4.10.2  Pre-Contact Responsibilities (Cont. 1)

4.10.2.7 
Pre-Contact Planning of Examination Activities

4.10.2.7.5 
Referrals for Specialists

4.10.2.7.5.2 
Referral Forms

4.10.2.7.5.2.3  (01-17-2012)
Art Appraisals

  1. Art Advisory Service (AAS) - provides assistance with valuing art. Until the AAS is incorporated into the SRS a manual referral will be used.

  2. A mandatory referral is required for an object of art and/or cultural property valued at $20,000 or more.

  3. The examiner should submit the mandatory referral to AAS as soon as practicable, but no later than 30 days of either the initial appointment or the group manager concurrence meeting, whichever occurs first. See IRM 4.48.2, Valuation Assistance for Cases Involving Works of Art.

  4. The examiner should complete a Form 5202, Request for Engineering Services, or a memorandum. IRM 4.48.2.3.1, Information Needed for Art Evaluation Request, provides a description of the information that should be included in the referral.

4.10.2.7.5.2.4  (04-02-2010)
Technical Guidance

  1. Headquarters analysts and technical advisors (TA) provide training, tools, and assistance to enhance examiners’ skills and use of audit techniques to respond to the unique business practices of a particular industry, entity, or issue. They also mentor through field facilitators and assist in providing information to trade associations and professional communities as well as developing legal positions to ensure consistent taxpayer treatment.

  2. Visit the various Business Units web pages for additional information.

    1. Large Business & International (LB&I): http://lmsb.irs.gov/

    2. Small Business and Self Employed (SB/SE): http://mysbse.web.irs.gov/

    3. Wage and Investment (W&I): http://win.web.irs.gov/

    4. Tax Exempt and Government Entities (TE/GE): http://tege.web.irs.gov/home.asp

4.10.2.7.5.2.5  (04-02-2010)
Other Referrals

  1. Request for informal advice from Area Counsel, request for Field Service Advice, and request for technical advice should be submitted to the Technical Coordinator in Technical Services. Technical Services also acts as a liaison between the area and tax law specialists in responding to examiners’ technical questions. See IRM 4.8.8.12, Formal and Informal Technical Assistance, for information on how to secure this information.

  2. If the case has indications of fraud, the examiner will discuss the facts with their group manager and contact a fraud technical advisor (FTA) if the manager concurs. If the FTA agrees that there are sufficient indicators to warrant fraud development, the examiner will complete Form 11661, Fraud Development Recommendation – Examination. All parties will follow the fraud development procedures prescribed in IRM 25.1.2, Recognizing and Developing Fraud.

4.10.2.7.5.3  (08-01-2007)
Control of Referrals

  1. SRS referrals are automatically tracked. This system will automatically follow up with the manager if a response has not been made.

  2. For referrals made outside of the SRS, a log of referrals from the examination group should be maintained.

    1. Referrals not acknowledged within 30 days should be followed up with a request for assignment or rejection.

    2. Referrals not assigned or rejected after the follow-up should be brought to the field examination territory manager for resolution.

4.10.2.7.5.4  (04-02-2010)
Specialist’s Role in Examination

  1. When a specialist is involved in a case, the examiner maintains control of the income tax return and its management. The specialist may take control of non-income tax returns.

  2. Specialist(s) assigned to the case should meet with the examiner and the taxpayer (if appropriate) to discuss the issue, information required, time for information to be presented, and an estimated completion date of the report.

  3. Coordination with the specialist is required to ensure issues are material to the return and time charged is commensurate with the issue.

  4. Disagreements on proposed adjustments between the examiner and specialist should be elevated to their respective managers for resolution.

4.10.2.7.5.5  (08-01-2007)
Subsequent Referrals

  1. Rejected cases may be referred again if substantial information is developed during the examination. If the case was rejected due to workload priorities, a specialist may be made available on a consulting basis for significant issues. For those specialist groups available through SRS, informal questions should be submitted using SRS. For specialist groups not available through SRS, arrangements for consultations should be made with the approval of both managers.

4.10.2.7.5.6  (08-01-2007)
Documentation of Referral

  1. Documentation of consideration of referrals should be made for all entities meeting the mandatory referral criteria. See IRM 4.10.2.7.5.1. If a case is referred, a copy of the referral is sufficient. If the case was not referred, the reasons for not referring a case should be documented in the workpapers or the activity record.

4.10.2.8  (02-11-2016)
Initial Contact: Overview

  1. The term "initial contact" is defined as the first contact with the taxpayer after the pre-contact analysis and before the initial appointment.

  2. The purpose of the initial contact is to:

    1. Notify the taxpayer their return has been selected for examination, and

    2. Schedule the initial appointment.

  3. Generally, revenue agents make initial contact via telephone and tax compliance officers (TCOs) make initial contact via letter.

  4. The pre-contact analysis must be conducted prior to contacting the taxpayer so the examiner is knowledgeable about the return. See IRM 4.10.2.3.

  5. Prior to making initial contact, examiners must check IMFOLT/BMFOLT or TXMODA to determine if a valid power of attorney is on file for the year(s) under examination. If a TC 960 is posted the examiner must secure a CC CFINK and retain a copy in the file. If CC CFINK indicates that a valid power of attorney is on file, the examiner must make initial contact with the representative. For additional information regarding a power of attorney see IRM 4.11.55, Power of Attorney Rights and Responsibilities.

  6. If a power of attorney is not on file for the year(s) under examination, generally initial contact is made with the following:

    1. For individual income tax returns, Form 1040, U.S. Individual Income Tax Return, the taxpayer(s) who signed the return.

    2. For corporate returns, Form 1120, U.S. Corporation Income Tax Return, or Form 1120-S, U.S. Income Tax Return for an S Corporation, the officer who signed the return or other corporate officer.

    3. For partnership returns, Form 1065, U.S. Return of Partnership Income, the partner who signed the return or the tax matters partner listed on the return.

    4. For other returns, the person who signed the return.

  7. Examiners must document any contact or efforts to contact the taxpayer on Form 9984.

4.10.2.8.1  (02-11-2016)
Contacting the Taxpayer or Representative by Telephone

  1. Contacting the taxpayer or representative by telephone allows the examiner to:

    1. Schedule the initial appointment at an appropriate time, which is agreeable to the taxpayer and reduces the number of rescheduled appointments.

    2. Explain what records should be available for the examination.

  2. During the telephone conversation with the taxpayer or representative, the examiner must:

    1. Immediately identify themselves and state the purpose of the call.

    2. Provide their telephone number and unique employee identification number. See IRM 4.10.1.6.9.1.1, Use of Unique Employee Identification Number, for additional guidance.

