4.71.9 Statute Control Procedures

Manual Transmittal

June 26, 2019

Purpose

(1) This transmits revised IRM 4.71.9, Employee Plans Examination of Returns, Statute Control Procedures.

Material Changes

(1) Added clarification in IRM section 4.71.9.6.2, Securing Consents for a Master Trust. Included requirement to secure a Form 56 and noted that all Master Trusts’ have an assigned EIN.

(2) Updated name of Support Processing Unit to TE/GE Closing Group.

(3) Deleted requirement in IRM 4.71.9.12.3, Instructions for Preparing Form 3999, that the Manager, EP Actuarial & Mandatory Review’s signature be obtained.

(4) Minor editorial changes were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.9 dated November 20, 2018.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(06-26-2019)

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

Program, Scope an Objectives

  1. Purpose: IRM 4.71.9, Employee Plans Examination of Returns, Statute Control Procedures, gives EP agents and their managers procedures to protect the statutes of limitations for returns under EP jurisdiction.

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

  3. Program Owner: Director, EP Examinations sets the program for the EP examination program.

  4. Program Authority: EP Examinations’ authority to conduct examinations, resolve issues and determine tax liability is derived from Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, which includes but is not limited to:

    1. IRC section 7602 - Examination of books and witnesses, which falls under Chapter 78 - Discovery of Liability and Enforcement of Title.

      Note:

      IRC 7602 provides agents with the authority to:
      * Audit any books, papers, records or other data necessary to complete an audit.
      * Take testimony under oath to secure additional information needed.
      * Issue summons for information necessary to complete an audit.
      * Ask about any offense connected to the administering or enforcing of the Internal Revenue laws.

    2. IRC section 6201- Assessment authority, which falls under Chapter 63 - Assessment.

      Note:

      EP Examinations’ authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

  5. This IRM section is authored by EP Mandatory Review. For questions, information or suggestions, contact the manager of EP Mandatory Review.

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. EP Examinations established two review groups to make sure agents conduct examinations per technical, procedural and administrative requirements:

    1. Mandatory Review, see IRM 4.71.14, Employee Plans Examination of Returns, EP Mandatory Review.

    2. Special Review, see IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures.

  2. Tax Exempt Quality Measurement System (TEQMS) is the quality control system TE/GE uses to oversee the entire examination program. For more information on TEQMS, see IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures.

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

    Note:

    Find additional information at: Taxpayer Bill of Rights

  4. The IRS is fully committed to protecting the privacy rights of taxpayers and employees. Privacy laws are included in 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 concerning privacy, send an email to *Privacy. For question concerning disclosure, send an email to *Disclosure.

Acronyms, Forms, Documents and Publications

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

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    ASED Assessment Statute Expiration Date
    BMF Business Master File
    CCR Case Chronology Record
    EIN Employer Identification Number
    EO Exempt Organizations
    EP Employee Plans
    ESOP Employee Stock Ownership Plan
    FSL/ET Federal, State & Local/ Employment Tax Area, EO Examination
    GCM General Counsel Memo
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    IRS Internal Revenue Service
    LB&I Large Business and International Division
    MFT Master File Tax
    NRU Non-Return Unit
    OTSA Office of Tax Shelter Analysis
    POA Power of Attorney
    RCCMS Reporting Compliance Case Management System
    SB/SE Small Business /Self-Employed Division
    SFR Substitute for Return
    SOL Statute of Limitations
    SSN Social Security Number
    TEQMS Tax Exempt Quality Measurement System
    UBI Unrelated Business Income
    W&I Wage and Investment Division

     

    Forms, Documents and Publications

    Form Name
    Form 56 Notice Concerning Fiduciary Relationship
    Form 870-EP Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment
    Form 872 Consent to Extend the Time to Assess Tax
    Form 872-H Consent to Extend the Time to Assess Tax on a Trust
    Form 895-EP Notice of Statute Expiration
    Form 941 Employer's Quarterly Federal Tax Return
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    1041 U.S. Income Tax Return for Estates and Trusts
    Form 1065 U.S. Return of Partnership Income
    Form 1120 U.S. Corporation Income Tax Return
    Form 1120-S U.S. Income Tax Return for an S Corporation
    Form 2848 Power of Attorney and Declaration of Representative
    Form 3177 Notice of Action for Entry on Master File
    Form 3210 Document Transmittal
    Form 3999 Statute Expiration Report
    Form 4549-E Income Tax Discrepancy Adjustments
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5464 Case Chronology Record (CCR)
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5595 TE/GE Update
    Form 5599 TE/GE Examined Closing Record
    Form 5666 TE/GE Referral Information Report
    5772-A Employee Plans (EP) Workpaper
    Form 5773-A Employee Plans (EP) Workpaper Summary Continuation
    Form 8821 Tax Information Authorization
    Form 8886 Reportable Transaction Disclosure Statement
    Form 9814 Request for Mail/Shipping Service
    Form 10364-A Statute Expiration Case Notice
    Form 10498-A Joint Investigations Intent to Solicit Consent to Extend Statute
    Form 10949-EP Statute Extension and Control Checksheet
    Form SS-4 Application for Employer Identification Number
    Form SS-10 Consent to Extend the Time to Assess Employment Taxes
    Document 11490 Performance Plan for Internal Revenue Agent GS-0512
    Document 11500 Guide to Penalty Determinations
    Pub 1035 Extending the Tax Assessment Period

     

Overview of Statute Control Procedures

  1. The Internal Revenue Code (IRC) requires the IRS to assess taxes within specific time limits. These limits are known as the statutes of limitations. When they expire, the IRS can no longer assess additional tax.

  2. Statute controls ensure that EP agents and managers:

    1. Properly determine the statute expiration dates on Form 1041, Form 5330, Form 990-T, Form 1040Form 1120, and Form 941, and annotate the case records to reflect the correct assessment statute expiration date (ASED).

    2. Closely monitor cases to prevent unintended expiration of the assessment statute of limitations.

  3. It is critical that EP employees take seriously their responsibility to protect the government's interest in tax matters.

  4. Failure to protect statutes not only impacts the amount of tax that IRS could have statutorily assessed and collected, but it could also impact EP employees performance and conduct.

    1. Per IRS Document 11490, in order to receive an "Exceeds" in item 5B of the Critical Job Elements, an employee must "consistently follow the procedures to protect statutes of limitations."

    2. Per IRS Document 11500, negligence or carelessness in carrying out duties or failure to carry out duties including failure to protect a statute may result in a written reprimand, suspension, or termination of employment, depending on the frequency and severity of the offense (see page 18 of Document 11500).

  5. Employees must take all necessary actions to protect the government’s interest when expiration of the statutory period for assessment of any additional or potential tax is imminent. This responsibility extends not only to the liability of the entity under exam, but also to the liabilities of the related taxpayers, whether or not these returns are currently under exam. Agents are responsible for protecting the statute of limitations for:

    1. Form 1041 and Form 990-T related to the trust for the plan under examination

    2. Form 5330 and Form 5329 related to excise tax involving the plan under examination

    3. Form 1040 of highly compensated employees plan participants when there are taxable events involving the plan under examination, unless these returns are currently under examination by W&I, SB/SE or LB&I

    4. Form 1120 filed by the plan sponsor when there are income tax adjustments related to the plan under examination, unless these returns are currently under examination by SB/SE or LB&I

    5. Form 941, Form 1120, or Form 1040 affected by the exam of a NRU.

  6. The term "case file" as used in this IRM refers to the RCCMS and/or a paper file as appropriate. See IRM 4.71.12, Case File Assembly Guidelines, for documents required to be included in a paper file.

  7. The following guidance in this IRM establishes uniform procedures for statute controls on EP examination cases.

  8. The Area Manager may, at his/her discretion also put in place additional procedures.

Safeguarding Personally Identifiable Information (PII)

  1. When possible, mask the first five digits of a taxpayer’s SSN on letters, forms, notices, workpapers and emails.

    Example:

    XXX-XX-9999

Contact Information for Business Units

  1. Phone, efax and email addresses for business units:

    1. AIMS Coordinator:
      Efax: 855-821-0089
      Email: Charles.Mazzarisi@irs.gov

    2. Classification: *TEGE-CPC-Classification (tege-cpc-classification@irs.gov)

      Note:

      Classification & Case Assignment (C&CA) is a subfunction of Compliance Planning & Classification (CP&C), which is referred to in this IRM as simply Classification. There are two Classification groups. Requests to pick up an additional year for examination (see IRM 4.71.1.14.1, Prior Year, Subsequent Year and Related Returns) and the processing of Form 5500 SFRs (see IRM 4.71.1.21(4), Amended, Substitute and Secured Forms 5500) should be emailed to *TEGE-CPC-Classification (tege-cpc-classification@irs.gov). Referrals should be emailed to *Manager EO Classification (EOclass@irs.gov).

    3. TE/GE Closing Group 7697 (phone numbers):
      Brooklyn 718-834-5076
      Baltimore 443-853-5586

  2. Physical addresses for business units are listed below:

    1. Classification:
      IRS –Classification & Case Assignment
      1100 Commerce St., Mail Code 4910DAL
      Dallas, TX 75242

    2. TE/GE Closing Groups:

      Note:

      Groups in Great Lakes, Gulf Coast and Pacific Coast Areas close all agreed Forms 5500 on RCCMS and AIMS to Baltimore.


      IRS
      TE/GE Closing Group 7697
      31 Hopkins Plaza
      Room 1120
      Baltimore, MD 21201

      Note:

      Groups in Northeast and Mid-Atlantic Areas close all agreed Forms 5500 on RCCMS and AIMS to Brooklyn.


