4.70.7 Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures

Manual Transmittal

August 22, 2018

Purpose

(1) This transmits new IRM 4.70.7, TE/GE Examinations, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures.

Background

This manual section identifies SR’s responsibilities and the TEQMS procedures, for reviewing, measuring and reporting, on the quality of TE/GE examinations (exams).

Material Changes

(1) This new manual consolidates and replaces the procedures previously presented in:

  1. IRM 4.71.15, Employee Plans Examination of Returns, EP Special Review,

  2. IRM 4.75.18, Exempt Organizations Examination Procedures, Special Review,

  3. IRM 4.75.26, Exempt Organizations Examination Procedures, TEQMS,

  4. IRM 4.90.8, Federal State and Local Governments, Examination Quality Measurement Standards, and

  5. IRM 4.81.10, Tax Exempt Bonds (TEB) Examination Program and Procedures, Quality Review

(2) The SR groups were moved from the specific function Examination groups to the Government Entities (GE) Shared Services (SS), Compliance, Planning and Classification (CP&C) function.

(3) Unless otherwise specified, the SR procedures in this IRM apply to the review of all TE/GE examinations.

(4) The redesigned TEQMS measures, elements and reason codes described in the TEQMS User Guide (TUG) are the basis for evaluating all TE/GE exams.

(5) All earlier applicable SR and TEQMS IRMs were captured, reorganized and renumbered in this IRM section.

Effect on Other Documents

This IRM obsoletes the function specific guidance in the following IRMs:
IRM 4.71.15, Employee Plans Examination of Returns, EP Special Review,
IRM 4.75.18, Exempt Organizations Examination Procedures, Special Review,
IRM 4.75.26, Exempt Organizations Examination Procedures, TEQMS,
IRM 4.90.8, Federal State and Local Governments, Examination Quality Measurement Standards, and
IRM 4.81.10, Tax Exempt Bonds (TEB) Examination Program and Procedures, Quality Review.

Audience

Tax Exempt and Government Entities

Effective Date

(08-22-2018)

Steven M. Martin
Director
Compliance, Planning and Classification
Government Entities and Shared Services
Tax Exempt and Government Entities

Program Purpose and Authority

  1. Purpose: IRM 4.70.7 identifies SR’s responsibilities and TEQMS procedures, for reviewing, measuring and reporting on the quality of TE/GE exams. SR will:

    1. Apply TEQMS to their review of closed exams (status 20, 51 or 90) selected for review.

    2. Offer suggestions to improve the quality in TE/GE exams.

    3. Report the organizational scores.

    4. Analyze and prepare an error trends report for each function.

  2. Audience: This IRM gives procedural guidance for TE/GE employees in SR.

  3. Stakeholders: TE/GE Examination and Closing Unit functions.

  4. Program Owner: Director, Compliance, Planning & Classification

  5. Program Authority: Treasury Regulation Part 801, Balanced Measurement System for Measuring Organizational and Employee Performance, put in place the IRS Balanced Measurement System. This system supports the IRS’s overall mission by:

    1. Assessing organizational performance through key measures

    2. Scoring cases numerically for quality

Background

  1. Treasury Regulation Part 801 mandates certain quality measures for TE/GE exams. TE/GE Shared Services:

    1. Created the CP&C function in May 2017.

    2. Moved EP and EO Special Review groups, under the former Examination Planning and Review unit in the respective Exam functions to CP&C.

    3. Gave CP&C, SS, SR the responsibility to review and report case quality for all TE/GE exams.

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    BMF Business Master File
    CP&C Compliance, Planning and Classification
    DCI Data Collection Instrument
    EP Employee Plans
    EPMF Employee Plans Master File
    EO Exempt Organizations
    GE Government Entities
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IRM Internal Revenue Manual
    IRS Internal Revenue Service
    MFT Master File Tax Account
    MR Mandatory Review
    NMF Non-Master File
    POD Post of Duty
    RCCMS Reporting Compliance Case Management System
    SR Special Review
    SS Shared Services
    TE/GE Tax Exempt & Government Entities
    TEQMS Tax Exempt Quality Measurement System
    TIN Taxpayer Identification Number
    TUG TEQMS User Guide
    WebETS Web-based Employee Technical time System

