Mandatory Review - See IRM 4.71.14, Employee Plans Examination of Returns, EP Mandatory Review

Special Review - See IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures

For information on privacy laws, see the IRC, the Privacy Act of 1974, the Freedom of Information Act, and IRS policies and practices.

For more information about these laws, visit the IRS Electronic Freedom of Information Act Reading Room.

For questions about privacy, email *Privacy.

For question about disclosure, email *Disclosure.

Form 1040

Form 1040A

Form 1040EZ

Form 1120

When there’s a discrepancy between information reported on an income tax return and facts developed during an EP examination.

From a related TE/GE examination or any other information TE/GE has access to, such as determination letter applications or compliance projects.

Use "Soft Contact Procedures" when communicating with affected taxpayers. Be considerate and sensitive to personal circumstances such as stress and fatigue even if the taxpayer didn’t experience any personal, monetary, or physical damage from the declared disaster.

If you already sent an initial contact letter to the taxpayer before the postponement period, send Letter 6017 to notify the taxpayer that you’re suspending the examination and postponing any scheduled appointment until after the end of the postponement period. You don’t have to return documents the taxpayer sent you. Allow the taxpayer to continue the examination if they want to. If the taxpayer chooses to continue, document your conversation or the taxpayer’s correspondence in the CCR and contact the FAST Unit to replace the –O freeze with a –S freeze.

Continue to work the case (in status 12) if you have all the necessary information to work the case and don’t need to contact the taxpayer. If the result is favorable to taxpayer, even if the case contains a written advisory (with or without Form 5666, TE/GE Referral Information Report), close the case as you normally would.

If you have an appointment scheduled, cancel it, subject to (f) and (g) below.

If you have an IDR outstanding, postpone the due date to the end of the postponement period, subject to (f) and (g) below.

If you don’t have all the necessary information to work the case and you previously spoke with the taxpayer, call the taxpayer/POA to inform them that you’ll suspend the examination unless they choose to continue. Discuss the contents of Letter 6017 and document your CCR of the material discussed.

If you don’t have all the necessary information and can’t reach the taxpayer by phone, or you never spoke with the taxpayer, send the taxpayer/POA Letter 6017, Taxpayer Contact After Disaster – TE/GE.

If the taxpayer opts out of the postponement period after receiving Letter 6017, document the taxpayer’s oral or written request to bypass the postponement period and continue with the examination before taking action. Document the substance of the conversation and the taxpayer’s correspondence in the CCR. For cases with a –O Freeze in effect that can’t be worked, contact the FAST Unit to replace the –O freeze with a –S freeze. See IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits for contact information for the FAST Unit.

If you can't continue to work on the case, place the case in status 21 suspense, stop all activity until the first business day after the close of the postponement period and document the CCR.

If you’re working on a closing agreement and the taxpayer has signed the agreement and paid the sanction, post the payment, make the assessment to balance the module, and close the case.

If you issued a summons before the postponement period and the period for the taxpayer to quash expired before the beginning of the postponement period, you may proceed with summons enforcement if the bank or third party record-keeper doesn’t reply. Consult Division Counsel about enforcement of the summons. You can’t issue or enforce any other summons during the postponement period.

If a 30-Day Letter is pending, notify the taxpayer that the response date may be extended until the last day of the postponement period.

If a taxpayer provided a valid protest to Appeals before the postponement period, contact the taxpayer to confirm that the taxpayer is still prepared to continue with Appeals. If yes, update the CCR and contact the FAST Unit to change the –O freeze to a –S freeze. Forward the case to the Closing Unit. See IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits for contact information for the FAST Unit.

Include Notice 1155, Disaster Relief from the IRS in any correspondence (such as IDRs cancelling an appointment, postpone an IDR deadline or to request additional information when the taxpayer opts out of the postponement period) to the taxpayer/POA you send during the postponement period.

