4.71.7 Survey Returns

Manual Transmittal

November 21, 2017

Purpose

(1) This transmits revised IRM 4.71.7, Employee Plans Examination of Returns, Survey Returns.

Background

IRM 4.71.7 contains procedures for surveying EP examinations of Form 5500, Form 5329, Form 5330, Form 990-T, Non-Return Units (NRU), and Form 1040/Form 1120 discrepancy adjustments.

IRM 4.71.7 does not contain procedures for surveying claims. Survey of claims are covered under IRM 4.71.8, EP Claims.

Material Changes

(1) IRM 4.71.7.1, Program, Scope and Objectives, and the subsections thereunder, were added to meet the new internal controls requirements.

(2) This revision makes minor editorial changes throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.7 dated December 19, 2016.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(11-21-2017)

Robert S. Choi
Director, Employee Plans
Tax Exempt and Government Entities

Program, Scope and Objectives

  1. The Employee Plans (EP) examination program was established to ensure:

    1. Compliance with the provisions of Internal Revenue Code (IRC) 401(a).

    2. That taxes related to trust assets are being properly reported.

  2. Purpose: IRM 4.71.7, Employee Plans Examination of Returns, Survey Returns, contains procedures for surveying EP examinations of Form 5500, Form 5330, Form 990-T, Non-Return Units (NRU), and Form 1040/Form 1120 discrepancy adjustments.

  3. Audience: This IRM provides procedures for agents, managers, and support staff in EP Exam.

  4. Program Owner: Director, EP Examination sets the program for the EP examination program.

  5. Program Authority: EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

Authority

  1. EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201. EP Examination is the division designated to determine if a retirement plan is qualified under IRC 401, and the underlying regulations, and thus, exempt from tax under IRC 501.

Program Controls

  1. Tax Exempt Quality Measurement System (TEQMS) is the quality control system used to oversee the entire examination program. For more information on TEQMS, see IRM 4.71.15.1.3, Program Controls and Program Reports - TEQMS.

  2. All examinations will be done in accordance with the Taxpayer Bill of Rights as listed in IRC 7803(a)(3).

    Note:

    Additional information may be found on the irs.gov website at www.irs.gov/taxpayer-bill-of-rights.

Acronyms and Forms

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

    Acronyms and Abbreviations

    Acronym Definition
    AIMS Audit Information Management System
    EIN Employer Identification Number
    EP Employee Plans
    ESSP Examinations Special Support and Processing (Closing Unit)
    IRA Individual Retirement Arrangements
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    MFT Master File Transaction
    NRU Non-Return Unit
    SARSEP Salary Reduction Simplified Employee Pension
    SEP Simplified Employee Pension
    SIMPLE Savings Incentive Match Plan for Employees
    TEQMS Tax Exempt Quality Measurement System

     

    Forms

    Form Name
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 1900 Income Tax Survey After Assignment
    Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5596 TE/GE Non-Examined Closings

     

Overview of Survey Returns

  1. Under certain circumstances, an EP group may make the determination to not examine a return selected for examination. These cases may be closed by survey.

  2. After coordination with their Area Manager, group managers may survey a return, before or after assignment if an examination is not warranted or if the number of returns assigned to the group exceeds the number that can be examined and processed in a timely manner.

    Note:

    Survey of an NRU case also requires coordination with the responsible EP Project Analyst.

  3. With Area Manager/group manager approval, returns selected for examination may be surveyed:

    1. Anytime prior to assignment to an agent.

    2. After assignment to an agent, but before receipt of plan records.

      Note:

      Once records are received or reviewed, the return may not be surveyed.

  4. The following types of returns are eligible to be closed by survey:

    1. Form 5500 series returns

    2. Form 1040 discrepancy adjustments

    3. Form 1120 discrepancy adjustments

    4. Form 5330

    5. Form 990-T

    6. Form 5329

    7. Non-Return Units (NRU)

  5. There are two types of surveys:

    1. Survey before assignment

    2. Survey after assignment

  6. Form 5596 is used for all surveys.

  7. When surveying a return that was established as a result of a referral from another governmental entity or another division within IRS, care should be taken to ensure that notification of the survey to the referring entity is made in a timely manner as specified in IRM 4.71.6, Employee Plans Referrals.

