4.46.5 Resolving the Examination

Manual Transmittal

December 13, 2018


(1) This transmits revised IRM 4.46.5, LB&I Examination Process, Resolving the Examination.


Examinations vary in scope, size, and complexity; therefore, portions of this IRM may be more applicable to some cases than others.

Material Changes

(1) Edits made throughout this IRM to clarify the LB&I issue-driven examination process as described in Publication 5125, LB&I Examination Process.

(2) Added new subsection, Program Scope and Objectives, to comply with internal control requirements in IRM, Address Management and Internal Controls.

(3) Added reference to the Rapid Appeals Process in IRM

(4) Editorial corrections made throughout.

(5) Updated hyperlinks and citations.

Effect on Other Documents

IRM 4.46.5 dated March 9, 2016 is superseded.


All LB&I personnel

Effective Date


De Lon Harris
Assistant Deputy Commissioner Compliance Integration
Large Business and International Division

Program Scope and Objectives

  1. The overall goal of the resolution phase of the examination process is to resolve all tax issues at the earliest appropriate point in the examination and at the lowest management level.

  2. Purpose: This IRM section defines the resolution phase within the LB&I Examination Process (LEP), including roles and responsibilities, collaboration and communication.

  3. Audience: All LB&I personnel

  4. Policy Owner: Assistant Deputy Commissioner Compliance Integration (ADCCI)

  5. Program Owner: Responsibility for the LB&I Examination Process is shared among the geographic practice areas.

  6. Primary Stakeholders: LB&I executives, senior managers, front-line managers, examiners, program analysts and paraprofessional staff.


  1. The implementation of the LB&I Examination Process as described in Publication 5125 changed the way LB&I conducts examinations. Examinations are divided into three phases: planning, execution and resolution. The resolution phase is discussed in this IRM.

  2. This IRM revision is based on internal and external feedback.


  1. See IRM, Authority.

  2. In addition to the authorities cited in IRM, the following IRC sections relate to dispute resolution:

    • IRC 7121, Closing agreements

    • IRC 7123, Appeals dispute resolution procedures

  3. Rev. Proc. 2003-40 formally established the Fast Track Settlement program.


  1. See, Roles and Responsibilities.

Program Management and Review

  1. See IRC, Program Management and Review.


  1. Refer to Exhibit 4.46.1-1, Glossary of LB&I Terms, in IRM 4.46.1, General Information and Definitions.

Related Resources

  1. The LB&I intranet home page at https://irssource.web.irs.gov/LBI/Pages/Home.aspx is a resource for learning more about the concepts and procedures in this section. Type key words in the search box on the LB&I home page for more information about a specific item.

  2. Also see:

    1. IRM 4.10 series, Examination of Returns

    2. IRM 4.51.4, LB&I Case Management, LB&I/Appeals Fast Track Settlement (FTS) Program

    3. IRM 1.2.17, Servicewide Policies and Authorities, Policy Statements for the Appeals Process

Issue Resolution

  1. The goal of the resolution phase is for the IRS and the taxpayer to reach an agreement on the tax treatment of each issue examined at the earliest appropriate point in the examination in a quality manner. The taxpayer and LB&I will benefit in terms of resource utilization and tax certainty when the parties have open and meaningful discussions of issues throughout the examination process. Early and frequent issue team discussions and presentation of all relevant facts are crucial for a complete understanding of the taxpayer’s and the government’s tax positions and their relative strengths and weaknesses.

  2. The issue manager, in collaboration with the case manager, will lead the issue team in resolving issues utilizing appropriate issue resolution tools. Expeditious issue resolution necessitates open communication, cooperation and collaboration among the issue team members and with the taxpayer. Issue exit strategies will be considered for recurring and carryover issues to provide certainty for the government and the taxpayer.

  3. As each issue is developed, the taxpayer should be given an opportunity to agree or disagree with the findings. For an issue to be resolved, there must be an open discussion between the issue team and the taxpayer in these three areas: factual development, applicable tax law(s) and interpretation of the tax law(s).

Factual Development

  1. During the examination, the issue team will:

    1. Identify all relevant facts relating to the issue.

    2. Present the facts in a clear and effective manner.

    3. Distinguish between facts and opinions. The facts do not include opinion, personal preferences, inferences, biases or prejudices.

    4. Document the evidence relied upon to reach the factual conclusion of a given transaction in a clear and understandable manner.

  2. It is the taxpayer’s responsibility to ensure all relevant facts have been identified and presented to support the tax position taken on the return. It is imperative that the issue team discuss the facts gathered with the taxpayer to understand the taxpayer’s position.

  3. Appeals may return the case to exam if new information is presented during the Appeals process. See IRM, Returning a Case to LB&I.

  4. An acknowledgment of the facts must be documented in the case file for all potential unagreed issue(s). Any disputed facts must be noted. The issue team should work collaboratively with the taxpayer to develop and reach a common understanding of the relevant facts. To ensure the effective application of the law, the facts and circumstances should be clear and accepted by both parties. (See IRM 4.46.4, Executing the Examination, for the process of obtaining the acknowledgment of facts.)

Application of the Law

  1. The issue team will:

    1. Apply the law to the facts and circumstances in a fair and impartial manner.

    2. Conduct open and transparent discussions with the taxpayer to reach an understanding of each other's position when identifying the appropriate laws.

    3. Consider the various legal authorities and other guidance to determine the merits of the issue.

    4. Refer to IRM, Researching Tax Law, which provides common research resources.

    5. Consider collaboration with subject matter experts or Division Counsel for assistance.

Interpretation of the Law

  1. The issue team must:

    1. Apply judgment and experience in weighing the merits of the taxpayer’s and the government’s tax position, based on the applicable laws, when resolving issues.

    2. Discuss the interpretation of the law, based on the facts and circumstances presented, to reach an understanding of the taxpayer’s and government’s position.

  2. Refer to IRM 4.10.7, Examination of Returns, Issue Resolution.

Resolution vs. Settlement

  1. Resolution: LB&I managers have the broad authority to resolve issues based upon the application of the tax law to the facts and circumstances. Other issue resolution tools, as outlined in IRM, Issue Resolution Tools, should be used to resolve issues when appropriate.

  2. Settlement: Appeals has the authority to settle cases based upon hazards of litigation. For example, in the event of litigation, there may be uncertainty as to how a court would interpret and apply the law or weigh the facts. Appeals utilizes techniques such as "mutual concession" and "split issue" settlements. Exam is not authorized to use these settlement techniques.


    There are various delegation orders available for settlement of issues at the examination level. See IRM 1.2.43, Servicewide Policies and Authorities, Delegations of Authority for the Examining Process.

Issue Resolution Tools

  1. Consideration and utilization of issue resolution tools can start at the earliest appropriate point and continue until the case is closed from examination’s jurisdiction. Using appropriate issue resolution tools can potentially reduce examination time, save resources and lessen the burden on both parties. LB&I encourages the use of issue resolution strategies.

Taxpayer-Specific Pre-Filing Resolution Tools

  1. Taxpayer-specific pre-filing resolution tools include: Pre-Filing Agreements (PFA), Advanced Pricing Agreements (APA), Compliance Assurance Process (CAP) and Private Letter Rulings.