      IRS
      TE/GE Closing Group 7697
      2 Metrotech Center
      100 Myrtle Avenue, 6th Floor
      Brooklyn, NY 11201

Organizational Goals

  1. To the extent possible, to provide adequate time for administrative case processing, follow these time periods when closing cases:

    1. Unagreed cases should have at least one year left on the statute when the case is submitted to EP Mandatory Review.

    2. Agreed cases (including no-change cases) should have at least 180 days remaining on the statute when the case is submitted to the closing functions.

  2. Timely and correctly prepare Form 872 and Form 872-H when extending the statute of limitations for examined returns under EP jurisdiction.

  3. Use red folders to identify cases with less than 180 calendar days remaining on the statute and the minimum required documents per IRM 4.71.12.5(1), Additional Assembly Guidelines for All EP Exam Files.

    Note:

    You may also use Form 10364-A if ordered from the National Distribution Center under catalog number 24613P (it will be delivered as a pre-printed red folder).

    Note:

    Don’t use a red folder for a Form 5500 exam for which the statute of limitations has been properly updated to alpha code "PP" because it’s not considered a short statute case.

Group Manager Responsibilities and Procedures

  1. As the group manager, you must continuously maintain statute controls on AIMS and RCCMS for all examined returns in your group’s inventory.

    Note:

    All examined returns are controlled on AIMS and RCCMS.

  2. Notify the agent in writing when an assigned return’s statute of limitations will expire within 270 days.

  3. Either give the agent a partially completed Form 895-EP or instruct him/her to prepare one. The Case Chronology Record (CCR) must document that Form 895-EP was prepared.

  4. Make sure a copy of the Form 895-EP (with appropriate notations) is:

    1. Attached to the outside of the case file if the case is unagreed per IRM 4.71.12.4, Assembly Guidelines for "Unagreed" Examinations.

    2. Included in the case file if the case is agreed, when necessary as required by IRM 4.71.12.3, Assembly Guidelines for "Agreed" Examinations

      Note:

      See IRM 4.71.9 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 895-EP.

  5. When you and the agent decide not to extend the statutory period for a Form 5500/1041, ensure that:

    1. You made the decision before the expiration of the statute of limitations.

    2. Both you and the agent noted and initialed Form 895-EP.

    3. The agent included a memo of explanation (signed by the manager) and attached it to the Form 895-EP detailing the reasons for not extending the statutory period. See IRM 4.71.9 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the memo to use when updating a statute to alpha code "PP" .

    4. You placed a copy of the memo in the case file and sent a copy to the Area Manager to document your decision not to extend the statutory period.

    5. Between 60 and 270 days before the statute expiration, the agent updated both AIMS and RCCMS to show this decision using alpha code "PP" - Non-taxable EP Return.

      Note:

      Use the "PP" code when the agent and manager determine with certainty that the non-taxable return will not be converted to a taxable return. If we later determine this alpha code was inappropriate, you may need to prepare Form 3999 per IRM 4.71.9.12, Barred Statute Reporting - Form 3999, Statute Expiration Report.

    6. The agent included a copy of the AIMS print in the file to verify the date of the update action to "PP" the statute.

      Note:

      If the case has been properly updated to alpha code "PP" , the case file should not be placed in a red folder.

  6. When the manager and agent decide to open a Form 5500 examination for a prior year for which the statute of limitations has expired or has less than 270 days remaining:

    1. Update the statute of limitations to alpha code "PP" immediately.

    2. Include a memo of explanation (signed by the group manager) detailing the reasons for opening an examination of a prior year's return must be included in the case file and/or saved in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.9 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the memo.

    3. Include a copy of the AIMS print in the case file to confirm the date of the statute update action to alpha code "PP."

      Note:

      Per Yarish Consulting, Inc. v. Commissioner, T.C. Memo. 2010-174, the U. S. Tax Court ruled that the expiration of a Form 5500/1041 statute does not prohibit the IRS from pursuing a qualification issue for a year in which the Form 1041 statute is barred. When a plan fails to qualify under IRC 401(a) for a given year, the plan continues to be non-qualified until the plan becomes re-qualified through a closing agreement.

  7. Ensure that cases closed from the group have the following periods of time remaining on the statutes of limitations:

    Types of Cases Days Remaining on Statute
    Agreed at least 210 days
    Unagreed at least one year
    All cases in which revocation or non-qualification is proposed (whether agreed or unagreed) at least one year
  8. Take the following actions for cases closed with less than 180 days remaining on the statute of limitations:

    1. If a statute will expire within 120 to 179 days, call the Manager, EP Mandatory Review, or the manager of the TE/GE Closing Group (as applicable depending on) before transferring the case to them. Follow up the phone conversation with an email listing the cases with a short statute and stating that the case is being transferred to Mandatory Review or closed to TE/GE Closing Group (as applicable).

      Note:

      The EP Mandatory Review group mailbox is *TE/GE-EP-Mandatory Review.

    2. If a statute will expire within 61-119 days, in addition to notifying the receiving manager, also notify your Area Manager that you’re transferring/closing the case with a short statute.

    3. If a statute will expire with 60 days or less, in addition to notifying the receiving group manager and the Area Manager, also notify the Director, EP Examinations. Indicate whether or not there will be a tax assessment. Area Managers and group managers must ensure that assessments are within the statutory period by monitoring the case until final AIMS closure.

    4. Prepare a memo providing an explanation of the reason(s) the case is being closed with less than 180 days remaining on the statute. Place the memo on top of the case file. Forward a copy of this memo to the Area Manager.

    5. Mail the case files via overnight mail (UPS).

    6. Follow-up with the receiving manager to make sure they received the case.

  9. Red Folders - Place all cases with less than 180 days remaining on the statutory period in a red folder and include the minimum required documents per IRM 4.71.12.5, Additional Assembly Guidelines for All EP Exam Files, in the case file.

    Note:

    You can use Form 10364-A which can be printed on red paper or ordered from the National Distribution Center under catalog number 24613P (it will be delivered as a pre-printed red folder).

    Note:

    A Form 5500 exam for which the statute of limitations has been properly updated to alpha code "PP" is not considered a short statute case so don’t place it in a red folder.

  10. For any case your group transfers between Areas or field locations with less than 18 months remaining on the statutory period:

    1. Discuss the case with your Area Manager and get their concurrence. When your Area Manager agrees, he/she should contact the prospective "receiving" Area Manager and ask them to agree to the transfer.

    2. Mail the case via overnight mail to the receiving exam group.

    3. Follow-up to make sure the group received the case.

    4. Follow the case transfer procedures in IRM 4.71.1.23.1, Circumstances Which Permit a Transfer of a Form 5500 Examination.

    5. Include both copies of Form 895-EP (if applicable) in the case file.

  11. When an agent extends a statute of limitations, ensure that Form 872 (or Form 872-H with Form 56, for Forms 5500/1041 extensions) is properly completed and executed.

  12. When an agent extends the statute of limitations or updates it to an alpha code, make sure RCCMS and AIMS are updated to reflect the current statute date.

  13. See Form 10949-EP to help you comply with statute procedures at IRM 4.71.9 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits.

  14. Follow additional procedures that your Area Manager has put in place.

Agent Responsibilities and Procedures

  1. As an agent, you should always be aware that the person who possesses the return is ultimately responsible for the protection of the statute of limitations.

  2. Ensure that cases closed from the group have the following periods of time remaining on the statutes of limitations:

    Types of Cases Days Remaining on Statute
    Agreed at least 180 days
    Unagreed at least one year
    All cases in which revocation or non-qualification is proposed (whether agreed or unagreed) at least one year
  3. Follow these procedures for Form 895-EP:

    1. Prepare and return Form 895-EP to your group manager/designee by 10 calendar days after your manager notified you of the need to complete Form 895-EP.

      Note:

      The group manager/designee is required to notify the agent in writing of those assigned returns where the statute of limitations will expire within 270 days. See IRM 4.71.9.3 (2), Group Manager Responsibilities and Procedures.

    2. Include a copy of the Form 895-EP (with appropriate notations) with the case file.

      Note:

      For an unagreed case, Form 895-EP should be attached to the outside of the case file. For an agreed case, it should be included inside the case file (if less than 180 days are left on the statute).

    3. Save the Form 895-EP in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    4. Update line 5 whenever you extended the statute of limitations with Form 872 or Form 872-H.

    5. Update Form 895-EP whenever you update the statute of limitations to alpha code "PP" per IRM 4.71.9.9 (15), Use of Alpha Codes.

    6. See IRM 4.71.9 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 895-EP.

  4. You are responsible for not only protecting the statute of limitations for the year under examination, but also for subsequent years if there is a potential tax effect.

  5. You may not begin an examination or requisition any return for audit if fewer than 12 months remain on the statute, unless you get your manager’s approval.

    1. Obtain managerial approval before you open an examination of a return with fewer than 12 months remaining on the statute.

    2. Document the approval and justification, or disapproval on Form 5464 (CCR).

    3. Consider factors such as the amount of potential tax liability and the impact on plan participants before opening a year with a short statute.

    4. If you/your manager decide to examine a return with 270 days or less remaining of the statute of limitations, submit a request for AIMS/RCCMS establishment and Form 895-EP at the same time.

  6. Use Form 872-H when extending a Form 1041 or a Form 990-T statute of limitations. See IRM 4.71.9.6.1, Securing Consents for Forms 5500/1041, and IRM 4.71.9.6.4, Securing Consents for Form 990-T.

  7. Use Form 872 when extending a statute of limitations for a Form 5330, Form 1040, or Form 1120.

  8. Use Form SS-10, when extending the statute of limitations for a Form 941 related to a Non-Return Unit (NRU) exam or an IRC 403(b) plan that filed a Form 5500. See IRM 4.71.9.7, Monitoring the Statute Date on a Non-Return Unit (NRU) Case.

