4.46.3  Planning the Examination (Cont. 1) 
The Examination Plan 
Sections of the Examination Plan 
Part III, Examination Procedure Section (Examination Assignments)  (12-29-2009)
Time Planning

  1. Responsibility - The Senior Team Coordinator or Team Manager is responsible for planning the time necessary for each examination. Time planning is essential in order to ensure staff resources are effectively utilized and concentrated in the most productive areas.

  2. Data available - Senior Team Coordinators or Team Managers have information developed during the preparation of Parts I and II of the examination plan that will assist in time planning. They must evaluate the information obtained, consult with team members, specialists, managers, the taxpayer, and others, including prior examiners who may be able to contribute to or supplement information about the taxpayer. The team manager must then relate this accumulated information to the planned depth and scope of the examination to be conducted.

  3. Prior cycle information available - The best judgment of the team members and the team manager is an important factor in those cases where detailed information about time expended for the prior examination is available. The team manager and examination team must take into account any changes to the depth and scope of the current examination, as well as any other known factors which would influence the examination. The team manager must be careful not to simply roll over time estimates from prior examinations.

  4. No prior cycle - Some audits do not have a prior history of examination time. The detailed projection of time requirements in these audits must reflect the team members' and team manager's best judgment after taking into account everything learned about the taxpayer.

  5. Other considerations - The following additional factors should be considered:

    1. Experience of the team manager and team members,

    2. Extent of computer assisted audit techniques,

    3. Location of records,

    4. Travel time (on-site vs. assistance or support),

    5. Taxpayer's staffing,

    6. Taxpayer's cooperation,

    7. Effectiveness of taxpayer’s retrieval system,

    8. Extent and nature of in-depth probes, and

    9. Complexity of examination areas selected.

  6. Format - Form 6609, Schedule of Work Assignments and planned Time, may be used to document time planned by specific activity or examination area.

  7. Modifications - Team managers must keep in mind that in estimating time they are dealing with many variables and unknowns. Initial estimates of specific time requirements should be as accurate as possible, however, team managers are expected to revise and adjust the time allocations during the course of the examination (on-going risk analysis). This ensures the application of time to those areas having the greatest compliance potential.  (03-01-2006)
Distribution of Plan

  1. Distribution - The examination plan is a working tool and once completed, should be distributed to those who have use for it:

    1. The taxpayer will be given a copy of the plan in all cases. Changes made to the plan should be promptly discussed and coordinated with the taxpayer.

    2. All team members should receive those portions of the plan, and other material and information, which are pertinent to their assignment. Instructions provided should be sufficient to permit full understanding of their assignments and enable team members to place in proper perspective their relative portion of the entire team's effort. A complete copy of the plan should be kept on site for reference.

    3. Area Counsel will be furnished relevant portions of the plan.

    4. The approving official (i.e. territory manager, team manager) should retain a copy for reference files.  (12-29-2009)
Significant Modifications to the Plan

  1. Periodic review and revision - Time allocations and estimated closing dates should be subject to continual managerial review during the life of an LB&I examination. These projections are to be modified when changes are called for by any case-related developments, particular needs of the examination, or needs of the Service.

  2. Plan addendum - Modification of the original plan, if significant, will be explained in an addendum to that plan. The team manager is responsible for making the judgments necessary to determine whether a particular change has the degree of significance to justify the preparation and submission of an addendum. A change of plus or minus 10 percent in planned time may not, by itself, be indicative of significance but may be material if considered in association with other factors.

  3. Significant changes - Changes involving the taxpayer's component entities could also be deemed significant. Adding a loss-year to a multiple-year examination already in process would also warrant an addendum to include that year. The taxpayer's input should be considered when making modifications to the plan.

  4. Approval - Development and documented approval of an addendum will follow the same processing procedures used for the original plan.  (03-01-2006)
Taxpayer Acknowledgement

  1. Taxpayer’s copy of the plan - The Taxpayer Information Section of the plan should be signed by both the taxpayer and the team manager. The team manager should deliver the examination plan personally since it will provide an opportunity to:

    1. Review the document with the taxpayer;

    2. Obtain the taxpayer's signature as an acknowledgment of receipt and that the agreements and information are correctly stated. (The team manager should document delivery of the plan and the fact that its correctness was orally acknowledged in the event the taxpayer declines to sign); and

    3. Remind the taxpayer that the examination plan is subject to change when necessary.  (03-01-2006)
Primary Control

  1. Team Manager Role - This section explains the role of the primary team manager and controlling group.

  2. Centralized Control - One of the objectives of the Coordinated Industry and Industry Case Program is to centralize responsibility for control and management of an entire LB&I case with the primary team manager and controlling group. This precludes any other group from unilaterally initiating an examination of a return considered to be a part of a case.

  3. Exceptions - Primary group control is exercised through a team manager except as provided in IRM, Excise and Employment Tax, IRM, Returns of Pensions and Profit Sharing Trusts, IRM, Tax Exempt and Government Entities, and IRM, Corporate Officers’ Returns.

  4. One-Case Concept – The team manager will take steps to assume control over all examination activities of all entities comprising the case once a case has been assigned to a team manager. This is known as the one-case concept, in that one team manager is in control of the entire case. Logically, the first step will be to obtain the returns, planning file, and other files essential to planning and executing an examination (some of these files will not be available for IC cases). The team manager should maintain effective control over the examination of those returns, although miscellaneous tax returns generally are assigned to specialty tax groups. Local procedures will be followed for control of partnership returns.

  5. One point of contact - A principal benefit inuring to taxpayers from the Coordinated Industry and Industry Case Program is the centralization of control over all examination activity by the primary group. Taxpayers can expect a timely and well-managed examination of those returns. This is also consistent with the IRS One-Stop-Service concept where the team manager and the examination team are the primary contact points for any inquiries pertaining to IRS matters.

  6. Timing - Effort should be made to submit all miscellaneous and income tax reports of examination simultaneously so that the entire case can be considered as a unit. The team manager has the discretion to separately close the miscellaneous returns if holding them until the income tax report is completed would cause significant delays in closing the miscellaneous returns.  (07-26-2011)
Obtaining Returns

  1. Originals/Copies - Original income tax returns should be obtained when practicable. It may be advisable to work from copies in order to expedite closure of an examination. The miscellaneous tax returns should be secured only when necessary for examination. The team manager should secure digital images of tax returns through the use of LB&I Imaging Network (LIN) when possible. A BRTVU should be secured upon receipt of the LIN image.

  2. Other Audits - Team managers should request taxpayers to inform them of any tax examinations being proposed or conducted by other offices of the Service.

  3. The LB&I Image Network (LIN) is a new system for imaging paper and electronic return filings and making them available to the field in an electronic format through a secure Intranet based system. Once returns are scanned by Statistics of Income (SOI) and updated in the LB&I Workload Identification System (LWIS) they are available for ordering. This system will make the return image available for secure viewing and download from status 08 within 90 days of the TC150 posting which will allow "just in time" inventory to the field. You will be required to have the LB&I Common Operating Environment which includes Adobe ver. 5.0 or later and Secure Messaging in Outlook. The returns will be in PDF format and stamped to identify them as copies. In most locations, access to returns that have been imaged will be provided electronically. You will need to have an approved Form 5081 to access the LIN system.

  4. Requesting a LIN Link:

    • Visit the LIN website and download the form to request a LIN Link,

    • Complete the Form and Fax into Ogden,

    • The LIN Link should come to you with 2 business days.

  5. Closing an Imaged Return - Upon completion of an examination, the agent will submit the case file to the manager including the following:

    • Form 4251 Facsimile,

    • BRTVU (If the statute has been extended, the executed Form 872 should be stapled to the back of the first page of the BRTVU),

    • Form 5344,

    • Admin. File (All items current required for closing a paper return including workpapers, etc.).

