4.24.6 Technical Guidance and Information Processing for Excise Tax Examination Issues

Manual Transmittal

February 11, 2019

Purpose

(1) This transmits revised IRM 4.24.6, Excise Tax, Technical Guidance and Information Processing for Excise Tax Examination Issues.

Material Changes

(1) Editorial changes have been made when necessary throughout this IRM to update hyperlinks. Refer to the table below for a detailed list of changes made.

IRM Section Description of Change
4.24.6.1.6 Related Resources Updated hyperlink.
4.24.6.4 Workpaper Preparation: The General Process Removed hyperlinks that have been deactivated.
4.24.6.5.3 A105 - Administrative Check Sheet Updated hyperlink.
4.24.6.5.8 B200-1 - Required Filing Checks, Prior/Subsequent Period Returns, Related Excise Tax Returns, Filing Verification Updated hyperlink.
4.24.6.5.10 C300 - Books to Returns Reconciliation Check Sheet Updated hyperlink.
4.24.6.5.12 C310 - Fraud Awareness Check Sheet. Content Updated hyperlink.
4.24.6.6.3 Excise Examinations with Wagering Issues Removed hyperlink that has been deactivated.
4.24.6.6.4 Excise Examinations Relating to Facilities and Services Taxes Under IRC 4251, 4261 and 4271 Updated hyperlink.
4.24.6.6.7 Excise Examinations Relating to Structured Settlement Factoring Transactions Removed hyperlink that has been deactivated.
4.24.6.7 Extending the Period of Limitations for Assessment of Excise Tax Updated hyperlinks.
4.24.6.8 Source Codes, Examination Codes, Project Codes and Tracking Codes Updated hyperlinks.
4.24.6.8.1 Use of Excise Project and Tracking Codes Removed hyperlink that has been deactivated.
4.24.6.10 Establishing Substitute for Return (SFR) Controls on Non-Filer Cases Updated hyperlink.
4.24.6.13 Third Party Contacts Updated hyperlink.
4.24.6.15 Conversion of QuickBooks Accounting Software Updated hyperlinks.
4.24.6.16 Requesting Excise Subject Matter Expert Assistance Updated hyperlink.
4.24.6.17 Deleted a hyperlink and updated a different hyperlink.

Effect on Other Documents

This material supersedes IRM 4.24.6, dated April 4, 2018.

Audience

This section is for Small Business/Self Employed (SB/SE) revenue agents and fuel compliance agents (excise examiners), excise tax managers (excise managers) and personnel at Campus Exam/Automated Under Reporter Cincinnati (CEAC) who process excise tax returns (excise returns), excise tax refunds (excise refunds) and excise tax claims (excise claims).

Effective Date

(02-11-2019)

Lisa M. Piehl
Acting Director, Examination - Specialty Policy
Small Business/Self Employed

Program Scope and Objectives

  1. General Overview - This IRM provides technical guidance and information processing steps necessary to prepare accurate Excise Tax Examination reports unless otherwise noted in IRM 4.24, Excise Tax.

  2. Purpose - This IRM explains the procedures and updates related to the technical guidance and information processing steps and methods specific to excise returns, excise refunds and excise claims.

  3. Audience - This IRM is for SB/SE excise managers, excise examiners and personnel at CEAC who process excise returns, excise refunds and excise claims.

  4. Policy Owner - Director, Examination - Speciality Policy is responsible for the administration, procedures and updates related to the technical guidance and information processing steps and methods specific to Excise Tax Examination issues.

  5. Program Owner - Director, Examination - Specialty Examination owns Excise Tax Examination operations.

  6. Primary Stakeholders - Appeals, AWSS, Counsel, Field and Specialty Exam Quality (FSEQ), Specialty Exam, and Large Business and International (LB&I) are the primary stakeholders for this IRM.

Background

  1. For compliance purposes, it is essential managers, senior management officials, excise examiners and personnel at CEAC understand and follow correctly the technical guidance and information processing steps and methods explained in this IRM section to ensure accurate reports are prepared and submitted.

  2. Examinations are conducted primarily by excise examiners located in field offices. CEAC personnel conduct correspondence examinations and assess excise tax penalties.

Authority

  1. The most significant statutes affecting excise taxes are listed in the table below and dedicated to the associated trust funds or general revenue authorized by the applicable Internal Revenue Code Sections.

    Type of Excise Tax Trust Fund IRC
    Air Transportation of Persons and Property Airport and Airways Air Transportation 4261-4263, 4271-4272, 4281-4282, 4291, 6672,7501
    Coal Black Lung Disability 4121
    Communications General 4251-4253, 4291, 6672,7501
    Ozone Depleting Chemicals General 4681-4682
    Foreign Insurance General 4371-4374
    Gas Guzzler General 4064, 4221-4222
    Indoor Tanning General 5000B
    Inland Waterways Inland Waterways Trust 4042
    Medical Device General 4191
    Leaking Underground Storage Tank Leaking Underground Storage Tank 4041, 4042, 4081
    Retail Truck Highway 4051-4053, 4221-4222
    Ship Passenger General 4471-4472
    Sports Fishing/Bows and Arrow Components Aquatic Resources, Wildlife Restoration 4161-4162, 4221-4222
    Taxable Fuel (gasoline, diesel fuel, kerosene) Highway, Airport and Airway 4041, 4081, 4082, 6715
    Tires Highway 4071-4073, 4221-4222
    Vaccines Vaccine Injury Compensation 4131-4132
    Obligations not in Registered Form General 103,149,163,4701
    Patients-Centered Outcomes Research Institute (fee) Patients-Centered Outcomes Research Trust Fund 4375-4377
    Structured Settlement Factoring General 5891
    Wagering General 4401-4405, 4411-4412, 4421-4424
    Occupational Tax and Registration Return for Wagering General 4411
    Heavy Highway Vehicle Use Highway 4481-4483

Responsibilities

  1. Director, Examination - Specialty Policy is responsible for Excise Tax Examination policy and procedures.

  2. Director, Examination - Specialty Examination is responsible for operational examination compliance activities.

  3. Chief, Estate & Gift/Excise Tax Exam is responsible for ensuring the policies and procedures specific to Excise Tax Examination are communicated to and carried out by excise examiners.

Program Objectives and Review

  1. Program Goals - The program goals provided in this IRM are designed to increase compliance with excise tax laws by applying the tax laws with integrity and fairness and to provide SB/SE taxpayers top quality post-filing services for excise taxes administered by SB/SE.

  2. Program Reports - Information reporting of program objectives are included on Program Manager Monthly Briefings provided to Director, Examination - Specialty Policy.

  3. Program Effectiveness - Program effectiveness is measured by the Exam Quality Review Staff, located in FSEQ. FSEQ supports the SB/SE Quality Improvement Program utilizing National Quality Review System (NQRS) to conduct independent case reviews from statistically valid samples of examination case work. National, area and territory trend analysis on the quality attributes are used to establish baselines to assess program performance, identify opportunities to improve work processes, analyze causes for failure, assess the feasibility of possible solutions and measure the success of quality improvement efforts.

  4. Annual Review - Program Manager - Excise Tax Policy is responsible for reviewing annually the information in this IRM to ensure accuracy and promote consistent tax administration.

Terms/Definitions/Acronyms

  1. The following chart contains terms and their definitions used throughout this IRM.

    Term Definitions
    AIMS Audit Information Management System - Used by Appeals, Examination and TE/GE to control returns, input assessments/adjustments to Master File and provide management reports.
    AMDIS IDRS Command Code used to access AIMS display.
    attribute Quality measures that allow managers and reviewers to critique case work.
    BMFOL Business Master File On-Line: An IDRS Command Code that provides business account information. Used in conjunction with a variety of definers to view specific account information, depending on which definer is used.
    BMFOLI IDRS Command Code that provides a summary screen of Business Master File accounts.
    BOD Business Operating Division. For example, SB/SE, W&I.
    CFINK IDRS Command Code used to check the Centralized Authorization File where third party authorizations are recorded.
    IMFOL Individual Master File On-Line - An IDRS Command Code that provides individual tax account information. Used in conjunction with a variety of definers to view specific account information, depending on which definer is used.
    MeF Modernized e-File receives and processes electronically filed returns in a digital environment.
    SUMRY This IDRS Command Code displays a summary of a taxpayer’s account and should generally be used as a first contact with IDRS to determine if a tax module or control base exists.
    TC Transaction Code - A three-digit code used to identify a transaction being processed and to maintain a history of actions posted to a taxpayer’s account on the Master File. A transaction code identifies the precise actions taken on a taxpayer’s account.
    TXMOD Tax Module - IDRS Command Code used to request for display all tax module information for a specific tax period on IDRS.
  2. Refer to Exhibit 4.24.6-2 for Acronyms and the associated words or phrase that define them as used throughout this IRM.

Related Resources

  1. IRS formally adopted a Taxpayer Bill of Rights (TBOR) in June 2014, which provides the nation’s taxpayers with a better understanding of their rights and helps reinforce the fairness of the tax system. In 2015, Congress charged the Commissioner with ensuring IRS employees are familiar with and act in accordance with taxpayer rights as afforded by IRC 7803(a)(3). IRS employees must be informed about taxpayer rights and be conscientious in the performance of their duties to honor, respect and effectively communicate those rights that may aid in reducing taxpayer burdens. IRS employees must administer the law with integrity and fairness and exercise professional judgment, not personal opinions, in conducting enforcement activities. Refer to Pub 1, Your Rights as a Taxpayer, to read TBOR and learn how IRS employees carry out these rights.

  2. Procedures, law and regulations on a wide variety of excise-related examination issues are addressed on the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/pages/default.aspx.

Excise Issue Management System

  1. The Issue Management System (IMS) is a tool required for all excise examinations. IMS is designed to:

    1. Support remotely located excise examiners.

    2. Enhance issue identification.

    3. Improve issue tracking and reporting.

    4. Share information through a centralized data repository.

    5. Capture data in support of performance measures.

    Note:

    Under IMS, the automatic synchronization saves work to a centralized server, which minimizes the risk of loss due to computer failure or other unforeseen loss of case-related data.

  2. The majority of excise cases are established in IMS by the Excise Tax Exam/Workload Selection and Delivery (WSD) group with some exceptions, such as when a paper excise claim case is sent to an excise group. If a case is not established in IMS, the excise examiner will create the case in IMS. For more information on working excise cases in IMS, refer to the excise section of the LB&I Office of Technology and Program Solutions (TPS) IMS web site at http://lmsb.irs.gov/tps/IMS/ims_home.asp.

  3. IMS functions include:

    1. Set-up and monitoring case assignments.

    2. Creation, input and monitoring of issue progress and status for Information Document Requests (IDRs).

    3. Input of case documents and time-charging information for each issue.

    4. Generation of various time reports and activity records.

    5. Creation of a next case cycle by populating automatically selected taxpayer information into the Excise Tax Notebook (Notebook) when the need to expand the number of tax periods arises.

Case Level Activity Requirements

  1. Excise managers and support staff (i.e., Form 637 Registration Group personnel) must document case actions on the Case Level Activities feature, which is found at the IMS Team web site. The excise manager has the option of using the Case Comments feature in IMS Client for all IMS cases, except for Form 637 Registration cases.

    Note:

    Senior management reviewers, including excise territory managers, may utilize the "Case Level Activities" feature at the IMS Team web site to enter comments.

Guide for Using Excise Tax Notebook

  1. Excise Tax Notebook (Notebook) is a tool that guides users in preparing tax reports and documents.

  2. Notebook, which is used in all excise case work, pre-populates many of the headers and footers with the text entered previously. Documents are imported into IMS by excise examiners and organized in a logical manner.

  3. Notebook contains a standard library of:

    1. Audit Technique Guides.

    2. Standard forms and letters.

    3. Mandatory and discretionary administrative forms.

    4. Issue lead sheets.

    5. Reference materials.

    6. Suggested IDR language for some excise issues.

  4. Notebook is updated as needed. The excise examiner is instructed when to perform updates by the IMS Coordinator. Update actions may include opening the Notebook Update Manager and selecting the Update Forms Library, Update Notebook Front End, Update Notebook Back End, Update Administrative Features and then selecting Perform Notebook Updates. Once the update is complete, the excise examiner opens Notebook to verify the Notebook version number is correct.

Workpaper Preparation: The General Process

  1. Issue-specific workpapers, letters, forms and other documents are generated and imported from Notebook into IMS as a part of the pre-audit process.

  2. All excise examiners must have access to Notebook. Workpaper preparation, in general, is completed within IMS. The workpapers should be completed contemporaneously with the examination process.

    Note:

    IMS has a synchronization feature that saves the excise examiner’s work to the IMS server automatically. The information saved at the server is protected from loss.

  3. Notebook can be accessed by clicking on the Notebook desktop icon or directly within IMS, from the top line menu "Navigate," then selecting Excise Notebook from the drop down menu.

  4. The excise examiner may create a case in Notebook by exporting data from IMS or by establishing it manually in Notebook.

  5. Once a case is created, the excise examiner selects the appropriate Mandatory Admin Forms from one of six available drop-down menu choices, which are

    1. RA Admin Forms

    2. 637 Admin Forms

    3. FCO Admin Forms

    4. CIC Admin Forms

    5. 720-TO Admin Forms

    6. 720-CS Admin Forms

    7. POA Admin Forms

      Note:

      The POA Admin Forms are not classified as mandatory.

  6. The selection of Mandatory Admin Forms will deploy the appropriate Excise Tax Case Lead Sheets (Lead Sheets) also known as Excise Tax Case Check Sheets (Check Sheets). The Lead Sheets are tailored to the type of excise tax case being examined.

    Note:

    The Mandatory Admin Forms are not uniform among the drop-down menu choices (1-6). Therefore, it is essential the excise examiner choose the appropriate area of classification.

  7. The following table lists the excise examination RA Mandatory Admin Forms deployed by Notebook. Form 9984, Examining Officer’s Activity Record, is generated in IMS under the Time Reports feature.

    Index Number Lead Sheet Title IRM Cite
    Form 4318-E Excise Workpapers Index 4.24.6.5.1
    A105 Administrative Check Sheet 4.24.6.5.3
    *Form 2848 Power of Attorney and Declaration of Representative 4.24.6.5.3.1.1
    *Instructions for Form 2848 Not Applicable 4.24.6.5.3.1.1.1
    *Fax Sheet Ogden Power of Attorney Not Applicable 4.24.6.5.3.1.1.2
    *Form 8821 Tax Information Authorization 4.24.6.5.3.1.2
    *Letter 937 Transmittal for Power of Attorney 4.24.6.5.3.1.3
    *Letter 3254 Representative Appointment Confirmation 4.24.6.5.3.1.4
    A110 Excise Tax Plan to Close Check Sheet 4.24.6.5.4
    A115 Group Manager Concurrence Meeting Check Sheet 4.24.6.5.5
    A120 Initial Appointment Check Sheet 4.24.6.5.6
    A125 Initial Interview Questions and Notes 4.24.6.5.7
    B200-1 Required Filing Checks, Prior/Subsequent Period Returns, Related Excise Tax Returns, Filing Verification 4.24.6.5.8
    B200-2 Related Excise Tax Returns Consideration 4.24.6.5.9
    C300 Books to Returns Reconciliation Check Sheet 4.24.6.5.10
    C305 Internal Controls Check Sheet 4.24.6.5.11
    C310 Fraud Awareness Check Sheet 4.24.6.5.12
    D400 Initial Taxpayer Contact Check Sheet 4.24.6.5.13
    E500 Penalty Check Sheet 4.24.6.5.14
    Risk Analysis Not Applicable 4.24.6.5.15

    Note:

    Mandatory Admin Forms notated with an asterisk (*) are POA Admin Forms. If the taxpayer has a valid authorization on file, the POA Admin Forms must be deployed. Those forms that apply must be completed and submitted timely. The excise examiner should document Form 9984 as to the verification check for a valid authorization and whether the POA Admin Forms were deployed, as appropriate.

