4.52.1 Global High Wealth Industry Processes and Procedures

Manual Transmittal

August 12, 2013

Purpose

(1) This transmits new IRM 4.52.1, Global High Wealth Industry, Global High Wealth Industry Processes and Procedures.

Material Changes

(1) This is a new IRM section outlining the Global High Wealth (GHW) industry and processes unique to the industry.

Effect on Other Documents

None

Audience

GHW employees in LB&I

Effective Date

(08-12-2013)

Tamera Ripperda
Director, Global High Wealth Industry
Large Business and International Division

Overview

  1. This section provides an introduction to the Global High Wealth (GHW) industry and processes used by GHW. GHW was formed to take a holistic approach in addressing the high wealth taxpayer population; to look at the complete financial picture of high wealth individuals and the enterprises they control. A GHW Enterprise Case consists of a key case, generally an individual income tax return, and related income tax returns where the individual has a controlling interest and significant compliance risk is deemed to exist. Controlling interest can include significant ownership of and/or significant influence over an entity or multiple entities within the enterprise. The enterprise case may include interests in partnerships, trusts, subchapter S corporations, C corporations, private foundations, gifts, and the like. GHW consists of two functions, Workload Services (WLS) and the field examination groups.

Population Identification

  1. The Global High Wealth Industry is responsible for individuals with assets or earnings of tens of millions of dollars. In accordance with IRM 4.1.21.2.2, LB&I Planning, Analysis, Inventory and Research (PAIR) has primary responsibility for overall coordination of the Annual Exam Plan and workload identification.

  2. PAIR provides GHW with an initial listing of the high wealth taxpayer population. GHW WLS then utilizes mathematical computations to determine the examination potential of high wealth individual taxpayers. These computations were developed from available Compliance Data Warehouse (CDW) data and are used to preliminarily assess the level of compliance risk on filed returns. The returns with the highest risk indicators, determined in consultation with PAIR, are further risk assessed by WLS and potentially selected for GHW examination.

Perform Detailed Risk Assessment and Case Building

  1. Workload services conducts a detailed risk assessment process consisting of researching taxpayer forms and related data, identifying particular issues, observing trends, and consulting with industry specialists. Risk assessment includes preparation and review of a YK-1 analysis for each taxpayer to gain an understanding of the taxpayer enterprise (Form 1040 and all related entities). During the risk assessment, large, unusual, or questionable items (LUQs) are noted by WLS for consideration by field agents for all entities in the enterprise that are determined to pose a risk of noncompliance. Related entities considered to be high risk are identified for inclusion in the case building package.

  2. Upon conducting a complete risk assessment, WLS risk assessors determine whether the case will be included in inventory available for assignment. WLS personnel build enterprise case files for delivery to the field with all related returns to be examined and other tax-relevant materials.

  3. Once an enterprise case is assigned, a virtual case team folder is established on a secure shared drive for additional case-building, exam workpapers, and examination-related materials. GHW enterprise cases may consist of one or more of the following forms.

    Form 1040 Individual Tax Return
    Form 1065 Return of Partnership Income
    Form 1120 Corporation Income Tax Return
    Form 1120S Small Business Corporation Income Tax Return
    Form 1041 Fiduciary Income Tax Return (for Estates and Trusts)
    Form 990 Return of Organization Exempt from Income Tax
    Form 990PF Return of Private Foundation
    Form 990T Exempt Organization Business Income Tax Return
    Form 706 Estate Tax Return
    Form 709 Gift Tax Return

  4. WLS uses a Microsoft Access database to monitor GHW inventory available for assignment. WLS establishes AIMS controls on all selected returns using the following codes –

    Name Code Description
    Source Code (SC) 20 Key case Initial Year
    40 Key Cases Subsequent or prior year
    50 Related Entity
    Primary Business Code (PBC) 307 Identifies the primary level of responsibility for the account
    Secondary Business Code (SBC) 87700 Identifies the secondary level of responsibility for the account
    Employee Group Code (EGC) 1025 GHW — No return secured
    1026 GHW — return secured
    Project Code 1048 GHW Industry
    Tracking Code 6205 Cases selected to be sent to the field

Additional Work Sources

  1. In addition to the high-risk individuals identified by PAIR, additional work sources are utilized to supplement inventory and balance coverage of the GHW population.

