4.1.26 Campus Exam Return Selection, Delivery and Monitoring

Manual Transmittal

December 27, 2016

Purpose

(1) This transmits new IRM 4.1.26, Campus Exam Return Selection, Delivery and Monitoring. This is a new IRM created to provide guidance to personnel responsible for developing criteria for audit return selection for the Refundable Credits Examination Operation (RCEO) and Small Business/Self-Employed Campus operations and to ensure that internal controls exist for the workload identification processes.

Scope

This section contains specifics on the workload identification method that is in use by the IRS to identify and select tax returns for campus correspondence examination.

Material Changes

(1) This is a new IRM. This IRM will replace IRM 4.19.27, Campus Exam Return Selection and Delivery, which will be made obsolete upon the publication of this IRM.

Effect on Other Documents

IRM 4.19.27, Campus Exam Return Selection and Delivery, will be obsolete as of this transmittal.

Audience

This IRM is intended for the use by all stakeholders involved in the campus examination workload identification process including Wage & Investment (W&I) Refundable Credits Policy and Program Management (RCPPM) and Small Business/Self-Employed (SB/SE) Campus Examination.

Effective Date

(01-01-2017)

Kenneth C. Corbin
Director, Return Integrity & Compliance Services (RICS),
Wage and Investment Division (W&I)

Overview

  1. W&I’s Correspondence Examination audit inventory is primarily selected systemically using risk based scoring criteria. W&I’s Refundable Credit Policy and Program Management Operation (RCPPM) headquarters has primary responsibility over developing and maintaining these criteria. They also have primary responsibility for development of the W&I Examination work plan which outlines the volumes and timeframes of audit initiations out of the available pool of scored returns based on resource availability. The work plan is meant to be used as a guide and is meant to be flexible. The actual audits are conducted by W&I Refundable Credits Examination Operations (RCEO) made up of five campus operations located in Andover, Atlanta, Austin, Kansas City and Fresno.

  2. SB/SE Campus Case Selection (CCS) is responsible for the case selection and delivery of SB/SE correspondence examinations. CCS resides under Examination Headquarters and the staff consists of two teams: Campus Workload Identification (CWI) and Campus Workload Delivery (CWD).

  3. RCEO and CCS work collaboratively with their respective workload planning staffs; Campus Workload Planning and Analysis (CWPA) for RCEO and Performance Planning & Analysis Examination for CCS, to develop annual audit start plans. Start plans (AKA work plans) outline the estimated volumes by issue and the proposed timeframes for initiation.

  4. Pools of potential inventory are filtered, prioritized, and introduced into the campus work stream based on the start plan.

  5. Headquarter analysts in both W&I and SB/SE provide campus support and guidance on workload selection and delivery-related issues. Headquarters analyzes audit results, performs program reviews, and monitors rule-based applications used to select inventory. The results are used to make data based decisions to improve program quality, improve case selection, and to ensure the integrity of the selection methods.

  6. The overarching responsibility of all stakeholders in the workload Identification and selection processes is to ensure that the organization is meeting the IRS Mission Statement: Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Cases Selected for Examination

  1. Determination of the volume of inventory by program that is selected for audit should consider a variety of factors. Among those factors are:

    • Issue coverage

    • Revenue protection

    • Taxpayer burden

    • Prior audit results (including "agreed" and "no change" rates)

    • Fairness and integrity, See Policy Statement P-1-236 at http://imdtrack.web.irs.gov/IG_Uploads/IRS.gov_Yes/OUO_No/policy_statement_1_236.pdf

    • Available resources

    • Program specific funding

    • Level of automation

    • Reliability of data sources

    • Taxpayer Bill of Rights

  2. There are two overarching factors that should be considered when creating selection criteria. How the inventory selected will assist in meeting the pre-defined program level objectives of Service and Enforcement, and that inventory is selected without bias, ensuring "fairness" in the inventory selection processes.

  3. There are three parts to the fairness aspect when developing selection criteria for audit:

    • Fairness to the taxpaying public by pursuing those who fail to voluntarily comply or otherwise meet their tax obligations,

    • An equitable process that selects returns for examination based on the likelihood of reporting errors across all areas of potential noncompliance and

    • Fairness to the individual taxpayers who are being examined by respecting and adhering to their rights.

  4. To ensure fairness to the taxpaying public, those responsible for workload selection should take into account the responsibilities and obligations that all taxpayers share, and pursue those individuals and businesses who do not comply with their tax obligations based purely on eligibility using data provided by the taxpayer or from reliable third parties. In this way, we are being fair to those who are compliant and that, in turn, helps promote public confidence in our tax system for all taxpayers.

