separate audit.

      Note:

      Chapter 43 excise taxes include excise taxes under Internal Revenue Code (IRC) sections 4971 through 4980G.

  7. When a plan examination is opened, whether inadvertently or by intent, the agent will follow the procedures for LB&I Support Involving Plan Audits found in IRM 4.71.20.4 and the subsections thereunder.

4.71.20.3.2.1  (09-30-2011)
Appropriate Records Requests

  1. EP agents must avoid inadvertently opening a plan examination. Therefore, agents will limit IDRs to the records of the taxpayer whose return is under examination.

  2. EP agents will confine their IDRs to:

    1. Records maintained by the CIP taxpayer, and

    2. Records relating to tax issues requiring specialized assistance.

  3. Typically, EP agents can resolve EP related income tax issues from a review of the CIP taxpayer’s records. A taxpayer’s retained copy of a favorable determination letter is one such record. Some other types of CIP taxpayer records used in a Deduction Only Examination are:

    1. Compensation data,

    2. Contribution substantiation including trust reports that verify the receipt of an employer contribution,

    3. Deductible limit calculations, (prepared 404 calculations by plan administrator or other),

    4. 404 deduction reconciliations,

    5. Schedule M-1 or M-3 (Form 1120) detail,

    6. Accounting records,

    7. Board of Directors resolutions,

    8. Verification of ESOP dividends paid directly by the employer,

    9. Verification of plan expenses paid directly by the employer,

    10. Actuarial valuation reports, and

    11. Confirmation as to the plan year to which a contribution pertains.

4.71.20.3.2.2  (09-30-2011)
Inappropriate Records Requests

  1. The failure of an EP agent to limit an IDR to the records of the CIP taxpayer may give rise to questions as to which entities are being examined. Therefore, EP agents will not request records maintained by the plan administrator or trustee, unless integral to the resolution of EP-related deduction issues (primarily IRC 404).

  2. EP agents should not request plan records that do not bear directly on an income tax issue under investigation. Such requests may constitute plan compliance inquiries. Examples of these types of records include:

    1. Plan allocation schedules,

    2. ADP/ACP nondiscrimination tests,

    3. Plan investment records (but for the singular purpose of substantiating employer contributions),

    4. Coverage and IRC 401(a)(4) testing, and

    5. Benefit calculation or distribution records.

4.71.20.3.3  (07-24-2013)
Deduction Only Examination Support - AIMS & RCCMS Establishment

  1. To account for time spent providing Deduction Only Examination Support, agents only need to establish one Form 5500 on AIMS and Reporting Compliance Case Management System (RCCMS) for each Deduction Only Examination.

    1. With group manager’s approval, an EP agent may extend an examination into other years or plan(s).

    2. The EP agent will document the group manager’s approval to extend the examination to subsequent years in the workpapers or in the case chronology record.

  2. If possible, the return established should correspond to one of the CIP tax years under examination.

  3. Establishing a later plan year on AIMS and RCCMS is always preferable to establishing an earlier plan year for statute of limitations purposes.

  4. Establishing a Form 5500 on AIMS and RCCMS for Deduction Only Examination Support will not constitute the opening of an examination of the plan.

  5. If the Form 5500 has not already been established on RCCMS and AIMS, establishment should be requested from EP Classification. The case should be established using:

    1. Use source code 47, EO TEP/LB&I CIP/EPTA (Large Case), and

    2. Use special project code 6451, 404 Deduction Only (CIP Support), or

    3. If the case is an international case, use special project code 6055, 404 Deduction Only – International (Support to LB&I) and follow procedures for SPC 6451.

      Note:

      These entries will identify Deduction Only Examinations from other types of EP support examination activity.

  6. Regarding the statute of limitations, there are special rules for project code 6451 and 6055 examinations:

    1. The statute of limitations should be updated to alpha code "PP" immediately upon assignment.

      Note:

      Do not use alpha code "FF" . The examination results of a Deduction Only Examination will not be captured when alpha code "FF" is used.

    2. When the scope of a project code 6451 or 6055 examination is expanded to include an IRC 401(a) issue and the statute of limitations is still open for that year, the general statute of limitation procedures contained in IRM 4.71.9 apply and the statute of limitations for Form 5500/1041 must be protected.