     

    Forms

    Form Name
    Form 886-A Explanation of Items
    Form 3198-A TE/GE Special Handling Notice
    Form 5456 Reviewer’s Memorandum – EP/EO
    Form 5457 Response to Reviewer’s Memorandum – EP/EO
    Form 5595 TE/GE Update
    Form 5599 TE/GE Examined Closing Record
    Form 5650 EP Examined Closing Record

     

Program Overview

  1. TEQMS measures the quality of TE/GE Examinations and offers ratings and comments at the national level.

  2. TEQMS has three quality measures:

    1. Proper Identification, Development and Resolution of Issues

    2. Taxpayer Communication (Internal & External)

    3. Timeliness

  3. Each quality measure evaluates elements essential to an exam. Elements are:

    1. Individually rated (20 total).

    2. Written as questions for the specific measure.

    3. Coded with specific reason codes (quality priorities) for the reviewers to consider when rating an element, NO.

  4. The reviewer:

    1. Evaluates the managerial, technical and procedural actions taken in the exam case.

    2. Rates each element YES, NO or N/A according to the instructions in the function specific appendices of the TUG.

    3. Uses his/her professional judgment when rating each element.

  5. Reviewers, group managers and examiners, should reference the TUG for their specific business function for a complete list of:

    1. Elements

    2. Reason codes

    3. Explanations

    4. Examples

Program Responsibilities and Benefits

  1. SR evaluates exam cases and reports TEQMS results.

  2. SR alerts management of areas that need attention and recommends quality improvements.

  3. SR duties are to:

    1. Review randomly selected, closed exam cases for quality.

    2. Compile and analyze quality review results.

    3. Give U.S. statistical and error trends analysis to managers, and examiners through the area managers.

    4. Identify quality improvement opportunities.

    5. Train new reviewers.

    6. Participate in consistency reviews.

    7. Communicate with employees via reports and presentations.

  4. SR expects the following benefits from exam quality review reporting:

    1. Obtain data to give quality management reports and address improvement opportunities.

    2. Increase consistency in exams.

    3. Identify possible training or continuing professional education needs.

Staffing

  1. Reviewers in SR should be experienced and highly competent employees who:

    1. Have a comprehensive knowledge of accounting and auditing principles and superior skill in interpreting and applying tax laws, regulations, and court decisions.

    2. Know the exam IRM’s policies and procedures for the function specific cases.

    3. Can do managerial case reviews.

    4. Have a fair and impartial attitude.

    5. Merit the highest respect and cooperation of other employees.

    6. Assume responsibility and act positively.

    7. Communicate ideas and opinions clearly, tactfully and objectively.

    8. Apply good judgment.

    9. Exercise individual initiative.

  2. Applicants may be selected for an SR reviewer detail as follows:

    1. Full time, 3-year assignment (may be extended to meet workload demands).

    2. Full time, 90-day or longer assignment (to handle sudden increases in workload).

    3. Collateral Duty Reviewer assignment, not to exceed 25% of the examiner’s time during a one to three-year period.

TEQMS Case Selection

  1. SR only reviews closed examinations. They don’t review surveyed cases.

  2. The Reporting Compliance Case Management System (RCCMS) samples and selects TEQMS cases for each function by: MFT, activity codes, disposal codes and project codes.

  3. Mandatory Review (MR) cases are part of the TEQMS sample universe. SR coordinates with MR, gets TEQMS selected cases that are in MR (such as, unagreed cases in status 20) reviews the case and then returns it to MR.

  4. All taxpayer returns, related returns and prior/subsequent year returns count as one review case.

  5. SR determines the number of cases selected for review by multiplying an annual selection rate to the anticipated number of RCCMS case closures.

  6. Exam cases are sampled for review selection when the exam group closes them to status 20, 51 or 90 on RCCMS.

  7. The TE/GE Closing Unit processes the selected closed cases and sends the paper file, if any to SR. RCCMS automatically transfers the electronic case file to SR upon closure.