  9. IRS must notify taxpayers of their right to: refuse to extend the limitation period, request the extension be limited to particular issues and request the limitation period be limited to a specific date (IRC 6501(c)(4)(B)). You must therefore:

    1. Inform the taxpayer of his or her rights every time you ask them to extend the statute of limitations.

    2. Notify the taxpayer by mailing Letter 907-A, Request to Extend the Statute Letter, and Pub 1035, (latest revision) with Form 872, Form 872-H, or Form SS-10.

      Note:

      The current revisions of Form 872, Form 872-H and Form SS-10 contain notification of taxpayer rights in the body of the form.

  10. Take the most conservative approach and protect the three-year statute of limitations, if possible, even though a six-year statute could be applicable.

    1. This protects the interest of the government if the six-year statute is later determined to be inapplicable. So, secure a consent to extend the statute before the three-year statute expires.

    2. If you/your manager determine that the six-year statute can be pursued, be aware that the burden of proof shifts to the government to support that six-year statute.

    3. Obtain Area Counsel's written advice on the six-year statute and document the case file.

  11. Make sure that when you prepare Form 872-H for a trust with a fiscal year end, that the trust year is converted to a calendar year taxable period when there is a possible qualification issue.

    Note:

    If the plan’s qualified status is revoked, the trust becomes taxable and Form 1041 is due each calendar year.

  12. When you propose to disqualify a qualified plan, which would result in the conversion of a Form 5500 series return to a taxable return, you are responsible for controlling and protecting the statute until either:

    1. A Form 1041 is secured and TE/GE forwards the case for closure.

    2. We refer the 1041 to the appropriate Exam Functional Unit (for example, SB/SE) with Form 5666. See IRM 4.71.6.6, EP Group Procedures – Making Referrals to Exam Functional Units.

  13. For any examination involving revocation or non-qualification, you must prepare and timely forward, necessary referrals to the appropriate Exam Functional Unit (EFU) (for example, SB/SE) responsible for the Form 1041 trust return. Consider making a preliminary referral based on the proposed revocation issues. Include any necessary supporting documentation that will help SB/SE calculate the correct tax to be reported on Form 1041. See IRM 4.71.6.6, EP Group Procedures – Making Referrals to Exam Functional Units, for Form 5666 referral procedures.

  14. Follow these procedures when you refer to an EFU for tax due on Form 1041:

    1. Either secure a statute extension on Form 872-H to extend a short statute, or with your group manager’s approval, update the statute of limitations on the corresponding Form 5500 return to alpha code "PP" . See IRM 4.71.9.9 (15), Use of Alpha Codes.

    2. When the statute is updated to alpha code "PP" (for example, 12/PP/2018), prepare a memo of explanation justifying the use of alpha code "PP" , obtain your manager’s signature on the memo and attach it to Form 895-EP.

      Note:

      See IRM 4.71.9 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the memo.

    3. Forward a copy of the memo to your Area Manager.

    4. Save the Form 895-EP in the RCCMS Office Documents folder using the RCCMS Naming Convention.

      Note:

      For an unagreed case, attach Form 895-EP to the outside of the case file. For an agreed case, include a copy of the memo inside the paper case file (if less than 180 days are left on the statute).

  15. Follow these special procedures for project code 6451, 404 Deduction Only (CIP Support), examinations:

    1. Update the statute of limitations to alpha code "PP" immediately upon assignment.

    2. When you expand the scope of a project code 6451 examination to include an IRC 401(a) issue and the statute of limitations is still open for that year, the general statute of limitation procedures contained in this IRM apply and you must protect the statute of limitations for Form 5500/1041.

    3. When you expand the scope of a project code 6451 examination to include an IRC 401(a) issue and the statute of limitations is closed for that year, the statute of limitations on RCCMS and AIMS should continue to reflect alpha code "PP" for that year. If Form 5500 exams are opened in later years for which the statute is still open, the general statute of limitations procedures contained in this IRM apply and you must protect the statute of limitations for Form 5500/1041.

    4. You don’t have to prepare Form 895-EP for a project code 6451 examination when you update the statute of limitations to alpha code "PP" and don’t expand the scope of the examination to include IRC 401(a) issues.

    5. Include a memorandum of explanation (signed by the group manager) detailing the reason for the exam and the update of the statute to alpha code "PP" in the case file. See IRM 4.71.9 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the memo.

  16. When the statute of limitations is extended or updated to an alpha code, RCCMS and AIMS must be updated to reflect the current statute date.

  17. See Form 10949-EP to help you comply with the statute extension rules. See IRM 4.71.9 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits.

Determining the Statute of Limitations Expiration Date

  1. To protect the government's interest, you must be able to determine the statute of limitations expiration date for the assessment of tax for returns that are within EP’s jurisdiction, which include:

    1. Form 5500 series returns

      Note:

      As discussed in IRM 4.71.9.5.1, Statute of Limitations for Forms 5500/1041, consents for Forms 5500 are actually secured for Forms 1041 for the related trust.

    2. Form 5330 (See IRM 4.71.5, Form 5330 Examinations)

    3. Form 990-T for unrelated business income related to plan assets of an examined Form 5500 (See IRM 4.71.10, Form 990-T Examinations)

    4. Form 1040/1120 discrepancy adjustments (See IRM 4.71.4, Discrepancy Adjustments)

  2. The normal statute of limitations for all returns under EP jurisdiction (except for Forms 5330 for excise tax under IRC 4975) expires three years from the due date of the return or the date filed, whichever is later. A return is deemed filed by its due date if filed on or before its due date. See IRC 6501.

  3. The normal statute of limitations for Form 5330 for excise tax under IRC 4975 is initially based on the filing of the related Form 5500. The statute of limitations generally expires three years from the due date of the related Form 5500 return or the date the related Form 5500 was filed, whichever is later. See IRM 4.71.9.5.2, Statute of Limitations for Form 5330, for a more detailed discussion.

  4. For these returns, the statutory period is six years from the date the return is filed or deemed filed, whichever is later where:

    1. Form 1040, Form 1120, or Form 990-T: there’s been a substantial omission of gross income on the return in excess of 25% of the amount of gross income stated on the return. See IRC 6501(e)(1).

    2. Form 5330: there has been an omission of more than 25% of the excise tax due, unless disclosure of the item giving rise to the tax was made in a manner that adequately apprises the Secretary of the existence and nature of the item. See IRC 6501(e)(3) and 26 CFR 301.6501(e)-1(c).

      Note:

      The statute of limitations for Forms 5330 for excise tax under IRC 4975 may also be six years if it is not adequately disclosed on the related Form 5500.

  5. The three and six year rules don’t apply when false or fraudulent returns are filed with the intent to evade tax. In these instances, the tax may be assessed or collected at any time.

    Note:

    Contact the EP Exam Fraud Subject Matter Expert (EP SME) or TE/GE Fraud Specialist if you have potential fraud. See IRM 4.71.25, EP Exam Fraud Procedures.

    Note:

    The EP Exam Fraud Subject Matter Expert (EP SME) or TEGE Fraud Specialist contact information is found on the TEGE Home Page at the Fraud Contacts link.

  6. Take the most conservative approach and protect the three-year statute, if possible, even though a six year statute appears applicable, or when it appears that the return is false or fraudulent.

  7. Obtain written approval from Area Counsel before pursuing a six year statute of limitations.

Statute of Limitations for Forms 5500/1041

  1. The normal statute of limitations date expires three years from the later of the due date of the Form 5500 series return or the date the Form 5500 series return is filed.

  2. If a Form 5500 is not filed, but is required to be filed, and you prepare a substitute for return that is established on AIMS and RCCMS per IRM 4.71.1.21(4), Amended, Substitute and Secured Forms 5500, update the statute of limitations on AIMS and RCCMS to alpha code "EE" per IRM 4.71.9.9 (12), Use of Alpha Codes.

  3. The statute of limitations that must be protected is that of the Form 1041 for the trust that relates to the plan.

    Note:

    If the plan is disqualified, the trust also becomes non-qualified and loses its tax-exempt status, and the trust must file Forms 1041 for each calendar year that it is not qualified.

  4. The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends.

    Note:

    See IRM 4.71.9.6.1, Securing Consents for Forms 5500/1041, for a more detailed explanation.

  5. See the Statute Expiration Chart to help you determine the statute of limitations for Forms 1041. Complete this chart and place it in the case file. See IRM 4.71.9 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for the Form 1041 Statute Expiration Chart.

Statute of Limitations for Form 5330

  1. For Chapter 43 excise taxes other than IRC 4975, the statute of limitations commences to run only when the Form 5330 is filed or due, whichever is later. Examples of excise taxes where the filing of Form 5330 begins the running of the statute are:

    IRC Section Description Form 5330 Due Date Responsible Filer
    IRC 4971 Failure to meet minimum funding standards. By the later of:
    • the last day of the 7th month after the end of the employer’s tax year, or

    • 8 1/2 months after the last day of the plan year that ends with or within the employer’s tax year.

    Employer
    IRC 4972 Nondeductible contributions to qualified employer plans. By the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. Employer
    IRC 4973(a)(3) Excess contributions to an IRC 403(b)(7)(A) custodial account. By the last day of the 7th month after the end of the tax year of the individual who must file the return. The individual who is liable for the tax under section 4973(a)(3)
    IRC 4976 Maintaining a funded welfare benefit plan that provides a disqualified benefit during any tax year. By the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. Employer
    IRC 4978 and IRC 4978A Tax on certain ESOP dispositions. By the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. Employer
    IRC 4979 Excess contributions and excess aggregate contributions to plans with cash or deferred arrangements. By the last day of the 15th month after the close of the plan year to which the excess contributions or excess aggregate contributions relate. Employer
    IRC 4979A Certain prohibited allocations of qualified securities by an ESOP. By the last day of the 7th month after the end of the tax year of the employer. Employer
    IRC 4980 Reversion of qualified plan assets to employers. By the last day of the month following the month in which the reversion occurred. Employer
  2. In general, for Form 5330 filed for IRC 4975 excise tax:

    1. The three-year statute of limitations begins to run on the date the administrator files the Form 5500 series return and the prohibited transaction is sufficiently disclosed. See IRC 6501(l)(1).