    3. When the scope of a project code 6451 or 6055 examination is expanded to include an IRC 401(a) issue and the statute of limitations is not open for that year, the statute of limitations should continue to reflect alpha code "PP" for that year. If Form 5500 exams are opened in later years for which the statute is still open, the general statute of limitation procedures contained in IRM 4.71.9 apply and the statute of limitations for Form 5500/1041 must be protected.

    4. It is not necessary to prepare Form 895-EP for a project code 6451 (or 6055) examination when the statute of limitations is updated to alpha "PP" and the scope of the examination is not expanded to include IRC 401(a) issues.

  7. At times it will be deemed necessary to expand the examination to include IRC 401(a) compliance issue(s) or to expand the examination to include other years or other returns.

    1. Group manager approval must be obtained to expand the examination beyond the Deduction Only issue.

    2. Any decision to expand the examination should be clearly reflected in the case chronology and in the workpapers.

    3. When the examination is expanded, time will be charged to related returns as appropriate.

    4. When the scope of a Deduction Only Examination is expanded to include one or more IRC 401(a) compliance issues, the appropriate Forms 5500 will be updated to project code 6078, Support to LB&I CIP, (or project code 6052 for international cases ) on AIMS and RCCMS, and the procedures for LB&I Support Involving Plan Audits should be followed.

4.71.20.3.4  (07-24-2013)
Deduction Only Examination Support - Examination Closing Requirements

  1. EP agents will not issue any examination closing letter relating to their Deduction Only Examination.

  2. EP agents will communicate their findings with the LB&I case manager.

    1. LB&I incorporates the results of EP related income tax adjustments in its examination report.

    2. The EP agent will prepare Form 5701, Notice of Proposed Adjustment, Form 886-A, Explanation of Items, and other written feedback to address the findings and conclusions of the EP Deduction Only examination.

    3. The LB&I case manager communicates any issues found by EP with the taxpayer as part of the overall LB&I examination report.

  3. Absent any EP related Form 5701, a post-examination critique or feedback report prepared by the EP agent to inform LB&I of his/her findings will serve as the EP report and included in the EP case file.

  4. To report the total income tax adjustment recommendation, the EP agent must make an appropriate entry on line 605 of the Form 5650, if required, or in the RCCMS closing record details tab line item entitled "adjustment to SBSE, W&I, LB&I."

    1. When establishing only one return, EP agents will not restrict this entry on line 605 of Form 5650 to an amount pertaining to the plan or plan year that was established on AIMS.

    2. To properly capture LB&I support activity, EP agents should enter the total recommended deduction adjustment (increase or decrease) deriving from all EP related code sections, for all corporate tax years, and for all deferred compensation arrangements qualified or otherwise on the one record established.

  5. Except for unusual circumstances, only three RCCMS disposal codes will apply to Deduction Only Examinations as follows:

    1. RCCMS disposal code 107, No Change (AIMS disposal code 02),

    2. RCCMS disposal code 205, Change to a Related Return (AIMS disposal code 04),

    3. RCCMS disposal code 207, Delinquent Related Return Secured (AIMS disposal code 05).

  6. Disposal code 205 is applicable where an adjustment is proposed or made to the EP related deductions claimed on the sponsor’s Form 1120.

  7. EP agents may enter disposal code 205 at the time the support case is closed, regardless of the outcome of subsequent protests, settlements, or court petitions.

  8. To the extent practicable, agents will not close a Deduction Only Examination involving an unagreed EP related deduction issue until after LB&I’s closing conference with the CIP taxpayer.

  9. An agent would use disposal code 207 in the relatively unlikely event a Form 5330 was secured to report IRC 4971 or IRC 4972 excise tax, when no IRC 404 deduction adjustment was proposed.

  10. Since the Form 5500 was established on AIMS simply to track time and results, and EP is working directly with LB&I, any proposed tax adjustments would be made by LB&I. Therefore, RCCMS disposal code 102, Agreed Tax Change, (AIMS disposal code 03) is inappropriate.

  11. LB&I is responsible for soliciting any tax payments from the CIP taxpayer; therefore, EP agents do not enter an ARDI code on line 42 of the Form 5650 or on the RCCMS closing record.

  12. Agents will follow IRM 4.71.12, Case Assembly Guidelines, when assembling the case for closure. See IRM 4.71.12.3 for "agreed" cases.

  13. The case file should include:

    1. Copy of the EP Audit Plan,

    2. Deduction Workpapers,

    3. Form(s) 5701, Notice of Proposed Adjustment (if an adjustment is proposed),

      Note:

      Form 5701 may be prepared by LB&I or by EP.

