4.24.21 Case Closings

Manual Transmittal

July 08, 2020

Purpose

(1) This reissues IRM 4.24.21, Excise Tax,Case Closings.

Material Changes

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

(2) The table below identifies the significant changes in content.

IRM Section Number Description of Change
4.24.21.1.6 Related Resources New content added to address IRM 4.10.1, Overview of Basic Examiner Responsibilities, IRM 4.10.2, Pre-Contact Responsibilities and IRM 4.10.8, Report Writing, that provides information for excise examiners to perform their duties more effectively.
4.24.21.3 Case Closing Timeframes Title Changed to Excise Case Closing Timeframes.
4.24.21.3.1 20 Day Timeframe for Closing Agreed and/or No Change Cases Title changed to 30 Day Timeframe for Closing Agreed and/or No Change Excise Cases. New content incorporated from IGM SB/SE 04-1018-0036, Interim Guidance Procedures for Timeframes to Close Agreed and No-Change Examinations, that provides guidance about newly established timeframes for closing agreed and/or no change excise cases.
4.24.21.3.2 Timeframe for Closing Agreed Cases with Deficiencies of $100,000 and Greater Title changed to Timeframe for Closing Agreed Excise Cases with Deficiencies of $100,000 and Greater.
4.24.21.3.3 Timeframe for Closing Unagreed Cases Title changed to Timeframe for Closing Unagreed Excise Cases.
4.24.21.4 Preparing for Case Closing Title changed to Preparing for Excise Case Closing.
4.24.21.4.1 Paper Closing/Electronic (IMS) Closing Title changed to Paper Excise Closing/Electronic (IMS) Excise Closing.
4.24.21.4.4 Form 5344 - Examination Closing Record Content about Form 5344 linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.4.5 Form 5351 - Examined Non-Examination Closings Record Content about Form 5351 linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5 Closing Procedures by Type of Closure Title changed to Excise Closing Procedures by Type of Closure. New content about closing procedures by type of closure linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.1 Closing Procedures for Surveyed Returns Title changed to Closing Procedures for Surveyed Excise Returns. New content added to provide information about closing surveyed excise returns. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.2 Closing Procedures for Agreed Examinations Title changed to Closing Procedures for Agreed Excise Examinations. New content added to provide information about closing procedures for agreed excise examinations. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.2.1 Closing Procedures for Partially Agreed and Excepted Agreed Examinations Title changed to Closing Procedures for Excepted Agreed and Partially Agreed Excise Examinations. New content added to provide information about closing procedures for partially agreed and excepted excise examinations. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.3 Closing Procedures for No Change Examinations Title changed Closing Procedures for No Change Excise Examinations. New content added to provide information about closing procedures for no change excise examinations. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
New 4.24.21.5.3.1 Title added No Change Excise Report Non-Filed Excise Return Report Forms, Letters and Closing Procedures. New content added to provide information about forms, letters and closing procedures for no change excise report non-filed excise return report. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.4 Closing Procedures for Unagreed Examinations Not to be Forwarded to Appeals Title changed to Closing Procedures for Unagreed Excise Examinations Not to be Forwarded to Appeals. New content added to provide information about closing procedures for unagreed excise examinations not to be forwarded to Appeals. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.5.5 Closing Procedures for No Liability Closures Title changed to Closing Procedures for No Liability Excise Closures. New content added to provide information about closing procedures for no liability excise closures. Additional content linked to information at the Excise Tax Knowledge Base Home Page.
4.24.21.6 Case Closing Procedures for Managers Title changed to Excise Case Closing Procedures for Managers. New content linked to the LB&I IMS website.
4.24.21.6.1 Case Documentation Title changed to Excise Case Documentation.
4.24.21.6.2 Review of Case Title changed to Review of Excise Case.
4.24.21.6.3 Grade of Case Title changed to Grade of Excise Case.

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

Effect on Other Documents

This material supersedes IRM 4.24.21 dated May 12, 2017, and Interim Guidance Memorandum (IGM) SB/SE 04-1018-0036, Interim Guidance Procedures for Timeframes to Close Agreed and No-Change Examinations, dated October 1, 2018.

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 about closing excise examination reports (excise reports) in terms of content and format. A taxpayer has the right to appeal an IRS decision in an independent forum, which allows for a fair and impartial administrative appeal.

  2. Purpose - For compliance purposes, it is essential excise managers, senior-level officials and excise examiners understand and correctly follow the technical guidance and closing processes explained in this IRM section so accurate excise reports result. Executed excise reports, unlike workpapers, are legally binding documents and serve as the basis for assessment and collection actions.

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

  4. Policy Owner - Director, Examination - Speciality Policy is responsible for the administration, procedures and updates related to closing excise reports.

