4.22.2 NRP Case Building

Manual Transmittal

September 27, 2017

Purpose

(1) This transmits revised IRM 4.22.2, National Research Program (NRP), NRP Case Building.

Background

Information contained in this document will be used during both the classification and examination of tax returns in the National Research Program (NRP). This information describes research material that will be included in NRP case files.

Material Changes

(1) This IRM content was completely revised and reorganized to reflect current NRP and examination processes and procedures. The information was also revised for readability and clarity.

(2) IRM 4.22.2.1 - The IRM was edited to accommodate the internal control information for the NRP.

(3) IRM 4.22.2.2 - Added detailed information and standards on the case building process to support NRP case studies.

(4) IRM 4.22.2.2.1- Added the case building elements along with a description of each applicable to NRP case studies.

(5) Exhibit 4.22.2-1- Added a list of the command codes applicable to NRP case studies and their definitions.

Effect on Other Documents

This supersedes IRM 4.22.2 dated October 1, 2008.

Audience

RAAS and Compliance employees participating in NRP studies from SB/SE, LB&I and TE/GE

Effective Date

(09-27-2017)

Erik Ogilvie
Chief, National Research Program
Knowledge, Development and Application
Research, Applied Analytics and Statistics

Program Scope and Objectives

  1. Purpose. This IRM section describes the case building process for tax returns selected for a National Research Program (NRP) study.

  2. The information contained in this IRM provides case building guidance on the following studies:

    • Form 1040 - Individual Income Tax - See IRM 4.22.6

    • Form 1120S - Subchapter S Corporate Tax - See IRM 4.22.7

    • Form 1120 - Corporate Tax - See IRM 4.22.11, IRM 4.22.12

    • Form 941 - Employment Tax - See IRM 4.22.10

    • Form 720 - Fuel Excise Tax - See IRM 4.22.13

  3. Audience. This information applies to IRS employees who participate in an NRP study, including:

    • Classifiers

    • Examiners

    • Group managers

    • Reviewers

    • NRP staff

  4. Director, Data Management Division (DMD) under Research, Applied Analytics and Statistics (RAAS) is the policy owner.

  5. NRP is the program office responsible for oversight of the NRP studies.

  6. For information about the National Research Program, visit the NRP website at: https://nrp.web.irs.gov.

Background

  1. One of the hallmarks of any NRP study is an enhanced focus on case building. Case building is the process of adding information to the case file, from both IRS and non-IRS sources, prior to classification. Use of this information during the classification process will identify or eliminate potential issues prior to contacting the taxpayer. The NRP approach maximizes the use of data available to the IRS and, to the extent possible, minimizes intrusiveness and taxpayer burden.

  2. Case building data provides:

    1. Taxpayer specific research to identify possible compliance issues for examination.

    2. A broader working knowledge of the taxpayer’s financial activities to make an informed decision to accept or examine specific items on the return.

    3. Data which can corroborate items on the return to reduce redundancy.

Roles

  1. Director, Research Applied Analytics and Statistics (RAAS)

  2. Director, Data Management Division (DMD)

  3. Chief, National Research Program

  4. Compliance employees under Small Business and Self Employed (SB/SE), Large Business and International (LB&I ) and Tax Exempt/Government Entities (TE/GE) Divisions.

Terms and Acronyms

  1. Following is a list of the defined terms applicable to case building:

    1. Case building is the process of collecting information for classification and adding information to the case file from both IRS and non-IRS sources. Use of this information during the classification process will help identify or eliminate potential issues and provide the examiner with the maximum amount of information to guide the examination activity.

    2. Classified Issue List is a list of the classified issues identified during classification and included in each electronic case file. For NRP, each issue includes the IMF/SAIN code, issue name, per return amount, form/schedule, line number and any issue-related comments entered by the classifier. Any case related comments entered by the classifier will also be included at the bottom of the document.

    3. Classification is the process of identifying cases and issues for examination.

    4. Compliance Data Environment (CDE) is a security-certified, menu driven database that contains a combination of all transcribed lines from returns and selected entity information for IMF. CDE does not include all the line items of the return; it’s limited to what is transcribed for RTVUE. CDE generates three years of tax return data in a side-by-side tax return format so returns are easy to compare.

    5. Integrated Data Retrieval System (IDRS) is an internal database accessed by various command codes, each of which provides specific information about the return and return activity.

    6. Issue Management System (IMS) is a comprehensive software program used by the LB&I Division throughout the examination process to perform a variety of audit, review and time reporting tasks.