Unreported income due to unreported or incorrectly reported distributions from plans

Taxable allocations to participant accounts in defined contribution plans due to the revocation of the tax-exempt status of the plan's trust

Taxable distributions to participants resulting from violations of IRC 72(p) loan limits

Adjustment to taxpayer deductions for contributions to a plan due to non-payment, late payment, excess contributions, plan disqualification, etc.

Unreported income from reversion of excess plan assets after a plan termination

IRC 72(t), 10% additional tax on early plan distributions

Statute of limitations needs to be extended.

IRS already examined the return.

Return was amended since it was initially filed.

Service Campus has already made an assessment of tax related to the discrepancy adjustment under current consideration

Service Campus has made any other adjustments to the taxpayer filed return.

Check the "Statute Valid" check box in the RCCMS Compliance Activity, General tab (1 of 2).

Select "Actions" , "Request Statute Validation" , complete the "Comment" box and submit the request for your manager’s approval.

Get your manager’s approval before you issue a 30-Day Letter for a return with less than 12 months left on the statute.

Include Form 872 with Letter 907-A when you mail the 30-Day Letter to the taxpayer.

documents the prior contact, and

the taxpayer’s wish to send the executed Form 872 by efax or email.

"This discrepancy adjustment doesn’t constitute an examination of your tax return."

"See the attached Revenue Agent Report for an explanation of the issue(s)."

Clearly state the issue(s).

Clearly explain the issue(s) as specified in IRM 4.71.4.4.5 (4).

Use Form 886-A for your write-up of the issue(s).

Issue(s)– Clearly state the issues. For example, if the issue is whether a participant loan is a taxable distribution under IRC 72(p), the issue might be stated as follows: "Whether a participant loan to Bobby Caribou in the amount of $103,317 from the XYZ Corporation Profit Sharing Plan (the Plan) is a taxable distribution under IRC 72(p)."

Facts– Include in the facts section a brief history of the plan and give pertinent details surrounding the issue. This section should also cite any plan provisions relevant to the issues raised.

Law– Give a summary of Code sections, Revenue Rulings, court cases, etc., that relate to the issue(s) raised. Don’t cite General Counsel Memos (GCM) or Private Letter Rulings (PLR) as sources of authority.

Government's Position– Discuss each issue separately and apply the law and the facts relevant to each specific issue. Also summarize taxes due and the applicability of penalties.

Taxpayer's Position– Describe the taxpayer's position including any rebuttals the taxpayer has made on the Government's position. If the taxpayer hasn’t provided a position on the Issue(s), type a simple statement to the effect that the taxpayer hasn’t provided a response.

Conclusion– If the taxpayer provides a position on the issue(s), you should prepare a rebuttal to the taxpayer’s position. Restate the Government’s position as a conclusion.

Pub. 1

Pub. 5

Pub. 504 (if the subject return is a Form 1040 series return and the taxpayer was married)

Pub. 594

RAR

Two copies of Form 4549-E

Penalty calculations (if penalties are being assessed)

Interest calculations

Form 9465 (optional)

Return Envelope

Update the case to status 13.

Call the taxpayer to discuss the issue(s).

Close the discrepancy adjustment to Mandatory Review with the related unagreed Form 5500 case file.

Mandatory Review issues the 30-Day Letter and discrepancy package when they send the 30-Day Letter for the proposed plan revocation/disqualification.

Use an INOLES print to get the taxpayer’s last known address.

If you know through other sources, that the taxpayer’s address has changed from the INOLES address, mail the discrepancy adjustment package to the new address.

Mail separate packages to each spouse, even if they live at the same address. Use the last known address of each spouse (or former spouse if no longer married).

Secure separate Forms 2848 for each spouse when the taxpayers want someone to represent them.

When you determine IRC 6662 penalties apply, get supervisory approval before you mail Form 4549-E to the taxpayer (IRC 6751(b)(2)).

Document your manager’s approval on Form 5464, through email, on a memo to the file, electronically or on a penalty approval form.

For 2005 returns filed after May 25, 2006, and for later years, interest is suspended on the day after the close of the 36 month period and ending 21 days after the IRS provides the notice. The "suspension period" begins 36 months after the later of (1) the date on which the return is timely filed, or (2) the due date of the return without regard to extensions.