    • Referrals: GHW receives referrals from the field and other business units by way of a referral form located on GHW Web page. Once it is determined that a referral may be appropriate for GHW, the enterprise is subjected to the risk assessment process described above on the GHW shared drive (see IRM 4.52.1.7 below). Referrals that are not accepted by GHW are forwarded to the appropriate Planning and Special Programs (PSP) office or back to the exam group that made the referral, as appropriate.

    • Whistleblower Claims: GHW receives whistleblower claims from the Whistleblower Office and works these claims in accordance with established Service-wide policy. See IRM 25.2.2, Whistleblower Awards for specific procedures on how to address Whistleblower Claims.

    • Issue driven: WLS may identify issues of significant impact to the GHW population that warrant screening for all taxpayers within this population. These issues can be identified from the WLS team, GHW field examinations, and/or networking interactions with specialists in technical areas such as international compliance. As issues are identified, further research and analysis are undertaken to determine whether the scope of the issue is significant in the GHW population, at which time a Compliance Initiative Project (CIP) will be considered.

Workload Services Remote Examination Support

  1. GHW field agents are often located in different Posts of Duty across the country. This creates a need for WLS to provide various support services so the field can work GHW cases efficiently and effectively. This section provides guidance on the various examination support services provided by WLS.

Requesting Subsequent Year and Additional Related Entity Returns

  1. All requests for prior year, subsequent year, and related returns will be sent to WLS to be filled.

  2. All requests will be submitted by the field team manager via E-mail to the risk assessor assigned to the respective territory. The team manager will provide WLS with the following information:

    • Related Entity Name

    • Taxpayer Identification Number (TIN)

    • Master File Transaction (MFT) code

    • Year(s)

    • Keycase Information

    All requests for returns will be updated to the team’s Employee Group Code (EGC) on AIMS once the return has been received and placed in the appropriate team folder.

Information Document Requests (IDR) Responses

  1. All information and documents received in response to Information Document Requests (IDR’s) issued by the examiner will be sent to the WLS unit to be Bates numbered and scanned (if needed).

    • All documents must be in PDF format in order to be Bates numbered.

    • WLS will convert all documents to PDF, with the exception of Excel spreadsheets, and make the PDF files text searchable.

    • WLS will save the original documents of any files that are converted and will purge them in accordance with established record retention policy. WLS will Bates number and scan (if needed) the entire IDR response. The IDR response will then be placed in the taxpayer “IDR Response Utah” electronic folder within five business days from the date WLS receives the IDR response. Note: If the IDR response is too voluminous to Bates number and scan within five business days, WLS will notify the revenue agent.

  2. WLS will create a case organizer for each Keycase and related entity. The case organizer will contain the following:

    1. Name of the IDR response

    2. Hyperlink for each response

    3. Date received

    4. Who prepared the IDR response


  3. All IDR responses received should be processed in the following manner:
    IDR Responses Delivered via Mail – Paper Copy
    • If the IDR response is delivered via mail, the IDR response should be mailed directly to the following address:

    Internal Revenue Service
    Attn: Global High Wealth WLS (Applicable Risk Analyst/Territory)
    324 25th Street Room 6025
    Ogden, UT 8440

  4. If the IDR response is received by mail, the revenue agent will send the original IDR response including the original envelope to WLS within two days. The revenue agent will provide WLS with the following information:

    1. The date the IDR response was received

    2. Who prepared the IDR response (taxpayer, POA, etc.)

    3. The IDR name

    4. The taxpayer name and TIN

    5. Password information, if applicable

    WLS will notify the revenue agent via E-mail when the Bates numbering and scanning have been completed. WLS will store and maintain original IDR responses in accordance with established record retention policy.

  5. IDR Responses – E-mailed Document
    If the IDR response is delivered via E-mail to the revenue agent, the revenue agent will forward the original E-mail to the IDR response E-mail box at *LB&I Global High Wealth WLS. The revenue agent will provide WLS with the following information:

    1. The date the IDR response was received

    2. Who prepared the IDR response (taxpayer, POA, etc.)

    3. The IDR name

    4. The taxpayer name and TIN

    5. Password information, if applicable

    WLS will notify the revenue agent by E-mail when the Bates numbering has been completed.

  6. Additional Information

    • All IDR responses are Bates numbered and scanned in received date order. If an Excel spreadsheet is included in an IDR response, WLS will not scan or convert the document to a PDF. WLS will create a coversheet documenting that a spreadsheet was received and describe its contents. This coversheet will be converted into a PDF file, Bates numbered, and included in the IDR response file.