Pre-Filing Agreements
  1. Pre-Filing Agreements (PFAs) permit a taxpayer to request the examination of specific issues relating to a tax return before the return is timely filed. The purpose is to resolve issues involving factual questions applying well-settled principles of law. A PFA can often resolve such issues more effectively and efficiently. A PFA also provides the taxpayer with a greater level of certainty regarding the examined issue at an earlier point in time than a post-filing examination. The PFA request is subject to a user fee. For more information see IRM 4.30.1, Pre-Filing Agreement Program, and Rev. Proc. 2016-30 or its successor.

Advanced Pricing Agreements (APA)
  1. Advanced Pricing Agreements (APAs) provide a process for determining the proper treatment of transfer pricing issues prior to the filing of returns. In some circumstances, the transfer pricing methodology agreed to in the APA process may also be used to resolve issues present on filed returns currently under examination. For more information see Rev. Proc. 2015-41 or its successor.

Compliance Assurance Process (CAP)
  1. Compliance Assurance Process (CAP) is a method of identifying and resolving tax issues through open, cooperative and transparent interaction between the IRS and LB&I taxpayers prior to the filing of a return. Through the CAP program, the taxpayer should achieve tax certainty sooner and with less administrative burden than through conventional examinations. CAP is a voluntary program for taxpayers. Taxpayers must apply and be accepted into CAP. For more information see IRM 4.51.8, Compliance Assurance Process (CAP) Examinations.

Private Letter Rulings
  1. A private letter ruling is a written determination issued to a taxpayer by an Associate Chief Counsel office in response to a taxpayer’s written inquiry submitted prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. A written ruling is subject to a user fee. The identical issue cannot be on an earlier return that is under examination, in Appeals or in litigation. For more information see Rev. Proc. 2018-1 or the first revenue procedure of the current year for up-to-date guidance.

Taxpayer-Specific Post-Filing Issue Resolution Tools

  1. Taxpayer-specific issue resolution tools include: Technical Advice Memorandums, Delegation Orders, Accelerated Issue Resolution, Early Referral to Appeals and Fast Track Settlement. Once a case is under Appeals’ jurisdiction the Rapid Appeals Process is available. The examination team will participate when invited.

Technical Advice Memorandums
  1. Technical Advice Memorandums (TAMs) are written statements issued by National Office Chief Counsel on technical or procedural questions on the proper application of tax law, treaties, regulations, etc. on a specific set of facts. TAMs are requested by and issued to IRS field offices. Taxpayers under examination may request that the examiner refer an issue to Chief Counsel for technical advice, but the examiner is not obligated to make the referral. See Rev. Proc. 2018-2 or the second revenue procedure of the current year.

  2. Taxpayers will be afforded an opportunity to participate in the technical advice process. Taxpayer participation is preferred but not required in order to process a TAM.

Delegation Orders
  1. Case managers will look to applicable delegation orders for potential issue resolution tools. See Delegation Order 4-24 (formerly DO-236, Rev. 3) in IRM and Delegation Order 4-25 (Rev. 2)) in IRM

  2. Division Counsel will be included in all aspects of resolution discussions that involve the use of delegation orders.

Accelerated Issue Resolution (AIR)
  1. Accelerated Issue Resolution (AIR) is an examination process to apply the resolution of the same or similar issues arising from an examination of certain LB&I taxpayers from one or more tax periods to other tax periods.

  2. Issue teams must refer to Rev. Proc. 94-67 and Rev. Proc. 68-16 when considering the use of AIR procedures.

    1. AIR does not include settlement authority for managers.

    2. AIR does not alter in any way the authority case managers have to resolve issues.

    3. Counsel assistance is mandatory when using AIR.

    4. An AIR agreement is generally limited in scope to issues on filed returns arising from an audit of specific taxpayers under the jurisdiction of the Director of Field Operations. Certain issues are excluded or require additional approvals. See Rev. Proc. 94-67, SECTION 3, SCOPE OF AN AIR AGREEMENT.


    For non-filed years, a taxpayer must request a Pre-Filing Agreement (PFA). .

Executing an Agreement
  1. The AIR process uses either a Closing Agreement, Form 906 or standard partial and/or full agreed deficiency procedures. See IRM 8.13.1, Closing Agreements, or Quick/Prompt and Partial Assessments, at http://mysbse.web.irs.gov/examination/cp/pro/22651.aspx for procedures.

  2. Delegation Order 8-3 (formerly DO-97, Rev. 34) delegates authority for closing agreements concerning internal revenue tax liability in cases under examination jurisdiction (but excludes cases docketed before the United States Tax Court). See IRM

  3. A closing agreement can cover the entire tax liability for a year(s), or be limited to a specific tax item.

Case Control
  1. Although the AIR process does not constitute a formal examination of the taxpayer’s books and records, examiners will follow normal procedures for the control of tax periods on the Audit Information Management System (AIMS).

  2. The AIR process will be limited in examinations where it is not practical to include subsequently filed tax return years as part of the current examination cycle.

  3. If the AIR process includes subsequently-filed years, the case manager will

    1. Establish sufficient controls to ensure that needed follow-up actions are taken with respect to all the terms of closing agreements affecting or relating to tax liability for later unexamined (or future) periods or related entities.

    2. Consider using Information Report procedures.

    3. Take whatever action is needed to facilitate follow-up.

  4. AIR does not affect Policy Statement P-4-5 for subsequent years included in the AIR agreement but not examined. (See Policy Statement P-4-5 at IRM

  1. When closing agreements are executed the examiner will attempt to secure and process payments for both examined and non-examined years.

  2. Submit payments and Form 3244-A, Payment Posting Voucher, with Form 3210, Document Transmittal, to the designated Submission Processing Center. See https://irssource.web.irs.gov/LBI/Lists/Case_Closing/DispItemForm.aspx?ID=11 for instructions.

  3. Record the amount under TC 640, Advance Payment on Deficiency. The TC 640 will freeze the refund.

  4. The examiner is responsible for monitoring the posting of the TC 640 payment to verify the full amount was paid.

Returns and Files
  1. An executed original of the closing agreement will be mailed to the taxpayer (or to the representative) with Letter 1595-E.

  2. Examiners are to place a copy of the following documents in the case:

    1. Letter 1595-E, inside the case folder on the top right side

    2. Form 3244-A and a copy of the check on front of the return or BRTVUE

    3. Form 906, back of return or BRTVUE (face in)

    4. Transcripts with the TC 640 posting (if applicable), back of return or BRTVUE (face out)

Early Referral to Appeals
  1. Early Referral to Appeals is a process to resolve cases more expeditiously through LB&I and Appeals working simultaneously. Appeals can consider a fully developed unagreed issue while exam is developing other issues. This process is optional and may be requested by the taxpayer. An early referral may be requested on one or more unagreed issues.

  2. Rev. Proc. 99-28, 1999-2 C.B. 109, sets forth the procedures to request early referral. More information can be found at IRM 8.26.4, Early Referral Procedures, or on the Appeals web site at http://appeals.web.irs.gov/tech_services/adr/early-referral.htm.