    7. Report Generation Software (RGS) is a comprehensive software program used throughout the examination process to perform a variety of audit and review tasks. In addition to computing tax, penalties and interest on the examination report, RGS generates correspondence, work papers and case closing documents.

    8. Reporting Compliance Case Management System (RCCMS) is a comprehensive software program used by the TE/GE Division throughout the examination process to perform a variety of audit and review tasks.

  2. Following is a list of acronyms relating to case building:

    1. AIMS – Audit Information Management System

    2. BMF – Business Master File

    3. BOD – Business Operating Division

    4. CBRS – Currency and Banking Retrieval System

    5. CDE – Compliance Data Environment

    6. CP – Computer Paragraph

    7. DCI – Data Capture Instrument

    8. HHS – Health and Human Services

    9. IDRS – Integrated Data Retrieval System

    10. IMF– Individual Master File

    11. IMS – Issue Management System

    12. LB&I – Large Business and International Business Division

    13. MFT – Master File Transactions

    14. RGS – Report Generation Software

    15. RCCMS – Reporting Compliance Case Management System

    16. SAIN – Standard Audit Index Numbers

    17. SB/SE – Small Business and Self Employed Division

    18. SSA – Social Security Administration

    19. TE/GE – Tax Exempt/Government Entities

    20. TIN – Taxpayer Identification Number

  3. See Exhibit 4.22.2-1 for a list and description of the IDRS command codes referred to in this IRM.

  4. For additional information on the terms and acronyms relating to the NRP program, refer to IRM 4.22.1.

Related Resources

  1. IRM 4.22.1, National Research Program Overview

  2. IRM 4.22.3, Classification

  3. IRM 2.3, IDRS Terminal Responses, for command code information

  4. IRM 2.4, IDRS Terminal Input

Case Building Process

  1. Case building is the process of adding information from IRS sources to the case file prior to classification and/or examination. Upon completion of the case building process, NRP selected returns are analyzed (classified) by highly skilled, well-trained classifiers who determine which issues on the return to examine. As discussed in IRM 4.22.3, classifiers will select any and all questionable items to be examined. Once selected, the examiner may not declassify that item.

  2. Case building tools help determine which issues to examine. The tools provide a current overall picture of the taxpayer based on the case building and other known data.

  3. Case building information is organized in a uniform manner to increase efficiency and effectiveness during classification and examination. With the number of NRP case files undergoing examination, it is important the information under review is presented in a consistent and consolidated format.

  4. The assembled case files are forwarded to the designated Business Operating Division (BOD) for assignment to the groups and NRP trained examiners for audit.

  5. NRP is moving towards a fully electronic case file. Most case building items are included in the electronic file.

  6. The following subsections identify the case building items that will be included in the NRP case files for each type of tax study.

    • Form 1040 - IRM 4.22.2.3

    • Form 1120S - IRM 4.22.2.4

    • Form 1120 - IRM 4.22.2.5

    • Form 941 - IRM 4.22.2.6

    • Form 720 - IRM 4.22.2.7

Case Building Elements

  1. Following is information about each of the key case building elements applicable to specific NRP case study files.

    1. Original Tax Return - Each case file contains a facsimile of the original tax return, an imaged copy of the original tax return, or a return facsimile, if e-filed. An imaged copy of the NRP key case return will also be included in the electronic case file.

    2. Classified Issue List - Each case file contains a list of the classified issues identified during the classification and included in each electronic case file. This list identifies the issues the examiner is required to examine.

    3. Information Data Retrieval System (IDRS) - A database, accessed by various command codes, containing return information that, when compared against the filed return, will identify any discrepancies or questionable items.

    4. Currency and Banking Retrieval System (CBRS) - CBRS provides financial information related to reported large cash transactions in excess of $10,000. Form 8300, Report of Cash Payments over $10,000 is associated with the transaction, when applicable.

    5. Compliance Data Environment (CDE) - CDE generates three years of tax return data in a side-by-side tax return format so returns are easy to compare. Three year comparison data enables the examiner to readily see changes from year to year but only for identical tax return forms. The CDE print also provides helpful and informative specially calculated fields. Variances and trends (in income, deductions or other information) can be detected through correlation of CDE with other case building data.

    6. Taxpayer Correspondence (letters, notices, publications) - Letters, notices and publications sent to taxpayers as part of the initial taxpayer contact in every examination.

    7. CP 2100 ("B" Notice) - This notice provides information on improperly filed 1099s with an invalid TIN, no TIN or a mismatched TIN. This notice, which is generated electronically, is provided to taxpayers in computer generated letters.