    3. Inform the taxpayer or representative which returns are being examined and the tax period(s) involved.

      Note:

      If a taxpayer requests the specific reason for their examination, the examiner will provide the taxpayer with a response that is as accurate as possible, without revealing restricted use information. Examiners should engage their manager and a disclosure official if assistance is needed in determining what information can or cannot be released. Pub 1, Your Rights As A Taxpayer, provides a comprehensive explanation of how returns are selected.

    4. Briefly explain the examination process and answer the taxpayer's or representative’s questions or concerns.

    5. Discuss the issues to be examined and inform the taxpayer or representative that the examination may be expanded to additional issues.

      Caution:

      Under no circumstances should the telephone conversation be used to verify items appearing on an income tax return; inspection of records or other data cannot be made by telephone. However, if the taxpayer or representative volunteers information during this initial contact concerning audit issues, the examiner should document the discussion.

    6. Determine the type of business records maintained, as well as the location of the records. This will assist in preparing the IDR.

    7. Schedule the initial appointment at a reasonable time and place. See IRM 4.10.2.9.

    8. Identify the person(s) to be present at the initial interview.

    9. Ask for clear directions to the audit site for timely arrival at the initial appointment, if the audit will be conducted in the field.

    10. Ask the taxpayer if they plan to secure a representative. If yes, explain that a Form 2848, Power of Attorney and Declaration of Representative, Form 8821, Tax Information Authorization, or a similar privately designed form, is needed.

      Caution:

      If the taxpayer(s) states they will secure a representative, allow the taxpayer a minimum of 10 business days to secure a representative before taking any follow-up action to schedule the appointment (extensions can be granted on a case by case basis). The examiner should not ask questions during this initial contact because this may give the impression of attempting to by-pass the representative. For additional information, see IRM 4.10.3.3.7.2, Request for Representation - Suspension of Interview.

    11. Inform the taxpayer or representative that a letter, confirming the scheduled appointment, along with a detailed Form 4564, Information Document Request, will be mailed to them.

  3. During the initial contact by telephone or in person, examiners must explain and discuss the taxpayer’s rights as outlined in Pub 1, and answer any questions the taxpayer may have concerning their rights. See IRM 4.10.1.6, Taxpayer Rights, for additional guidance.

  4. Examiners must not attempt contacts with the taxpayer before 8:00 a.m. or after 9:00 p.m. (taxpayer’s time zone) as prescribed by the Fair Debt Collection Practices Act.

    Note:

    Generally, contacts with taxpayers should be made during the normal business hours of 8:00 a.m. to 6:00 p.m. (taxpayer’s time zone).

  5. If the taxpayer questions whether or not the examiner works for the IRS, the examiner should advise the taxpayer they will send them a letter notifying them their tax return(s) has been selected for examination and requesting that they contact the examiner to schedule the appointment, then discontinue the call. Examiners should then follow the procedures in IRM 4.10.2.8.2 and contact the taxpayer or representative by letter.

4.10.2.8.1.1  (02-11-2016)
Field Examination Contact by Telephone

  1. As noted in IRM 4.10.2.8(3), revenue agents generally make initial contact by telephone. Revenue agents must issue one of the following letters to confirm the initial appointment scheduled with the taxpayer or representative:

    1. Letter 3253, Taxpayer Appointment Confirmation Letter, is used for individual, corporate, partnership or other return types.

    2. Letter 3254, Representative Appointment Confirmation Letter, is used when the initial appointment is scheduled with the representative. A copy of the letter must be sent to the taxpayer.

  2. Revenue agents must mail a detailed Form 4564 with the confirmation letter listing all the information needed at the initial appointment. See IRM 4.10.2.10.

  3. Revenue agents should confirm the appointment with the taxpayer a day or two prior to the scheduled appointment date to ensure that the taxpayer is prepared for the appointment. This will reduce the potential lost time traveling to an appointment when the taxpayer is not prepared for the examination or may not be available.

  4. If revenue agents are unable to make initial contact by telephone due to factors outside their control, they should follow the procedures in IRM 4.10.2.8.2 and contact the taxpayer or representative by letter.

  5. Revenue agents must document the discussion with the taxpayer or representative on Lead Sheet 120-1, Initial Taxpayer Contact Check Sheet. The lead sheet will assist the revenue agent in conducting their initial conversation with the taxpayer.

4.10.2.8.1.2  (02-11-2016)
Office Examination Contact by Telephone

  1. If TCOs make initial contact by telephone, they must issue Letter 2202, Initial Contact Letter - Firm Set Appointment Letter, along with a focused IDR (see IRM 4.10.2.8.2.1(2)), to confirm the initial appointment scheduled with the taxpayer or representative. TCOs should update the action code to 01.

    Note:

    If the initial appointment is scheduled with the representative, also send Letter 937, Transmittal Letter For Power of Attorney, with a copy of Letter 2202 that is sent to the taxpayer.

  2. TCOs must document the discussion with the taxpayer or representative on Lead Sheet 125-1, Initial TP Contact-TCO. The lead sheet will assist the TCO in conducting their initial conversation with the taxpayer.

4.10.2.8.2  (02-11-2016)
Contacting the Taxpayer or Representative by Letter

  1. When the initial contact is made by letter, the examiner will send the taxpayer the appropriate initial contact letter listed in IRM 4.10.2.8.2.1 (office) and IRM 4.10.2.8.2.2 (field).

  2. Examiners should mail the initial contact letter to the taxpayer’s last known address. The Service is required to exercise due diligence to find and use the taxpayer’s last known address. Generally, the last known address is the address on Master File unless the taxpayer has provided "clear and concise" notification. For a definition of what constitutes "clear and concise" notification, see IRM 4.10.2.11.

    Note:

    The IRS receives weekly address updates from the United States Postal Service National Change of Address (NCOA) database. The NCOA helps maintain the most current taxpayer addresses. Address changes due to the NCOA database are identified by a TC 014 on IMFOLE/BMFOLE/ENMOD with special document locator numbers (DLNs). See IRM 5.1.18.12, United States Postal Service, for additional information about the NCOA database.

    Caution:

    Prior to mailing the initial contact letter, examiners must review CC ENMOD or IMFOLE for an identity theft (IDT) indicator. IDT indicators are explained in IRM 4.10.27.8.1, Identity Theft Tracking Indicators. If an IDT indicator exists, examiners should attempt to contact the taxpayer via telephone to confirm the address before mailing the initial contact letter. If examiners cannot make telephone contact with the taxpayer, they should send the initial contact letter to the last known address on Master File.

  3. Examiners must use approved form letters to schedule and confirm examination appointments.

  4. For examinations involving a joint tax return, initial contact letters must be sent separately to both parties at the appropriate address. See IRM 4.10.1.6.8, Separate Notice Requirements for Joint Returns, for additional information.