Fast Track Settlement (FTS)
  1. FTS must be considered for all unagreed issues. The program is not right for every situation, but when properly applied, it can save significant time and administrative burden for the IRS and the taxpayer. Issues must be fully developed prior to consideration of FTS. IRM states "fully developed" will generally be indicated by:

    1. The issuance of a Notice of Proposed Adjustment (Form 5701) to the taxpayer, clearly setting out the government's determination and the legal and factual basis upon which it is made, and

    2. A written response from the taxpayer clearly stating its position and the basis for disagreement.

  2. FTS is a collaborative effort where the taxpayer, the LB&I issue team and Appeals agree to participate and work toward a mutual resolution based upon an agreed set of facts.


    All examiners must provide Pub. 4539, Fast Track Settlement brochure to the taxpayer at the opening interview and discuss the program with the taxpayer.

  3. FTS is designed to utilize the mediation skills and designated settlement authority of Appeals to resolve issues while the case is still within examination’s jurisdiction.

  4. Appeals acts as a facilitator to arrive at and execute a resolution/settlement that is mutually agreed upon by both the taxpayer and the LB&I issue team. When a resolution cannot be reached through mediation, Appeals may propose a resolution, but such proposal cannot be imposed on either party.

  5. The rules regarding ex parte communications do not apply to communications arising in the FTS process, because Appeals personnel are not acting in their traditional settlement role. Information disclosed by the taxpayer to LB&I during the FTS session can be used by LB&I to complete the examination report.

  6. Documentation that fast track settlement was considered will be recorded in the case file.

  7. Rev. Proc. 2003-40, 2003-1 C.B. 1044, sets forth the procedures for requesting FTS. More information can be found in IRM 8.26.1, Fast Track Settlement for Large Business and International (LB&I) Taxpayers, and on the Appeals web site at http://appeals.web.irs.gov/tech_services/adr/fasttrack-lbi.htm.

Rapid Appeals Process
  1. For information about the rapid appeals process please refer to IRM 8.26.11, Alternative Dispute Resolution (ADR) Program - Rapid Appeals Process (RAP), and http://appeals.web.irs.gov/atcl/RAP/RAPdefault.htm.

Generic Issue Resolution Tools

  1. Generic issue resolution tools include: Industry Issue Resolution (IIR), LB&I Administrative Guidance and LB&I Published Guidance Recommendations.

Industry Issue Resolution (IIR)
  1. Industry Issue Resolution (IIR) is a process that involves frequently disputed/burdensome business tax issues common to a significant number of taxpayers. The focus is on resolving issues arising in future years. The process will likely result in the issuance of published guidance in the form of a revenue procedure or revenue ruling. A request for guidance can be submitted at any time. For more information see IRM 7.40.1, Industry Issue Resolution (IIR) Program.

LB&I Administrative Guidance
  1. LB&I administrative guidance (issued as directives) provides operational instructions for planning and conducting examinations in areas of unsettled law. See https://www.irs.gov/businesses/corporations/large-business-and-international-lb-i-industry-director-guidance for more information.

LB&I Published Guidance Recommendations
  1. LB&I Published Guidance Recommendations focus on both resolving issues arising in future years and under current examination. Issue recommendations are submitted through LB&I Counsel for inclusion in the Priority Guidance Plan (PGP). The PGP sets forth guidance that the Service intends to issue from July 1 through June 30 of the following year. See https://www.irs.gov/privacy-disclosure/priority-guidance-plan for more information.

Management Involvement in the Issue Resolution Process

  1. The issue manager is responsible for resolving the issue at the earliest point using an appropriate resolution tool.

  2. The issue manager will collaborate with the case manager when resolving the issue with the taxpayer and keep the issue team apprised of the status of the issue resolution.

  3. Any differences among managers regarding the resolution of the issue will be elevated to their respective managers.

  4. The issue manager must verify an acknowledgment of facts (AOF) IDR is issued prior to issuance of a NOPA for all potential unagreed issues.

  5. The issue manager must review the taxpayer’s response to the AOF and assess the strengths and weaknesses of each side’s position to ascertain if the issue can be resolved at the examination level. The case file must document the issue manager’s review of the AOF.

  6. The issue manager must review and approve the NOPA before issuance to the taxpayer. Approval must be documented in the case file. The case file must document all meaningful efforts by both the issue manager and the case manager to resolve issues.


    Documented evidence can be in the form of an email, signature on the NOPA, a statement in the activity record, or any other form of documentation in the case file confirming that the issue manager approved the issuance of the NOPA to the taxpayer.

  7. The NOPA will be shared and discussed with the taxpayer upon issuance. A management conference will be held as needed.

  8. The issue manager will engage in a collaborative discussion with the taxpayer when a timely response to the NOPAs has not been received.

  9. The taxpayer has the option to agree or disagree with the NOPA presented. If agreement is reached, request the taxpayer to approve and sign the Form 5701.


    The status and taxpayer’s position must be updated in IMS.

  10. If taxpayer does not agree with the NOPA as presented, the issue manager will:

    1. Determine which aspects of the issue may be agreed and which aspects are unagreed.

    2. Determine the strengths and weaknesses of each side’s tax positions.

    3. Use issue resolution tools to assist in the resolution of the unagreed issue.

    4. Consider Fast Track as an issue resolution tool.

    5. Begin unagreed procedures, if an agreement cannot be reached.

    6. Support the Appeals pre-conference process where appropriate.

  11. The issue manager is responsible for timely review and approval of the LB&I issue team’s rebuttal to the taxpayer's protest to ensure that all arguments raised in the protest are fully addressed.

Closing Agreements

  1. Treas. Reg. 301.7121-1(a) provides that a closing agreement may be entered into in any case in which there appears to be an advantage in having the case permanently and conclusively closed, or if good and sufficient reasons are shown by the taxpayer for desiring a closing agreement and it is determined by the Commissioner that the United States will sustain no disadvantage through consummation of an agreement.

  2. IRM 8.13.1, Closing Agreements, provides instructions and prescribes procedures for Service personnel handling closing agreements entered under IRC 7121.

  3. IRM 8.13.1 contains a number of examples of closing agreements. The LB&I issue team should be able to effectively prepare a customized closing agreement based on the particular fact pattern unique to the issue(s) being resolved. Division Counsel will review the closing agreement and ensure its legal sufficiency prior to entering into the agreement.

  4. The Director, Treaty and Transfer Pricing Operations must provide concurrence on cases where U.S. competent authority assistance has been requested, or is intended to be requested, under Rev. Proc. 2015-40 or its successor, and on closing agreements that provide relief under Rev. Proc. 99-32 or its successor for issues involving allocations of income under IRC 482.

Closing Agreement - Joint Committee Aspects

  1. The examination issue team, with Division Counsel’s assistance, is responsible for preparing the closing agreement. However, closing agreements involving any Joint Committee jurisdictional years must not be signed by or on behalf of the Service until the case manager is notified by the Joint Committee Specialist Group that the Joint Committee’s views have been received and considered. IRM provides guidance for requesting Joint Committee review of closing agreements. These procedures should also be referred to where issues are resolved early in the examination process, such as through Fast Track Settlement or Early Referral to Appeals.