    Note:

    Check boxes are found on several of these forms, which serve many purposes such as a reminder or an action completion list. Checking a box does not mean comments and workpapers are not required.

  8. Refer to Notebook Mandatory Admin Forms for information about RA Admin Forms, which are 14 Excise Tax Lead Sheets, and POA Admin Forms, which are six documents that include a fax sheet, two forms plus instructions and two letters.

  9. Refer to the table below for more information about the Mandatory Admin Forms required for use in other case workload types:

    Workload Type IRM Section
    Fuel Compliance Officer Inspections 4.24.13 through 4.24.16
    Coordinated Industry Examinations 4.24.5, Large Business and International (LB&I) Examination Program Procedures for Excise Employees
    Form 637 Registration Cases 4.24.2, Form 637 Excise Tax Registrations
    ExSTARS Compliance Examinations 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures

Workpaper Preparation: Other Resources

  1. By selecting Library from the top line menu in Notebook, the excise examiner can access Audit Guides, Rate Reference, the FCO Tool Kit and RA Tool Kit.

  2. For each option, the excise examiner will find reference materials useful in completing successfully the appropriate Excise Lead Sheets.

Workpaper and Lead Sheet Expectations

  1. Use of Lead Sheets helps the excise examiner meet all workpaper requirements. The use of non-standard workpapers does not relieve the excise examiner from meeting workpaper requirements.

  2. Properly prepared workpapers must provide adequate documentation to support conclusions. Sufficient documentation allows reviewers to verify whether the scope of the excise examination is appropriate or the basis of a proposed adjustment is accurate. The excise examiner should always cite legal authority to support the conclusions (e.g., IRC, applicable regulations, court cases, revenue rulings and/or revenue procedures).

  3. Workpapers and reports must be neat, legible, clear and concise and is an important aspect of the overall quality of the examination.

  4. Workpapers must contain headers that identify:

    • Taxpayer name

    • Taxpayer Identification Number (TIN)

    • Tax period examined

    • Date workpapers were prepared

    • Name or initials of the excise examiner

    • Issues or items examined

  5. Workpapers must be indexed and numbered. If an issue cannot be fully explained on the specific Lead Sheet, supporting workpapers must be prepared, indexed and identified as an attachment to the respective Lead Sheet. Supporting workpapers provide detailed explanations, analyses, schedules and/or computations.

  6. The number of supporting workpapers prepared during an excise examination depends on the size and complexity of the entity, as well as, the number and type of issues developed. While no fixed requirement exists to include specific schedules or analyses in the supporting workpapers, the excise examiner must include suitable and appropriate information to support the conclusion documented on the Lead Sheet. Any notes taken during interviews conducted must be included in the case file as additional support for the final case resolution.

  7. Workpapers should reflect actual accomplishments during the excise examination. The workpapers should exclude superfluous documentation or data. For example, copies of the Certified Public Accountant’s workpapers or reports should not be included in the workpapers, if they do not contribute to the development of an issue. The excise examiner’s personal opinions relating to a taxpayer are not appropriate. Case file workpapers are included under the Freedom of Information Act.

  8. If the case was initiated by a referral, the excise examiner must include a copy of the Specialist Referral System (SRS) Referral Form in the IMS MFT B5 case file.

Form 4318-E, Excise Workpapers Index

  1. Form 4318-E, Excise Workpapers Index, refers to the examination workpapers cover sheet that indexes the Lead Sheets, issue workpapers and supporting workpapers (e.g., appointment letters, IDRs, correspondence, case building materials, etc.). Form 4318-E pertains to one taxpayer and includes all tax periods under examination.

  2. Adjustments reported on Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, and/or Form 5385, Excise Tax Examination Changes, are documented on Form 4318-E. The explanations must properly correspond chronologically to the issue workpapers and supporting workpapers.

Form 9984, Examining Officer’s Activity Record

  1. The excise examiner must document each substantive action taken on a case on Form 9984. Form 9984 is required for uniform case file documentation of examination activities, NQRS case reviews, determining whether taxpayers cooperated fully with reasonable requests for information and the possibility of responding to a taxpayer’s claims for interest abatement under IRC 6404(e). In some situations, Form 9984 will reference other workpapers or relevant lead sheets for more detail.

    Note:

    Appropriate documentation on Lead Sheets does not need to be repeated on Form 9984.

  2. Form 9984 should be prepared contemporaneously with the actions taken on the case and provide a complete and concise case history. Form 9984 chronicles all substantive actions taken during the course of an examination by excise examiners, excise managers, clerical support staff, the taxpayer and/or the representative. Alternatively, in lieu of Form 9984, excise managers may use the "Case Level Activity Record" feature at the IMS Team web site.

  3. All entries on Form 9984 should be written factually and professionally. Form 9984 is used to document activity including the date of the activity, location of the activity, contact code, time charged and remarks and/or substantive actions taken.

  4. If no significant activity occurs on a case for 45 days, the excise examiner must provide a written comment on Form 9984 fully explaining why this occurred and whether the delay was communicated to the affected parties. "Significant activity" includes any activity where the excise examiner performed substantial work that moved the case toward a conclusion. This does not include telephone calls to, or from, the taxpayer to cancel or change an appointment. It would, however, include telephone calls if issues were discussed that helped move the case toward a conclusion, appointments were arranged, information requested, research conducted, etc. This requirement includes leave and extended temporary detail assignments.

  5. Each action taken on the case must be documented on Form 9984 or the "Case Level Activity Record" feature in IMS. These include, but are not limited to:

    • Pre-contact examination steps.

      Note:

      Refer to IRM 4.10.2.8, Examination of Returns, Pre-Contact Responsibilities, Initial Contact: Overview, about initial contact with taxpayers.

    • All research activities.

    • Any evaluation of collectibility and any decision to survey or examine a return.

    • Significant travel time to and from the examination location.

    • Verification that the taxpayer and/or the representative has the excise examiner’s correct name, telephone number and unique employee identification number at the inception of the examination.

    • Confirmation of taxpayer receipt of Pub 1, Notice 609, Privacy Act Notice, and the related discussion held with the taxpayer and/or the representative.

    • If a tour or site visit of the taxpayer’s business was conducted.

    • Reasons for expanding or contracting the examination and the related discussions with the excise manager.

    • All actions taken with respect to the statute of limitations (SOL), including verification of the SOL, steps to protect the SOL, status of Form 895, Notice of Statute Expiration, completion date(s), discussions with the excise manager regarding soliciting statute extensions and actions taken for securing consents to extend.

    • The completion of the required filing checks, actions taken and the decisions made by the excise examiner, including internal documents secured and any analysis performed or workpapers created by the excise examiner in making this determination.

      Note:

      If the required filing checks are not completed, the excise examiner must document the reasons why and the extent of managerial involvement.

    • If an excise examiner determines a required return has not been filed (except when fraud or willful failure is indicated), actions and conclusions addressing how the issue was resolved.

    • If the taxpayer was notified that the inspection of a return did not result in an examination.

    • If an extension of the mutual commitment date (MCD) for more than 30 days was granted and the related discussions with the taxpayer and/or the representative and the excise manager addressing this.

    • When records are incomplete, nonexistent or suspect, all attempts to obtain the taxpayer’s records and actions to keep the excise manager informed.

    • Documentation of excise manager involvement, including formal and informal discussions, in-process case reviews, on-the-job visitations and workload reviews, plan to close meetings, fraud awareness discussions and the date the case was closed to CCP or Tech Services.

    • If the facts and circumstances warrant a partial overassessment, excise manager approval and concurrence prior to such allowance.

    • Managerial involvement for all unagreed cases.

    • If the taxpayer wants to submit a fax signature for consents or closing agreements, the related discussions and actions regarding contact with the taxpayer, the date of the contact and the desire of the taxpayer to submit the consent or closing agreement by fax.

    • Actions related to report delivery and receipt, including date(s) of the notice, method of delivery of notice (i.e., personal delivery, regular mail, certified mail, etc.), person(s) to whom notice(s) were delivered and items included in the delivery (i.e., letter, report form, publications, etc.).

    • When collateral requests and referrals are made, accepted, when work begins and when progress reports are received.

    • Any actions taken regarding Form 5346, Examination Information Report.

    • If the facts and circumstances warrant the assertion of penalties, related actions and decisions.

    • If a deficiency results, the discussions about the solicitation of payment and payment options.

A105 - Administrative Check Sheet

  1. A105 - Administrative Check Sheet provides administrative guidelines for examination tasks. The excise examiner completes the following portions of A105 by addressing:

    1. Pre-audit issues, including verification of SOL and collectibility. Refer to IRM 4.10.2.

    2. Form 637 Registration information, if applicable. Refer to IRM 4.24.2, Form 637 Excise Tax Registrations.

    3. Power of Attorney (POA).

    4. Initial taxpayer contact by mail.

      Note:

      Initial contact by telephone is prohibited. After mailing the contact letter and sufficient time lapsed for the taxpayer to respond (14 calendar days from mailing the letter), the excise examiner may initiate contact with the taxpayer by telephone as needed.

    5. Initial appointment.

    6. Referrals.

    7. Extensions to SOL.

    8. Issue resolution.

    9. Payment. Refer to IRM 4.20.3, Examination Collectibility, Soliciting Payment, for guidance on using the tiered interview approach for soliciting payment, securing levy source information and coordinating with Collection.

      Note:

      The excise examiner must check "yes" on A105 under the heading Payment (IRM 4.20.3, IRM 4.4.24.2) to establish that payment was solicited whether full or partial. The substance of the discussion with the taxpayer or the representative as to payment options, how the taxpayer indicates the deficiency will be addressed and acknowledgement of the obligations must be documented on A105 under Additional Comments to A105 Administrative Summary Sheet.

    10. For additional procedural items, including third party contacts, inadequate records notice and conversion of QuickBook accounting software, refer to IRM 4.24.6.13, IRM 4.24.6.14 and IRM 4.24.6.15.

  2. For case file assembly, refer to the Examiner’s Miscellaneous Job Aids at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/examinersmiscellaneousjobaids/casefileassembly.aspx.

  3. Excise examiners need to be aware of the Potentially Dangerous Taxpayer and Caution Upon Contact Programs. Refer to IRM 25.4.1, Employee Protection, Potentially Dangerous Taxpayer, and IRM 25.4.2, Caution Upon Contact Taxpayer.

Taxpayer’s Right to Representation
  1. Taxpayers have the right to retain an authorized representative at any time during an examination. Both excise managers and excise examiners are responsible for ensuring this right. Refer to IRM 4.10.1.2.1.9, Overview of Examiner Responsibilities, Taxpayer Rights.

  2. Prior to issuing Letter 2205-A, Initial Contact, excise examiners must determine if a valid POA is on file for the tax periods under examination. If a TC 960 is posted to the account, the excise examiner must secure a Command Code (CC) CFINK and include it in the file. If a valid POA is on file for the tax periods under examination, Letter 2205-A should be mailed to the taxpayer with a copy to the POA using Letter 937, Transmittal of Information to the Power of Attorney, for the POA. Refer to IRM 4.10.2.8.1, Pre-Contact Responsibilities, Making Initial Contact.

  3. The excise examiner must be willing to communicate with any POA authorized by the taxpayer. Refer to IRM 4.10.2.9.1(3), Scheduling the Initial Appointment with the Taxpayer and/or Representative.

  4. When a taxpayer has executed a valid POA, the taxpayer’s presence at the interview cannot be required without the issuance of a summons. However, the POA must demonstrate first-hand knowledge of the taxpayer’s business operations and provide reliable information to the questions asked. Refer to IRM 4.11.55.2.1.1(4), Examining Officer’s Guide (EOG), Power of Attorney Rights and Responsibilities, Taxpayer’s Presence Required?

  5. If the taxpayer states during the interview that he or she wishes to consult with a representative, the interview must be suspended to allow 10 business days to consult or secure representation. Refer to IRM 4.10.3.3.7.2, Examination Techniques, Request for Representation - Suspension of Interview; see exception.

  6. Excise examiners must document requests to consult or secure representation on Form 9984 or appropriate workpapers.

Processing Power of Attorney
  1. The excise examiner should check Centralized Authorization File (CAF) using the Integrated Data Retrieval System (IDRS) CC CFINK to determine if a POA exists for the taxpayer and for which types of tax and periods. The box for this action should be checked on A105 and the finding documented on Form 9984.

  2. If the taxpayer retained representation, the excise examiner must select the POA Admin Forms and deploy the appropriate POA Lead Sheets.

Form 2848, Power of Attorney and Declaration of Representative
  1. Form 2848, Power of Attorney and Declaration of Representative, authorizes an individual to represent the taxpayer before the IRS. The individual authorized by the taxpayer must be a person eligible to practice before the IRS. The eligible individuals are listed in Part II, Declaration of Representative, items a-h.

  2. The excise examiner will process Form 2848 to the CAF within five days of receipt. Delays should be documented on Form 9984. If the POA is not properly executed, return it to the taxpayer for corrections and document Form 9984.

  3. The excise examiner will check CC CFINK to ensure Form 2848 was processed.

  4. For guidance about Form 2848 and the POA, refer to IRM 4.11.55.1.7.1, Form 2848 - Power of Attorney and Declaration of Representative.

Instructions for Form 2848
  1. For greater clarity, review the Instructions for http://publish.no.irs.gov/cat12.cgi?request=CAT1&catnum=11980.

Fax Sheet Power of Attorney Ogden
  1. The excise examiner must download and complete Fax Sheet POA Ogden, included in the POA Lead Sheets within Notebook.

  2. For guidance about fax signatures, refer to IRM 4.19.13.9.3, Liability Determination, General Case Development and Resolution, Fax Signatures.

Form 8821, Tax Information Authorization
  1. Form 8821, Tax Information Authorization, provides the authority for any individual, corporation, firm, organization or partnership designated by the taxpayer to inspect and/or receive confidential information for the type of tax and the years or periods authorized. The taxpayer must include all of the information requested on Form 8821. If incomplete, the excise examiner must return it to the taxpayer for corrections and document Form 9984.

