4.24.20 Excise Tax Report Writing Guide

Manual Transmittal

May 19, 2017

Purpose

(1) This transmits revised IRM 4.24.20, Excise Tax Report Writing Guide.

Material Changes

(1) This IRM was updated to include required information about the program’s system of internal controls.

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

(3) The table below identifies the significant changes in content:

4.24.20.1 General Overview of Excise Examination Reports Title changed to Program Scope and Objectives. New content added about information involving internal controls placed under this subsection to comply with rules and requirements under 1.11.2.1. Prior content moved to 4.24.20.2.
New 4.24.20.1.1 Title added Background. New content added about background to comply with rules and requirements under 1.11.2.1.1.
New 4.24.20.1.2 Title added Authority. New content added about legal authorities to comply with rules and requirements under 1.11.2.1.2.
New 4.24.20.1.3 Title added Responsibilities. New content about responsibilities added to comply with rules and requirements under 1.11.2.1.3.
New 4.24.20.1.4 Title added Program Objectives and Review. Information from 1.11.2 and IRM 1230, Internal Management Document System Handbook, added to comply with rules and requirements under 1.11.2.1.4.
New 4.24.20.1.5 Title added Terms/Definitions/Acronyms. A list of frequently used terms, definitions and acronyms in the IRM process, including those related to management and internal controls, added to comply with the rules and requirements under 1.11.2.1.5 and 1.11.2.1.6.
New 4.24.20.1.6 Title added Related Resources. Information about technical guidance and information processing steps and methods for other excise tax abstracts other than general program added to comply with rules and requirements under 1.11.2.1.7.
4.24.20.2 Reports by Type of Closure Title Changed to Excise Examination Reports. New content moved from 4.24.20.1. Prior content moved to 4.24.20.3.
4.24.20.2.1 Agreed Reports Subsection removed. Content moved to 4.24.20.3.1.
4.24.20.2.2 Partially Agreed and Excepted Agreed Reports Subsection removed. Content moved to 4.24.20.3.2.
4.24.20.2.3 No Change Reports Subsection removed. Content moved to 4.24.20.3.3.
4.24.20.2.4 Unagreed Reports Subsection removed. Content moved to 4.24.20.3.4.
4.24.20.2.5 Information Reports Subsection removed. Content moved to 4.24.20.3.5.
4. 24.20.3 Report Writing Guidelines Title changed to Reports by Type of Closure. New content moved from 4.24.20.2. Prior content moved to 4.24.20.4.
4. 24.20.3.1 Reports in Notebook and IMS Title changed to Agreed Reports. New content moved from 4.24.20.2.1. Prior content moved to 4.24.20.4.1.
4. 24.20.3.2 Separate Reports for Different Types of Excise Taxes Title changed to Partially Agreed/Excepted Agreed Reports. New content moved from 4.24.20.2.2. Prior content moved to 4.24.20.4.2.
4. 24.20.3.3 Publications to Include with Reports Title changed to No Change Reports. New content moved from 4.24.20.2.3. Prior content moved to 4.24.20.4.3.
4. 24.20.3.4 Reports Sent to Power of Attorney Title changed to Unagreed Reports. New content moved from 4.24.20.2.4. Prior content moved to 4.24.20.4.4.
4. 24.20.3.5 Execution of Reports and Payment Title changed to Information Reports. New content moved from 4.24.20.2.5. Prior content moved to 4.24.20.4.5.
4. 24.20.3.6 Fax Signatures Subsection removed. Content moved to 4.24.20.4.6.
4. 24.20.3.7 Extension of Time to Respond Subsection removed. Content moved to 4.24.20.4.7.
4.24.20.4 Form 5384 and Form 5385 Title changed to Report Writing Guidelines. New content moved from 4.24.20.3. Prior content moved to 4.24.20.5.
New 4.24.20.4.1 Title added Reports in Notebook and the Issue Management System (IMS). New content moved from 4.24.20.3.1.
New 4.24.20.4.2 Title added Separate Reports for Different Types of Excise Taxes. New content moved from 4.24.20.3..2
New 4.24.20.4.3 Title added Publications to Include with Reports. New content moved from 4.24.20.3.3.
New 4.24.20.4.4 Title added Reports Sent to Authorized Third Parties. New content moved from 4.24.20.3.4.
New 4.24.20.4.4.1 Title added Excise Tax Enclosures with Correspondence to Representatives and Appointees. New content added from SB/SE 04-1216-0057 issued on December 13, 2016. Publications sent to taxpayers should agree with enclosures listed on the taxpayer’s cover letter to avoid confusion.
New 4.24.20.4.5 Title added Execution of Reports and Payments. New content moved from 4.24.20.3.5.
New 4.24.20.4.6 Title added Facsimile (Fax) Signatures. New content moved from 4.24.20.3.6.
New 4.24.20.4.7 Title added Extension of Time to Respond. New content moved from 4.24.20.3.7.
4.24.20.5 Soliciting Excise Examination Deficiency Payments Title changed to Form 5384 and Form 5385 New content moved from 4.24.20.4. Prior content moved to 4.24.20.4.6.
New 4.24.20.6 Title added Soliciting Excise Examination Deficiency Payments. New content moved from 4.24.20.4.5.
Exhibit 4.24.20-1 Instructions for Completing Form 5384 and Form 5385 Content updated.
Exhibit 4.24.20-2 Acronyms Table added.

