4.24.20 Excise Tax Report Writing Guide

Manual Transmittal

July 08, 2020

Purpose

(1) This reissues IRM 4.24.20, Excise Tax, Excise Tax Report Writing Guide, which has been revised.

Material Changes

(1) This section has been updated to provide comprehensive guidance that addresses excise tax report writing. Content was added to be more cohesive, current and accurate.

(2) The table below identifies significant changes in content:

4.24.20.1.6 Related Resources Content added to address IRM 4.10.2, Pre-Contact Responsibilities, that provides information for excise examiners to perform their duties more effectively.
4.24.20.2 Excise Examination Reports Title changed to Overview of Excise Examination Reports.
New 4.24.20.2.1 Title added Excise Report Guidelines. New content added to address the guidelines for excise report preparation.
4.24.20.2.3 Reports by Type of Closure Title changed to Excise Reports by Type of Closure.
4. 24.20.3.1 Agreed Reports Title changed to Agreed Excise Reports. Content about agreed excise reports linked to information at the Excise Tax Knowledge Base Home Page.
4. 24.20.3.2 Partially Agreed/Excepted Agreed Reports Title changed to Partially Agreed/Excepted Agreed Excise Reports. Content about partially agreed/excepted agreed excise reports linked to information at the Excise Tax Knowledge Base Home Page.
4. 24.20.3.3 No Change Reports Title changed to No Change Excise Reports. Content about no change excise reports linked to information at the Excise Tax Knowledge Base Home Page.
4. 24.20.3.4 Unagreed Reports Title changed to Unagreed Excise Reports. Content about unagreed excise reports linked to the Excise Tax Knowledge Base Home Page.
4.24.20.3.5 Information Reports Title changed to Surveyed Excise Reports. New content added to address information about surveying an excise examination. Prior content moved to 4.24.20.3.8.
New 4.24.20.3.6 Title added Audit Reconsideration and Reopening Excise Reports. New content added to address information about reconsideration and reopening an excise examination.
New 4.24.20.3.7 Title added Information Excise Reports. Content updated and transferred from 4.24.20.3.5.
4.24.20.4 Report Writing Guidelines Title changed to Excise Report Writing Guidelines.
4.24.20.4.1 Reports in Notebook and the Issue Management System (IMS) Title changed to Excise Reports in Notebook and the Issue Management System. Content updated about usage for Notebook and IMS.
4.24.20.4.2 Separate Reports for Different Types of Excise Tax Title changed to Separate Excise Reports for Different Types of Excise Tax.
4.24.20.4.3 Publications to Include with Reports Title changed to Publications to Include with Excise Reports.
4.24.20.4.4 Reports Sent to Authorized Third Parties Title changed to Excise Reports Sent to Authorized Third Parties. Content updated to incorporate material from IGM SB/SE 04-0816-0044, Initial Taxpayer Contact in Excise Tax Examination Cases.
4.24.20.4.4.1 Excise Tax Enclosures with Correspondence to Representatives and Appointees Content updated to incorporate material from IGM SB/SE 04-1216-0057, Excise Tax Enclosures and Correspondence to Representatives and Appointees.
4.24.20.4.5 Execution of Reports and Payments Title changed to Execution of Excise Reports and Payments.
4.24.20.4.6 Facsimile Signatures Content linked to include clarification memorandum issued on October 29, 2019, and revision memorandum issued on November 19, 2015.

(3) Editorial changes were made throughout this IRM, such as updating electronic hyperlinks and IRM references.

Effect on Other Documents

This material supersedes IRM 4.24.20 dated May 19, 2017.

Audience

This section is for SB/SE excise tax managers (excise managers) and excise tax examiners (excise examiners).

Effective Date

(07-08-2020)

Wanda R. Griffin
Director, Examination - Specialty Policy
Small Business/Self-Employed

Program Scope and Objectives

  1. General Overview - This IRM provides specific information and procedural guidance for excise examination reports (excise reports) in terms of content and format.

  2. Purpose - Excise reports should contain all information necessary to ensure a clear understanding of the adjustments proposed and document how the tax liability was computed. Executed excise reports (unlike workpapers) are legally binding documents and serve as the basis for assessment and collection actions. Based on this importance, excise managers and excise examiners must take all necessary steps to ensure excise report accuracy.

  3. Audience - This IRM is for excise managers and excise examiners who prepare and process excise reports.

  4. Policy Owner - Director, Examination - Specialty Policy is responsible for the administration, procedures and updates related to the technical guidance and information processing steps and methods specific to excise reports.

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

  6. Primary Stakeholders - Appeals, Agency-Wide Shared Services, Counsel, SB/SE Specialty Examination, SB/SE Field and Specialty Exam Quality (FSEQ) and Large Business & International (LB&I) are the primary stakeholders for this IRM.

Background

  1. The processes and procedures provided in this IRM are consistent with the objectives and goals for Excise Tax Examination that are addressed in IRM 1.1.16.3.3.1, Organization and Staffing, Small Business and Self/Employed (SB/SE), Excise Tax Examination.

