4.90.12  Case Closing Procedures

Manual Transmittal

October 01, 2014

Purpose

(1) This transmits a table of contents and text for 4.90.12, Federal State and Local Governments, Case Closing Procedures.

Material Changes

(1) This section is renamed to accurately reflect its contents.

(2) 4.90.12.1 Overview revised to reflect proper content

(3) 4.90.12.3.1 Document 11308 title changed

(4) 4.90.12.3.2 IRM reference changed

(5) 4.90.12.4.2 IRM references changed.

(6) 4.90.12.4.3 IRM references changed

(7) 4.90.12.5 is now "Case File Assembly"

(8) 4.90.12.5 has been restructured; IRM 4.90.12.5.2; added “Closing Examination Cases 100% Electronically”

(9) 4.90.12.6 is now Field Manager Responsibilities; exhibit reference inserted at 4.90.12.6(2).

(10) 4.90.12.7 is now "AIMS/RCCMS Group Processing Responsibilities"

(11) 4.90.12.8 is now FSLG Case Data Form

(12) The following topics were moved to 4.90.9, Federal, State and Local Governments, Procedures, Workpapers and Report Writing:

  1. Procedures for Processing Related Returns

  2. Return Documents

  3. Procedures for Processing Suspense Cases

  4. Delinquent Returns and Substitute for Returns

  5. Remittance Processing Procedures

  6. Third-Party Authorization/Power of Attorney

  7. Third-Party Contacts

  8. Specialist Referral System

  9. IRC 3402(d)

Effect on Other Documents

This section supersedes IRM 4.90.12, dated May 10, 2013.

Audience

This section contains instruction and guidance for all Federal, State and Local Governments employees when dealing with case closing procedures.

Effective Date

(10-01-2014)

Paul A. Marmolejo
Director, Federal, State and Local Governments

4.90.12.1  (10-01-2014)
Overview

  1. This section contains specific guidelines for Federal, State and Local Governments (FSLG) personnel on how to properly close a completed examination of an FSLG entity. It includes procedures on preparing the required closing documents and properly assembling the case file.

  2. General case closing procedures and guidelines relating to Employment Tax returns of FSLG entities are provided on the following topics:

    1. Standard time-frames for closing cases

    2. Preparing various documents

    3. Case file assembly

    4. Field Manager/Group responsibilities

    5. Audit Information Management System (AIMS) / Reporting Case Compliance Management System (RCCMS)

4.90.12.2  (10-01-2014)
Standard Time-frames for Closing Cases

  1. Examinations should generally be closed within the following established time-frames. Any delays or extended periods of inactivity must be adequately documented in the case chronology.

    1. 10 calendar days for the Specialist to close agreed or no-change examinations, starting from the date the agreement is secured or the no-change determination was made.

    2. 20 calendar days for the Specialist to close unagreed examinations, starting from the earlier of the protest date or the 30 day letter default date.

    3. 10 calendar days for the Field Manager to initial and date the case activity record after receipt from the Specialist.

      Note:

      An exception applies to these time-frames for agreed cases with an unpaid amount of $50,000 or more. See IRM 4.90.12.4.4

  2. The activity record should reflect the date the case is closed by the Specialist and the date the Field Manager approves the case for closure.

4.90.12.3  (10-01-2014)
Preparation of AIMS Closing Documents

  1. The Specialist is responsible for preparing the appropriate closing forms so information about the examination is correctly recorded on AIMS.

  2. On most examinations, Specialists will prepare the RCCMS Closing Records, but the following forms are required on some cases:

    1. Form 5599, TE/GE Examined Closing Record

    2. Form 5596, TE/GE Non-Examined Closings

4.90.12.3.1  (10-01-2014)
Form 5599, TE/GE Examined Closing Record

  1. Form 5599, TE/GE Examined Closing Record, is needed for unagreed cases going to Appeals or processing partial agreements.

  2. For unagreed cases going to Appeals, the Specialist will enter information on Form 5599 as indicated in Exhibit 4.90.12-1.

  3. For a partial agreement, the Specialist will prepare Form 5599 if the partial agreement is to be assessed prior to the full development of other examination issues. This step usually occurs when the assessment of agreed issues in a partial agreement case is processed before the full development and issuance of the 30-day letter that addresses the unagreed issues. Partial agreements can also occur in relation to secured delinquent returns that are being examined. See IRM 4.90.9.3.1.2. A partial assessment paper examination file will be created and sent to CPM Review when Form 5599 is used for a partial agreement. The Specialist will retain control of the examination and the RCCMS case controls. The paper examination file that is sent to CPM will include Form 895 (if necessary), Form 3198-A attached to the outside of the case file, Form 5599, the signed report, and any supporting documentation needed to explain the partial agreement. The Specialist completes only the following fields on Form 5599 in these partial agreement cases:

    1. Check the Partial box at the top of the form

    2. Complete TIN, MFT, Tax Period, Name Control, Name (P7-34)

    3. Tax Liability Adjustment (Item 12)

    4. Disposal Code (Item 13)

    5. Credit and Tax Computation Adjustments (Item 15)

    6. ARDI code

  4. For assistance in determining the correct codes to enter on Form 5599, Specialists should refer to Document 11308, Information Systems Codes. Specialists should refer to the most current version of the document to ensure the correct codes are used.

4.90.12.3.2  (10-01-2014)
Form 5596, TE/GE Non-Examined Closings

  1. Form 5596, TE/GE Non-Examined Closings, is the document used to close non-examined BMF or NMF account(s) (except surveyed claims) off of AIMS. Instructions for completing the form can be found in IRM 4.5.1, Exhibit 4.5.1-16. See IRM 4.90.9.14.2 and 4.90.9.14.3 for survey instructions.