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

  6. Primary Stakeholders - Appeals, Agency-Wide Shared Services, Counsel, Specialty Examination, SB/SE Field and Specialty Examination Quality (FSEQ) and Large Business and 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 or goals for Excise Tax Examination 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 the tax due, interest, additional amounts, additions to tax and assessable penalties included in such notice. 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 Congress desires 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, Estate & Gift/Excise Tax Examination is the executive responsible for ensuring information about closing excise reports is communicated to and carried out by excise managers and excise examiners.

Program Objectives and Review

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

  2. Program Reports - Information regarding the reporting of program objectives are included on, but not limited to Headquarters Examination Monthly Briefing, Program Manager Monthly Briefing, Examination Operational Review and Business Performance Reviews, which are provided to Director, Examination - Specialty Policy.

  3. Program Effectiveness - Program effectiveness is measured by the Examination Quality Review Staff, located in FSEQ, that supports the SB/SE quality improvement program utilizing National Quality Review System (NQRS) to conduct independent case reviews from a statistically valid sample of examination case work. National, area and territory trend analysis for 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 information in this IRM annually 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 Definition
    AMDISA Command Code (CC) so, if the modifer “A” is added to CC AMDIS and input with the Tax Identification Number (TIN), File Source, Master File Tax (MFT) (or Plan Number) and Tax Period, up to seven screens will be displayed.
    BMFOLI CC to request on/off line status of entity and tax modules.
    BMFOLR CC to request Business Master File (BMF) return screen information.
    BMFOLT CC to request BMF tax module screen information.
    BRTVU CC to gain read-only access to the tax return data submitted by business taxpayer.
    CFINK CC to research the Central Authorization File (CAF).
    INOLES CC to display specific data for the account addressed.
    TXMODA CC to request for display all tax module information for a specific tax period.

Related Resources

  1. Refer to IRM 4.10.1, Examination of Returns, Overview and Basic Examiner Responsibilities, for guidance about the responsibilities excise 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 completing required responsibilities and analyses before an examination is initiated, pre-contact planning of the examination and 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 information about completing Form 637 registration program compliance cases.

  5. Refer to IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement, for information about closing excise claim cases.

  6. Refer to IRM 4.24.10, Appeals Referral Procedures, for information about closing unagreed cases (other than claims) to Appeals.

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

Closing Information for Excise Tax Returns

  1. This section provides information on procedures for closing an examination of excise tax returns (excise returns).

  2. All excise tax field groups (excise groups) should send excise reports on agreed, no change and surveyed excise tax cases (excise cases) to Cincinnati Centralized Case Processing (CCP) via Form 3210, Document Transmittal.

    Note:

    If a taxpayer failed to timely respond to a Letter 950-E, 30 Day Letter - Straight Deficiency or Overassessment for Excise Tax Examination Cases, or otherwise failed to satisfy the requirements for a review of case findings by Appeals, that case should be sent to CCP via Form 3210. Refer to IRM 4.24.10.3, Appeals Referral Procedures, Appeals Referral Process, for further guidance.

Excise Case Closing Timeframes

  1. Taking timely actions on an excise case is an essential element for managing the examination cycle time and is key to taxpayer satisfaction. Nationally mandated timeframes dictate when the excise examiner should initiate, follow-up or complete certain actions.

  2. The current time frames for case action may be found at IRM Exhibit 4.2.8-6, General Examining Procedures, Guidelines for SB/SE National Quality Review, NQRS Time Frames for Case Action. Specific excise case closing timeframes are indicated below.

30 Day Timeframe for Closing Agreed and/or No Change Excise Cases

  1. NQRS reviews, agreed or no change examinations are to be closed in 30 calendar days measured from the date the agreed report is received or the date the no change status is communicated to the taxpayer to the date the case is closed from the excise group and updated in Examination Return Control System (ERCS).

  2. Examination Quality Review System (EQRS) reviews, agreed and no change examinations are to be closed within 30 calendar days. The 30 days are divided as follows:

    1. The excise examiner has 15 days to close agreed and no change excise examinations to the excise manager. The 15 day period begins on the earlier of the date the agreed report is received from the taxpayer or the date the no change status is communicated to the taxpayer. The 15 day period ends on the day the case is mailed to the excise manager and/or the IMS case file is updated for closing.

    2. The excise manager has 15 days to close agreed and no change excise examinations from the excise group. The 15 day period is measured from the date the case is mailed to the excise manager or the IMS case file is updated to the excise manager to the date the case is updated to closing status on ERCS.

  3. The timeframe is calculated beginning the day immediately following the occurrence of one of the events described immediately above.

