- 4.22.11 SB/SE Examination of NRP C Corporation Returns
- 22.214.171.124 Case Building for Corporate Returns
- 126.96.36.199.1 Case Building Tools for Corporate Returns
- 188.8.131.52 Electronic Case Files for the Key Case and Related Returns
- 184.108.40.206.1 Case Files and Required Printing
- 220.127.116.11 Initiating Examinations
- 18.104.22.168 C Corporation Examination Guidelines
- 22.214.171.124 Case Management and NRP Monitoring
Part 4. Examining Process
Chapter 22. National Research Program (NRP)
Section 11. SB/SE Examination of NRP C Corporation Returns
May 24, 2012
(1) This transmits new IRM 4.22.11 - SB/SE Examination of National Research Program (NRP) C Corporation Returns
(1) This is a new IRM, it will provide field guidance for the NRP C Corporation Reporting Compliance Study.
Director of Research, Janice Hedemann
The NRP approach maximizes use of data available to the IRS and, to the extent possible, minimizes intrusiveness and taxpayer burden.
Case building is the process of adding information to the case file from IRS internal sources prior to classification. Use of this information during the classification process will identify or eliminate potential issues prior to contacting the taxpayer.
NRP case files for the Corporate Study will be completely electronic as noted in IRM 126.96.36.199. This includes all case building material discussed in this IRM.
Agents should supplement the case building material included in the file as necessary.
The following are the electronic case building items that will be included in the Corporate NRP case files. These items will be used as investigative tools to facilitate improved analysis and enhanced decision making.
The corporate key case tax return image.
Examination Return Charge-Out (Form 5546) – If the Form 5546 is generated electronically as part of establishing the return on AIMS, it will be provided as part of the return image. This verifies that the return has been established on AIMS and will show the NRP Source Code, Project Code, and Tracking Code. It provides an audit history, information for any Power of Attorney, and a myriad of codes giving information about the selected tax return. It lets the agent know the results of the last two returns the Service either classified or examined. Care should be taken in using this information to draw conclusions. The agent needs to look at the current overall picture of the taxpayer based on the case building and other known data.
Compliance Data Environment (CDE) – The CDE system contains a combination of all transcribed lines from returns and selected entity information. CDE does not include all the line items of the return. It is limited to what is transcribed for BRTVU. CDE generates three years of tax return data in a side-by-side tax return format so multiple returns are easy to compare. This enables agents to readily see changes from year to year. Additionally, CDE prints include several helpful and informative specially-calculated fields. Variances and trends in income, deductions, and other items can be detected through correlation of CDE with other case building data. For example, CDE data could indicate unusually low gross profits year after year or consistent losses with low net profit and no other apparent sources of income to support expenditures.
IDRS prints for specific command codes for the NRP key case that provide taxpayer return and financial data. These include:
AMDISA - Displays whether or not the return is established on AIMS and if it is currently assigned
BMFOLE - Displays filing requirements such as current name and address
BMFOLI - Displays filing history and module balances (if any)
BMFOLT - Displays a list of posted transactions to a specific period
BMFOLU - Displays employment tax information
BRTVU - Displays return items from the Form 1120 as filed and as changed during processing
PMFOL - Displays Payer Master File Information such as whether the entity filed W-2s and 1099s
IRPTR - Displays a listing of information returns filed for the taxpayer
Twenty percent (20%) or greater shareholder IDRS prints. These include:
RTVUE - Displays return items from the 1040 as filed and as changed during processing
INOLES - Displays filing requirements such as current name and address
IMFOLI/T - Displays filing history, module balances and a list of posted transactions to a specific period
Agents will receive a case file folder along with an NRP label for each return assigned. The rest of the case file information will be provided electronically in the NRP RGS case.
The NRP C Corporation Study will involve completing fully electronic case files. Agents will receive a case file which consists of a folder with a label. Everything else (return, classification items, work papers, lead sheets, letters, case building, etc.) will be included in the RGS case file. Agents will complete all work electronically in RGS.
All lead sheets, check sheets and work papers used to support the conclusion reached on the issue being examined are required to be completed in the electronic case file. This includes mandatory lead sheets and check sheets that may contain answers to administrative items. Everything must be entered electronically; no pen or pencil additions.
Anything that is critical to the case or that supports an adjustment should be included in the final RGS electronic case file including lead sheets, created work papers that support adjustments, and documents that support unagreed issues/cases. Other superfluous information should not be included. Agents need to use good judgment when including information in their work papers. They should ask themselves whether the documents they want to include in the electronic case file add merit or value to the case. The properly completed electronic case file should contain all documents that would normally be necessary in a paper case file. For additional information, the NRP Form 1120 training material includes a listing of documents that you should and should not include in an electronic case file.