  2. Closing agreements on Joint Committee cases, including those based on Competent Authority determinations, must not be executed on behalf of the Government until reviewed and cleared by the Joint Committee on Taxation. See IRM

  3. If a resolution is reached on an issue near the completion of the LB&I examination, the closing agreement must be submitted with the revenue agent’s report (RAR) to the local Joint Committee Coordinator for preparation of the Joint Committee Report.

  4. If a resolution is reached on an issue near the beginning of the LB&I examination, there could be substantial delay in executing the closing agreement if the closing agreement is not reviewed by the Joint Committee until the examination is completed. In this situation:

    1. The case manager must consider asking the Joint Committee Refund Counsel to review the issue.

    2. Assuming the Joint Committee Refund Counsel raises no objection, the closing agreement may then be executed by or on behalf of the IRS. See IRM for further guidance in situations where an issue is resolved early in the examination; such as, through Fast Track Settlement or Early Referral to Appeals.

Closing Agreements - TEFRA/Bipartisan Budget Act (BBA) Partnership Considerations

  1. Due to the complexities in attempting to resolve TEFRA/BBA partnership issues and the technical administrative procedural requirements involved, closing agreements for partnership issues subject to TEFRA/BBA audit rules must be thoroughly vetted through senior management and Division Counsel.

Completing the Examination

  1. In the issue-based approach teams and/or members within a team may complete their role at different points in the issue/case timeline. Upon the completion of any examiner's assignment, that team member will:

    1. Discuss the issue with the issue manager and case manager to obtain concurrence of issue completion.

    2. Discuss any pending proposed issues with the issue team depending upon the communications agreement and instructions to issue team members established during planning.

    3. Complete their portion of the examination report.

Types of Examination Reports Based on Agreement

  1. See IRM 4.46.6 for workpaper and report guidelines. The following are the different types of reports that are issued to close a case from Examination:

    1. No-change report - See IRM, No-Change Examination (Disposal Code 02) Procedures.

    2. No-change with Adjustments Affecting Other Tax Years Report - Report is issued if the adjustment results in no-change to the current year's tax, yet they affect other tax years that are not under examination.

    3. Agreed Report - This report is issued when the taxpayer agrees with all the issues. Letter 4121-L (LB&I Expected Agreed Examination Report Transmittal) will be issued with the agreed report.

    4. Unagreed Report - The report contains unagreed issues that the taxpayer has taken exception to in the issue team’s findings. Prepare unagreed report and if sufficient time remains on the statute issue Letter 950-Z (30-day letter). If a consent is solicited and not received to enable the issuance of a 30-day letter a statutory notice of deficiency may need to be issued.

    5. Partially-Agreed Report - This report is issued when the taxpayer agrees to some, but not all issues. In this instance, the exam team will prepare two reports, one for the agreed portion and the other will reflect the unagreed issues. The partial agreement must be processed prior to the issuance of the 30-day letter. See IRM, Partially Agreed Cases.

Key Points to Consider and Verify in Preparing an Unagreed Issue Report

  1. Report Clarity and Logic - review to ensure the following:

    1. The report is clear, concise and presented in a logical order.

    2. The issue statement is straightforward and easy to read.

    3. All relevant factual information is clearly documented in the examiner’s report.

    4. The facts and law sections contain no analysis.

    5. The analysis section provides arguments which are thorough and understandable and assert a logical conclusion based upon the facts and law.

    6. Attach schedules, exhibits, specialist or outside expert reports, and other supplemental information that are essential for Appeals’ determination.

    7. See IRS Plain Writing Toolkit for more information about using plain language.

  2. Report Elements - review to ensure the following:

    1. The unagreed report provides the issue statement, adjustment table, facts (including AOF response), law, taxpayer’s position, government’s argument and conclusion.

    2. The report clearly presents the issue(s), the proposed adjustment amount(s) and the reasons for the adjustment(s).

    3. The Form 886-A includes a statement in the beginning of the Facts section indicating the taxpayer’s response to the AOF IDR is appropriately addressed and documented. When there are disputed facts, the NOPA should clearly distinguish the government's and the taxpayer’s factual positions. See IRM (2).

    4. The Service’s position is adequately substantiated based on the tax law.

    5. The pertinent legal arguments and current legal citations are included.

    6. For issues containing alternative positions see IRM, Reports for Alternative Positions.

    7. The report addresses the taxpayer’s position objectively.

    8. Rebuttal of the taxpayer’s position should be included in the government’s position section of the report. The report rebuts the taxpayer’s position(s) within the Service’s position section.


      Appeals may return the case to LB&I if new information is presented to Appeals. See IRM The process of securing the AOF from the taxpayer must be documented in the case file. See IRM for documentation for AOF.

  3. Statute of Limitations: Before a 30-day letter is issued there must be sufficient time remaining on the statute to allow the taxpayer to respond, the protest to be addressed and sufficient processing time to ensure that the statute will have at least 365 days remaining when the case is received in Appeals. See IRM, Minimum Time Remaining on ASED.


    Because of the extra processing time needed for TEFRA procedures, Technical Services requires at least 600 days on the assessment statute for unagreed TEFRA key entity cases going to Appeals. The 600 days includes the 365-day Appeals requirement. See http://tefra.web.irs.gov for more information.

  4. The case manager has responsibility for the preparation and delivery of the 30-day letter to the taxpayer. See IRM, Form Letters (LB&I Examiners only), for guidance on the required form letters. The 30-day letters will be expeditiously prepared and mailed in accordance with existing procedures. The case will be included in the 30-day letter suspense files at the group level and updated timely to status 13 on ERCS after the mailing of the 30-day letter to the taxpayer.

  5. The taxpayer may request an extension of time in which to file a protest. Before an extension is granted, the examination team must determine if a statute extension should be solicited to ensure adequate time to address the protest and still meet the remaining time on the statute requirements set by Appeals. The case manager, in collaboration with the issue manager(s), may approve the request based on the facts and circumstances in each case. Letter 686 may be used for this purpose.

  6. Taxpayer's Protest: See IRM, Response to Preliminary (30-Day) Letters (LB&I Examiners only), for the procedures to follow in reviewing a taxpayer’s response to the 30-day letter.

  7. Rebuttal to the Taxpayer’s Protest – review to ensure the following:

    1. The issue team prepares a timely rebuttal on the unagreed issue.

    2. The rebuttal addresses/resolves factual differences between the protest and audit report.

    3. The rebuttal addresses any new arguments or legal positions presented by the taxpayer.

    4. The rebuttal contains the same clarity and logic as stated in paragraph (1) above.

  8. TEFRA:

    1. If the unagreed case is TEFRA, see IRM, Minimum Time Remaining on ASED.

    2. If the case is a key TEFRA case, ensure the PCS linkage requirements for investors have been completed. See IRM, Linking the Key Case on the PCS.

  9. Other Issues:

    1. Ensure claims and other affirmative issues are addressed. See IRM

    2. If the case falls under the jurisdiction of the Joint Committee, ensure the requirements for "minimum refund" have been properly considered. See IRM

30-Day Letter Follow-up

  1. If resolution of the issue(s) is reached and the case is now agreed, payment will be solicited and the case will be processed as agreed.