  4. Delays in meeting the timeframe must be documented on Form 9984, Examining Officer’s Activity Record, by the excise examiner and/or excise manager. The excise manager may utilize whatever features are available in IMS to make comments (e.g., Case Comments via the time sheet on a Form 9984 or Case Level Activities at the Team Web Site). Documentation must explain the facts and circumstances that caused the delay. Timeframes may be extended whenever documentation establishes the excise examiner and/or excise manager exercised ordinary care and prudence.

Timeframe for Closing Agreed Excise Cases with Unpaid Deficiencies of $100,000 and Greater

  1. Currently, excise taxes subject to the provisions for unpaid deficiencies of $100,000 and greater are administered by Tax Exempt/Governmental Entities not Excise Tax Examination.

    Note:

    The unpaid deficiency applies per tax period not the aggregate amount.

  2. The only excise taxes subject to these procedures are under Chapters 41 - 44 on certain exempt organizations and employee plan transactions.

Timeframe for Closing Unagreed Excise Cases

  1. The excise examiner and excise manager have 20 calendar days to close an unagreed excise case measured from the earlier of:

    • The date to respond to Letter 950-E.

    • The date the request for an Appeals conference is received from the taxpayer to the date the excise case is forwarded to Technical Services (Tech Services).

  2. The timeframe is calculated beginning the day immediately following the occurrence of one of the events described immediately above.

  3. Delays in meeting the timeframe must be documented on Form 9984 by the excise examiner and/or excise manager. The excise manager may utilize whatever features are available in Issue Management System (IMS) to make comments (e.g., Case Comments via the time sheet on a Form 9984 or Case Level Activities at the Team Web Site). Documentation must explain the facts and circumstances that caused the delay. Timeframes may be extended whenever documentation establishes the excise examiner and/or excise manager exercised ordinary care and prudence.

Preparing for Excise Case Closing

  1. Once the excise examiner issues the report, the excise case must be prepared for closing.

  2. The following topics address the general steps to prepare the excise case regardless of the type of closing.

Paper Excise Closing / Electronic Issue Management System Excise Closing

  1. The excise case closing process requires a paper file closing and a separate IMS closing. The excise examiner will attempt to close both IMS and paper files at the same time.

  2. The excise examiner will include all key documents in the IMS file. The excise examiner will also print and organize all key documents into the paper file, which will be mailed to the excise manager for further processing. Key documents will include, but are not limited to, work papers or supporting documentation (or portions thereof) detailing all proposed adjustments. Effort should be made by the excise examiner to index all key documents in the IMS file in a similar fashion to those in the paper file. The excise examiner should apply judgment as to what information is necessary to include in both IMS and paper files. The excise manager’s advice should be sought, if any question exists as to whether the document should be included.

  3. The excise manager will review the closed excise case upon receipt. Review of the excise case will include a comparison by the excise manager of the paper file to the IMS file. If any inconsistencies exist, the excise manager will return the excise case file to the excise examiner for correction. The excise manager will document all closing actions in IMS on Form 9984, Examining Officer’s Activity Record, or through Case Level Activities at the IMS Team Web Site. If the excise manager added or changed any documents, those documents must be uploaded or saved in the IMS file and printed for the paper file.

  4. The status of the IMS file must be updated to "closed" by the excise examiner but not until it reaches on the Examination Return Controls System (ERCS) either Status 51 or Status 52, which is determined as to when by the excise manager. The excise manager must then complete the managerial actions in IMS. After the excise manager has completed the review of the excise case, the paper file should be mailed to CCP or Tech Services for further processing and final closing.

Obtain Necessary IDRS Transcripts

  1. The excise examiner should verify the correct statute of limitations (SOL) period for assessment of tax date is reflected on all transcripts. Transcripts must be less than 30 days old but preferably less than one week old.

  2. The excise examiner should include the following IDRS material in the closed excise case:

    • AMDIS.

    • AMDISA for each period - attached to the inside left of the case file folder.

    • BMFOLT whichever reflects the most current module activity - attached to the back of the filed Form 720, Quarterly Federal Excise Tax Return, Form 8849, Claim for Refund of Excise Taxes, or Substitute for Return (SFR) facing outward.

    • INOLES - attached to the inside left of the case file folder.

    • CFINK, if there is a representative - attached to the bottom of the first page of the filed Form 720, Form 8849, or SFR facing outward.

    • TXMODA (Current within 30 days of closure) - attached to the back of filed the Form 720, Form 8849 or SFR facing outward.

      Note:

      An original excise return should be used when appropriate. TXMODA may not always be present for an excise return. For example, TXMODA is not present for an SFR. In some situations, TXMODA may not be present for a filed excise return. If TXMODA is not present, the excise examiner should substitute BRTVU for TXMODA.

  3. The excise examiner should verify the Transaction Codes (TCs) are generated properly on Form 5344, Examination Closing Record, generated by IMS.