Authority

  1. IRC 7522, Content of tax due, deficiencies, and other notices, requires certain notices describe the basis for and identify the amounts of tax due, interest, additional amounts, additions to tax and assessable penalties included in such notices. The notices specified include the first letter of proposed deficiency offering a review by Appeals, a notice of deficiency and notices of tax due. While the statutory requirement is limited to the specified notices, the conference report notes the desire of Congress the Service make every effort to improve the clarity of all explanations sent to taxpayers. H.R. Conf. Rep. No. 1104, 100th Cong., 2nd Sess., pt. 2, at 219, 1988-3 C.B. 473, 481.

Responsibilities

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

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

  3. Chief, Estate & Gift/Excise Tax Examination is responsible for ensuring general information, such as the administration, procedures and updates related to the technical guidance and information processing steps and methods specific to excise reports, is communicated to and executed by excise examiners.

Program Objectives and Review

  1. Program Goals - The processes and procedures in this IRM are consistent with the objectives and goals for Excise Tax Examination that are addressed in IRM 1.1.16.3.3.1.

  2. Program Reports - Reporting of program objectives are included in, but not limited to, Headquarters Examination Monthly Briefings, Program Manager Monthly Briefings, Examination Operational Reviews and Business Performance Reviews, which are provided by the Director, Examination - Specialty Policy.

  3. Program Effectiveness - Program effectiveness is measured by the Examination Quality Review Staff located in FSEQ, which supports the SB/SE quality improvement program utilizing the National Quality Review System to conduct independent case reviews from a statistically valid sample of examination case work. National, area and territory trend analyses on the quality attributes 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 the information in this IRM annually to ensure accuracy and promote consistent tax administration.

Terms/Definitions/Acronyms

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

    Term Definition
    Restructuring and Reform Act of 1998 (RRA 98) Broadly scoped legislation with the goal of transforming the IRS into a modern financial organization.
    Tax Abstract The specific type of excise tax, which is assigned a unique number, to properly identify the tax paid.
  2. Refer to Exhibit 4.24.20-2 for acronyms and definitions used throughout this IRM.

Related Resources

  1. Refer to IRM 4.10.1, Examination of Returns, Overview and Basic Examiner Responsibilities, for guidance about the responsibilities examiners should understand and apply in the performance of their duties.

  2. Refer to IRM 4.10.2, Examination of Returns, Pre-Contact Responsibilities, for guidance about required responsibilities and analyses that must be completed before an examination is initiated, actions that are necessary for pre-contact planning of the examination and procedural instructions for contacting the taxpayer.

  3. Refer to IRM 4.10.8, Examination of Returns, Report Writing, for guidance about the preparation of audit reports, details regarding the preparation of corrected reports, issues that require special reports and forms and some case closing requirements.

  4. Refer to IRM 4.24.2, Form 637 Excise Tax Registrations, for guidance about Form 637 registration program compliance, letters and initial application reviews.

  5. Refer to IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement, for information regarding claims letters and excise examination reports.

  6. Refer to IRM 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures, for information about fuel terminal and carrier compliance examination letters and reports.

  7. Refer to IRM 4.24.21, Case Closings, for information about closing excise tax cases.

  8. 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), Execution of duties in accordance with taxpayer rights. IRS employees must be informed about taxpayer rights and be conscientious in the performance of their duties to honor, respect and must communicate effectively those rights that may aid in reducing taxpayer burdens. IRS employees must administer the law with integrity and fairness and exercise professional judgment in conducting enforcement activities. Refer to Pub 1, Your Rights as a Taxpayer, for more information.

Overview of Excise Reports

  1. Excise reporting procedures are determined by examination findings of selected excise tax returns (excise returns). An excise report may be:

    • Agreed.

    • Partially Agreed/Excepted Agreed.

    • No Change.

    • Unagreed.

    • Surveyed.

    • Audit Reconsideration.

    • Information Excise Reports.

  2. At the conclusion of an excise examination, the excise examiner will discuss Examination’s findings with the taxpayer.

    Note:

    This does not apply to information excise reports, which are for internal use only.

  3. The excise examiner contact information will be provided to the taxpayer for a second time when an excise report is issued. Refer to IRM 4.10.1.2.2.2, Employee Contact Information, for additional guidance.

  4. Except as otherwise provided in IRM 4.24.20.4.3, the excise examiner must provide to the taxpayer Pub 3498, The Examination Process, with the first examination report and with Letter 950-E, 30 Day Letter - Straight Deficiency or Over-Assessment for Excise Tax Examination Cases.

  5. In attempts to reach agreement, Examination personnel have the authority and obligation to reach a definite conclusion based on a balanced and impartial evaluation of all evidence. This authority does not extend to consideration for the hazards of litigation. This is consistent with Policy Statement P-4-40, which encourages the disposition of tax differences at the lowest level. Refer to IRM 1.2.1.5.16, Servicewide Policies and Authorities, Policy Statements for the Examining Process, Policy Statement 4-40, for more detailed guidance.

Excise Report Guidelines

  1. At the conclusion of the excise examination, the excise examiner will prepare the excise report, secure the taxpayer’s signature where the examination resulted in a tax deficiency or reduction of a claim amount and solicit payment, if a deficiency is due. The excise examiner will give one signed copy of the excise report to each taxpayer and, if appropriate, to the taxpayer’s representative. The signed original excise report will be retained for the administrative file.