    • Additional documents other than IDR responses (e.g. Summons, Powers of Attorney) requiring Bates numbering and/or scanning should be coordinated with the appropriate WLS risk analyst using similar procedures outlined for the IDR responses, notating to WLS the location of where the documents should be placed on the shared drive.

The Tax Equity Fiscal Responsibility Act of 1982 (TEFRA)

  1. Many GHW cases include partnership and other flow-through entities subject to the Tax Equity Fiscal Responsibility Act (TEFRA). GHW established a liaison position in WLS to support GHW field examination groups in navigating TEFRA and meeting their responsibilities regarding TEFRA.

  2. The TEFRA liaison is tasked with identifying and bridging gaps between GHW and its internal customers, including campus and Technical Services units. Through the implementation of a liaison position, GHW is able to ensure that TEFRA and other complex casework is addressed in an effective and consistent manner.

Critical Information Relating to GHW TEFRA Examinations:

  1. IRM 4.31 provides the processes and requirements for working a TEFRA examination.

  2. IRM 4.31.1, Pass-Through Entity Handbook, provides a general overview, TEFRA terminology, and details the core responsibilities of various positions held within the field and the campus.

  3. IRM 4.31.2, Pass-Through Entity Handbook, TEFRA Examinations-Field Office Procedures, explains the field TEFRA procedures necessary for working a TEFRA key case entity and the related investors. The procedures include how to identify a TEFRA entity, its TMP, and the TEFRA statute, as well as the notices required to be sent to TEFRA partnerships and investors. The duties of the field Coordinator are also outlined.

  4. In addition to these critical TEFRA procedures, one TEFRA requirement that is unique to GHW is: If there are less than 425 days (but at least 12 months) remaining on the TEFRA key case statute of limitations, approval from the GHW Territory Manager is required to start an examination of the key case .

GHW Shared Drive

  1. The GHW shared drive gives GHW examiners, managers, exam technicians, and other staff the ability to share information and documentation among team members. The shared drive also permits sharing of case information with other functions such as field specialists, technical specialists, and counsel.

    • The shared drive includes a main Global folder.

    • Within the main “Global” folder, there are separate team folders for each GHW team to maintain their unassigned and started cases. Within each team folder there are subfolders for each taxpayer and other team resources.

    • Also within the Global folder, there is a folder named “Common” which includes job aids, documents, and information relevant to all GHW teams. The job aids include instruction on how to establish the enterprise cases, naming convention and folder creation, which must be followed on all enterprises cases that are set up on the shared drive.

Gaining Access to the Shared Drive

  1. When access is needed to the shared drive, follow the procedures below:

    • When access is needed to the shared drive for GHW team members, the GHW team manager will request access through WLS.

    • When access is needed for others such as field specialists, technical specialists, or counsel, the team coordinator will request access through WLS.

    • Although employees who have been granted access will be able to access the entire team folder, there is an understanding that access is only being authorized to the case folder and its contents for the assigned taxpayer. Established unauthorized access (UNAX) restrictions apply.

Monitoring Access to the Shared Drive

  1. At least quarterly, the WLS manager will review the access list for the shared drive and verify the access is still needed. If any access is no longer needed the WLS manager will terminate the access.

Field Case Closings

  1. The closing procedures for GHW enterprise cases have not been finalized. There is a field desk guide located in the GHW Toolkit containing draft procedures.

Record Retention

  1. (Reserved)

Enterprise Case Exam Plan Overview

  1. The purpose of this section is to provide guidelines for the development of the Enterprise Case Exam Plan for GHW cases. The Enterprise Case Exam Plan document is for official use only (OUO) and should not be sent to the taxpayer. The Enterprise Case Exam Plan is a compilation of a holistic approach to an examination of a taxpayer and the entities comprising his/her financial enterprise. These may represent various tax return filings, tax jurisdictions and filing periods, which have common ownership and/or control. The taxpayer and the various business entities are holistically risk assessed and an Enterprise Case Exam Plan is developed to consolidate the actions to be taken.

  2. This approach presents unique challenges in that the enterprise can have separate returns, separate statute dates, separate filing dates, separate representation and proportional ownership interest. A return exam plan is developed for each separate return that is placed under exam as a component of the enterprise exam.