Form 3198 - Special Handling Notice for Examination Case Processing

  1. The excise examiner is responsible for completing Form 3198, Special Handling Notice for Examination Case Processing.

  2. Form 3198 provides closing instructions to CCP, Tech Services or WSD.

  3. Form 3198 is prepared in IMS.

  4. IMS will automatically populate Form 3198 after the examiner enters the data into IMS. This will generally result in improved accuracy. The excise examiner will need to manually complete the remaining applicable fields and itemize the closing data on Form 3198 .

    Note:

    For example, the Failure to File, Failure to Pay and Failure to Deposit penalties are individually entered in IMS as IRC 6651(a)(1), Failure to file tax return or pay tax, Addition to the tax, IRC 6651 (a)(2), Failure to file tax return or pay tax, Addition to the tax, and IRC 6656Failure to make deposit of taxes. These penalties are then listed separately on Form 3198 when generated in IMS. Additionally, if no penalties are asserted, IMS allows the excise examiner to report zero for penalty non-assertion.

  5. Under IMS, the excise examiner must identify and check the closing letters to be issued by CCP on Form 3198 or indicate no letter is to be sent by CCP. Closing letters must be prepared, signed and included in the paper file for CCP to date stamp and mail. Envelopes should be included when appropriate.

  6. If Form 3198 is not annotated correctly with all closing actions, the excise case closing may be delayed and the excise case returned to the group for additional closing actions.

  7. Refer to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf at Closing an Examination for sample copies of completed Forms 3198 for No Change Reports, Agreed Reports and Unagreed Reports

Form 5344 - Examination Closing Record

  1. Form 5344 serves as an input document for the AIMS, which captures the closing information on examined cases. The system also transmits Form 5344 adjustment information to the Master File to update taxpayer account records.

  2. The IMS file cannot be closed until a closing document is generated. The excise examiner is responsible to verify all TCs are properly completed on Form 5344.

    Note:

    Closing documents include Form 5344, Form 5351, Examination Non-Examined Closings, and Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

    Note:

    The excise examiner does not need to attach Form 8278 when abating a penalty because this is accomplished under IMS on Form 3198.

  3. Form 5344 is generated in IMS, which will automatically populate when data is entered on the "IMS Entity Closing Data" tab. To complete Form 5344, the excise examiner must click "Submit on IMS."

  4. Refer to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf at Closing an Examination for sample copies of completed Forms 5344 for No Change Reports, Agreed Reports and Unagreed Reports.

Form 5351 - Examined Non-Examination Closings Record

  1. For surveyed excise cases, the excise examiner must generate Form 5351 in IMS.

  2. Refer to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf at Closing an Examination for a sample copy of a completed Form 5351 for a Survey.

Excise Closing Procedures by Type of Closure

  1. This Section provides information for closing excise cases based on the type of closure.

  2. The excise examiner is responsible to select those forms and letters that apply to the taxpayer’s situation. During the course of the examination, the excise examiner must selectively issue forms and letters directly to the taxpayer and selectively forward letters to CCP to be issued to the taxpayer when the excise case fully closes. The excise examiner must complete those forms and letters that are not automatically populated, as well as review and correct them for accuracy.

  3. IMS will deploy standardized closing forms and Notebook will deploy standardized closing letters based on type of closure.

Closing Procedures for Surveyed Excise Returns

  1. If the taxpayer has not been contacted, taxpayer books and records have not been inspected and an examination will most likely not result in a material change to the taxpayer’s tax liability, the excise examiner must survey the return after assignment by completing Form 2503, Survey After Assignment - Excise or Employment Tax.

    Note:

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

  2. The excise examiner is required to document the reason for the survey on Form 2503.

  3. To support the decision to survey the return after assignment, the excise examiner must ensure the case file has been documented with all actions taken, which led to this conclusion, including, but not be limited to, consideration of Large, Unusual or Questionable items, completion of required filing checks, consideration of collectibility, evaluation of audit potential, repetitive audits and other materials that influenced his or her decision.

  4. Paper surveys are required for unpaid claims and cases with original returns in the case file. If not required, paperless electronic survey procedures can be utilized. Refer to IRM 4.24.21.5.1.2 for more detailed guidance.

  5. The excise examiner should stamp the face of the excise return or a paper copy of the Business Transactions File View (BRTVU) with the message "Closed Survey After Assignment," "Excise Examiner’s Signature and Date," and "Approved - Excise Manager’s Signature and Date." If a stamp is not available, the message may be handwritten. The excise examiner should sign and date the message. The excise manager should do the same.

  6. When an excise return is surveyed after assignment Disposal Code (DC) 32 is entered on Form 3198 . DC 31 is entered by an excise manager for an excise return surveyed before assignment.

  7. Refer to the IRM 4.24.8.8.1, Unpaid Claims - Survey, and/or the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter at Survey for more information about closing forms and procedures for surveying excise cases.