NRP related returns (1040, 1120, 1120S, 1065 etc.) should also be completed electronically in RGS following the same procedures outlined in this IRM and training.
The NRP 1120 Corporate Study will be the first where SB/SE agents are required to complete a fully electronic case file. The following are the guidelines for printing case documents from the files.
No-change, No-Change with Adjustments and Agreed Cases
BRTVU or Facsimile of Return
A Current AMDISA
Any Closing Letters properly completed
NRP Form 1120 Electronic Record Notification (this is in the RGS Office Documents Folder)
Unagreed, No-Show, No-Response Cases
(1) The entire case file. This is the same as is currently used in regular field cases.
NRP Related Returns-Source Code 91
(1) The procedures listed above apply to the NRP key case (source code 80) as well as any related return(s) (source code 91).
Other Case Printing Instructions
(1) The entire case file is always required to be printed whenever a key case or related return is sent to Appeals or Technical Services.
All possible efforts should be made to contact taxpayers whose cases have been identified for examination.
Initial contact Letter 2205-B (10-2010) for revenue agents was developed for NRP key case examinations. This letter will be used to arrange the appointment for all NRP Corporate key case examinations. This letter requests a taxpayer to call the revenue agent to schedule an appointment.
Field examination cases should be scheduled using telephone contact. During the initial telephone contact it is important that the revenue agent ensures that the taxpayer knows that this is an NRP examination and covers the items discussed in Letter 2205-B. This should be documented in the case file. When the initial appointment is made by telephone, a follow-up letter will be mailed to the taxpayer confirming the time/place of the examination.
Any other letters or correspondence to taxpayers or their representatives should utilize standard examination letters. This would include but not be limited to confirmation letters, appointment letters for related returns, no-change letters, and no change with adjustment letters.
Notice 1332 (1-2007), Notice 609 (9-2009) and Publication 1 (5-2005) will be used as enclosures to the initial contact letters or the confirmation letter if the revenue agent makes the initial contact by telephone. Notice 1332 explains to the taxpayer how and why their return was selected for an NRP examination.
If no contact is made, see the following IRM sections for guidance:
IRM 188.8.131.52.2 – Locating the Taxpayer
IRM 184.108.40.206.2.1 – Undeliverable Initial Contact Letters
IRM 220.127.116.11.2.2 – Unlocatable Taxpayers - Mandatory Steps to Locate
IRM 18.104.22.168.2.3 – Additional Resources for Locating Taxpayers
IRM 22.214.171.124.2.4 – IDRS/CFOL Command Codes Useful in Locating the Taxpayer
IRM 126.96.36.199.2.5 – Using Credit Bureau Information to Locate a Taxpayer
IRM 188.8.131.52.2.6 – Third Party Contacts
NRP research and accurate data gathering require that all issues be examined as outlined in IRM 4.22.4. In addition, information contained in the NRP training modules must be followed to ensure accurate examination and data capture. The following training modules are required for all SB/SE NRP managers and agents:
Course One – Beginning the NRP Form 1120 Examination (Required for all SB/SE agents) – ELMS #43389
Lesson 1 – Introduction to the NRP Form 1120 Examination
Lesson 2 – Conducting the Pre-Audit
Lesson 3 – Examination Guidelines
Course Two – Conducting the NRP Form 1120 Examination (Required for all SB/SE agents) – ELMS #43390
Lesson 1 – Mandatory Issues
Lesson 2 – Technical Issues and Issue Specific Lead Sheets
Course Three – RGS NRP Form 1120 (Required for all SB/SE agents) – ELMS #43391
Lesson 1 – Starting the Exam
Lesson 2 – RGS Pre-Audit
Lesson 3 – RGS Adjustments
Lesson 4 – Tax Computation
Lesson 5 – Report Writing
Lesson 6 – Closing the Case
Course Four – NRP 1120 Manager Case Review (Required for all SB/SE managers)
This section contains information about Case Management and NRP Monitoring.
NRP cases should only be assigned to examiners that have completed all applicable training courses and are familiar with C Corporation tax law and procedures.
Analysts from the NRP Office and Small Business/Self Employed Operating Division will analyze the data gathered from sample reviews and take appropriate action to ensure the quality of NRP examinations.