  2. Form 8821 is not used to appoint a representative.

  3. Refer to IRM 4.11.55.1.7.2, Form 8821 - Tax Information Authorization.

Letter 937, Transmittal Letter for Power of Attorney
  1. Letter 937 transmits copies of correspondence addressed to the POA.

Letter 3254, Representative Appointment Confirmation Letter
  1. The initial appointment for an examination is confirmed on Letter 3254, Representative Appointment Confirmation. The letter is used for individual, corporate, partnership, or other types of returns.

    Note:

    The excise examiner must follow the initial contact procedures described under IRM 4.10.2.8.1, Making Initial Contact.

Pre-Audit Issues - Collectibility
  1. WSD uses collectibility factors to determine if a case should be selected for examination. Cases selected for field examination that have known collectibility issues are identified on the Classification Checksheet included in the case file. The Classification Checksheet also documents how the collectibility problem was overcome (with WSD Management support) to justify case selection for field examination. This information is found in the Classification Checksheet Field Notes section.

  2. Collectibility must be considered when setting the scope of an examination. Collectibility is based on current financial condition and not the tax return reflecting the taxpayer’s earlier financial condition. Excise examiners must document collectibility evaluation during the pre-planning phase of the examination using A105.

  3. Refer to IRM 4.20.2.2, Examination Collectibility, Scope Consideration, General Collectibility Considerations, for collectibility indicators and steps to take when evaluating collectibility potential during the pre-planning phase.

  4. The excise examiner should request an IDRS CC AMDIS with definer A (AMDISA) print, which will display collectibility indicators such as:

    • BANKRUPTCY – Taxpayer is currently in bankruptcy or bankruptcy discharge in a prior period.

    • CURNOTCOLL - Prior period was closed as Currently Not Collectible.

    • COLLSTCD26 - Open Collection status (i.e. assigned to revenue officer, Automated Collection, or is in Collection queue).

    • Offer-In-Compromise (OIC) Pending.

  5. If collectibility indicators are present or there are reasons to believe that the taxpayer has liabilities outstanding for other tax periods, CC SUMRY, CC IMFOLI (for information on sole proprietor or individual account balances) or CC BMFOLI should be obtained. They reveal any previous tax periods with account balances. A CC TXMODA for those tax periods reveals account activity. If Transaction Code (TC) 480 is present on any of the modules, an OIC is under consideration. The group and employee number of the revenue officer charged with the account is reflected on CC TXMODA.

  6. Not all taxpayers lacking the means to satisfy additional tax liabilities are identified. Excise examiners should be alert for indications in the file that collectibility may be a consideration (i.e., the taxpayer is deceased, the taxpayer is a defunct corporation and/or the issue of transferee liability is not present). Form 9439, Collectibility Evaluation Form, may be used to accurately document collectibility.

  7. If collectibility is an issue for an assigned case, alert the excise manager as soon as the issue is discovered. Excise managers will make the final determination whether to survey the return or to limit the examination scope/depth. A return may be surveyed due to an absolutely uncollectible assessment or subjected to a limited scope examination where there is lack of collectibility.

  8. Returns should not be surveyed based solely on collectibility when a limited examination has the potential for developing leads to other non-compliant taxpayers or for cases involving fraud or special cases referred by Counsel.

A110 - Excise Tax Plan to Close Check Sheet

  1. A110 - Excise Tax Plan to Close Check Sheet serves as a guide for the examination planning phase. A110 is a summary sheet of task reminders to complete as part of the examination process.

  2. A110 ensures the excise examiner:

    1. Is focused on a plan to close.

    2. Is organized.

    3. Knows the next steps needing completion.

    4. Completes each step in logical procession.

    5. Is prepared to go to the next step.

  3. A110 consists of the following steps:

    1. Review the case-built file.

    2. Establish initial taxpayer contact by mail.

    3. Import, prepare and mail the approved taxpayer and/or the representative an appointment letter.

      Note:

      Refer to IRM 4.10.2.5.7, Surveying International Feature Returns, for exceptions for international excise examination cases.

    4. If the appointment must be scheduled or re-scheduled beyond 45 days after the initial contact, managerial involvement must be documented in the case file.

    5. Obtain excise manager audit plan concurrence within 30 business days after initial appointment if case is not closed.

A115 - Group Manager Concurrence Meeting Check Sheet

  1. A115 - Group Manager Concurrence Meeting Check Sheet documents the group manager concurrence meeting (GMCM). This occurs between the excise examiner and the excise manager within 30 business days after the initial meeting with the taxpayer or the first receipt of information from the taxpayer in a correspondence case. The GMCM will cover:

    1. The initial appointment meeting with the taxpayer or the first receipt of information from the taxpayer in a correspondence case.

    2. The reasonableness of the MCD established.

    3. Accomplishments and planned actions for completing the case.

    4. Issues identified.

    5. Location of the examination work.

    6. Concerns or barriers to closing the case.

    Note:

    In situations where it takes more than one meeting with the taxpayer to complete the planning tasks, the GMCM should be scheduled 30 business days after the completion of those tasks. The GMCM may not necessarily occur after the initial meeting with the taxpayer.

  2. The GMCM is required for all excise examiners GS-12 and below.

  3. Excise examiners, GS-13, are encouraged to utilize a GMCM process to provide updates on cases and to obtain guidance from excise managers.

  4. When the 30 business day requirement cannot be met, reasons for the delay must be documented sufficiently. Only in rare circumstances should the meeting occur prior to the initial meeting with the taxpayer or the first receipt of information from the taxpayer in a correspondence case.

  5. Excise managers acknowledge completion of the GMCM by initialing and dating the A115.

  6. Refer to IRM 1.4.40.7.6, Resource Guide for Managers, SB/SE Field and Office Examination Group Manager, Group Manager Concurrence Meeting (GMCM) for Revenue Agents.

    Note:

    A GMCM is not required, if the case is closed to the excise manager within 30 business days of the initial appointment or the first receipt of information from a taxpayer in a correspondence case.

A120 - Initial Appointment Check Sheet

  1. A120 - Initial Appointment Check Sheet provides guidance in conducting the initial appointment with the taxpayer. It serves as a guide to assist the examiner with completing the examination. Additionally, it provides an index and reference to supporting workpapers.

  2. Initial contact procedures found in IRM 4.10.2.8 apply.

    Note:

    The excise examiner must use an appropriate initial contact letter, such as Letter 2205-A, to notify the taxpayer his or her return was selected for examination. Initial contact will not be made by telephone. After mailing the contact letter and sufficient time lapsed for the taxpayer to respond (14 calendar days from mailing the letter), the excise examiner may initiate contact with the taxpayer by telephone as needed. When a valid Form 2848 is on file for the taxpayer, the appropriate initial contact letter will be mailed to the taxpayer and a copy of that letter will be mailed to the representative along with Letter 937.

    Note:

    For excise International examinations, the examiner may include an IDR with the initial contact letter.

  3. At the beginning of the initial appointment, the excise examiner will discuss and document the following:

    1. The mutual responsibilities (i.e., what the taxpayer can expect from the excise examiner and what the excise examiner can expect from the taxpayer).

    2. The excise examiner’s availability to meet and resolve issues, the normal working hours of the excise examiner and the contact information for the excise manager, including name, address and telephone number.

    3. The excise examiner will discuss the examination issues and explain that the scope of the examination may expand, as additional issues arise.

  4. Prior to concluding the initial appointment, the excise examiner will work with the taxpayer and/or the taxpayer’s representative to set the MCD. Consideration must be given to the number of expected field visits, the availability of the excise examiner and the taxpayer. Every effort should be made to complete the examination as soon as possible.

    Note:

    If the MCD is later changed by more than 30 calendar days, the excise examiner must discuss the new date with the excise manager and the taxpayer.

A125 - Initial Interview Questions and Notes

  1. Interviews will be documented on A125 - Initial Interview Questions and Notes.

  2. If not already addressed during the pre-contact phase of the examination, the excise examiner must take the following actions during the initial interview:

    1. Verify the taxpayer’s receipt of Pub 1 and Notice 609.

    2. Briefly describe the rights described in Pub 1 and Notice 609 and respond to any questions.

    3. Briefly describe the examination process and inform the taxpayer and/or the representative of the options available for resolving unagreed cases.

    4. Document confirmation of receipt of Pub 1 and Notice 609 and the discussion held with the taxpayer and/or the representative on Form 9984.

  3. Interviews provide information about the taxpayer’s financial history, business operations, use of internal controls and books and records not available from other sources. Interview questions are planned to address items specific to the taxpayer under examination. The type of return and relevant facts and circumstances need to be considered in the interview plan.

  4. Interviews should be documented in sufficient depth to give a clear understanding of the taxpayer and the taxpayer's operations.

  5. Interviews should obtain the information needed to make informed judgments about the scope and depth of the examination and to correctly resolve issues.

  6. Questions specific to the abstracts should be incorporated into A125.

    Note:

    The completion of A125 does not necessarily constitute a complete interview.

  7. Appropriate follow-up questions should be asked. The person interviewed should have sufficient knowledge of the taxpayer’s operations to answer questions.

  8. Adequate narrative and specific abstract commentary is essential. Excise examiners need to follow the interview guidance contained in IRM 4.10.3.3, Examination of Returns, Examination Techniques, Interviews: Authority and Purpose.

Tour of Business
  1. Tours of business sites should be conducted during examinations of all business entities. Touring the business as part of the initial interview process helps the excise examiner obtain a better understanding of the taxpayer’s operations and business flow. Generally, the principal location and any pertinent locations acquired during the period under examination, should be visited. However, consideration should be given to the cost effectiveness and practicality of conducting the tour. Consideration should be given to the taxpayer’s right to privacy, which under TBOR, ensures any inquiry or examination will be no more intrusive than necessary. When appropriate, alternatives should be considered. The excise examiner needs to document all findings and conclusions on the A125.

  2. Treas. Reg. 301.7605-1(d)(3)(iii) states that "(r)egardless of where an examination takes place, the Service may visit the taxpayer’s place of business... to establish facts that can only be established by direct visit."

  3. Refer to IRM 4.10.3.4, Tours of Business Sites and Inspection of Residences.

B200-1 - Required Filing Checks Prior/Subsequent Period Returns, Related Excise Tax Returns, Filing Verification

  1. The excise examiner documents evidence of voluntary compliance on B200-1 - Required Filing Checks Prior/Subsequent Period Returns, Related Excise Tax Returns, Filing Verification, (RFC).

  2. Excise examiners should perform taxpayer filing verification checks to determine that taxpayers are in compliance with all federal tax return filing requirements and all returns reflect the substantially correct tax. Refer to IRM 4.10.5, Required Filing Checks.

  3. The excise examiner will:

    1. Identify all prior, subsequent and related returns.

    2. Include a summary of the analysis performed.

    3. Document the conclusions reached.

  4. The excise examiner will indicate why a prior or subsequent period is not picked up when an adjustment is proposed in the current period.

  5. The RFC include the analysis of prior, subsequent and related returns. The analysis and pick-up of prior, subsequent and related returns, when warranted, is an excise examiner’s primary responsibility.

  6. Limited scope examinations do not eliminate the need to perform RFC.

  7. The inspection of a return is not an examination. The excise examiner may question the taxpayer concerning items on the return in an attempt to understand how or why they occurred. The excise examiner may not request documentation concerning items on the return. If documentation is requested, an examination has been opened.

  8. When possible, excise examiners should use internal sources of information, (e.g., IDRS, Modernized e-File (MeF) and Compliance Data Environment), to complete the RFC. Filing should be verified for prior and subsequent period returns, related returns, information returns, employment tax returns, gift tax returns, other excise tax returns, pension plan returns, etc.

  9. Case file documentation should include key or summary documents secured from IDRS system verifying filing such as:

    • BMFOLI.

    • BMFOLT.

    • SUMRY.

  10. MeF is a web-based system that allows electronic filing of corporate, individual, partnership and other returns, including excise returns. The MeF system provides the excise examiner original transmitted tax return data in various formats, including a Form View, which resembles a tax return. If a return was filed using MeF, an excise examiner can access the Employee User Portal (EUP) to view the return. For additional information on EUP refer to Initiating an Examination at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/book110/employeeuserportal.aspx.

Form 5346, Examination Information Report
  1. When the excise examiner receives information containing sufficient compliance value that may warrant another compliance action, that excise examiner completes Form 5346. Examples include:

    1. Non-related taxpayers having similar audit issues present.

    2. A referral of the taxpayer for non-excise related issues (i.e., income tax or employment tax referrals).

    Note:

    If the excise examiner has related tax periods for the same taxpayer, those tax periods are established on Form 5345-D, Examination Request - ERCS (Examination Returns Control System) User. This would include parent/subsidiary relationships and brother/sister businesses, as well as prior and subsequent tax periods for the primary entity.

  2. Form 5346 must be electronically submitted to the excise manager. Once approved, the excise manager sends Form 5346 and any additional information to the SB/SE WSD mailbox at "*SBSE Excise WSD. " Refer to IRM 4.24.18.4, Excise Operations Support, EOS Group Mailbox Receipt Leads.

B200-2 - Related Excise Tax Returns Consideration

  1. B200-2 - Related Excise Tax Returns Consideration documents the excise examiner’s appropriate follow-through, i.e., whether the taxpayer:

    1. Manufactures, produces, recycles, or imports items for sale or use subject to excise taxes.

    2. Uses products subject to excise taxes.

    3. Receives payment for services subject to excise taxes.

    4. As a retailer or importer, engages in the sale, lease, or use of goods subject to excise taxes.

    5. Has been a party to transactions subject to excise taxes.

    6. Engages in miscellaneous activities subject to excise taxes.

C300 - Book to Return Reconciliation Check Sheet

  1. C300 - Book to Return Reconciliation Check Sheet documents the excise examiner’s analysis and consideration of the taxpayer’s operations and activities for determining the proper examination scope.

  2. In the course of examining Form 720, Quarterly Federal Excise Tax Return, it is often necessary for the excise examiner to verify the taxpayer’s total sales of relevant products for a tax period.

  3. The excise examiner will often review the total sales for a year shown on a taxpayer’s income tax return and inquire into the purpose of any adjustments. This information helps establish the accuracy of all Form 720 returns filed during the taxable year.

  4. Conducting a books-to-return analysis is especially important when the taxpayer has not filed an excise return. Even if the taxpayer has not filed an excise return and there is no amount on the excise return to reconcile, the excise examiner must still perform a books-to-return analysis and document the conclusions reached regarding what sales/revenue should have been reflected on the non-filed return.

    Note:

    The inspection of the year-end books and records to determine year-end adjustments and total sales for the year for excise purposes and tying the year-end books and records to reported sales on the income tax return are part of an excise tax examination. There is no legal requirement to treat a thorough review of the annual sales receipts and any documents related to adjustments as reported on the annual return as a separate income tax examination. When the period under examination is the third quarter, the review of the year-end books and records for sales and adjusting entries does not constitute an examination for the fourth quarter Form 720 return.