Paper Survey Procedures
  1. To process a paper survey, complete Form 2503 and Form 5351 in IMS and submit for managerial approval. Upon receiving managerial approval, print these forms for the paper file.

  2. Complete and upload the following documents into IMS and assemble the paper file as follows:

    1. On the front of the case file (top to bottom), attach Form 3210 and Form 895, Notice of Statute Expiration, if applicable.

    2. Inside the case cover on the left (top to bottom), attach AMDISA and INOLES that are less than 30 days old.

    3. Inside the case cover on the right, attach labels, if available.

    4. Inside the case file, attach Form 5351, Form 2503, the tax return or BRTVU, Form 9984, and miscellaneous case documents.

      Note:

      Remove unnecessary documents, duplicates and fasteners.

    5. On the front of the return or BRTVU, nothing should be attached.

    6. On the back of the return or BRTVU (face in), attach Form 5546, Examination Return Charge-Out Sheet, if available.

    7. On the back of the return or BRTVU (face out), attach TXMODA that is less than 30 days old.

      Note:

      If TXMODA is not found on IDRS, the excise examiner can attach a BMFOLT that is less than 30 days old and a BMFOLR (for a filed return only).

  3. Form 5344 is not required for a survey.

  4. Close the case to the excise manager for further processing.

Paperless Electronic Survey Procedures
  1. Certain non-examined cases can be closed in a virtually paperless fashion, if the original return was never requested. Generally, a paperless electronic survey is used when the return was established on Audit Information Management System (AIMS) and the original return was never requested.

  2. Only Form 5351 and Form 3210 are submitted to CCP for a paperless electronic survey.

    Note:

    For purposes of IMS, in addition to Form 5351 and Form 3210, Form 2503 must be completed, submitted to the excise manager for approval and a signed copy uploaded for record into IMS even though it is not submitted to CCP nor will it be accepted by CCP.

  3. Form 5351 and Form 3210 are to be e-mailed to the Examination Cincinnati Centralized Case Processing site mailbox at *SBSE CCP Exam Cinncinnati. CCP has 45 days from the receipt to process these cases.

  4. Field offices are still required to do the following:

    1. Update ERCS to Status 51.

    2. Use only one MFT per Form 5351.

    3. Use of more than one DC is allowable.

    4. Include Form 3210 listing all appropriate TINs.

    5. An electronic signature by the group manager is required on Form 5351.

  5. If the return was requested when the case was established on ERCS/AIMS (All Differential Index Function and Automatic Openings request the return) the case cannot be closed as a paperless electronic survey. Before requesting a paperless electronic closure, pull an AMDISA and if the words “Return Requested” appear on page 2 - line 8, a paperless electronic survey cannot be requested.

  6. An electronic print can be surveyed using the paperless electronic survey process, if there is no requirement to attach any documentation to the survey.

  7. Only survey cases at the excise group level with DC 31 or DC 32 may use the paperless electronic survey process.

Survey of Excise Return and Pick Up of Later Period
  1. A period may become overaged, which means an un-started excise case remained in an excise examiner’s inventory for 210 days or more. For this reason, the excise examiner may decide to request examination controls on a later period to be more current. When these periods are surveyed and a subsequent period is requested, the excise examiner will follow the procedures listed below to comply with the provisions of the IRS Restructuring and Reform Act of 1998:

    1. When surveying the original period, the excise examiner will maintain and include the original Form 5346, Examination Information Report, and include it in the excise case file of the subsequent period.

    2. When completing Form 5345-D, Examination Request-ERCS (Examination Returns Control System) Users, for the subsequent period, the excise examiner will write on Form 5345-D"previous period surveyed-requesting subsequent period."

    3. DC 31 should be used for excise returns surveyed before assignment. DC 32 should be used for excise returns surveyed after assignment.

    4. Refer to Source Code Job Aid for more information about determining the correct source code for excise returns.

Closing Procedures for Agreed Excise Examinations

  1. If the taxpayer agrees to all of the proposed adjustments, the excise case is agreed. 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, must 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 4.24.20.3.4, Unagreed Excise Reports, for more detailed guidance.

  5. To further process an agreed excise examination, the excise examiner should take the steps itemized below:

    1. Prepare Form 886-A with any schedules or exhibits that should be included, if applicable.

    2. Prepare Form 5344 in IMS and enter the adjustment amount on line 404d.

    3. Prepare Letter 987-X, which will be signed by the Chief, Estate & Gift/Excise Tax Examination and left in the case file. It will be dated and mailed to the taxpayer by CCP.

    4. On Form 3198, check the appropriate letter box on page 2 under "Letter Instructions for CCP."

    5. Include Pub 3498, The Examination Process, in the package provided to the taxpayer.

  6. DC 03 should be used for excise returns closed agreed prior to issuance and DC 04 should be used for excise returns close agreed after issuance of Letter 950-E.