  2. If the issue(s) on the case remain unagreed, the taxpayer will submit a timely protest letter. The following actions will be completed timely by the examination team when a protest is received from the taxpayer:

    1. Thoroughly review the taxpayer’s protest and address each of the arguments presented in the protest. Also, address all new facts and legal references the taxpayer puts forth.

    2. The adequacy of the protest and its compatibility with the examiner’s report must be considered. All discrepancies and factual differences should be reconciled and resolved before the case is transmitted to Appeals. Appeals may return the case or consult LB&I Examination on an issue. See IRM for explanation of those situations.

    3. Additional facts may arise during the protest process and/or new information, issues or legal arguments may be presented. If the information received after issuance of the 30-day letter changes the proposed tax, new Forms 5701 and 886-A should be issued and the team coordinator will issue a revised report with assistance from the TCS.

    4. Where new information received in the protest delays the case closing, the issue manager and the case manager will discuss the ECD and statute considerations with the taxpayer.

  3. The LB&I issue team(s) will prepare a timely rebuttal to the protest. The rebuttal is not intended to restate positions taken in the RAR. The protest may include new information not previously introduced. The new information will be appropriately considered to ensure complete development prior to Appeals consideration. Division Counsel and subject matter experts are available to assist in analyzing and responding to new information or issues raised in the protest. The rebuttal must fully address all the taxpayer’s arguments and positions.

  4. The LB&I issue team(s) will share the rebuttal with the taxpayer prior to forwarding the case to Technical Services. Such information could help in resolving the case. A copy of the rebuttal will also be included in the administrative file with the protest.

  5. In closing the case to Appeals, the examination team must note in the Form 4665 that the Form 886-A and the rebuttal fully address the taxpayer’s arguments and includes the examination team’s response to each argument. The examination team must also indicate in the Form 4665 where the AOF documentation is located in the case file. Keep in mind that a copy of the Transmittal Letter must be shared with the taxpayer if it includes statements or comments intended to influence Appeals’ decision-making process. See Rev. Proc. 2012-18 § 2.03(4).

  6. If a protest is not received, a Statutory Notice of Deficiency (90-day letter) will be timely issued.

Forwarding for Appeals Action

  1. The case manager will simultaneously forward the entire group of related entities in the case to Appeals. Also see paragraph (4) of IRM, When to Link the Key Case on PCS.

  2. The Appeals office serving the taxpayer is responsible for consolidating all cases in the group. Appeals may request the following from the examination team:

    1. Background information

    2. The part of the examination plan which contains a brief history of the taxpayer

    3. Information on how workpapers are organized

    4. A concise synopsis of the overall case

Appeals Acceptance Procedures

  1. The team coordinator and case manager must be aware of circumstances in which Appeals will not accept a case from LB&I. Refer to IRM for list of possible circumstances.

Review of Case

  1. The case manager is responsible for timely reviewing the primary case and all effectively controlled entities that are included in the examination.

  2. Issue managers are required to perform a timely review of the technical/mathematical accuracy and issue development/documentation for their assigned issues.

  3. Managers of specialty groups such as Employment Tax, Excise Tax or TEGE will be responsible for the technical/mathematical accuracy and issue development/documentation of any separate specialty reports issued.

  4. Joint Committee refund cases must be processed as outlined in the Joint Committee Procedures (See IRM 4.36).

Quality Case Reviews

  1. LB&I Quality Measurement System (LQMS) case reviews are completed by Quality Review and Analysis (QRA) reviewers. Cases for review are randomly selected according to a statistically valid sample that is determined on an annual basis.

  2. The integrity, independence and objectivity of the reviewer must be preserved. Reviewers must not vary from regular procedures by orally confirming a quality standard.

  3. A case-specific advisory memorandum will be issued to all examiners and specialists whose work product has been reviewed. Case quality scores will not be included. An advisory memorandum will be distributed electronically to examiners or specialists and their manager. Examiners or specialists who have questions concerning the contents of a memorandum may submit inquiries electronically to the address the advisory memorandum transmitted and a reply will be provided by QRA. If there is a serious disagreement with the results of the review between the reviewer or review team and examiner or examination team, the examiner or exam team will have the right to elevate the disagreed issues.

  4. LQMS results are not to be used to evaluate the performance of an individual employee or team. Upon receipt of the advisory memorandum, the manager will discuss, as appropriate, its contents with the employee. Unless employees provide their manager with a written or email request that a copy of the memorandum be retained in his/her Employee Performance File, all copies of the memorandum will be disposed of by the manager no later than (45) days after the issuance date.

  5. The case manager is responsible for reviewing the case for compliance with LB&I auditing standards prior to closing the case.

Exit Strategies

  1. During the resolution phase, examiners are encouraged to engage in discussions with the taxpayer to resolve tax controversy, so that LB&I and the taxpayer have tax certainty. Recommendations should address the future tax treatment of issues. This can result in significant resource savings as it relates to carryover and recurring issues. The following subsections describe factors to consider in developing ways to resolve tax controversy.

Closing Agreements - Process

  1. A Form 906, Closing Agreement on Final Determination Covering Specific Matters, must be signed and filed in triplicate. All copies must have the original signatures. DFO approval signature is required for a closing agreement.

  2. Upon approval of the closing agreement, the original copies are processed in the following manner:

    1. One original copy will be sent to the taxpayer. This action must be recorded (e.g. keep a copy of the Form 4665, Report Transmittal in the files, notate the activity record, etc.).

    2. Attach one original copy to the last examined return in the file covering a year to which the agreement pertains (with the top of the form affixed such that one can see the printed "Form 906" notation). Write in red on the top margin on all of the other returns “SUBJECT TO FORM 906 CLOSING AGREEMENT ATTACHED TO 20XX RETURN”.

    3. One original copy will be sent to the DFO having jurisdiction over the taxpayer. The DFO will maintain a folder for closing agreements.

Recurring Issues

  1. A recurring issue is an issue that has been raised in the current cycle and continues into subsequent filed returns and/or returns that have not yet been filed. For optimizing resource utilization, the issue team should plan on how that issue could be addressed in any filed returns and when possible reach agreement that the taxpayer will report the issue properly going forward.

  2. To minimize burden to the taxpayer and LB&I, discussions to resolve recurring issues are encouraged. The following will be addressed for all recurring issues:

    1. Identify and discuss all agreed recurring issues.

    2. Develop a strategy that could result in agreement with the taxpayer to eliminate the recurring issue(s).

    3. If the recurring issue is due to inadequate records, the taxpayer will be advised in writing relative to the areas where the accounting procedures or practices are inadequate or need to be changed. The inadequate records notice will be issued by the case manager and should be directed to the principal corporate officer responsible for taxes. See IRM, Inadequate Records Notices: Overview.

    4. Consider appropriate penalties when the examination of returns filed after the receipt of the inadequate records notice indicate the taxpayer failed to correct the procedures or practices.

  3. For complex tax computations that are recurring in nature, a reasonable estimate of the future period amounts may be used for the RAR with the understanding that exact amounts will be computed and used in all subsequently filed tax returns when possible.


    The IRS and taxpayer should agree to a methodology to approach the examination of an issue so that significant resources will be saved in achieving voluntary compliance for filed and unfiled tax periods.