4.90.12.3.3  (10-01-2014)
Deletion of AIMS Accounts

  1. In cases where an AIMS account has been established in error and the filed return has not been received, the following procedures should be followed to close the case:

    1. Form 5596 should be completed with disposal code 33 entered at the top of the form and block series "10" in the space provided.

    2. Form 10904, Request for Record Deletion from AIMS, should be prepared by the Specialist and approved by the Field Manager. If the account is in Status 12 or higher, the Specialist should include a statement regarding taxpayer contact.

      Note:

      For NMF accounts, the required approval of Form 10904 also rests at the Field Manager level.

    3. Letter 1024-T should be issued if taxpayer contact has been made.

    4. Approved Forms 10904 should be forwarded to CPM at the time of approval or included on the left side of the closed examination case file with other forms that need to be forwarded to other functions.

    5. CPM will input the approved deletion request.

4.90.12.4  (10-01-2014)
Preparation of Other Documents at Case Closing

  1. The Specialist may be required to complete other documents to ensure proper processing of the case by the GE Closing Unit and FSLG CPM. These include:

    1. Form 2363, Master File Entity Change

    2. Form 3198-A, TE/GE Special Handling Notice

    3. Form 5666, TE/GE Referral Information Report

4.90.12.4.1  (10-01-2014)
Form 2363, Master File Entity Change

  1. Form 2363, Master File Entity Change, is used to establish or change accounts on the BMF. For instructions on completing Form 2363, Specialists should refer to IRM 4.4.11.

  2. Specialists conducting an examination of an FSLG entity should complete Form 2363 to reflect any actions taken as a result of the examination. Any errors identified on a Master File entity during the examination should also be corrected using Form 2363.

  3. Common changes requiring a change to the BMF include:

    1. Changes to name and address

    2. Additions or deletions of an entity's filing requirements

    3. Corrections to Employment Code

    Note:

    General guidance for name or address changes is offered in IRM 21.3.8.9.

  4. Form 2363 should be prepared by the Specialist and processed to CPM via email as soon as incorrect entity information is identified on IDRS. It must be processed immediately during an examination in which IDRS research reflects there is no BMF filing requirement for the type of return that is being secured/submitted as a delinquent or substitute (e.g. Form 941 or Form 945).

  5. If the Form 2363 has not been processed by CPM during an exam the Specialist must indicate this on the Form 3198-A and add a remark on the RCCMS closing tabs comment section to alert CPM to pull and process the Form. If the case is going to Appeals and a paper file is required then the Form 2363 should be placed on the left inside of the paper case folder.

4.90.12.4.2  (10-01-2014)
Form 3198-A, TE/GE Special Handling Notice

  1. Form 3198-A should be enclosed in every RCCMS electronic file and attached to every closed paper examination file.

  2. Use Form 3198-A to communicate any instructions or special features of the case. The following list indicates just some of the items:

    1. Mandatory Review (check block and state nature)

    2. Cases closed on the basis of an entity's retained copy, BRTVU, RICS, TRDB, or Form 2275. See IRM 4.90.9.1

    3. Send all communications per POA (check block)

    4. Unagreed Case (check block)

    5. Forward to Appeals (check block)

    6. Referral (check block)

    7. Closing Agreement (check block)

    8. Prepare/Issue Letter (check block and insert letter number)

    9. Third-Party Contact Forms (check block)

    10. Whistleblower Claim (check block)

    11. Suspense (check block; see IRM 4.90.9.5)

    12. Unagreed cases with less than 410 days on the statute of limitations

    13. Agreed and no-change cases with less than 180 days remaining on the statute of limitations

    14. Routing instructions for closures of Compliance Checks

    15. Entity Change Form 2363 prepared (check block)

    16. 6205 Interest Free Adjustment (check block; leave date field blank)

    17. Cases with all assessments under IRC 3509 ; annotate "ASEDR 5" in "Other Instructions" field

    18. Claim Case (check block)

      Note:

      If there is an "-A" freeze on any examined tax module, provide a note that amended returns have been addressed during the examination. See IRM 4.90.7 for further information.

    19. Over $50,000 agreed/unpaid (check block)( see Quick Assessment Procedures below)

    20. Other Instructions should include helpful comments to facilitate the closing process such as: "Forms 4669 Adjustments Allowed by Examination" or "Wage Statements Secured By Examiner" or "Assess Civil Penalty as Indicated on Form 8278 and Form 3645"

4.90.12.4.3  (10-01-2014)
Form 5666, Referral Information Report

  1. Form 5666 is used as an information report or recommending a future year examination. Instructions for completing Form 5666 are provided in IRM 4.5.1, Exhibit 4.5.1-12.

  2. The Specialist should prepare Form 5666 in cases where a subsequent year examination is warranted due to certain activities or operations, disclosed during the current examination, that could jeopardize the future compliance of that entity.

  3. Form 5666 is also used to transmit information discovered during the examination relative to a nongovernmental entity to other operating units within the Service.

  4. The Specialist should attach supporting documentation that provides additional details about potential non-compliance, such as Form 4632-C, news clippings, correspondence from and minutes of discussions with whistleblowers, and include any information that is available about the size of the potential problem, etc. See IRM 4.90.6.4 for additional information.

    1. The "Referral" box under Special Features must be checked on Form 3198-A to alert the CPM reviewer to pull the documents from the case file and send them to the CPM referral coordinator for further action.

    2. If the referral is not associated with an established FSLG case, e-mail the referral package directly to the CPM referral coordinator after approval by the Field Manager.

4.90.12.4.4  (10-01-2014)
Expedited Processing of Large Deficiency or Overassessment Cases

  1. For purposes of this topic, the term "deficiency" refers to the sum of all deficiencies and penalties for any one taxpayer, for all periods in the case file, without any regard to any offsetting overassessment.