  7. Refer to Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Book at Agreed Reports for additional guidance about closing forms, letters and procedures for agreed excise cases where the taxpayer fully agreed to all proposed adjustments.

Closing Procedures for Excepted Agreed and Partially Agreed Excise Examinations
  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. For those proposed adjustments to which the taxpayer agreed, DC 03 should be used, if the agreement was reached prior to issuance of Letter 950-E . DC 04 should be used for those proposed adjustments reached after issuance of Letter 950-E . For those proposed adjustments to which the taxpayer did not agree, DC 07 should be used.

    Note:

    If the taxpayer did not timely respond to a Letter 950-E, DC 08 should be used.

  4. The excise examiner is encouraged to secure a partial agreement in an unagreed excise case.

  5. If the taxpayer executes a partial agreement, procedures for partial assessment must be followed. Refer to IRM 4.4.9, AIMS Procedures and Processing Instructions, Delinquent and Substitute for Return Processing, and IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments. This information is applicable to all cases. There are no special procedures for excise cases.

  6. Refer to IRM 4.24.10.2, Appeals Process, to ensure adequate time remains under the SOL to forward the unagreed portion of the excise case to Appeals.

  7. Prepare Form 5385, Excise Tax Examination Changes, for an excepted agreed case.

    1. All proposed adjustments are listed and numbered as page 1.

    2. Only the agreed adjustments are listed and numbered as page 2.

    .

  8. Prepare Form 2504-E, Agreement to Overassessment and Collection, to accompany Form 5385.

    Note:

    Include an unsigned Form 2504-E that addresses the unagreed adjustments in the case file, if the taxpayer wishes to agree.

  9. Prepare Form 886-A to provide written explanations for adjustments when needed for excepted agreed cases.

  10. Prepare Form 4665, Report Transmittal, for all partially agreed cases and include in the case file but do not issue to the taxpayer.

  11. After the partial assessment is assessed, the excise examiner can proceed with the unagreed excise case closing.

  12. Refer to IRM 4.10.8.5, Excepted Agreed Cases, and IRM 4.10.8.6, Partially Agreed Cases, and the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Book at Agreed Reports for more information about closing forms, letters and procedures for agreed excise cases where the taxpayer partially agreed or excepted agreed to proposed adjustments.

Closing Procedures for No Change Excise Examinations

  1. If an examination of books and records results in a decision the taxpayer is not liable for an excise tax in the period examined, the excise examiner will follow the procedures listed below:

    1. Prepare a no change report using Form 5384. Enter amounts under columns 1 - 6 and column 8.

    2. A no change report will be accounted for by writing "0" under columns 6 and 8 for the appropriate tax period.

    3. Make the statement under "Other Information" the no change report is subject to approval by the Chief, Estate & Gift/Excise Tax Examination

    4. Prepare two copies of Letter 3401-E. Provide one copy to the taxpayer and the taxpayer’s representative, if Form 2848, Power of Attorney and Declaration of Representative, authorizes the representative to receive notices and communications. Letter 3401-E advises the taxpayer a no change is proposed but subject to managerial review and approval.

    5. Enter DC 02 on Form 3198 in IMS.

    6. Complete Form 5344 in IMS and enter zero (0) on line 404d.

    7. Prepare Letter 590-X, which will be signed by the excise manager for Chief, Estate & Gift/Excise Tax Examination and left in the case file. It will be dated and mailed to the taxpayer by CCP.

    8. On Form 3198 check the "No Change Letters" and "Letter 590-X" (straight N/C) boxes under the letter instructions for CCP.

  2. The excise examiner must request and review the BMF screen using CC BMFOLE or INOLES to determine, if the Form 720 filing requirement is present.

  3. If the taxpayer is not liable for an excise tax in the period under excise examination or for any future period, the excise examiner will follow the procedures listed below:

    1. If the filing requirement is not present, no further action is required.

    2. If the filing requirement is present, the excise examiner will prepare Form 3177, Notice of Action for Entry on Master File. Check the "Other" box and insert TC 591 and Closing Code 75 to remove the filing requirement indicator.

    3. Form 3177 should be faxed to CCP prior to closing the case.

    4. The excise examiner will include Form 3177 in the case file and check the "Form 3177" box on Form 3198.

  4. If the taxpayer is not liable for an excise tax in the period under examination but may have a filing requirement in a subsequent period, the excise examiner will follow the procedures listed below:

    1. If the filing requirement is present, no further action is required.

    2. If the filing requirement is not present, the excise examiner will prepare Form 2363, Master File Entity Change. Check the "Form 720" box to set the filing requirement indicator.