    If a return is surveyed after assignment, the agent will submit the case file to the manager including the following:

    • Form 4251 Facsimile,

    • BRTVU (Survey stamped and signed), and

    • Form 1900, if applicable (see IRM  (07-26-2011)
Returns in Statistics of Income (SOI)

  1. Securing Returns from SOI - IRM procedures will be followed in securing returns from SOI. (See IRM 4.1.3, Source of Returns/DIF and Ordering)

  2. Contact your local AIMS/ERCS Analyst if problems develop in securing returns.  (03-01-2006)
Control of Miscellaneous Tax Examinations

  1. Various examinations - The primary group should have control over various types of miscellaneous tax examinations.  (03-01-2006)
Excise and Employment Tax

  1. Consider miscellaneous returns - The team manager should plan the examination to include income, excise, and employment taxes, if warranted, and should include employment and excise tax specialists in the examination team. The involvement of, and coordination with, the taxpayer is necessary in planning the examination of miscellaneous tax returns.

  2. Different tax years - Either of the alternatives described below are preferred over the separate control of the examination when the examinations of excise and employment taxes are more current than income tax:

    1. Plan to make concurrent examinations of both the income tax and miscellaneous taxes even though for different periods; (The main advantage in this approach is that the team manager has to draw up only one plan and perform one coordinating role. Another advantage is that the teamwork which results may yield time savings.)

    2. Plan separate consecutive examinations of income and miscellaneous taxes for the different periods involved. (The disadvantages in this approach are the additional planning and coordination required and the absence of teamwork. The team manager should seek the taxpayer's cooperation before this alternative is selected.)

  3. Excise Tax and Employment Tax Handbooks - IRM 4.24, Excise Tax Handbook, and IRM 4.23, Employment Tax Handbook, provide additional details on the use of excise tax agents and employment tax agents in LB&I examinations.  (03-01-2006)
Returns of Pension and Profit Sharing Trusts

  1. Trusts - Examination of the trusts related to pension and profit sharing plans should be considered as a part of case planning.  (03-01-2006)
Tax Exempt and Government Entities

  1. Coordination with Tax Exempt and Government Entities (TEGE) - The team manager must be responsive to TEGE, while remaining sensitive to the one-case concept.

  2. Involvement of TEGE - The plan for this segment of the examination is normally prepared and executed by TEGE and should be coordinated with the overall examination plan. The team manager should involve the TEGE supervisor early in the development of the overall examination plan, including achieving the one-case concept.

  3. Processing - Further processing of the returns and reports will be accomplished by the TEGE group upon completion of the examination. The team manager is responsible for securing copies of reports of the TEGE examination for the planning file.

  4. Delineation of Responsibilities - IRM 4.71, Employee Plans Examination of Returns, contains instructions concerning the delineation of examination responsibilities between LB&I and TEGE.  (09-04-2013)
Corporate Officers' Returns

  1. LB&I’s Executive Compensation Strategy - This strategy requires the assessment of compliance risk of corporate officers and other key executives as part of any LB&I examination.

  2. Inspection of Officer and Key Executive Returns –The Senior Team Coordinator or Team Manager, at a minimum, will secure and inspect the individual returns of the top officers of the corporation and other key executives or highly compensated employees. The team should include the top officers of the largest subsidiaries in meeting the minimum requirement for inspection purposes if the taxpayer filed a consolidated return. The inspection generally will be limited to the officer/shareholder returns for IC taxpayers.

  3. Definition - Key corporate officers are those officers who have control or authority over corporate activities, or whose relationship with any segment of the case is close enough to significantly influence corporate management or tax results. This would include, for example, board chairman, chief executive officer, chief financial officer, officers in charge of foreign operations, officers in charge of governmental activities, or any other officer with significant decision-making responsibility.

  4. TC 420 Indicators - The team manager should be alert to any TC 420 indicators showing an open examination. The return may be excluded from inspection sampling if the return is open in another operating division. Flow-through adjustments will be referred to the controlling group.

  5. Securing the Individual Returns – The team should requisition the returns of the corporate officer/key executives during the planning stage of the examination. If the tax return was filed electronically, IDRS Command Code TRPRT may be used to request a tax form out of electronically filed data, including all schedules filed. It takes approximately one week to receive the print. Otherwise, a copy of the return should be requested directly from the campus using Form 5345-D with the appropriate activity code, source code 45 and status code 10. If this is not practicable based on current circumstances or other factors (e.g., the return is not available from the campus or has been delayed) the team may decide to request the return directly from the executive by using Letter 3996. Additional information is available at Corporate Executive Compliance (CEC) website and also at http://www.irs.gov/Businesses/Corporations/Corporate-Executive-Compliance.

  6. Establishing Individual Returns - The team manager will use the ERCS/AIMS system to establish the individual returns and any other related returns if an examination is warranted.

  7. Scope of Individual Examinations – It is the responsibility of the industry team, with participation by employment tax specialists as necessary, to conduct any examinations if potential issues are identified. The examiner should be alert to Schedule D losses, Schedule E losses, losses generated by related flow-through entities, and tax shelters in addition to possible issues identified because of the corporate relationship (Executive Compensation Issues).

  8. Verification of Individual Return Filing – The Senior Team Coordinator or Team Manager should secure a transcript for" key" executives returns not inspected or examined to ensure the filings of all required returns through the most recent filing season.

  9. Statute Concerns – Every effort should be made to conduct the examinations of the corporate officers’ returns and the corporate tax return concurrently. It may be necessary for the team to solicit consent from the corporate officer or key executive if this is not possible.

  10. Referrals to Other Operating Divisions – Referrals to SB/SE to conduct individual examinations identified during the course of a CIC or IC examination should be limited and must be approved by the appropriate territory managers. Referrals will be considered only when the issue is substantial and affects a number of executives which can be worked separately from the corporate return. The industry team is then responsible for preparing the position paper and providing a listing of the individual taxpayers, with social security numbers, impacted by the issue to the accepting operating division.

  11. Referrals to SB/SE - The LB&I agent will use Form 6229, Collateral Examination, when making any referrals to SB/SE. The LB&I territory manager will forward the request to the responsible SB/SE territory manager. The LB&I team manager should consider conducting the individual examinations if SB/SE declines the referral.

  12. "Whipsawing" of Issues – Some executive compensation issues have extremely high whipsaw potential. A government whipsaw position exists where two parties involved in a transaction take inconsistent positions. A case involving restricted stock illustrates a $20 million whipsaw situation. See Robinson v. United States , 335F.3d 1365, 1370 ( U.S. App., 2003) cert. denied, 124 S. Ct. 1044. Agents examining executive compensation issues should be careful to protect against a whipsaw position.

  13. Examinations of Non-Filers –The examination team should report the non-filing of tax returns to LB&I’s Non-Filer Coordinator if a failure to file situation is discovered. The examination team should then establish AIMS controls. The LB&I Non-Filer Coordinator will then monitor these failure-to-file instances to ensure appropriate action has been taken. Detailed instructions on the establishment of AIMS controls and IDRS research are posted to the LB&I Non-filer Program Website.

  14. Closely-Held - The individual returns should be considered the same as other effectively controlled entities in the case of officer and shareholder returns on closely-held entities.  (03-01-2006)
Separate Examinations

  1. Situations where separate examinations are warranted - The examination normally should include concurrent consideration of all returns and liabilities for all types of taxes by the various entities in the LB&I case family unit, however, circumstances may arise which will require separate examinations of entities that will not be controlled directly by the team manager. Specifically, in a joint investigation with Criminal Investigation involving only some of the entities, it may be advantageous to establish independent management of the joint investigation. Other conditions such as excise or employment tax program needs and requirements of the special studies may compel separate examination and control of specific returns.

  2. Separate examinations on an exception basis – Exercise care in the liberal use of separate examinations since it can have an adverse effect on the one-case concept of the Program, however, it does provide for removing an entity's examination or return from the controlled audit when compelling reasons exist for doing so.  (03-01-2006)
Instances When Separate Examinations May Be Warranted

  1. Joint investigations – The incidence of fraud may be confined to actions of individuals in one entity or to a limited number of entities in the controlled group, and there may be no reason to tie up the remainder of the case. The joint investigation in these instances could be limited to the specific entities involved and they could be examined separately. This decision must be coordinated with Criminal Investigation and continued coordination between the regular examination and the joint investigation segments will be necessary. Area Counsel is available to evaluate factors relevant to this decision and to determine which specific entities should be examined separately.