  5. An examination is started when actual books and records of sales are requested and examined for a period for which a return has been filed or is due to have been filed.

  6. The excise examiner will reconcile all sales/revenues shown on the excise return with those on the income tax return. The excise examiner will document the justification for any differences between the two amounts. The excise examination should account for all sales/revenues (and sometimes uses) are subject to excise tax until verified and proven otherwise. Through the examination process, the excise examiner verifies and eliminates those sales/revenues (and sometimes uses) not subject to excise tax. All remaining items are then taxable.

    Note:

    An excise examiner who only verifies the accuracy of the taxpayer-prepared worksheets is not properly considering all sales/revenues and uses that the taxpayer may not have included on those schedules.

  7. The excise examiner will document any adjustments made by the taxpayer to the amounts shown for sales/revenues on the books of the taxpayer.

  8. An in-depth job aid covering the book to return reconciliation may be found at Examination in Process at the Excise Tax Knowledge Base Homepage located athttps://portal.ds.irsnet.gov/sites/vl037/lists/book2/books%20to%20returns%20reconciliation.aspx.

C305 - Internal Controls Check Sheet

  1. C305 - Internal Controls Check Sheet documents the analysis of internal controls and assesses the level of control risk.

  2. It is important to obtain sufficient evidence to determine the accuracy of the taxpayer’s return. The excise examiner must determine the appropriate amount of evidence to accumulate and establish the proper depth of the examination. This decision is a matter of judgment and important because of the prohibitive cost of examining and evaluating all available evidence. Factors to consider when establishing the depth of the examination include:

    1. The risk of taxpayer errors that are individually or collectively material.

    2. The risk that examination tests will fail to uncover material errors (e.g. the examination techniques used, the nature of the errors (intentional or unintentional) and the reliability of available evidence).

  3. The excise examiner should either flowchart key business operations or document, in narrative form sufficient detail, which provides information comparable to that shown by flowcharting the process.

C310 - Fraud Awareness Check Sheet

  1. Excise examiners should familiarize themselves with the IRM 25.1, Fraud Handbook, when developing a fraud case.

  2. IRM 25.1.7, Failure to File, discusses the various procedures concerning fraud in failure to file cases.

  3. To assist in the timely development of fraud cases, the excise examiner, with the excise manager’s concurrence, should contact a Fraud Technical Advisor (FTA) and the Excise Fraud Analyst (Fraud Analyst) when initial indicators of fraud are uncovered. A plan of action is developed jointly to document firm indications of fraud. An integral part of the plan is establishing that sufficient affirmative acts exist confirming fraud. The plan should be a joint effort by the excise examiner, the excise manager, the FTA and the Fraud Analyst.

  4. The FTA and Fraud Analyst serve as consultants during case development.

  5. The excise examiner will use the C310 to document actions taken.

  6. The excise examiner will complete Form 11661, Fraud Development Recommendation - Examination, when he or she suspects fraud. Form 11661 should be forwarded electronically via secure e-mail to the FTA through the excise manager. Upon receipt of an approved Form 11661, the case is placed in Status Code 17 (Fraud Development Status) on the Audit Inventory Management System (AIMS).

  7. When the excise examiner, excise manager and FTA have agreed that the case contains sufficient evidence to prove the existence of firm indicators of fraud, the excise examiner (with the help of the FTA, if needed) prepares Form 2797, Referral Report of Potential Criminal Fraud Cases, to refer the case to Criminal Investigation (CI). The excise examiner will route Form 2797 via secure e-mail to the excise manager, who forwards it to the FTA via secure e-mail.

    Note:

    Form 2797 is not required for civil fraud referrals.

  8. CI has 10 business days after receipt of the referral to contact the excise examiner, excise manager and FTA and set up a meeting to discuss the case. At the 10-day meeting, the excise examiner provides CI with the entire case file and discusses the issues.

  9. If a case referred to CI is accepted for a criminal investigation, the case will be placed in Status Code 18 (Accepted by CI). The excise manager monitors Status Code 18 cases through quarterly four-way conferences with CI.

  10. Excise examiners are responsible for monitoring all civil assessment Statutes of Limitations (SOLs) during joint investigations, including prior and subsequent tax periods and related tax returns under examination/collection activity.

    • When fewer than 210 days remain on the SOL for assessment, the excise examiner completes Form 10498-B, Joint Investigations Intent to Solicit Consent to Extend Statute, to request CI’s permission to solicit the taxpayer’s consent to extend the assessment SOL to issue a notice of deficiency. The completed Form 10498-B is sent via secure e-mail by the excise manager to the Supervisory Special Agent (SSA). CI must accept or decline the request within 10 days after receipt of Form 10498-B. The SSA indicates the desired action by checking the appropriate boxes on Form 10498-B. The SSA then forwards via secure e-mail Form 10498-B to the Special Agent in Charge (SAC). The SAC indicates approval by entering his/her signature and the date. The SAC forwards via secure e-mail the completed Form 10498-B to the Compliance Authorizing Official, who is generally the excise territory manager. The Compliance Authorizing Official forwards via secure e-mail the approved Form 10498-B to the excise manager.

    • For instructions on updating the statute on AIMS, refer to Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS and to Form 10498-B instructions.

    • Refer to IRM 25.1.4.3.8, Administrative Joint Investigation, Statute Protection.

  11. For additional information regarding fraud, refer to the Fraud Development Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl019/pages/default.aspx.

D400 - Initial Taxpayer Contact Check Sheet

  1. D400 - Initial Taxpayer Contact Check Sheet documents action items the excise examiner should consider when making initial contact. Examples include

    1. Discussed taxpayer rights.

    2. Discussed the examination process.

    3. Advised the taxpayer that his or her return was selected for examination.

    4. Addressed questions or concerns of the taxpayer.

  2. Initial contact procedures found under IRM 4.10.2.8 apply.

  3. All initial taxpayer contacts must be made by mail. For this reason, the excise examiner will issue Letter 2205-A, with Pub 1 and Notice 609. Prior to contacting the taxpayer, the excise examiner must determine if a POA is on file before mailing Letter 2205-A. If a valid POA is on file for the tax period(s) under examination, the excise examiner must make initial contact with the taxpayer and the representative. After mailing the contact letter and sufficient time lapsed for the taxpayer to respond (allow 14 calendar days from mailing), excise examiners may initiate contact by phone with the taxpayer as needed. The initial IDR is not issued with this initial contact letter except for situations involving excise International examinations. The IDR is instead sent with the appointment confirmation letter after contact with the taxpayer is established and the appointment is scheduled.

    Note:

    When the taxpayer responds to the initial contact letter, the excise examiner will follow the D400 and address all required information.

  4. The excise examiner discusses taxpayer rights as outlined in Pub 1 with the taxpayer and answer questions the taxpayer may have about his or her rights.

  5. The excise examiner must explain to the taxpayer the records that should be available for the examination. If the taxpayer volunteers information concerning examination issues, the excise examiner should include that information when documenting the discussion.

  6. When the initial appointment is scheduled, Letter 3253, Taxpayer Appointment Confirmation, and/or Letter 3254 are mailed to the taxpayer and/or the taxpayer’s representative confirming the time/place of the examination and the records that must be available. The items shown below must be enclosed with the letter to the taxpayer:

    1. Pub 1

    2. Notice 609

    3. Form 4564, Information Document Request

  7. If the attempts to contact the taxpayer are not successful, refer to IRM 4.10.2.8.4, Undeliverable Initial Contact Letters.

E500 - Penalty Issues Check Sheet

  1. The E500 - Penalty Issues Check Sheet documents the assertion or non-assertion of penalties by excise examiners and excise managers.

  2. IRC 6751(b)(1) states that "no penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate."

  3. Notwithstanding the exception noted in paragraph 4 below, this approval requirement also applies to the imposition of any fraud penalty including fraudulent failure to file penalty under IRC 6651(f).

  4. IRC 6751(b)(2) provides an exception to the managerial approval requirement for certain penalties calculated through electronic means. This exception applies to the following penalties:

    1. IRC 6651, Failure to File Tax Return or to Pay Tax.

    2. IRC 6654, Failure by an Individual to Pay Estimated Income Tax.

    3. IRC 6655, Failure by Corporation to Pay Estimated Income Tax.

    4. Failure to deposit penalty IRC 6656, if using CC FTDPN without any independent judgment with respect to the applicability of the penalty. Refer to IRM 20.1.1.2.3.2, Penalty Handbook, Introduction and Penalty Relief, Underreporter Program, IRM 20.1.1.2.3.3, IDRS Command Code FTDPN, and IRM 20.1.4.21.7, Failure to Deposit Penalty, Managerial Approval.

    5. Any other penalties calculated automatically through electronic means.

    Note:

    A penalty calculated automatically through electronic means is more than merely an electronic device used to perform arithmetic functions. Instead, the assessment of a penalty qualifies as one calculated through electronic means, if the penalty is assessed free of any independent determination by an IRS employee as to whether the penalty should be imposed against a taxpayer.

  5. For purposes of this section, the term "penalty" includes "any addition to tax or any additional amount." Refer to IRC 6751(c).

  6. The excise manager must perform a meaningful review of the excise examiner's penalty determination prior to assessment. The excise manager should verify the penalty impositions are accurate and the excise examiner documented properly in the file, the conclusions regarding assertion or non-assertion of penalties. The managerial review must be documented in writing and retained in the case file. Refer to IRM 20.1.1.2.3, Penalty Handbook, Introduction and Penalty Relief, Managerial Approval for Penalty Assessments.

  7. Refer to IRM 4.10.6, Penalty Considerations, for the assertion and non-assertion of penalties.

  8. Refer to IRM 20.1.1.3.2, Reasonable Cause, for penalty relief.

  9. Refer to IRM 4.24.9, Excise Tax Penalties and Excise Return Preparer Penalties Guidance, and IRM 20.1.11, Excise Tax and Estate and Gift Tax Penalties.

Risk Analysis Workpaper

  1. The excise examiner should compare the potential benefits derived from examining a return to the resources required to perform the examination.

  2. The excise examiner is expected to effectively manage his or her workload by prioritizing the issues so that issues with higher audit potential are examined compared to those with lower potential.

  3. The excise examiner is expected to use professional judgment to determine if it is in the government’s best interest to continue the examination and to document the excise examiner's risk-based decisions with regard to depth and scope of the examination.

  4. At the mid-point of the examination, using risk analysis, the excise examiner should determine whether the remaining classified/identified issues should be examined. This decision should be based on the facts and circumstances, evaluation of internal controls (refer to IRM 4.24.6.5.11) and the excise examiner’s judgment. For example, if the resulting additional tax is not expected to be material, or the time to develop additional issues is not justified based on the potential for more tax, further examination steps are not appropriate.

  5. Refer to IRM 4.10.2.4, Evaluation of Audit Potential.

Procedural Guidance for Certain Types of Excise Examinations

  1. This section covers unique procedural guidance relating to excise examinations involving:

    • International issues.

    • Federal agencies.

    • Wagering issues.

    • Facilities and services taxes under IRC 4251, IRC 4261 and IRC 4271.

    • Examinations of an air collector for taxes imposed under IRC 4261.

    • Direct assessment procedures under IRC 4251, IRC 4261 and IRC 4271.

    • Structured settlement factoring transactions.

    • Executing blanket export exemption certificates.

    • Jeopardy assessments transferor and transferee cases.

    Note:

    During the examination of a taxpayer, the excise tax examiner should consider all excise issues when warranted. Refer to IRM 4.24.6.5.9 and IRM 4.24.6.5.15.

Excise Examinations with International Issues

  1. Excise examiners are responsible for conducting excise tax examinations of international taxpayers. Generally, those areas addressed are air transportation, foreign insurance, Ozone Depleting Chemicals (ODC) and fuel.

International Case Referrals for Foreign Insurance Excise Tax
  1. When an excise examiner encounters a foreign insurance transaction with a foreign insurer or reinsurer who has an excise tax exemption, such as a IRC 953(d) election or a company in a country with an excise exemption in that treaty, the following required procedures must be followed:

    1. Complete Form 5346.

    2. Include amount of reinsurance or reinsurance purchased in the “other information” section on Form 5346.

    3. State whether exemption is due to a IRC 953(d) election or a treaty exemption in the “other information” on Form 5346.

    4. Secure group manager approval signature.

    5. Submit to WSD via secure e-mail address: "*SBSE Excise WSD."

  2. The information submitted on Form 5346 will be reviewed and classified by WSD according to approved criteria.

  3. If the examination of the foreign entity is to be conducted by an international excise examiner, the international excise examiner will coordinate all actions with the excise examiner assigned to the parent/related entity case, as well as with the Coordinator Industry Case (CIC) Coordinator assigned to the parent/related entity case, if applicable.

Excise Examinations of Federal Agencies

  1. In general, federal agencies are not exempt from excise taxes.

  2. The Tax Exempt/Government Entities (TE/GE) Federal, State and Local Governments (FSLG) is responsible for ensuring federal tax compliance by federal, quasi-governmental, state agencies, city, county and other units of local government, American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands. FSLG coordinates activities with other IRS offices, such as Customer Account Services, Counsel, Government Liaison & Disclosure, Employee Plans and Excise Tax Examination.

  3. At the beginning of an examination of a federal agency, the excise examiner will review the IDRS CC AMDIS to determine whether FSLG has an open AIMS control on the taxpayer. If so, the excise examiner should contact FSLG by sending a secure email to "tege.fslg@irs.gov" . The excise examiner should advise FSLG that he or she plans to start an examination on the taxpayer. FSLG will respond to the excise examiner, if coordination is necessary. The excise examiner does not need to delay opening an examination while awaiting FSLG’s response.

  4. To contact FSLG through TE/GE, the excise examiner should use SRS. For more information about SRS, refer to IRM 4.24.6.12.

  5. Also refer to IRM 4.90, Federal, State and Local Governments (FSLG).

Excise Examinations with Wagering Issues

  1. The potential collectibility of the proposed excise tax liability must be reviewed and evaluated for excise examinations with wagering issues.

  2. For a wagering case where the excise tax liability is $75,000 or greater, the excise examiner must contact the Abusive Tax Avoidance Transactions (ATAT) Collection Coordinator covering the state where the taxpayer resides for assistance in determining collectibility.

  3. The excise examiner provides the ATAT Collection Coordinator with the taxpayer's:

    1. Name.

    2. Address.

    3. TIN.

    4. A completed Form SS-4, Application for Employer Identification Number, that includes the taxpayer's Social Security Number on the form for association with the taxpayer's Employee Identification Number.

  4. The ATAT Collection Coordinator assigns an ATAT revenue officer (RO) to assist the excise examiner.

  5. The excise examiner contacts the assigned ATAT RO to provide pertinent financial information that has been secured.

  6. Upon completion of the investigation, the ATAT RO provides the excise examiner with a summary addressing the collectibility of the proposed tax assessment. This information should be reviewed and evaluated by both the excise examiner and excise manager before further examination steps are initiated. The decision made by the excise examiner and excise manager must be documented in the case file.