    4. Copy of the EP Revenue Agent Report (or Form 886-A),

      Note:

      This is generally issued as an attachment to Form 5701.

    5. Form 4632 or 4632A, Employee Plans Referral, as per IRM § 4.71.12.4. With the Specialist Referral System (SRS), a Form 4632 is not always available. In such instances, the EP agent will include the printed or electronic referral in the case file, and

    6. Minutes or feedback report from the post-examination critique.

    Note:

    All applicable forms and workpapers must be saved in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.20 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits

  14. If there is a paper file, Form 3198-A, TEGE Special Handling Notice, should be attached to the outside of the examination file folder for each return.

    1. Check the "CIP/EPTA/TEP" and "Other Instructions" boxes in the Special Features section of the Form 3198-A, and

    2. Write: "Deduction Only Examination – No Closing Letter Required" in the "Other Instructions" line.

  15. If the case file is paperless, the Form 3198-A will not be necessary. The following comment should be made in the comments section of the RCCMS closing record: "Paperless file, Deduction Only Examination and No Closing Letter Required" .

4.71.20.4  (09-30-2011)
Overview of LB&I Support Involving Plan Audits

  1. This section applies when a Deduction Only Examination has been initiated and a formal decision is made to conduct a plan audit, open a Form 5330 exam, or LB&I requests support regarding an issue related to plan qualification.

  2. When a plan or related return (usually Form 5330) is placed under examination, EP agents will:

    1. Notify the plan sponsor in writing that an EP examination is being conducted,

    2. Conduct an EP specific opening conference to which both the LB&I case manager and team coordinator will be invited,

    3. Explain the EP examination process to the plan sponsor,

    4. Apprise the plan sponsor of taxpayer rights related to the examination of the plan,

      Note:

      The fact that LB&I may have apprised the CIP taxpayer (typically the plan sponsor) of its examination rights does not absolve the EP agent of this obligation with regard to the plan.

    5. Solicit the active participation of the plan sponsor and/or the plan administrator in the examination planning process, and

    6. Protect the plan trust’s statute of limitations in accordance with IRM 4.71.9.

  3. The examination procedures found in IRM 4.71.16, Employee Plans Team Audit (EPTA) Program should be followed except that special project code 6078 (or 6052 if an international case) will be used on RCCMS and AIMS.

  4. In accordance with IRM 4.71.16, the appropriate closing letter should be prepared.

4.71.20.4.1  (07-24-2013)
LB&I Support Involving Plan Audits - Examination Planning and Protocol

  1. LB&I is responsible for notifying the CIP taxpayer of the Form 1120 examination.

  2. LB&I also apprises the taxpayer of its rights, engages the taxpayer in the examination planning process, and explains the CIP examination process.

  3. EP agents are responsible for fulfilling these same obligations with respect to IRC 401(a) compliance and any excise tax examination conducted in conjunction with large case support activity.

  4. The LB&I case manager negotiates agreements as to benchmark events, target dates, and time frames.

    1. LB&I agreements as to benchmark events will generally be honored by the EP agent.

    2. Circumstances may require a deviation from such agreements in order to meet EP obligations with respect to IRC 401(a) compliance or other areas that fall within TEGE jurisdiction.

  5. LB&I and EP may disagree as to an EP request to deviate from LB&I negotiated target dates or examination protocol.

    1. Requests may involve IDR deadlines, memoranda windows or deadlines, or case closing dates.

    2. The EP manager should attempt to resolve any dispute.

    3. If the EP manager can not resolve the dispute, then the EP manager will bring the dispute to the attention of his/her Area Manager to negotiate a resolution.

4.71.20.4.2  (09-30-2011)
LB&I Support Involving Plan Audits - Submitting Information Document Request(s) (IDRs)

  1. The plan sponsor is responsible for maintaining plan records.

    1. The EP contact person will be identified by the plan sponsor at the EP opening conference.

    2. The EP exam contact person may not be the same individual as LB&I’s primary examination contact.

    3. In many instances, pre-established examination protocol may require EP Information Document Requests (IDRs) to be routed through the tax manager or other designated officer.

  2. EP agents will limit their IDRs to items needed to verify IRC 401(a) compliance of plans examined within the scope of the support assignment.

4.71.20.4.2.1  (09-30-2011)
Appropriate Records Requests

  1. Although unlikely, a plan year under examination may correspond to an LB&I tax year that is not currently under audit.