    2. If the filed Form 5500 does not disclose the prohibited transaction, the six-year statute period applies. The excise tax may be assessed at any time within six years after the later of the date the Form 5500 series return was filed or due.

      Note:

      Written approval from Area Counsel is required whenever a statute of limitations beyond three years is being pursued. Take the most conservative approach and protect the three-year statute, if possible, even though a six year statute appears applicable.

  3. Even if the disqualified person files Form 5330 and pays the excise tax, it is the filing of the applicable Form 5500 series return that starts the running of the statute of limitations for IRC 4975 excise tax.

  4. For prohibited transactions under IRC 4975 involving a discrete act (one-time occurrence, such as a sale), even though the taxes are imposed annually, there is only one period of limitations applicable to all the tax attributable to the prohibited transaction. Therefore, the filed or due date to be used in determining the statute of limitations date is limited to that of the initial Form 5500 return filed for the period in which the discrete act occurred.

    1. It is the filing of the Form 5500 for the plan year in which the prohibited transaction occurs that starts the running of the statute of limitations for IRC 4975 excise tax imposed on a disqualified person for a discrete act. The Form 5500 filed for the year in which the discrete act occurred governs the Form 5330 statute of limitations for the initial year in which the prohibited transaction occurred, and also for all years within the taxable period. The taxable period ends on the earlier of: i) Mandatory Review mailing of the notice of deficiency (90-Day Letter), ii) the assessment of the excise tax under IRC 4975(a), or iii) the correction of the prohibited transaction.

    2. The IRS must assess all excise taxes on a disqualified person for a discrete transaction, even those payable in later tax years, before the statute of limitations expires for the tax year in which the transaction initially occurred. The IRS can’t assess any excise tax on a prohibited transaction payable in any year, once the statute has expired for the disqualified person’s tax year in which the transaction occurred if that prohibited transaction is a discrete act.

    3. See IRM 4.71.9.6.3, Securing Consents for Form 5330, for instructions on preparing Form 872 for a prohibited transaction that is a discrete act.

  5. For a prohibited transaction that is considered a continuing transaction, such as a loan or lease, the situation is different.

    1. In addition to the original transaction, a new transaction is deemed to occur on the first day of each subsequent taxable year of the disqualified person. The amount involved is reported and taxed in the initial tax year and again in each subsequent tax year until the original transaction is corrected.

    2. The filing of the Form 5500 return for the year in which the prohibited transaction first occurred starts the running of the statute of limitations for purposes of the tax on the actual transaction occurring in that plan year. It does not start the running of the statute of limitations for the transactions deemed to occur in subsequent plan years.

    3. There are separate statutes of limitations for the transactions deemed to occur in each subsequent year. The filing of the Form 5500 return for each subsequent plan year starts the running of the statutes for transactions deemed to reoccur in that year.

    4. Unlike a discrete act, the statutory period may expire for the act engaged in the first year, but IRS may assess the tax for subsequent acts deemed to have occurred for which the statutory period has not expired.

    5. Excise tax related to a year for which the statute of limitations has expired may not be tiered into later years.

  6. If the excise tax omitted on a filed return is greater than 25% of the excise tax initially reported, the statute of limitations period is six years.

    Note:

    You must obtain Area Counsel's written advice on whether the six-year statute applies and keep it in the case file.

  7. Filing Form 5330 for one type of excise tax does not start the running of the statute of limitations for another type of excise tax.

    Example:

    If Employer A files Form 5330 to report excise tax for IRC 4975 excise tax, but also owes IRC 4972 excise tax which was not reported on the Form 5330, the statute of limitations for IRC 4972 excise tax does not begin to run with the filing of Form 5330 filed for IRC 4975 excise tax.

Statute of Limitations for Form 990-T

  1. If the trust has unrelated business taxable income for the taxable year of $1,000 or more, the trust is required to file a Form 990-T. See 26 CFR 1.6012-2(e).

  2. Form 990-T is due on the 15th day of the fourth month following the close of the taxable year of the trust.

  3. If the trust files a Form 990-T before filing a Form 5500, then the Form 990-T is the return that begins the running of the statute of limitations on the Form 990-T.

  4. If the Form 990-T is not filed, the statute of limitations starts to run based upon the Form 5500 return if:

    1. The Form 5500 series return is filed, and

    2. The Form 5500 discloses sufficient information to reveal the existence of UBI.

      Note:

      The IRS's position on adequate disclosure is in Rev. Rul. 69-247. Although specifically citing Form 990, the same principles apply to Form 5500. Per Rev. Rul. 69-247, the return (for example Form 990 or Form 5500) "must state the nature of the income-producing activity with sufficient specificity" to enable the Commissioner to determine whether the income is from a related activity and must disclose the gross receipts from the activity. If the information return does not disclose facts sufficient to apprise the IRS of the nature and amount of the income, the IRS follows the position of Rev. Rul. 62-10, which is that the filing of the information return (for example Form 5500) does not start the period of limitations for purposes of assessment of unrelated business income tax. See GCM 38082.

  5. If the Form 990-T is not filed, and the criteria in IRM 4.71.9.5.3 (4) above are not met, the statute of limitations does not begin to run.

  6. If the trust files Form 990-T and the amount of omitted gross income from unrelated business activity is greater than 25% of the reported gross income from unrelated business activity, the statute of limitations period is six years from the date the Form 990-T return was filed.

    Note:

    Obtain Area Counsel's written advice on whether the six-year statute applies and keep it in the case file.

Statute of Limitations for Form 1040 and Form 1120

  1. The normal statute of limitations for Forms 1040 and Forms 1120 expires three years from the due date of the return or the date filed, whichever is later. A return is deemed filed on the due date of the return if filed on or before its due date.

  2. Forms 1040 are due on April 15th following the end of the tax year of the individual.

    Example:

    For example, Form 1040 for a tax year ending December 31, 2017 was due on April 15, 2018.

  3. Forms 1120 are due on the 15th day of the third month following the end of the tax year of the corporation for 2015 tax tears and earlier. For example, Form 1120 for a tax year ending December 31, 2015 is due on March 15, 2016.

    Note:

    Beginning with 2016 tax returns, unless the tax year ends on December 31 or June 30, all C corporations are due on the 15th day of the 4th month after the end of the tax year. A six-month extension is allowed from that date. Tax years ending December 31 or June 30th continue to be due on the 15th day of the third month following the end of the tax year until the 2026 tax year when they also will be due on the 15th day of the fourth month.

  4. If the gross income omitted on the Form 1040 or Form 1120 return is greater than 25% of the reported gross income, the statute of limitations period is six years from the date the applicable return was filed.

    Note:

    Obtain Area Counsel's written advice on whether the six-year statute applies and keep it in the case file.

Statute of Limitations for Form 5329

  1. The statute of limitations for assessment of taxes expires the later of, three years from the due date of the Form 5329 return or the date the return is filed.

    1. If a Form 5329 is not filed, there is no statute of limitations date.

    2. A return is deemed filed on its due date if filed on or before its due date.

  2. The statutory period for assessment of tax is six years from the date the return is filed when a determination is made that there has been an omission of more than 25% of the tax due. See IRC 6501(e)(3).

    Note:

    Only Area Counsel can determine if a six-year statute of limitations applies. Fully document all discussions with and responses from Area Counsel in the CCR.

  3. IMF will automatically calculate a statute of limitations date for a Form 5329 established on AIMS; however, we can’t rely on the calculated date to correctly reflect the statute date for a SFR for IRC 4973 excise taxes.

  4. Update the statute of limitations to alpha code "EE" per IRM 4.71.9.9 (12), Use of Alpha Codes, when no return has been filed and the statute of limitations has not begun to run.

    Note:

    The procedures listed in IRM 4.71.9.9 (13) related to alpha code "II" no longer apply to Forms 1040 related to Form 5329 exams (i.e., the statute date of Forms 1040 related to Forms 5329 under exam should no longer be updated to alpha code "II" ).

  5. If AIMS and/or RCCMS reflects an incorrect statute date, notify your manager and update the statute of limitations through RCCMS with the "Update AIMS" box checked.

Preparation and Processing of Consents to Extend the Statute of Limitations

  1. Use the most current version of forms when you extend a statute of limitations:

    • Form 872-H when extending a statute of limitations for a Form 990-T or Form 1041 related to Form 5500.

    • Form 872 when extending a statute of limitations for a Form 5330, Form 1040, or Form 1120.

    • Form SS-10 when extending a statute of limitations for a Form 941. See IRM 4.71.9.7, Monitoring the Statute Date on a Non-Return Unit (NRU) Case.

  2. The IRS must prepare the consent, not the taxpayer or the POA.

  3. The consent must be prepared in duplicate.

  4. Both consents must be signed with the original signature(s) of the taxpayer(s) or valid POA and dated, and returned to the IRS.

    1. Preparer/taxpayer signature stamps or carbon signatures aren’t permitted when signing consent forms.

    2. Make sure that the individual who signs Forms 872 or 872-H on behalf of the taxpayer is properly authorized to sign.

    3. If Forms 872 or 872-H are signed by an individual other than the taxpayer, inspect Form 2848 carefully to make sure the individual who signed is authorized to sign the consent for that particular return and year.