    Note:

    No signature is required for a no change report or an unpaid claim allowed in full.

    Note:

    Do not enter an agreement date when there is no signed agreement. If full payment of tax and penalties is received in lieu of a signature, use Disposal Code 08 to close the case. Refer to IRM 4.4.12.5.18.3.8, AIMS Procedures and Processing Instructions, Examined Closings, Survey Claims, and Partial Assessments, No Signed Agreement, for more detailed guidance.

  2. Excise reports will always be numbered as page 1 in every report package. When other forms or pages are included in an excise report, including worksheet computations, they should follow the basic report form in the consecutive page numbering system. Form 886-A, Explanation of Items, or Excise Issue Summary Lead Sheet is to be sent to the taxpayer and includes spaces for facts, law and argument, conclusion and taxpayer position. Exhibits will be labeled alphabetically and schedules will be labeled numerically.

  3. Regardless of the number of periods examined, one set of explanations, if needed, will be prepared. When reasons for an adjustment vary from period to period, they should be detailed in one explanation.

  4. When the size of the excise report warrants a Table of Contents, it should be prepared and inserted in the excise report immediately behind the basic report form. Each item in the Table of Contents should be keyed to its page number in the report.

  5. Refer to Exhibit 4.24.20-1, Instructions for Completing Form 5384 and Form 5385, for details on completing excise reports.

  6. Procedures under IRM 4.10.8.14, Corrected Reports, will be followed for corrected report writing, processing and closing.

Excise Reports by Type of Closure

  1. The excise examination findings control the type of excise report prepared and issued. This section provides general information about excise reports based on type of closure.

  2. Refer to IRM 4.24.21.5, Closing Procedures by Type of Closure, for detailed guidance about closing forms, letters and procedures per type of closure.

Agreed Excise Reports

  1. In an agreed excise examination, the taxpayer agrees to the adjustments proposed by the excise examiner. An agreed excise report is prepared.

  2. Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, is prepared for agreed cases when the taxpayer indicated agreement. The taxpayer signs Form 5384 to establish agreement.

  3. If a written explanation is needed for clarification of the excise examiner’s findings or requested by the taxpayer, Form 886-A or Excise Issue Summary Lead Sheet, should be issued.

  4. Letter 4121-X, Letter to Transmit Expected Agreed Examination Report, must be issued on an agreed case when the taxpayer indicated probable agreement with the proposed examination changes. The response date added to Letter 4121-X is determined by the excise examiner based on the facts and circumstances of the case. When a taxpayer does not respond to Letter 4121-X within the requested time frame, the excise examiner should follow up with the taxpayer to determine if unagreed case procedures should be initiated. Refer to IRM 4.10.8.4(5), Report Writing, Regular Agreed Cases (SB/SE Field and Office Examiners Only), for more detailed guidance.

  5. If the taxpayer does not agree or if the excise examiner is uncertain if the taxpayer will agree or if the taxpayer does not respond within a reasonable amount of time after issuance of Form 5384, the excise examiner with the excise manager’s concurrence is to follow the unagreed report procedures under IRM 4.24.20.3.4.

  6. Refer to IRM 4.24.21.5.2, Closing Procedures for Agreed Excise Examinations, and/or the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter, Agreed Reports Book at Agreed Reports for detailed guidance about closing forms, letters and procedures for agreed excise cases where the taxpayer fully agreed to all proposed adjustments.

Partially Agreed/Excepted Agreed Excise Reports

  1. In an excepted agreed case, the taxpayer agrees to the proposed adjustments, but the excise examination results are subject to review, additional processing or some other condition communicated to the taxpayer.

  2. A partially agreed case is an excepted agreed case when it contains two or more issues of which the taxpayer agrees with at least one issue and does not agree with at least one other issue. A partially agreed excise report is prepared.

    Note:

    An unagreed excise report is prepared anytime there is a proposed adjustment to which the taxpayer does not agree. If the taxpayer requests an Appeals conference and the case is eligible, the unagreed excise report is sent to Appeals. Refer to IRM 4.24.10.2, Appeals Referral Procedures, Appeals Process, for additional guidance.

  3. Prepare Form 4665, Report Transmittal, in all partially agreed cases but do not provide this to the taxpayer. Refer to Rev. Proc. 2012-18 , Section 2.03(4)(b) Transmittal, for additional guidance.

  4. Refer to IRM 4.24.21.5.2.1, Closing Procedures for Partially Agreed and Excepted Agreed Excise Examinations, IRM 4.10.8.5, Excepted Agreed Cases, IRM 4.10.8.6, Partially Agreed Cases, and/or the Closing Procedures for Agreed Excise Examinations, and/or the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter, Agreed Reports Book at Agreed Reports for detailed guidance about closing forms, letters and procedures for partially agreed and excepted agreed excise examinations.

No Change Excise Reports

  1. In a no change examination, the excise examiner determines there is no change to the reported tax liability.

  2. Form 5384, which is issued to the taxpayer, serves as the no change report. A signed agreement is not required for a no change report.

