4.90.13  FSLG Large Case Examination Program (Cont. 1)

4.90.13.11 
Planning the Large Case Examination

4.90.13.11.5  (05-31-2006)
Stage 3 - Establishing Examination Procedures

  1. After completing this preliminary examination work, the Team Coordinator, Team Members and any requested specialists will submit the following to the Team Coordinator:

    1. A list of specific areas to be examined;

    2. Proposed examination procedures to be used for each area; and

    3. A time estimate for each specific area.

  2. The proposed procedures and time estimates are subject to the approval of the Field Manager.

4.90.13.12  (05-31-2006)
The Examination Plan

  1. The examination plan usually contains three sections, each serving distinctly different purposes. Form 4764 or Form 4764-A may be used.

  2. The first section, Entity Information Section, is devoted to management information that can be furnished to the Entity. Information contained in this section should be of such content that it would aid and assist the Entity in preparing to accommodate the needs of the examiners (space, equipment, files, records, etc.). This section contains the overall plan of examination. A copy is furnished to the Entity.

  3. The second section, Service Management Information Section, should contain the instructions to Team Members and contains general management information. It is not intended for the Entity, but a copy of this section may be furnished to the Entity upon its request.

  4. The third section, Examination Procedures Section, contains each Team Member's assignment and plan for the procedures to be used in accomplishing the assignment and is not intended for use by the Entity.

  5. The Team Coordinators will revise and reschedule throughout the examination to take advantage of the additional information and feedback obtained. The Field Manager has final responsibility for deciding whether the change is justified. All changes to examination procedures will be documented.

4.90.13.12.1  (05-31-2006)
Entity Information Section

  1. This section includes the following:

    1. Name of Entity;

    2. Years to be examined;

    3. Names of Field Manager, Team Coordinator, Team Members, and official telephone number of Field Manager;

    4. Communication agreement for records requests, issue discussion and closing conferences;

    5. Broad scope of the examination for each year (entities, divisions, activities and plans to be included);

    6. Broad description of Team Member's individual assignments with scheduled beginning dates and estimated completion dates;

    7. A list of participants at the pre-examination conference;

    8. A list of records to be made available specifying dates, locations, and methods of request;

    9. Other pertinent matters agreed to at the pre-examination conference; and

    10. Notice to Entity that the plan is general and will be modified as required to meet examination needs.

4.90.13.12.2  (05-31-2006)
Service Management Information Section

  1. This section contains the following information:

    1. Brief description of the Entity structure. This should include information regarding location of Entity activities, types of employee plans maintained, and location of books and records;

    2. A list of all agencies/plans of the Entity;

    3. Instructions to Team Members regarding:

      • Workpapers (size, format, etc.);

      • Indexing of workpapers and final reports;

      • Procedures for requesting information from Entity and routing of information requests;

      • Procedures for requesting conferences with Entity;

      • Development of examination procedures;

      • Raising of issues;

      • Preparation of the report; and

      • Procedures for monitoring time.

    4. Information regarding practices and issues common to this type of Entity;

    5. Information regarding special examination features; and

    6. Examination assignments for each Team Member with an estimate of staff days for completion of assignment.

4.90.13.12.3  (05-31-2006)
Examination Procedure Section

  1. This section contains the following information:

    1. Name of Entity;

    2. Years involved;

    3. Brief description of examination assignments including:

      • Scheduled starting dates and planned completion dates;

      • An estimate of examination time;

      • Specific audit techniques to be used;

    4. Name of Team Members.

4.90.13.13  (05-31-2006)
Monitoring the Examination

  1. The Team Coordinator is responsible for the day-to-day coordination of a large case examination.

4.90.13.13.1  (05-31-2006)
General

  1. One of the primary responsibilities of a Team Coordinator is to serve as a focal point for communications between Team Members and the Entity and/or Team Members and the Field Manager during the examination.