  5. To ensure an equitable process for all taxpayers, fairness and integrity are built into the foundation of our return selection process, which is designed to select returns across those submitted with the highest likelihood of noncompliance by relying on a combination of tools. The entire process operates under a comprehensive set of checks and balances and safeguards, all aimed at delivering and ensuring a process that is fair by design. No one individual can control the examination selection decision-making process, and we limit involvement to only those employees whose duties require participation. This creates a process that is impartial and applied consistently to each taxpayer return.

  6. To ensure fairness to each taxpayer whose return is examined, those responsible for workload identification and selection will work with a focus on taxpayer rights, a responsibility that is a priority for all IRS employees in their work every day. These taxpayer rights are embodied in the Taxpayer Bill of Rights, which outlines the 10 fundamental rights taxpayers have when working with the IRS. Managers and examiners adhere to many administrative and legislative procedures, including managerial and quality reviews. Also, IRS employees are managed and evaluated on how well we provide fair and equitable treatment to taxpayers as required by the Restructuring and Reform Act of 1998. Finally, taxpayers may administratively appeal most IRS decisions, including the assessment of additional tax or penalties or the denial of a refund claim. An employee in the Office of Appeals, an independent and impartial function within IRS, will contact the taxpayer, hear the case and decide whether to sustain the results of the examination. Most taxpayers can also petition the U.S. Tax Court for a pre-assessment review of any proposed additional tax or seek a refund in other federal courts.

Sources of Potential Examinations

  1. Examination Headquarters identifies potential casework from many different sources. When new sources of potential examinations are identified, Headquarters will use IRS applications to select and deliver the inventory to the campus Exam Operations. The main sources of potential examination workload are in the following sections. An important distinction is made between inventory referral criteria and inventory selection criteria. Examination Headquarter functions responsible for inventory selection are not responsible for criteria used to identify cases to be referred to Campus Examination from outside areas even though they may be asked for input. Examples of these types of referrals are; Criminal Investigation (CI), Questionable Refund Program (QRP) and Exam Quality and Technical Support (EQTS) referrals.

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Dependent Database (DDb)

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    1. The DDb identifies potential non-compliance relevant to the EITC and other tax benefits related to the dependency exemptions, based on the relationship and residency of children. EITC returns selected for audit by the DDb application must comply with the tax laws for claiming EITC, as well as other tax issues, such as dependent exemptions, filing status, Child and Dependent Care Credit, Child Tax Credit, education benefits and other refundable credits.

    2. The DDb identifies potential non-compliant issues relevant to PTC and other tax benefits, which includes Advanced PTC. The DDb selects returns with discrepancies related to eligibility, participation, premiums, and Second Lowest Cost Silver Plan.

Process to Create/Modify DDb Rules
  1. These rules may be modified/changed through a Unified Work Request (UWR). Annual rule modifications are accomplished through a collaborative effort with IT, W&I and SB/SE Business Analysts, and senior management utilizing prior audit results, program review results, feedback from tax examiners, and legislative changes. Stakeholders involved in this yearly collaboration include representatives from Return Integrity and Compliance Services (RICS), Small Business/Self Employed Division (SB/SE) Exam, and Information Technology (IT).

DDb Approval Path
  1. Approval path - Agreements to recommendations for the modifications and creations of new rules in the DDb process are discussed with senior managers and headquarter analysts of the impacted stakeholders and consensus is reached. Agreed upon recommendations are vetted with IT prior to submission. Approved revisions are entered into the Work Request Management System (WRMS) by the business unit working with IT. The WRMS is initiated by RCPPM with input from SB/SE, RICS, and IT. Both the Dependent Database owner and IT programmers must concur with the changes prior to implementation.

Amendments to the Approved UWR Process
  1. When it is necessary to revise or correct selection requirements outside of the normal Unified Work Request (UWR) timeframes, the analyst must secure management approval using Form 14747, Change Request Modification Approval. The form must provide the following information and have executive approval prior to implementation:

    • The type of modification requested (i.e. correction, enhancement or TIGTA/GAO Mandate)

    • A description of the change requested, and

    • The reason for the modification requested

  2. Upon approval, the signed Form 14747 must be forwarded to the Senior Analyst of the RCPPM PMAQ group for storage.

Verification of Rule Function
  1. Verification of Rule Function - As each processing year commences and tax returns begin to fire DDb rules, RICS Headquarters Analysts travel to Ogden, Utah to conduct sample reviews of selections to ensure the rules are functioning correctly, appropriate notices and instructional information are generating, and if applicable to determine if the appropriate amount of the refund is being held. For each project code reviewed, a document is created that shows the project code reviewed, the results of the review, description of defects found, and steps taken to resolve or mitigate defects found. Additionally, this document contains the Taxpayer Identification Numbers (TINs) reviewed that require corrections and how they tested against each specific rule condition. The final document is reviewed and shared with the Director, RCPPM.