  2. Special studies - Excise and employment tax specialists and TEGE occasionally conduct special studies that might necessitate separate examinations.

  3. TEFRA Partnership Examinations – It is critical to recognize whether the case involves a TEFRA or Non TEFRA entity early in the planning process. Refer to IRM 4.31, Flow-through Entity Handbook, for appropriate guidance. There are specific requirements regarding statutes, controls, time frames, identification of tax matters partner and various notification letters that must be considered. Failure to properly identify a TEFRA entity return from the outset will invariably impact these requirements. A "TEFRA partnership" is any partnership required to file a partnership return. Subchapter S corporations are no longer subject to the TEFRA audit and litigation provisions. A small partnership exception applies to partnerships with 10 or fewer partners, each of whom is an individual (other than a non-resident alien), a corporation, or an estate of a deceased partner. Additional considerations are noted below:

    1. The TEFRA audit and litigation rules do not apply to S corporations for taxable years beginning after December 31, 1996.

    2. The small partnership exception (10 or fewer partners, each of whom is an individual) applies to partnership taxable years ending before August 6, 1997. For partnership taxable years ending after August 5, 1997, a partnership may have a C corporation as a partner and still qualify for the small partnership exception.

    3. A partnership cannot qualify for the small partnership exception if any of its partners is a partnership, trust, or limited liability company (i.e., no flow-through entities).

    4. A partnership that qualifies for the small partnership exception can still elect to be subject to the TEFRA partnership provisions.

    5. Mandatory completion of TEFRA Checksheets – See IRM for guidance on completion of mandatory Partnership (TEFRA/Non-TEFRA) identification, TEFRA linkage and TMP designation checksheets.

  4. Caution - Separate examinations are not justified solely because of difficulty in coordinating or controlling them. Insignificance of inter company dealings, separate accounting systems or centers, or unrelated business operations would not be justification for separate examinations. It is well established that separate examinations are more likely to lack uniformity and consistency in raising and resolving issues than when the different parts are controlled in a coordinated effort.  (12-29-2009)
Removing an Entity from Control

  1. Entity removed from case - The group to be given authority to conduct a unilateral examination should be notified by memorandum from the primary group when an entity is to be removed from a CIC examination. The taxpayer should be promptly notified of the change in status.

  2. For procedures related to key case linkage and closing TEFRA investor cases before the TEFRA key case examination is complete see IRM, Accelerated TEFRA Investor Closing Procedures (Delink).  (03-01-2006)
Transfer of Primary Group Jurisdiction

  1. Initiation - Recommendations to transfer jurisdiction of an LB&I case may originate with the group currently designated as the primary group, a potential transferee group, the territory manager, Director of Field Operations (DFO) or Industry Director. Form 4791, Approval for LB&I Case Transfer/Decontrol, will be prepared to initiate a recommendation for transfer of primary group control. Transfers should be discussed with the taxpayer prior to the recommendation.

  2. Approval - The recommendation to transfer a case should be submitted to the territory manager in the receiving industry for concurrence by the receiving group prior to the transfer. The matter will be referred to the respective DFOs for a decision if there is disagreement regarding the recommendation.

  3. Transfer – The transferor group will forward to the transferee group all available returns, open claims, pertinent documents, planning file data, and other relevant information upon agreement or decision to transfer a case. If the case has already been put on IMS, then the name SEID of the new primary team coordinator must be obtained, so that the transferor group can add the new primary TC on IMS as a new team member with TC permissions by the following steps:

    1. The case primary team coordinator or case team manager would add the new primary TC as a team member.

    2. The case team manager would then change the case’s primary TC to the new primary TC.

    3. Then the case’s new primary TC would do a summary synchronization. The transferred case will then appear in the new primary TCs case inventory listing.

    4. The new primary TC will then perform a case synchronization and download case documents and return(s) to their computer. At this point the new primary would update the case’s team manager and team code on the case attribute screen.  (03-01-2006)
Dual Control Resulting from Transfer

  1. Open cycle - There may be instances of simultaneous control by two groups resulting from a change in primary group identity, such as where a group relinquishing control is engaged in examining years initiated before the transfer took place. The transferor group will retain primary group identity for those tax years which are still in process.

  2. Transition period - The transferor and transferee groups should maintain close coordination to ensure uniformity in the resolution of issues and to facilitate the sharing of specialized knowledge during the transition period. One method of effectively accomplishing this objective would be to have personnel from the proposed transferee group assist as team members on an examination of the concluding tax years being conducted by the group relinquishing control.

  3. Jurisdiction - Jurisdiction for open years prior to the date of acquisition or merger may move to the group having jurisdiction over the acquiring or surviving corporation where a taxpayer is acquired or merged into a CIC taxpayer located in another primary group. Jurisdiction of open years may not change if the offices, records and tax liability remain in the original group. Close coordination should be immediately established to ensure an exchange of pertinent information regarding examination jurisdiction and other matters. Consideration should be given to the best method of bringing the pre-acquisition/merger year(s) current.

  4. Taxpayer involvement - This process also requires intensive and careful planning with the taxpayer to ensure that all necessary records are available, and to cause the least burden to both the Service and to the taxpayer.  (03-01-2006)
Decontrol of Coordinated Industry Cases

  1. Reasons - A CIC taxpayer may cease to be a coordinated case after applying the point criteria or after its acquisition by another taxpayer. A case not meeting the point criteria does not require decontrol unless the change can be reasonably forecasted as permanent.

  2. Permanent decontrol – A case that is under examination should be decontrolled at the end of its current cycle if it is determined that it needs to be permanently decontrolled. A case that is not under examination should be decontrolled immediately. Notification and approval of a decision to decontrol a CIC taxpayer is accomplished by utilizing Form 4791, Approval for LB&I Case Transfer/Decontrol. Form 4791 should be used to transfer or decontrol LB&I cases.

  3. Decontrolled Cases - Completed Form 4791 for decontrolled cases shall be submitted to the DFO.

  4. Transferred Cases - Completed Form 4791 for case transfers shall be submitted to the territory manager.  (03-01-2006)
Management of Specialists

  1. Overview - The management of specialists is set forth in this separate section because of the unique nature of their participation in the examination of LB&I cases. Special attention is required in coordinating their activities which is further complicated by the fact that management is a shared responsibility between the team manager and the specialist manager who may operate under a different management structure. Team managers should provide specialists and their managers as much advance notification as possible to ensure specialists are available to participate in planning. Recommendations should be sought from specialists concerning potential areas of adjustment (in order of priority) and time requirements to address these areas.

  2. Specialist Participation in the Examination - The participation of specialists in the examination can be limited to highly complex specialty areas in which the team manager may have limited technical knowledge. The specialists may be engaged at the examination site for less frequent and shorter periods of time than other examiners depending on the scope and depth of the specialist issue. The specialist normally is involved in several in-process assignments.  (12-29-2009)
Team Manager's Role

  1. Tailoring Procedures for Specialist Participation in the Examination -Team managers need to recognize the distinctive way in which specialists participate in the examination and should establish tailored procedures for planning, monitoring and controlling specialists’ portions of the examination.

  2. Team Manager Responsibilities - The team manager is responsible for organizing, motivating, controlling and directing team members in LB&I examinations. Team managers are involved in the management of each case from initial planning to final examination action. They are responsible for the scope and depth of the examination, for specific assignments to team members and for approval of plans for accomplishing their part of the examination.