  2. Unpaid, agreed deficiency cases of $10,000 or more (but less than $50,000) must be processed within twenty-two calendar days of the date IRS receives a signed waiver. In the Expedite Processing section of Form 3198-A, check the "Other" block then specify "Unpaid, Agreed Deficiency over $10,000" .

  3. Unpaid, agreed deficiency cases of $50,000 or more are subject to quick assessment. These cases will be subject to manual assessment within twenty-two calendar days of the date IRS receives a signed waiver. In the Expedite Processing section of Form 3198-A, check the "Over $50,000 AGREED/UNPAID" block.

  4. Agreed overassessments of $10,000 or more must be processed within twenty-two calendar days of the date IRS receives a signed waiver. In the Expedite Processing section of Form 3198-A, check the "Other" block then specify "Overassessment over $10,000" .

  5. In order to meet the twenty-two day guideline, it is helpful that these categories of cases close from the group within three workdays.

4.90.12.5  (10-01-2014)
Case File Assembly

  1. Because further technical, administrative and procedural action on cases is sometimes required after a case is closed from the examining Specialist's inventory, it is important that the case be properly organized to assist Field Managers, reviewers, Appeals, processing employees and others who may subsequently become involved with the case.

  2. Adherence to this IRM section will provide a uniform presentation to the next level of review. Each form, report or document listed will not be required in every case. While this listing is not all-inclusive, it will cover most situations. Minor variances from the IRM may be necessary in unusual situations.

  3. The Specialist is responsible for properly assembling the case file and purging all unnecessary documents. Any important telephone discussions or telephone numbers should be detailed on Form 9984, Examining Officer's Activity Record. Once the files are properly assembled, they will be maintained in this manner throughout the closing process.

  4. Guidelines are provided on proper case file assembly for cases closed from the groups. The most commonly used forms and other documents are addressed in this section.

  5. The Specialist should adequately index all supporting documentation in the case files. The Specialist will use the FSLG RCCMS Naming Convention to allow anyone unfamiliar with the case to easily locate workpapers and other important documents in the file.

  6. The FSLG RCCMS Naming Convention is designed so that when files are sorted by name electronically, they will be listed in the standard case file assembly order.

4.90.12.5.1  (10-01-2014)
FSLG RCCMS Naming Convention

  1. The Specialist is responsible for adhering to the procedures for naming electronic documents within, or imported into, RCCMS. This will enable anyone viewing the RCCMS case to easily identify and locate case file documents.

  2. The FSLG RCCMS Naming Convention requires a combination of numbers to be used as prefixes to all file names. The specific prefix used is determined by the location of the document or workpaper in the case file assembly. The first number of the prefix is determined by whether the file would be located on the outside front, inside left, or inside right of a paper case file, using a "1" "2" or "3" respectively. Documents that are required for each quarter should include the tax period in the name.

  3. A second number is only needed for items that begin with the number 3, items assembled on the inside right of a case file. Documents that normally are placed loose on the inside right of a hard copy case file begin with the numbers 30, 31, and 32, followed by a period. Certain documents add a third number starting with 1, 2, or 3.

  4. CPM may include files from a prior compliance contact. These filenames always begin with "40" .

  5. Refer to the FSLG Naming Convention Spreadsheet (Exhibit 4.90.12-3 for illustrations of how various types of electronic documents/workpaper files should be labeled or named when posted to the Office Documents folder in RCCMS. The list is not all-inclusive, but should address most situations.

4.90.12.5.2  (10-01-2014)
Closing Examination Cases 100% Electronically

  1. The official examination file is modified to allow for full use of the electronic case records within RCCMS. Efficiency of examination case processing improves because duplicate work is minimized. Most closed examinations will no longer require paper files.

  2. All examination cases can be closed 100% electronically with the following exceptions:

    1. Cases going to Appeals, using disposal code 601 (Appealed :Protest to Appeals). This category includes partial agreements along with the unagreed issues.

    2. Cases with a tax assessment more than $250,000. This type of case requires a report with an original signature.

    3. Cases which include statute extensions. These forms require original signatures which need to be retained and forwarded. All other documents can be imported into RCCMS.

  3. Specialists closing cases 100% electronically will check the "All Electronic" check box in RCCMS . There is no longer a need to address this in the RCCMS comments box.

  4. When closing a case 100% electronically, the "Remarks and comments" box in the RCCMS closing record should mirror the wording in the "Other Instructions" section of Form 3198-A.

  5. See Exhibit 4.90.12-4FSLG Examination Assembly (Paper or Electronic).

4.90.12.5.3  (10-01-2014)
Paper Case File Folders

  1. Generally, one folder will be used for all returns of a given type for each entity.

  2. The Specialist should include in the primary case file copies of all materials necessary to document any adjustment(s) proposed in related case file(s).

  3. Red folders are used on all cases with less than 410 days remaining on the statute of limitations.

  4. Large case files may require more than one folder or may be placed in expanding folders. All folders should be labeled with the entity’s name, EIN, type of return, quarter/period and/or year. Multiple folders should be numbered (1 of 4, 2 of 4, etc.).

  5. All cases containing executed Forms SS-10 must have a paper case file. This type cannot be closed 100% electronically. These documents may be scanned and imported to RCCMS, but the originals must be submitted to CPM in a paper case file at the time of case closure.

4.90.12.5.3.1  (10-01-2014)
Forms Attached to Outside of Case Folder

  1. Forms and documents that assist in the processing and closing of the case should be attached to the outside of the case folder.