    8. Data Capture Instruments (DCI) and NRP Lead Sheets - DCI and lead sheets are used to collect taxpayer and examination data. They are developed by NRP with assistance from subject matter experts.

    9. Examiner Case Closing Checksheet - This document serves as a guide for examiners to ensure that all NRP-specific elements of a case are completed. A completed checksheet is a required part of the case file on all NRP cases.

    10. Manager Case Closing Checksheet - This document serves as a guide for managers to ensure the quality of the audit and adherence to NRP-specific guidelines. A completed checksheet is a required part of the case file on all NRP cases.

    11. Related Return - These are the tax returns related to the return under examination and any return the taxpayer is responsible for filing or can control.

    12. Capital IQ - This report provides corporate entity information which includes SEC reports, executive reports and news articles about the company.

    13. Asset Locator Tool - This commercial tool provides locator and asset information about individual taxpayers. See IRM 1.4.5.1(3) Enterprise Research Program, for the types of products provided under the current contract.

    14. Schedule K-1 (for Form 1120S) - Schedule K-1 provides classifiers and examiners a link between the entity and investor or owner. The K-1s can be used to identify issues at the investor level not apparent on the entity return.

    15. YK1 Database - The YK1 database information is able to interactively chart link relationships from flow-through entities to tax paying entities. The tool provides the database, visualization software and a process to visually understand this data.

    16. Transcript of Summary Data for Schedule E - This document displays the calculated Per Return amounts used in the NRP RGS case data for the summary of all Schedule E Rental Real Estate income and expense line items, as part of the Form 1040 case study.

    17. Taxpayer Information Gateway (TIG) Reports - TIG reports provide a set of case building analytical reports designed to assist the LB&I examiner in identifying potential issues and trends.

    18. Information Return Analysis System (IRAS) Data File - IRAS is designed to identify potential employment tax issues during an examination. This program provides examiners with the capability to import and analyze many types of information returns including Forms 1099-DIV, 1099-INT, 1099-MISC, 1099-OID, W-2 and 1042-S. IRAS utilizes the IRPTRR command code data from the master file.

    19. NRP Administrative Summary Checksheet - This checksheet, which incorporates NRP specific procedures, is used by LB&I to verify that all essential audit steps are completed.

    20. Excise Summary Terminal Activity Reporting System (ExSTARS) - The ExSTARS system is designed to assist examiners of Form 720 fuel excise tax studies. Specifically, this system tracks the movement of fuel to and from approved terminals by electronically filed monthly returns (Form 720-TO and Form 720-CS) reflecting fuel quantity and type as it moved through the distribution chain

Form 1040 Study Case Building Elements

  1. This subsection identifies the case building elements to include in the individual Form 1040 NRP case file. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making by NRP classifiers and examiners.

  2. The Form 1040 NRP electronic case study files include:

    1. IDRS command codes (applicable to Form 1040 returns)

    2. An imaged copy of the original NRP Individual key case tax return. This includes either a paper filed return or a return facsimile, if e-filed.

    3. Compliance Data Environment (CDE) 3-year return data comparison, if available.

    4. Letters, notices and publications

    5. Classified Issue List

    6. Transcript of Summary Data for Schedule E

    7. NRP lead sheets (see IRM 4.22.6.3, Individual Examination Guidelines)

    8. Examiner case closing checksheet

    9. Manager case closing checksheet

  3. The paper case file only includes:

    1. The physical paper return if the return was paper filed (not e-filed),

    2. Amended returns filed by the taxpayer, and

    3. Correspondence submitted by the taxpayer.

  4. IDRS command codes applicable to the Form 1040 NRP case study include:

    • BMFOL

    • DDBKD

    • DDBOL

    • IMFOLA

    • IMFOLT

    • IMFOLI

    • IMFOLE

    • IMFOLR

    • INOLES

    • IRPTR

    • PMFOLS

    • RTVUE

  5. Letters, notices and publications include:

    • Letter 2205-B

    • Letter 3572-B

    • Letter 3624

    • Notice 609

    • Notice 1332

    • Pub 1

    • Pub 4134

Form 1120S Study Case Building Elements

  1. This subsection identifies the case building elements to include in the Form 1120S NRP case file. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making by NRP classifiers and examiners.

  2. The Form 1120S NRP electronic case study files include:

    1. IDRS command codes (applicable to Form 1120S returns)

    2. An imaged copy of the original NRP Form 1120S key case tax return. This includes either a paper filed return or a return facsimile, if e-filed.