  2. Information that pertains to a plan year not under examination may be requested when required to determine compliance in the year under examination. Examples may include:

    1. Prior plan year highly compensated employee (HCE) related information used in determining current year ADP compliance, and

    2. Prior plan year actuarial valuation reports when analyzing the report that pertains to the plan year examined.

  3. To avoid initiating an examination of the plan sponsor’s income tax return, agents should:

    1. Restrict their IDRs to records relating to IRC 401(a) compliance and other matters within EP’s jurisdiction,

    2. Address IDRs to the plan sponsor's designated contact, and

    3. Provide an explanation to the plan sponsor's designated contact and the rationale for requesting specific items of information.

  4. Requests for information relating to compliance within the jurisdiction of EP generally do not give rise to an examination of the plan sponsor’s tax return. Examples of such compliance inquiries include matters relating to:

    1. Minimum funding requirements under IRC 412,

    2. Prohibited transactions under IRC 4975, and

    3. Other Chapter 43 excise tax liabilities.

  5. Requests for prior or subsequent year information solely needed to properly apply the relief provisions of EPCRS do not constitute an examination of those plan or corporate tax years.

4.71.20.4.2.2  (09-30-2011)
Inappropriate Records Requests

  1. EP agents should not request records from the plan sponsor, trustee or plan administrator unless they are:

    1. Integral to plan administration,

    2. Related to IRC 401(a) compliance or other matters within EP or TEGE jurisdiction, or

    3. Related to plan(s) or plan year(s) currently under examination.

      Note:

      Information that pertains to a plan year not under examination may be requested when required to determine compliance in the year under examination.

4.71.20.4.3  (07-24-2013)
LB&I Support Involving Plan Audits - AIMS & RCCMS Establishment Procedures

  1. When the examination reveals recurring issues or transactions that may adversely affect the plan’s qualified status or the trust's exemption for the year assigned for examination, an examination of related or subsequent year returns may be warranted.

  2. The agent should discuss the issue(s) with his or her manager and a decision will be made regarding examination of a related or subsequent year.

  3. The following procedures should be followed when a decision is made to examine a related or subsequent year Form 5500 series return:

    1. The agent should do the appropriate research on Integrated Data Retrieval System (IDRS) to verify that the Form 5500 series return has posted on the EPMF.

      Note:

      If the return has not posted on the Employee Plans Master File (EPMF), the agent should follow the appropriate procedures in IRM 4.71.1.21.

    2. The agent will prepare the Related and Subsequent Year Form 5500 Request form and forward it to their manager for approval. See IRM 4.71.20 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits.

    3. Use source code 47, EO TEP/LB&I CIP/EPTA (Large Case).

    4. Use special project code 6078, Support to LB&I CIP (or special project code 6052, International Support to TEP/CIP, if the case is international).

    5. It is important that all the information is completed on the form or it will be returned to the group. The agent should note in their request that the return has posted to the EPMF.

    6. The group manager or designee will email the approved form to EP Classification’s group mailbox: tege.ep.classification@irs.gov.

    7. EP Classification will acknowledge receipt of the request for the return (normally within 5 business days).

    8. EP Classification will inform the agent and group manager (normally within 10 business days) that the record has been assigned to the group on AIMS and RCCMS.

  4. AIMS and RCCMS must be updated to special project code 6078 (or 6052 if an international case) for cases previously established using special project code 6451 (or 6055 if an international case) whenever the scope of EP involvement is expanded to include one or more IRC 401(a) issues.

    Note:

    Special project code 6078 and 6052 cases are by definition subject to large case Tax Exempt Quality Measurement System (TEQMS) review, while special project code 6451 and 6055 cases are subject to general program TEQMS. Proper RCCMS entries are extremely important.

  5. Agents should not use special project code 6068 (Referrals) for EP examination support to LB&I CIP cases.

4.71.20.4.4  (09-30-2011)
LB&I Support Involving Plan Audits - Statute Protection Safeguards

  1. EP agents are responsible for protecting the statute of limitations in accordance with IRM 4.71.9 for any return they open for exam (other than Deduction Only Examinations).

  2. The provisions of IRM 4.71.9, EP Statute Control Procedures should be carefully followed for all LB&I Support Examinations Involving Plan Audits.