    1. Form 895, Notice of Statute Expiration

    2. Form 3198-A, TE/GE Special Handling Notice

4.90.12.5.3.2  (10-01-2014)
Forms Attached to Left Inside of Case Folder

  1. Reports and other information emanating from the examination, which must be forwarded to another function or operating unit, should be attached to the left inside of the case folder. This includes (in descending order):

    1. Form 2363, Master File Entity Change and supporting documentation

    2. Form 5666, TE/GE Referral Information Report and any attached supporting documentation

    3. Whistleblower's information in secured envelope, including Form 211.

    4. FSLG Referral Control Sheet

    5. FSLG Case Data Form

    6. Computer disk, if applicable (multiple disks may be needed).

  2. Any computer disks used for the examination should be placed in an envelope or disk sleeve and stapled to the folder and properly encrypted. Specialists are to ensure that all computer disks are clearly labeled.

    Note:

    Disks are only required for unagreed cases going to Appeals, or to store excess data files that cannot be placed in RCCMS due to space limitations. For Appeals cases, the Specialist must indicate in the activity record that Appeals should contact the Specialist for the GERS password in order to access files on the disk.

4.90.12.5.3.3  (10-01-2014)
Forms and Other Documents Enclosed in the Case File

  1. The following forms and other documents are enclosed in the case file in descending order:

    1. Form 4665, Report Transmittal

    2. Specialist's rebuttal to taxpayer protest

    3. Taxpayer’s protest, correspondence, a copy of the thirty day letter, a copy of Letter 569, and/or a copy of Letter 570

    4. Form 5599, TE/GE Examined Closing Record

    5. Waiver and Acceptance Forms (e.g. 870, 2297, 2504, 2504-WC, 3363)

    6. Examination report forms and draft closing letters, including those requiring a signature.

    7. Form(s) 4670, Request for Relief from Payment of Income Tax Withholding, and Form(s) 4669 Statement of Payments Received, if applicable

    8. Return, copy of return, or return document

    9. Information return penalty case file

    10. Form 4318-A, Continuation Sheet for Form 4318, Examination Workpapers Index.

    11. Form 9984, Examining Officer’s Activity Record

    12. Supporting workpapers, indexed and numbered

    13. Miscellaneous documents; e.g. Special Agents’ Reports, Collateral Reports

    14. Prior examination reports and workpapers

4.90.12.5.3.4  (10-01-2014)
Documents Attached to the Return/Return Document

  1. The following form is stapled to the front:

    1. Form 3244-A, Payment Posting Voucher-Examination

  2. The following forms are stapled to the back , facing out:

    1. Form SS-10, Consent to Extend the Time to Assess Employment Taxes

    2. Form 2848, Power of Attorney and Declaration of Representative.

    3. Form 8821, Tax Information Authorization

    4. Amended returns or claims

    Note:

    If the amended return was received directly from the taxpayer during the examination, this should be noted on the Form 3198-A, TE/GE Special Handling Notice attached to the front of the return file.

4.90.12.6  (10-01-2014)
Field Manager Responsibilities

  1. All completed case files must be sent through the Field Manager for closing. If a case requires action by another group prior to final closing, the case should be forwarded via Form 3210, Document Transmittal, directly to that group after approval by the Field Manager and the appropriate status update actions are taken in RCCMS.

  2. The Field Manager will approve the case for closing, ensuring that the final case grade is accurate by completing item 32 of Form 5599 and the corresponding "Grade of Case" fields in RCCMS (i.e., Class, Grade, and Estate fields) on the "Codes" tab. See Exhibit 4.90.12-2.

  3. The Field Manager should initial and date the bottom of Form 9984 to indicate his/her review has been completed.

  4. IRC 6751 requires the Field Manager to provide written approval of a Specialist's decision to assess certain penalties. The written documentation can be part of Form 9984. The following penalties do not require managerial approval:

    1. IRC Section 6651 (Failure to File or Failure to Pay)

    2. IRC Section 6654 (Failure to Pay Estimated Tax for Individuals)

    3. IRC Section 6655 (Failure to Pay Estimated for Corporations)

    4. Any other penalties automatically calculated through electronic means

4.90.12.7  (10-01-2014)
AIMS/RCCMS Group Processing Responsibilities

  1. At the time a case is closed, the group will query IDRS ( AMDISA command code) to ensure that each return being closed has been placed in Status 12, a full AIMS record has been established, and there are no freeze codes on any of the modules.

  2. Field Managers should refer to the FSLG RCCMS Case Closing Desk Guide for appropriate closing procedures, including completion of the "Codes" tab on RCCMS in the "Grades " , "Class" , and "Estate" fields .

  3. The MA should complete a cursory review, including all tabs on the RCCMS record. Once all fields have been validated as complete/accurate, the MA should process the closure to CPM on RCCMS.

  4. Form 3210 should be electronically signed. Include the originator's telephone number. The electronic file of Form 3210 will be sent via e-mail to CPM. One paper copy will be sent with the case. When the case is received in CPM, Form 3210 will be electronically signed and returned to the group via e-mail. When the acknowledgement copy of Form 3210 is received in the group, the previously maintained copy can be destroyed.

  5. The returns and related workpapers will be sent to CPM Review, based on management direction or local procedures. If directed by the Field Manager, the returns and related workpapers will be sent overnight. Otherwise, the returns and related workpapers will be sent by U.S. Mail or other shipping.

4.90.12.8  (10-01-2014)
FSLG Case Data Form

  1. CPM collects data from the FSLG Case Data Form (FCD). Closed case data will be analyzed in order to determine how productive the case selection criteria are. The same form will follow the case throughout its life. Both CPM and the Specialist are responsible for completing various entries.

  2. The FCD will be completed for Examinations, Compliance Checks, and Information Return Examinations.

  3. The electronic FCD is included within the RCCMS case file.

Exhibit 4.90.12-1 
Instructions for Completion of Form 5599

Reflected below are explanations for the line items on the Form 5599 that should be completed by the Specialist, the Field Manager, CPM, or the GE Closing Unit. Although these explanations relate to Form 5599, several of them apply to RCCMS tabs.