  3. Working in Concert with Team - Specialists must work in concert with other team members so that individual efforts are blended into a quality examination product. The team manager is the catalyst in accomplishing this. Therefore, the team manager must:

    1. Involve specialists in the examination as early as possible;

    2. Ensure that all management actions demonstrate that specialists are full members of the examination team;

    3. Provide the same degree of support and amount of attention to specialists as is given to any other team member having comparable responsibilities; and

    4. Coordinate and monitor information document requests (IDRs) issued by specialists.

  4. Disclosure of Conflicts of Interest - The Senior Team Coordinator or Team Manager is responsible for ascertaining from each team member, including specialists, that all financial interests which are potential conflicts of interest are properly disclosed. The team manager will communicate to the specialist manager disclosures of potential conflicts of interest by specialists and related determinations concerning specialists assigned to the CIC and IC examinations.  (12-29-2009)
Role and Responsibilities of Specialist Manager

  1. Joint Planning Effort - The development of the plan with respect to specialists’ issues should be a cooperative effort, however it is recognized that the team manager has the discretion to determine the application of planning input. The specialists and the specialists’ managers have experience, expertise, training, and education in the specific issues identified in the planning recommendations. The examination process for the specialists’ issues will be a joint responsibility if the Senior Team Coordinator or Team Manager selects issues identified by the specialists for examination. The specific examination steps to be used by the specialist will be approved by both the specialist manager and the team manager to ensure that work is completed within the timeframes established by the team manager.

  2. Specialist Areas of Expertise - The Field Specialist Program includes financial products specialists, computer audit specialists, economists, employment tax specialists, and engineers. Other examiners, though not included in the Field Specialist Program, (see IRM, Other Specialists), are also specialists who perform similar services. It should be noted that the international manager may be the team manager of the case in certain circumstances where international issues are the dominant issues in the examination.

  3. Specialist Manager Shared Responsibilities - Although the team manager primarily is responsible for directing all activities necessary to examine and close an LB&I case, the specialist manager shares in the responsibility of managing the activities of the specialist. Some of those roles and responsibilities are listed below:

    1. Efficient use of resources based on workload objectives,

    2. Determining the right specialist for each assignment,

    3. Preparation, monitoring, and delivery of the specialist portion of the LB&I Examination Plan,

    4. Preparation, monitoring and timely delivery of specialist risk analysis information,

    5. Assurance of full and timely development of specialist issues and timely submission of specialist reports.

  4. Accountability of the Specialist Manager - The specialist manager is accountable for delivery of a timely and professional work product on all examinations that utilize the expertise of the specialist. This can happen only when the specialist manager is included as a full management partner in LB&I examinations. This means that the specialist manager works with the other managers on the examination to accomplish the overall team/examination goals. Specialists are responsible for protecting the statute of limitations on the returns under their control.

  5. Prioritization of Specialist Workload - Specialist managers are accountable for prioritizing the cases that need the most oversight and direct managerial involvement. This prioritization is done in light of large inventories, span-of-control issues and the geographic dispersion of the specialists. Prioritization is imperative since these factors often make it impossible for a specialist manager to be equally involved in all examinations for which they are accountable.

  6. Communication and Relationship Management - It is also necessary for the specialist manager to communicate regularly with the team manager, team coordinators and other managers on each case to keep abreast of examination progress and team needs. This regular communication can assist the specialist manager in setting or shifting priorities as situations dictate. This interaction can eliminate misunderstandings over the roles and responsibilities of each manager and team member on a LB&I examination. The key to this is relationship management. This means that the specialist manager has a key responsibility to build and maintain relationships with other managers in LB&I.

  7. Specialist Team Manager Involvement - The specialist team manager also is accountable for and should participate, as needed, in:

    1. Examination planning, including negotiation of specialist time if necessary;

    2. Management of issues through risk analysis;

    3. Review and approval subject to the team manager’s concurrence of Part III of the Examination Plan relating to the specialist;

    4. Monitoring the specialist’s progress and resolving workload conflicts;

    5. Site visits coordinated with the team manager on selected cases as part of the monitoring process;

    6. Supervision of the development and the resolution of specialist issues; and

    7. Identification and selection of outside experts.

  8. Other Requirements for Specialist Team Managers – Specialist team managers also should:

    1. Be informed of and included in case status and other meetings and attend as appropriate;

    2. Recognize opportunities for other specialists to assist in his or her areas of expertise;

    3. Review and sign specialist reports and Forms 5701, Notice of Proposed Adjustment, on significant issues before they are provided to the taxpayer by the team manager; (The team manager can approve Form 5701 for routine and carryover issues.)

    4. Coordinate with Competent Authority, Appeals, Counsel, or the Office of Pre-Filing and Technical Guidance on coordinated emerging or controversial issues, as needed; and

    5. Participate with the specialist in the post-examination management critique in selected cases.  (03-01-2006)
Management of Differences

  1. Management of Differences - The team manager has responsibility for identifying and resolving differences during the examination process. Team managers are responsible for the prompt and proper disposition of problems and disagreements and are expected to resolve those differences after consideration of all opposing viewpoints.

  2. Disagreement among Parties - Problems and disagreements may arise among the following parties:

    • Team manager and team members (including specialists and their managers)

    • Taxpayer and team members

    • Various team members  (03-01-2006)
Differences among Team Manager and Team Member

  1. Differences among the Team Manager and Team Members - Differences among the team manager and team members may involve:

    • Scope or depth of technical issues

    • Disposition of technical issues

    • Nature of assignment

    • Examination procedures  (03-01-2006)
Differences as to Scope and Depth

  1. Differences as to Scope and Depth - Differences of opinion as to scope and depth could arise with the team at anytime during the examination. The prime consideration in resolving these differences is proper adherence to auditing standards as measured by the LQMS, evaluation of a complete risk analysis, and consideration of materiality thresholds (See IRM, Key Principles of Materiality and Other Considerations). Decisions should take into account experience gained during the course of the examination. There should be no hesitation to modify a segment of the plan during the examination or to change an earlier decision.

  2. Team Manager Has Ultimate Responsibility - The team manager is responsible for deciding the position to be taken when there are differences.

  3. Team Manager Should Consider Opposing Viewpoints - The team manager should consider all opposing viewpoints before taking a position.  (03-01-2006)
Differences Concerning Technical Issues

  1. Differences Concerning Technical Issues - Differences concerning technical issues may arise among team members or between a team member and the team manager. The team manager is expected to weigh the merits of all viewpoints before making a decision. Team managers should be sure that their decision not only has a technical basis, but also that it is consistent with the position of the Service in other cases. Consultation with Counsel is recommended.

  2. Team Manager Concurrence on Technical Issues Prior to Presentation to Taxpayer - Each team member is responsible for raising and developing issues within his or her area of assignment. Nonetheless, adjustments to be proposed should be discussed with the team manager before presentation to the taxpayer. The team manager should concur with all positions to be taken, including those in the specialist area. The team manager should consult with the specialist team manager to resolve differences related to specialist issues.

  3. Industry Issues and Technical Advisors - The team manager should consult with the technical advisor about all industry issues to preserve uniformity.  (12-29-2009)
Differences Regarding Nature of Assignment or Examination Procedures

  1. Differences Related to Nature of Assignment or Examination Procedures - Differences may arise regarding the nature of the team member's assignment or how the assignment is to be carried out. The nature of assignment is the team manager’s responsibility, since the team manager is responsible for approving the scope and depth of the examination. This authority should be exercised with the greatest discretion possible.

  2. Examination Procedures Developed by the Team Members Are Subject To Team Manager Approval - Each team member is responsible for developing the specific examination procedures to be used in carrying out his or her assignment, subject to approval of the team manager. The team members should have discretion in meeting the responsibility of developing the examination procedures to use. The team manager should consider the following regarding approval of the team members’ examination procedures:

    1. Whether the procedures are consistent with the scope and depth of the examination.

    2. Whether the procedures are consistent with the overall examination plan.

    3. Whether the procedures do not duplicate those performed by other team members.

    4. Whether the procedures result in effective and efficient utilization of Service and taxpayer personnel.  (03-01-2006)
Differences Among Taxpayer and Team Members

  1. Team Manager Awareness of Differences among Taxpayers and Team Members - Team managers should be sure that both they and the team members involved are willing to consider the taxpayer's point of view. They should be familiar with all the facts, ascertain the acceptable alternatives, and seek mutual agreement on proposed actions. Team managers should instruct the team members of the approach to be taken, consistent with the procedure shown in IRM, Team Member/Team Manager Differences, if they find that the taxpayer's position is correct.