4.71.20.4.5  (09-30-2011)
LB&I Support Involving Plan Audits - Closing Requirements

  1. EP agents must coordinate the issuance of plan examination closing letters with the LB&I case manager.

  2. Closing letters can be issued one of two ways:

    1. LB&I issues the plan closing letter(s) concurrent with its report, or

    2. EP issues the plan closing letter(s) in the usual manner.

  3. If LB&I is issuing the letter, the EP agent will:

    1. Route the undated closing letter to the LB&I CIP case manager for issuance.

    2. A copy of the letter will be retained in the EP case file.

    3. The copy should be notated as follows: "LB&I Support Case –Closing Letter(s) Forward to:_____________ (name, title and address of LB&I CIP case manager) on _______ (date)."

  4. If EP is responsible for issuing the plan’s closing letter(s), the EP agent will:

    1. Date and issue the closing letter to the taxpayer,

    2. Forward a dated copy of the closing letter to the LB&I CIP case manager, and

    3. Notate on the file copy of the letter: "LB&I Support Case – Original closing letter sent to taxpayer on ________ (date). Copy of closing letter(s) forwarded to _____________ (name, title and address of LB&I CIP case manager) on ________ (date)."

  5. If there is a paper case file, Form 3198-A, TEGE Special Handling Notice, should be attached to the outside of the examination file folder for each return. Agents will check the "CIP/EPTA/TEP" box in the Special Features section of the Form 3198-A.

  6. If the case file is paperless, the Form 3198-A is not necessary. The following comment should be made in the comments section of the RCCMS closing record: "Paperless file, closing letter issued to taxpayer or closing letter issued through LB&I."

  7. Otherwise, the group's normal closing procedures found in IRM 4.71.16 or IRM 4.71.1.22 will be followed.

4.71.20.5  (09-30-2011)
Overview of EO Examination Support Procedures Involving Plan Audits

  1. This IRM section provides procedures for EP agents when providing support in EO TEP examinations.

  2. Most EO Examination Support involves examination of one or more of the following types of deferred compensation arrangements maintained and/or sponsored by the EO sponsor:

    1. Qualified plans under IRC 401(a),

    2. Eligible deferred compensation plans under IRC 457(b),

    3. Tax-sheltered arrangements under IRC 403(b).

  3. In general, EP agents will follow the procedures of IRM 4.71.20.4 (LB&I Support Involving Plan Audits) when examining one of these types of arrangements except that EO is the entity being supported instead of LB&I.

  4. EP agents are responsible for protecting the statute of limitations in accordance with IRM 4.71.9 for any taxable plan trust.

  5. Although relatively infrequent, EP agents may encounter an EO Deduction Only Examination when the EO TEP examination includes:

    1. Related taxable entities,

    2. Unrelated business income tax returns,

    3. Organizations that lose their exempt status, or

    4. Taxability of nonqualified deferred compensation plans.

  6. In such cases, if the scope of EP examination involvement is restricted to income tax issues involving the above returns or scenarios, then EP agents will follow the procedures of IRM 4.71.20.3 (Deduction Only Examination Support) except that coordination will be with EO instead of LB&I.

4.71.20.5.1  (07-24-2013)
EO Examination Support Procedures Involving Plan Audits - AIMS and RCCMS Establishment

  1. The procedures to be followed when establishing the case on AIMS and RCCMS depends on the type of deferred compensation arrangement being examined.

  2. If the arrangement is an IRC 401(a) plan for which a Form 5500 was filed (or required to be filed):

    1. The agent should do the appropriate research on Integrated Data Retrieval System (IDRS) to verify that the Form 5500 series return has posted on the EPMF.

      Note:

      If the return has not posted on the EPMF, the agent should follow the appropriate procedures in IRM 4.71.1.21.

    2. The agent will prepare the Related and Subsequent Year Form 5500 Request form and forward it to their manager for approval. See IRM 4.71.20, Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits.

    3. Source code 47, EO TEP/LB&I CIP/EPTA (Large Case), should be used.

    4. Except as provided in paragraph (4) of this section, special project code 6045, Support to EO/TEP, (or 6052 if an international case) should be used.

    5. It is important that all the information is completed on the Related and Subsequent Year Form 5500 Request form or it will be returned to the group. The agent should note in their request that the return has posted to the EPMF.

    6. The group manager or designee will email the approved form to EP Classification’s group mailbox: tege.ep.classification@irs.gov.