TIN(P7-18, Form 5599) (Completed by Specialist) The Taxpayer Identification Number (TIN), i.e., EIN or SSN, will be included on the audit label or must be entered in the left-most position.

MFT(P21-22, Form 5599) (Completed by Specialist) The Master File Tax Code (MFT) or Non-Master File Tax Code (NMFT) must be entered. Refer to Document 11308, Government Entities Computer Systems Codes, for a complete listing of MFTs.

Tax Period (P24-29, Form 5599) (Completed by Specialist) The correct tax period must be entered in YYYYMM format. For Forms 11C and 730, the beginning of the tax period must be entered.

Name Control/Check Digit(P31-34, Form 5599) (Completed by Specialist)
The name control consists of the first four characters of the name, the last name of an individual, or the first partner for partnership returns. No spaces are used except at the end of the name control. If the last name is less than four letters, the remaining positions will be blank.
A check digit is the two alpha characters printed on the examination label that follow the tax period on the first line. If a check digit or name control does not appear on the first print line of the examination label, underline the name control on line two. If the check digit was used to establish the account, the check digit must be used at closing. Enter the check digit in positions 33 and 34.

Name (Item C, Form 5599) (Completed by Specialist)
The name must appear completely and legibly. When entering the name of an individual, enter the last name first, followed by a comma, then the first name and middle initial, if any.

Note:

The total number of characters in a taxpayer name cannot exceed thirty-five. If it does, edit the name to reduce the length.

Penalty Reason Code (Item 02, Form 5599) (Completed by Specialist)
A penalty reason code must be input when penalties are abated. See IRM 4.5.2, Exhibit 4.5.2-2.

Note:

A reason code can also be input (but is not required) when a penalty is considered but not asserted, and when a penalty is considered for abatement, but not abated.

Agreement Date(Item 08, Form 5599) (Completed by GE Closing Unit) The agreement date is the date the agreement from the taxpayer was received in the IRS office. This should be a date stamp or a handwritten date initialed by the person receiving the document.

Interest Computation Date (Item 11, Form 5599) (Completed by GE Closing Unit)

Tax Liability Adjustment (Item 12, Form 5599) (Completed by Specialist)
Transaction code (TC) identified as "Code" on Form 5599. The "Code" must be three digits. The increase in tax dollars and decrease in tax dollars may be up to 11 digits. The adjustment penalty, penalties, and interest may also be up to 11 digits.

  a. Data in the Increase or Decrease Tax Dollars, Penalties, and Interest is dependent on the DC used. For DC’s 02, 04-08, 11,13,14,16,18, and 19 these fields must be left blank.
  b. For DC’s 01,15, and 17 a TC 300 should be entered in Tax Liability Adjustment section under Code, and a zero in the Increase in Tax Dollars.
  c. DC’s 03, 09, 10, and 12, may or may not contain an entry.
  d. DC 34 must contain an entry (not zero) in the Tax Liability Adjustment decrease in Tax Dollars, unless an amount is entered in item 12 and/or Item 15, and the net amount may be a decrease in amount due. For example, there is an Increase in Dollars and Increase in a refundable credit in an amount greater than the tax increase.
  e. If DCs are 07, or 11, no Item 12 or 15 entries are allowable.
Valid TCs for Tax Adjustments on Form 5599:
  TC 300 Assesses additional tax or deficiency because of an examination of a tax return. (+)
  TC 301 Abates previously posted tax, due to an examination of a taxpayer return. Frequently used for claims for refund that does not involve net operating loss carry-back. (-)
  TC 304 Adjusts previously posted tentative allowance. (+) TC 295 or TC 305 must be present in the module. TC 304 amount cannot exceed the sum of the TC 295 and/or TC 305.
  TC 305 Abates prior tax assessment for a tentative allowance. (-) Do not use if penalty and interest transaction codes are reflected on transcript.
  TC 308 Assesses additional tax on employment taxes, where interest is restricted due to IRC 6205. (+)
  TC 309 Abates prior tax assessment for a tentative allowance.
Valid TCs for Penalty Adjustments on Form 5599:
  TC 160 Delinquency Penalty Increase
  TC 161 Delinquency Penalty Decrease
  TC 170 Estimated Tax Penalty Increase
  TC 171 Estimated Tax Penalty Decrease
  TC 180 Failure to Deposit Increase
  TC 181 Failure to Deposit Decrease
  TC 234 Daily Delinquency Penalty Increase
  TC 235 Daily Delinquency Penalty Decrease
  TC 320 Fraud Penalty Increase
  TC 321 Fraud Penalty Decrease
  TC 350 Negligence Penalty Increase
  TC 351 Negligence Penalty Decrease
Valid TCs for Interest Adjustments on Form 5599:
  TC 340 Restricted Interest Increase
  TC 341 Restricted Interest Decrease
  TC 770 Allowable Interest Increase
  TC 771 Netted Allowable Interest

Determination of the Tax Adjustment:

It is very important that the person closing the case accurately identify the tax adjustment. The correct tax adjustment is determined by the following formula:

CORRECTED TAX – PREVIOUSLY ADJUSTED TAX = TAX ON FORM 5599

The previously adjusted amount on the report must match the tax liability on the transcript. This tax amount from the transcript is subtracted from the corrected tax liability to arrive at the tax adjustment that will be entered in Item 12 on Form 5599.

Increases in Tax are entered in Item 12 with "+" circled

Decreases in Tax are entered in Item 12 with "-" circled

Disposal Code (Item 13, Form 5599) (Completed by Specialist) One Disposal Code must be entered that best describes the examination results. Refer to Document 11308, Government Entities Computer Systems Codes, for Disposal Code definitions.