  2. Other important duties of the Team Coordinator include:

    1. Preparing the pre-contact analysis;

    2. Participating in the pre-examination conference;

    3. Coordinating and editing the overall plan and the report of examination;

    4. Coordinating and updating the planning and the administrative files.

    5. Advising the Field Manager immediately of any apparent need for changes in the examination plan or the procedures being used;

    6. Reporting to the Field Manager any developing problems regarding Entity/Team Member relationships;

    7. Maintaining the Information Document Request Log;

    8. Advising the Field Manager of significant proposed issues and the need for discussions with Team Members or the Entity;

    9. Maintaining the Issue Control Sheet, if used;

    10. Periodically updating the planning file;

    11. Bringing all the important pieces of the final report together in a professional, orderly and useful package; and

    12. Participating in the post examination critique.

  3. The Field Manager must monitor case progress to determine the need for plan revision and rescheduling. The examination plan is not a static tool. Successful Field Managers plan throughout the examination to take advantage of additional information. The Field Manager may accomplish this objective through analysis and review of to accomplish this objective through on-site visits, case reviews/critiques and analysis and review of the following:

    1. Information Document Requests (IDR) for timeliness, quality, etc.;

    2. Notices of Proposed Adjustment for accuracy and completeness by the agent and responsiveness by the Entity;

    3. Reports for staff day comparison to plan; and

    4. GSAIN time tracking system for time expended by Team Members.

  4. Risk analysis should be performed to properly assess the viability of issues and appropriateness of the resources being used.

  5. Each Team Member may record his or her time by issue on the Issue Control Sheet. The Field Manager's analysis of this information will:

    1. Help him or her to make decisions regarding adjustments to the plan;

    2. Provide evidence that the high priority areas are being developed early in the examination and according to plan;

    3. When two or more Team Members are engaged in the development of an issue or are applying time to the same item but in different entities, provide the information needed to compare actual time spend with the planned time. This system of recording time by examination segment will only be used by the Field Manager as a means to effectively manage the case. It is not intended nor will it ever be used for personnel evaluation purposes.

  6. The Field Manager is responsible for monitoring time spent by all Team Members. Time spent on large case areas follows the normal time reporting requirements as provided in the Government Entities Code Book. Field Manager responsibilities include:

    1. Ensuring that all FSLG Team Members will report their time on large case areas on Form 6490.

    2. Ensuring that the transfer of all FSLG Team Member time to the Team Coordinator will be done upon completion of the Team Member's assignment.

    3. Ensuring that the scope and depth of the examination specific assignments to Team Members are appropriate;

    4. Approving examination plans;

    5. Examining or surveying the primary Entity's return;

    6. Examining, non-examining, or surveying returns of effectively controlled entities within the jurisdiction of the TEGE Division;

    7. Disposing promptly and properly of problems and disagreements; and

    8. Seeking technical and/or area counsel advice as early as practical in the examination in every case that warrants such action.

4.90.13.14  (05-31-2006)
Management of Differences

  1. This section discusses the responsibilities of the Field Manager for the prompt and proper disposition of problems and disagreements.

4.90.13.14.1  (05-31-2006)
Differences Related to Scope and Depth

  1. The prime consideration in resolving differences as to scope and depth is that the objectives remain consistent with national program and FSLG objectives. When the differences involve another functional activity (i.e. Excise, Employee Plans, Exempt Organizations), the Field Manager is responsible for determining the position to be taken. If necessary, the FSLG Director will be involved to assure an equitable resolution of serious differences.

4.90.13.14.2  (05-31-2006)
Differences Regarding Nature of Assignment or Examination Procedures

  1. Where differences arise regarding the nature of the Team Member's assignment or how the assignment is to be carried out, it is important that all parties understand and respect the other's responsibilities. The Field Manager's responsibility regarding approval of the procedures is twofold:

    1. To ensure that the Team Member's procedures are consistent with the scope and depth of the examination.

    2. To ensure that the procedures are consistent with the overall examination plan and do not duplicate procedures performed by other Team Members.

4.90.13.14.3  (05-31-2006)
Differences Between Entity and Team Member (Including Field Manager)

  1. Differences with the Entity may involve a disagreement regarding case management or may relate to a technical area.

4.90.13.14.3.1  (05-31-2006)
Case Management

  1. Differences in the case management area may be due to an inadequate plan or failure to follow the plan.

  2. Careful consideration should be given to the Entity’s point of view. However, the Field Manager should be on guard for actions that may adversely affect the examination.

  3. Entity/Team Member differences are likely to result in polarization and a breakdown of communication and/or cooperation necessary for an efficient examination. If differences arise, corrective action must be taken immediately. Field Managers should include in Part 1 of the examination plan a provision for regular meetings with designated officials to discuss the examination progress.