Review Procedures

  1. SR conducts exam reviews using the guidance in the TUG.

  2. SR embedded the Data Collection Instrument (DCI) in RCCMS. Reviewers answer DCI questions on each sampled case. The DCI automatically populates the taxpayer information for the key/primary case, the reviewer’s name and time applied, the evaluative elements and four non-measured questions. See the TUG for specific instructions for completing the DCI.

  3. After completing the DCI, the reviewer transfers the electronic RCCMS case to the SR manager and returns the paper file, if any, to the Closing Unit.

Program Controls

  1. The annual sample size is statistically valid, although it has a reasonable margin of error.

  2. The SR manager reviews the reviewer’s work.

  3. SR does consistency reviews to ensure that reviewers are consistent in the way they evaluate cases.

    1. Each reviewer reviews the same case.

    2. The SR group compares and discusses the reviewed case.

    3. The SR group discusses discrepancies in their TEQMS ratings and agrees on the final rating.

    4. The SR manager or reviewer takes minutes to record the rationale used to evaluate and rate the case based on its specific set of facts and circumstances. SR considers the minutes when updating the TUG.

  4. SR runs RCCMS case selection reports and tests them to ensure the RCCMS algorithm has captured the complete and appropriate population.

  5. SR tests and validates the DCI and TEQMS reports when changes are made to the RCCMS TEQMS algorithm or the DCI.

  6. The SR manager reviews and approves TEQMS reports and case returns.

Case Return Criteria

  1. SR may reopen and return cases they review to the group if:

    1. There is clear evidence that an incorrect determination was reached about qualification. SR doesn’t return an underdeveloped case unless there is clear evidence that a qualification issue exists.

    2. There is a clearly defined material error based on an established IRS position at the time of the exam.

      Note:

      "Clearly defined" means the error is clearly apparent as opposed to being vague or uncertain. "Material" refers to the dollar amount of tax that IRS would assess if the case was returned (regardless of the number of years involved). Any proposed change should involve net additional tax of at least $10,000. Don’t include penalties and interest when calculating the $10,000. SR may return a case without an exact dollar amount if the anticipated deficiency appears to meet the dollar return criteria.

    3. There is evidence of taxpayer or representative fraud, malfeasance, collusion, concealment or misrepresentation that the examiner didn’t address.

    4. The case can’t be processed (for example, needs AIMS establishment).

    5. The adjustment is favorable to the taxpayer and SR staff can’t readily correct the report.

    6. The error will likely result in serious criticism of the IRS’s administration of the tax laws.

    7. The error will likely establish a precedent that would seriously hamper subsequent IRS attempts to take corrective action.

    8. The error will likely result in inconsistent treatment of similarly situated taxpayers.

  2. The SR manager may, at his/her discretion, return related and any prior/subsequent year returns in RCCMS associated with a returned TEQMS case considering:

    1. Whether the separating of related return(s) would complicate case closure.

    2. Whether a return in the file has a statute of limitation date which will expire within one year.

    3. Which year(s) were affected by the failure(s) that warrants the case return.

    4. Whether the failure(s) were corrected per a closing agreement.

    5. The area and group manager’s input.

  3. The SR manager keeps a log of cases returned to the exam groups.

Special Review Procedures for Returned Cases

  1. Reviewer: After reviewing the case per the TUG, determine whether the case meets the return case criteria in IRM 4.70.7.5, Case Return Criteria.

  2. If you determine the case meets the return case criteria:

    1. Prepare a summary and discuss it with the SR manager for concurrence.

    2. The SR manager will ask the Issue ID and Review manager to approve sending the case summary to the director and the area manager for their agreement to reopen the exam.

    3. If approved, the reviewer prepares Form 5456 (or similar form) to the examiner who worked the case. See IRM 4.70.7.5.1.1, Completion of Form 5456, for instructions.

    4. Prepare Form 886-A detailing the reasons you’re returning the case. Explain the facts, law conclusion, and the reviewer’s position.