  4. Accounting method issues may be delayed until a subsequent examination cycle, when time does not permit the completion of the issue in the current examination cycle. In addition, accounting method issues that require an extensive amount of factual development may be developed over two examination cycles. The taxpayer should be provided written notification that the issue is under consideration, but is being delayed until a subsequent examination cycle. The taxpayer and the examination team will discuss which facts would be necessary to determine a proper amount. The taxpayer should start to gather these facts and have them available when the IDR is issued in the subsequent examination cycle.

  5. The IRS and the taxpayer should review reports from prior cycles noting areas of agreement. If the facts and circumstances haven’t changed significantly, similar agreements may be reached in the current cycle. If this is done, the IRS and the taxpayer could substantially reduce the amount of examination time required to resolve these issues. They should also look at areas of prior disagreement (including previous Appeals decisions) to see if they can jointly arrive at a solution that will satisfy both parties.

Carryover Adjustments Schedule
  1. Form 6095, Carryover and Recurring Adjustments Schedule, or other suitable schedule, that fit the needs of the case will be prepared by the team coordinator at the conclusion of the examination. A copy of the schedule will be placed in the planning file for follow-up by the succeeding team.

  2. The team coordinator will provide a copy of Form 6095 to the taxpayer along with the schedule of required adjustments and corresponding workpapers. The taxpayer can compute carryover adjustments for subsequent years by using Form 6095. These adjustments might involve depreciation computations on items capitalized in prior years or certain accruals.

  3. The examination team will reach an agreement with the taxpayer as to how to process carryover adjustments for filed and unfiled returns and document the agreement in the case file.

  4. The subsequent team will review the completed schedule along with the RAR. This will provide the subsequent team members with the confidence that all carryover/rollover adjustments have been identified.

Closing a Case

  1. LB&I examinations can often contain multiple entities and multiple years; one tax period of one entity is designated as the key case. Grouping those related components as one case will be done whenever possible, to preserve the one-case concept.

  2. Issue teams complete their assignments at various stages of the examination cycle. Several tasks must be performed including the preparation of their portion of the NOPA before their assignments are completed.

  3. All cases related to the key case must be closed through the primary examination group. An exception applies for employment tax, excise tax and withholding tax cases, which generally close out of their respective specialty groups. The case manager enters all closing data in IMS.

  4. The taxpayer must submit a timely protest to the 30-day letter to address unagreed issues in order to exercise their appeal rights. After the protest is received and a timely rebuttal is written, the case is transferred to Appeals through SB/SE Technical Services. The ex parte rules must be observed during all conferences with Appeals. See Rev. Proc. 2012-18.

Partial Closing

  1. The return of a related entity may be closed out in advance of the primary case. This is generally done at the request of the taxpayer or when agreement forms are received and must be processed.

  2. Care should be exercised to provide reasonable assurance that the partial closing is in the best interest of the Service. The examination report must indicate that the entity is part of a LB&I case and must document the reason(s) for the separate closing.

  3. Time spent must be closed out using Form 5344, Examination Closing Record, in IMS. The case manager must keep copies of all closing documents to capture the results subsequent to closing.

Closing Actions

  1. All returns associated with the LB&I examination should be closed in coordination with the primary examination team. This could include both examined and surveyed returns. When the taxpayer’s copy of a return is inspected but not examined, appropriate comments will be made in the examination plan, planning file and in the transmittal letter to the examination report.

  2. Employment tax returns are generally controlled by the employment tax specialist and closed by the employment tax team member assigned to the case.

  3. Excise tax returns are generally controlled by the excise tax specialist and closed by the excise tax issue team member assigned to the case, except for excise tax on Form 5330 controlled by Tax Exempt and Government Entities (TE/GE).

  4. Tax exempt and pension returns are generally controlled and closed by the TE/GE issue team assigned to the case.

  5. Other types of returns may be controlled by other specialists and closed separately from the income tax files.

Disposition of Files and Workpapers
  1. If a case is going to Appeals, workpaper files are forwarded to Appeals for their use in resolving the unagreed issue(s). LB&I case examination workpapers will be forwarded with the closed case file. Team managers will ensure appropriate reports, schedules, workpapers and other administrative data that may be needed for future examinations are uploaded to IMS so they are available to subsequent examination teams.

  2. In certain cases, LB&I maintains workpapers locally; however, workpapers must be retired to the Federal Records Center no earlier than 4 years after the date of closing (AIMS Status 90). See Schedule 23 of Document 12990, Records Control Schedules, for additional guidance. Copies of original workpapers related to carryover/recurring issues may be retained as needed to promote effective tax administration.

  3. IRM 1.15.4, Retiring and Requesting Records, provides detailed procedures for the retirement of IRS records, including packing records, making cartons, shipping records and instructions for the completion of various forms. IRM contains instructions on how to retrieve records from the FRC.

  4. If files need to be shipped to another location, the case manager will control the documents by utilizing Form 3210, Document Transmittal. Form 3210 must always accompany taxpayer sensitive records shipped to other offices (for example, Appeals, Counsel, LB&I Quality Review and Analysis, etc.).

  5. Mandatory IMS workpapers, any electronic data received in response to IDRs, and Form 5701s are required to be maintained (uploaded) into IMS work papers for all issue(s).

Conference with Appeals

  1. LB&I employees may meet with Appeals before the Appeals process begins and after it is concluded.

  2. Requests can be made for a pre-conference with Appeals using Form 4665, Report Transmittal.

  3. Changes brought about by RRA 98 Sec. 1001 give the taxpayer the opportunity to participate in most taxpayer-related communications between LB&I and Appeals. See Rev. Proc. 2012-18, §§ 2.01(3), 2.02(4).

Procedures for Pre-Conference with Appeals Regarding LB&I Cases

  1. RRA 98 Sec. 1001(a)(4) established that ex parte communications between Appeals Officers and other IRS employees are prohibited to the extent that such communications appear to compromise the independence of Appeals. See IRM, Permissible Communications. The following pertains to the ex parte rules:

    1. Ex parte communications are communications that take place in the absence of the taxpayer or the taxpayer’s representative. This prohibition is not limited to oral communications but applies to any form of communication, oral or written (manually or computer generated).

    2. The taxpayer may waive the ex parte restrictions.

    3. The issue manager, in collaboration with the case manager, may request a pre-conference meeting with Appeals. Appeals will notify the taxpayer/representative and give them the opportunity to attend.

    4. The purpose of the pre-conference is to discuss the issues, protest and the LB&I issue team’s rebuttal to the protest.

    5. It is expected that the meeting will serve to establish lines of communication that will be maintained throughout consideration of the case between Appeals and LB&I.

    6. LB&I participants will prepare and present their positions on disputed issues.

Participation in Pre-Conference

  1. LB&I will determine the appropriate pre-conference participants.

  2. The Appeals team will usually consist of the appeals team case leader (ATCL) or team leader and the appeals officer assigned to the case. Appeals specialists or other personnel may also attend where appropriate.