  5. The following documents must be mailed to the taxpayer with the initial contact letter:

    1. Publication 1, Your Rights As A Taxpayer

    2. Notice 609, Privacy Act and Paperwork Reduction Act

  6. If the taxpayer doesn’t respond to the initial contact letter and it is not returned as undeliverable, follow the procedures in IRM 4.10.2.8.3.

  7. If the letter is returned undeliverable, follow the procedures in IRM 4.10.2.8.4.

4.10.2.8.2.1  (02-11-2016)
Office Examination Contact by Letter

  1. As noted in IRM 4.10.2.8(3), TCOs generally make initial contact by letter. The following initial contact letters are used to schedule the initial appointment:

    1. Letter 2202, Initial Contact Letter - Firm Set Appointment Letter, is used to schedule a firm initial appointment date and time for individual taxpayers. TCOs should update the action code to 01.

    2. Letter 3572, SBSE Office Exam Call-Back Appointment Letter, is used to request individual taxpayers call to schedule an initial appointment. TCOs should update the action code to 10, Call Back Letter, and allow the taxpayer 14 calendar days to respond (includes time for mailing).

    3. Letter 3572-A, SBSE Office Exam Call-Back Appointment Letter for Forms 1120, 1120-S and 1065, is used to request that the taxpayer call to schedule an initial appointment for a corporate or partnership return. TCOs should update the action code to 10, and allow the taxpayer 14 calendar days to respond (includes time for mailing).

  2. TCOs must mail a focused IDR to inform the taxpayer of the specific information or documents they need to provide at the initial appointment. TCOs must tailor the IDR specifically to the tax return and issues to be examined. For any issues not covered by the focused IDR, TCOs must develop the list of documentation needed from the taxpayer and include it on the IDR.

  3. If a call-back letter was used, after the taxpayer calls to schedule the initial appointment, TCOs must use one of the following letters to confirm the initial appointment:

    1. Letter 3573, SBSE Office Exam Appointment Confirmation Letter, is used when the taxpayer responds to Letter 3572, and should be issued no later than one business day following confirmation of the appointment. TCOs should update the action code to 01.

    2. Letter 3573-A, SBSE Office Exam Appointment Confirmation Letter for Forms 1120, 1120-S and 1065, is used for corporate and partnership taxpayers. TCOs should update the action code to 01.

  4. TCOs must use Lead Sheet 125-1, Initial TP Contact-TCO, to document the completion of any action items listed on Lead Sheet 125-1.

  5. In rare instances when the initial appointment is scheduled via telephone, TCOs should follow the appropriate procedures listed in IRM 4.10.2.8.1.

4.10.2.8.2.2  (02-11-2016)
Field Examination Contact by Letter

  1. If an revenue agent makes initial contact by letter, they must use one of the following initial contact letters to request that the taxpayer call to schedule the initial appointment:

    1. Letter 2205-A, Initial Contact Letter, lists the issues to be examined. Allow the taxpayer 14 calendar days to respond (includes time for mailing).

    2. Letter 2205, Initial Contact Letter, does not list the issues being examined. Allow the taxpayer 14 calendar days to respond (includes time for mailing).

  2. After the taxpayer or representative calls to schedule the initial appointment, revenue agents must follow the procedures in IRM 4.10.2.8.1.1 1)-(3) and (5) to confirm the initial appointment scheduled with the taxpayer or representative.

4.10.2.8.3  (02-11-2016)
No Response/No Show Procedures

  1. If the taxpayer fails to respond to the initial contact letter and it was not returned as undeliverable, or the taxpayer does not show for the initial appointment when a firm appointment letter was sent (e.g. Letter 2202), examiners must determine why the taxpayer is not responding. Follow-up attempts must be made to contact the no response taxpayer (including by telephone) to encourage them to schedule an appointment. If practicable, revenue agents may conduct a field visit to the taxpayer’s residence and/or business.

    Note:

    A no show case occurs once all attempts have been made to contact the taxpayer by telephone and/or certified/registered mail, and the examiner has confirmed a "deliverable" address exists (see paragraph (2) below)), but the taxpayer never responds or "shows" for a scheduled appointment.

  2. If examiners are not able to contact the taxpayer, they must reissue the initial contact letter or send Letter 2295, Follow-up to Initial Contact Letter. Letter 2295 advises the taxpayer their tax liability will be changed based on information on hand, or a summons may be issued. The original initial contact letter or Letter 2295 must be issued as:

    1. Certified mail with return receipt requested, when the taxpayer resides in the U.S., or

    2. Registered mail with return receipt requested, when the taxpayer resides outside the U.S.

      Note:

      TCOs should update the action code to 08, Follow-up Activities, and allow up to 21 calendar days for a response from the U.S. Post Office.

  3. Examiners can use the unique article number to check the United States Postal Service (USPS) online feature called "USPS Tracking", to determine the delivery status of the certified or registered mail.

  4. Office Examination: Follow the procedures below depending on the results of the return receipt:

    If... Then...
    The return receipt indicates the taxpayer or a member of the household signed for the mail This confirms you have a "deliverable" address and the taxpayer has received the certified letter.

    Allow 10 calendar days from the date the certified mail was delivered for the taxpayer to call to schedule the appointment.

    If the taxpayer does not call and the minimum income probes have been completed and:
    1. Income is not an issue, issue a report disallowing the expenses under examination.

    2. Income is an issue, TCOs must follow the procedures in IRM 4.10.4, Examination of Income.


    The return receipt and envelope are returned as refused or unclaimed This confirms you have a "deliverable" address and the taxpayer has refused or failed to claim the certified letter. If the minimum income probes have been completed and:
    1. Income is not an issue, issue a report disallowing the expenses under examination.

    2. Income is an issue, TCOs must follow the procedures in IRM 4.10.4, Examination of Income.


    The return receipt indicates a new address for the taxpayer The U.S. Post Office will forward the mail to the new address unless the forwarding order has expired.

    If the forwarding order has expired, TCOs must reissue the initial contact letter or Letter 2295 to the new address using certified mail, return receipt requested.

    After the mail has been sent to the new address, TCOs must follow the procedures in this table depending on the result of the return receipt.

    Caution:

    In addition, if the taxpayer does not respond, TCOs must issue the report to the last known address on Master File and the current address confirmed by the U.S. Post Office. For procedures regarding updating a change of address, see IRM 4.10.2.11.

    The certified letter is returned undeliverable Additional steps must be taken to locate the taxpayer. TCOs must follow the procedures in IRM 4.10.2.8.4.
  5. Field Examination: Follow the procedures below depending on the outcome of the return receipt:

    If... Then...
    The return receipt indicates the taxpayer or a member of the household signed for the mail This confirms you have a "deliverable" address and the taxpayer has received the certified letter.

    Allow 10 calendar days from the date the certified mail was delivered for the taxpayer to call to schedule the appointment.