  2. Immediate Action Required to Correct Differences - Taxpayer/team member differences, if left unresolved, are likely to result in polarization and a breakdown of communication or cooperation necessary for an efficient examination. Corrective action must be taken immediately. Some team managers include in Part I of the examination plan a provision for quarterly meetings with the corporate officer responsible for the federal tax function. These meetings are designed to discuss examination progress. Also, they have served successfully to forestall and resolve developing problems. The territory manager should be requested to participate in meetings with the taxpayer to discuss continuing problems, if necessary.  (03-01-2006)
Resolving Team Conflicts

  1. Consider All Views in a Conflict - The team manager should consider all views expressed and then make a firm decision where differences of opinion arise among team members as to how a particular technical issue should be treated. Free and open discussion of the merits of each team member's position should contribute to a correct decision. This type of discussion often stimulates independent thoughts on technical issues and gives each member due recognition as a fully participating team member.

  2. Conflicts Involving Specialist Team Members - The team manager should consult with the specialist manager and work collaboratively to resolve any differences if the technical issue involves a specialist's area. Issue(s) that cannot be resolved at the team manager’s level should be elevated to the territory manager or next level of management for resolution. The team manager should inform the specialist manager of his or her decision prior to discussion with the taxpayer.

  3. Conflict Resolution Procedures and Guidance – The team manager should refer to the steps outlined in IRM, Team Manager/Team Member Differences, and in IRM, Conflict Resolution Resources Available to the Team Manager, when resolving differences among team members.  (03-01-2006)
Team Manager/Team Member Differences

  1. Recommended Process for Resolving Differences - The following steps should be taken when the team manager’s position is contrary to that of the team member:

    1. The team manager should carefully explain the reasons for his or her position to the team member.

    2. Team members should be given ample opportunity to accept the team manager's position as their own.

    3. The team manager's decision must nevertheless be followed if, after a complete discussion of the matter, the team member still disagrees with the team manager's decision.

    4. The team member will be instructed by the team manager to present the dissent in a portion of the transmittal letter of the report of examination.

    5. The team manager should follow sound management practice by providing the team member with written instructions on the matter in question and by retaining a copy for the files so that it becomes a part of the case record.

    6. The team member can request that the team manager raise the matter to the territory manager for review. If the manager declines this request, the team member may forward the matter directly to the territory manager with a copy to the team manager.  (03-01-2006)
Conflict Resolution Resources Available to the Team Manager

  1. Sources of Assistance with Conflict Resolution - The team manager has many resources to draw upon in determining a course of action in conflict resolution, such as:

    • Interest Based Problem Solving Training

    • Topical books and publications

    • Industry staff members

    • Other managers whose agents might be involved in the conflict

    • AWSS staff or training personnel

    • Associate Office Counsel

    • Area Counsel

    • Technical advisors  (03-01-2006)
Resources Available to the Team Manager

  1. Overview – Various sources of information about each LB&I taxpayer may be available to the team manager. There are also resources available to the team manager for conducting the examination. These sources should be reviewed to the extent they are available and appropriate for use in developing an examination plan tailored to the needs of each taxpayer.  (03-01-2006)
Planning File

  1. The planning file is a valuable resource for CIC and certain IC cases.

  2. Contents - The planning file (See Exhibit 4.46.3-3, LB&I Planning File) should be one of the best sources of information available to the team manager in planning the examination. It is designed specifically to provide continuity from one examination to the next. The taxpayer can be of significant help in updating this file. Typically, the planning file should include information such as:

    • History of taxpayer

    • Organizational structure, including current organizational chart (showing changes)

    • Form 5698, Examination History Record

    • Annual reports

    • Other appropriate reports

    • History of reorganizations and acquisitions

    • Identification of taxpayer's principal officials and representatives

    • Location of records and facilities

    • Description of records

    • Transactions potentially affecting subsequent year returns

    • Summary of examination adjustments by year and techniques used

    • Surplus analysis

    • Unusual examination problems

    • Chart of accounts

    • Taxpayer's accounting manuals (if they can be obtained)

    • Copies of Associate Office Counsel’s rulings affecting the taxpayer (including PLRs, TAMs and CCAs)

    • Copies of elections having a significant bearing on subsequent years

    • Difficulties encountered during the prior examination, such as public relations, facilities problems, etc.

    • Assistance or support group problems encountered, requirements and recommendations

    • Most recent examination plan

    • CEMIS reports for prior examinations

    • Record retention limitation agreements (See Rev. Proc. 98-25)

    • Post-examination management critique

    • Media information

    • Potential offset issues that exist which should be considered in the event claims are subsequently filed (included in post-examination management critique)

    • "Examination Team Activity Information" file. (See IRM , Team Activity Record)

    • Form 9984, Examination Officer's Activity Record

  3. Merged or Acquired Corporations - The planning file of a taxpayer that has been acquired by or merged into another LB&I case is invaluable to the team manager who will have responsibility for the subsequent examination. The file should be transferred to the new team manager as soon as possible. Pertinent portions essential to the preliminary analysis should be copied and sent to the team manager assigned to the next cycle if it is not feasible to transfer the whole file because of an ongoing examination.

  4. Change In Primary Group - The same procedure is applicable when primary group responsibility shifts from one group to another.  (03-01-2006)
Examination History Record

  1. Examination History - Each planning file should contain an Examination History Record reflecting examination activity on each entity, division, subsidiary, or other related taxpayer for the most recent ten-year period. The Examination History Record benefits the team manager in developing the current examination plan. It also provides a graphic view of the taxpayer's examination history.

  2. Form 5698, Examination History Record - Each entity, division, etc. is listed vertically. Columns are provided for acquisition date and for recording the examination activity in each of the ten years. Examination activity is identified in the appropriate column by entering "E" for "Examination" or "S" for "Survey" . Dispositions of any type are noted by entering appropriate commentary and the effective date on the appropriate line.

  3. Initial Preparation of Form 5698 - The initial preparation of the Form 5698 covering any taxpayer can be confined to information readily available in the planning file or from other sources.

  4. Revising Form 5698 - The Form 5698 is updated to reflect planned and current examination activity at the time the examination plan is prepared. Any subsequent additions to the examination plan or deletions will be reflected with appropriate correction of this form. Automated Forms 5698 should be used to facilitate updates.  (03-01-2006)

  1. Maintenance - Workpapers should be maintained for each LB&I taxpayer. Workpapers should contain the following:

    • Administrative File

    • Team Activity Record  (03-01-2006)
Administrative File

  1. Review of Administrative File - Administrative file workpapers may be of assistance in preparing for planning conferences as well a in development of the examination plan. Review of workpapers during the pre-contact analysis is particularly important where there are carryover issues or adjustments from the prior examination.  (12-29-2009)
Team Activity Record

  1. Overview - The Taxpayer Bill of Rights 2 may entitle taxpayers to interest abatement if any assessment of interest on a deficiency is attributable in whole or in part to any unreasonable error or delay on the part of the Service in performing a ministerial or managerial act.

  2. Team Activity Record Required - Team managers will elect one of the following procedures for LB&I examinations under their control in order to ensure the Service's ability to accurately and fairly respond to the taxpayer's claims for interest abatement under section 6404(e):

    1. All team members, including the team manager, are required to document case activity on Form 9984, Examining Officer's Activity Record. All the completed Forms 9984 are to be collected and maintained in the case planning file under an index category titled Form 9984, Examination Team Activity Information, upon completion of the examination.

    2. The team manager, in lieu of requiring all team members to prepare Form 9984, will document case activities for the whole team at the end of each quarter. Examples of activities that should be documented by the team manager include loss of records, team member transfer, extended illnesses, extended training, extended leave, or any other event(s) that has the potential for delaying the closing of the examination. This information should be recorded for each team member and the team manager and should be maintained in the case planning file for each examination under an index category with the title "Examination Team Activity Information" .