4.90.13.14.3.2  (05-31-2006)
Technical Areas

  1. Most of the differences encountered with the Entity will involve a position taken on technical issues. The Field Manager must fully consider the Entity's position on the issue. If the Field Manager is convinced that the argument or information submitted by the Entity warrants a change in position, he or she should carefully explain the change to the Team Member and make certain the team member understands the changed position and the reason for the change. If the Team Member still believes his or her position is correct, he or she should follow the procedures set out in 4.90.13.14.5 herein.

4.90.13.14.4  (05-31-2006)
Differences Between Team Members

  1. Where differences of opinion arise among Team Members as to how a particular technical issue should be treated, the Field Manager should consider all views expressed and then make a decision.

  2. If, after a complete discussion of the matter, the Team Member is still in disagreement with the Field Manager’s decision, the Team Member must follow the decision. The Team Member will present in the dissent the case chronology record. The Field Manager will provide the Team Member and Team Coordinator with written instructions on the matter in question. These instructions will be included in the case file.

4.90.13.15  (05-31-2006)
Quality Measurement Standards

  1. The FSLG Field Manager is responsible for the initial closing review of the large case and all effectively controlled entities that are included in the examination.

  2. Managers of specialty groups will be responsible for the technical and mathematical accuracy and issue development/documentation of any separate specialty reports issued.

  3. The CPM Review staff is responsible for the review of the large case and all effectively controlled entities that are included in the examination. The review staff will use the established Employment Tax Quality Measurement System (ETQMS) auditing standards as discussed in FSLG IRM 4.90.8.

4.90.13.15.1  (05-31-2006)
Assistance from the CPM Technical/Quality Review Staff (TQR)

  1. Assistance from TQR will include, but is not limited to:

    1. Technical advice or assistance requests;

    2. Requests for review of a case by the Field Manager; and

    3. Unagreed cases.

  2. The Field Manager will determine the need to request assistance from TQR. Written requests for assistance will be routed to CPM/TQR, which will determine the need for assistance after assessing staffing, type of case or problem, and if necessary, discussion with the appropriate Field Manager. Where there is a difference of opinion as to whether assistance from CPM/TQR should be requested, the decision will be made by the Director of FSLG.

  3. Procedurally, the Field Manager will request assistance after he or she is satisfied that the issues are fully developed factually and that key legal questions have been researched prior to requesting assistance from TQR. Whenever possible, Form 5701, Notice of Proposed Adjustment, should be prepared by the Service and reviewed by the Entity for accuracy. Where unagreed, the Entity's position should be received in writing.

  4. The integrity, independence, and objectivity of the reviewer must be preserved. Reviewers must not vary from regular procedures by orally resolving issues. Differences should be documented and reviewer's memorandums and Field Manager/Team Member replies should be prepared and made part of the case file.

4.90.13.16  (05-31-2006)
Completing Unagreed Cases

  1. Procedures for the Primary Group and pre- and post-Appeals conference activities are discussed below.

4.90.13.16.1  (05-31-2006)
Primary Group Procedures

  1. The primary Field Manager will issue the 30-day letter. At the request of the Entity, the Field Manager will grant a 60-day extension to prepare the protest, provided the following requirements are met:

    1. The Entity's request must be made in writing to the Field Manager and state the reasons why additional time is needed.

    2. If the statute of limitations will expire within 240 days and the granting of an extension will not leave sufficient time on the period to adequately process the case, the extension will be contingent upon securing a consent to extend the statute.

    3. Only those entities in the approved FSLG large case examination universe are eligible for the additional 60-day extension to file the protest.

  2. When the additional 60-day extension is granted, the new protest due date should be given to the Entity in writing. The Entity should also be informed that granting of the extension to file the protest will not extend the period from which the Service will begin to compute the additional interest, if applicable.

  3. The Field Manager will carefully review the protest filed by the Entity within 30 days of receipt. This review will be in writing and will address each point raised by the Entity that is inconsistent with the factual position presented in the FSLG Specialist’s report. The review will also include appropriate responses to any new issues raised by the Entity and an attempt must be made to secure any new records or documentation to which the Entity refers. By conducting a thorough analysis of the protest, the Field Manager can provide the Appeals Officer with valuable information to thoroughly consider the Entity's claims.