Discretionary Exam Business Rules (DEBR)

  1. The Discretionary Exam Business Rules (DEBR) is a subset of the workload selection rules built into the Dependent Database (DDb) programming.

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  3. The rule filters are programmed by IT and applied against all returns as they are filed. Each processing cycle, IT provides the business unit with an analysis, via Business Objects, of the number of returns meeting the business rules. As inventory is needed to meet the work plan, Exam CWI selects the volume and type of cases to deliver to the campuses. IT runs these through standard screening filters and then establishes the cases on the Audit Information Management System (AIMS). Some types of cases require additional screening by a Headquarters Analyst before being assigned to a campus. These are specified in the annual rules package. Any cases researched/screened in this manner can be established on AIMS by the analyst themselves, submitted to IT through an ad hoc AIMS request, or sent to CWD.

Process to Create/Modify DEBR Rules
  1. Process for criteria change - SB/SE CCS holds an annual meeting with the IT DDb staff representatives and other impacted stakeholders to discuss the effectiveness of the rules and to finalize recommended revisions to the selection criteria and processing for the upcoming filing season. In addition to providing valuable feedback to the businesses, IT’s primary role in these workshops is to ensure the rules requested can be carried out within the limitations of the systems available. Consensus of all impacted stakeholders is needed to submit the final revised recommendations of the selection criteria for SB/SE Senior Management approval. The SB/SE CCS DEBR analyst creates a DEBR IT program package and a summary of proposed rule changes for the upcoming processing year as a result of this meeting.

DEBR Approval Path
  1. All rule modifications and additions, agreed upon by the business stakeholders and vetted by IT during the annual review process, are submitted to the SB/SE CCS Program Manager for approval by the SB/SE CCS DEBR analyst.

Verification of Rule Function
  1. Verification of Rule Function - As each processing year commences and tax returns begin to fire DEBR rules, SB/SE CCS analysts conduct sample reviews to ensure the rules are functioning correctly. Identified defects are brought to attention of the responsible IT representative. The reviewing SB/SE analyst coordinates corrective action with IT. For each rule reviewed, a document is created that shows the rule reviewed, the results of the review, description of defects found, and steps taken to resolve or mitigate defects found. Additionally, this document contains the TINs reviewed and how they tested against each specific rule condition. The final document is reviewed and signed by the SB/SE CCS Program Manager.

Compliance Data Environment (CDE)

  1. Compliance Data Environment (CDE) is a workload identification, planning and delivery system that operates in a web-based environment. It can be used to filter, order, classify, and deliver returns for examination. In CCS, CDE is primarily used to analyze return data meeting specified criteria (rules) to produce a population of returns having audit potential. SB/SE CCS analysts gather CDE output and perform further classification and filtering to make the final case selections. More information on CDE functionality may be found in IRM 4.103, Compliance Data Environment (CDE).

Process to Create/Modify CDE Rules
  1. SB/SE CCS analysts are responsible for monitoring and determining necessary changes to the rules/filters for the project codes that they are responsible for delivering. Project code reviews, directed by CCS management, are conducted by the assigned analysts. Considering the findings of the reviews, the performance of the project, analysis of the statistics, and feedback from the campus each analyst will consider necessary rule changes before pulling the bulk of their inventory each year in CDE. The assigned CWI analyst will sign into CDE, select the rule, and make changes as needed before running the rule. For any CDE rule changes beyond annual updates of tax year and cycle, the analyst must secure approval from the CCS Program Manager before using the rule for selecting cases.

CDE Approval Path
  1. All rule modifications and additions, agreed upon by the CWI analyst, CWI manager, and CCS Program Manager are placed in the updated Project Code Procedure Documents on the CCS Share Point, and then used to select inventory.

Rules Engine Issue Detection (REID)

  1. REID (formerly CDEr3) is an Internal Revenue Service (IRS) application that seeks to eliminate the manual handling of paper tax returns and provides central and local monitoring of all aspects of the classification process. The purpose of REID is to automate and increase workload efficiencies and fairness of audit case selection, and to address alternative compliance treatment. The conversion from CDEr3 to REID is currently under development.

Process to Create/ Modify REID Rules
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REID Approval Path
  1. All rule modifications and additions, agreed upon by the CWI REID Super User, CWI analyst, and CCS Program Manager, are maintained by the CCS staff.

Referrals

  1. Referrals are cases identified by functions other than Examination that have audit potential. Cases are referred from the Lead Development Center (LDC) for Criminal Investigation (CI), Treasury Inspector General for Tax Administration (TIGTA), Collections, Integrity and Verification Operation (IVO), Submission Processing, and other areas.