  7. All excise examiners need to be aware that TE/GE, not SB/SE, examines wagering issues for Indian Tribal Governments. Refer to IRM 4.88.1.5, Indian Tribal Governments Examination Issues and Procedures, Examination Issues Pertaining to ITG Cases, Indian Gaming.

Excise Examinations Relating to Facilities and Services Taxes Under IRC 4251, IRC 4261 and IRC 4271

  1. For examination procedures including an air carrier for imposition of tax under IRC 4261, refer to IRM 4.24.6.6.5.

  2. For general procedural guidelines in the case of uncollected taxes, see Treas. Reg. § 49.4291-1.

  3. Determine whether the collector (the entity that files the Form 720 and deposits taxes collected from the actual taxpayers) provided an "uncollected tax report" described in Treas. Reg. 49.4291-1. If the collector has not provided the report and an examination reveals that the collector failed to collect taxes due on past transactions, the excise examiner should request that the collector:

    1. Attempt to collect the back taxes from the actual taxpayers.

    2. Report the taxes on Form 720X, Amended Quarterly Federal Excise Tax Return, for the period during which the taxes should have been collected.

    3. Provide a list of back taxes collected showing each person's name and address, the amount of tax collected, the date the tax was incurred, and the date the tax was collected.

    4. Provide a list of uncollected back taxes, showing each person's name and address, the amount of tax due, and the date the tax was incurred.

  4. If the collector agrees to follow the preceding procedures, the examination will be held open for a reasonable amount of time to allow the collector to collect the back taxes.

  5. The excise examiner should also follow the procedures below:

    1. If the collector filed Form 720, the prior periods covered by the examination should be established on AIMS using regular Master File procedures.

    2. The substitute for return (SFR) procedures will be followed if the collector did not file Form 720. See IRM 4.24.6.10 .

    3. Copies of current Form 720 filed by the collector to report tax collected on past transactions will be secured and made part of the examination work papers. The work papers will also include the lists described in (3)(c) and (d) above.

    4. Where the collector is unable to collect back taxes and the failure to collect was not willful, as defined for purposes of IRC 6672, Non-Master File (NMF) assessments will be made directly against the actual taxpayers using correspondence examination procedures. For example, the failure is not willful if the collector timely provided the "uncollected tax report." See IRM 4.24.6.6.6 for detailed procedures.

    5. In such cases, the examination of the collector should be closed as a "no change" case. An assessment of additional tax should not be proposed for the prior periods.

  6. If the collector refuses to collect the taxes it failed to collect on past transactions, the following procedures apply:

    1. Establish on AIMS all prior periods covered by the examination.

    2. Consider the Trust Fund Recovery Penalty (TFRP) under IRC 6672, if the collector's failure to collect and remit the tax was willful. See IRM 5.7.3.3.2. Trust Fund Compliance, Establishing Responsibility and Willfulness for Trust Fund Recovery Penalty, Establishing Willfulness, for a discussion of willfulness. See IRM 4.24.9.5, IRC 6672 Trust Fund Recovery Penalty, for asserting the TFRP.

    3. If the IRC 6672 penalty is not applicable, assess directly the back taxes against the actual taxpayers using correspondence examination procedures in IRM 4.24.6.6.6.

    4. In such cases, close the examination of the collector as a "no change" case. The work papers will reflect the back taxes, which were not collected by the collector.

  7. If the collector volunteers to pay an amount equal to the back taxes from its own funds, the procedures in IRS Policy Statement 4-104 allow for acceptance of the payment by the collector in lieu of asserting tax against the actual taxpayer or asserting the IRC 6672 penalty. As a condition to the acceptance of such payments, the collector is required to execute a waiver of its rights to claim any refund on the grounds of failure to collect the tax. An example of a waiver template may be found at Other Examination Work and Referrals at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/otherexaminationworkandreferrals/waivrofcollectortofileclaim.aspx.

    Note:

    The waiver language should read as follows: "It is agreed that (Corporation) waives its right to claim a refund with respect to any portion of this voluntary payment. No penalties will be assessed in connection with these tax assessments."

  8. The excise examiner should make the assessments directly on the collector’s Form 720 using standard report writing procedures. Refer to IRM 4.24.20 and IRM 4.24.21.

    Note:

    The signed waiver is attached to the examination report

    .

  9. Rev. Rul. 58-300, 1958–1 C.B. 454 provides guidelines on the assessment of interest in collected tax cases. Interest assessments are made against the actual taxpayers when warranted.

  10. There is no basis for assertion of a delinquent filing penalty against the actual taxpayers.

Excise Examinations of an Air Collector for Taxes Imposed Under IRC 4261

  1. If an examination of a collector, who is also an air carrier, for taxes imposed under IRC 4261 reveals that the collector/air carrier failed to collect one or more of these taxes due under IRC 4261, the excise examiner will:

    1. Determine if the air carrier under examination provided the initial segment of taxable transportation. IRC 4263(c) provides that where any tax imposed by IRC 4261 is not paid at the time payment for transportation is made, then such tax shall be paid by the air carrier providing the initial segment of such transportation, which begins or ends in the United States (U.S.). Normally, this will be the air carrier/collector who sold the transportation to the taxpayer but it could be another air carrier. If the air carrier under examination is the air carrier who provided the initial segment of transportation beginning or ending in the U.S., then prior and subsequent tax periods where there is potential liability should be established on AIMS using Master File procedures.

    2. Follow the SFR procedures, if the air carrier who provided the initial domestic segment of air transportation did not file Form 720.

    3. If the excise examiner does not have the air carrier that provided the initial segment that begins or ends in the U.S. under examination, that excise examiner should prepare and submit Form 5346. Refer to IRM 4.24.6.5.8.1. Once the air carrier that provided the initial segment is assigned for examination by WSD, the excise examiner should initiate an examination of that air carrier.

    4. The excise examiner should prepare detailed work papers to support taxes assessed under IRC 4263(c).

    5. Ensure all components of the taxes imposed under IRC 4261 are properly included in the proposed assessment. Work papers will include computations of the tax and a review of all flights.

    6. Prepare an assessment of the uncollected tax against the air carrier utilizing forms used in an agreed or unagreed case, whichever applies. Refer to IRM 4.24.20 and IRM 4.24.21.

    7. If SOL extensions are necessary, extend all applicable statutes. Refer to IRM 4.24.6.7.1.

  2. These procedures are limited to air carriers who failed to collect tax taxes imposed under IRC 4261 and may not be utilized for taxes due under IRC 4271. Refer to IRM 4.24.6.6.4.

Direct Assessment Procedures Under IRC 4251, IRC 4261 and IRC 4271

  1. Under IRC 4251, IRC 4261 and IRC 4271, the taxes imposed are "collected taxes." Therefore, the person making a payment for the taxable air transportation service is considered the taxpayer and liable for the tax; however, the collector of the payment is the entity required to file Form 720 and remit the collected tax to the government. Tax attaches at the time payment is made for the taxable air transportation service. Form 720 filed by the collector should include all amounts collected for the period for which the Form 720 is filed. The taxpayer (i.e., the person paying for the taxable air transportation service) does not have a filing requirement for these taxes. Treas. Reg. 40.6011(a)-1(a)(3) provides that the person required to collect a collected tax, and not the person incurring liability for the tax, must file Form 720. Generally, in examinations where air transportation taxes are due, the assessment is made against the collector.

  2. In instances where a tax assessment must be made against the taxpayer (the person paying for the taxable air transportation service), direct assessment procedures are followed. Direct assessments are controlled on Master File. To establish controls on a taxpayer for whom direct assessment applies, the excise examiner must submit Form 5346. Refer to IRM 4.24.6.5.8.1. The excise examiner should note in the comments section that this is a direct assessment and identify the collector where the issue was originally identified. WSD will establish the Master File controls after receipt of Form 5346.

  3. If the taxpayer has no Master File controls established, WSD should establish the case on Examination Return Control System (ERCS) using NMF 45 controls. The case can then be established and worked in IMS. Time can then be charged to ERCS through the IMS time synchronization mechanism.

  4. If the taxpayer is currently controlled on Master File, the excise examiner will work the case outside IMS. Time should be charged to Activity Code 521.

  5. The excise examiner should ensure each tax period is controlled where a collector or collectors failed to collect tax on transactions arising in different quarters.

  6. The excise examiner must ensure the SOL date established by WSD is correct. If there is an error, the excise examiner assigned the case must correct the error using Form 5354, Examination Request Non-Master File.

    Note:

    Even though the taxpayer is not required to file a return, the taxpayer’s statute begins with the filing of Form 720 by the collector who should have collected the tax. See IRC 6501(a). For purposes of statute control, the excise examiner should know which Form 720 quarter includes the date the purchasing taxpayer did not pay the service provider. If transactions involve more than one quarter, all statutes must be protected individually and Form 895 is prepared as required. The excise examiner should update the SOL information to reflect statute extensions secured from the taxpayer, as needed. Statute extensions executed by the entity that should have collected tax on the transaction (the collector) do not extend the assessments SOL against the taxpayer.

  7. Letter 898, 15 - 30 Day Letter-Statement of Proposed Adjustments, is used when making direct assessment of a "collected" tax against an actual taxpayer where the collector failed to collect taxes due on past transactions. Items to consider when preparing Letter 898 are:

    1. The period covered by the examination should be shown on Letter 898 as an inclusive period from the date of the first transaction for which tax was not collected to the date of the last transaction for which tax was not collected.

    2. Completing the last page of Letter 898, eliminates the need for an accompanying report. If a separate report is necessary as in the case of claim adjustments, Letter 898 will be the mechanism for transmitting the report and should be notated "See Attached Report" on the last page.

    3. Form 886-A, Explanation of Items, should be attached to explain the proposed assessment.

  8. Letter 898 offers the recipient taxpayer three options. The taxpayer may:

    1. Sign and return the Statement of Proposed Adjustments on Letter 898.

    2. Request an appointment to discuss the case with the excise manager.

    3. Within 30 days, request consideration of the case by Appeals.

  9. If the taxpayer agrees to the proposed assessment, Letter 898 becomes the "return" for processing. Form 5344, Examination Closing Record, and Form 5734, Non-Master File Assessment Voucher, must also be completed before the case is forwarded to the excise manager for closure. When preparing Form 5734, the excise examiner must exercise care to utilize:

    1. NMF 46, even though the case is controlled on NMF 45.

    2. Tax Class 6.

  10. If the taxpayer has not responded to the Letter 898 after 30 days, the case is processed as agreed and the procedures in the preceding paragraph are followed. The initialed copy of Letter 898 along with Form 5344 and Form 5734 suffice for assessment of the tax.

  11. If the taxpayer does not agree and responds to Letter 898 requesting an Appeals hearing, standard procedures for unagreed cases are followed. Refer to IRM 4.24.10.

  12. No penalties apply in direct assessments as the taxpayer was not required to file a return or to make deposits. See Rev. Rul. 58-300, 1958-1 CB 454. Additionally, because the tax attaches at the time the taxpayer/customer pays the seller/collector for the taxable services, interest is due from the time the taxable services were paid until the time the tax is paid, either to the collector or the government. See Rev. Rul. 58-300 , Rev. Rul 59-306, 1959-2 CB 422 and IRM 20.2.10.3, Interest, Interest on Estate, Excise, Employment Taxes and Foreign Taxes, Excise Taxes. For CCP to calculate the interest, the excise examiner must include a list of the transaction dates and amount of tax due for each transaction in the case file at closing.

  13. Once the NMF direct assessment case established on AIMS is ready to close, it is updated to Status Code 51, by the local AIMS/ERCS Analyst. The case should be closed to CCP using Form 3210 and indicate that, "This case is NMF and is controlled on AIMS ONLY and must be closed accordingly. As such no time has been applied." The AIMS/ERCS Analyst puts the case into Status Code 51 prior to it closing to CCP.

Excise Examinations Relating to Structured Settlement Factoring Transactions

  1. Form 8876, Excise Tax on Structured Settlement Factoring Transactions, can be filed multiple times during the year and does not have a due date tied to a specific tax period. Any taxpayer filings of this form are posted for assessment to NMF using Abstract Code 234.

  2. Leads for Excise Tax Examination on structured settlement factoring transactions are sent to the field from WSD and controlled on AIMS and ERCS on NMF as non-filer leads using MFT 27, Abstract Code 034.

  3. If during the course of the examination it is determined that the taxpayer is liable for filing a prior or subsequent Form 8876, the excise examiner will submit Form 5345-D and request NMF controls.

  4. If the excise examiner reviews records for multiple months, Form 5345-D is completed for each month/period reviewed.

  5. The statute is the alpha statute EE.

  6. If the case is agreed, the excise examiner updates the statute to three years from the date the signed Form 5384 is received. The excise examiner need not submit a SFR for processing.

Examples of Closing Procedures for Excise Tax on Structured Settlement Factoring Transactions
  1. In February 2014, the excise manager receives a non-filer lead for a company that may be liable for the excise tax on structured settlement factoring transactions from WSD. Case controls are established on NMF under MFT 27, abstract code 034 for the 201212 period. The case is assigned to an excise examiner who examines the taxpayer’s books and records for the month of December 2012. The excise examiner determines the taxpayer is not liable for the tax for this month, but through discussions with the taxpayer the excise examiner decides to examine the books and records for October and November 2012. The excise examiner submits Form 5345-D requesting NMF case controls for the 201210 and 201211 periods. The excise examiner determines the taxpayer is liable for the excise tax on structured settlement factoring transactions for the 201210 and 201211 periods. The excise examiner solicits and receives a signed agreement on March 15, 2014. At this point the excise examiner:

    1. Issues Letter 930, Non-filer No Liability SFR Transmittal, for the 201212 period.

    2. Updates the statute for the 201210 and 201211 periods to 03/15/2017.

    3. Prepares the case file for closure using Disposal Code (DC) 36 for the 201212 period and DC 03 for the 201210 and 201211 periods on Form 5344

  2. Assume the same facts as in IRM 4.24.6.6.7.1(1) except that upon the initial appointment on March 8, 2014, the taxpayer gives the excise examiner delinquent Form 8876 for the 201210, 201211 and 201212 periods. The excise examiner examines the taxpayer’s books and records to determine whether the submitted delinquent forms are substantially accurate. As a result, the excise examiner will:

    1. Not forward the delinquent forms to CEAC for processing.

    2. Ask the taxpayer to make an advanced payment on the deficiency to ensure the taxpayer is not charged any undue interest.

    3. Submit Form 5345-D requesting NMF case controls for the 201210 and 201211 periods.

  3. If, after review of the taxpayer’s books and records, it is determined that the delinquent forms will be accepted as filed, the excise examiner will:

    1. Incorporate the amounts shown on the delinquent forms into the final examination report.

    2. Attach the delinquent forms to and obtain the taxpayer’s signature on the examination report, which suffices as agreement to the tax liability as represented on the examination report.