  4. A copy of the rebuttal must be provided to the Entity.

4.90.13.16.2  (05-31-2006)
Pre-Appeal Conferences

  1. A meeting will be held between FSLG and Appeals following closing of the case at the request of the Field Manager or FSLG CPM Technical/Quality Review function. The pre-conference meeting is intended to provide a forum for discussing issues and concerns, the protest, issue strengths and weaknesses, identification of particular issues for continuing dialogue, anticipating problems, and understanding respective positions.

  2. In accordance with Rev. Proc. 2000-43, C.B. 2000-2, such meetings should not be held unless the Entity/Representative is given the opportunity to participate. The Entity must be given a reasonable opportunity to attend a meeting or be a participant in a conference call between Appeals and FSLG when the strengths and weaknesses of issues or positions in the Entity's case are discussed. If the Entity/Representative is unable to participate at the scheduled time, reasonable accommodations will be made to reschedule. This does not mean that the Service will delay scheduling a meeting for a protracted period of time to accommodate the Entity/Representative. The Entity/Representative may waive participation in such a meeting either orally or in writing. Generally, such waiver will be granted on a communication-by-communication basis. However, the Entity/Representative may deem the waiver to encompass all communications that might occur during the course of Appeals' consideration of a specified case.

  3. The Field Manager or FSLG CPM Technical/Quality Review function will submit a request, in writing, to the Chief, Appeals Office, with copies to TEGE Area Counsel if an attorney assisted FSLG in developing the case, that a meeting be scheduled to discuss the case. The request will confirm the fact that an in-depth review of the Entity's protest was completed and a written response is included in the case file. It will also include a brief statement regarding the particular issues in the case that FSLG would like to discuss at the meeting. The request memorandum will be attached to the case file when it is forwarded to Appeals.

  4. After Appeals receives a request for a Pre-Appeal on any covered case, the conference will be held in accordance with IRM 8.16.1.5.5 and IRM 8.6.1.2.7.

    1. The FSLG Director, Field Manager, Team Coordinator, and FSLG Specialists may participate in the meeting at the discretion of the Primary Field Manager and/or the Director, FSLG. It is anticipated that the Field Manager will attend all such meetings. Only those FSLG Specialists that were involved with the issues set forth in the request memorandum need to be present.

    2. If an attorney from TEGE Area Counsel assisted FSLG in the development of the case, the attorney will be invited to participate in the meeting if his or her participation will contribute meaningfully to the conference. If an attorney did not participate to a large degree in developing the case, either FSLG or Appeals may request the attendance of an attorney at the pre-conference meeting.

  5. The Appeals Team Manager and the Appeals Officer to whom the case is assigned will preside at the meeting. If necessary, any Appeals team members assigned to the case will be in attendance.

  6. Both FSLG and Appeals should continue to encourage informal, ongoing communication, subject to the conditions discussed above, during the time the case is under Appeals' jurisdiction. Open lines of communication can greatly expedite the completion of the case when new arguments or information are presented by the Entity or there are other developments that were not previously anticipated.

4.90.13.16.3  (05-31-2006)
Post-Appeal Conferences

  1. After Appeals action has been completed on any covered case, a post-settlement conference will be held in accordance with IRM 8.16.5.5 and IRM 8.6.1.2.7.8.

  2. All formal meetings held under these procedures shall be documented via a conference memorandum signed by a representative of each function in attendance.

4.90.13.17  (05-31-2006)
Completing the Examination

  1. Generally, all Team Members will not complete their work at the same time. When the individual Team Member completes his or her examination, the following actions are required:

    1. Preparation of Notice of Proposed Adjustment (Form 5701) and discuss any pending proposed issues with the Team Coordinator and the Field Manager to obtain his or her concurrence. Issues should be raised throughout the examination in accordance with the agreement in the pre-examination conference (Section One of Examination Plan).

    2. Discussion of proposed issues directly with the appropriate Entity official per the communications agreement (Section One of Examination Plan), generally with the Field Manager or Team Coordinator present.

    3. Preparation of his or her portion of the examination report and forward it to the Team Coordinator.

    4. When FSLG or CAS Team Members have completed their examination segment they are to close out cumulative time on Form 6490 to the Team Coordinator, if not done previously.

  2. Team Members will attach their workpapers to the appropriate form for the item or transaction examined. The workpapers should support the conclusion of the Team Members. All forms with supporting workpapers will then be forwarded to the Team Coordinator for inclusion in the final examination report.