  3. A no change report is always subject to managerial review and approval.

  4. Refer to IRM 4.24.21.5.3, Closing Procedures for No Change Excise Examinations, and IRM 4.24.21.5.3.1, No Change Excise Report Non-Filed Excise Return Report Forms, Letters and Closing Procedures, and/or to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter, No Change Reports Book at No Change Reports for detailed guidance about closing forms, letters and procedures for no change excise examinations.

Unagreed Excise Reports

  1. In an unagreed excise examination, the taxpayer does not agree to the adjustments proposed by the excise examiner. An unagreed excise report is prepared.

  2. Form 5385 is issued to the taxpayer for an unagreed case.

  3. Form 2504-E is used in conjunction with Form 5385. This form is signed by the taxpayer upon agreement of an unagreed case after the Letter 950-E package was issued.

    Note:

    Form 886-A or the Excise Issue Summary Lead Sheet with a written explanation of adjustments that includes schedules or exhibits is attached to Form 5385.

  4. Form 4665, Report Transmittal, is prepared but not issued to the taxpayer.

  5. The excise examiner will prepare and issue Form 5385, Excise Tax Examination Changes, Form 2504-E, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, Form 13683, Statement of Disputed Issues, and Pub 3498, The Examination Process, with the Letter 950-E package.

    Note:

    Case status is updated to 13 on Form 5348, AIMS/ERCS Update (Examination Update), which is submitted for managerial approval when the Letter 950-E is issued to the taxpayer.

  6. Refer to IRM 4.24.10.2 for the required timeframes that must remain on the statute of limitations (SOL) period for the assessment of tax before an unagreed excise examination may be forwarded to Appeals.

  7. Refer to IRM 4.24.21.5.4, Closing Procedures for Unagreed Excise Examinations Not to be Forwarded to Appeals, and/or the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter, Unagreed Reports Book at Unagreed Case for detailed guidance about closing forms, letters and procedures for unagreed excise examinations.

Surveyed Excise Reports

  1. A case will be closed "Survey after Assignment" if, after analyzing the excise return and without contacting the taxpayer or representative or reviewing any books or records, the excise examiner believes that an examination of the excise return would result in no material change in excise tax liability.

    Note:

    This authority extends to excise returns identified for examination on Form 3449, Referral Report.

  2. Under certain conditions, a return may be surveyed after the taxpayer has been contacted, but before records have been inspected. This may include situations where the taxpayer is deceased, has a terminal illness, or there are other extraordinary circumstances that may warrant the survey of the return. Letter 1024, Return Accepted as Filed, must be issued if a decision is made to survey the return after taxpayer contact.

  3. To survey an excise return after assignment, the excise examiner completes Form 5351, Examination Non Examined Closings.

  4. To support the survey after assignment, the excise examiner must document all actions that led to this decision, including but not limited to consideration of Large, Unusual or Questionable Items, completion of required filing checks, consideration of collectibility, evaluation of examination potential, repetitive examinations and other materials that influenced his or her decision.

  5. Paper surveys are required for unpaid claims and cases with the original excise returns in the case file. If not required, paperless surveys may be utilized.

  6. Certain non-examined cases can be closed in a virtually paperless fashion, if the original excise return was never requested. Only a Form 5351 and Form 3210Document Transmittal, are required. Generally, this process is used when the excise return was established on AIMS using an electronic print and the original return was never requested. Form 2503, Survey After Assignment - Excise or Employment Tax, must also be prepared and included in the IMS case file for all surveyed returns.

  7. Refer to IRM 4.24.8.8.1, Unpaid Claims - Survey, IRM 4.24.10.5.1.1, Paperless Survey of an Excise Tax Return, IRM 4.24.10.5.1.2, Survey of Return and Subsequent Pick Up of a Later Period, IRM 4.24.21.5.1, Survey of Excise Tax Cases, and/or the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter, Survey at Survey for detailed guidance about closing forms, letters and procedures for surveying excise examinations.

Audit Reconsideration and Reopening Excise Reports

  1. When the taxpayer requests an audit reconsideration, report writing procedures found in IRM 4.13.4, Audit Reconsideration, Area Office (AO) Examination, apply.

  2. A regular excise report will be prepared, if the excise return has been reopened. Refer to IRM 4.4.26, AIMS Procedures and Processing Instructions, Reopening/Reclosing/Reinputting Records, for procedural guidance on how to reopen and reclose cases that were previously closed.

Information Excise Reports

  1. The excise examiner will prepare Form 5346, Examination Information Report, when information of sufficient compliance value is received and warrants another compliance action. Refer to IRM 4.10.5.14 , Form 5346 , Examination Information Report, for more detailed guidance.

  2. Situations warranting the submission of Form 5346 include, but are not limited to:

    • A related or non-related taxpayer having similar examination issues.

    • A referral of the taxpayer for non-excise related issues.

      Note:

      Information excise reports are not issued to the taxpayer.

  3. Refer to IRM 4.24.18.12, ECS Data Assistance Requests, for procedural guidance regarding information reports for excise leads and non-excise leads.

Excise Report Writing Guidelines

  1. This section, in general, describes report writing guidelines.

Excise Reports in Notebook and the Issue Management System

  1. The excise examiner is required to utilize the Notebook Job Aid (Notebook). Notebook generates excise case reports, which must then be imported into the Issue Management System (IMS).