In all instances where interest is suspended, the "suspension period" ends 21 days after the date on which the IRS issues the required notice.

"Notice" is considered to be made when the 30-Day Letter (Letter 3605) is mailed.

Suspension of interest under IRC 6404(g) applies only to timely filed returns (returns filed by the original due date or by the extended due date if a valid extension was filed).

Suspension of interest under IRC 6404(g) applies only to individuals, not to corporations.

Suspension of interest under IRC 6404(g) has an impact on discrepancy adjustments only with regard to the assessment of interest.

If IRC 6404(g) applies, the suspension of interest begins on the day after the 36 month period and ends 21 days after the IRS mails the 30-Day Letter package.

IRC 6404(g) applies only if the 30-Day Letter package is mailed to the taxpayer after the applicable suspension period has expired.

If IRC 6404(g) applies, calculate interest on Form 4549-E from the original due date of the Form 1040 return through the 36 month period.

If IRC 6404(g) doesn’t apply, calculate interest on Form 4549-E from the original due date of the return through 30 days after the date of the 30-Day Letter.

IRC 6404(g) doesn’t apply to any penalty imposed by IRC 6651, any case involving fraud, any "listed transaction," or any criminal penalty.

Get your manager’s approval before you assess any penalty under IRC 6662 (Negligence or Disregard of Rules and Regulations).

Notify the taxpayer in writing that penalties are being assessed and include the penalty Code section and a computation of the penalties.

The taxpayer retains a representative and demonstrates a need for more time to prepare a meaningful protest.

The taxpayer retains a new representative.

The taxpayer or representative is sick or injured.

Issues are complex and require extensive research.

If you find the taxpayer’s correct address, re-mail the 30-Day Letter to the new address.

If you can’t find the taxpayer’s correct address, process the case per IRM 4.71.4.6.2, Failure of the Taxpayer to Properly Respond.

You may close an agreed case without payment from the taxpayer; however, try to reasonably secure full payment of taxes, interest and penalties (if applicable).

If the taxpayer is unable to pay, see IRM 4.71.4.11, Installment Agreement and Bankruptcy Procedures, for information on Installment Agreements.

Ensure the check is made out to the "United States Treasury." If the payee line is blank or the check is made out to "IRS," use the United States Treasury stamp to complete/correct the payee section of the check.

Enter the check information (date of check, check number, amount, payer, IRS recipient name and date received) into the required group logbook.

Complete Form 3244-A per IRM 4.71.4.5.1 (6) below. See IRM 4.71.4 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3244-A.

Complete Form 3210 to accompany the payment you send to the Service Campus. Include in the body of the Form 3210 the taxpayer’s name, SSN/EIN, tax return form number, amount of payment, and check number. If the payment applies to more than one tax period, note and itemize the breakdown on the Form 3210.

Include, both your telephone number and your EEFax number on the "Originator Telephone Number" line at the bottom of Form 3210.

Forward the Form 3210 and Form 3244-A to your group manager who reviews the Form 3210, compares it to the Form 3244-A and signs the Form 3210.

Make a copy of Form 3244-A, Form 3210 and the payment (i.e., check) to keep in the case file.

Send the check along with the Form 3244-A and Form 3210 express mail (next day) to the Ogden Service Campus at the address listed in IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits by the end of the next business day after receipt.

If you can’t mail the check to Service Campus when you receive it, secure it in a locked file overnight.

Place the check in a separate addressed envelope along with the completed Form 3244-A when you enclose it in the express mail envelope.

Email the Ogden Teller Unit per IRM 4.71.4.5.1 (7).

If you don’t receive the Form 3210 acknowledgement copy from the Service Campus within 10 days after mailing, contact the Service Campus to follow-up receipt of the check. Document these actions in the group logbook.

SSN/EIN: Enter the SSN or EIN (as applicable).

Form number/MFT: Enter 1040/30 or 1120/02.