  3. All specialists' reports must be included as a part of the case examination file.

  4. The Team Coordinator should make editorial changes as needed for uniformity and style. A Team Member's transmittal letter should not be changed.

  5. After the Team Coordinator completes and assembles the total examination report, he or she will forward it to the Field Manager for review.

  6. After the Field Manager reviews the examination report and after the post-examination management critique, the case will be closed in the following manner:

    1. Original return(s), return charge-out, AIMS closing document, draft examination letter, proposed agreed/unagreed reports and other documents for processing will be placed in a separate folder and forwarded to CPM for appropriate closing actions.

    2. A copy of each item listed in 6a and the balance of the examination case file, including all multimedia files, will be maintained by CPM for future planning purposes.

4.90.13.18  (05-31-2006)
Post-Examination Critique

  1. The experiences of those involved in planning and executing team examinations are the best and most reliable sources of information for evaluating the effectiveness of these examinations.

  2. The objectives of the critique are:

    1. To determine the effectiveness of the present examination;

    2. To obtain data that will be useful to the subsequent examination team;

    3. To develop recommendations for improving the subsequent examination;

    4. To bring to the Entity's attention problems encountered and discuss possible solutions; and

    5. To give the Entity an opportunity to present problems caused by the examination.

  3. The critique should be provided for in Section One, Entity Information Section, of the examination plan. It should identify persons who will participate in the critique and the specific areas each will cover.

  4. Each Team Member will maintain a folder containing summaries of topics and related background material to be used in preparation for the post-examination critique. The critique should be held during the final stages of the examination or within thirty days after the case is closed.

  5. In conducting the critique, the Field Manager and Team Members should remember that the primary objective is to establish the groundwork for the next examination. Some of the more important questions to be discussed during the critique are:

    1. Were results commensurate with the time spent?

    2. Were examination procedures efficient and effective?

    3. Did the examination plan:

      • prove effective in monitoring and controlling the examination?

      • provide adequate guidelines for Team Members in carrying out their assignments?

      • facilitate a more orderly examination?

      • adequately serve as a vehicle for coordination?

    4. Was there an effective relationship between the Entity and the Team Member? This discussion should be approached from the standpoint of identifying corrective actions the subsequent years Field Manager can take in solving or avoiding any problem area(s);

    5. Were responses to information document requests (IDRs) timely? If not, how can this be improved for subsequent examinations?

    6. How effective were the Support Areas? If Support Areas did not participate, why not? Would participation by Support Areas be helpful in subsequent audits? If so, what are the expected results or benefits of Support Area participation?

    7. What estimate of time is suggested for the next examination?

    8. When should the Entity be examined again?

  6. In appropriate cases a post-examination critique may be held with the Entity. It should be held separately with Service participants limited to the Field Manager, Team Coordinator, and, when appropriate, the Director, FSLG.

  7. A written report is required on each case and should be prepared by the Field Manager at the conclusion of the post-examination critique and made part of the planning file for subsequent examinations.

4.90.13.19  (05-31-2006)
Assessment of Team Members Performance Appraisal

  1. At the conclusion of each team examination involving personnel from a supporting area, the Field Manager will consider whether written comments regarding the Team Members' work should be submitted to appropriate managers.

4.90.13.19.1  (05-31-2006)
General

  1. Written comments will be prepared when total time spent by a Team Member amounts to more than 30 workdays. The Team Member's managers may, under special circumstances, request an assessment regardless of the time. Some Team Members complete their assignments long before the conclusion of the examination.

4.90.13.19.1.1  (05-31-2006)
Criteria for Assessment

  1. The Field Manager's assessment will pertain to the Team Member's contribution to the team effort and final product.

  2. For an assessment to be of value, it should include the following specific information:

    1. Name of case;

    2. Type and complexity of assignment;

    3. Time spent by Team Member and period covered;

    4. Manner in which assignment instructions were given to the Team Member;

    5. Communications maintained between Team Member and Field Manager;

    6. Initiative and creativity displayed in planning the work, in developing examination procedures, and in carrying out the assignment; and

    7. The Team Member's overall contribution to the team effort and ability to work in a team environment.

4.90.13.19.1.2  (05-31-2006)
Format

  1. The performance assessment of a detailed Team Member should be presented in narrative form.

4.90.13.19.2  (05-31-2006)
Informal Assessments

  1. There should be a continual exchange of viewpoints between the Field Manager and Team Members directed toward the identification of strengths and weaknesses in both case management and work accomplishment areas.