    3. Letters, notices and publications

    4. NRP S Corporation Classification Checksheet

    5. Original tax return

    6. Schedule K-1 (Form 1120S)

    7. YK1 Database

    8. Currency and Banking Retrieval System (CBRS)

    9. NRP lead sheets (see IRM 4.22.7.2, S Corporation examination guidelines)

    10. Examiner case closing checksheet

    11. Manager case closing checksheet.

  3. The paper case file only includes:

    • Tax return image, including Schedule(s) K-1

    • NRP S Corporation Classification Checksheet

    • Form 5546, Examination Return Charge-Out

    • Original Tax Return

    • YK1 Database

    • CBRS Reports

  4. IDRS command codes include:

    • INOLES

    • INOLEX

    • BMFOLE

    • BMFOLI

    • BMFOLT

    • BMFOLU

    • PMFOLS

  5. Letters, notices and publications include:

    • Letter 2205-B - NRP2 Initial Contact Letter

    • Notice 609 - Privacy Act Notice

    • Notice 1332 - Why Your Return Is Being Examined

    • Pub 1 - Your Rights As A Taxpayer

Form 1120 Study Case Building Elements

  1. This subsection identifies the case building elements to include in the Form 1120 NRP case file. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making by NRP classifiers and examiners.

  2. The Form 1120 NRP electronic case study files include:

    1. IDRS command codes (applicable to Form 1120 returns)

    2. An imaged copy of the original NRP Form 1120 Corporate tax return. This includes either a paper filed return or a return facsimile, if e-filed.

    3. Letters, notices and publications

    4. CDE 3-year return data comparison

    5. Classified Issues List

    6. TIG reports

    7. YK1 Database

    8. IRAS Data File

    9. NRP Administrative Summary

    10. NRP lead sheets (see IRM 4.22.11.4 and IRM 4.22.12.4, C Corporation Examination Guidelines)

    11. Examiner case closing checksheet

    12. Manager case closing checksheet.

  3. The paper case file only includes:

    1. Instruction sheet with the examiner’s name (LB&I only)

    2. Taxpayer correspondence (if applicable)

    3. Amended returns (if applicable)

  4. IDRS command codes applicable to the Form 1120 case study include:

    • INOLES

    • INOLEX

    • BMFOLE

    • BMFOLI

    • BMFOLT

    • BMFOLU

    • IRPTRL

    • PMFOLS

  5. Letters, notices and publications include:

    • Letter 2205-B - NRP2 Initial Contact Letter

    • Notice 609 - Privacy Act Notice

    • Notice 1332 - Why Your Return Is Being Examined

    • Pub 1 - Your Rights As A Taxpayer

Form 941 Study Case Building Elements

  1. This subsection identifies the case building elements to include in the employment tax study NRP case file. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making by NRP classifiers and examiners.

  2. The Form 941 NRP electronic case study files include:

    1. IDRS command codes

    2. Letters, notices and publications

    3. Form 941 return facsimile

    4. Related returns

    5. Capital IQ

    6. CBRS

    7. Asset Locator report

    8. DCI-1 Workpapers. This file contains all NRP and examination lead sheets to be completed during the audit.

    9. DCI-2 ET Reports. This file contains all NRP examination reports to be completed during the audit.

    10. IRAS Data File

    11. Examiner case closing checksheet

    12. Manager case closing checksheet

  3. The paper case file only includes the CP 2100 (B Notice), if applicable.

  4. IDRS command codes applicable to the Employment Tax NRP case study include:

    • AMDISA

    • BMFOLE

    • BMFOLI

    • BMFOLR

    • BMFOLT

    • BMFOLU

    • BMFOLZ

    • PMFOLS

    • PMFOLB

    • BRTVU

    • INOLES

    • INOLEX

    • SUMRY

  5. Letters, notices and publications include:

    • Letter 2205-B - NRP2 Initial Contact Letter

    • Notice 609 - Privacy Act Notice

    • Notice 1332 - Why Your Return Is Being Examined

    • Pub 1 - Your Rights As A Taxpayer

Form 720 Fuel Excise Tax Study Case Building Elements

  1. This subsection identifies the case building elements to include in the Form 720 NRP case file. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making by NRP classifiers and examiners.

  2. The Form 720 NRP electronic case study files include:

    1. IDRS command codes

    2. Fuel Excise Tax DCI. This file contains the classified examination issues and NRP data capture fields to be completed during the audit.

    3. Examiner case closing checksheet

    4. Manager case closing checksheet

    5. CP Notices, if applicable

    6. ExSTARS data

    7. Customs and Border Protection Form 7501

    8. IDRS prints

  3. The paper case file will only include:

    1. NRP Case Building Inventory Sheet

    2. Form 5546, Examination Return Charge-Out

    3. CP notices, if applicable

  4. IDRS command codes applicable to the Form 720 case study include:

    • AMDISA

    • BMFOLA

    • BMFOLE

    • BMFOLI

    • BMFOLR

    • BMFOLT

    • BMFOLZ.