    If the taxpayer is not responsive, revenue agents must continue with normal audit procedures, including minimum income probes, summons and third-party contacts as needed, etc.
    The return receipt and envelope are returned as refused or unclaimed This confirms you have a "deliverable" address and the taxpayer has refused or failed to claim the certified letter.

    If the taxpayer is not responsive, revenue agents must continue with normal audit procedures, including minimum income probes, summons and third-party contacts as needed, etc.
    The return receipt indicates a new address for the taxpayer The U.S. Post Office will forward the mail to the new address unless the forwarding order has expired.

    If the forwarding order has expired, revenue agents must reissue the initial contact letter or Letter 2295 to the new address using certified mail, return receipt requested.

    After the mail has been sent to the new address, revenue agents must follow the procedures in this table depending on the result of the return receipt.

    Caution:

    In addition, if the taxpayer does not respond, revenue agents must issue the report to the last known address on Master File and the current address confirmed by the U.S. Post Office. For procedures regarding updating a change of address, see IRM 4.10.2.11.

    The certified letter is returned undeliverable Additional steps must be taken to locate the taxpayer. Revenue agents must follow the procedures in IRM 4.10.2.8.4.

4.10.2.8.4  (02-11-2016)
Undeliverable Initial Contact Letters

  1. If the initial contact letter or certified (or registered) return receipt is returned undeliverable, the following steps must be taken to determine if a more current address or contact information can be obtained.

    1. Perform a search of the taxpayer’s name, business name, or phone number by checking the local telephone directory or www.whitepages.com, for a current telephone number and/or address. Compare it to the information reflected on the tax return or Master File.

    2. Check IDRS or other internal data such as IMFOL with definers I and T and INOLE with definers X and S for the last known address using both the primary and secondary SSNs.

    3. Review AIMS Weekly Update Report if available - the report is generated only when a change occurs at Master File that affects a case in a group status. A code 18 or 19 on this report indicates Master File has been updated with new address information.

    4. If the taxpayer cannot be located from the above steps, query the various sources in the Service's asset locator service at http://rnet.web.irs.gov/Accurint/default.asp, such as business licensing information, city and county permits, etc.

  2. Additional resources that may help to identify a more current address for the taxpayer are listed below:

    1. CFOL Express: a reference guide that may assist in determining additional IDRS command codes that can be used to locate a taxpayer.

    2. Local governmental liaison: may be contacted to determine if other governmental entities have more current address information. For example, some states provide information from unemployment insurance records. Your local governmental liaison can be found on the Governmental Liaison website.

    3. IRM 5.1.18, Locating Taxpayers: provides other methods of locating the taxpayer.

  3. If a more current address cannot be identified after following the steps above, prepare and send Form 4759, Address Information Request - Postal Tracer. A postal tracer can be used to:

    1. Obtain the physical address of a post office box holder.

    2. Verify an address that does not appear on the Master File.

    3. Provide a new address if the address was changed within the past 48 months.

  4. If a more current address for the taxpayer is identified after completing all the steps above, examiners should reissue the initial contact letter using certified (or registered) mail, return receipt requested. See IRM 4.10.2.8.3 for additional guidance.

  5. If a more current address cannot be identified after completing all the steps above, examiners may contact third parties such as the taxpayer’s employer, return preparer, representatives (use CFINK), banks, brokerage houses, mortgage companies and other third party payor(s), if known. If contact is made by mail, the following forms should be used:

    1. Form 3242, Request for Information from Employer (To Locate Person), when writing to the taxpayer’s employer;

    2. Form 2223, Request for Information From Military, when requesting information from military service; or

    3. Form 3241, Request for Information to Locate Person, when writing to other third parties.

    Note:

    Revenue agents may visit the last known address.

    Note:

    IRC 7602(c) notification must be given prior to making a third party contact. This notification may be made by sending the initial appointment letter and Publication 1 to the taxpayer’s last known address. See IRM 4.11.57.7, Impact of Third Party Contact Procedures on Case Building and Return Selection, Unlocatable Taxpayers, Congressional Inquiries.

  6. If a "deliverable" address is identified and the taxpayer does not respond to the initial contact letter, examiners must follow the procedures in IRM 4.10.4.3.6, Minimum Income Probes: No Show and/or No Response Cases, if income is an issue. If income is not an issue, a report may be prepared with proposed adjustments to the specific issues and mailed to the taxpayer’s last known address as reflected on IDRS. See IRM 4.10.2.11.

  7. If the steps set forth above do not result in a "deliverable" address, the examiners must follow the procedures in IRM 4.10.2.8.6.

  8. Examiners must document all steps taken to identify a current address on Form 1900-B, Unlocatable Taxpayer Checksheet.

4.10.2.8.5  (02-11-2016)
Using Credit Bureau Information to Locate Taxpayers

  1. Examination employees can use their asset locator service to access information that is currently available in the short consumer credit report. Consequently, there is no need to request this report from Collection to locate a taxpayer.

  2. Examiners must be alert to the appropriate use of credit bureau reports. There are two types of reports:

    1. Short consumer credit report – the short report contains consumer's name, address, former address, and places of present and former employment.

    2. Full consumer credit report – This report contains all of the information in the short report plus loan, employment, financial and payment information.

  3. Examination is prohibited by the Fair Credit Reporting Act (F.C.R.A.) from using full consumer credit reports, if the reports were originally obtained for collection of a balance due. Therefore, examiners cannot request a full consumer credit report from Collection. If examiners need a full consumer credit report, a third party summons must be issued to the credit reporting agency. Refer to F.C.R.A 15 U.S.C. 1681b(a) and IRM 25.5.4.5.6, Statutory limitations on Acquiring Credit Reports From a Consumer Reporting Agency-Summons Required.

4.10.2.8.6  (02-11-2016)
Case Closing Procedures if the Taxpayer Cannot be Located

  1. If the taxpayer cannot be located, a decision must be made whether the audit will continue. The examiner and group manager must consider if an assessment is appropriate when a taxpayer is not locatable.

  2. There are instances where an examination report should be issued in order to preserve voluntary compliance. The list below provides some examples but is not all inclusive:

    1. Frivolous returns as defined in IRM 25.25.10, Frivolous Return Program.

    2. Grossly overstated expenses or a material imbalance in income.

    3. Abusive tax avoidance transactions, as defined in IRM 4.32.2.2, Abusive Transactions Defined. For assistance with promoter investigations, see the Promoter Investigations website.

  3. If an assessment is deemed appropriate, close the case using the following procedures:

    1. Nonfiled returns - follow the substitute for return procedures in IRM 4.12.1.8.4, Substitute for Return.

    2. Filed returns - use available information to prepare the examination report.

    Examiners must send all correspondence to the last known address. For guidance regarding the last known address, see IRM 4.10.2.11

  4. If an assessment is deemed not appropriate, close the case using the following procedures:

    1. Nonfiled returns - use Non-Examined Disposal Code 40 (No Return – Unable to locate).

    2. Filed returns - use Non-Examined Disposal Code 32, Survey After Assignment. Complete Form 1900-B and attach it to Form 1900.