Effect on Other Documents

This material supersedes IRM 4.24.20 dated February 12, 2016, and SBSE IGM 04-1216-0057, Excise Tax Enclosures with Correspondence to Representatives and Appointees, dated December 13, 2016.

Audience

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

Effective Date

(05-19-2017)

Alfredo Valdespino
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 Examination Tax managers and 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, AWSS, Counsel, SB/SE Specialty Examination, SB/SE Examination Quality & Technical Support (EQ&TS) 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 requires that certain notices describe the basis for and identify the amounts of the 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 that 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 the executive responsible for Excise Tax Examination policy and procedures.

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

  3. Chief, 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, Organization and Staffing, Small Business and Self/Employed (SB/SE), Excise Tax Examination.

  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 (EQRS), located in EQ&TS, which supports the SB/SE quality improvement program utilizing the National Quality Review System (NQRS) to conduct independent case reviews from a statistically valid sample of examination case work. National, area and territory trend analyses 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 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, which requires providing taxpayers with employee contact information when an examination report is issued.

  2. Refer to IRM 4.10.8, Examination of Returns, Report Writing, for general procedural report writing guidance.

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

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

  5. 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.

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

  7. 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 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.

Excise Examination Reports

  1. Reporting procedures are determined by examination findings of selected excise tax returns (excise return). An excise return may be:

    1. Agreed

    2. Partially Agreed/Excepted Agreed

    3. No Change

    4. Unagreed

    5. No Liability Closure

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

  3. Except as otherwise provided in 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.

  4. 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. See IRM 1.2.13.1.16, Servicewide Policies and Authorities, Policy Statements for the Examining Process, Policy Statement 4-40.

Reports by Type of Closure

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

Agreed Reports

  1. In an agreed 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 used for agreed cases. The taxpayer signs Form 5384 to reflect agreement.

  3. If a written explanation is necessary or requested by the taxpayer, Form 886-A, Explanation of Items, or Excise Issue Summary Lead Sheet, must be issued.

  4. A 30 Day Letter is issued on an agreed case (or unagreed case) when the excise examiner does not know, if the taxpayer will agree to the proposed examination changes.

  5. 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.

  6. Refer to “My SB/SE Preparing Reports and Closing an Excise Tax Case - Agreed” webpage athttp://mysbse.web.irs.gov/examination/specialty/excise/close/agreed/default.aspx.

Partially Agreed/Excepted Agreed Reports

  1. In an excepted agreed case, the taxpayer agrees to the proposed adjustments, but the 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 are proposed adjustments 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.

  3. Use Form 4665, Report Transmittal, in all partially agreed cases.

  4. Refer to My SB/SE Preparing Reports and Closing an Excise Tax Case - Partially Agreed and Excepted Agreed webpage at http://mysbse.web.irs.gov/examination/specialty/excise/close/partiallyagreedexcepted/default.aspx and IRM 4.10.8 for guidance on preparing excise reports and closing a partially agreed or excepted agreed case.

No Change Reports

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

  2. Refer to My SB/SE Preparing Reports and Closing an Excise Tax Case - No Change webpage athttp://mysbse.web.irs.gov/examination/specialty/excise/close/nc/default.aspx.

Unagreed Reports

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

  2. 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 examination may be forwarded to Appeals.

  3. Refer to My SB/SE Preparing Reports and Closing an Excise Tax Case - Unagreed webpage at http://mysbse.web.irs.gov/examination/specialty/excise/close/unagreed/default.aspx for preparing excise reports and closing an unagreed case that is not going to Appeals.

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

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

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

  2. Refer to IRM 4.24.18, Excise Operations Support, for general procedural guidance regarding information reports for excise leads and non-excise leads.

Report Writing Guidelines

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

  2. Refer to IRM 4.24.21 for information about steps and procedures for case closing based on the type of closure.

Reports in Notebook and the Issue Management System (IMS)

  1. The excise examiner is required to utilize the Notebook Job Aid (Notebook). Notebook is used to generate excise case reports, which must then be imported into the Issue Management System (IMS). Refer to IRM 4.24.6, Technical Guidance and Procedures for Excise Issues, for additional Notebook and IMS guidance.

  2. 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.

  3. The excise examiner is responsible for selecting those forms and letters that apply to the taxpayer’s situation (i.e., agreed, no changed, 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 reviewing them for report accuracy.

  4. Form 3198, Special Handling Notice for Examination Case Processing, may be prepared in either Notebook or IMS.

  5. IMS has the advantage of populating automatically a significant portion of documents based on data previously entered. This results generally in improved accuracy.