  2. For additional guidance on Notebook, refer to IRM 4.24.6.3, Guide for Using Excise Tax Notebook, and the Excise Notebook Job Aid User Guide at the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Initiating an Examination Chapter, Notebook Book at Notebook, which provides operating instructions for the standard library of excise tax forms.

  3. For additional guidance on IMS, refer to IRM 4.24.6.2, Excise Issue Management System, and the LB&I Homepage, Computers and Technology at IMS for specific IMS areas of interest, such as IMS Help, IMS Team Website and IMS Frequently Asked Questions. Also refer to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Technical Assistance Chapter, Issue Management (IMS) System Book at IMS, which provides detailed operating instructions for IMS.

  4. Notebook contains a library of standardized forms and letters. Based on information input to Notebook and the selections made by the excise examiner, Notebook deploys the designated forms and letters.

  5. Notebook prepares the Revenue Agent Report (RAR), which is mandatory. Information imported from the RAR into IMS automatically populates a significant number of documents based on data previously entered resulting in improved accuracy.

  6. The excise examiner is responsible for selecting those forms and letters that apply to the taxpayer’s situation (i.e., agreed, no change, etc.) and for importing these forms and letters into IMS. The excise examiner must complete those forms and letters with information that is not populated automatically, as well as review them for report accuracy.

  7. The excise examiner is responsible to manually enter under IMS "Returns" for each period and fill in the tabs "ERCS Data" , "Issue Closing Data" and "Entity Closing Data" to generate closing documents Form 3198 and Form 5344.

  8. The excise examiner must prepare all closing letters, addressed to the taxpayer and sent by Centralized Case Processing (CCP) when case closing is completed. All closing letters must be generated in Notebook and imported into IMS.

Separate Excise Reports for Different Types of Excise Taxes

  1. Separate reports reflecting changes are prepared based on the filing type of excise return. For example, adjustments made to Form 720, Quarterly Federal Excise Tax Return, and Form 2290, Heavy Highway Vehicle Use Tax Return, cannot be included on the same excise report.

  2. A single excise report covering all periods examined will be prepared when the same type of excise return was examined concurrently.

    Note:

    Separate excise reports for each period are prepared/required only if administrative action to close the case is due to exceptional circumstances.

  3. When multiple tax abstracts are examined on the same excise return, each tax abstract must be listed separately on the excise report.

  4. Excise tax adjustments must not be incorporated into income tax reports.

Publications to Include with Excise Reports

  1. RRA ‘98 requires the IRS to include an explanation of the examination and collection processes, as well as information about Taxpayer Advocate assistance with any first examination report and with any formal Letter 950-E package. Pub 3498 is used for this purpose. Pub 3498 consolidates information from Pub 1, Pub 5, Your Appeal Rights and How to a Prepare Protest if You Don’t Agree, and Pub 594, The IRS Collection Process.

  2. Follow these procedures:

    1. Pub 3498 must be provided to the taxpayer with the first excise report given to the taxpayer and with all Letters 950-E .

    2. Providing Pub 3498 to the same taxpayer is not required for excise reports issued subsequent to the first excise report (i.e., corrected and supplemental excise reports).

    3. Publications sent to the taxpayer should always agree with the enclosures listed on the cover letter.

    4. Publications are not required to be included with no change excise reports but must be included with no change with adjustments excise reports.

Excise Reports Sent to Authorized Third Parties

  1. If a valid Form 2848, Power of Attorney and Declaration of Representative, (POA) or Form 8821, Tax Information Authorization, (TIA) is on file for a taxpayer, granted authorities will be reviewed prior to the issuance of an excise report to determine who should receive a copy of the excise report.

  2. The excise examiner should research information under Information Document Retrieval System (IDRS) using IDRS Command Code (CC) CFINK to determine if Transaction Code (TC) 960, which verifies that Centralized Authorization File (CAF) accepted the POA/TIA was posted on IDRS. It is possible the POA may have been superseded by a new POA/TIA submission or rescinded through other channels. Refer to IRM 21.3.7, Taxpayer Contacts, Processing Third Party Authorizations onto the Central Authorization File (CAF), for more information regarding excise examiner duties and obligations.

    Note:

    These instructions are consistent with IRM 4.24.6.5.13, D400 - Initial Taxpayer Contact Check Sheet. Excise examiners must mail the taxpayer or authorized third party an initial contact letter before contacting them by telephone.

  3. Per CFR 601.506, Notices to be given to recognized representative, the excise examiner should forward any correspondence (or copies), discussions, excise reports and/or other materials to the taxpayer at the same time they are sent to the representative. Refer to IRM 4.11.55, Examining Officer’s Guide (EOG), Power of Attorney Rights and Responsibilities, for more detailed information on mailing correspondence when an authorized third party is involved.

Excise Tax Enclosures with Correspondence to Representatives and Appointees
  1. When a POA or TIA is on file for the taxpayer, the publications sent to the taxpayer must agree with the enclosures listed on the cover letter to avoid confusion. However, blank forms and publications available on IRS.gov should not be included when sending copies of letters, examination reports, waivers, etc. with Letter 937, Transmittal for Power of Attorney, to representatives and appointees.

