4.19.18 Quality Review Program

Manual Transmittal

December 16, 2016

Purpose

(1) This transmits revised IRM 4.19.18, Liability Determination, Quality Review Program.

Scope

This section contains information on Examination general procedures for administrative matters and provides a reference for common issues and related items that might be found on tax returns. Throughout this revision are references to other IRMs which may contain related information needed when working cases.

Material Changes

(1) Editorial changes have been made throughout this IRM

(2) IPU 16U0531 issued 03-15-2016 IRM 4.19.18.6.2, Local Reviews, Changed the title and updated paragraph (1). Removed paragraph (2) and changed it to a Note

(3) IPU 16U0547 issued 03-17-2016 IRM 4.19.18.6.2.1, Disposal Code 20 - Exam Paper Discretionary and Exam Paper EIC, Removed section, no longer needed

(4) IPU 16U0547 issued 03-17-2016 IRM 4.19.18.6.2.2, Deficiencies more than $50,000 - Exam Paper Discretionary, Exam Pass-Through Entities, Removed section, no longer needed

(5) IRM 4.19.18.5, Sample Selection Process, Changed definition of tool used for selections, in paragraph (3)

Effect on Other Documents

IRM 4.19.18 dated December 8, 2015 (effective January 1, 2016) is superseded. This IRM also incorporates IRM Procedural Update (IPU) 16U0531 and 16U0547, issued March 17, 2016.

Audience

This IRM is intended for the use of the Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) Campus Examination Operations.

Effective Date

(01-01-2017)

Karen A. Turner
Acting Director, Examination
Field and Campus Policy

Burden of Proof

  1. Restructuring and Reform Act of 1998 (RRA 98), Section 3001, produced significant changes to the Burden of Proof in tax litigation. To support the IRS’s position, it is mandated that during any type of review performed, the case is reviewed to ensure that the work papers are fully and accurately documented for each action taken during the Examination process.

    1. Review case file to determine what actions were taken, such as letters/reports sent, correspondence or telephone calls received or returned, and determine if there is a corresponding annotation on the history sheet including all required information (date, time, explanation of actions taken).

      Note:

      Correspondence Examination Automation Support (CEAS) notes are sufficient for work paper documentation requirements when the case is not assigned to the examiner adding the case note.

Policy Statement 21–3 Review

  1. Policy Statement P-21-3 criteria will be considered in all case reviews when taxpayer correspondence is in the case file. See IRM 21.3.3.1.1, Policy Statement P-21-3 (formerly P-6-12), for details.

Reviewer Reports and Responsibilities

  1. Reviewers will apply the applicable Internal Revenue Manual (IRM) program procedures in conjunction with the Seven Auditing Standards to determine whether a quality Examination has been performed and if any further Examination action is necessary.

  2. Reviewers are responsible for the Quality Review procedures outlined in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Compliance Services, Field Assistance, Tax Exempt/Government Entities, Return Integrity & Compliance Services (RICS) - Integrity & Verification Operations, and Electronic Products and Services Support, in conjunction with Examination procedures outlined in IRM 4.19.10, Examination General Overview, through IRM 4.19.21, Clerical, and in IRM 4.29, Partnership Control System (PCS), IRM 4.31, Pass-through Entity Handbook, IRM 4.31.3, TEFRA Examinations - CTF Procedures, and IRM 4.31.6, NonTEFRA Examinations - CTF Procedures. These IRM's describe different types of case reviews and how they are to be treated on Embedded Quality Review System (EQRS)/National Quality Review System (NQRS).

  3. The Embedded Quality Review System (http://eq.web.irs.gov) is comprised of NQRS, the non-evaluative quality review portion, and EQRS, the evaluative quality review. EQRS is performed by managers and leads to monitor an employee’s action on a work product. NQRS reviews are performed by teams, and these reviews take into account the entire process.

  4. Reviewers will input all completed national reviews in NQRS, selecting the applicable SPRG (Specialized Product Review Group). The case type is based on the applicable Examination program. When a case does not fit under any of the Examination programs, "Other" will be used as the case type.

  5. The Quality Staff will ensure that the Examination Operations Manager receives a copy of the NQRS accuracy report with supporting analysis on a monthly/quarterly basis. The analysis will breakdown the NQRS attribute to identify the root cause of the defect.

    Example:

    Paper: The NQRS attribute is Form 5344 Input Items and the root cause identified is an incorrect technique code on the Form 5344, Examination Closing Record.

  6. The monthly analysis of the top 5 defects on the Examination Cases will assist in identifying error trends. When an error trend is identified, the Quality Staff will issue a Quality Alert to all Examination Team Managers for implementation of corrective action and/or dissemination of information to employees. The Quality Alert will identify the error trend and outline the correct procedures to follow.

Quality Review Procedures

  1. Examination cases should be assigned and reviewed within 10 work days of receipt in the Quality function.

  2. When the normal review process is interrupted because of special assignments, work will be promptly reassigned to other reviewers.

  3. If errors are found upon review of an Examination case, the case will be returned to the Operation for correction.

  4. The following types of cases are examples which will receive priority handling if they are selected for quality review during the sample selection process:

    1. Short statute expiration cases. It is recommended that these cases be hand carried to the Quality Review Manager for expedite handling.

    2. Agreed unpaid deficiencies of $10,000 or more.

    3. Cases that have been identified for an Appeals conference per taxpayer request.

    4. Other special feature cases as designated by the Examination Operations Manager.

Sample Selection Process

  1. All types of closed cases are included in the sample selection process for quality review. All Appeals transfer cases will be considered "closed" for purposes of quality review and subject to the sample selection process. All Examination programs are to be included in the sample selection process.

    1. A "case" is defined as any group of related returns and/or multiple years that are closed together as a case. A case can also be one return. In any case containing related returns, the "key" return must be clearly identified. The "key" return is the one that brought about the Examination.

  2. All incoming calls will be included in the selection process.

  3. Texas Instrument Randomizer Tool will be used. For additional information refer to IRM 21.10.1.3.2, Quality Review Sampling Guidelines.

Clerical Review

  1. This includes, but is not limited to: unpostables, 90-day letter preparation and Form 5600, Statutory Notice Worksheet, claim openings, estate letters, AIMS terminal work (long and short closing), updates, hash totals completed by AIMS tax examiners, etc.

Telephone Reviews

  1. The case type used for this review should be taken from the Examination programs based on the applicable SPRG and can be found in the Quality Job Aid posted on the EQ website http://eq.web.irs.gov.

  2. Based on the statistically valid sample plan from SOI, the Review Staff will utilize Contact Recording to randomly select calls. The Review Staff will select the correct SPRG for the type call, complete the review using Contact Recording, and input the DCI on the NQRS.

  3. This review will be entered on NQRS as a National review.