Other Communications with Appeals

  1. It is important that LB&I and Appeals maintain an open dialogue. The ex parte rules under Rev. Proc. 2012-18 must be followed. New information that is not presented during the examination may be presented to Appeals. See Policy Statements 8-2 and 8-3 in IRM 1.2.17. However, Appeals will release jurisdiction and return the case to LB&I when a taxpayer presents new information that was not previously reviewed by the examination team. See IRM New taxpayer arguments (excluding new information) or information provided by the taxpayer in response to an inquiry from Appeals to clarify or corroborate information contained or referenced in the RAR, protest or rebuttal will be referred to LB&I for review and comment within a specific time frame that is at least 45 days. Every effort should be made to handle these requests expeditiously and on a priority basis.

  2. The LB&I issue team may have to make additional contacts with the taxpayer to perform a complete review of any new information provided by the taxpayer. The taxpayer will be notified when Appeals sends the new information to the examination team for consideration. Remember that all communications, oral and written, must be shared with the taxpayer, unless the communications fall within one of the exceptions to the ex parte rules; for example, comments involving ministerial, administrative, or procedural matters. See Rev. Proc. 2012-18 § 2.03(2). The issue team’s evaluation of the information will also be shared with the taxpayer.

Applications to Docketed Cases

  1. The examination team is not expected to review and comment on the taxpayer’s petition before receipt of the case by Appeals. However, Appeals will provide the examination team with a copy of the petition for review and comment in docketed cases.

  2. LB&I will provide a review of the petition to the extent it has knowledge of the facts and issues in dispute.

  3. A key part of the meeting will be planning the timetables and resources needed to respond to new information that may be presented by the taxpayer. Recognition will be given to time frames established by the rules of the Tax Court in establishing priorities for the examination of new information and response to the taxpayer’s positions.

Appeals Case Return Procedures

  1. Under IRM, Appeals will return the case to LB&I jurisdiction if:

    1. The taxpayer provides Appeals with information that LB&I previously requested during the examination, or

    2. If the taxpayer, on its own initiative, provides Appeals with information that was not previously shared with LB&I during the examination.

  2. Statute requirements:

    1. A minimum of 365 days must remain on the statute of limitations when the unagreed case is received in Appeals. TEFRA returns require 600 days remaining on the statute of limitations.

    2. When Appeals releases jurisdiction of cases to LB&I for consideration of new information or a new issue, there must be at least 210 days remaining on the statute when LB&I receives the case.

    3. LB&I must ensure there are at least 180 days remaining on the statute when Appeals receives the case from LB&I after consideration of new information or a new issue.

LB&I Process on Cases Returned From Appeals

  1. When Appeals releases jurisdiction of cases to LB&I, Appeals will update the case in IMS. The update will generate an e-mail to the case manager and team coordinator informing them that the case is being returned to the group. The appeals officer will complete Form 5402, Appeals Transmittal and Case Memo, and state that the taxpayer has provided Appeals with new information and the case is being returned to LB&I. The actual hardcopy case will be returned through Technical Services.

  2. Appeals will notify the taxpayer that the case will be returned to LB&I.

  3. As a reminder, Appeals may have secured a partial agreement for some issues prior to releasing jurisdiction to LB&I. Examiners will secure transcripts to see whether changes have been made to "tax as previously adjusted."

LB&I Case Resolution and Closing Procedures Following Appeals Case Return

  1. If there are changes to the proposed tax and the taxpayer still does not agree, the examination team will take the following actions:

    1. If appropriate, solicit a new AOF. See IRM, Written Acknowledgment of the Facts (AOF).

    2. Attempt to come to an agreement on the facts and document facts that remain in dispute.

    3. Follow IRM, Corrected Reports.

    4. Prepare a revised 4549-A.

    5. Prepare an update to the NOPA. Both the government’s and taxpayer’s positions with respect to the new information should be addressed.

    6. A new 30-Day Letter will be issued if there is an increase to tax, subject to the provisions of IRM

    7. A new 30-Day Letter will not be issued if there is a decrease to tax.

    8. Review the protest for adequacy and prepare update to the rebuttal as necessary.

    9. The examination team should highlight any pertinent changes to the RAR and the efforts made to reach an agreement in its report transmittal to Appeals.

    10. Close the case through SB/SE Technical Services to Appeals as usual.

  2. If there is no change to the previous determination and the taxpayer still does not agree:

    1. If appropriate, solicit a new AOF. See IRM

    2. Attempt to come to an agreement on the facts and document facts that remain in dispute.

    3. Prepare an update to the NOPA. Both the government’s and taxpayer’s positions with respect to the new information should be addressed.

    4. A new RAR or 30-day Letter is not issued.

    5. Timely review the protest for adequacy and timely prepare an update to rebuttal as necessary.

    6. The examination team will highlight efforts to reach an agreement in its report transmittal to Appeals.

    7. Close the case through SB/SE Technical Services to Appeals as usual.

  3. If the taxpayer now agrees, obtain the taxpayer’s signature on the RAR (revised for changes to government’s position, if necessary) and close the case to CCP as usual.

Appeals Request for LB&I Review and Comment

  1. Under IRM, Appeals will retain the jurisdiction of the case and provide LB&I with an opportunity to review and comment on the new information if:

    1. The taxpayer provides information in response to a question or request from Appeals to clarify or corroborate information contained or referenced in the RAR, protest or rebuttal, or

    2. The taxpayer makes a new argument and this new argument does not include new information.

  2. The Appeals Team Manager will send the information package along with all supporting information to LB&I. At least 45 days will be allowed for LB&I to comment and prepare a written review (subject to ex parte requirements). Appeals may grant an extension of time if mutually agreed.

Post-Settlement Conference

  1. The purpose of the post-closing conference with Appeals is to discuss the settlement reached and its subsequent impact on the taxpayer. The conference is intended to supply the examination team with information that may be helpful in subsequent examinations of the taxpayer and to assist in identifying those issues that may be resolved by the application of issue resolution tools.


    The discussion between Appeals and LB&I is limited to closed years only. Matters pertaining to open years should not be discussed.

  2. A post-closing conference will be held on all cases after the final disposition by Appeals unless an exception is agreed by LB&I and Appeals. Division Counsel will be invited to attend this conference for all docketed cases. Division Counsel may attend these meetings in non-docketed cases at the request of either LB&I or Appeals. However, the conference can be waived if both Appeals and LB&I agree it is not necessary.

  3. This conference is neither intended to be a critique of the settlement nor is it intended to replace LB&I’s dissent procedures. It is solely intended to communicate the resolution of the case to the examination team. For more detailed information, see IRM, Evaluation of Team Members’ Performance.

Direct Examination Time for Conference Procedures

  1. The team members will use Activity Code 598, Pre/Post- Appeals Conferences, to charge time for these meetings.

Dissent Procedures for Disagreements with Appeals Determinations

  1. This section provides formal procedures for LB&I to voice their concerns about an Appeals settled case. These procedures are not intended to replace any informal procedures currently in use at the local level. Local management in LB&I and Appeals should continue to address and resolve disagreements over case resolutions at the lowest possible level. These formal procedures are to be used when the informal process results in LB&I still having unresolved significant concerns about the Appeals disposition of an issue(s). See IRM, Disagreements With Appeals Determinations, and IRM 8.6.4, Conference and Settlement Practices, Reaching Settlement and Securing an Appeals Agreement Form, Disagreements to Appeals Determinations.