Various processes will be utilized to ensure quality NRP cases. These include group manager evaluative case reviews, mandatory non-evaluative closed case reviews, and completion of an Area electronic case review process. In addition, NRP cases assigned in SB/SE will be subject to the same national sample NQRS reviews as any regular examination.
Evaluative in-process case reviews are critical in guaranteeing the highest quality. One evaluative case review is required for each agent assigned a tax year 2010 Form 1120. The evaluative in-process review should take place within 60 days of the first appointment on one of the earliest started cases for the newest tax year. The in-process evaluative review should take place after the concurrence meeting, if applicable, and when enough audit work has been completed for meaningful feedback on the quality of the examination. If the agent was able to close the case within 60 days of the first appointment, the case can still meet this review requirement.
To the extent possible, EQRS attributes evaluated on the review should include 102 (Information Document Requests), 112 (Required Filing Checks), 301 (Minimum Income Probe), 304 (Income Development), 400 (Interview), 405 (Tax Law), 408 (Civil Penalty), 509 (Time Charged), 617 (Taxpayer Rights), 707 (Work papers) and 717 (Report Writing). The purpose of the reviews is to provide meaningful timely feedback. Any trends identified by the group manager should be shared with the Area NRP Territory Manager.
Group managers will complete a 100% non-evaluative closed case review on all NRP examinations. NRP 100% non-evaluative closed case reviews will focus on the quality of:
Technical correctness of the examination.
Adherence to NRP examination guidelines (all classified issues completed), procedural requirements, and case closing/data accuracy requirements.
The non-evaluative closed case reviews will be completed electronically by the manager and documented on the NRP Group Manager Closed Case Review Checksheet (Non-Evaluative). This form is included in the NRP RGS case file. Once completed and saved in the electronic RGS case file, a printed copy of the form is included behind the Form 9984 (Case Activity Record) or in Section 615 of the workpapers. By checking "yes" on the review checksheet, the manager is indicating that the item (Income Probe, IDR, etc.) was properly completed by the examiner. If a "no" is checked, the case should be returned to the examiner for clarification/corrections.
The Area will complete NRP Quality Reviews using the following processes. Area participation in the review process is required. The NRP Area territory manager or Area group managers or technical analysts will consider the same EQRS evaluative reviews for the quality of the feedback. The preference would be to do this jointly with the SB/SE Headquarters analyst(s).
A1. The quality process will involve (1) testing to see if Area group managers completed the required evaluative case review as specified in IRM 184.108.40.206.4 and (2) reviewing the actual quality of the feedback provided in these reviews.
2. Once sufficient Form 1120 inventory has been started, an ERCS listing that shows NRP Status 12 cases for each group in the Area will be generated.
3. There are two ways to obtain the completed EQRS reviews.
The SB/SE Headquarters EQRS analyst could extract the EQRS NRP case reviews for each of the Areas/managers/groups in the sample. This would be the preferred method as it minimizes Area burden.
An ERCS listing can be provided to each Area with the managers selected for review. The group managers can send copies of their evaluative case reviews to the Area NRP territory manager. The Area territory manager can send copies of the completed EQRS reviews to SB/SE Headquarters NRP Analysts.
A total of 10 EQRS revenue agent and 10 EQRS tax compliance officer reviews will be completed for each Area.
B1. Area case reviews will be completed remotely using the electronic RGS case files. SB/SE Exam Headquarters analysts will work with the Area NRP Coordinators and select 15 closed cases for review. Prior to the case review process, the Area NRP Coordinator will transmit the EOAD closed case data to Detroit on these cases but they will not make any corrections to the closed cases.
SB/SE Examination Headquarters analysts will complete the closed case reviews jointly with Area managers. The reviews will focus on the following four NQRS attributes:
Attribute 112 - Required Filing Checks
Attribute 300 - Minimum Income Probes
Attribute 400 - Audit/Compliance Interview
Attribute 509 - Time Charged
To the extent possible, RGS data reviews will also be completed by NRP analysts, and if possible the Area NRP Coordinator and an Area RGS Coordinator on the same closed cases. These reviews will also be done remotely.
On-site Area visitations by Headquarters analysts will be considered if the EQRS managerial reviews are not being completed in a quality manner and/or the attribute cases reviewed consistently show low attribute scores.
Feedback from the completed reviews will be provided to Area agents and managers by the Area NRP territory manager. The preferred way to provide feedback is through conference calls with Area managers.
If an Area has EQRS managerial reviews that are inadequate and or if the Area attribute scores reflect low passing percentages, an on-site visit by Headquarters analysts will be considered.