Statute Extended to (Item 14, Form 5599) (Completed by Specialist) At the time a valid Form SS–10, Consent to Extend the Time to Assess Employment Taxes, is secured, the Statute Extended to Date must be entered in item 14. The updated statute date must be input on AIMS (by submitting Form 5595, TE/GE Update) before Form 5599 is forwarded for closure off of AIMS. Must be in "MMDDYYYY" format.

Credit and Tax Computation Adjustment (Item 15, Form 5599) (Completed by Specialist) A Credit/Item Reference Number is a three-digit code used to adjust taxpayer information according to the type of examined return. This information should be taken from Forms 4668 or 4668-B. When making any entry in Item 15 of Form 5599 ensure that the "+" or the "-" is identified in the last column. The "+" or the "-" must be circled to ensure that the correct Reference Information or Credit Adjustment is made to the taxpayer account. See Document 6209. Valid Item Adjustment Codes are presented by form number.

Appeals Office Code (Item 16, Form 5599) (Completed by CPM) If the case is going to an Appeals Office, enter the applicable three-digit Appeals Office Code. See IRM 4.5.2, Exhibit 4.5.2-6. and Document 6209 for Appeals Office codes.

EO/GE Appeals Issue Code (Item 17, Form 5599) (Completed by CPM) If the case is going to an Appeals Office, enter the applicable three-digit Appeals Issue Code. See Document 11308, Government Entities Computer Systems Codes.

Unagreed Amount (Item 18, Form 5599) (Completed by CPM) If the case is going to Appeals , enter the unagreed amount.

Revenue Base Protection Section (RBP) (Items 20-24, Form 5599) (Completed by Specialist)
Protection of the revenue base includes the work done by FSLG personnel to prevent the release of money from the Treasury to a taxpayer. Items 22, 23, and 24 are to be completed only if Revenue Base Protection applies. The most common example of RBP is the examination of a claim submitted by a taxpayer whose account has no outstanding liability for a claim that has been filed. If they disallow such claims, FSLG Specialists are expending resources to prevent the inappropriate release of money from the Treasury. We measure this valuable contribution by FSLG personnel, through the completion of the Revenue Base Protection section of Form 5599, Items 20-24.
A claim is only considered as RBP if we are preventing money from leaving the Treasury. If an outstanding balance is due on the account, the RBP amount will not be the entire amount of the claim. A calculation must be done to determine how much of the claim qualifies as RBP. Since the taxpayer can be making payments on the outstanding liability while the examination is taking place; the Specialist must make the calculation when the examination is completed.
Not all claims are considered RBP; therefore, a claim Source Code does not have any relationship with RBP. Although the following situations are sometimes called "claims," they do not qualify as RBP:
Audit reconsideration, Source Code 73 (Taxpayer's Request), (if the tax has not been paid). FSLG received credit for this closure when it was originally closed. Therefore, if the audit reconsideration is being referred to Appeals, leave the RBP items blank and enter $1 in Item 18 to get the case through the terminal. Entering the amount of the "audit reconsideration" will cause duplicate results.

Claim Rejection Date(Item 20, Form 5599) (Completed by Specialist)
(a) An entry should not be made if the service center previously allowed the claim.

IF... AND... THEN...
The claim was not previously allowed Form 2297, Waiver of Statutory Notification of Claim Disallowance, signed by the taxpayer, is in the file Enter the completion date of Form 2297 in MMDDYYYY format. Do not send a letter to the taxpayer.
  Form 2297 is not in the file Initiate the appropriate letter notifying the taxpayer that their claim has been disallowed. Enter the date of the letter in MMDDYYYY format.

(b)If a date is entered, the DC must be 01, 03, 07, 10, or 11 and the Source Code must be 30. DC 34 cannot be used. Items 21-24 are required entries for DC 01, 07, or 11. When DC 03 or 10 is used, Items 21-24 and 28 are required entries. Item 28 is needed for DC 07 or 11 if non-revenue issues are involved.

Amount Claimed (Item 21, Form 5599) (Completed by Specialist)

(a) Claim or reduction of tax requested by the taxpayer. If the Source Code is 30; this item is a required entry.
(b) Forms 843, 1040X, 1120X, any amended returns, or written claim requests by taxpayers, are considered claims. The amount from the applicable form must be entered unless the amount is in error. For example, the taxpayer submits a claim for $1,500. In examining the claim, it is discovered that the taxpayer made a computational error and the correct amount is $2,500. A correction must be made to the Amount Claimed field on AIMS to reflect the correct amount. Claims filed during an examination after an audit report has been written are treated as claims. Protective claims are treated as claims. Oral requests for a refund made during an interview or by telephone are not claims.
(c) If the taxpayer submitted a protective claim for $1, when the correct amount of the claim is determined, AIMS should be updated using CC AMSTU to reflect the correct amount. Enter the corrected amount in Item 21 at closing.

Claim Amount Disallowed (Item 22, Form 5599) (Completed by Specialist)

(a) Enter the dollar amount that was protected from leaving the revenue base (a disallowed claim amount). This amount cannot exceed the amount that is entered in Item 21 or in the amount claimed field on AIMS. An entry must not be made if the claim was allowed in full. If this item is entered, Items 20, 21, 23, and 24 are also required for DC 01. For DCs 03, 07, 10 or 11, Items 20-24 are required entries. Item 28 should be completed if non-revenue issues are also involved for DC 03, 07, 10, or 11. If Item 28 is completed, do not include the time entered in Item 23.
(b) If the claim is being referred to Appeals, enter the entire disallowed amount in this field and a negative $1 in Item 18. If the taxpayer is also protesting other issues, enter the protested amount of the other issues in item 18 and the claim amount disallowed in Item 22. See IRM 4.5.2, Exhibit 4.5.2-7, Claim Amount Examples, for Item 22 entries.