Unallowables
  1. The Unallowable (UA) Code Program is a Compliance initiative used to identify potential audit inventory during the processing of the original tax return. The Unallowable program identifies issues on a return that are unallowable by law to prevent erroneous tax refunds on both IMF (Individual Master File) and BMF (Business Master File) tax returns. The program requires coordination between W&I, SB/SE, Large Business and International (LB&I) Examination, and Submission Processing (SP) Headquarters to ensure the correct types of Unallowable Conditions are being identified and to provide guidance to impacted employees. Returns identified for audit potential are referred to Exam.

Process to Create/Modify Unallowables Criteria
  1. Submission Processing has the primary oversight of the Unallowable program; however, the criteria for Exam referrals are developed in conjunction with Exam.

Unallowables Approval Path
  1. Referral Criteria is outlined in the SP IRM 3.11.3, Individual Income Tax Returns. The procedures for working the examination are outlined in the Correspondence Exam IRM 4.19.15.18, Unallowable Code (UA) Program. These IRMs are reviewed by Senior Management and are signed off by executives.

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Math Error
  1. Math (or clerical) errors are defined by IRC 6213(g)(2). This legislation permits assessment of additional tax resulting from math or clerical errors. Submission Processing contacts the taxpayer for supporting documentation. If the taxpayer disputes the request and examination criteria are met, the case is forwarded to Exam for review and validation.

  2. Accounts Management (AM) systemically verifies and scores EITC math errors using Command Code (CC) DDBCK. The criterion for classification is similar to regular Exam DDb classification. If selected, AM will forward the case to Exam.

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Process to Create/Modify Math Error Criteria
  1. Submission Processing (SP) has the primary oversight of the Math Error program; however, SP collaborates with W&I and SB/SE Exam to develop referral criteria. Referral Criteria is outlined in the SP IRM 3.12.3, Individual Income Tax Returns. The procedures for working the examination are outlined in the Correspondence Exam IRM 4.19.14.9.1, EITC Math Error Referrals To Examination, and IRM 4.19.15.12, Math/Clerical Error. When the Exam, AM, or SP functions identify the need for a possible change to a specific issue or tolerance, or when another function such as TAS elevates an issue to Exam, AM, or SP headquarters for consideration, the functions meet to discuss the business reasons and customer impact for the potential change.

Math Error Approval Path
  1. If Exam headquarters analysts from both W&I and SB/SE agree that a change is warranted the Exam analysts discuss the proposed changes and alternatives with their respective executives and secure written approval or advice. The coordinating analyst will then advise the responsible Customer Account Services (CAS) Headquarters analyst of the changes to be made to the Math Error criteria. After receiving concurrence, the CAS headquarters analyst posts the IRM Procedural Update (IPU) to SERP. These IRMs are reviewed by senior management and are signed off by executives.

Questionable Refund Program (QRP)
  1. QRP referrals are referred to Examination by the Integrity and Verification Operations (IVO). The IVO utilizes the Electronic Fraud Detection System (EFDS) to screen paper and electronically filed returns to verify the accuracy of taxpayer’s wages and withholding. Cases with refundable credits in addition to the false/inflated income and withholding are referred to Examination.

Process to Create/Modify QRP Criteria
  1. Return Integrity and Correspondence Services, Integrity and Verification Operations (IVO) has ownership on the verification process, however RCPPM works with IVO in developing and revising criteria for cases referred to Exam. All referred inventory that passes through the filtering process and meets exam’s selection criteria is opened for audit.

QRP Approval Path
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QRP Model Updates
  1. Early in the filing season, the DM Team will develop Requirements, Models and Fraud Definitions. These findings are presented to stakeholders and impacted organization (RICS, CI, SB/SE, EXAM, MDD, DM, Office of Compliance Analytics (OCA) and (AD)) during DM Decision Point sessions. Any consolidation, deleting, or introduction of models is presented to the Revenue Protection Technology (RPT) Governance Board for approval.

Alternative Minimum Tax (AMT)
  1. Alternative Minimum Tax (AMT) program cases are identified by Submission Processing. The AMT program identifies taxpayers who are liable for the AMT but have not completed or attached Form 6251, Alternative Minimum Tax - Individuals.

  2. Submission Processing notifies taxpayers that they appear to be liable for the AMT by issuing Letter 12C. If the taxpayer does not respond timely to a request for substantiation, or disagrees, the return is coded as an Audit Code P. This establishes the case on AIMS and the case is sent to be processed through the Unattended Case Processing (UCP) system. Inventory is filtered and classified by CWD and the workable inventory is delivered to the Batch Leveraging Process (BLP) team.