  3. Required Entries - Senior Team Coordinators or Team Managers must follow requirements set forth in IRM, Notification of Taxpayer’s Rights, when seeking a statute extension. The Service employee requesting the consent must document in the case file on Form 9984, that the required notification was made. A copy of the Letter 907 (DO) or Letter 967 will be maintained in the case file. If a consent is secured, then the copy of Letter 907 or Letter 967 will be attached to the back of the executed consent form and the consent will be attached to the tax return in accord with the instructions at IRM If the consent is not secured, then the copy of Letter 907/967 will be attached to the back of the retained file copy of the unexecuted consent form. Significant periods of case inactivity or delays must be documented.  (12-29-2009)

  1. Review All Related Returns - The team manager should ensure that the team reviews all related returns to ascertain:

    1. Size and complexity of the case;

    2. Identity of persons authorized to sign the various returns;

    3. Dollar volume of items for the year to be examined compared with dollar volume of like items in prior years;

    4. Location of entities, operations and plants;

    5. Questionable items in regular or reconciliation accounts.

  2. Review Service Transcripts – Transcript reviews should include RTVUEs and BRTVUs to the most current tax period required to be filed.

  3. Midwest Automated Compliance System (MACS) – MACS allows immediate access to tax return data including 1120 tax returns. MACS reports provide three year comparisons of tax return information. (See IRM 4.3, Midwest Automated Compliance System Handbook)

  4. Taxpayer Information Gateway (TIG) - TIG is a case building tool that has been developed for LSMB examiners. It is used to assist in identifying issues and analyzing taxpayer's data by providing analytical reports. LSMB Audit Standard 1A1 recommends utilization of TIG to facilitate the comparative analysis of tax return information. (See the TIG Website for a listing of available reports).  (03-01-2006)
Taxpayer Sources

  1. Orientation to Taxpayer’s Business Operations - The team manager and team coordinator (TC) should identify areas where the taxpayer can provide orientation or training sessions to expedite the examination process. Included in these could be:

    • Industry techniques and practices

    • Industry language and terminology

    • Industry problems

    • Economic factors which impact on tax considerations of the taxpayer

    • Systems - accounting, computer files, etc.

    • Processes, policies and procedures of the accounting and tax departments and operational divisions

    • Necessity for business site tours

    • Assistance or support examination consideration

    • Taxpayer peak periods  (03-01-2006)
Public Sources

  1. Other Public Sources of Information - Libraries, trade associations and news media usually provide helpful information about the taxpayer’s plans and activities. Some publications that could be of interest to the team manager are:

    1. Newspapers which specialize in financial information and provide a communications outlet from the taxpayer to the general public on matters such as organizational changes, acquisitions, contracts, new processes, and financial data;

    2. Financial magazines which report statistical data, ranking of corporations and articles reflecting trends in the various industries; and

    3. Annual stockholder reports which are published by publicly owned taxpayers and are available in most public libraries or can usually be obtained from the taxpayer or brokerage offices.

  2. Internet as a Source of Information - Current IRS policy is that whenever possible, revenue agents who work tax-related matters should use contracted subscription search services (for example, Westlaw, LexisNexis or Accurint) to obtain information about a tax case or taxpayer. Various other internet web sites, including the taxpayer's own web site, and publicly available databases can also provide useful information.  (12-29-2009)
Federal, State, and Local Agencies

  1. When contacting third parties to obtain non-public information about the taxpayer under examination, see above IRM (4).

  2. Government Agencies as Sources of Information - Most of the taxpayers identified in the Coordinated Industry Case Program and many Industry Case taxpayers deal with one or more regulatory agencies, either Federal or State. These agencies usually conduct detailed examinations of the taxpayer's operations. The team manager can sometimes save time by the use of the audit reports and workpapers of those agencies. The team manager should ensure that the team attempts to get the information from the agency directly if the taxpayer does not voluntarily make the reports available. A request for the reports should be made through Communication and Liaison’s Office of Governmental Liaison if the requests to the taxpayer and to the agencies are unsuccessful (See IRM 11.4 – Office of Government Liaison). Some of these Federal Agencies are described in Paragraphs (2) through (6) below.

  3. The Federal Power Commission - The Federal Power Commission (FPC) audits utilities, including power transmission and natural gas pipeline operations. Copies of the audit reports usually can be secured from the taxpayer.

  4. The Office of the Comptroller of the Currency (OCC) - The OCC has jurisdiction over national bank examiners who conduct audits of banks. Information on the result of these audits can be secured by the following means:

    1. The national bank examiner will present the bank with a list of assets the bank was directed to write off at the conclusion of an audit. These lists are available to Service personnel either at the bank or local office of the OCC.

    2. Regional administrators of national bank examiners will, upon request from the team manager, provide a certification of assets that a bank was directed to write off.

    3. Other information from a bank examiner's audit report can be obtained by a request through channels.

  5. The Securities and Exchange Commission (SEC) - SEC files contain financial information about many corporations such as:

    1. Prospectus – A prospectus is a report prepared by a corporation which contains detailed information on plans for expansion, etc. Copies of prospectuses may be secured from the taxpayer.

    2. 10K Report - A 10K Report is a financial information report furnished to the SEC annually. It provides comprehensive overviews of the registrant's business.

    3. 10Q Report - A 10Q Report is a report that includes unaudited financial statements and provides a continuing view of the company's position during the year. It is filed three times a year. The 10K takes the place of the fourth quarterly report.

    4. 8K Report - An 8K Report is an interim report required when special problems, transactions or events occur which should be made known on a current basis.

    5. S-4 Form – An S-4 Form is used to register securities in connection with business combinations, mergers, and exchanges.

    6. S-8 Form – An S-8 Form is used for the registration of securities to be offered solely to an issuer's employees pursuant to certain employee plans.

    7. F-4 Form – An F-4 Form is used to register securities issued by foreign private issuers in connection with business combinations, including foreign private registrants, in the context of mergers and exchange offers.

    8. Form 20-F – A Form 20-F is a financial information report furnished to the SEC annually when a foreign entity is the parent company.

  6. The Defense Contract Audit Agency - The Defense Contract Audit Agency (DCAA) conducts detailed audits of businesses involved in defense work. The audit reports and workpapers of this agency are sometimes very valuable in that they contain detailed analyses of various accounts, especially travel and entertainment and deferred income accounts. Access to this information may be obtained in accordance with procedures provided in IRM 11.4 - Office of Government Liaison.

  7. Other Federal Agencies - Information from other Federal agencies can also be obtained by submitting requests through proper channels to the Communication and Liaison Office of Governmental Liaison.

  8. State and Local Agencies - Information from state and local agencies usually can be obtained directly by the team manager, or in some instances, through the DFOs. Requests for information should be consistent with any existing tax information exchange agreements which are in force.  (03-01-2006)
Other Sources of Information

  1. Prior Examination Team - The prior team manager and prior team coordinator are in a position to materially assist team managers by alerting them to any unusual procedures and problems that may be encountered during the examination and in suggesting corrective action. They can also furnish information concerning taxpayer personnel to be contacted. Other helpful information which they may be able to supply that is sometimes inadvertently omitted in updating the planning file could pertain to:

    1. Taxpayer cooperation in providing logistical support for the examination (a prime concern to the team manager);

    2. Agreements that need to be firmly established and clearly understood;

    3. Agreements which should be modified;

    4. Periods during the examination when the taxpayer cannot serve the information needs of the team. (Typically, these involve periods when books are being closed, returns are being prepared, or traditional vacation times.)

  2. Prior Team Coordinator Assistance on Current Examination - It may be necessary, in highly specialized examinations, to request the assistance of the previous team coordinator in an advisory capacity for the new team during the initial stages of the examination. The time expended by the prior team coordinator should be minimal. This involvement should not be considered a factor in the P-4-5 rotation policy.