  5. Examiners must document the reasons for issuing a report or surveying the return in the case file.

4.10.2.9  (02-11-2016)
Scheduling the Appointment: Overview

  1. Field Examination: Every effort should be made to hold the initial appointment within 14-21 calendar days of the first action on the case.

  2. Office Examination: Every effort should be made to hold the initial appointment within 28-35 calendar days of the first action on the case.

  3. "First action" is considered to have occurred when initial contact (either written or oral communication) has been made with the taxpayer or substantial work has taken place on the case, regardless of whether time has been charged. "First action" is determined on a case-by-case basis.

  4. In the event that the initial appointment must be rescheduled, see IRM 4.10.2.9.4 for additional guidance. Rescheduling the initial appointment beyond 45 days from the first action on the case requires group manager’s approval. The group manager's approval should be documented in the case file.

4.10.2.9.1  (02-11-2016)
Scheduling the Initial Appointment with the Taxpayer and/or Representative

  1. Generally the initial appointment will be scheduled with the taxpayer. However, taxpayers have the right to representation at any time during the examination process.

  2. If the taxpayer wants representation prior to scheduling the initial appointment, the examiner should allow the taxpayer a minimum of 10 business days to secure representation before taking any follow-up action to schedule the appointment. For additional information, see IRM 4.11.55.2.1.2, Request for Representation - Suspension of Interview, and IRM 4.10.3.3.7.2, Request for Representation - Suspension of Interview.

  3. The examiner must be willing to talk to anyone who is authorized by the taxpayer. IRC 7521(c) states that when a taxpayer has executed a written power of attorney to represent the taxpayer in any interview, IRS cannot require the taxpayer's presence without issuance of a summons. However, the representative must commit to having first-hand knowledge of the taxpayer’s business operations and affirm that the examiner can rely on the information provided. In addition, the representative should agree to provide follow-up information timely if he or she is unable to provide responses to questions at the initial interview. See IRM 4.11.55.2.1.1, Taxpayer’s Presence Required? for additional information.

  4. If the taxpayer requests representation, proper authorization is required:

    1. Form 2848, Power of Attorney and Declaration of Representative, can be used to authorize an attorney, certified public accountant, enrolled agent/actuary, etc. See IRM 4.11.55.1.2, Practice Before the Internal Revenue Service (IRS), for detailed information regarding authorization to practice before the Service.

    2. Form 8821, Tax Information Authorization, authorizes any individual, corporation, firm or partnership the taxpayer designates to inspect and/or receive confidential information for the type of tax and years or periods listed on the form. See IRM 4.11.55.1.7.2, Form 8821 - Tax Information Authorization.

    3. If any other form is submitted to request representation or tax authorization, written approval by the group manager is required before relying on the authorization. See IRM 4.11.55.1.7.3, Non-IRS Power of Attorney Document..

  5. When a valid Form 2848 or Form 8821 has been received from the taxpayer, the initial appointment must be scheduled with the representative. It is advisable that the appointment be scheduled via telephone and followed up with Letter 3254 . The taxpayer must receive a copy of Letter 3254.

  6. Examiners will use their judgment to determine whether an authorized representative is sufficiently knowledgeable; however, examiners should take all reasonable steps to work effectively with authorized representatives. See IRM 4.11.55.3, By-Pass of a Representative, for additional guidance.

  7. Procedures for handling assertions of accountant/client privilege can be found in IRM 4.11.55.2.3, Privileged Communications, and IRM 4.10.20, Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers.

4.10.2.9.2  (02-11-2016)
Place and Time of Examination

  1. IRC 7605(a) states, in part, that "the time and place of examination shall be such time and place as may be fixed by the Secretary and as are reasonable under the circumstances." It is the Service's goal to set the time and place for the examination to maximize the convenience of the taxpayer within the constraints of sound and efficient tax administration.

  2. Office Examination: Generally, the examination will be conducted in the IRS office closest to the taxpayer’s residence, providing the office has appropriate office examination personnel. In extenuating circumstances, the examiner may meet with the taxpayer at the taxpayer’s home or place of business. This situation could occur due to the nature of the taxpayer’s business or due to the incapacity of the taxpayer. See 26 CFR 301.7605–1.

  3. Field Examination: Revenue agents have the responsibility to determine the most reasonable place to conduct the examination based on the circumstances. See IRM 4.10.2.9.2.1. Generally, the location of a taxpayer’s representative will not be a consideration in determining the place of the examination.

    1. Generally, the examination will be conducted at the location where the original books, records, and source documents are maintained. This includes all phases of the examination, the initial interview, review of books and records, fact finding, issue resolution, report writing, and the closing conference, etc. This location is usually the taxpayer's principal place of business.

      Note:

      Revenue agents must not copy taxpayer records only to continue the case work at an alternative location. This practice may increase the burden on the taxpayer, prolong the examination, and discourages communication with the taxpayer and/or representative.

    2. If the location of the audit is not at the taxpayer's place of business, the revenue agent must document on the Form 9984 the reasons for conducting the audit at an alternative location. In cases where specialists are involved, the revenue agent will request enough space to accommodate the specialist’s needs.

      Note:

      Revenue agents should visit the taxpayer’s business to establish facts that can only be ascertained by a tour, such as inventory and asset verification. See 26 CFR 301.7605–1(d)(3)(iii).

  4. The definition of books and records means not only the bookkeeping and accounting records, but also the vouchers, invoices, canceled checks, and other source documents usually maintained at the business site.

  5. If an individual under examination or a representative requests an accommodation for a physical or mental disability, examination personnel should make every effort to accommodate the request. The provisions of Policy Statement 1-47 (P-1-47) (see IRM 1.2.10.1.12, Reasonable Accommodations for People with Disabilities), regarding requests for reasonable accommodation by taxpayers or representatives with disabilities must be considered when scheduling the appointment.

    Example:

    If a taxpayer has a physical disability that limits their mobility, a reasonable accommodation should be granted to hold the examination at a location that is readily accessible to the taxpayer. If necessary, the examination may be conducted by correspondence if the issues are conducive to being worked using that technique.

  6. If the examiner does not feel safe in the taxpayer’s place of business, the examiner should leave the examination site and call the group manager or contact TIGTA. The examiner should request that the taxpayer come to the IRS office for subsequent appointments. For further information concerning potentially dangerous taxpayers, see IRM 4.2.1.2, Potentially Dangerous Taxpayer (PDT) and Caution Upon Contact (CAU) Indicators.