    Note:

    You may accept consents by efax if you have contacted the taxpayer by phone or in-person and documented the case chronology record with the contact date and noted that the taxpayer wishes to send the Form 872 or Form 872-H by efax.

  5. Consents with alterations, erasures, and corrections should not knowingly be provided to the taxpayer for signature, regardless of how slight or immaterial.

  6. If the taxpayer has made alterations on the consent, it is preferred that you prepare a new consent for the taxpayer’s signature.

    1. However, if the alterations on the consent are acceptable to the IRS, the taxpayer has initialed each alteration, and there is not sufficient time to perfect the consent, the IRS representative signing the consent may initial alterations and sign the consent.

    2. Advice of Area Counsel must be sought before accepting an altered consent.

    3. For additional guidance on restricted consents, see IRM 25.6.22.8, Restricted Consents.

  7. The IRS will not make changes to a consent form after execution by the taxpayer.

  8. If later discovered that consents mailed to the taxpayer contain errors, prepare and mail corrected consents to the taxpayer. Use Letter 1817-A to:

    1. Send corrected consents to the taxpayer.

    2. Solicit Form 56 if Form 872-H is received from the taxpayer without Form 56.

      Note:

      See IRM 4.71.9 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1817-A.

  9. After an authorized IRS employee has executed both consent forms, keep one original in the case file and return the second original to the taxpayer.

    Note:

    If the taxpayer only returns one signed copy of the consent, make a copy. The original and the copy should be signed on behalf of the IRS. Keep the original in the file. Send the signed copy to the taxpayer/POA.

  10. Per IRS Delegation Order 25-2, group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

  11. Persons officially acting for someone authorized to sign consents may sign consents.

    1. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned.

    2. Attach the document giving authority to act to the IRS’s copy of the consent.

  12. The IRS official executing the consent should enter the date in the space provided to the right of his/her signature.

Securing Consents for Forms 5500/1041

  1. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

    Note:

    When a Form 5500 examination is closed from the group, agreed cases should have at least 180 days remaining on the statute of limitations and unagreed cases should have one year.

  2. Consents related to a Form 5500 are secured for the related Form 1041.

  3. Use the most current version of Form 872-H when extending a statute of limitations for a Form 1041 related to a Form 5500.

  4. Also send Form 56 to the trustee(s) for completion when extending the statute of limitations on a trust. See IRM 4.71.9 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 56.

    Note:

    Form 56 must be prepared for an individual and signed by that individual. Do not prepare a Form 56 for a trust department.

  5. The statute of limitations for a Form 1041 related to a Form 5500 expires three years from the later of:

    1. The due date of the Form 5500 (the last day of the seventh month after the end of the plan year), or

    2. The date the Form 5500 was filed.

  6. Once a plan is no longer qualified under IRC 401(a), realized income earned by the trust becomes taxable.

    1. The trust must file a Form 1041 for those years during which the plan is disqualified and the statute of limitations is open.

    2. The Form 1041 is filed on behalf of the trust by the trustee.

    3. The trust is responsible for paying the tax, and the trustee is responsible for making sure that the Form 1041 is filed and the taxes are paid.

    4. The trustee (or authorized representative) must sign the statute extension form (Form 872-H) in order for the extension to be valid.

      Note:

      If the trust has multiple trustees, review the trust document to determine if multiple trustees are required to sign Form 872-H. If the trust document doesn’t specifically require the signature of more than one trustee, the signature of one trustee is sufficient.

      Note:

      You (the agent) must verify fiduciary authority to ensure the validity of the consent. You can verify this by reviewing the plan and/or trust instrument. Include in the case file, a copy of the documentation under which the fiduciary derives the authority to act and which documents the fact that such authority remains in full force and effect on the date the consent is signed by the fiduciary.

    5. Form 872-H must be signed by a current trustee and dated, which may be a different individual than the person who was a trustee when Form 5500 was filed.

  7. Use Form 872-H when extending a statute of limitations for a Form 1041 related to Form 5500.

  8. Since an examination of Form 5500 may result in the revocation or disqualification of the plan, consents must be secured for the trust for the calendar year.

    Note:

    The tax year of any trust is a calendar year (IRC 644(a)). If IRS determines that the plan is not qualified under IRC 401(a), its associated trust would also not be qualified under IRC 501(a). Therefore, consents are obtained for the calendar year.

  9. The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends. For example, if the plan years ending 9/30/2016 and 9/30/2017 are being examined and it is determined that issues exist that may result in revocation or disqualification of the plan:

    1. Form 872-H would be secured for the trust year ending 12/31/2015. If the Form 5500 for the 9/30/2016 plan year was filed timely on 4/30/2017, the statute of limitations for the trust year ending 12/31/2015 would expire on 4/30/2020.

    2. Form 872-H would be secured for a short trust year (10/1/2015 through 12/31/2015) if the 9/30/2016 plan year is the initial year of proposed revocation or disqualification (for example, the plan sponsor failed to include eligible employees in the plan and you determined that this issue didn’t occur in the 9/30/2015 plan year).

      Note:

      See IRM 4.71.9 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 872-H for a short tax year.

    3. If you need to extend the statute of limitations for the trust year ending 12/31/2016, you’d complete Form 872-H for the trust year ending 12/31/2016 for a full calendar year (1/1/2016 through 12/31/2016). The statute of limitations would be based on the Form 5500 for the plan year ending 9/30/2017. The statute of limitations for the trust year ending 12/31/2016 would expire on 4/30/2021 if the Form 5500 for the 9/30/2017 plan year was timely filed on 4/30/2018.

      Note:

      When you must extend the statute of limitations for the trust year ending 12/31/2016, do not neglect to also extend the statute for the trust year ending 12/31/2015. See IRM 4.71.9 Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 872-H for the short tax year (12/31/2015) and the subsequent full trust year (12/31/2016).

    4. If the plan disqualification extends to an earlier plan year, Form 872-H would be secured for the entire 2015 calendar year (for example, the plan sponsor failed to amend the plan timely for EGTRRA, or the plan sponsor failed to include eligible employees in the plan in an earlier plan year).

      Note:

      See IRM 4.71.9 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 872-H for a full trust year.

  10. Generally, the name of the trust listed on the applicable Form 5500 should be listed on the "Name(s)" line of Form 872-H, unless since filing, there has been a name change.

  11. If the trust name has changed since the applicable Form 5500 was filed, prepare the consent using both the current trust name and the former name of the trust (for example, "XYZ Profit Sharing Trust, formerly XYZ ESOP Trust" ).

  12. Include the plan number on the "Name(s)" line.

  13. If the trust has its own EIN, list it on the "Taxpayer Identification Number" line in the header of Form 872-H.

    1. Do not use the plan sponsor's EIN on Form 872-H.

    2. If the trust does not have an EIN, then leave the "Taxpayer Identification Number" line on Form 872-H blank.

    3. Research to determine if the trust has an EIN: Ask the plan sponsor or trustee if the trust has its own EIN. Also, review all documentation you received when reviewing the plan assets for the existence of a trust EIN.

      Note:

      Verify that the trust EIN is correct via IDRS research with the INOLES command code (i.e., INOLES75-0000000).

    4. If the trust does not have its own EIN, the taxpayer can obtain an EIN for the trust by: i) filing Form SS-4 (see Form SS-4 instructions) or ii) online at IRS.gov. See IRM 4.71.10.4.1, Obtaining a Trust EIN.

  14. List the current address on the appropriate lines.

  15. List the word "Income" on the "Kind of tax" line of Form 872-H.

  16. List a date on the "Expiration date" line of Form 872-H that is far enough in the future to allow ample time for case processing.

    Note:

    When a Form 5500 examination is closed from the group: agreed cases should have at least 270 days remaining on the statute of limitations and unagreed cases should have one year.

  17. List the following information in the "Internal Revenue Service Signature and Title" section:

    1. List the name of the authorized individual's name (for example, group manager's name) who will sign the consent on the "IRS Official's Name" line.

    2. List in the title of the authorized individual (such as Manager, Group 7672) on the "IRS Official's Title" line.

  18. Complete Form 56 per IRM 4.71.9 Exhibit 6. See IRM 4.71.9 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits.

    Note:

    If the trust does not have an EIN, leave the EIN on Form 56 blank.

  19. Mail Form 56 to the trustee along with the two original Forms 872-H.

  20. The trustee(s) must sign both Forms 872-H exactly as his/her name appears on Form 56. The trustee must be a current trustee.

  21. Per IRS Delegation Order 25-2, group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

  22. Persons officially acting for someone authorized to sign consents may sign consents.

    1. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned.

    2. Attach the document giving authority to act to the IRS’s copy of the consent.

  23. Make sure the consent is dated on the "Date signed" line next to the signatures.

Securing Consents for a Master Trust

  1. Use Form 872-H to extend the statute of limitations for a master trust.

  2. When extending a statute of limitations related to a master trust, secure a statute extension for the entire master trust.

  3. When completing Form 872-H, and Form 56 for a master trust:

    1. Use the name of the master trust.

    2. Use the EIN of the master trust (all have an EIN).

    3. Use the address of the master trust.

      Note:

      The fiduciary’s name on Form 56 must reflect an individual and that individual must signed the form. Do not prepare the form for a trust department.

  4. If the taxpayer or POA requests a restricted consent, including a restricted consent that attempts to limit the consent to the plan under examination, the restricted consent must be approved by Area Counsel prior to its execution. If the taxpayer or POA requests that restrictive language be added to a consent, the restrictive language must be approved by Area Counsel prior to the execution of the restricted consent.

  5. Form 872-H must be signed by the trustee of the master trust.

    Note:

    Consult Area Counsel if you have concerns about an individual’s authority to sign the Form 872-H.