    3. Form 2363 should be faxed to CCP prior to closing the case.

    4. The excise examiner will include Form 2363 in the case file and check the "Form 2363" box on Form 3198.

  5. Submit the case file to the excise manager for review and closure to CCP.

    Note:

    The excise examiner must document on Form 9984 the date the case file was closed to the excise manager.

  6. The excise manager will review the case file and, if in agreement with the no change recommendation, will sign Letter 590-X and leave the letter in the case file.

    Note:

    The excise manager must document on Form 9984 the date the case file was closed from the group to CCP.

  7. Refer to Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter at No Change Reports for more information about no change examinations.

No Change Excise Report Non-Filed Excise Return Report Forms, Letters and Closing Procedures
  1. The excise examiner will follow the procedures stated in IRM 4.24.21.5.3.

  2. If an SFR examination results in a decision the taxpayer is not liable for an excise tax in the period examined, the excise examiner will prepare a Form 5384. A "no change" examination will be accounted for by writing in columns 4 and 5 to represent the SFR "TC 150 posting" and in columns 6 and 8 for the "appropriate tax period" on Form 5384.

  3. The excise examiner will prepare Form 3177 on Master File. If there is no liability for the period under examination, the "Other" box will be checked and TC Code 590 and Closing Code 75 will be inserted in the space provided. If the taxpayer is not expected to have an excise liability in any subsequent tax periods, then enter Transaction Code 591 and Closing Code 75 in the space provided.

  4. On Form 3198 in the "Forms Enclosed," the excise examiner must check the "Form 3177" box to indicate Form 3177 is in the case file. In the Letter Instructions for CCP section, check “other” and list Letter 590-X.

  5. Refer to Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter at No Change Reports for more information about no change examinations.

Closing Procedures for Unagreed Excise Examinations Not to be Forwarded to Appeals

  1. This section addresses the forms, letters and procedures for unagreed excise cases that are not controlled under the Appeals Process described in IRM 4.24.10. This category of unagreed excise cases has less than 365 days remaining on the statute when it is received at Appeals or is one where the taxpayer did not timely respond to a Letter 950-E, which requires an assessment.

    Note:

    Refer to IRM 4.24.10.2 for more detailed guidance.

  2. If the taxpayer does not agree to the proposed adjustments, the excise case is unagreed. An unagreed excise report is prepared.

  3. The excise examiner will issue to the taxpayer a Letter 950-E package that includes Form 5385, Form 2504-E, Form 13683, Statement of Disputed Issues, and Pub 3498.

  4. 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 is 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.

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

  6. 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.

  7. DC 07 is used for unagreed examinations when the taxpayer did not sign an excise report or request an Appeals conference.

  8. Refer to Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Chapter at Unagreed Reports for more information about closing forms, letters and procedures for more information about closing unagreed excise cases where the taxpayer disagrees with the proposed adjustments and either did not file an acceptable protest, or the SOL will not have 365 days remaining on the excise case when received at Appeals and the taxpayer will not or cannot extend the SOL.

Closing Procedures for No Liability Excise Closures

  1. No Liability SFR Non-Filer excise cases are to be closed using DC 02. This applies only to excise cases where the excise examiner has taken actions that may include, but is not limited to, conducting an interview, reviewing books and records and ultimately making the decision the taxpayer is not liable for excise taxes.

    Note:

    In situations where no examination of books and records occurred, the excise examiner or excise manager will follow paperless electronic survey procedures, using non-examined DC 31 or DC 32. The taxpayer will not receive any correspondence for a non-examined closure. Refer to IRM 4.46.3.2.2.1 , LB&I Examination Process, Paperless Survey - Nonexamined Closures Using a Paperless Process, for more detailed guidance.

  2. Closing out the IMS file and the paper file to CCP requires the actions described in the paragraphs that follow.

  3. Letter 930, Non-Filer No Liability Substitute for Return (SFR) Transmittal Letter, Procedures for No Liability SFR Non-Filer Examinations:

    1. The excise examiner must prepare an original and a copy of Letter 930 advising the taxpayer there is no liability for the excise tax indicated, as well as an envelope addressed to the taxpayer.

    2. Letter 930 will be signed by the excise manager on behalf of the Chief, Estate and Gift/Excise Tax Examination.

    3. Both copies of Letter 930 and the addressed envelope will be placed in the paper file.

    4. The excise examiner will note under the Letter Instructions for the CCP section on Form 3198"Other Instructions" box, "No Liability SFR - Issue Letter 930 to the taxpayer."

    5. CCP ensures the original letter is mailed to the taxpayer and the copy remains in the paper file.

  4. IMS Case Closing:

    1. Established no change IMS excise case closing procedures are followed for no liability SFR examinations, including all excise case documentation that is in the paper file.