Claim Hours (Item 23, Form 5599) (Completed by Specialist) Time spent on Revenue Base Protection, will be entered by the Specialist in whole hours only. Specialists must include any hours or fractions of hours spent on non-revenue in Item 28.

Note:

If Item 22 is entered, Items 20, 21, and 24, are also required.

Claim Type (Item 24, Form 5599) (Completed by Specialist)
All claims with examination criteria will be slotted into one of two categories for screening. The examination criteria are divided into two categories: Category A and Category B. Category A criteria are issues that do not meet potential. Category B criteria are issues that do not meet Category A criteria and have a refund of at least $200.00 or more. The allowable alpha codes identify the type of revenue base protection. See IRM 4.5.2, Exhibit 4.5.2-8.

Alpha Code Definition
A Abatement of Interest Claims
B Bankrupt/Insolvent Financial Institution Claims
C Carry Back/Carry Forward Claims (Restricted Interest and Tentative Carry Back)
E Excise Taxes Claims
F FICA or Self-Employment Tax Claims
G Grants, Fellowship, or Stipend Claims
H Hardship Claims
I Injured Spouse Claims
J Joint Committee Case Claims
K Disaster Claims*
L Loss Year BMF Return Consolidation Claims
M Tax Exempt Bonds
N Non-Disaster Casualty Losses Over $10,000
O Other Claims
1) Amended Returns
2) 60-Day Statute Pending
3) Constitutional Objection to Income Tax
4) Protested Claims
P Protective Claims
Q RESERVED
R Returns for Estate or Gift Tax Claims
S Savings/Retirement/Investment Plan Distribution Claims
T Tax Treaty Claims
U RESERVED
V Vow-of-Poverty Issue Claims
W WPT Claims
X Examination Requested Immediately by Taxpayer Claims
Y Claims Involving any Terminated Year
Z RESERVED

* Previously "D" was denoted for Disaster Claims; however, when using CC AMAXU, "D" is used to denote an item.

Examiner's Time (Item 28, Form 5599) (Completed by Specialist)
(a) Enter total time spent on non-revenue base protection issues for each return examined. Do not include this time in Item 23. No time should be entered for partially agreed cases.
(b) If the return has been reestablished from Status 90 using CC AMSTUR or returned from Appeals using CC AMSTUB, the total time from both closings must be entered in this field.
(c) An entry is required for all examined returns and is reported in full hours and tenths of hours. The entry must be in the range 0000.1 - 9999.9.

Note:

In cases that involve protection of the Revenue Base only; all time is entered in whole hours in Item 23.


(d) The entry for cases also involving protection of the Revenue Base must only include Revenue Production Time. The protection of the Revenue Base Time is entered in whole hours in Item 23.
(e) An entry is not made for Surveyed Claims, DC 34.

Technique Code (Item 30, Form 5599) (Completed by Specialist)
An entry is required for all examined returns. No entry is made for surveyed claims. Valid codes for this item are:

  1 - Office Interview Examination
  2 - Office Correspondence Examination
  4 - Field Examination

Agent's Grade (Item 31, Form 5599) (Completed by Specialist)
Enter the two-digit grade of the Specialist who closed the case. This is a required entry for all examined returns. An entry is not required for Surveyed Claims. Valid range of grades are 05 through 14.

Case Grade (Item 32, Form 5599) (Completed by the Field Manager)
(a) Field Managers determine grade of case for all returns. The Field Manager will consider both the primary and related returns to determine the grade level. The first position must be 1, the second position must be 1-3 (1 - Grade 11, 2 - Grade 12, 3 - Grade 13), the third position must be 1, and the fourth position must be blank or R. Exhibit 4.90.12-2.
(b) The related returns are graded to be the same as the primary return, therefore the same three-digit code is used followed by an "R." When other Specialists examine the related entities, each Field Manager grades the separate entities as separate cases and they do not enter the "R."

Examiner's Name (Item 33, Form 5599) (Completed by Specialist)
This item is a required entry for all examined returns. An entry is not required for Surveyed Claims. Enter the last name first, followed by a space and the first initial.

Exam Adjustment Amount (Item 34, Form 5599) (Completed by Specialist)
Exam Adjustment Amount (Item 34, Form 5599) (Completed by Specialist)

Note:

Effective 1/1/1999, this field is no longer used for delinquent returns.

Delinquent Return Code (Item 37, Form 5599) (Completed by Specialist)
(a) Item 37 must always be completed when closing delinquent returns secured during the examination and sent to a campus for processing. This entry gives FSLG credit for a delinquent return pick-up on Report 20.
(b) If the delinquent return is incorporated into the examination, this item must be left blank.
(c) If Item 37 is entered, Item 414 is required and Item 35 requires a $1 amount.
(d) Segregate the closing records of secured delinquent returns by MFT code. For each type of return included in the case file, the Specialist will:
Enter a "T" in Item 37 if there is only one delinquent return.

Note:

If there is more than one delinquent return, enter a "T" on one of the closing records in Item 37.


Enter an "R" in Item 37 on the rest of the closing records having the same MFT code as the closing record marked with a "T."
Example: Eight delinquent returns are secured from a taxpayer - Forms 941 for each quarter of 2007 and 2008 year(s). A "T" should be entered on the closing documents of the latest quarter of the Form 941 return. The balance of the closing documents are marked with an "R."

Fraud Condition (Item 38, Form 5599) (Completed by Specialist)
This item may be blank or contain an entry of "C" (Civil) or "F" (Criminal), or B "Both " .

Special Project Code (Item 40, Form 5599) (Completed by Specialist)
Project Codes are used to identify a Priority Emphasis Program or a referral to Examination Division. Refer to Document 11308, Government Entities Computer Systems Codes for valid Project Codes.