Process to Create/Modify AMT Criteria
  1. Process for criteria change - Submission Processing has the primary oversight of the AMT program; however, the criteria for Exam referrals are developed in conjunction with Exam.

AMT Approval Path
  1. Referral criteria are outlined in the SP IRM 3.12.3 Individual Income Tax Returns. The IRM is reviewed by senior management and signed off by executives.

Informant Referrals
  1. The Informant Referrals are taxpayer-generated. Taxpayers submit Forms 3949-A, Information Referral, or informant letters to the IRS to report suspected/perceived tax law violations by other taxpayers. These referrals are received in Exam and are classified by either tax compliance officers (TCOs) or tax analysts for a determination of audit potential.

Process to Create/Modify Informant Referrals Criteria
  1. W&I RCPPM Headquarters, SB/SE CCS, and SP Headquarters analysts coordinate to ensure the Informant Referral Program is working as intended. They participate in bi-monthly conference calls to discuss any issues that may arise. The RCEO Planning and Analysis (P&A) Staff performs a product review of classified referrals to ensure quality. In addition, they evaluate procedures and identify training needs for improvement. The results are sent to Examination Headquarters quarterly. Written feedback for W&I campus examination is shared with the Examination Operations Manager. In addition, feedback is provided to SP as appropriate to assist in improving the screening process. Consensus of all impacted stakeholders is needed prior to submitting any revisions to the selection criteria to the executives for approval.

Informant Referrals Approval Path
  1. All modifications are recommended with the agreement of senior managers and headquarters analysts for both W&I and SB/SE Campus Exam, and are vetted with the Submission Processing analysts prior to recommendations being submitted for executive approval.

Exam Quality and Technical Support (EQTS) Referrals
  1. EQTS preparer referrals are submitted to Examination Non-EITC by the SB/SE EQTS group. EQTS focuses on conducting civil investigations of promoters (preparers) of abusive schemes to seek a court-ordered injunction against the promoter to make them stop the abusive behavior. Since the returns do not meet the definition of a mathematical or clerical error as defined in IRC 6213(g)(2), a referral to Examination is necessary to determine entitlement to the credit.

Process to Create/Modify EQTS Referrals Criteria
  1. The referral criteria are reviewed annually to determine its effectiveness. An agreement on any proposed changes to the criteria or tolerances is required between the SB/SE EQTS and Exam Non-EITC team analysts.

EQTS Referrals Approval Path
  1. Any revisions to referral criteria or the workload delivery process must be included as part of the annual Memorandum of Understanding (MOU) which is agreed to and signed by executives of W&I and SB/SE.

Refundable Credits Return Preparer Strategy (RCRPS)
  1. RCRPS returns are referred to Examination as part of the EITC Return Preparer Program. W&I Operations Support (WIOS), in conjunction with Refundable Credits Administration (RCA), selects for audit client returns of those preparers who file high volumes of potentially erroneous EITC returns. These audits are conducted in a post-refund environment. Returns selected for audit have already been run through DDb rules and scored. The cases are assigned tracking code 6472 in order to monitor the outcome of the audits.

Process to Create/Modify RCRPS Selection Criteria
  1. The selection criteria utilized for this inventory is embedded in the DDb programming detailed in IRM 4.1.26.3.1, Dependent Database (DDb). Changes made to the DDb criteria will affect this inventory.

RCRPS Approval Path
  1. The approval process for changes to the selection criteria are made as a part of the DDb rules process.

Erroneous Refund Referrals
  1. The Erroneous Refund Program in Correspondence Examination involves cases that had incorrect refunds issued to taxpayers due to a variety of reasons. IRM 21.4.5, Refund Inquiries, Erroneous Refunds, contains the referral process for employees within a co-located campus function. The potential for erroneous refunds may occur in the following situations:

    • misapplied payments

    • incorrect tax adjustments/assessments

    • incorrect credit refunds

    • taxpayers filing fraudulent returns

    • taxpayers using incorrect TINs

  2. Erroneous refunds are generally classified as either:

    • Assessable - Requires a recalculation of tax liability.

    • Un-assessable - No requirement for a recalculation of tax liability.

  3. The correspondence examination program involves assessable erroneous refunds. These errors arise when the Service made a downward re-computation of the taxpayer’s tax liability based on a substantive determination and later discovers that the determination was incorrect. The adjustment to the tax liability or recapture of a refundable credit will require Statutory Notice of Deficiency procedures requiring Exam involvement.