  2. For example, Pub 3498 or Letter 907, Request to Extend Assessment Statute, should not accompany the representative’s or appointee’s copy of Letter 950-E, Letter 4121-X or Letter 907.

    Note:

    This is consistent with Form 2848 and Form 8821, Tax Information Authorization, instructions, which direct that representatives and appointees will not review forms, publications and other related materials with the notice.

Execution of Excise Reports and Payments

  1. An agreement form is considered "executed" when the taxpayer signs the form. The executed agreement form must indicate the date IRS received it. For this reason, the agreement form must be date-stamped upon receipt. Alternatively, the excise examiner may, on the face of the agreement form, write the date it was received and authenticate the document with his or her initials.

  2. A taxpayer, upon receipt of an excise report, may wish to pay immediately the proposed deficiency. Form 3244-A, Payment Posting Voucher-Examination, must be completed and processed with the funds, if payment is received. A copy of the completed Form 3244-A must be attached to the face of the excise return or the current BMFOLT or TXMODA with a Substitute for Return.

  3. Refer to IRM 4.4.24, AIMS Procedures and Processing Instructions, Payments and Remittances, for instructions on Form 3244-A processing.

Facsimile Signatures

  1. In May 2003, the Tax Administration Council approved the use of facsimiles (faxes) for receiving information and documents from taxpayers and practitioners when contact with the taxpayer has been made and documented on Form 9984, Examining Officer's Activity Record. Documentation on Form 9984 must include the date of the contact and a notation indicating the taxpayer wants to send information by fax.

  2. On November 19, 2015, a revision to the IRS’s fax policy was announced by the Deputy Commissioner for Services and Enforcement, which eliminated the dollar ceiling for acceptance by fax of consents to assess additional tax and taxpayer closing agreements. The amount was capped previously at $250,000. With the revised fax policy, consents to assess additional tax and taxpayer closing agreements are now accepted by fax signature regardless of the dollar amount. This applies to Form 5384 and Form 2504-E.

    Note:

    Form 9984 must clearly document the contact with the taxpayer, the date of contact, and the desire of the taxpayer to submit the consent to assess additional tax by fax.

    Note:

    Item 416 on Form 5344, Examination Closing Record, should contain a "1," if a faxed agreement is received.

  3. Documents, forms, letters and returns related to post-filing inquiries and interactions can be allowed via fax unless if there is a specific prohibition. Refer to Revision of Policy Use of Fax and Signature Stamps in Taxpayer Submissions, a memorandum dated November 19, 2015, and Clarification of Policy for Use of Fax in Taxpayer Submissions, a memorandum dated October 29, 2019.

Extension of Time to Respond

  1. Appeals procedures impose strict requirements pertaining to the time remaining on an SOL before an examination case may be referred. Prior to granting an extension of time for a taxpayer to respond, the excise examiner must determine, if there is adequate time for forwarding a case to Appeals. If the excise examiner is uncertain about the application of the Appeals requirements to the taxpayer’s request, the excise examiner should consult the excise manager. Refer to IRM 4.24.10 for detailed information about the Appeals procedures.

  2. The excise examiner should offer and secure an extension of the SOL to ensure Appeals eligibility requirements are met.

  3. The steps and procedures described below apply only to situations where the excise examiner confirms there is sufficient time on the SOL, consistent with requirements established under Appeals.

  4. As a matter of practice, under reasonable circumstances, requests for extensions to respond may be granted.

  5. Requests for extensions to respond must be in writing and should state the reason why additional time is needed. Since many requests are made by telephone, the extension may be granted verbally and confirmed in writing upon receipt of the written request.

  6. The excise examiner must issue Letter 923-E, Letter Extending Time to File Protest - Excise, after the expiration of the 30 day period to allow the taxpayer 15 more calendar days to respond. Letter 923-E is used only if the 30 day period expired and the taxpayer has stated an intention to protest the examination results.

  7. Extensions beyond the 15 day extension are granted by the excise manager or a designated management official. The taxpayer must be notified in writing of the approved extension and the specific extended response date. Letter 686, Extension of Time for Certain Actions, is used for this purpose. Extensions are normally granted for no more than 30 days unless supported by a specific reason.

  8. If the taxpayer lives outside of the United States, the Letter 950-E can be modified to allow for a reasonable period of time to respond.

  9. If an excise report is changed after a Letter 950-E response date is issued, the excise examiner will follow corrected report procedures found in IRM 4.10.8 and solicit the taxpayer’s agreement. If the taxpayer does not agree to the corrected report, the excise examiner will take the following steps, as appropriate:

    1. If the corrected report changes the proposed adjustment in the taxpayer’s favor and no new issues are raised, the examination can be closed after the initial 30 days expired. A new Letter 950-E is not needed.

    2. If the corrected report raises new issue(s) or the proposed adjustment goes against the taxpayer (i.e., more tax due or less refund), a new Letter 950-E will be issued, if sufficient time remains on the SOL.