ARDI Code (Item 42, Form 5599) (Completed by Specialist)
(a) Enter a one-digit code in this item for an agreed deficiency under the Accounts Receivable Dollar inventory (ARDI) project. Refer to Document 11308, Government Entities Computer Systems Codes for valid ARDI Codes.
(b) When closing multiple years, and an overassessment from one year will be used to offset an assessment from another year, consider the overassessment as payment secured. "Full Paid" or "Partially Paid" depends on the amount of the overassessment.
(c) The ARDI Code is valid for all FSLG MFT Codes. Valid Disposal Codes are 03, 06, 09, and 12.
Reminder: DC 05 must contain an ARDI Code if an entry is present in Item 34.

Employee Group Code (Item 50, Form 5599) (Completed by Specialist)
The Employee Group Code (EGC) is a four-digit code designating a specific group. An EGC is a required entry on all examined full closures with the exception of disposal code 34 – Surveyed Claims. The following list identifies the EGC used by TE/GE:

EP Examinations 7600 through 7699
EO Examinations 7900 through 7999
GE Examinations 7200 through 7284




CIC Indicator (Item 400, Page 2, Form 5599) (Completed by Specialist) If the examination is a large case examination, as defined in IRM 4.90.13, an "L" should be entered.

International Examiner Time (Item 402, Page 2, Form 5599) (Completed by Specialist)
Percentage of Total Case time reported in Item 28, Page 1, Form 5599.

International Exam Amount (Item 403, Page 2, Form 5599) (Completed by Specialist)
Percentage of Total Audit Results.
RELATED RETURN INFORMATION SECTION (Item(s) 405 – 412) Enter data from primary return.

Related TIN (Item 405, Page 2, Form 5599) (Completed by Specialist)

Related MFT (Item 406, Page 2, Form 5599) (Completed by Specialist)

Related Tax Period (Item 407, Page 2, Form 5599) (Completed by Specialist)

Related Return Alpha Code (Item 408, Page 2, Form 5599) (Completed by Specialist)
P - Primary Return
S - Secondary Return

Installment Agreement Code (Item 412, Page 2, Form 5599) (Completed by Specialist)

Delinquent Return Amount (Item 414, Page 2, Form 5599) (Completed by Specialist)
(a) In order to capture accurate results when FSLG secures delinquent returns, a separate field has been created. Previously this amount was entered in the dual-purpose field, Item 34, Adjustment Amount. Effective January 1999, Item 34 will be used to reflect adjustments to nontaxable returns and Item 414 will be used for delinquent returns secured by FSLG.

(b) For taxable returns, the amount entered in Item 414 must reflect the balance due or refund amount per the return that was forwarded to the campus for posting of the TC 150. If this amount is zero, enter $1 in this field.
(c) For nontaxable returns, enter the amount in Item 414 of the ordinary net income/loss or special allocation items per return forwarded to the campus for posting of the TC 150. If this amount is zero, enter $1 in this field.
(d) If Item 414 is entered, Item 37, Delinquent Return Code must also be entered and vice versa.
(e) If Item 414 is entered, Item 13, Disposal Code must not be 02 or 34.
(f) If there is no balance due/refund due or no change to income/loss, enter $1 in Item 414.

Amended Return Amount (Item 415, Page 2, Form 5599) (Completed by Specialist)
(a) In the past, if a taxpayer filed an amended return with the campus, even if it was due to an ongoing examination, FSLG could not take credit for the adjustment. To accurately capture the Specialist's efforts, Item 415 has been created. This entry is only valid if MF shows that the examination was started before the taxpayer filed the amended return or an original return, if the TC 150 is a Substitute for Return (SFR). Enter the amount of the TC 29X that has posted to MF, if the return was filed as a result of an ongoing examination. A current transcript must be included in the case file supporting the amount entered in Item 415. The TC 42X date must be prior to the TC 29X date.
(b) For taxable returns, enter the amount of the TC 29X, less any credits posted. In most cases this is the balance/refund due.
(c) For nontaxable returns, enter the adjustment amount to income/loss.
(d) Item 415 can be corrected by CC AMAXUO.

Fax Agreement Ind. (Item 416, Page 2, Form 5599) (Completed by Specialist)
Enter a "1" if a FAX agreement has been received.

Principal Issue Codes (Item 701, Page 2, Form 5599) (Completed by Specialist)
Reference Document 11308, Government Entities Computer Systems Codes booklet for a listing. Two-digit entries should be left-justified and "0" should be entered in all unused fields.

Employment Tax/GE (Item 722, Page 2, Form 5599) (Completed by Specialist)
Enter the deficiency or overassessment.

Exhibit 4.90.12-2 
Case Grading Criteria

FSLG Employment Tax Case Grading Criteria
Grade 13 (i) Cases with an annual total tax liability (FICA/Medicare/FIT) in excess of $499,999 (ii) Cases between $100,000 and $499,000 annual liability that meet upgrade criteria (iii) G coded taxpayers with annual compensation in excess of $1.35 Million.
Grade 12 (i) Compliance Checks(ii) Cases with an annual total tax liability (FICA/Medicare/FIT) less than $500,000 that do not meet upgrade criteria(iii) All cases with $100,000 or less annual liability

GS-12 Specialists can work above grade cases for no more than 25% of their inventory (per pay period).

Field Managers should consider the case grading implications of converting a compliance check into an examination. For example, a grade 12 compliance check may be a grade 13 examination due to the taxpayer’s employment tax liability and/or the complexity of its structure.

Exhibit 4.90.12-3 
FSLG Naming Convention for RCCMS

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Exhibit 4.90.12-4 
FSLG Examination Assembly (Paper or Electronic)

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