  6. Since the name of the master trust is being used on Form 872-H, document the CCR and the workpapers to explain that plan assets are invested in a master trust and that Form 872-H was secured to extend the statute of limitations on the master trust.

  7. Update the statute of the Form(s) 5500 under exam in RCCMS for the plan year(s) that correspond to the years of the master trust that were extended with Form 872-H.

Securing Consents for Form 5330

  1. Use the most current version of Form 872 when extending a statute of limitations for a Form 5330.

  2. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

    Note:

    When a Form 5330 examination is closed from the group, agreed cases should have at least 180 days remaining on the statute of limitations and unagreed cases should have at least one year.

    Note:

    Appeals will not accept a case unless there is at least one year remaining on the statute of limitations when they receive it.

  3. A Form 5330 exam is considered agreed if:

    1. The issue giving rise to the excise tax has been corrected (in the case of IRC 4971 and IRC 4975 excise tax), and

    2. The responsible party has filed Form 5330 (or signed and submitted Form 870-EP) for the correct amount of tax.

    Note:

    A case is considered to be an agreed case if these two items occur, even if no taxes have been paid at the time the case is ready to close.

  4. Remember that for Chapter 43 excise taxes, other than for prohibited transactions (IRC 4975), the statute of limitations starts to run only when the Form 5330 is filed or due, whichever is later. So for all excise taxes other than IRC 4975, prepare Form 872 only if:

    1. Form 5330 was filed,

    2. The tax reported is incorrect, and

    3. The statute of limitations is less than the number of days specified in IRM 4.71.9.6.3 (2) above.

    Note:

    See IRM 4.71.9.5.2, Statute of Limitations for Form 5330, for additional information on determining the statute of limitations for Forms 5330.

  5. Remember that for IRC 4975 excise tax, the statute of limitations is initially based on the Form 5500 series return filed for the plan year in which the prohibited transaction occurred. The normal statute of limitations date is three years following the later of the date the Form 5500 was filed or due.

  6. Prepare Form 872 to extend the statute of limitations for a Form 5330 for any excise tax listed in IRM 4.71.9.5.2, Statute of Limitations for Form 5330,other than tax under IRC 4975 for a discrete prohibited transaction as follows:

    1. List the complete name of the person or entity responsible for filing the Form 5330 on the "Name(s)" line.

    2. List the EIN or SSN of the person responsible for filing the Form 5330 in the "Taxpayer Identification Number" block.

    3. List the current address of the person or entity responsible for filing the Form 5330 on the address line.

    4. For IRC 4975 excise tax, insert "IRC 4975 excise" as the type of tax.

    5. For all other excise tax, insert "excise" as the type of tax.

    6. Enter the tax period for which the statute is being extended.

      Note:

      The tax period must be the taxpayer’s tax year and not the plan year.

    7. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

    8. Fill in the name and title of the authorized individual who will sign on behalf of the IRS (normally the group manager).

      Note:

      IRS Delegation Order 25-2 authorizes group managers and reviewers (grade GS-11 or higher) to sign consents (Form 872 or Form 872-H).

    9. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

    10. Make sure the consent is dated on the "Date signed" line next to the signatures.

    11. See IRM 4.71.9 Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 872 for a continuing prohibited transaction (IRC 4975 excise tax).

  7. For prohibited transactions involving a discrete act, you must obtain an extension that covers not only the tax year of the disqualified person for the year in which the act occurred, but also each subsequent year.

    1. The preferred way to prepare an extension is to complete a restricted consent that specifies the type of tax (IRC 4975 excise) and the initial year in paragraph (1) of Form 872.

    2. Include in the consent an additional paragraph (6) that lists each subsequent tax year beginning with the second tax year and ending with the current tax year.

      Example:

      Assume a discrete prohibited transaction occurred on July 1, 2014, during the plan year ending December 31, 2014. Also assume that the transaction involves a disqualified person with a calendar tax year. If the consent is being mailed on October 10, 2017, paragraph (6) would read as follows: "This consent also applies to returns filed for the periods ended December 31, 2015; December 31, 2016, and December 31, 2017 for tax attributable to prohibited acts occurring during the plan year ending December 31, 2014."

    3. See IRM 4.71.9 Exhibit 11 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 872 for a discrete prohibited transaction.

    Note:

    For discrete acts, the statute is technically extended for each affected taxable year if a consent is obtained for the year in which the prohibited transaction occurred. However, obtaining an extension that covers each year will resolve any questions as to whether later years have closed because specific extensions were not obtained for those years.

  8. For prohibited transactions involving either discrete or continuing transactions:

    1. More than one disqualified person may be involved in the same prohibited transaction. In such cases, all of the parties are jointly and severally liable.

    2. Secure the consent to extend the statutory period from all disqualified persons who may be subject to tax on the prohibited transaction.

      Note:

      Remember that, initially, the three-year statute of limitations will commence to run on the date the administrator files the Form 5500 series return in which the prohibited transaction is sufficiently disclosed.

    3. While each disqualified person must sign a separate consent, only one must pay the tax.

    4. Obtaining a statute extension for the Form 5500 does not extend the statute of limitations for IRC 4975 excise tax on a prohibited transaction that occurred in that plan year.

Securing Consents for Form 990-T

  1. If the trust has engaged in activities which result in UBI, the trust is required to file a Form 990-T for those years during which the trust has engaged in such activities and for which the statute of limitations is open.

  2. If the trust files a Form 990-T prior to the filing of a Form 5500, then the Form 990-T is the return that begins the running of the statute of limitations on the Form 990-T.

  3. If the Form 990-T is not filed, the statute of limitations starts to run based upon the Form 5500 return if:

    1. The Form 5500 series return is filed, and

    2. The Form 5500 discloses sufficient information to reveal the existence of UBI.

  4. The Form 990-T is filed by the trustee(s) on behalf of the trust.

  5. The trust is responsible for paying the tax, and the trustee is responsible for making sure the Form 990-T is filed and that the taxes are paid.

  6. The trustee must sign the Form 872-H in order for the extension to be valid.

    Note:

    If the trust has multiple trustees then the trust document must be reviewed to determine if multiple trustees are required to sign Form 872-H. If the trust document does not specifically require the signature of more than one trustee, the signature of one trustee is sufficient.

    Note:

    You must verify fiduciary authority to ensure the validity of the consent. Verify by reviewing the plan and/or trust instrument. Include in the case file a copy of the documentation under which the fiduciary derives the authority to act and which documents, the fact that such authority remains in full force and effect on the date the fiduciary signed the consent.

  7. Also send Form 56 to the trustee(s) for completion when extending the statute of limitations on a trust. See IRM 4.71.9 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 56.

    Note:

    Check Line 4h in section B of Form 56 and insert "Form 990-T" in the space provided.

  8. If the trust is required to file a Form 990-T, the taxable year of the trust is the same as the plan year of the trust. A trust does not lose its exempt status due to UBI; therefore, if the plan is on a calendar year, the Form 990-T is filed based upon a calendar year. If the trust is on a fiscal year, the Form 990-T is filed based upon the plan’s fiscal year. The Form 872-H must reflect the plan year of the trust as the period being extended.

  9. Prepare Form 872-H to extend the statute of limitations for a Form 990-T as follows:

    1. List the name of the trust on the "Name(s)" line of Form 872-H.

      Note:

      If the trust name has changed since the applicable Form 5500 was filed, the consent should be prepared using both the current trust name and the former name of the trust (for example, "XYZ Profit Sharing Trust, formerly XYZ ESOP Trust" ).

    2. List the employer identification number (EIN) of the trust in the "Taxpayer Identification Number" block.

      Note:

      Do not use the plan sponsor's EIN. If the trust doesn’t have an EIN, the trustee must get one before a consent can be secured for Form 990-T. See IRM 4.71.10.4.1, Obtaining a Trust EIN, for the procedures in obtaining a trust EIN.

    3. List the current address of the trust on the address line.

    4. Insert "income" as the type of tax.

    5. Enter the tax period for which the statute is being extended.

      Note:

      For Form 990-T this would be the same period as the plan year.

    6. Input a date on the "Expiration date" line of Form 872-H that is far enough in the future to allow ample time for case processing.

    7. Type the name of the authorized individual's name (e.g., group manager's name) who will sign the consent on the "IRS Official's Name" line.

    8. IRS Delegation Order 25-2 provides that group managers and Reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

    9. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

    10. Make sure the consent is dated on the "Date signed" line next to the signatures.

  10. See IRM 4.71.9 Exhibit 12 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 872-H for Form 990-T.

Securing Consents for Form 1040 and Form 1120

  1. Use the most current version of Form 872 when extending the statute of limitations for a Form 1040 or Form 1120.

  2. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

    Note:

    When a Form 1040 or Form 1120 discrepancy adjustment is closed from the group, agreed cases should have at least 180 days remaining on the statute of limitations and unagreed cases should have one year.

    Note:

    A case is considered agreed if the taxpayer signs Form 4549-E.

  3. Complete Form 872 as follows:

    1. Prepare the consent using the same name(s) as that under which the return was filed, unless since filing, there has been a name change. If the name changed, prepare the consent using both names (for example, "Mary J. Smith, formerly Mary J. Brown" ).

    2. For a jointly filed Form 1040, list both spouses’ names (for example, William L. Smith and Jane M. Smith).

    3. List the EIN or SSN in the "Taxpayer Identification Number" block. For a jointly filed Form 1040, list only the primary SSN.

    4. Insert "income" as the type of tax.

    5. Use the taxpayer’s current address, rather than the address shown on the return. Determine the current address based on the best information available, including IDRS, correspondence from the taxpayer, etc.