    5. Include, Forms 5456 and 886-A in the case file.

    6. The SR manager contacts the director or area manager of the exam group that conducted the exam to discuss the case return process.

    7. If the case is still on AIMS, the reviewer prepares Form 5595 (or similar form) to reopen the exam and updates the case status on AIMS. See IRM 4.70.7.5.1.2, instructions for completing Form 5595.

    8. SR emails Form 5595 to the TE/GE AIMS coordinator for input.

      Note:

      The TE/GE AIMS coordinator can’t reopen cases per AIMS programming until after 40 days but not beyond six months of the status 90 date.

    9. The TE/GE AIMS coordinator processes Form 5595 ( or similar form)and updates the case to the applicable AIMS status code and gives the SR manager an IDRS AMDISA print to show the update. The SR manager adds the AMDISA to the RCCMS case file.

    10. The SR manager will update the case to the applicable RCCMS status code, and transfers the case in RCCMS to the group. (The case stays in the updated (reopened) status until closed from the group).

    11. The SR manager mails the paper case file, if any, to the manager of the group that conducted the exam.

Instructions for Completing Form 5456
  1. Complete Form 5456 as follows:

    1. Check advisory, correction, or inquiry

    2. Box 1: insert the group number after the group manager salutation

    3. Box 2: identify the last agent to work the case

    4. Box 3: enter the date of completion of the memo

    5. Box 4: indicate whether the case has a short statute

    6. Box 5: list the name, form, EIN, and plan name and number (EP only)

    7. Box 6: enter the year, use hyphens if multiple periods

    8. Box 7: check examination

    9. Box 8: check sample review

    10. Box 9: check applicable box

    11. Box 10: enter date and initials if indicating an error in the agent’s computations, if applicable

    12. Box 11: enter the pages of the agent’s report that have computation errors, if applicable

    13. Box 12: write the text of the memo indicating why the case is returned and indicate that the detailed explanation is on the attached Form 886-A, Explanation of Items.

    14. Box 13: electronically sign (e-sign) the memo (on all pages) after completing the remaining boxes

    15. Box 14: leave blank

    16. Box 15: check the type of error

    17. Box 16: check the specific error, if applicable

Instructions for Completing Form 5595
  1. Complete Form 5595 as follows:

    1. Line 1 (P1-6) – Check the box "CC AMSTU" . Insert definer "R" .

    2. Line 8 Originator – reviewer signs.

    3. Line 9 Approved by – SR manager (or designee) signs.

      Note:

      The form can be electronically signed.

    4. In the numbered boxes, beginning with Box 00, include the following information for all accounts which need to be reopened: the taxpayer’s name, taxpayer identification number (TIN), MFT, tax period, name control, and status code. Input different TIN types separately. Complete a separate Form 5595 for each EPMF, IMF, BMF, and NMF account

    5. If there is a Plan/Report Number (For EP Enter the plan number for both MFT 74 and MFT 76 accounts).

Group Procedures for Returned Cases

  1. Group: When you receive a returned case:

    1. Control the case on AIMS, RCCMS and the examiner’s WebETS report.

    2. If the AIMS account was not reopened, contact classification to get the return properly re-established.

    3. Control the case’s statute of limitations.

  2. Examiner: Reopening the case

    1. Issue a re-examination letter to the taxpayer with your director’s signature. See Exhibit 4.70.7-1, TE/GE Letter for Exam Reconsideration, for an example of the re-examination letter.

    2. Include a Form 886-A or similar attachment with the re-examination letter to explain: why the case is being re-examined, what issues the taxpayer must address, and what actions the taxpayer must take.

    3. Monitor and extend the statute of limitations, as applicable.

  3. Examiner: When you’re ready to re-close the case:

    1. Prepare Form 5457 (or similar form) detailing the resolution and correction of the reviewer’s issues and/or any other response.

    2. Keep Forms 5456 and 886-A in the case file.

    3. Include a copy of Form 5457 in the paper case file and in the RCCMS Office Documents folder.

    4. Update the closing record in RCCMS.

    5. Prepare a revised Form 5650 or Form 5599 (as/if applicable) for each re-closed return, that includes the total time charged (original exam time plus additional). Revise other input items in the closing record as necessary.