Tax period: Enter the tax year.

Plan number: Leave blank.

Transaction date: Enter the date the payment was received.

Taxpayer name, address and zip code: Enter the taxpayer’s information.

Transaction Data: List the amount received for the year under transaction code 640 (Advance Payment) and the same amount under "Total payment." Also list $0 next to transaction code 570.

Remarks: List the check number and the amount of the check. If the check represents payments for more than one year, list each year and the amount applied to each year.

Prepared by: Enter the agent’s name and group number.

UPS tracking number

Dollar amount of the remittance

The city/state the package is being shipped from

Find the designated remittance liaison on the Submission Processing Field Office Payment Processing page website at http://win.web.irs.gov/SP/Programs_Information/Standard_Proce_Webpages/Field_Office_Pymt_Proc.htm to obtain the Ogden Campus liaison's email address in the "Phone" column.

Call, email, or EEFax the liaison that you’ll send a single remittance of $1 million or more and give them the tracking number for the overnight package of the remittance. See IRM 5.1.2.6.1.1, Remittance Over $1M.

List the IRC 6404(g) notice date in the "Other Information" section of the file copy of Form 4549-E. Suggested language: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date Form 4549-E was mailed to the taxpayer)."

In the "Other Instructions" section of Form 3198-A, include the following: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date you mailed Form 4549-E to the taxpayer). Interest should be suspended beginning _______ (insert the date the suspension period begins) through _______ (insert the date the suspension period ends)." See IRM 4.71.4 Exhibit 12 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 3198-A.

Prepare Form 3177 per IRM 4.71.4 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits and save it in the RCCMS Office Documents folder using the RCCMS Naming Convention.

The Exam group manager must email the TE/GE Closing group manager when the case is closed to let them know interest is suspended and Form 3177 is in the RCCMS Office Documents folder.

Be limited to the discrepancy adjustment issue(s)

Include a discussion on IRC 72(t) when the issue involves pension distributions

Include a brief discussion on the applicability of penalties and whether or not penalties are being assessed

Form 872 (if secured, attach face down to the back of Form 1040/1120)

Form 2848 (if applicable) attached to the back of the first page of the return (if there is a valid 2848 and it is not scanned into the RCCMS Office Documents folder)

Form 4549-E

A copy of the check if payment is received (if not scanned and saved in the RCCMS Office Documents folder)

Keep a copy of the return (or applicable RTVUE or BRTVU print) in the RCCMS Office Documents folder.

Include the original return (if secured) with the closed discrepancy adjustment case file.

Prepare Form 5772-A and Form 5773-A (or equivalent), along with any supplemental workpapers and all other relevant documents, fully explaining why the case is being closed "no change."

Prepare Letter 2656. See IRM 4.71.4 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 2656.

Copy of Form 1040/1120 (or RTVUE/BRTVU print)

Form 872 (if secured, attach face down to the back of Form 1040/1120)

Form 2848 (if applicable) attached to the back of the first page of the return for the lead file (if there is a valid 2848 and its not scanned into the RCCMS Office Documents folder)

Right to discuss the proposed adjustment with a supervisor

Appeal rights

Appeals won’t accept cases with less than one year remaining on the statute of limitations.

If the taxpayer refuses to extend the statute of limitations, or you can’t find the taxpayer, close the case to Mandatory Review to issue a 90-Day letter instead of sending the case to Appeals.

The protest is a "valid protest"

The case requires further development

See IRM 4.71.4.6.1.1, Cases to Appeals.

If the taxpayer agrees, close the case as an agreed case.

If the taxpayer doesn’t agree, close the case to Appeals with AIMS disposal code 07 (601 on RCCMS).

Open the RGS program, highlight the case from "Case Management Window," which usually opens automatically, and hit "Select." If the "Case Management Window" doesn’t automatically (or you’ve been working in RGS on another case, select "File," "Open" and "Case" from the "Report Generation Software" window.

From the "Report Generation Software" window, select "Copy Case" from the "File" drop down menu.