    6. Enter the tax period for which the statute is being extended.

    7. State the year covered by the consent in full, including the month, day, and year.

    8. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

    9. Type the name of the authorized individual's name (for example, group manager's name) who will sign the consent on the IRS Official's Name line.

    10. The consent must be signed and dated by a corporate officer when extending the statute for a Form 1120.

    11. The consent must be signed and dated by both spouses when extending the statute for a jointly filed Form 1040.

      Note:

      Alternatively, each spouse (or former spouse, if the taxpayers are no longer married) may sign two copies of separate Forms 872.

    12. IRS Delegation Order 25-2 provides that group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

    13. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

    14. Make sure the consent is dated on the "Date signed" line next to the signatures.

  4. Wherever practicable, any notice for a joint return must be sent separately to each individual filing the joint return. See Act section 3201(d) of RRA 98.

    Note:

    If you can determine with absolute certainty that both individuals reside at the same address, then you don’t need to mail the consents separately. Document in the CCR how you determined that the taxpayers resided at the same address.

Securing Consents for Form 5329

  1. Use the most current version of Form 872 when extending a statute of limitations for a Form 5329.

  2. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

    Note:

    When a Form 5329 examination is closed from the group, agreed cases should have at least 180 days remaining on the statute of limitations and unagreed cases, one year.

  3. A Form 5329 exam is considered agreed if Form 5329 (or Form 870-EP) has been filed for the correct amount of tax.:

    Note:

    A case is considered to be an agreed case if these two forms are filed reporting the correct amount of tax, even if no taxes have been paid at the time the case is ready to close.

  4. Remember that the statute of limitations commences to run only when the Form 5329 is filed or due, whichever is later, so preparation of Form 872 is only necessary if:

    1. Form 5329 was filed, and

    2. The statute of limitations is less than the number of days specified in IRM 4.71.9.6.6 (2) above.

    Note:

    See IRM 4.71.9.5.5, Statute of Limitations for Form 5329, for additional information on determining the statute of limitations for Forms 5330.

  5. Prepare Form 872, when extending the statute of limitations for a Form 5329, as follows:

    1. List the complete name of the person responsible for filing the Form 5329 on the "Name(s)" line.

    2. List the SSN of the person responsible for filing the Form 5329 in the "Taxpayer Identification Number" block.

    3. List the current address of the person responsible for filing the Form 5329 on the address line.

    4. List "excise" as the type of tax.

    5. Enter the tax period for which the statute is being extended.

      Note:

      The tax period must be the taxpayer’s tax year and not the plan year.

    6. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

    7. Fill in the name and title of the authorized individual who will sign on behalf of the IRS (normally the group manager).

      Note:

      IRS Delegation Order 25-2 authorizes group managers and reviewers (grade GS-11 or higher) to counter sign Form 872.

    8. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

    9. Make sure the consent is dated on the "Date signed" line next to the signatures.

Letters Used to Transmit Consents

  1. Use the following letters to send consents to the taxpayer with copies to the POA:

    Letter Use to... Refer to Exhibit for Example
    Letter 907-A, Request to Extend Statute Letter Send the applicable consent forms (two originals of each consent) to the taxpayer or POA. See IRM 4.71.9 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits
    Letter 928, Request to Extend Statute-Follow-up Letter Follow-up to Letter 907-A when you haven’t timely received the requested consents from the taxpayer. See IRM 4.71.9 Exhibit 14 at IRM 4.71 - Employee Plans Examination Exhibits.
    Letter 929, Transmittal to Taxpayer of Copy of Signed Consent Send the original executed consent form to the taxpayer or POA. See IRM 4.71.9 Exhibit 15 at IRM 4.71 - Employee Plans Examination Exhibits
    Letter 1817-A Request additional information or send the taxpayer revised consent forms if you need to secure a revised consent See IRM 4.71.9 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits.
  2. If the taxpayer has a POA, you must mail a copy of the same documents mailed to the taxpayer to the POA. Use cover Letter 937-A, Transmittal Letter for Power of Attorney, to mail the documents.

    Note:

    When preparing any of these letters, make sure your (agent's) address is in the top header, and the correct taxpayer information is on the address line and in the spaces in the upper right header.

  3. When you mail Letter 907-A to the taxpayer, include the following items as enclosures:

    1. Two copies of the consent form (Form 872 or Form 872-H),

    2. Pub 1035,

    3. Form 56 (if the consent pertains to Form 1041 or Form 990-T), and

    4. A self-addressed return envelope.

  4. If the applicable return is a jointly filed Form 1040 and both spouses are residing at the same mailing address, then mail or present one complete set of documents, which contains Letter 907-A addressed to both spouses at the common address, Pub 1035 and two copies of Form 872.

  5. If the applicable return is a jointly filed Form 1040 and you determined that both spouses are not residing at the same address, document the separate addresses in the CCR and mail separately a complete set of documents, which contains Letter 907-A, Pub 1035 and two copies of Form 872, to each spouse and document the CCR with the date and fact that you mailed one set of documents to each spouse.

  6. The taxpayer must send you two original executed consent forms (Form 872 or Form 872-H).

    1. Both forms should be executed by an authorized IRS representative.

    2. Include one original in the case file and mail the other original back to the taxpayer.

    3. See IRM 4.71.12, Case File Assembly Guidelines.

  7. Save a copy of all letters mailed in IRM 4.71.9.6.7 (1) in the RCCMS Office Documents folder using the RCCMS Naming Convention.

Monitoring the Statute Date on a Non-Return Unit (NRU) Case

  1. Although a NRU does not have its own statute date (because a return was not filed), there are returns with statute of limitations affected by the NRU plan under examination.

  2. Use RCCMS to track the statute date of the affected related return.

    1. On the RCCMS NRU case, enter the statute date of the related Form 941, Form 1120, Form 1120-S, Form 1065, or Form 1040, (as applicable) affected by the NRU examination.

    2. The statute date will help you and your manager monitor the case for a timely referral or pursuit of a Form 1040/1120 discrepancy adjustment, or pursuit and assessment of applicable penalties, when necessary.

  3. For IRC 403(b) and IRC 457(b) examinations, the affected related return will be the last quarterly Form 941 filed for the tax year examined.

    Note:

    The last quarterly Form 941 return is due by 1/31 and has a three year statute date from 4/15.

    Example:

    The statute date for the Form 941 for the quarter ending 12/31/2017 is 4/15/2021).

    1. Initially, Classification uses the normal statute date of the related Form 941 for IRC 403(b) and IRC 457(b) examinations for RCCMS statute control purposes.

    2. EP won’t control the Form 941 return for IRC 403(b) and IRC 457(b) examinations on AIMS since EP does not have jurisdiction to examine Forms 941.

    3. Even though we don’t control the Form 941 statute date on AIMS for the applicable tax years, protect the Government’s interests for any potential tax adjustments to that return before the statute expires.

    4. Steps to protect the Government's interest would include making a timely referral on Form 5666 with Exempt Organizations (EO) to ensure the Form 941 statute is protected for any proposed adjustments.

    5. When you make a timely referral to EO (or whichever business unit has jurisdiction over the taxpayer), the responsibility to protect the statute no longer rests with you. When you make a timely referral, update the statute of limitations to alpha code "EE" in RCCMS and NMF AIMS (for example, 04/EE/2018).

    6. You may update the statute date for the IRC 403(b) and IRC 457(b) examination to alpha code "EE" when you and your manager determine that there are no tax consequences to the related Form 941 or the Form 941 tax is insignificant.

      Note:

      Document your discussion with your manager and his/her concurrence on the CCR.

    7. You may update the statute date for the IRC 403(b) and IRC 457(b) examination to alpha code "EE" when you pick up a prior year and the related Form 941 statute has already barred.

      Example:

      You are resolving an exam issue through Employee Plans Compliance Resolution System (EPCRS). As part of resolution, you open prior years for correction. Although you don’t create an AIMS account for the 403(b) return, you may update the 403(b) statute using alpha code EE.

      Note:

      Document your discussions with your manager and his/her concurrence on the CCR.

    8. The statute of limitations for Form 941 is extended by Form SS-10. See IRM 4.71.9 Exhibit 18 at IRM 4.71 - Employee Plans Examination Exhibits.

    9. Form SS-10 may be secured by EP Exam or by EO or FSL/ET.

      Note:

      If Form SS-10 is secured by EP, the EP group manager can countersign Form SS-10 for the IRS.

    10. When secured, and the group has a scanner, scan the Form SS-10 and save it in RCCMS Office Documents folder using the RCCMS Naming Convention, regardless of whether EO or FSL/ET secures it. If not scanned, place a copy of the SS-10 in the paper case file.

  4. When updating the statute of limitations for a Form 941 that is not under exam (the exam is not established on AIMS by either EO, SB/SE or LB&I), complete Form 3177 as follows:

    1. Initiator – Enter the agent’s name and phone number.

    2. Date – Enter the current date.

    3. Taxpayer Name – Enter the name of the Taxpayer.

    4. EIN OR SSN – Enter the TIN of the Taxpayer.

    5. TRC – Highlight "560" and enter the new statute date as MM/DD/YY.

    6. MFT Code – Enter 01 for Form 941.

    7. Taxable Period – Enter the taxable period being extended as YYYYMM.

    8. Send through secure email or efax the completed Form 3177 and Form SS-10 to the manager of the TE/GE Closing Group in Brooklyn. The efax number is 855-821-0089.

    9. The Efax Cover Sheet should contain the following note: "Please update the statute on Form 941. The return is not controlled on AIMS" .

  5. For SEP, SARSEP, SIMPLE IRAs, and IRC 457(f) examinations, the related return(s) affected will normally be Form 1040 for the tax years under examination for the individual participants.