Form 5384 and Form 5385

  1. The excise examiner should use Notebook to prepare Form 5384 and/or Form 5385, Excise Tax Examination Changes,.

  2. Refer to Exhibit 4.24.20-1 to properly complete Form 5384 and Form 5385.

  3. Form 5384 and Form 5385 are generated by Notebook. These forms generate the excise report that establishes the taxpayer’s liability or refund. The data on Form 5384 and Form 5385 generated in Notebook must be entered into IMS to automatically populate Form 3198, Special Handling Notice for Examination Case Processing, and Form 5344.

  4. The excise examiner is responsible for verifying the accuracy of the information on Form 5384 and Form 5385.

Soliciting Excise Examination Deficiency Payments

  1. The excise examiner should discuss payment options with the taxpayer during the initial interview and again at the conclusion of the examination. Payment for agreed deficiency cases should be solicited and secured at the closing conference whenever possible.

  2. The excise examiner will advise the taxpayer of the current interest rate and explain the advantage of making advance payment, (i.e., accrual of interest will stop as of the date of payment). Generally, interest is computed by the excise examiner and provided to the taxpayer so full payment is received.

  3. The excise examiner should utilize interest generating software programs, such as CC COMPA for interest computations. Refer to IRM 20.2.5, Interest, Interest on Underpayments.

  4. The excise examiner can accept payment by check or money order, but not cash. The check should be made payable to the U.S. Treasury.

  5. The taxpayer has the right to designate any part of the advance payment, e.g., to penalty or interest, and the excise examiner must apply the payment as designated.

  6. A separate Form 3244-A shall be prepared for each taxpayer and period.

  7. If full payment is not received or the case is unagreed, the excise examiner should follow the tiered interview approach outlined in IRM 4.20.3, Examination Collectibility, Soliciting Payment, to explain payment options. Full payment is considered tax, penalty and interest. Refer to IRM 4.20.3.3, Securing Collection Information - Form 9440, for more detailed guidance.

    Note:

    For an agreed case, the excise examiner is required to use the Specialist Referral System to submit a mandatory collection referral, if the total unpaid liability (tax, penalty and interest) exceeds $100,000.

  8. Refer to IRM 4.4.24 for information on completing Form 3244-A.

  9. Payments must be processed within 24 hours.

  10. Case files must be documented to reflect the payment options discussion, the taxpayer’s response, and actions taken to verify the taxpayers statements, if appropriate. Case file documentation should cover the following items:

    1. Whether any payment was received.

    2. The taxpayer was advised to respond to the first notice.

    3. The taxpayer was provided with Pub 3498.

    4. Form 9440, Taxpayer Levy Source and Contact Information, was completed for cases without full payment. Refer to IRM 4.20.3 for more information.

  11. In unpaid cases (agreed and unagreed), taxpayer financial data is recorded on Form 9440, which should be placed on top of Form 5344 in the case file and the Form 9440 box should be checked on Form 3198 before closing the case.

    Note:

    The excise examiner cannot secure an installment agreement on MFT 03 accounts.

  12. If the taxpayer cannot pay in full, the excise examiner should solicit from the taxpayer:

    • Form 9465, Installment Agreement Request.

    • Form 433-B, Collection Information Statement for Businesses.

  13. If the taxpayer returns a "completed" Form 9465 to the excise examiner, he or she will:

    1. Complete Form 3177, Notice of Action for Entry on Master File. In the "other (specify) box" record "TC 971/AC43" and record the MFT(s) and period(s) that apply.

    2. Fax the completed Form 3177 to General Case Processing within 24 hours of receipt from the taxpayer, using fax number (267) 941-1515.

    3. Place Form 9465 and Form 433-B in the case file. The completed case file with Form 9465 and Form 433-B should be sent to CCP. Form 3198 must be marked accordingly to indicate that Form 9465 and Form 433-B are enclosed in the file. The excise examiner is not required to verify information on Form 433-B. The excise examiner’s role is to collect the information while working with the taxpayer for quicker processing by Collection when it is received.

  14. If the taxpayer is unable or unwilling to provide the excise examiner with Form 9465, the excise examiner may coordinate with Collection using locally-established procedures. A referral is mandatory for agreed, unpaid cases over $100,000. Refer to IRM 4.20.3.4 for additional information.

  15. If a business taxpayer owes $50,000 or less in combined tax, penalties and interest and filed all required returns, excise examiners may direct the taxpayer to https://www.irs.gov to apply for an Online Payment Agreement. Online agreements offer reduced user fees. Taxpayer may also qualify for a short-term agreement if the balance is under $100,000. For more information, excise examiners should refer taxpayers to https://www.irs.gov/payments/online-payment-agreement-application.

Instructions for Completing Form 5384 and Form 5385

The excise examiner is required to use Form 5384 and Form 5385 found in the Notebook Job Aid. Refer to the Excise Notebook Job Aid User Guide for detailed guidance.

The following instructions are for Form 5384 and Form 5385:

  1. Name and address: Show current taxpayer name and mailing address.

  2. Social Security or Employer Identification Number: self-explanatory.

  3. Return form number: self-explanatory.

  4. Indicate individual with whom findings were discussed.

  5. In column 1, denote the period of an examined return using an eight-digit number (MM/DD/YYYY).

  6. In column 2, indicate the IRS Number or Credit Reference Number (CRN) as reflected on Form 720. However, for consistency use the Activity Code as listed in Document 6209, IRS Processing Codes and Information.