  3. Hence, the Enterprise Case Exam Plan is an internal document, which consolidates all these separate return exam plans into one exam plan from an issue driven and resource perspective. It is constructed as a Microsoft Excel document that provides a roll up of each examined return within the enterprise and includes summaries of issues, time, and agents assigned for each return being examined. This document is for OUO purposes and is not to be disclosed or shared outside the IRS. These guidelines are provided to promote quality and consistency in the preparation of the Enterprise Case Exam Plan. The Enterprise Case Exam Plan is required for every GHW enterprise case.

  4. The Enterprise Case Exam Plan should be completed during the risk analysis stage of the examination, and should be prepared using the standardized spreadsheet format. The Enterprise Case Exam Plan must contain the following sections shown in Exhibit 4.52.1-1.

Enterprise Case Exam Plan

  1. Return Entity

    • The first return will be the Key Case of the enterprise (general rule is this will be the primary 1040).

    • Following the Key Case, all other related returns in status 12 should be listed. (Do not include returns that are inspected but not examined).

  2. Exam Plan

    • Section will include hyperlink to the individual/entity exam plan and risk analysis issued to the taxpayer.

    • GHW will follow current LB&I procedures in IRM 4.46.3.4 for the preparation and inclusion of the following forms:

    • 4764

    • 4764A

    • 4764B

    • Taxpayer copy of risk analysis

  3. SAIN Number

    • IMS SAIN number for the issue

  4. Issue

    • Description of the issue related to the corresponding SAIN number.

  5. Team Coordinator Comments/Notes:

    • Section should be used for comments of the Team Coordinator (TC) related to each issue listed.

  6. Agent Assigned

    • Revenue agent assigned to each issue.

  7. Potential (A= Highest)

    • The TC ratings of risk for the issue

    1. Required issues to be worked and Tier one issues.

    2. Other issues to be worked that can be dropped at the 50% review by TC or Manager.

    3. Issues to be worked only if A & B issues are completed by the 50% review.

  8. Est. Staff Days

    • Estimated staff days assigned by issue by agent. Total estimated staff days per the enterprise case exam plan must reconcile to total staff days reported in IMS. Estimated staff days will include both technical and administrative issues.

    • A summary reconciliation work paper will be used to reconcile exam plan time and IMS time.

  9. Discuss with Specialist

    • Name of the specialist assigned or consulted regarding the issue. If no specialist was assigned use N/A.

  10. Counsel/Technical Specialist Involvement

    • List any Counsel involvement and any technical specialist involvement during the exam.

  11. National Office Involvement

    • List any discussion with National Office and who was involved.

  12. Potential Adjustment

    • List the potential adjustment amount for each issue.

  13. 50% Yes or No

    • At the time of the 50% review, use this column to state if examination of the issue will continue.

  14. 50% Review Comments

    • Give a brief explanation of why examination of the issue will continue or will not be continued and provide the estimated amount of the potential adjustment if examination of the issue will be continued.

Enterprise Timeline Tab

  1. First Day Time Charged to Enterprise Case(s)

  2. Opening Conference with Taxpayer (30-60 days small enterprise exam, 60-90 large enterprise exam)

  3. Enterprise Exam Plan Submitted to TTM for Approval (NLT 120 Days)

  4. Mid-Cycle Risk Analysis

  5. Last Day to Issue IDR

    • Specialist

    • Domestic

  6. Last Day for TP to respond to IDR’s

    • Specialist

    • Domestic

  7. Last day to Issue Form 5701, Notice of Proposed Adjustment

    • Specialist

    • Domestic

  8. Submit Case to Joint Committee

  9. Issue Resolution (Fast Track, Early Referral to Appeals)

  10. Issue RAR/ 30-Day Letter (60 Day for TEFRA Partnership)

  11. Taxpayer Protest Due Team (if unagreed)

  12. Case Closed to Team Manager

  13. Case Closed to Status 80/90 (ECD)

Enterprise Examinations Approvals

  1. Enterprise Case Exam Plan Document.

    • Cases assigned to a senior team coordinator (STC) require team manager and territory manager approval (initial plan and 50% review).

    • Cases assigned to a non-STC, require team manager approval (initial plan and 50% review).

  2. Form 4764 (Examination Plan) must be prepared for each individual entity under exam and the team manager must approve all examination plans.

  3. Risk Analysis must be conducted on all enterprise cases and the team manager must approve all risk analyses.