    7. EP Classification will acknowledge receipt of the request for the Return (normally within 5 business days).

    8. EP Classification will establish the return on AIMS and RCCMS and update these systems to the group.

    9. EP Classification will inform the agent and group manager (normally within 10 business days) that the record has been assigned to the group on AIMS and RCCMS.

  3. If the deferred compensation arrangement being examined is an IRC 403(b) or IRC 457 plan, the Non-Return Unit (NRU) procedures found in IRM 4.71.17 should be followed when establishing the case on Non-Master File AIMS and RCCMS.

  4. EPTA Agents supporting an EO Team Examination may use special project codes 6040, EPTA - 403(b), 6041, EPTA - 457(b), 6045, Support to EO TEP, or 6052, International Support to TEP/CIP, as directed by the project coordinator.

  5. When examination activity is limited to providing deduction only support on a related taxable entity, related Form 990-T or other tax return, special project code 6451 (or 6055 if the case is international) will be used. Using special project code 6451 (or 6052) rather than codes 6045, 6040, or 6041 will ensure this limited involvement is subject to general program TEQMS review.

4.71.20.5.2  (09-30-2011)
EO Examination Support Procedures Involving Plan Audits - Non-Return Units

  1. IRC 457 plan and IRC 403(b) annuity arrangements are not always required to file a Form 5500.

  2. The Non-Return Unit (NRU) procedures found in IRM 4.71.17 should be followed when establishing IRC 403(b) and IRC 457 examinations on Non-Master File AIMS and RCCMS.

  3. For inventory control purposes, it is crucial that the EP group establish (through EP Classification) on RCCMS any Non-Return Unit (NRU) examined in conjunction with an EO TEP examination support assignment.

  4. Managers will ensure the RCCMS record reflects the following codes or information:

    1. MFT code 74 will be used to track cases on RCCMS & Non-Master File AIMS for NRU exams.

    2. Activity code 370.

    3. Source code 47, TEP/CIP/EPTA Large Case.

    4. Special project code 6040, 6041, 6045, or 6052 as applicable.

    5. As detailed in IRM 4.71.20.5.3 below, the statute date of the related Form 941 should be entered as the statute of limitations date in the IRC 403(b) or IRC 457(b) RCCMS record.

4.71.20.5.3  (07-24-2013)
EO Examination Support Procedures Involving Plan Audits - Statute Protection Safeguards

  1. EO is responsible for the protection of the employment tax statutes of limitations of its taxpayers.

  2. EO is also responsible for the issuance of closing letters for employment tax examinations.

  3. EP examination activity in this regard usually relates to IRC 403(b) and IRC 457 examinations. Since these are Non-Return Unit (NRU) examinations, they have no statute of limitations. The statute of limitations of the related tax return must be protected.

  4. For IRC 403(b) and IRC 457(b) examinations, the statute of limitations date that will be reflected on AIMS will be the statute of limitations date for the Form 941 for the last quarter of the tax year examined.

    Note:

    The last quarterly Form 941 is due by January 31st of the subsequent year and has a three year statute of limitations date starting on April 15th.

    1. As the preferred method, the statute of limitations date of the related Form 941 should be entered as the statute of limitations date in the IRC 403(b) or IRC 457(b) RCCMS record.

      Note:

      With group manager approval, the Form 941 return for IRC 403(b) and IRC 457(b) examinations may be controlled on AIMS or RCCMS.

    2. The EP agent is responsible for the protection of the Form(s) 941 statute of limitation(s), when EO has not protected these returns, regardless as to whether they are established on AIMS or RCCMS.

    3. Agents will coordinate the protection of employment tax statutes with the EO Team Coordinator.

    4. A copy of the Form SS-10 should be kept in the EP case file regardless of whether it has been secured by another Business Function.

  5. The procedures found in IRM 4.71.9 should be followed when protecting the statute of limitations.

4.71.20.6  (07-24-2013)
Special Instructions to General Program Agents

  1. When an EP General Program Agent participates in an EP Large Case Support Examination in conjunction with LB&I and/or EO, the General Program Agent should prepare an Audit Plan and reference the following large case examination tools:

    1. TEQMS - EP Large Case Audit User Guide . , and

    2. IRM 4.71.16, EPTA Program and related exhibits. The exhibits to IRM 4.71.16 (which include Form 5701-A, Notice of Proposed Adjustments/Issues, Sample EPTA Audit Plan, and Sample Report to Another Business Unit) are found at IRM 4.71 - Employee Plans Examination Exhibits.


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