Survey Before Assignment

  1. Any return closed from an EP group before assignment to an agent and before contact with the taxpayer is considered surveyed before assignment.

  2. Returns surveyed before assignment are closed with disposal code 31.

  3. Form 5596 must be completed to reflect the EIN, MFT, plan number, year, taxpayer name, and disposal code 31.

Survey After Assignment

  1. To allow Area offices flexibility in managing workload, under certain circumstances, cases may be surveyed after assignment even though initial contact was made by the agent, if no records were received.

  2. If records were solicited and received, the case may not be surveyed.

  3. As long as no records have been received and Area Manager/group manager approval was obtained, an agent may survey a return if they believe the examination would result in no material change in tax liability or result in no change in the qualified status of the plan.

    Note:

    Survey of an NRU case also requires coordination with the appropriate EP Project Analyst.

  4. Use Form 1900 for all returns surveyed after assignment to explain the reason(s) for the survey action (this is especially important for referrals).

    Note:

    When surveying a Form 5500, write in "5500" at the top of the form. See IRM 4.71.7 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 1900.

  5. Form 5596 should be completed to reflect the EIN, MFT, plan number, year, taxpayer name, and disposal code 32 (Surveyed After Assignment). See IRM 4.71.7 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5596.

    Note:

    Make sure you use disposal code 32.

  6. When surveying a case after contact has been made with the taxpayer (but no records were received), use Letter 1024-A or Letter 1024-B to notify the taxpayer the case is closed.

    1. For cases other than Simplified Employee Pensions (SEP IRAs), Salary Reduction Simplified Employee Pensions (SARSEP IRAs), or Simple Retirement Accounts (SIMPLE IRAs), use Letter 1024-A.

    2. For SEP IRAs, SARSEP IRAs and SIMPLE IRAs, use Letter 1024-B.

    Note:

    Letters 1024-A and 1024-B will be prepared by the agent and mailed by the designated person in the group.

    Note:

    See IRM 4.71.7 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1024-A.

Case Closing

  1. Surveys of returns no longer require a paper file as RCCMS has been enhanced to process the closing action directly to AIMS.

  2. If the group manager and agent elect to process a survey as a completely electronic file, a notation should be made in the Message screen and in the Compliance screen in RCCMS that the case is fully electronic.

  3. If the manager and agent elect to not process a survey as a completely electronic file, printed paper copies of the following documents must be included in the case file when the case is closed from the group to ESSP:

    1. Form 5596

    2. The return being surveyed

      Note:

      Any surveyed return will be stamped with a "Closed Survey After Assignment" stamp or a "Closed Survey Before Assignment" and must be signed by the agent and the group manager approving the survey. Do not stamp an original filed return; instead make a copy of any original return and stamp the copy.

  4. Prepare and save Form 5596 in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  5. If the case was assigned to an agent, make sure Form 1900 is prepared, electronically signed and saved in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  6. When closing the case in RCCMS:

    1. Make sure the closing tab has the "Survey Reason Code" completed.

    2. Make sure disposal code 908 is entered for a "Survey After Assignment."

    3. Make sure disposal code 910 is entered for a "Survey Before Assignment."

  7. Prepare and mail Letter 1024-A or Letter 1024-B if contact was made with the taxpayer.

    Note:

    Letter 1024-A and Letter 1024-B will be prepared by the agent and mailed out by the designated person in the group.

  8. Save copies of all forms and letters generated by the agent in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  9. Update the status code to 51 on RCCMS and AIMS when the case is closed from the group.

  10. Close the case file and RCCMS record to ESSP.

    Note:

    Surveyed NRU cases are closed in ESSP using command code AMSOC.