    2. Both the IMS file and the paper file must contain documentation to support the no liability determination.

    3. The IMS file serves as the historical record for all excise examiner actions, findings and determinations that is essential background, if that excise case is subsequently identified and/or classified.

  5. Case File Assembly Procedures - At a minimum the paper file, as well as the IMS file, will contain:

    1. A copy of the BMFOLT for the periods involved that show the TC 150 posting for the SFR and AMDIS to show the module is fully established on AIMS. The excise examiner should also check TXMODA to ensure there are no pending transactions.

    2. Letter 930 (two copies) with proper signature and an addressed envelope with current taxpayer address.

    3. Form 3198.

    4. Form 5344.

    5. Supporting documentation explaining the reasons for the no liability closure, such as Form 9984 and any lead sheets or workpapers.

  6. Excise Report - If an SFR examination results in a decision the taxpayer is not liable for an excise tax in the tax period examined, no excise report is required. Letter 930 is all that is necessary because the taxpayer did not file an excise return.

  7. After the excise manager completes the review, the secretary or designated group closing official will update the status of the excise case in ERCS to status 51 and the excise case will be shipped to CCP for closure. Changing the status in ERCS to status 51 should be the last update prior to mailing the paper file.

  8. SFR Filing Requirement Indicator - If the taxpayer is not liable for any excise tax, the excise examiner will prepare Form 3177, Notice of Action for Entry on Master File. This is necessary to release the expectation the taxpayer should file excise returns. Enter the following appropriate TC and Closing Code in the "Other" field:

    1. If the taxpayer is not liable for the tax period(s), enter TC 590 in the TC column and type "Closing Code 75" in the space provided.

    2. If the taxpayer is not liable for the tax period(s) and will not be liable for any subsequent tax period(s) for the same MFT, enter 591 in the TC column and type "Closing Code 75" in the space provided.

      Note:

      On Form 3198 in the "Forms Enclosed" section, the excise examiner must check the "Form 3177" box to indicate that Form 3177 is in the excise case.

Excise Case Closing Procedures for Managers

  1. Upon receipt of the closed excise case, the excise manager should review and close the excise case within the recommended timeframes. Refer to IRM 4.24.21.2.3 for further guidance.

  2. The excise manager must ensure all IMS required closing actions are completed when the excise case is closed from the excise group. For additional guidance on IMS, refer to IRM 4.24.6.2 , Excise Issue Management, and the LB&I Homepage, Computers and Technology at Issue Management System (IMS) for specific IMS areas of interest, such as IMS Help, IMS Team Website and IMS Frequently Asked Questions.

Excise Case Documentation

  1. The excise manager must document the excise case review on the IMS Case Level Activities found at the IMS Team Web Site.

  2. The excise manager must document and explain all delays (i.e., shipment of the paper file, remote excise manager travel, etc.) from the date the excise case is closed to the excise manager to the date the excise case is closed from the excise group.

Review of Excise Case

  1. The excise manager should review the completed excise case, including but not limited to, Form 3198, Form 5344 and work papers or supporting documentation (or portions thereof) detailing all proposed adjustments.

  2. At a minimum, the excise manager should review the current AMDISA, TXMODA, BMFOLI, BMFOLR, BMFOLT, CFINK and INOLES (less than 30 days old) to verify the accuracy of the balance on the account, all prior assessments have been acknowledged and used in computations and to confirm the correct SOL is being used in all systems, reports and excise case closing documents.

Grade of Excise Case

  1. The excise manager determines the grade of case for all excise returns.

  2. Refer to IRM 1.4.40, Resource Guide for Managers - SB/SE Field and Office Examination Group Manager, and Document 6036, Examination Division Reporting Codes Booklet, for more information about recording grade of case on Form 5344.

  3. The case grading guidelines may be used at any point in the examination process. However, at assignment, only the excise return information will be available. Development during the course of the examination may more fully disclose the final grade of case. Final grading factors take into account excise return information, work papers and the excise report. Thus, the final grade may differ from grade at assignment. The final grade is entered by the excise manager in box "32" on Form 5344.

Acronyms

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

Acronym Definition
AIMS Audit Information Management System
AMDIS Audit Management Display Information System
AWSS Agency-Wide Shared Services
BMF Business Master File
BRTVU Business Transactions File View
CC Command Code
CCP Centralized Case Processing
DC Disposal Code
ERCS Examination Returns Control System
FSEQ Field and Specialty Examination Quality
IDRS Integrated Data Retrieval System
IGM Interim Guidance Memorandum
IMS Issue Management System
LB&I Large Business and International
MFT Master File Tax
NQRS National Quality Review System
SFR Substitute for Return
SOL Statute of Limitations
TC Transaction Code
TIN Taxpayer Identification Number
WSD Workload Selection and Delivery