  7. Examiners will schedule examinations during normal business hours of the Service and without regard to seasonal fluctuations in the business hours of the taxpayer or his representative.

4.10.2.9.2.1  (02-11-2016)
Requests to Change the Examination to other than the Place of Business

  1. On a case by case basis, examiners will consider requests by the taxpayer or representatives to change the place of the examination (26 CFR 301.7605-1(e)). In considering these requests, the following factors should be considered:

    1. The location of the taxpayer's current residence and principal place of business.

    2. The location where the books and records and source documents are maintained.

    3. The physical restrictions at the place of business which could cause disruption of the taxpayer's daily operations. It is generally not reasonable for the examination to be conducted at the place of business if the business is so small that the examination would essentially require the taxpayer to close.

  2. If the taxpayer states in writing that the examination would unduly disrupt business operations or force it to close, the examiner should verify this. Upon verification, the examiner will change the place of examination to an IRS office within the Area where the taxpayer's books, records and source documents are maintained. See 26 CFR 301.7605-1(d)(3)(ii). Also, an alternative work place can be the representative's office if it is in the taxpayer’s local commuting area.

  3. In most cases, the mere presence of an examiner on the premises would not disrupt a taxpayer's daily operations and does not warrant changing the location of the examination. When verifying that an examination would unduly disrupt a business, the examiner should consider where the major issues can most conveniently be resolved; and other factors which indicate that conducting the examination at a particular location could pose undue inconvenience to the taxpayer.

  4. If the examination is conducted at a place other than the taxpayer's place of business, the examiner should inform the taxpayer and/or representative that the Service reserves the right to later change the place of the examination if it will promote the effective and efficient conduct of the examination. The examiner should ensure that the place of the examination does not hinder or delay the examination and does not adversely impact the examiner's time utilization. See the note in IRM 4.10.2.9.2(3).

4.10.2.9.3  (02-11-2016)
Scheduling Problems

  1. Examiners may encounter problems attempting to schedule the initial appointment during the initial contact with the taxpayer.

  2. Examiners will attempt to minimize scheduling problems for taxpayers and representatives. It is expected that examiners will accommodate taxpayers for religious or secular holidays.

4.10.2.9.3.1  (02-11-2016)
Taxpayers Who Delay

  1. Examiners must attempt to accommodate the valid needs of the taxpayer(s) in scheduling the initial appointment. However, examiners must not allow the taxpayer(s) to delay or circumvent the examination of their tax return(s). See IRM 4.10.2.9.4.

  2. When it is apparent that the taxpayer is attempting to delay the examination, examiners should discuss the situation with their group manager. Consideration should be given to the issuance of a summons. Examiners must document the discussion with the group manager and summons consideration on Form 9984.

4.10.2.9.3.2  (02-11-2016)
Appointments Scheduled During the Filing Season

  1. During the filing season, representatives are usually busy preparing the current year tax returns and will often request that the initial appointment be rescheduled until after the end of the filing season.

    1. If the initial appointment can be rescheduled within 45 days after the first action on the case, the examiner may reschedule the appointment. Examiners must document the activity record with the reason for rescheduling.

    2. If rescheduling the initial appointment would result in the appointment being more than 45 days after the first action on the case, then examiners should discourage the rescheduling of the appointment. If the taxpayer or representative persists, examiners must discuss the situation with their group manager. Group manager approval is required to reschedule the appointment beyond 45 days after the first action on the case. Examiners must document the activity record with the facts and the group manager’s decision.

4.10.2.9.3.3  (02-11-2016)
Taxpayer in Prison

  1. If the taxpayer is confined in prison or otherwise detained by federal, state or local authorities, examiners will temporarily delay interviewing the taxpayer until the case has been evaluated for possible fraud potential.

  2. If the case has no fraud potential, the examination should resume. The examiner may interview the taxpayer in custody without providing the taxpayer their constitutional rights in accordance with the rules of Miranda v. Arizona, 86 S. Ct. 1602 (1966).

  3. If the case has indications of fraud, the examiner will discuss the facts with his/her group manager and contact a fraud technical advisor (FTA) if the manager concurs. See IRM 25.1.2, Recognizing and Developing Fraud, for additional guidance.

4.10.2.9.3.4  (02-11-2016)
Taxpayer Identity Stolen

  1. If during the initial contact, the taxpayer advises the examiner or manager that their identity has been stolen and the identify theft impacts the tax year under examination, the taxpayer will need to provide documentation to support the identity theft. See IRM 4.10.27, Identity Theft Case Processing for Field Examiners, for additional guidance.

4.10.2.9.4  (02-11-2016)
Rescheduling the Initial Appointment

  1. If the examiner finds that the initial appointment must be rescheduled, the examiner will attempt to contact the taxpayer by telephone to reschedule the appointment as soon as the conflict arises.

    1. If the examiner cannot personally contact the taxpayer due to illness or other emergency, the group manager or group clerk will attempt to telephone the taxpayer to reschedule the appointment or to advise them that the examiner will contact them to reschedule the appointment.

    2. In office audit cases where the return has not yet been assigned to the tax auditor, the group clerk will contact the taxpayer.

  2. If the taxpayer asks to reschedule the initial appointment, the examiner will attempt to accommodate the taxpayer when the request is reasonable. However, examiners must not allow taxpayers to delay the examination by continually rescheduling the initial appointment.

    1. In field examination cases, the examiner has the authority to allow the rescheduling of the initial appointment for a valid reason one time. Any subsequent requests by the taxpayer to reschedule the initial appointment must be approved by the group manager. The group manager’s approval must be documented on Form 9984.

    2. In office examination cases where the examiner has performed the pre-contact analysis and scheduled the initial appointment, the group clerk will refer the taxpayer to the examiner whenever they request rescheduling of the initial appointment. The examiner may reschedule the appointment one time and will document the reason(s) in the case file. Any subsequent request(s) for rescheduling the initial appointment must be approved by the group manager. The reason(s) for the request(s) and the group manager’s decision must be documented on Form 9984 in the case file.

    3. In unassigned office examination cases, the group clerk may reschedule the initial appointment at the request of the taxpayer, one time. The group clerk will refer any subsequent requests by the taxpayer for rescheduling the initial appointment to the group manager. The group manager will consider the request and document the reason for the request and their decision on Form 9984.

  3. Whenever possible, the initial appointments will be rescheduled within 14 days from the previously scheduled appointment. If the appointment cannot be scheduled within 14 days, the examiner can extend this period. However, group manager approval is required in order to reschedule an initial appointment beyond the 45 day time frame. The examiner must document the reason(s) for rescheduling beyond the 45 day time frame on Form 9984. The group manager must document their concurrence on these forms.