Claims

  1. A taxpayer can make a change to an originally filed Form 1040, U.S. Individual Income Tax Return, using Form 1040X, Amended U.S. Individual Income Tax Return. A taxpayer can change income, exemptions, deductions, credits, filing status, etc., reported on the original tax return, including claiming tax credits and deductions that were not previously claimed. Under Internal Revenue Code (IRC) Section 6511, the general rule is that a claim for refund must be filed within three years from the time the original tax return was filed or two years from the time the tax was paid, whichever is later.

Category A (CAT A)
  1. In general, CAT A Claim criteria can be set and modified by W&I, SB/SE, LB&I, or by Customer Accounts Services (CAS) but the work on the referrals is handled in the campus environment and is coordinated by Accounts Management (AM). The criteria are changed periodically. When claims come in to CAS and are deemed (because of the items reported on the claim) to meet CAT A criteria AM refers the claims to the Exam Classification teams electronically within the campuses to have the claims evaluated using established criteria. Each claim is either accepted as filed, rejected (Not CAT A), selected for the office or field exam, selected for Correspondence Exam, or non-considered which will require the taxpayer to provide further information for the claim to be adequately evaluated.

Process to Create/Modify CAT A Criteria
  1. When the Exam, AM or SP functions identify the need for a possible change to a specific issue or tolerance, or when another function such as TAS elevates an issue to Exam, AM or SP headquarters for consideration, the Headquarters functions meet to discuss the business reasons and customer impact for the potential change.

CAT A Approval Path
  1. If Exam headquarters analysts find that a change to the criteria appears warranted, a discussion and consultation with all affected stakeholders will be held. If the nature of the change requires approval from Exam leadership, the Exam analysts discuss the proposed changes and alternatives with their respective executives and secure written approval or advice. If approved by Exam leadership from both W&I and SB/SE, Exam headquarters analysts advise the responsible AM headquarters analyst what changes should be made to the Exam CAT A criteria. The AM headquarters analyst prepares an interim procedural update (IPU) and requests the concurrence of analysts from both W&I and SB/SE Exam headquarters. After receiving concurrence, the AM headquarters analyst posts the IPU to SERP and updates the SERP IRM.

DDBCK
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Process to Create/Modify DDBCK Criteria
  1. W&I RICS headquarters (HQ) analysts and AM HQ analysts coordinate to ensure the program is working as intended. When the Exam, AM or SP functions identify the need for a possible change to a specific issue or tolerance, or when another function such as TAS elevates an issue to Exam, AM or SP headquarters for consideration, the functions meet to discuss the business reasons and customer impact for the potential change.

DDBCK Approval Path
  1. All modifications are recommended with agreement of senior managers and analysts for both W&I and SB/SE Campus Exam and vetted with the Accounts Management analysts prior to recommendations being submitted for executive approval.

Duplicate Dependent Taxpayer Identification Number (DupTIN)

  1. The DupTIN program identifies returns where a TIN is used more than one time for a dependent exemption in the same filing year. During the filing of the original tax return an entry is recorded on the DupTIN database every time a TIN is used as a Primary, Secondary, Dependent, EIC qualifying child, etc. The first use of the TIN is not flagged. Second and subsequent uses of the TINs are flagged. The duplicated taxpayers are identified with applied treatment logic.

  2. Generally, taxpayers that have duplicated a TIN for more than one year are considered for audit. Identified DupTIN audit inventory is sorted by tax changes and business rules. Exam issues a notice to the taxpayer requesting documentation to verify the qualifying dependents(s). If after the audit process a determination is made to no-change the case, then the related taxpayer that also duplicated the use of the dependent TIN is opened for audit.

Process to Change/Modify DupTIN Criteria
  1. SB/SE Campus Exam or W&I Examination can identify a need to change the treatment logic. Proposals originating in either BOD will be vetted by the assigned DupTIN Analysts and first line managers in both BODs before being submitted to the SB/SE CCS Program Manager and the RCPPM Senior Manager for approval. IT programmers can be involved at this stage, as necessary, to assist in system capability issues.

DupTIN Approval Path
  1. All modifications are recommended with the agreement of senior managers and analysts for both W&I and SB/SE Campus Exam and vetted with the IT analysts prior to recommendations being submitted for executive approval. The IT programmer is notified by e-mail outlining the recommendation for implementation. The IT programmer e-mails confirmation of the implementation of the change. The DupTIN Analyst updates the DupTIN overview document to include the change.

Miscellaneous Identified Inventory

  1. Inventory for audit is occasionally identified through resources and referrals that are not part of the normal inventory selection processes. Inventory such as this may carry varied selection criteria and filtering requirements specific to that case type. By its nature, this is often unplanned work and coordination between Examination and the work plan staff is required before audits are started. Typically, potential cases are further vetted by the Exam Headquarters analysts. An agreement to process audits on this type of inventory rests with Examination Headquarters management. Examples of these miscellaneous inventories are listed in the subsections below.