Exhibit 4.90.13-1  (05-31-2006)
GSAIN For FSLG Large Case Examinations

Part 1: Planning and Information Gathering

  • 100 INDEX TO AUDIT WORKPAPERS

    101 GSAIN Index and Explanation--explanations may be expanded as needed

  • 200 CASE CHRONOLOGY & STATUS REPORTS

    201 GSAIN Time Tracking/Case Chronology--amount of time spent daily on each GSAIN area.
    202 CEP Case Status Reports--reports to Internal Revenue Service management
    203 Other Memos and Communiqus--various communication documents of importance

  • 300INFORMATION DOCUMENT REQUESTS (IDR LOG)

    301 IDR Log--notes the topic of the IDR, date given to the Entity, date the Entity is to respond, date the Entity did respond and includes a copy of each IDR (if possible, only one topic per IDR)

  • 400 BMF, AIMS and STATUTES

    401 BMF/AIMS & UPDATES--copies of all ADP & IDRS information requested and received as well as copies of forms filed to update or change the existing Internal Revenue Service internal records
    402 Statute Controls & Consents--copies of Form(s) SS-10 and related letters given to the Entity

  • 500 PRE-CONTACT PLANNING

    501 Forms 940, 941 and 945 and claims if applicable--all these returns and charge-outs
    502 IRM and Guidelines--all notes applicable to the IRM or other guidelines; if issues are to be stressed or waived, explain rationale
    503 News Drop files--all newspaper, web site, or Lexis information that would pertain to the examination
    504 Public Records--applicable records on file at other government entities (i.e. deeds, reports, reviews)
    505 Initial Meetings with Team Members--notes relating to such meetings
    506 Audit Plan--copy of the plan, including all updates
    507 Support Contacts--copies of all support requests such as CAS, EO, EP, Excise, Tax-exempt Bonds, etc.
    508 Other Information--any other external information gathered for the examination (interviews with previous examining specialists, review of previous workpapers and/or administrative files)

  • 600 INITIAL CONTACT & VISITATION

    601 Pre-examination Meeting with Entity--all notes relating to who was at the meeting and what transpired
    602 Organizational Chart--chart should show all entities controlled or related to the primary Entity
    603 Tour of the Facilities--notes on who conducted the tour and what facilities were reviewed and which were not and why
    604 Private Letter Rulings--copies all PLRs that were issued to the Entity
    605 Legal Opinions on Specific Issues--copies of all legal opinions issued to the Entity on issues that might pertain to the examination
    606 Other information--any other information given or exchanged at the meeting

  • 700 MINUTES

    701 Board/Trustees Minutes--copies and/or notes of pertinent minutes
    702 Committee & Other Minutes--copies and/or notes of pertinent minutes of committees or other decision-making bodies (i.e. Finance, Recreation, Personnel)

  • 800 PUBLICATIONS

    801 Pamphlets & Brochures--all copies of and/or notes on such printed material published by the Entity for public consumption
    802 Newsletters--all copies of and/or notes on internal and public newsletters
    803 Employee Handbook(s)--copies of and/or notes on employee handbook(s)
    804 Other Internal Publications--delineate the ones reviewed and why

  • 900 FINANCIAL RECORDS

    901 Auditor’s Report & Management Letter--copies of these documents and notes
    902 Form 940,941, & 945 Reconciliation Workpapers--copies of the workpapers and notes pertaining to them
    903 G/L, T/B, Chart of Accounts--copies of and/or notes on these documents
    904 Reports to/from Other Agencies--copies of reports to/from the State or federal government, or other government entities (i.e. agencies and authorities)
    905 Records--records maintained to determine income tax refunds in the filing of Forms 1099-G
    906 Other--specify other records reviewed and why