  4. Examiners will document all rescheduled appointments and the reasons for the rescheduling on Form 9984.

  5. Whenever the initial appointment is rescheduled, a confirmation letter will be mailed to the taxpayer with the new appointment date and time unless there is not time for the taxpayer to receive the confirmation letter prior to the rescheduled appointment (i.e. appointment is rescheduled for the next day).

4.10.2.10  (08-01-2007)
Requesting Information: Overview

  1. It is vital to the audit process that records reviewed are timely requested and received. Examiners should ensure records requested are for information necessary to perform the examination.

4.10.2.10.1  (01-17-2012)
Determine the Type of Books and Records Available

  1. When the initial contact is made by telephone, examiners will ask taxpayers what type of records are maintained so that Form 4564 can be prepared.

  2. Examiners will ask the taxpayer about any computer records so that a determination as to whether or not the services of a computer audit specialist are needed. If a computer audit specialist is needed or required, the request should be made at this time so that the specialist can attend the initial interview. Visit https://srs.web.irs.gov/help/MandatoryInfo.aspx for mandatory referral criteria.

4.10.2.10.2  (01-17-2012)
Requesting Information or Documents from the Taxpayer

  1. On office examination cases, the examiners will prepare the Form 4564 to mail to the taxpayer with the initial contact letter. On field examination cases the Form 4564 will generally be sent with the appointment confirmation letter. See IRM 4.10.2.8.2.1 and IRM 4.10.2.8.2.2.

    1. The Form 4564 and /or issues may be discussed with the taxpayer during the initial telephone call.

    2. During the discussion, the examiner will explain to the taxpayer that the examination will be facilitated by having the information and documentation organized before the initial interview.

  2. Form 4564 will be used to document all requested information and documents needed to support items being examined. The Form 4564 will list the specific records, information, and documents the taxpayer should have available at the initial interview. Examiners should always carefully consider what data is necessary. Requests should be specific and should avoid requesting more information than is essential to resolve the issues identified.

  3. Facts in each case will determine what is considered an adequate description of the requested data. A Form 4564 must sufficiently specify the books, papers, records, or other data. The request should also include the particular activity and time period. For example:

    1. Books, papers, records and other data of the XYZ Manufacturing Company pertaining to the depreciation expense on keypunch presses purchased in 2011, as claimed on its federal income tax returns for the taxable years ending March 31, 2012 and 2013.

    2. Bank records, including cancelled checks and bank statements, relative to income and expenses, as reported by the XYZ Corporation on its federal income tax return for the taxable years ending February 15, 2012 and 2013. Include the records for the month prior to this period and the month following this period.

  4. It is advisable to include a statement on the Form 4564 indicating that the examiner will probably request additional records as the examination progresses.

  5. Examiners may have access to pro-forma type IDRs that include a list of items which are commonly requested in examinations. Use of these pro-forma IDRs is acceptable; however, the examiner must be careful not to use a "shot-gun" approach and request everything on the list if some of it may not be relevant to the return under examination. The pro-forma Form 4564 must be modified to the particular return being examined.

  6. The examiner may use either the manually prepared three-part snap-out assembly or a computer generated IDR.

    1. If the three-part snap-out assembly version is used, Parts I and II will be issued to the taxpayer or representative; Part III will be retained by the examiner in the case file.

    2. If a computer generated version is used, two copies will be issued to the taxpayer or representative and a copy retained by the examiner in the case file.

  7. The Form 4564 must always include a date for submission of the requested information or documents.

  8. If it is necessary to make a second request for the same information or documents, the date(s) of previous request(s) will be entered in the appropriate space.

4.10.2.10.3  (01-17-2012)
Authority to Request Books, Records, and Accountant’s Workpapers

  1. IRC 7602, and 26 CFR 301.7602-1(a) provide an examiner the authority to request and receive books, records, etc., necessary to properly examine an entity’s tax return.

  2. When a taxpayer indicates a reluctance to provide the necessary records, the examiner must be insistent, yet courteous, in requesting the records. The following suggestions can be adopted in handling this situation.

    1. Apprise the taxpayer of the appropriate requirements to produce books and records. To deny access to the records will only prolong the examination or investigation since third party inquiries will, by necessity, be initiated.

    2. Do not ever attempt to mislead or misrepresent the scope of the examination or investigation in an effort to secure records.

    3. Do not assert your authority in a manner that could be interpreted as a threat.

    4. Do not summons the records unless the action is first approved by the group manager. If the examiner is advised that the taxpayer is the subject of a criminal investigation, typically indicated by a 914 freeze code, the special agent assigned to the case should be contacted prior to issuing any summons.

  3. Accountant’s workpapers used in the audit of tax records or in preparation of a tax return are not the property of the taxpayer and are not privileged information. Therefore, the workpapers can be summoned.

  4. In general, there are three types of workpapers:

    • Audit

    • Tax accrual

    • Tax reconciliation

    See IRM 4.10.20.2, Audit Workpapers, Tax Accrual Workpapers, and Tax Reconciliation Workpapers Defined, for a definition of these terms.

  5. The Service has different policies for seeking access to each of the three types of documents listed above. The different policies are set forth in IRM 4.10.20.3, Service Policy for Requesting Workpapers. Examiners should familiarize themselves with this section.

  6. If it is necessary to issue a summons to secure workpapers, IRC 7603 provides that the records should be described with reasonable certainty. This requirement can be satisfied if the description of the records is specific and unambiguous and the summoned party can reasonably identify the exact records sought.

  7. The fact that the accounting firm whose workpapers are needed did not prepare the tax return in no way diminishes the authority by IRC 7602.

4.10.2.11  (02-11-2016)
Taxpayer Change of Address

  1. Do not update the Master File address unless the taxpayer provides "clear and concise notification" in accordance with Rev. Proc. 2010-16, and 26 CFR 301.6212-2.

    1. Clear and concise notification may be written, electronic, or oral.

    2. In all cases, clear and concise written notification must be specific as to a change of address. Thus, a new address reflected in the letterhead of taxpayer correspondence will not by itself serve to change a taxpayer's address of record.

  2. Master File data should NOT be updated based solely upon third party information, such as a new address reflected in the letterhead or return envelope of a taxpayer's correspondence, even when verified by a postal tracer. Corroborating information should be obtained in these situations.

  3. Form 2363, Master File Entity Change, is used by examination to make changes (names, addresses, dates, etc.) to the Business Master File (BMF) and Individual Master File (IMF). If the taxpayer's address has changed, the examiner must immediately submit Form 2363 to update internal information with the correct address, but only if clear and concise notification has been received. The completed form is forwarded to CCP. Form 2363 can be efaxed or mailed to CCP for input. See IRM Exhibit 4.4.11-1, for instructions on completing Form 2363. For joint returns, prepare one Form 2363 for both spouses when they reside at the same address. A separate Form 2363 is required if the spouses reside at different addresses.