TIGTA Related Inventory
  1. TIGTA conducts investigations, and following established TIGTA audit protocol, can refer lists of taxpayers for potential audit to SB/SE CCS, RCPPM, or RCEO. Typically, additional research is conducted to determine if Examination agrees the returns should be examined. As determined by Headquarters Exam senior management in the receiving BOD in coordination with the workload planning staff, TIGTA referred cases are given priority for delivery. The referrals can involve any filed return issue and can involve multiple years, preparers, and issue amounts.

Audit Reconsiderations
  1. Audit Reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed when the taxpayer disagrees with the original determination. The taxpayer must provide information that was not previously considered during the original examination to be eligible for audit reconsideration. See IRM 4.13, Audit Reconsideration, for more information on the Audit Recon program.

Other Year Returns
  1. Subsequent Year Return Program - Each quarter, SB/SE CCS conducts an analysis of select audits closed as either a Default or Agreed to determine if the subsequent year has audit potential for the same project code. SB/SE CWD gathers the closure data from ACIS, performs preliminary exclusion filtering, and refers these cases to the project code’s assigned CWI analyst. The CWI analyst classifies this inventory for the project code identified and introduces viable cases into the work stream at the next scheduled delivery. The inventory carries tracking code 0900.

  2. This process is independent of the subsequent or prior year selections and whipsaw case selections carried out by campus examiners in both SB/SE and W&I, which are specified in each project code’s IRM section.

Filtering and Pre-Classification Process Performed by SB/SE Campus Workload Delivery (CWD)

  1. Most work in SB/SE Campus Examination is processed through the CWD team. The CWD team performs pre-classification account and tax return information gathering and applies standard exclusion filters (see Exhibit 4.1.26 - 1) before establishing AIMS. CWD is an intermediary that processes high volumes of work through automated, systemic and manual applications. The main filtering application is the GII-EITCRA. The EITCRA is an IDRS-based application that gathers pre-determined tax return line items, entity information and Information Return Processing (IRP) data.

  2. The CWI analyst sends batches of potential audit cases to CWD. CWD gathers IDRS data as needed for the project code being worked. Each project will have specific criteria, provided by CWI, to which the cases must be compared. CWD gathers the data, sorts the information into categorized spreadsheet tabs, and, if required for the project, runs cases through a tax template to compute potential account changes. CWD also screens and categorizes the potential cases as; workable (able to go forward with audit opening), unworkable, or needing manual review by the CWI analyst.

  3. CWI makes the final determination of which cases are submitted to the work stream. After screening and pre-classification are completed by CWD, CWI analysts perform final classification. Depending on the project code requirements, the specific classification criteria will vary. The CWI analyst sends the selected cases to the CWD team to establish AIMS at the designated campuses. CWI analysts maintain listings of classification, filtering, and selection outcomes for their assigned programs. Any cases flagged as Manual Screening by CWD are verified and retained for possible future action by the CWI analyst. These cases may be examined but only after the condition for which it was excluded is resolved.

  4. While data-gathering and filtering is performed by CWD on almost all Non-EITC project codes, certain Math Error cases and small-volume referrals do not have enough continuous volume to justify CCS involvement and are worked by the local campus examiners.

  5. Inventory selected by DEBR is not processed through CWD for data-gathering or exclusion filtering. Classification, ranking of cases and application of exclusion filters is automated. DEBR inventory does not go to CWD to assign AIMS. This process is performed by IT. DEBR-identified inventory information regarding filtering, ranking, and AIMS opening results are accessible via Business Objects.

Delivery Process

  1. W&I Delivery process: The majority of the workload delivery is systemic. Inventory which has been identified for opening in each campus exam operation will be created on the Audit Information Management System (AIMS) and be automatically introduced into the Report Generating System (RGS).

  2. SB/SE Delivery Process: For work processed through CWD: The CWI analyst transfers the needed files (typically Excel spreadsheets) to CWD and requests CWD to establish AIMS in specified campuses/employee group codes Employee Group Code (EGC). If the cases are to be started in conjunction with AIMS establishment, or shortly thereafter, this can be accompanied by a delivery sheet. If cases being delivered are to be started at a later date, delivery sheets will be sent closer to the scheduled start date, per local procedures.

    1. Delivery sheets are the vehicle used to inform CWD, Examination Workload Planning, CCS Management, and campus contacts of the details of a project start. They contain information such as the start schedule, volumes, and tracking codes.

    2. For work not processed through CWD, such as DEBR, only delivery sheets are sent as described.

  3. With the exception of Non-Filer work, inventory for W&I is typically delivered for processing in two ways; either through Automated Correspondence Examination (ACE) or UCP. SB/SE inventory is delivered first through UCP.