  • 1000 OTHER RETURNS/FORMS

    1001 Forms W-2 & W-3--copies received from the Entity and/or notes after reviewing
    1002 Forms W-2G--copies received from the Entity on gambling winnings and/or notes after reviewing
    1003 Forms W-4, W-5, W-9--copies received from the Entity and/or notes
    1004 Forms 1098-E & 1098-T--copies received from the Entity and/or notes
    1005 Forms 1096 & 1099--copies received from the Entity and/or notes
    1006 Foreign Person Returns--copies of 1042, 1042-S, 1078 & 8233 and/or notes
    1007 Support Division Returns--includes such returns as 5500 (EP), 8038G & 8038T (Tax-exempt bonds), 990 & 990T (EO), and excise tax returns
    1008 Other Returns/Forms--specify

  • 1100 CONTRACTS, GRANTS, LEASES, LOANS & OTHER AGREEMENTS

    1101 Employee Contracts--copies and/or notes on pertinent employee contracts
    1102 Grants--copies and/or notes on grants applicable to the filing of Form 1099-G
    1103 Contractor Agreements--copies and/or notes on selected sub-contractor agreements
    1104 Lease/Rental Agreements--copies and/or notes on selected agreements
    1105 Loan Agreements--copies and/or notes on selected employee or other loan agreements
    1106 Section 218 Agreement(s)--copy of the agreement(s) and modifications if any and notes
    1107 Other Agreements--specify the agreements and why reviewed

  • 1200 PLANS, POLICIES & PROCEDURES

    1201 Cafeteria Plan--copy of plan and/or notes
    1202 Dependent Care Assistance Program--copy of plan and/or notes
    1203 Educational Assistance Program--copy of plan and/or notes
    1204 Adoption Assistance Program--copy of plan and/or notes
    1205 Health Plan--copy of plan and/or notes
    1206 Meals & Lodging Policies--copy of policies and/or notes
    1207 Group Long-term Care Insurance Plan & Group-term Life Insurance Plan & Disability Income Plan--copy of plans and/or notes
    1208 Travel, Transportation, Moving & Entertainment Reimbursement Policies---copy of the plans and/or notes on the accountability required and verification provided
    1209 Other Fringe Benefit Policies--copy of the policy(ies) and notes

Part 2: Issue Development

  • 1300 APPLICABILITY OF FICA TAXES UNDER SECTION 218

1301 Section 218--does the Entity have an agreement and extent to which it was followed
1302 Mandatory Exclusions--applicability of the exclusions
1303 Optional 218 Exclusions--applicability of the exclusions (fee-bases, students, & election workers)
1304 Retirement System Coverage--extent to which the Entity has a qualified retirement system and if re-hired annuitants are members of the system
1305 Medicare Continuing Employment Exception--applicability of the exception for employees hired before March 31, 1986.
1306 Other issues--specify
  • 1400 EMPLOYEE VERSUS INDEPENDENT CONTRACTOR

    1401 Reclassification of Workers--verification for change and rationale
    1402 Section 530--applicability and substantiation
    1403 IRC 3509--applicability and tax computation
    1404 Statutory Employee--applicability
    1405 Compliance Settlement Agreements--applicability
    1406 Other--specify

  • 1500 STANDARD ITEMS OF COMPENSATION

    1501 Regular Salary/wages--does W-2 agree with employee’s contract, if not, why not?
    1502 Commissions--were they paid, and if so, why and were the amounts correct?
    1503 Payments Made After Employee’s Death--note IRC 101(h) and IRC 3121(a)(13) & IRC 3121(14)
    1504 Back Pay and Damage Award--were amounts received for past regular wages, or for physical injuries, or as punitive damages? See the MSSP audit guide issued by the Internal Revenue Service titled "Lawsuits, Awards and Settlements" (January 1, 2001)
    1505 Awards & Prizes--see IRC 74(c) & 274(j)
    1506 Loans with Below-Market Interest Rates--see IRC 7872(c)(3)(A) & IRC 7872(f)(10)
    1507 Loan Forgiveness & Guarantees--determine time that the loan was forgiven and amount
    1508 Severance Pay--was the employee involuntary terminated or was there a settlement of a canceled employment contract? See especially North State University v US, 87 AFTR 2d 2001-2522
    1509 Grossing Up Wages When Employer Pays Employee’s Taxes--see Rev. Rul. 86-14
    1510 Foreign Person Issues--refer to Publications 515 & 519
    1511 Scholarships/Fellowships--see IRC 117(a)
    1512 Sick Pay--see IRC 105(a), IRC 3121(a)(4) and IRC 3402(o)(3)
    1513 Vacation Pay--should be all taxable
    1514 Other--specify