4.10.2.12  (02-11-2016)
Transfers of Returns Prior to the Initial Appointment

  1. Generally, the examination of any income, estate, or gift tax returns is the responsibility of the area in which the taxpayer resides or conducts its business or maintains its principal office. The examination will generally be assigned to an examiner at the post-of-duty nearest to the taxpayer’s residence for a non-business return or place of business for a business return.

  2. Transfer of returns for examination from area to area and between posts-of-duty in the same area will be governed by CFR 301.7605–1(e). By observing the regulatory guidelines on time and place of examination, the convenience of the taxpayer will be balanced with the requirements of sound and efficient tax administration.

  3. In addition to the general guidelines noted below, examiners must be familiar with all details of 26 CFR 301.7605-1.

    1. No less than thirteen months will remain on the statute of limitations for assessment when the return is transferred from one area to another.

    2. Campus transfers to area offices will not be initiated with less than seven months remaining on the statute of limitations.

    3. Office examination: Taxpayers will be able to attend an audit interview at a service office closest to their residence in the assigned area providing that office examination has appropriate personnel.

    4. Field examination: The audit will be conducted at the location where the original books, records, and source documents are maintained, unless, in the case of a small business, doing so would significantly disrupt the taxpayer’s operation and require the business to close; this does not preclude on-site visits by the examiner.

  4. A taxpayer may request a transfer of an examination if they no longer reside or conduct business at the site shown on the original return. The taxpayer’s request to transfer the place of examination must be written and must take into account the following factors:

    1. Location of the taxpayer’s residence,

    2. Location of the taxpayer’s business,

    3. Where the taxpayer’s books and records are maintained, and

    4. Character and extent of inconvenience at origin of taxpayer’s request.

  5. 26 CFR 301.7601-1 provides further guidelines on time and place of examination with respect to incapacitated taxpayers; Service initiated transfers; location of representative’s office; seasonal fluctuations in the business of the taxpayer or representative; and requests for transfer to offices with insufficient resources.

  6. When an income tax return is transferred from one area to another area for examination, the following closing procedures should be followed:

    1. Form 3185, Transfer of Returns—Transfer of Administrative File, will be used as the transmittal notice.

    2. All cases will be routed to the Planning and Special Programs staff for review prior to transfer. This requirement will ensure that only those cases meeting appropriate criteria are being transferred.

    3. The transferring area will close out the return using Disposal Code 30.

    4. See IRM 4.4.33, Transfers, for additional guidance on processing the transfer.

  7. Examiners should strictly adhere to the "case by case" standard contained in the regulation for determining if a transfer is appropriate. No additional criteria should be developed by examiners or areas.

  8. If an examiner is assigned a case that was transferred from another area and it becomes clear that the books and records and other source documents needed to complete the examination are not available in that area, this case should be discussed with the group manager. If the group manager concurs, the group manager will contact PSP and request the return be returned to the originating area. If PSP concurs, the case will be returned to the local PSP. If the PSP staff and the examination group manager cannot reach agreement, the examination territory manager should become engaged in the resolution of this examination. Under no circumstances should the case be returned to the transferring area without prior discussion.

  9. Taxpayers and/or representatives should be consulted as necessary during this process and should be advised expeditiously where the examination will be completed.

  10. The transfer procedures outlined in this subsection apply to transfer requests that are received at any time during the examination.

4.10.2.13  (02-11-2016)
Repetitive Audits

  1. Repetitive audit procedures apply to individual tax returns without a Schedule C or Schedule F, when the following criteria are met:

    1. An examination of one or both of the two preceding tax years resulted in a no change or a small tax change (deficiency or overassessment), and

    2. The issues examined in either of the two preceding tax years are the same as the issues selected for examination in the current year.

      Note:

      Prior year surveys do not meet the criteria for repetitive audit procedures.

4.10.2.13.1  (02-11-2016)
Repetitive Audits Before Initial Contact with the Taxpayer

  1. During the initial return screening of an individual tax return without a Schedule C or Schedule F, examiners must review Form 5546, if available, for any indication of an audit in the preceding two years. Information on Form 5546 should include:

    • Prior audit year(s)

    • Disposal code

    • Deficiency or overassessment amount

    • No-change issue codes

      Note:

      See IRM 4.4.1, Introduction, IRM 4.1.5, Classification and Case Building, and related exhibits for a more detailed description of the information contained on Form 5546.

  2. If Form 5546 is not available, examiners must secure an IDRS command code IMFOLZ print for the two preceding tax years. All individual returns closed as a no-change require entry of IMF no change issue codes to allow AIMS to record the issues that were no-changed. The IMFOLZ will display the no change issue codes. See IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments, and visit http://mysbse.web.irs.gov/examination/mis/data/33008.aspx for a list of IMF issue codes.

  3. If there is a prior audit, examiners should thoroughly research the CEAS database to secure prior audit information.

  4. If the review indicated the taxpayer was audited in one or both of the two preceding tax years, determine if the taxpayer meets the criteria in IRM 4.10.2.13(1), and proceed as follows:

    1. If the taxpayer meets the criteria, examiners should survey the return. Examiners must document their reason for the survey on Form 9984, Examining Officer’s Activity Record, or Form 1900, and include the documentation with the surveyed tax year. Examiners should follow the survey after assignment procedures in IRM 4.10.2.5.3.

    2. If the taxpayer does not meet the criteria, examiners must proceed with following the in-depth pre-contact analysis. See IRM 4.10.2.3.

4.10.2.13.2  (02-11-2016)
Repetitive Audits After Initial Contact with the Taxpayer

  1. If a taxpayer (individual) responds to the initial contact by stating that an examination of the same issue(s) in either of the two preceding years resulted in no-change or a small tax change (deficiency or over assessment), and an appointment has been scheduled, advise the taxpayer that the appointment is postponed pending a review to determine if the examination should be continued.

  2. Examiners must review the criteria in IRM 4.10.2.13(1) to determine whether the taxpayer qualifies for closing the examination using repetitive audit procedures.

    1. If the criteria applies, examiners should follow the closing procedures in paragraph (3) below.

    2. If the criteria does not apply, examiners must inform the taxpayer that repetitive audit procedures do not apply and the examination will be continued. Letter 2685, Repetitive Exam Letter, will be used to notify the taxpayer and reschedule the appointment.

  3. Cases qualifying for repetitive audit should be closed as follows:

    1. If the taxpayer’s records were not examined, even though contact was made, the case may be closed using "survey after assignment" procedures. Examiners must document the reason for the survey on Form 1900 or Form 9984 and issue Letter 1024. See IRM 4.10.2.5.3.

    2. If the taxpayer’s records were examined, the case will be closed using regular no-change procedures in IRM 4.10.8.2.1, No Change (No Adjustments) (SB/SE Field and Office Examiners Only).


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