    Note:

    Both Form 5384 and Form 5385 include references to CRNs for use, when warranted.

  7. In column 3, denote the kind of tax adjusted using abbreviated format listed below:

    TYPE OF TAX DESCRIPTION
    RET Retail (4001 – 4053), Passenger Automobiles (4001 – 4003), Special Fuels (4041 – 4042), Heavy Trucks & Trailers (4051 – 4053)
    MAN Manufacturing (4064 – 4227), Automotive Related Items including Tires, Gasoline, Diesel, Kerosene and LUST (4064 – 4105), Coal (4121), Certain Vaccines (4131 - 4132), Recreational Equipment – Sport Fishing and Archery (4161 – 4182), Medical Device (4191)
    FAC Facilities and Service (4251 – 4293), Communications (4251 - 4254), Transportation by Air ( 4261 – 4282), Indoor Tanning Services (5000B)
    FOR Policies Issued by Foreign Insurers (4371 – 4374)
    SSF Structured Settlement Factoring Transactions (5891)
    WAG Taxes on Wagering (4401 – 4424), Tax on Wagers (4401 – 4405) , Occupational Tax (4411 – 4415)
    USE Certain Other Excise Taxes (4461 – 4484), Harbor Maintenance Tax (4461 – 4462), Transportation by Water (4471 – 4472),Tax on Use of Certain Vehicles (4481 – 4484)
    ENV Environmental Taxes (4611 – 4682), Tax on Petroleum (4611 – 4612), Tax on Certain Chemicals (4661 – 4662), Tax on Certain Imported Substances (4671 – 4672), Ozone Depleting Chemicals (4681 – 4682)
    REG Registration Required Obligations (4701), Tax on Issuer of Registration-Required Obligation-Not in Registered Form (4701)
    COB COBRA (4980B), Failure to Satisfy Continuation Coverage Requirements of Group Health Plans (4098B)
    INS Patient-Centered Outcomes Research Institute (4375 - 4377)
  8. In column 4, denote the total corrected liability or credit per examination for the particular period and tax examined.

  9. In column 5, show the tax or credit per return or as previously adjusted. Request a current BMFOLR to verify abstract tax issue per return and a BMFOLT to verify the Transaction Code (TC) 150 or TC 290/291 or TC 300/301 tax amount posted to the tax module. T/C 840/846/766 does not affect tax per return.

    Note:

    The TC 150 posting for a Substitute for Return (SFR) will be zero (0) unless a partial assessment was made for a delinquent return received after the SFR posted.

  10. In column 6, show the adjustment made per examination. Parentheses indicate the adjustment is a decrease to tax. The delinquent tax for categories omitted from Form 720 will appear in this column.

  11. In column 7, enter all applicable penalties from Notebook penalty reports. Refer to IRM 20.1.4, Penalty Handbook, Failure to Deposit Penalty, Form 720 Reporting Requirements, for guidance about computing the deposit penalty and IRM 20.1.11.19, Managerial Approval for Penalty Assessment, for guidance about managerial involvement.

  12. In column 8, calculate the total adjustments for the return and excise tax examined. This is the total of lines 6 and 7.

  13. In the "Other Information " section include statements as needed. This includes the statement that the excise report is subject to approval by Chief, Estate & Gift/Excise Tax Examination. If additional space is needed, use Form 886-A or Excise Issue Summary Lead Sheet and add: "See 886-A or Excise Issue Summary Lead Sheet attached." Below are examples of statements which should be used to clarify the examination results.
    • Statement on corrected or supplemental reports such as "This report supersedes report dated ______;"
    • References to attachments.
    • Statements regarding the disposition of claims. See IRM 4.24.8 for information regarding claim reports.
    • Statement regarding the application of any penalties or additions to tax (or reference to attachments). Include the IRC Section, title of the penalty, and the dollar amount.
    • Statement regarding the application of IRC 6404(g), Suspension of interest and certain penalties where Secretary fails to contact taxpayer, and the date on which the notice was provided. Refer to IRM 4.10.8.13.12, Time Reporting for Preliminary (30 Day) Letters (LB&I Examiners Only) for more detailed guidance.
    • Report does not reflect the interest on the underpayment of tax. The underpayment rate is the sum or the federal short-term rate plus three percentage points. Refer to IRC 6621, (a)(2), Underpayment rate, for more detailed guidance.

  14. Only taxes reported on the same type of return are reflected on a Form 5384. For example, if a Form 720 and a Form 2290 are examined for the same taxpayer, two separate Form 5384/5385 are required.

Acronyms

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

Acronym Definition
CAF Central Authorization File
CC Command Code
CCP Centralized Case Processing
CRN Credit Reference Number
FSEQ Field and Specialty Exam Quality
IDRS Information Document Retrieval System
IMS Issue Management System
LB&I Large Business and International
POA Power of Attorney
RRA ‘98 Restructuring and Reform Act of 1998
SFR Substitute for Return
SOL Statute of Limitations
TC Transaction Code
TIA Tax Information Authorization