  • 1600 FRINGE BENEFITS

    1601 Employee Discounts--see IRC 132(c)
    1602 No-Additional Cost--see IRC 132(b)
    1603 Working Condition (excluding autos)--see IRC 132 (d)
    1604 Qualified Transportation--see IRC 132(f)
    1605 Moving Expense Reimbursements--see IRC 132(g)
    1606 On-premises Gyms and Other Athletic Facilities--see IRC 132(j)(4)
    1607 Qualified Retirement Planning Services--see IRC 132(m)
    1608 Meals and Lodging--see IRC 119
    1609 Group Term Life Insurance--see IRC 79
    1610 Cafeteria Plans--are requirements of IRC 125 met
    1611 Dependent Care--see IRC 129
    1612 Educational Assistance--see IRC 127
    1613 Adoption Assistance--see IRC 137
    1614 Medical & Accident Benefits--see IRC 105
    1615 Health & Accident & Disability Insurance Premiums --see IRC 106
    1616 Other--specify

  • 1700 EMPLOYER PROVIDED TRANSPORTATION

    1701 Automobiles--see IRC 3401(a)(1), 3121(a)(1) and Announcement 85-113
    1702 Aircraft--same as above
    1703 Other--specify

  • 1800 EMPLOYEE PROVIDED TRANSPORTATION

    1801 Automobiles--see 1.62-2(c)
    1802 Other--specify

  • 1900 ACCOUNTABLE/NONACCOUNTABLE PLANS

    1901 Entertainment--see 1.62-2(c) and 1.62-2(i)
    1902 Equipment & Uniform Allowances--see 31.3401(a)
    1903 Other--specify

  • 2000 FORMS 1098, 1099 & W2G ISSUES

    2001 Form 1098-E--for student loan interest statements
    2002 Form 1098-T--for tuition payments
    2003 Form 1099-MISC--various income payments
    2004 Form 1099-G--payments by governments
    2005 Form 1099-INT--payments of interest
    2006 Form 1099-R--retirement payments
    2007 Form W2G--gambling winnings
    2008 Other--specify

  • 2100 PENSIONS & DEFERRED COMPENSATION (unless covered by the EP agent)

    2101 IRC 457 Plans
    2102 IRC 403(b) Plans
    2103 Other Nonqualified Deferred Compensation Plans

  • 2200 BACKUP WITHHOLDING

    2201 W9 Review
    2202 CP 2100 Notices
    2203 B Notices
    2204 Abatements of Backup Withholding
    2205 Other--specify

  • 2300 SPECIAL EMPHASIS PROGRAMS

    2301 Chore Service Providers
    2302 Medical Residents
    2303 Other--specify

Part 3: SUMMARY & CONCLUSIONS

  • 2400 FORMS 5701 & RESPONSES

    2401 Proposed Issues and Conclusions
    2402 Penalties
    2403 Copies of Agreement Forms
    2404 Other--specify

  • 2500 OTHER AGENTS’ CONCLUSIONS

    2501 EP Agent
    2502 EO Agent
    2503 Tax-exempt Bond Agent
    2504 Others--specify

  • 2600 POST AUDIT CRITIQUE

    2601 Future Recommendations

Exhibit 4.90.13-2  (05-31-2006)
Index to Coordinated Examination Program Forms

Form Number Title
4564 Information Document Request
4764 Large case Examination Plan
4764-A Large Case Examination Plan (Special Instructions and summary of Assignment)
4764B Large Case Examination Plan (Outline of Examination Procedures)
5699 Information Document Request Log
5701 Notice of Proposed Adjustment

Exhibit 4.90.13-3  (05-31-2006)
Project Codes for the Federal, State, and Local Government (FSLG) Large Case Examination Program

Project codes applicable to Large Case Examination Program cases are described in Document 11308V- Government Entities Computer Systems Codes Booklet.

Exhibit 4.90.13-4  (05-31-2006)
Flowcharts – Six High Level Steps Required Within The FSLG Large Case Examination Process

Step 1A Internal Planning
Step 1B Planning With The Entity
Step 2 Inspection and Fact Finding
Step 3 Develop and Propose Issues
Step 4 Resolution of Issues
Step 5 Report and Field Manager Review
Step 6 Closing Actions/Procedures

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