    1. Automated Correspondence Examination (ACE) - This process will systemically open a case on RGS, issue the Initial Contact Letter (ICL), and update the case on AIMS into the correct letter status.

    2. Unattended Case Processing (UCP) Tool - This process will hold inventory that has been opened on AIMS until the cases are scheduled to be started. At that point the inventory is selected and created on RGS for manual opening.

Examination Opening Process

  1. Inventory is opened utilizing a schedule that ensures it will meet the start plan date to conform to the annual Work Plan. If the work type is programmed for systemic opening through the ACE process, it will be opened when needed to meet the start plan. This inventory cannot be held once it has been submitted for AIMS creation.

    1. Automated Correspondence Examination (ACE) is multifunctional software application that fully automates the initiation, Aging and Closing of certain Earned Income Tax Credit (EITC) and some non-EITC cases. Using the ACE, Correspondence Examination can process specified cases with minimal-to-no tax examiner involvement prior to a taxpayer reply. Please see IRM 4.19.20.1, Automated Correspondence Exam Overview (ACE), for further information.

  2. Some inventory that will be processed through ACE programming is populated first in the UCP Tool. This inventory is scheduled for systemic opening to meet start plan needs.

  3. Workload inventory not programmed for ACE processing is systemically created in the Discretionary Tool for UCP. This inventory can be opened for Examination in one of three ways:

    1. Batch Leveraging Process (BLP) - Is a joint effort between SB/SE Headquarters and the Ogden Campus Examination that utilizes tax examiners to expedite the input of issues into RGS. If there is a project code that cannot be directly introduced into the ACE system, the BLP team will prepare and mail out the initial contact letter. SB/SE Headquarters will designate the specific issues and adjustments that the BLP tax examiner needs to input into RGS. Once the cases have been manually created by the BLP team, the cases can be introduced into the ACE for automated processing.

    2. Filer Bridge - This process allows batches of case work to be introduced non-traditionally into the ACE system. The project code issues are created in a tickler file that can be introduced into ACE.

    3. Manual Starts - The system will only create the work center files and inventory record in RGS. These cases need to be manually worked on RGS, Correspondence Examination Automation Support (CEAS) by a tax examiner. The campus tax examiner will have to input all relevant project code issues then print and mail the taxpayer the required letters, forms and reports that are in direct association to an examination.

      Note:

      Non-Filer inventory is not created in RGS using either ACE or the Discretionary Tool programming. This inventory is created using the Non-Filer Bridge. This is a process by which the SB/SE CWD team creates a tickler file that can be introduced into ACE. This allows Non-Filer cases to be inserted into ACE without manual input.

Inventory Case Review

  1. There are two types of case reviews that should be conducted at the W&I Headquarters level throughout the audit process.

    1. Rule/Filter validation reviews - These reviews are done to verify that the rule used to select the inventory is working as requested. This review type should be done by the analyst with oversight for implementing rule creation/revisions.

    2. Casework reviews - These reviews are done to validate that the campus examiners are working the inventory accurately and applying the tax law appropriately. This review type should be completed by the Policy Analyst with oversight of the program.

  2. As part of SB/SE Examination’s overall monitoring strategy, results of audits are reviewed in SB/SE CCS as directed by the Program manager. Reviews are performed to gauge program effectiveness and Examiner adherence to IRM procedures. Results are shared with SB/SE CCS management and, as appropriate, can be referred to SB/SE Examination Policy for issuance of alerts, feedback for training, or IRM revisions. Additionally, system reviews are conducted to ensure case selection systems, such as DEBR and REID, are performing as prescribed in the system documentation. These reviews are typically done by the analyst with oversight of rule creation/revisions. Resolving or mitigating any defects found is a coordinated effort between the CWI analyst and the respective systems analyst(s) or coordinator. Documentation of these reviews, including corrective action taken, is provided to the SB/SE CCS Program Manager for signature and retained.

Monitoring and Support - W&I

  1. Refundable Credits, Policy, Monitoring and Analysis (PMA) is responsible for providing oversight and monitors the performance results of the EITC and Non-EITC programs at the Refundable Credits Examination Operations (RCEO) campuses. See IRM 1.1.13.7.3.4, Policy, Monitoring and Analysis (PMA), for PMA’s mission and a full description of how they accomplish their goals.

Monitoring and Support - SB/SE

  1. SB/SE Examination Planning and Performance Analysis provides support and monitors program results of the SB/SE campuses. See IRM 1.1.16.3.4, Planning and Performance Analysis.

SB/SE Self-Employed, Examination Campus Case Selection Inventory Filter Sheet

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