Assessment of Issue Team Member's Performance

  1. At the conclusion of each LB&I case, the case manager or the issue manager will consider whether written feedback regarding the issue team members’ work should be submitted to the employee’s manager.

Performance Assessment

  1. A case or issue manager should provide feedback on any team member that is part of their issue team, even if the team member is not their employee. The issue manager or the case manager’s assessment is not intended to substitute for the overall performance assessment. It is one of the factors that can be considered in the total evaluation prepared by the employee’s manager.

  2. Written feedback should reflect not only how well the team member performed, but what he or she contributed to the examination.

  3. Case and/or issue managers may ask for feedback from team coordinators about the work performed by issue team members.

Post-Examination Management Critique

  1. A critique of the completed cycle should be performed to gather recommendations or suggestions for improving case efficiency, communication and collaboration.

  2. The case manager may perform a critique of the completed cycle through a collaborative meeting or through multiple meetings. The critique should be held during the final stages of the examination or within thirty days after the case is closed from the field. Critiques should be held even when there are overlapping examinations.

Post-Examination Critique Objectives

  1. In a post-examination critique, LB&I will seek opportunities to improve the quality and efficiency of the examination process. This can be accomplished by:

    1. Discussing issue exit strategies

    2. Assessing the effectiveness of the examination

    3. Developing recommendations for improving subsequent examinations

    4. Evaluating how the issue-based process and collaboration worked, and what opportunities exist for improving tax administration with this taxpayer

    5. Evaluating opportunities to improve the effectiveness of the issue-based process and the contribution of each participant

    6. Evaluating the effectiveness of the computer programs used during the examination

Critique with the Examination Team

  1. Depending on the type of examination plan used, the critique details should be addressed in the communication section.

  2. The transfer of knowledge can be facilitated if each issue team member maintains summaries of topics and related background material to be used in preparation for the post-examination critique. Contemporaneous updating of this information throughout the examination should be helpful in improving the efficiency and effectiveness such as:

    1. Recommendations for issue development


      Certain probes, accounts or audit procedures can be eliminated or expanded

    2. Identification of special computer programs that should be employed and any additional records that will be needed

    3. Recommendations regarding time requirements

    4. Identification of potential issues based on information obtained during the current examination

    5. Suggestions of adjustments to the scope or depth of the examination

    6. Identification of resources such as specialists, subject matter experts, Counsel, and outside experts that may be needed in the development of issues in subsequent cycles

  3. If a new cycle is to be opened on the same taxpayer, combining the post-examination critique meeting with the next cycle’s opening conference may be a useful technique. The similarities in the objectives of the two meetings make the critique an important source of information for the next cycle’s issue team members. Where applicable, consideration should be given to combining the two meetings or portions of the meetings, whether or not the same case manager is assigned to the subsequent examination.

Scope of Critique

  1. The case manager, issue manager(s) and issue team members should keep in mind that the primary objective for conducting the critique is to evaluate opportunities to improve future examinations. The recent examination must be thoroughly evaluated with emphasis on how subsequent examinations, if warranted, can be improved. Some of the more important topics to be discussed during the critique are listed below:

    1. Assessment as to whether the examination results were commensurate with the time spent.

    2. Determination as to whether the examination procedures were effective and efficient. This appraisal should be sufficiently detailed to provide the case manager and/or issue manager(s) of the subsequent examination a basis for adopting new examination techniques and planning new specialized computer programs.

    3. Assessment as to whether the examination plan effectively monitored and controlled the examination; provided adequate guidelines to issue team members; facilitated a more orderly examination; and, adequately served as a vehicle for coordination.

    4. Assessment of issue team member interactions. This discussion should be approached from the standpoint of identifying corrective actions that the next case manager and issue manager(s) can take in solving or avoiding problem areas.

    5. Assessment of the adequacy of the team’s compliance with the IDR management process.

    6. Assessment of the effectiveness of the assistance or support participation. If there was no assistance or support, consideration should be given to whether the examination team should provide for support participation. This discussion should involve: 1) analysis of time vs. results; 2) the need for improved communication, cooperation or commitment; and 3) expected or resulting benefits of support group participation.

    7. Estimation of the time needed to complete the next examination. This subject is best left until the end of the current cycle since some of the discussions and resulting recommendations will involve expenditures of more or less time than spent on the completed examination. The case manager and issue managers will need this estimate for advance planning and program planning purposes.

    8. Assessment as to whether all agreed and unagreed issues were adequately documented.

    9. Determination as to whether workpapers were adequately prepared during issue development and whether the issues in the RAR were adequately explained.

    10. Assessment as to whether the issues were timely resolved during the audit using appropriate expertise.

  2. Potential offset issues should be considered, critiqued and documented by examiners in the event that claims are subsequently filed by the taxpayer.

Post-Examination Critique with the Taxpayer

  1. A joint critique of the exam process may provide a valuable opportunity to improve future case processes, collaboration and cooperation with the taxpayer.

  2. The post examination critique with the taxpayer can be held separately from the critique with the examination team.

  3. A list of items to discuss during the critique with the taxpayer is contained in Exhibit 4.46.5-1, Sample Agenda for Post-Examination Critique. Items to be discussed in the critique should be given to the taxpayer at the opening conference. The taxpayer should be encouraged to maintain critique notes during the examination.

  4. The taxpayer should be advised that the case will be part of an examination survey conducted by an outside contractor for LB&I. All responses are confidential and intended to assist LB&I in improving customer satisfaction.

Documentation and Disposal of Post-Examination Critique

  1. A written report is required for each case and will be prepared by the case manager after the post-examination critique. The report will, at a minimum, include:

    1. The subjects discussed

    2. The conclusions reached

    3. Recommendations and instructions to the next team

    4. Identification of agreed recurring issues (these must be discussed with the taxpayer)

    5. Taxpayer's recommendations and comments

    6. Identification of the critique meeting participants

  2. The case manager will retain the critique report in the planning files for use by the subsequent case manager unless other specific guidance on the disposition of critiques has been issued.

Sample Agenda for Post-Examination Critique

Agenda Topics
1 Information Document Request (IDR) Form 4564:
a. Prioritization
b. Clarity
c. Timeliness -- issuance and responses
d. Appropriate scope
2 Notice of Proposed Adjustment -- Form 5701:
a. Clarity
b. Discussion and resolution of issues
c. Timeliness -- issuance and responses
d. Agreement on facts
e. Accelerated issue resolution
3 Progress Meetings:
a. Frequency
b. Content - address problems and concerns
4 Issue Team:
a. Scheduling
b. Discussion of issues
c. Subject Matter Expert
5 Assistance or support examinations:
a. Timeliness
b. Scope and depth
c. Taxpayer support
6 Data processing:
a. Effectiveness of techniques
b. Access/resources
7 Accommodations:
a. Space and equipment
b. On-Site visitations
8 One-stop Service
9 Issue Team Assignment:
a. Rotation of personnel
b. Team expansion/contraction
c. Diversion of personnel
10 Scheduling/responsibility:
a. Peak period coordination
b. Rollover computations
c. Interviews of corporate officials
d. Cycle size-projected