  3. Formal Record of Assistance from Prior Team Coordinator - A description of the activities of the prior team coordinator must be maintained in the taxpayer's case binder for the cycle in which the assistance took place. This will allow management to properly monitor Policy Statement P-4-5, Rotation of Examiners.  (03-01-2006)
Team Managers of Similar Cases

  1. Team Managers of Similar Cases - Team managers who are experienced in directing examinations of taxpayers within the same industry may be in a position to provide information by telephone or through special meetings that could be helpful in planning the examination or in raising and resolving issues uniformly. IBMIS provides a directory listing of all LB&I cases, the team manager for each case, primary group and telephone number. IBMIS is an invaluable tool for use by team managers and LB&I team members to contact other managers and examiners with similar issues or industry taxpayers.  (03-01-2006)
Office of Chief Counsel

  1. The Office of Chief Counsel is the Service’s Legal Advisor – The Office of Chief Counsel is the chief law officer for the Internal Revenue Service and can provide assistance to the team manager throughout all phases of the examination. Associate Offices in Washington, DC (Associate Office Counsel) issue technical guidance such as Revenue Rulings, Technical Advice Memoranda (TAMs), and Technical Expedited Advice Memoranda (TEAMs), and provide Chief Counsel Advice. Chief Counsel’s LB&I Division Counsel has field offices (Area Counsel) to support and provide assistance to team managers. The team manager should seek involvement of Area Counsel prior to involving Associate Office Counsel on all CIC examinations and on IC cases as needed. Common forms of assistance available to team managers include the following:

    1. Planning the examination;

    2. Assisting with risk analysis;

    3. Attending opening conferences on CIC and IC examinations;

    4. Helping identify and develop issues, including assistance in the preparation and review of information document requests (IDRs) and summonses;

    5. Providing legal analysis and advice at a local level; and

    6. Assisting in preparing requests for, coordinating, and obtaining technical guidance or Chief Counsel Advice from Associate Office Counsel.

  2. Coordination with Associate Office Counsel – Coordination with Associate Office Counsel should be made at the earliest possible stage in any proceeding.

  3. Informal Coordination with Associate Office Counsel – Informal coordination with Associate Office Counsel is obtained through Area Counsel. The Area Counsel attorney contacts the Associate Office Counsel attorney to obtain informal coordination, and records the conversation in an email or memorandum to the file. Informal advice from Associate Office Counsel can be provided in writing.

  4. Formal Coordination with Associate Office Counsel – Formal coordination with Associate Office Counsel is required where there is no clear guidance on the proposed position; where there is no uniformity regarding the disposition of an issue; or when the issue is unusual or complex (TAM or TEAM required). It is appropriate for the Area Counsel attorney to make a pre-advice telephone call to the Associate Office Counsel to determine if formal advice is needed and what form it should take. Formal coordination, although preferred, is not required to obtain advice on matters concerning routine case development or litigation questions involving the application of well settled principles of law.

  5. Procedures for Requesting TAMs and TEAMs - Detailed procedures for the submission of a TAM or TEAM request are updated annually as the second Revenue Procedure (Rev. Proc.) for the year (for example, Rev. Proc. 2004-02).

    1. TAM - A TAM has a targeted time frame of 120 to 180 days during which it is pending in National Office. The taxpayer does not have to participate in the process. LB&I and the taxpayer do not have to agree on the facts if the taxpayer does not participate. An adverse conference will be offered to the taxpayer if Counsel’s decision is adverse to the taxpayer. The TAM issued will note that factual disagreement is immaterial where the taxpayer and LB&I disagree on the facts, and the Associate Office rules the same way for both sets of facts. The TAM will be issued addressing both the taxpayer’s and LB&I’s facts if the Associate Office rules differently on the sets of facts. LB&I will be required to process the case consistently with the legal analysis in the TAM as applied to LB&I’s facts.

    2. TEAM - A TEAM is technical advice issued in an expedited manner. It has a targeted time frame of approximately 60 days during which it is pending in National Office. A presubmission conference is mandatory and only one other conference is allowed, otherwise the TEAM process is similar to the TAM process.

  6. Effect of Associate Office Counsel Advice – Generally, legal advice provided to field examination teams by Associate Office Counsel on specific technical issues is not binding on the field examination team or the taxpayer.

  7. IRM 1.1.6 - See IRM 1.1.6, Chief Counsel, for more detailed information about the Office of Chief Counsel.  (03-01-2006)
Specialists and Specialists' Managers

  1. In-House Field Examination Specialists - One of LB&I’s principal strengths is the availability of various specialists with training, experience and expertise who can render valuable assistance in formulating examination plans, actively participating in the examination process and giving technical advice in their particular areas of specialization.

  2. Description of Field Specialists - Field specialists include financial products specialists, computer audit specialists, economists, employment tax specialists and engineers. Excise tax specialists and International examiners, though not included in the field specialist program, are also specialists who provide similar services. TEGE specialists include exempt organization and employee plan revenue agents, tax-exempt bond, Indian tribal government, and federal, state and local government agents.

  3. Field Specialists as Examination Team Members – Generally, field specialists provide specialized technical expertise to all business units within the IRS. The specialists primarily serve as team members in the examination process. This includes Coordinated Industry (CIC) and Industry Cases (IC), and any other examinations requiring specialized expertise. They work in partnership with other examiners and managers assigned to the examination of a corporate or other tax return. They are accountable for providing efficient, objective, and professional expertise that leads to the timely completion and resolution of specialist issues and the overall examination.

  4. Role of the Field Specialist - The field specialist's role in the examination process includes but is not limited to the following activities:

    1. Involvement in all phases of an examination,

    2. Participation as a team member in preliminary planning, including review of tax returns and historical files, performing risk analysis, issue prioritization, and determination of time requirements,

    3. Preparation of an examination plan to be reviewed and approved by the specialist manager,

    4. Attendance, as appropriate, at opening conferences on CIC and IC examinations,

    5. Preparation of IDRs,

    6. Discussions of IDRs with the audit team and with the taxpayer,

    7. Development of issues, Attendance at team meetings (i.e., to include risk analysis meetings) to better understand the relative weight of all issues raised by the team, and

    8. Discussions of issues with the team coordinator, specialist manager, and team manager to ensure understanding of the specialist issues.

  5. Effective Utilization of Field Specialists and Coordination With Other Operating Divisions - It is necessary for the team manager to fully understand the functions of specialists and other operating divisions and integrate those functions into the overall examination plan in order to make full and effective use of specialists. The team manager should be familiar with the following IRM sections:

    • IRM 4.10 – Examination of Returns

    • IRM 4.47 – Computer Audit Specialist

    • IRM 4.60 – International Procedures Handbook

    • IRM 4.61 – International Audit Guidelines Handbook

    • IRM 4.48 – Engineering Program

    • IRM 4.49 – Economist Program

    • IRM 4.37 – Financial Products and Transactions Handbook

    • IRM 4.23 – Employment Tax Handbook

    • IRM 4.24 – Excise Tax Handbook

    • IRM 4.71 – Employee Plans Examination of Returns

    • IRM 4.36 – Joint Committee Procedures  (07-26-2011)
Specialist Referral System (SRS)

  1. Automated System for Requesting Specialist Assistance – The Specialist Referral System (SRS) automates the referral request process for requesting specialist assistance. Agents generate referral requests online and SRS automatically notifies the appropriate specialist managers of the request.

  2. Specialists covered by the SRS – The following specialist services must be requested using SRS:

    • Computer audit specialists (CAS)

    • Economists

    • Employee plans

    • Employment tax (LB&I)

    • Employment tax (SBSE)

    • Employment tax (TEGE)

    • Engineering

    • Excise tax

    • Joint Committee

    • Exempt organizations

    • Federal, state & local government

    • Financial products

    • Indian tribal government

    • International

    • Tax-exempt bonds specialists

  3. Accessing the SRS – The SRS is located on the LB&I Field Specialists intranet website.  (03-01-2006)
Computer Audit Specialist

  1. Mandatory Referral Criteria for CAS Assistance – IRM 4.47, Computer Audit Specialist, describes the mandatory referral criteria for Computer Audit Assistance on examinations.