From the "Copy Case(s)" window, use "Select Location" in the "Copy Cases(s) To" box to navigate to the desired location on your hard drive.

Select "Copy." A folder containing a file "NFORWARDI1.ZIP" (or similar name) is created.

Send this file to the email address the Manager, EP Mandatory Review gave you. See IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits, for contact information for the Manager, EP Mandatory Review.

Save the file to your hard drive.

Open RGS.

At the "Case Management" window, select "Merge" .

A "Merge" window will open.

In the "Merge from" box navigate to the NFORWARDI1.ZIP file and select.

Then select "Merge"

List the IRC 6404(g) notice date in the "Other Information" section of the file copy of Form 4549-E. Suggested language is as follows: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date you mailed Form 4549-E to the taxpayer)."

In the "Other Instructions" section of Form 3198-A, include the following: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date you mailed Form 4549-E to the taxpayer). Interest should be suspended beginning _______ (insert the date the suspension period begins) through _______ (insert the date the suspension period ends)." See IRM 4.71.4 Exhibit 12 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 3198-A.

Prepare Form 3177 per IRM 4.71.4 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits and save it in the RCCMS Office Documents folder using the RCCMS Naming Convention.

The Exam group manager must notate in the CCR that interest is to be suspended and Form 3177 is saved in the RCCMS Office Documents folder.

Are limited to the discrepancy adjustment issue(s).

Discuss IRC 72(t) when the issue involves pension distributions.

Briefly discuss the applicability of penalties and whether or not penalties are assessed.

It appears reasonable that the taxpayer or authorized representative received the 30-Day Letter, and the taxpayer neither agrees (e.g., signs Form 4549-E) nor protests within the 30 day period.

The taxpayer didn’t receive the 30-Day Letter, but the IRS exercised due diligence in determining the taxpayer’s last known address.

The taxpayer is temporarily away and not expected to return within a reasonable period of time, or has not returned after a reasonable extension has been granted.

You followed-up without success.

Open the RGS program, highlight the case from "Case Management Window," which usually opens automatically, and hit "Select" . If the "Case Management Window" doesn’t automatically (or you’ve been working in RGS on another case, select "File," "Open" and "Case" from the "Report Generation Software" window.

From the "Report Generation Software" window, select "Copy Case" from the "File" drop down menu.

From the "Copy Case(s)" window, use "Select Location" in the "Copy Cases(s) To" box to navigate to the desired location on your hard drive.

Select "Copy." A folder containing a file "NFORWARDI1.ZIP" (or similar name) is created.

Send this file to the email address the Manager, EP Mandatory Review gave you. See IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits, for contact information for the Manager, EP Mandatory Review.

List the IRC 6404(g) notice date in the "Other Information" section of the file copy of Form 4549-E. Suggested language is as follows: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date you mailed Form 4549-E to the taxpayer)."

Include the following statement in the "Other Instructions" section of Form 3198-A: "IRC 6404(g) does apply, and notice was provided on _______ (insert the date you mailed Form 4549-E to the taxpayer). Interest should be suspended beginning _______ (insert the date the suspension period begins) through _______ (insert the date the suspension period ends)."

Be limited to the discrepancy adjustment issue(s).

Include a discussion on IRC 72(t) when the issue involves pension distributions.

Include a brief discussion on the applicability of penalties and whether or not penalties are being assessed.

Appeals won’t accept cases with less than one year remaining on the statute of limitations.

If the taxpayer refuses to extend the statute of limitations, or you can’t find the taxpayer, close the case to Mandatory Review to issue a 90-Day letter instead of sending the case to Appeals.

The group manager must contact the Manager, EP Mandatory Review if a case is closed to Review with less than one year on the statute of limitations.

Scan all paper documents you exchanged with the taxpayer including envelopes or anything the taxpayer or representative marked.

Upload all exchanged documents and relevant documents you prepared during the examination into RCCMS.

Keep all records you upload into RCCMS or determine are no longer relevant to the case file per normal record retention requirements outlined in IRM1.15.2.