    3. Update the statute for the periods to 03/08/2017.

    4. Close the case using DC 08.

  4. If, after review of the taxpayer’s books and records, it is determined the delinquent forms will not be accepted as filed, the excise examiner will:

    1. Process the delinquent forms as a partial assessment by incorporating the amounts shown on the delinquent forms into an appropriately completed examination report.

    2. Prepare Form 3198, Special Handling Notice for Examination Case Processing.

    3. Complete line 12, Form 5344.

    4. Submit the partial agreement package to CCP for a NMF assessment and indicate on Form 3198 NMF - Partial Assessment.

    5. Complete the examination.

    6. On the final examination report, use the tax liability reported on the processed delinquent forms as a starting point.

    7. Close the case using DC 03 (DC 07 if appealed).

Disposal Codes for Excise Tax Cases on Structured Settlement Factoring Transactions
  1. The following examined DCs are available for closing these cases:

    1. DC 03 – Agreed before issuance of Letter 950-E, 30-Day Letter - Straight Deficiency or Over-Assessment for Excise Tax Examination Cases

    2. DC 04 – Agreed after issuance of Letter 950-E

    3. DC 07 – Appealed

    4. DC 08 – Other, use when taxpayer did not sign report

  2. The above listed DCs require a completed:

    1. Form 3198.

    2. Form 5384.

    3. Form 5344.

  3. All agreed, no change and surveyed cases are closed to the CCP following normal case routing procedures.

  4. All cases closing to Appeals (DC 07) are updated to Status Code 21 and sent to the local Area Tech Services office following normal excise case routing procedures found in IRM 4.24.10.3.1, Appeals Referral Procedures,Case Routing Procedures for Unagreed Excise Tax Cases Going to Appeals.

  5. The following non-examined DCs are available for closing these cases:

    1. DCs 31/32 – If after due consideration, it is determined that an examination of the taxpayer is not necessary, the case file should be surveyed. Use either DC 31, survey before assignment, or DC 32, survey after assignment.

    2. DC 33 – Error accounts with no returns. This DC is used to remove records from the AIMS database established in error.

    3. DC 36 - No return filed. Taxpayer not liable or there is little or no tax due.

    4. DC Code 40 – No return, unable to locate taxpayer.

Executing Blanket Export Exemption Certificates

  1. Form 1363, Export Exemption Certificate (Tax on Amount Paid for Transportation of Property by Air), is used to support exemption under IRC 4272(b)(2) from the excise tax on the transportation of property by air, where property is transported by two or more methods of transportation in the course of exportation. For general guidelines see Treas. Reg. 49.4271-1(d).

  2. Form 1363 may be prepared by the shipper for each payment or, if the shipper expects to make payments for numerous export shipments over a definite or an indefinite period of time, it may be used as a blanket exemption with the permission if approved by an IRS manager with responsibility for excise tax matters.

  3. Written requests for permission to execute a blanket exemption certificate are reviewed by the Air Transportation Analyst and, if necessary, will be assigned to an excise tax group. Requests are reviewed for completeness and, when necessary, additional information will be secured from the shipper to make a determination. The determination, if made by the excise tax group, will be forwarded to the Air Transportation Analyst who will make the final determination of granting the permission.

  4. Permission will be granted where the shipper can demonstrate that it is impractical to execute a separate Form 1363 for each payment.

  5. Written notice of permission to issue a certificate is prepared by the Air Transportation Analyst and signed by managers with responsibility for excise tax matters. Written notice to the shipper that it is not entitled to execute a blanket exemption certificate will be prepared by the Air Transportation Analyst for signature by managers with responsibility for excise tax matters. There is no standard form to be used for the shipper's request or for blanket exemption permission.

  6. If the permission is for an indefinite time or an extended period time, the status of shippers who receive permission to execute blanket exemption certificates should be reviewed within six months after permission is granted and every two years thereafter, to determine if the shipper still qualifies to execute the certificates.

  7. If denial of permission to execute a blanket exemption certificate is recommended and agreement with the shipper cannot be reached at the excise manager level, the shipper can appeal to the next level of excise tax management.

  8. For indefinite or extended periods of time for the blanket exemption, a copy of the written requests and all notices of permission and denial are sent to the affected excise tax group and are maintained by the group. Permission to execute a blanket certificate shall remain in force until withdrawn or until the expiration date noted in the permission.

Procedural Guidance for Jeopardy Assessment Transferor/Transferee Cases

  1. Under IRC 6901(a)(2) an assessment may be made of the liability of a transferee for excise taxes incurred, if the transferee liability arises from the liquidation of a partnership or a corporation or a reorganization within the meaning of IRC 368(a).

  2. In such cases, if the transferee agrees to pay the excise tax due, the excise examiner will prepare a supplemental return for the taxpayer or collecting agency involved. The transferee will evidence his or her agreement by signing the return as transferee under IRC 6901(a)(2).

  3. Refer to IRM 4.4.17, AIMS Procedures and Processing Instructions, Jeopardy Assessments/Termination Assessments/Transferor-Transferee Assessments.

Extending the Period of Limitations for Assessment of Excise Tax

  1. The IRC limits the time in which the government may make an assessment of tax. Excise examiners have the primary responsibility for identifying and protecting the period of limitations for returns in their custody. IRM 25.6.1, Statute of Limitations, Statute of Limitations Processes and Procedures, provides guidance for verifying statute dates. Failure to protect the period of limitations can result in disciplinary action.

  2. Form 895 provides information, notification and statute update approval for SOLs for tax returns. Refer to the Product Catalogue for a sample document at http://core.publish.no.irs.gov/forms/internal/pdf/f895--2010-11-00.pdf.

  3. If the assessment SOL is due to expire, or if it has already expired on the assigned return, the excise examiner should immediately confer with the excise manager to determine the return’s disposal.

  4. An assessment SOL for certain excise taxes can generally be extended with the taxpayer’s consent. The excise examiner must obtain the approval of the excise manager before requesting a taxpayer execute a consent. The need for a consent should be clearly identified before solicited and the excise manager’s approval documented fully in the IMS case file. Refer to IRM 25.6.22.2.1(2), Extension of Assessment Statute of Limitations by Consent, Assessment, for an itemization of suitable conditions that allow for an extension of limitation to assess certain excise taxes.

    Note:

    The excise examiner generally cannot initiate an examination on any return with less than 365 days remaining on the assessment SOL. There are exceptions to which the excise manager may agree to extend, such as a whistleblower claim.

  5. Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, extends the assessment SOL of the excise taxes reported on:

    • Form 720.

    • Form 2290, Heavy Highway Vehicle Use Tax Return.

    • Form 730, Monthly Tax Return for Wagers.

    • Form 11-C, Occupational Tax and Registration Return for Wagering.

  6. Form 872-EX, Consent to Extend the Time on Assessment of Information Report Penalty,(Form 872-EX) extends the statutory period of limitation on assessment of civil penalties relating to information reported on:

    • Form 720-TO, Terminal Operator Report.

    • Form 720-CS, Carrier Summary Report.

    Refer to IRM 4.24.17.4, ExSTARS Statute Control and Extensions, for detailed procedures.

  7. The consent agreement is signed by the taxpayer and an authorized IRS representative to extend, to a mutually agreed upon (new) specified date, the Assessment Statute Expiration Date for excise taxes.

  8. Instructions for proper completion of Form 872-B are found in IRM 25.6.22.6.11, Excise Tax, which may be signed on behalf of the Director, Examination - Specialty Tax by excise managers as specified in Delegation Order 25-2 (Rev. 2)(formerly DO-25-2 and DO-42, Rev. 28). Refer to IRM 1.2.52.3, Servicewide Policies and Authorities, Delegations of Authority for Special Topics Activities, Delegation Order (25-2)(Rev. 2)(formerly DO-25-2 and DO-42, Rev. 28).

    Note:

    When consent agreements are executed by excise managers, the name of the Director, Examination - Specialty Tax will be written, typed, or stamped on the signature line of the form. The excise manager will sign his or her name and indicate his or her title and date on the line immediately below.

  9. Form 8849, Claim for Refund of Excise Taxes, and/or amended Form 720 returns present unique statute situations. Refer to IRM 4.24.8.

  10. Refer to Exhibit 4.24.6-1for a summary of excise return SOLs.

  11. Form 872-B is an agreement signed by the taxpayer(s) and an IRS representative to extend to a mutually agreed upon new specified date the Assessment Statute Expiration Date (ASED) on assessment of excise taxes. Refer to the Product Catalogue for a sample document at http://core.publish.no.irs.gov/forms/public/pdf/f872-b--2004-12-00.pdf.

Extending the Period of Limitations to Assess Air Transportation Taxes

  1. With collected taxes, special care is needed to ensure that all aspects of the SOL for filed returns are protected. On May 23, 2001, IRS Chief Counsel issued Field Advice 200101032 followed by supplemental guidance later that same year, which provided language required for extending statutes for collected taxes. The forms and wording to accomplish this task depend on the type of entity under examination. Special language must be used on the Form 872-B and it will depend on the function the taxpayer plays (i.e., collector, taxpayer, or air carrier).

    Note:

    The entity examined may provide more than one function and SOL extensions for each function must be secured, when appropriate.

  2. In situations where the collector failed to charge and collect tax from the customer, an IRC 6672 penalty can be asserted against the collector to recoup non-collected taxes. Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty, extends the period of limitations for this penalty. Refer to IRM 4.24.9.5, IRC 6672 Trust Fund Recovery Penalty.

  3. For collectors, the following forms are secured:

    1. Form 2750 for each tax period under examination. The form can be prepared for the entity or for each responsible official depending on the facts and circumstances of the case. This form protects the IRC 6672 penalty SOL.

    2. Form 872-B to protect the collectibility for the collected taxes under IRC 7501. The wording depends on the type of tax protected. The language below are the entries that must be entered on the form:

    • For taxable transportation of persons by air tax, the following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4261 Taxable Transportation by Air tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

    • For the taxable transportation of property by air tax, the following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4271 Taxable Transportation by Air tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

  4. For taxpayers, Form 872-B is to be secured to protect the collectibility for the taxes imposed under IRC 4261 and IRC 4271. The wording depends on the type of tax protected. The language below are the entries that must be entered on the form:

    • For the taxable transportation of persons by air tax, the following bolded language must be entered on the form: The amount of liability for Taxable Transportation of Persons by Air tax, imposed on the taxpayer(s) by section 4261 of the Internal Revenue Code.

    • For the taxable transportation of property by air tax, the following bolded language must be entered on the form: The amount of liability for Taxable Transportation of Property by Air tax, imposed on the taxpayer(s) by section 4271 of the Internal Revenue Code.

  5. For air carriers, Form 872-B is secured to protect the collectibility for the tax imposed on the air carrier under IRC section 4263. The following bolded language must be entered on the form: The amount of liability for IRC 4261taxes not paid or collected under any other provision tax, imposed on the taxpayer(s) by section 4263 of the Internal Revenue Code.

  6. While the surcharge on fuel used in an aircraft, which is part of a fractional ownership program, is not a collected tax, specific language is required to protect this statute. Form 872-B is secured to protect the liability for the tax imposed on the fractional program manager of a fractional program aircraft under IRC 4043. The following bolded language must be entered on the form: The amount of liability for Fractional Aircraft Ownership Programs Fuel Surtax tax, imposed on the taxpayer(s) by section 4043 of the Internal Revenue Code.

Extending the Period of Limitations to Assess Communications Taxes

  1. Special language on Form 872-B is needed to assess communications taxes and depends on the function the taxpayer plays (i.e. collector/communication provider, or taxpayer).

  2. Where the collector failed to charge and collect tax from customers, an IRC 6672 penalty can be asserted against the collector to recoup non-collected taxes. Form 2750 extends the period of limitations for this penalty.

  3. Extension information for a collector:

    • Form 2750 is secured for IRC 4251 taxes.

    • Form 872-B is secured to protect the collectibility for the tax imposed under IRC 4251. The following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4251 Communication Service tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

  4. Extension information for a taxpayer: Form 872-B is secured to protect the collectibilty for tax imposed under IRC 4251. The following bolded language must be entered on the form: The amount of liability for Taxable Communication Service tax imposed on the taxpayer(s) by section 4251 of the Internal Revenue Code.

Six Year Period of Assessment under IRC 6501(e)(3) for Substantial Omissions of Excise Taxes

  1. If an excise return omits an amount of properly includible tax exceeding 25% of the amount of tax reported on that return, IRS has additional time (up to six years) to assess the additional tax from the date the return was filed. The excise examiner must secure written advice from Counsel that the six year statute applies and include that documentation in the case file.

  2. For example, when a Form 720 is filed including the word, " None" or "0" in the abstract’s tax column, a return has been filed in accordance with IRC 6501(b)(4) and any omission of tax from that return triggers the six-year period for assessment provided by IRC 6501(e)(3) because the omission is in excess of 25% of the tax reported on that return.

  3. Since IDRS CC BRTVU and BMFOLR so not always reflect what is recorded on the actual tax return, the original return should be solicited to confirm the amount of tax reported.

  4. Update the SOL on Form 895 as required.

Source Codes, Examination Activity Codes, Project Codes and Tracking Codes

  1. Consistent and accurate coding used for application of time and for case data allows the Excise Tax Program to measure and plan workload with confidence.

  2. The Excise Tax Program uses examination data to:

    1. Capture business results.

    2. Develop the Excise Tax Examination work plan.

    3. Respond to internal and external stakeholders about resource application and results.

  3. Tracking codes are based on case origin and the type of issue under examination.

  4. It is the responsibility of the excise examiner to confirm the accuracy of the source code, activity code, project and tracking codes on every assigned case. The excise examiner will correct these codes, if warranted.

  5. When the excise examiner expands the examination to other tax periods or entities, the appropriate codes should be updated and/or corrected, if appropriate:

    1. In most cases, the project/tracking codes of the primary return will carry over to related returns.

    2. Normally, there is only one tax period with a primary source code on ERCS and on AIMS.

    3. The related and multiple year periods reflect pick-up source codes.

    4. Exceptions are each cycle of a CIC case, which stand alone.

    5. Excise claims can have more than one return with a primary source code.

  6. For information about direct examination compliance activity codes and second segment codes, refer to the exhibits shown at http://irm.web.irs.gov/Part4/Chapter9/Section1/IRM4.9.1.asp and Document 6209, IRS Processing Codes and Information.

  7. Aging Reason Code 62 (Excise Tax FCA) will be used when establishing/closing all cases assigned to fuel compliance agents (FCAs).

  8. It is common for a Form 637 Review to expand into an examination. When this occurs, the excise examiner uses tracking code 0000 and project code 0637.

  9. Additional guidance may be found in the Source Code Job Aid located on Examiner’s Miscellaneous Job Aids at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/examinersmiscellaneousjobaids/landingview.aspx.

Use of Excise Project and Tracking Codes

  1. A project code is a four-digit number indicating that a case belongs to a special program. A project code should be used for large broad based excise exam actions that cannot be monitored via activity codes alone.