  6. 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 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 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 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 30 Day Letter. Pub 3498 is used for this purpose. Pub 3498 consolidates information from Pub 1, Your Rights as a Taxpayer, 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 30 Day Letters.

    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.

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. Centralized Authorization File (CAF) research on Information Document Retrieval System (IDRS) should be conducted because it is possible the power of attorney (POA) may have been superseded by a new POA/TIA submission or rescinded through channels other than the excise examiner. Refer to IRM 21.3.7, Taxpayer Contacts, Processing Third Party Authorizations onto the Central Authorization File (CAF), for more information regarding examiner duties and obligations.

    Note:

    These instructions are consistent with SBSE-04-0816-0044, Initial Taxpayer Contact in Excise Tax Examination Cases, issued on August 16, 2016, and which will be incorporated into IRM 4.24.6.

  2. Per 26 CFR § 601.506 (Statement of Procedural Rules), 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. 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 Letter 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:

    These instructions are consistent with the Form 2848 instructions and Form 8821 instructions and interim guidance SB/SE-04-1216-0057, Excise Tax Enclosures and Correspondence to Representatives and Appointees, issued December 13, 2016.

Execution of Reports and Payments

  1. Agreement forms are considered “executed” when taxpayers sign the forms. 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.

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

Facsimile (Fax) 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, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (Excise Tax).

    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 for Use of Fax and Signature Stamps in Taxpayer Submissions memorandum, dated November 19, 2015, at http://imdtrack.web.irs.gov/IG_Uploads/IRS.gov_No/Revision%20of%20Policy%20for%20Use%20of%20Fax%20in%20Taxpayer%20Submissions508REV.pdf .

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 30 Day Letter can be modified to allow for a reasonable period of time to respond.

  9. If an excise report is changed after a 30 Day Letter 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 has expired. A new 30 Day Letter 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 30 Day Letter 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 and uploaded into IMS can be extracted in IMS to automatically populate Form 3198 and Form 5344.

  4. The excise examiner is responsible for verifying the accuracy of the information on Form 5384 and Form 5385 whether generated by Notebook or not.

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 IDRS Command Code (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 must provide the taxpayer with Pub 594 and follow the tiered interview approach outlined in IRM 4.20.3, Examination Collectibility, Soliciting Payment, to explain payment options. A referral to Collection is mandatory for agreed unpaid cases over $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 594.

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

  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. An installment agreement is limited to only IMF and Form 1120 BMF accounts.

Instructions for Completing Form 5384 and Form 5385

The excise examiner is required to use Form 5384 and Form 5385. For detailed guidance, see the Excise Notebook Job Aid User Guide at http://mysbse.web.irs.gov/examination/specialty/excise/library/default.aspx.

The following instructions are for Form 5384 and Form 5385:

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

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

  • Return form number: self-explanatory.

  • Indicate individual with whom findings were discussed.

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

  • 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.

  • 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)
  • In column 4, denote the total corrected liability or credit per examination for the particular period and tax examined.

  • In column 5, show the tax or credit per return or as previously adjusted. Request a current BMFOLT to verify the Transaction Code (TC) 150 or TC 290/291 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.

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

  • In column 7, enter all applicable penalties from any Notebook generated work papers. The excise examiner may also compute the failure to deposit penalty on Form 2769, Computation of Deposit Penalty,

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

  • In the Other Information section include statements as needed. This includes the statement that the excise report is subject to approval by Chief, Excise Tax Examination. If additional space is needed, use Form 886-A or Issue Summary Sheets and add: See 886-A or Issue Summary Sheets attached. Below are examples of statements which should be used to clarify the examination results.

    1. Statement on corrected or supplemental reports such as "This report supersedes report dated ______;" .

    2. References to attachments.

    3. Statements regarding the disposition of claims. See IRM 4.24.8 for information regarding claim reports.

    4. 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.

    5. Statement regarding the application of IRC 6404(g) (suspension of interest provisions) and the date on which the notice was provided see IRM 4.10.8.13.12, Time Reporting for Preliminary (30 Day) Letters (LB&I Examiners Only).

  • Form 2769 is used as needed to augment Form 5384.

  • 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.

  • The instructions for Form 5384 are applicable to Form 5385.

Acronyms

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

Acronym Definition
AWSS Agency-Wide Shared Services
CAF Central Authorization File
CC Command Code
CCP Centralized Case Processing
CRN Credit Reference Number
EQ&TS Examination Quality & Technical Support Staff
IDRS Information Document Retrieval System
IMS Issue Management System
IT Information Technology
LB&I Large Business and International
NQRS National Quality Review System
POA Power of Attorney
RRA ‘98 Restructuring and Reform Act of 1998
SFR Substitute for Return
SOL Statute of Limitations
TC Transaction Code
TE/GE Tax Exempt & Governmental Entities
TIA Tax Information Authorization