    • PMFOLB

    • BRTVU

    • INOLES

    • INOLEX

    • SUMRY

IDRS Command Codes for NRP Case Studies

The following information provides a brief summary of IDRS command codes.

Note:

Additional information on IDRS command codes may be found in IRM 2.3, IRM 2.4 and for command code AMDIS, IRM 2.8.3.

  1. AMDIS – Provides a summary of all MFT’s and Tax Periods established on AIMS for this TIN.

  2. AMDISA – Provides AIMS examination information for a specific MFT and Tax Period on AIMS.

  3. BMFOL – Provides research of nationwide entity and tax data information posted to the BMF. Several definers can be used to access specific tax information from the BMF.

  4. BMFOLA – Displays information summarizing adjustments made to the original BMF tax return (examinations, adjustments, amended returns, etc.).

  5. BMFOLE – Displays entity information for a BMF TIN (name, address, filing requirements, historical information of changes to this data, etc.).

  6. BMFOLI – Displays a summary of all current BMF tax modules for all tax types (income, employment, excise taxes). The summary includes data such as the MFT, tax period, if a return was filed, account balance and freeze codes.

  7. BMFOLR – Displays BMF return information summarized (return filing DLN, cycle posted, income, taxable income, credits, etc.).

  8. BMFOLT – Displays BMF Tax Module (transcript) information including general tax information and tax transactions for a specific TIN, MFT and Tax Period. Use to analyze the return filing and historic information.

  9. BMFOLU – Displays a reconciliation of the filed 941/945/Schedule H wages and tax to the W-2s filed with Social Security and 1099-Rs that show taxes withheld. This command code provides a 941 reconciliation report when MFT 88 is input.

  10. BMFOLU – Provides a 941 reconciliation report when MFT 88 is input.

  11. BMFOLZ – Displays a summary of audit history information.

  12. BRTVU – Displays BMF return information. BRTVU provides a display of the transcribed line items on all business tax returns and their accompanying schedules or forms as the returns are processed at the campuses.

  13. DDBKD – Displays information from the SSA, HHS and the IRS for a dependent’s SSN. Displays the person who may be entitled to claim the child indicated on the return, who actually claimed the child, the number of returns on which the child was claimed, and if the child filed a return and claimed their own exemption.

  14. DDBOL – Displays information from the SSA, HHS and the IRS for the possible erroneous claim of a person receiving public assistance.

  15. IMFOLA – Displays information summarizing adjustments made to the original IMF tax return (examinations, adjustments, amended returns, etc.).

  16. IMFOLE – Displays entity information for a IMF SSN (name, address, filing status, historical information of changes to this data, etc.).

  17. IMFOLI - Displays a summary of all current IMF tax modules for the SSN requested. The summary includes data such as the MFT, tax period, if a return was filed and how (electronic/paper), filing status, account balance, freeze codes etc.

  18. IMFOLR – Displays IMF return information summarized (return filing DLN, cycle posted, income, taxable income, credits, etc.).

  19. IMFOLT – Displays IMF Tax Module (transcript) information including general tax information and tax transactions for a specific TIN, MFT and Tax Period. Use to analyze the return filing and historic information.

  20. INOLES – Displays entity information (names, address, cross reference TIN’s, filing requirements, filing status, etc.).

  21. INOLEX – Displays Social Security Administration (SSA) name controls, any cross reference information and merge transaction information (request tax payer spouse’s SSN and it provides the primary SSN).

  22. IRPTRL – Displays IRP (income) information: W-2s, K-1s, 1099s, etc., online based on a summary of income reported by the payer

  23. PMFOLB – Displays a summary of CP 2100 notices used in back-up withholding tax cases.

  24. PMFOLS – Displays Payer Master File (PMF) data for 1099s, W-2s, etc., issued and total dollars reported. The summary screen shows all sources of income and amounts, withholdings and the number or payer documents filed by the payer as shown on Form 1096.

  25. RTVUE – Displays return line items transcribed from Forms 1040 and their accompanying schedules and/or forms as the returns are processed at the Campus. The summary screen shows schedules/forms for a specific SSN, MFT and tax period and their respective definer/document codes. It also shows information about income, filing status, tax and payments.

  26. SUMRY – Displays a summary screen showing all modules on IDRS. Use for determining if Collection, the Campus or Criminal Investigation is actively working a case.