  2. A tracking code is a four-digit code used to identify specific categories of excise projects, or specific excise exam issues or strategies.

  3. WSD coordinates assignment of project and tracking codes to case work to gauge whether the work sent for examination is productive. Most case work sent to the field for examination includes a project and/or tracking code. WSD is also responsible for all requests for new project and tracking codes or for discontinuance of a code.

  4. Excise managers and excise examiners must review case inventory to verify that the correct project/tracking codes are reflected on ERCS/AIMS and confirm the codes are recorded on Form 5345-D for any examination pick-ups.

  5. The accurate use of these codes allows for meaningful data analysis regarding the productivity of each project and provides excise management critical information regarding resource allocation.

  6. All Affordable Care Act case work requires an assigned project code. The excise examiner must verify accuracy of the project code for these cases.

Procedural Guidance Relating to Offers in Compromise and Doubt as to Liability

  1. A Doubt as to Liability (DATL) exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law. Taxpayers, who have a legitimate doubt of liability for part or all of a tax debt, may file an Offer-in-Compromise (OIC) under the DATL basis.

  2. On May 17, 2006, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was enacted creating IRC 7122(f) that applies to all OICs (both as to DATL and Doubt as to Collectibility offers) received on or after July 16, 2006. Under this section, if IRS does not make a determination with regard to the OIC-DATL within 24 months of receipt, the OIC will be deemed accepted.

  3. The IRS received date is the earliest date stamped on Form 656-L, Offer in Compromise (Doubt as to Liability), and is the date that starts the 24-month timeframe.

  4. If IRS does not make a timely determination, the offer is accepted in full and the statute is considered barred.

  5. IRS must follow appropriate barred statute procedures in any situation where the 24-month TIPRA date lapses with no determination.

  6. An OIC request involving the taxpayer’s statement that he or she should not be held liable for the amounts due and owing should not be sent to the OIC Coordinator. These must be addressed by Collection to determine who is responsible for payment because these claims are not questioning the assessment but rather the responsible (liable) party.

Referral Criteria for SB/SE Excise Tax Offers in Compromise

  1. Referral criteria for Excise Tax Examination are:

    1. Taxpayer’s BOD code is SB/SE or LB&I.

    2. Tax period involves an examination made previously by Area 214 Excise Tax (TC300 or TC308).

    3. Tax period involves an assessment from an original filed excise return (Form 720, Form 730, Form 11-C, Form 2290, etc.) that has not had an examination assessment made from another area.

Offer in Compromise - Doubt as to Liability Statute Controls

  1. Cases accepted for processing that are forwarded for examination by WSD should reflect the two-year TIPRA statute when received by the group.

  2. The statute date will reflect an "R" at the end to assist in identifying the TIPRA statute. For example, an offer received on 12/28/2017 will have a TIPRA statute for all tax periods involved with the offer of 12/28/2019R regardless of the "normal" statute date of three-years from the date filed.

  3. Excise managers must routinely review any OIC-DATL cases assigned to their groups and ensure they are updated appropriately to reflect the TIPRA statute.

  4. An OIC-DATL case is controlled with the following information:

    1. Project Code: 0264.

    2. Tracking Code: None.

    3. AIMS Freeze Code: 08 (ensures the case is closed to WSD for the offer resolution before sending it to CCP for final examination closure or Appeals for further consideration).

    4. Statute Date: TIPRA statute of two-years from the received date of the offer. (The earliest date-stamp on Form 656-L determines the appropriate statute. TIPRA statutes must have an" R" following the date.)

  5. Issuance of a determination, acceptance, or confirmation letter or the withdrawal of the offer voids the TIPRA statute. WSD will update the statute date to reflect the recomputed ASED or, if the ASED has expired prior to the filing of the OIC-DATL Form 656-L, alpha statute AA. Refer to IRM 5.8.10.8, Effect of Previous Offers on Assessment Statute Expiration Date.

Doubt as to Liability Determination

  1. If the offer is valid and can be processed, the DATL examiner will:

    1. Send the taxpayer an Automated Offer-In-Compromise (AOIC) transfer letter informing the taxpayer that his or her case is transferred to WSD for field consideration.

    2. Print and attach a copy of the Exam/Specialty Tech Independent Administrative Review Checklist (IAR/Tech) to the outside cover of the case file.

    3. Ensure any deposit received is reflected on the checklist.

    4. Document the AOIC to reflect case disposition and update the AOIC assignment number to reflect Excise Tax.

    5. Send the case using Form 3210, Document Transmittal, to WSD for subsequent assignment to the appropriate Excise Tax Examination field group.

Workload Selection and Delivery Coordinator Involvement

  1. WSD conducts an initial screening of the case within 10 days of receipt to determine if the case is appropriate for assignment to an Excise Tax Examination field group.

  2. If the offer is not appropriate for field assignment, WSD will:

    1. Return the offer to the centralized DATL processing unit and update the AOIC assignment number to 1901165901.

    2. Enter information in the AOIC remarks section regarding why the case was returned.

  3. If the offer is deemed appropriate for an Excise Tax Examination field group, WSD will:

    1. Request case controls on all quarters involved (those with TCs 480) using Project Code 0264, Source Code 73 and Tracking Code None.

    2. Request the original case file workpapers.

    3. Verify TIPRA statute.

    4. Notify the excise manager via secure e-mail that an OIC-DATL case has been assigned to his or her group and forward the case file via Form 3210 to the excise manager.

  4. Once the DATL case is assigned to an examination group and the case file forwarded to the group via Form 3210 to the excise manager, WSD will update the AOIC remarks section to reflect the appropriate Employee Group Code (EGC) and a contact point.

Excise Tax Examination of Offer in Compromise Case

  1. Upon receipt of the case from WSD, the excise manager assigns control to an excise examiner who will:

    1. Work the case using procedures similar to an examination reconsideration case, except the excise examiner does not issue a report to the taxpayer.

    2. Discuss the examination findings with the taxpayer. If an accepted offer is not warranted and the taxpayer agrees with the examination findings, solicit a withdrawal of the OIC. If the taxpayer does not agree, reject the offer. Examples of OIC withdrawal letters are found in the AOIC and should be signed by the taxpayer (a faxed signature is acceptable). Applicable paragraphs can be found in IRM 4.18, Exam Offer-in-Compromise. The excise examiner will ensure the taxpayer understands that by withdrawing the offer, all appeal rights are forfeited.

      If... Then...
      The Taxpayer will withdraw the offer. The IAR/Tech Checklist must be updated to reflect the legal date of the withdrawal and the date the offer was withdrawn.
      The taxpayer will not withdraw the offer. The excise examiner will inform the taxpayer that his or her offer will be rejected. Upon receipt of the rejection letter, the taxpayer will have the right to request an Appeals hearing.
    3. If the taxpayer does not respond to the excise examiner’s contact and/or does not provide the information requested, the case will be closed as a "returned offer." The excise examiner must document fully the reasons for closing the offer as "returned" and show all attempts made to gain taxpayer cooperation. The taxpayer does not have any appeal rights for a returned offer.

      Note:

      Although Form 1271, Rejection or Withdrawal Memorandum, is not required for a withdrawn offer, it can be included in the case file.

    4. Forward the case file along with Form 1271 and the IAR/Tech Checklist back to WSD via Form 3210.

Acceptance of Doubt as to Liability Offer

  1. There is no need for an OIC-DATL if the liability for the tax is correct and can be supported. An OIC-DATL applies when settlement of the issue of liability is determined based on the degree of doubt regarding the appropriateness of the liability for the unpaid tax.

  2. Acceptance of an OIC-DATL requires special processing. IRM 1.2.44.2, Delegations of Authority for the Collecting Process, Delegation Order No. 5-1 (Rev. 4), outlines the level of authority needed for OIC approval. Under IRC 7122(b), if the total liability for an offer is $50,000 or more, Counsel must provide an opinion to ensure that the OIC meets the legal requirements for a compromise and conforms to IRS’s policy and procedure. See IRM 5.8.8.13, Offer in Compromise, Acceptance Processing, Legal Opinion of Counsel.

    1. Form 7249, Offer Acceptance Report, is completed for accepted offers.

    2. Payment of an accepted OIC is in accordance with the terms listed on the Form 656-L.

  3. The completed case is routed via Form 3198 to the attention of WSD, who reviews the case, secures approval to issue the acceptance letter and prepares and processes abatement on Form 3870.

Doubt as to Liability Cases Subject to Independent Review Process

  1. IRC 7122(e) requires IRS to provide for independent administrative review of all proposed OIC rejections prior to the rejection being communicated to the taxpayer. For Excise Tax Examination cases, the case is forwarded to WSD for review by an Excise Tax Policy Subject Matter Expert (SME). The SME cannot be anyone who worked on the case or is a party to the initial rejection or acceptance decision. The SME will review the proposed rejection of OIC prior to any indication or notification of such action being given to the taxpayer. The purpose of the review is to evaluate the case and determine if rejection is the correct decision.

  2. WSD forwards the case via Form 3210 to the SME for review.

    Note:

    The SME has 15 days from receipt to review the excise examiner's recommendation. If the SME does not agree with the excise examiner’s recommendation, the case is returned to the excise examiner for further development. If the SME agrees with the recommendation, the examiner is advised and the case is forwarded to WSD via Form 3210 for final processing.

Final Case Processing and Closure by Workload Selection and Delivery

  1. Upon receipt of a case from the SME for rejected offers or from the excise examiner for withdrawal offers, WSD will:

    1. Generate and issue the appropriate AOIC disposition letter.

    2. For rejected offers, suspend the case for 45 days to allow taxpayer time to request Appeals consideration.

    3. Update the statute date to reflect the recomputed ASED or, if the ASED has expired prior to the filing of the OIC-DATL Form 656-L, alpha statute AA. Refer to IRM 5.8.10.8.

    4. Complete the IAR/Tech Checklist and fax or scan the sheet to the Brookhaven Centralized OIC-DATL site.

    5. Return the IAR/Tech Checklist to the OIC-DATL processing unit within 180 days of receipt. It must include the date the case was forwarded to Appeals, if appropriate.

    6. Complete the AOIC offer closing actions based on information on the IAR/Tech Checklist.

    7. Close the case to CCP for final closure, if agreed or if no Appeals request is received.

    8. For accepted offers, a file containing a copy of Form 7249 and IDRS CC MFTRA for all periods compromised is maintained for public inspection. This file is maintained for one year, after which it may be destroyed.

Establishing Substitute for Return Controls on Non-Filer Cases

  1. Push Code 036 is used to establish a TC 150 (Master File Entity Created) on MFT 03 for all non-filer Form 720 cases sent to the field for examination. The MFT 03 Master File account is controlled on AIMS.

    Note:

    No filing requirement is established through this process.

  2. Push Code 051 is used to establish a TC 150 on MFT 03, Form 720, SFRs requested for all paid claim cases (Source Code 31). Refer to IRM 4.24.8.

  3. If during the course of the examination it is determined that a taxpayer is liable for filing prior/subsequent period excise returns, the excise examiner will establish SFR controls for those periods.

  4. The excise examiner requests information necessary from the taxpayer to determine a substantially correct tax liability. If the taxpayer provides the excise examiner with delinquent returns, the excise examiner will review the books and records of the taxpayer to determine the accuracy of the delinquent returns received.

  5. The controlling IRM for SFR actions is IRM 4.4.9, AIMS Procedures and Processing Instructions, Delinquent and Substitute for Return Processing.

  6. The excise examiner needs to consider properly the assertion or non-assertion of penalties.

  7. Refer to IRM 4.24.9.4.3, Penalties Applicable to Substitute for Return.

  8. Refer to IRM 4.24.20, Excise Tax Report Writing Guide, and IRM 4.24.21, Case Closings, for detailed SFR non-filer report writing and case closing procedures.

  9. Information for processing Delinquent returns and SFRs can be found at Closing an Examination at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/book31/delinquent%20returns%20and%20substitute%20for%20return%20sfr.aspx.

Delinquent Return - No Examination Action Taken

  1. If the excise examiner receives a delinquent return through no direct or indirect action, the excise examiner will accept the return, date stamp it and mail it to the IRS Center, Cincinnati, OH 45999-0009.

    Note:

    If more than one return is received by the excise examiner, care should be taken to mail each return under a separate cover.

  2. The excise examiner will not process the delinquent filings as delinquent returns secured in the field or obtain controls via SFR procedures as though secured during the course of an examination.

Specialist Referral System

  1. The SRS is an online automated system that allows for all submissions and approvals for specialist assistance. It automates the referral request process for FSLG, LB&I, SB/SE and W&I field specialists. Refer to IRM 4.10.2.7.5.2.1, Specialist Referral System (SRS) - Online Referrals, and IRM 4.24.5.3, Large Business and International (LB&I) Examination Program Procedures for Excise Employees, Specialist Referral System (SRS) - Overview.

  2. Refer to IRM 4.24.6.16 regarding submissions and approvals for assistance or advice of an Excise Tax Subject Matter Expert (SME).

Third Party Contacts

  1. The Third Party Contacts webpage is located at Examination in Process at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/book2/third%20party.aspx.

  2. Refer to IRM 4.11.57, Examining Officer’s Guide (EOG), Third Party Contacts, and IRM 25.27.1, Third Party Contacts, Third Party Contact Program.

Inadequate Records Notice

  1. Refer to IRM 4.10.8.16, Inadequate Records Notices: Overview. The excise examiner uses A105 to document and address inadequate records notice.

Conversion of QuickBooks Accounting Software

  1. When the taxpayer uses QuickBooks to maintain his or her financial books and records, use of QuickBooks accounting software by the excise examiner is recommended but not mandatory. Refer to Examination in Process at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/book2/quickbooks.aspx.

  2. For technical questions about the use of QuickBooks accounting software or understanding QuickBooks records, refer to the Electronic Records Specialist Listing at Examiner’s Miscellaneous Job Aids located at the Excise Tax Knowledge Base Homepage at https://portal.ds.irsnet.gov/sites/vl037/lists/examinersmiscellaneousjobaids/thirdpartycontacts.aspx.

Requesting Excise Subject Matter Expert Assistance

  1. When the excise examiner needs the assistance or advice of an Excise Tax SME, the excise examiner must first discuss the need for assistance with the excise manager. If the excise manager agrees, the excise examiner will complete a Guidance Request Memorandum (GRM) and submit it to the excise manager for review and approval. Additional information about the GRM is found on Examination in Process at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/book2/requestingexcisesubjectmattersexpertsassistance.aspx .

  2. If the excise manager approves the request for advice or assistance, the GRM is e-mailed to the territory manager for review and approval. Secure e-mail is used when taxpayer identifiable information is included.

  3. Upon review and approval, the territory manager e-mails the GRM, via secure e-mail when required, to the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy for review and assignment to the appropriate SME.

  4. The Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy monitors requests to ensure timely handling and that responses are consistent with current policy.