  2. Use of CAS - CAS can improve coverage and/or efficiency by managing stat samples to meet audit objectives. CAS can review stat samples prepared by taxpayers for accuracy and consistency with IRS requirements. CAS also has Statistical Sampling Coordinators for complex situations and can access expert witnesses should the need arise. See IRM section 4.47.3.

  3. Early Involvement of CAS in Planning Process - The CAS has the expertise to assist the team manager in planning the depth and scope of the examination. Accordingly, the CAS should be requested and involved in the case as early as possible in step one of the planning process for the purpose of performing a systems analysis, stratification and any other applications deemed appropriate by the CAS and team manager. CAS involvement in the planning process is recommended 90 -180 days prior to the case opening whenever possible.

  4. Utilization of CAS Throughout the Examination - The CAS is LB&I's information specialist and should be used throughout the examination for advice and the application of innovative computer programs. The CAS gains familiarity with the taxpayer’s financial accounting processes regarding electronic data (available files, accounting code translations, summarization of detail information, etc.) for the years under audit. Financial accounting systems, information technology systems (mainframe vs. network server platforms), internal control, etc., are areas that the CAS will usually have an adequate base of knowledge to comment on or to provide assistance. Situations may arise during the examination or additional examination areas may be discovered where further assistance may be helpful.

  5. Evaluation and Reconciliation - One of the most important duties the CAS performs is an evaluation of the taxpayer's Electronic Data Processing (EDP) systems. This process identifies useful computer files and provides the CAS with invaluable knowledge of the taxpayer's computer system. It also includes reviewing internal controls which could indicate issues of potential noncompliance. An important part of this process is to reconcile the electronic files to books and returns.

  6. Acquiring Taxpayer Records - CASs are able to acquire taxpayer data and provide this data in usable form to examination teams on most cases. Most CIC cases require the combining of files, although some EDP systems are centralized. Team managers should provide full support to the CAS in the attempt to perform a systems/record analysis. Appropriate contacts within the corporation should be arranged for the CAS. The personnel available should include tax department, accounting, and data processing personnel who understand the inner workings of the data processing phase of their division. The CAS must work closely with all team members to ensure that all files appropriate and useful to the examination are identified for retention.

  7. Computer Examination Applications – The CAS has knowledge of and experience with the utilization of many different computer applications that add efficiencies to the examination. CASs should be consulted to help determine appropriate audit techniques and invited to team discussions and discussions with or presentations by taxpayers that involve potential references to systems, processes, and/or data.

  8. CAS Work Product – The CAS examination plan, activity record, reports, and work product documentation must be included in the LB&I case file.

  9. Post-Examination Critique by CAS - The CAS should be available to participate in the Post Examination Critique. This can be accomplished by having the CAS, or CAS manager participate in the post-examination critique. Also, the CAS will provide written reports on these items. This fact must be documented if the CAS is not available. See IRM, and 4.46.7-2.  (03-01-2006)
International Examiner

  1. Mandatory Referrals – IRM 4.60.6, International Procedures, describes the mandatory referral criteria for international examiner assistance on audits.

  2. Effective Audits of Foreign Transactions - The United States tax laws that relate to overseas activity are exceedingly complex and difficult to administer. It is necessary to make full use of international examiners trained in this complex area in order for the Service to effectively audit foreign transactions.

  3. International Examiner Involvement in Audit Planning - IRM 4.60 describes the major features of the International Enforcement Program. The team manager should be familiar with this chapter which includes functional responsibilities and specific instructions for early referral to the international manager. Early involvement of the international examiner in the planning stages of the examination is essential for those cases having substantial foreign transactions. This facilitates timely development of plans for examination of issue areas peculiar to foreign operations and facilitates more timely development of international tax issues.

  4. Challenges to International Tax Law Enforcement - The principal challenges to effective international tax law enforcement are the complexities of the laws involved and the difficulties encountered in obtaining records from which a proper determination of U.S. tax effect can be made. The expertise of international examiners and the availability of advice and assistance from the Office of Pre-Filing and Technical Guidance can dispel much of the mystery inherent in this area of tax law. The team manager should be fully conversant with the record keeping requirements of sections 905, 964, 6001, 6038, 6038A and 6046A and the corresponding regulations. The team manager should also be conversant with the methods for obtaining these documents from foreign countries. (See IRM, Use of LB&I International).

  5. International Examiner’s Work Product - The international examiner’s examination plan, activity record, and work product documentation must be included in the LB&I case file.  (03-01-2006)

  1. Mandatory Referrals – IRM 4.48, Engineer Program, describes the mandatory referral criteria for Engineer assistance on audits.

  2. Engineer Expertise – Today’s business climate consists of specialization and rapidly changing technology. Team managers have specially educated and trained engineers as potential team members who can add value to examinations. The engineers bring education, experience, expertise, and special training to the examination. Many engineers have credentials or certifications in technical and valuation areas beyond their formal education. These credentials or certifications were earned from nationally recognized professional associations such as appraisal societies and societies of professional scientists, foresters, and engineers.

  3. Engineer Involvement in Examination Planning - The engineer should be involved in the early planning stages of the examination. The engineer should have the opportunity to review all available information about the taxpayer to be examined such as the planning file, prior reports, tax returns, reports to stockholders, etc. One very important step, often overlooked or delayed, is a tour of the taxpayer's premises for the purpose of observing the physical assets of the taxpayer. The engineer is better equipped to recommend potential examination areas if these steps are taken.

  4. Engineer Resources Available on National Basis - The engineer manager will seek assistance from other engineer teams or seek the assistance of outside experts to provide the needed expertise to the examination in situations that arise where the locally available engineering staff does not have a required specialist in a particular field.

  5. Engineer Specialist’s Work Product - The engineer specialist’s examination plan, activity record, and work product documentation must be included in the LB&I case file.  (03-01-2006)

  1. Mandatory Referrals - IRM 4.49, Economist Program, describes the mandatory referral criteria for economist assistance on audits.

  2. Need for Economist Assistance – Economists can assist the team manager with the ever growing development of various tax avoidance schemes involving business transactions between related parties doing business in different countries. These foreign transactions raise substantial examination problems outside the traditional accounting or tax audit function.

  3. Economist Involvement in Examination Planning - The economist should be involved in the early planning stages of the examination. The economist should have the opportunity to review all available information about the taxpayer to be examined such as the planning file, prior reports, tax returns, reports to stockholders, etc.

  4. Economist Expertise - The economists provide economic assistance on a broad range of tax issues. Economic analysis covers issues such as valuation of intangibles, determination of transfer pricing of cross-border transactions, shipping rates, royalties, commissions, discounts and the valuation of goodwill in acquisitions.

  5. Economist Resources Available on National Basis - The economist manager will seek assistance from other economist teams or seek the assistance of outside experts to provide the needed expertise to the examination in situations that arise where the locally available economist staff does not have a required expertise in a particular field.

  6. Economist Specialist’s Work Product - The economist specialist’s examination plan, activity record, and work product documentation must be included in the LB&I case file.  (03-01-2006)
Financial Products and Transactions Specialist

  1. Mandatory Referrals – IRM 4.37, Financial Products and Transactions Handbook, describes the mandatory referral criteria for Financial Products and Transactions Specialist assistance on examinations.

  2. Early Involvement of the Financial Products Specialist - LB&I team managers and team coordinators should involve financial products and transactions specialists early in the examination to identify industry-related issues and to achieve uniform compliance on an industry-wide and issue basis.

  3. Financial Products Specialist Expertise - Financial products and transactions specialists are revenue agents who possess broad expertise in tax law and who have been given special training involving futures, options, government securities and other financial products. They are available to assist the team by participating in the planning and examination process. These specialists understand financial terminology, operations of the markets and industry practices, as well as the varied systems of accounting and record keeping associated with financial industries.

  4. Financial Products and Transactions Specialist’s Work Product - The financial products and transactions specialist’s examination plan, activity record, and work product documentation must be included in the LB&I case file.

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