    6. Prepare Form 3198-A (in RCCMS and paper file) indicating "Reopened Case and Response to Reviewer’s Memorandum."

    7. Comment in the RCCMS closing record to send both the electronic file and the paper file, if any, to SR.

  4. Examiner: Prepare a revised closing letter if you contacted the taxpayer or representative and/or if previously issued closing letter conclusions changed:

    1. Clearly indicate on the revised closing letter that it supersedes and replaces the prior closing letter issued on MM/ DD/YYYY, due to the case being reopened.

    2. Keep the original closing letter in the file and add the revised closing letter to RCCMS.

    3. If including a paper letter, don’t date stamp the revised letter.

    4. Do not mail the revised closing letter to the taxpayer or representative, SR will mail it.

  5. Group: Reclosing the case:

    1. Send an email to the SR manager alerting him/her of the case re-closure.

    2. Manually update the case to status 20 in AIMS using CC AMSTU.

    3. Update the case to status 49 in RCCMS and transfer the RCCMS case file to the SR group.

    4. Send the electronic files and paper files, if any, to SR.

Final Closure by SR and Closing Unit for a Reopened Case Returned from the Group

  1. SR receives and reviews the returned case and completes the following actions for agreed cases:

    1. The reviewer dates, signs and mails the revised closing letter to the taxpayer and the taxpayer’s representative (if applicable).

    2. SR closes the case to TE/GE Closing Unit with the revised Form 5650 or Form 5599 (as applicable) in the case file with Form 5595 requesting manual update to status 51.

    3. SR closes the "reopened" RCCMS file to TE/GE Closing Unit with the "Update AIMS" box unchecked.

    4. If the examiner established additional years or related returns (for example they examined returns in addition to the reopened exam(s)), SR sends the "new" cases to TE/GE Closing Unit requesting status 51 updates with the "Update AIMS" box checked.

    5. SR mails the paper case file, if any, to the TE/GE Closing Unit as follows:

      Function Address
      EO Internal Revenue Service
      TE/GE EO Closing Unit
      MC: 4980 DAL
      1100 Commerce St.
      Dallas, Texas 75242
      EP Internal Revenue Service
      TE/GE EP Closing Unit
      2 Metrotech Center
      100 Myrtle Avenue Sixth Floor
      Brooklyn, NY 11201
      FSL/ET, ITG & TEB Internal Revenue Service
      GE Closing Unit
      MS 6510, Attn: Tricia Wilson
      1973 N Rulon White Blvd
      Ogden, UT 84404

      Note:

      When TE/GE Closing Unit receives a closed case, they update the AIMS account(s) manually.

  2. For unagreed cases, SR manager:

    1. Informs MR manager that SR is sending the case to them.

    2. Updates the MR case to status 20 in RCCMS, if in status 49.

    3. Transfers the case on RCCMS to MR.

    4. Mails MR the paper case, if SR received one.

TE/GE Letter for Exam Reconsideration

Internal Revenue Service
Tax Exempt and Government Entities
Department of the Treasury
[Address line 1]
[Address line 2]
[City, State Zip]
 
  Date:
[Recipient Address Line 1]
[Recipient Address Line 2]
[Recipient Address Line 3]
[Recipient Address Line 4]
[Recipient Address Line 5]
Person to contact:
Name:
ID number:
Telephone:
  Plan name and number:
  Form:
  Year ending:
Dear [name]
After further consideration, we determined the decision reached in our examination of the return identified above was incorrect. This correspondence is to notify you that we are rescinding our closing letter dated [insert Month DD, Year].
Enclosed is an explanation of the reasons for the re-examination, the issues being raised and the actions, if any, you may be required to take.
If you have any questions, contact the person whose name and telephone number are listed above.
Thank you for your cooperation in this matter.
  Sincerely,
   
  [Name]
[Title]
Enclosures:  
  Letter xxxx (X-2018
Catalog Number xxxxxx