  5. Within 10 business days after receiving the GRM, the SME provides a written response to the GRM. In the event the SME is unable to provide a written response within 10 business days, the SME will notify the excise examiner, the excise manager and the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy of the projected date when advice will be provided.

  6. All requests for Counsel’s opinions, guidance and any legal assistance are to be routed through the territory managers, to the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy, who will forward the request to the SME for technical review before final approval by the Chief, Estate & Gift/Excise Tax Exam.

  7. Upon approval from the Chief, Estate & Gift/Excise Tax Exam, the request is routed by either to the Associate offices, Office of Chief Counsel or to the Division Counsel assigned excise tax matters.

  8. Technical advice requests, opinions, guidance, or assistance requests will not be submitted directly from the field to local Counsel offices, not on an informal or draft basis or otherwise.

Coordinated Excise Issues

  1. The purpose of Coordinated Excise Issues (CEI) is to provide excise examiners with guidance on significant national issues that are identified as potentially not resolved consistently. CEI may be proposed by the Program Manager, Excise Tax Policy, Program Manager, Fuel Tax Policy, or SME to ensure key excise issues are raised within a particular abstract and are developed and resolved consistently.

  2. The CEI process for excise tax issues establishes uniform positions within the excise tax abstract or issue area. Excise examiners must not deviate from such positions without the concurrence of the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy.

Coordination of Excise Technical Advice and Guidance

  1. The following are the duties and responsibilities of excise management with regard to ensuring technical advice and guidance are observed:

    1. Follow the policies and the procedures instituted by Excise Tax Policy or Fuel Tax Policy for uniform and consistent excise tax administration.

    2. Consider CEI during the examination process.

    3. Excise examiners consult with the SME, as warranted, whenever the excise examination involves an abstract/issue within the SME’s area of expertise.

    4. Excise examiners consult with the SME in preparing requests for excise tax technical advice. Requests should be made as early as possible in the examination process. A copy of each request should be sent to the appropriate SME in accordance with the yearly Technical Advice Request Revenue Procedure. The SME should be involved in every step in the process leading to the release of the Technical Advice Memorandum (TAM), including Chief Counsel requests for additional information, conferences, discussions of tentative conclusions, etc.

    5. The SME’s involvement on all excise issues selected for the LB&I Pre-Filing Program or Industry Issue Resolution Program.

Excise Technical Advice Memorandum Procedures

  1. An excise Technical Advice Memorandum (TAM) is furnished as a means of assisting personnel in closing cases and establishing and maintaining uniformity in the treatment of excise tax examination issues. The Office of Associate Chief Counsel issues TAMs. The procedures to request a TAM are found each year in Rev. Proc. 20XX-2. The excise examiner must:

    1. Follow the requirements of the annual Technical Advice Request Revenue Procedure.

    2. Request assistance of the SME assigned the specific abstract involved.

    3. Forward the completed request immediately to the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy and copy the SME involved.

    4. Notify the Program Analyst, LB&I Excise Tax, if the request for a TAM originates from an LB&I CIC case.

  2. The Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy will forward the request for a TAM to the Office of Associate Chief Counsel.

  3. Other technical requests, such as CEIs and issues resulting from the Compliance Assurance Process program (CAP) (see IRM 4.51.8, LB&I Case Management, Compliance Assurance Process (CAP) Examinations) require the following:

    1. Forward the request immediately upon receipt to the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy.

    2. Notify the LB&I Program Analyst, Excise Tax, if the request originates from a CEI case.

    3. Engage the SME for the excise issue abstract, if needed.

  4. Technical excise tax issues should be coordinated with other divisions:

    1. Including involvement by the Chief, Estate & Gift/Excise Tax Exam and the Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy.

    2. The Program Manager, Excise Tax Policy or the Program Manager, Fuel Tax Policy collaborates with the LB&I Technical Advisor to provide SME support to the excise tax field group in resolving case issues.

Quality Review

  1. EQ is the acronym for Embedded Quality. EQRS is the acronym for the Embedded Quality Review System. NQRS is the acronym for National Quality Review System. For purposes of this IRM, unless otherwise stated, EQ, EQRS and NQRS as described under IRM 4.2.8, Examining Process, Chapter 2, General Examining Procedures, Guidelines for SB/SE National Quality Review, apply to the Excise Tax Program. IRM 4.2.8, in general, provides guidance and direction about quality standards.

  2. The EQRS supports SB/SE’s quality improvement program. EQRS and NQRS are quality-driven programs and are a component of business results. Their prominence as part of business results measurement requires management to focus on systemic processes and results, as well as seek improvement opportunities as part of normal daily business practices.

  3. EQRS consists of two parts:

    1. EQRS is utilized by excise managers to perform reviews addressing employees’ case work.

    2. NQRS is utilized by Specialty Examination Quality to collect information, measure examination quality and assess the long-term trends of system performance consistent with balanced measures.

  4. EQRS is an automated quality review system, which allows managers and reviewers to critique case work using quality measures known as "attributes." Both managers and reviewers use many of the same attributes in their case reviews. It is important that all users apply the review guidelines consistently.

  5. Front line managers use EQRS to conduct reviews of employee case work. The quality attributes are linked to excise examiners’ Critical Job Elements (CJEs) to assist managers in performance evaluation.

  6. Excise Tax Embedded Quality Job Aid, also known as The Job Aid, is a reference tool used by managers and NQRS reviewers. The Job Aid may be accessed at Quality at the Excise Tax Knowledge Base Homepage located at https://portal.ds.irsnet.gov/sites/vl037/lists/quality/eqrs.aspx. The Job Aid provides guidelines to apply uniformly and consistently the excise quality attributes when conducting case reviews. NQRS reviewers look to the IRM, in addition to The Job Aid, for guidance for this task and duty.

    Note:

    The Job Aid includes the cross walks to the CJEs, shown as EQRS CJE Mapping for Revenue Agent and EQRS CJE Mapping for Fuel Compliance Agent.

Excise Tax Policy Manager Responsibilities

  1. An analyst on the Excise Tax Policy Manager’s staff shall be assigned responsibilities for the Excise Tax Embedded Quality Program.

  2. At the direction of the Excise Tax Policy Manager, such analyst’s responsibilities include:

    • Establishing and providing guidance to meet program objectives.

    • Ensuring consistent application of the quality attributes.

    • Recommending updates to the quality attributes and process measures.

    • Maintaining instructional guides, forms and letters as needed.

    • Host embedded quality summit to discuss quality trends with affected stakeholders, as needed.

Territory Manager and Excise Tax Examination Group Manager Responsibilities

  1. Territory Manager responsibilities include:

    1. Conducting analysis of the territory’s NQRS and EQRS results and identifying opportunities for improvement.

    2. Conducting quality improvement initiatives to impact NQRS and EQRS results.

  2. Excise Tax Examination group manager responsibilities include:

    1. Conducting quality reviews on case work and inputting the results into the EQRS system.

    2. Assisting Territory Managers in conducting analysis of the territory’s NQRS and EQRS results and identifying opportunities for improvement.

    3. Conducting quality improvement initiatives to impact NQRS and EQRS results.

Procedures for Examining Form 211, Application for Reward for Original Information

  1. On December 20, 2006, Congress created a provision establishing a Whistleblower Office (WBO) within the IRS. The WBO oversees administration of the informant award program under IRC 7623(a) and IRC 7623(b). The provision authorizes awards based on a percentage of proceeds collected by the Government and arising from information provided by the informant.

  2. Treas. Reg. 301.7623–1 provides that whistleblowers may claim an award on Form 211, Application for Award for Original Information. All claims received require coordination with the WBO.

  3. Most excise tax cases involving an award claim originate with the WBO. The proper designation (IRC 7623(a) or IRC 7623(b) claim) is determined by the WBO and special instructions are included in the assigned case. However, if an examiner receives a Form 211 directly from a taxpayer, immediate coordination with the WBO is required to ensure the proper claim procedures are followed.

  4. IRM 25.2.1, Information and Whistleblower Awards, Receiving Information, and IRM 25.2.2, Whistleblower Awards, provides Service-wide procedures and guidance to ensure consistent and proper handling of these cases, including the use of proper safeguards in protecting the claimant’s identity. Additional information can be found at the Whistleblower Office Home Page at: http://irweb.irs.gov/AboutIRS/bu/wo/default.aspx.

  5. Refer to IRM 4.24.18, Excise Operations Support, for information regarding processing Whistleblower claims.

IRC Section 7611 Procedures Relating to Excise Tax Examinations of Churches

  1. IRC 7611 procedures apply to all excise tax inquiries.

  2. IRC 7611 provides guidelines and a procedural framework for certain examinations of churches, conventions or association of churches. Refer to Treas. Reg. 301.7611-1.

  3. Excise examiners should not initiate any examinations on a church. If an excise tax examiner encounters an excise tax issue that involves a church, the excise tax examiner should refer to IRM 4.75.39, Exempt Organizations Examination Procedures, Church Tax Inquiries and Examinations under IRC 7611.

Statute of Limitations Chart

  1. Refer to IRM 25.6, Statute of Limitations.

  2. Statute controls, due dates and statutory period of limitations are found in the current revision of Document 6209.

  3. Refer to IRM 4.24.8 for due dates, SOLs and statute extension procedures for excise claims for refund or abatement.

  4. The SOL citations for:

    1. Extensions: Use Form 872-B or Form 872-EX. Refer to IRM 25.6.22.4.3, Extension of Assessment Statute of Limitations by Consent, Consent Forms Used for Return.

    2. Preparation of consent forms: Refer to IRM 25.6.22.5, Preparation of Consent Forms - General Procedures.

    3. Statute controls: Refer to IRM 1.4.40.4.3, Statute Controls.

    4. Form 895 procedures: Refer to IRM 25.6.23, Examination Process - Assessment Statute of Limitations Controls.

    5. Alpha codes: Refer to Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS.

    1. MFT Code Form No Type of Return Period Covered Due Date Statutory Period of Limitations
      03 720 Excise Tax Quarter Last day of the month following the end of the quarter (April 30, July 31, Oct 31, Jan 31.) The tax assessment statute is three years from the date a return is filed or due without regard to extensions, whichever is later. The refund statute is three years from the date a return is filed or due without regard to extensions, whichever is later or two years from payment, depending on the date the claim, abatement or reconsideration was filed.
      64 730 Wagering Tax Month Last day of the month following the month in which the wagers are accepted. The tax assessment statute is three years from the date a return is filed or due without regard to extensions, whichever is later. The refund statute is three years from the date a return is filed or due without regard to extensions, whichever is later or two years from payment, depending on the date the claim, abatement or reconsideration was filed.
      60 2290 See Note Below Heavy Highway Vehicle Use Tax Annual / Month August 31, if in use in July, or last day of the month following the month first used in a period The tax assessment statute is three years from the date a return is filed or due without regard to extensions, whichever is later. The refund statute is three years from the date a return is filed or due without regard to extensions, whichever is later or two years from payment, depending on the date the claim, abatement or reconsideration was filed.
      63 11-C Occupational Tax on Wagering And Registration Return For Wagering Annual Register prior to accepting first wager, then renew by July 1 each year. The tax assessment statute is three years from the date a return is filed or due without regard to extensions, whichever is later. The refund statute is three years from the date a return is filed or due without regard to extensions, whichever is later or two years from payment, depending on the date the claim, abatement or reconsideration was filed.
      NA 720TO/CS Terminal Operator Report and Carrier Summary Report Returns Month Last day of the month following the month Three years after due date of return or three years after the date return was actually filed or two years after penalty payment was made, whichever is later.

      Note:

      Form 2290 must be filed for the month the taxable vehicle is first used on public highways during the current period. The current period begins July 1st and ends June 30th of the following year. Form 2290 must be filed by the last day of the month following the month of first use. If any due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. For due dates, refer to the Form 2290 instructions that can be found at the following IRS publishing site: http://publish.no.irs.gov/cat12.cgi?request=CAT1&catnum=27231L.

      Note:

      An agreed assessment on an SFR does not constitute a filing by the taxpayer. Therefore, there is no three year statute, although a two year statute applies, if the taxpayer paid the tax.

      Note:

      With the exception of Form 720-TO and Form 720-CS information returns, the six year assessment period may also apply, if written approval is obtained from Counsel.

      Note:

      The IRS issued a temporary regulation to extend the due date of Form 2290 to 11/30/2011 for returns due 08/31/2011 due the possibility of the expiration of this tax. The tax was subsequently extended through September 30, 2017. As a result, normal due dates and SOL periods apply for all subsequent tax periods.

Acronyms

The following table contains acronyms and their definitions used throughout this IRM.

Acronym Associated Words or Phrase
AIMS Audit Information Management System
AOIC Automated Offer-in-Compromise
ASED Assessment Statute Expiration Date
ATAT Abusive Tax Avoidance Transactions
AWSS Agency-Wide Shared Services
BOD Business Operating Division
CAF Centralized Authorization File
CAP Compliance Assurance Process
CC Command Code
CCP Centralized Case Processing
CI Criminal Investigation
CIC Coordinated Industry Case
CEAC Campus Exam/Automated Under Reporter Cincinnati
CEIC Coordinated Excise Industry Case
CJEs Critical Job Elements
DATL Doubt as to Liability
DC Disposal Code
DO Delegation Order
ECS Excise Case Selection
EGC Employee Group Code
EIS Excise Industry Specialist
EOG Examining Officer’s Guide
EOS Excise Operations Support
EQ Embedded Quality
EQRS Embedded Quality Review System
ERCS Examination Returns Control System
EUP Employee User Portal
ExSTARS Excise Summary Terminal Activity Reporting System
FCA Fuel Compliance Agent
FET Federal Excise Tax
FSEQ Field and Specialty Exam Quality
FSLG Federal State and Local Governments
FTA Fraud Technical Advisor
GMCM Group Manager Concurrence Meeting
GRM Guidance Request Memorandum
IAR Independent Administrative Review
IDR Information Document Request
IDRS Integrated Data Retrieval System
IGM Interim Guidance Memorandum
IMS Issue Management System
IRC Internal Revenue Code
IRM Internal Revenue Manual
LB&I Large Business & International
MCD Mutual Commitment Date
MeF Modernized e-File
NMF Non-Master File
NQRS National Quality Review System
ODCs Ozone Depleting Chemicals
OIC Offer in Compromise
POA Power of Attorney
POD Post of Duty
PSI Passthroughs and Special Industries
RFC Required Filing Check
SAC Special Agent in Charge
SB/SE Small Business/Self Employed
SFR Substitute for Return
SME Subject Matter Expert
SOL Statute of Limitations
SRS Specialist Referral System
SSA Supervisory Special Agent
TAM Technical Advice Memorandum
TBOR Taxpayer Bill of Rights
Tech Services Technical Services
TE/GE Tax Exempt & Governmental Entities
TFRP Trust Fund Recovery Penalty
TIN Taxpayer Identification Number
TIPRA Tax Increase Prevention and Reconciliation Act of 2005
TPS Technology and Program Solutions
WBO Whistleblower Office
WSD Workload Selection and Delivery