    Note:

    The related Form 1120 can be a return of concern for a SEP, SARSEP, or SIMPLE IRA-based plan sponsor if potential discrepancy adjustments are proposed as a result of an improper deduction for employer contributions to the participant's IRA accounts.

    1. Initially, EP Classification uses the normal statute date of the related Form 1040 for SEP, SARSEP, SIMPLE IRA, and 457(f) examinations for control purposes on RCCMS.

    2. If you establish the related Form 1040 discrepancy adjustment on AIMS and RCCMS, you may update the statute date for the SEP, SARSEP, SIMPLE IRA, or IRC 457(f) examination to alpha code "EE" .

    3. You may update the statute date for the SEP, SARSEP, or SIMPLE IRA examination to alpha code "EE" in RCCMS and NMF AIMS when you and your manager determine that the SEP/SARSEP complies with IRC 408(k) or the SIMPLE IRA complies with IRC 408(p).

  6. Because related 1040 and 1120 tax returns can be affected by NRU examinations, agents should review IRM 4.71.9.5.4, Statute of Limitations for Form 1040 and Form 1120, before opening an examination of a particular year.

  7. Because a related Form 941, Form 1040 or Form 1120 can be affected by NRU examinations, follow the time frames in IRM 4.71.9.4, Agent Responsibilities and Procedures, when beginning an examination.

    1. Unless your group manager approves, don’t start a NRU examination for a given year if the statute date for the related tax return will expire within 12 months.

      Example:

      You shouldn’t start a SIMPLE IRA examination for the 2016 calendar tax year any later than April 15, 2019 (if the related Form 1040 was timely filed and there were no extensions), since starting the examination after that date would leave less than one year on the related Form 1040 statute date.

Securing Consents for IRC 6707A Penalties

  1. IRC 6707A imposes a penalty for failure to include "reportable transaction" information on a return.

  2. "Reportable transaction" means any transaction with respect to which information is required to be included with a return or statement because that transaction is of a type which the Secretary determines as having a potential for tax avoidance or evasion. See IRC 6707A(c)(1).

    1. A "listed transaction" is a type of "reportable transaction" .

    2. A "listed transaction" is defined as a reportable transaction which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of IRC 6011.

  3. Generally, the initial statute of limitations period for purposes of IRC 6707A is determined by the statute of limitations for the applicable tax return(s) (Forms 1040, 1120 1120-S or 1065), which is the later of three years from the date the return is filed or due.

  4. If a "reportable transaction" exists, IRC 6011 requires that the transaction be reported on the applicable income tax return (Forms 1040, 1120, 1065) of the entities involved in the transaction.

  5. The taxpayer should file Form 8886 with the applicable tax return(s) and the Office of Tax Shelter Analysis (OTSA).

  6. If Form 8886 is not filed with the applicable tax return and with OTSA, additional time may be added to the normal three year statute of limitations per IRC 6501(c)(10).

  7. Per IRC 6501(c)(10), if a taxpayer fails to include on any return or statement for any taxable year any information with respect to a "listed transaction" , which is required under IRC 6011 to be included with such return or statement, the time for assessment of any tax imposed by this title with respect to such transaction shall not expire before the date which is 1 year after the earlier of--

    1. The date on which the Secretary is furnished the information so required, or

    2. The date that a material advisor meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112(b) relating to such transaction with respect to such taxpayer.

  8. If the normal statute has expired, seek written approval from Counsel for support of the extended statute under IRC 6501(c)(10) for a "listed transaction" .

    1. Include Counsel’s written approval in the penalty case file.

    2. Get the Counsel attorney’s contact information from the EP Abusive Tax Avoidance Transaction (ATAT) Coordinator.

      Note:

      The contact information for ATAT Coordinator is found on the TEGE Home Page at the ATAT Program Contacts link.

  9. Form 5500 is not subject to the IRC 6707A penalty.

  10. When an IRC 6707A penalty file is closed from the group, agreed cases should have at least 210 days remaining on the statute of limitations and unagreed cases, at least one year.

    1. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

    2. A case is considered agreed if Form 870-EP is signed by the taxpayer.

  11. When extending the statute on an IRC 6707A penalty case (Forms 1120, 1120-S, 1065, or 1040), prepare Form 872 (using the most current version) for each entity or person involved in the transaction as follows:

    1. List the complete name of the person or entity on the "Name(s)" line of Form 872.

    2. List the employer identification number (EIN) or social security number (SSN) on the "TIN" line of the Form 872.

    3. List the current address of the person or entity on the "Address" line of Form 872.

    4. If you’re extending both the income tax statute and IRC 6707A penalty statute, list "Income and IRC 6707A Penalty" on the "Kind of tax" line of Form 872.

    5. If you’re extending the IRC 6707A penalty statute only, list "IRC 6707A Penalty" on the "Kind of tax" line of Form 872.

    6. Enter the tax period for which the statute is being extended on the applicable line of Form 872.

    7. Enter a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for the penalty case to process.

    8. Include in the consent an additional paragraph (6) that reads as follows: "Without otherwise limiting the applicability of this agreement, this agreement also extends to the expiration date identified in paragraph (1) above, the period of limitations for assessing any penalty pursuant to IRC section 6707A, Penalty For Failure to Include Reportable Transaction Information with the Return, with respect to the taxpayers, kind of tax and tax periods identified above."

    9. To extend the statute for a partnership (Form 1065), the Form 872 should be signed by the General Partner and not the Tax Matters Partner. Since there isn’t a line on the Form 872 for a General Partner to sign, strike through the words "Corporate Name" and insert "Partnership Name" and strike through "Corporate Officer" and insert "General Partner" .

    10. Type the name of the authorized individual's name (e.g., group manager's name) who will sign the consent on the "IRS Official's Name" line.

    11. Per IRS Delegation Order 25-2, group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872).

    12. Make sure the consent is dated on the "Date signed" line next to the signatures.

    13. See IRM 4.71.9 Exhibit 16 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 872 for a IRC 6707A penalty case.

  12. Once a signed Form 872 has been secured and countersigned, update Non-Master File AIMS for the penalty case, AIMS (for the taxable return if the 872 covers it), and RCCMS.

  13. If the taxable return is established on AIMS, the group responsible for the return must update AIMS.

    1. If the return is charged out to an SB/SE group, that group must update the statute.

    2. If the return is not charged out to any group (the exam is not established on AIMS by either EP, SB/SE or LB&I), follow the instructions in IRM 4.71.9.8 (14) to update the statute on Master File using Form 3177.

    3. If Form 872 is secured only for the IRC 6707A penalty, update only Non-Master File AIMS for the penalty case and RCCMS.

  14. When updating the statute of limitations using Form 3177 for a Form 1120, 1120-S, 1065, or 1040 for which an examination has not yet been established on AIMS, complete and process Form 3177 as follows:

    1. Initiator – Enter the agent’s name and phone number.

    2. Date – Enter the current date.

    3. Taxpayer Name – Enter the name of the Taxpayer.

    4. EIN OR SSN – Enter the TIN of the Taxpayer.

    5. TRC – Highlight "560" and enter the new statute date as MM/DD/YY.

    6. MFT Code – Enter 02 for Form 1120, 06 for Form 1065, or 30 for Form 1040.

    7. Taxable Period – Enter the taxable period being extended as YYYY/MM.

    8. Efax the completed Form 3177, Form 872 and AMDIS print to the manager of the TE/GE Closing Group in Brooklyn. The efax number is 855-821-0089.

    9. The Efax Cover Sheet should contain the following note: "Please update the statute on this return. The return is not controlled on AIMS."

    10. See IRM 4.71.9 Exhibit 17 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3177.

    Note:

    If a return is controlled on AIMS (an exam of the applicable return has been initiated), the group with the open exam must complete this update to the statute. Do not send it to the manager of the Support Processing Unit.

Use of Alpha Codes

  1. In some cases, you may enter a two-digit alphabetic code designating a special statute situation in the day (DD) position of the statute date on AIMS and RCCMS.

    Example:

    If you update a statute to alpha code "PP" and the actual statute expiration date is 12/31/2017, the statute date will be entered on AIMS as 12/PP/2017.

  2. In the past, assessment statutes have expired and the ability to assess a tax liability has been lost because we’ve improperly used alpha codes. Therefore, it is important that employees who determine alpha codes understand how the tax law impacting the periods of limitation applies in each situation.

  3. In non-filer situations, update the statute to alpha code "EE" after the AIMS record for the non-filed tax period is established.

    Note:

    This does not apply to IRC 4975 excise tax if a Form 5500 was filed for the applicable year in which the prohibited transaction occurred or was deemed to re-occur.

  4. Most alpha codes apply only when precise requirements of the law are met. The alpha code should be used only when it is clear that all essential elements of the applicable law are present.

  5. To protect the persons determining and approving the alpha code, in cases where the normal statutory period for assessment is still open, prepare Form 895-EP at the time the statute is updated and include a statement in the "Remarks" section of Form 895-EP. The signatures or initials of the employee charged with the return and the manager next to the statement ensure that they’ve considered all aspects of the alpha code condition.

  6. Alpha codes "AA" , "EE" , and "PP" are commonly used within EP Exam.

  7. Alpha code "WW" is used in EP in conjunction with "listed transactions" and corresponding penalties under IRC 6707A.

  8. Alpha codes "CC" and "XX" are used in very specific occasions, as stated in IRM 4.71.9.9 (11) and IRM 4.71.9.9 (17) below.

  9. Alpha code "AA" , Claim for Refund/Credit Only Issue, is often used when working claims.

    1. Alpha code "AA" designates that the taxpayer timely filed a claim for refund/credit and you’ve decided that there are no other issues on the return which will warrant an additional assessment and the claimed refund has not been paid to the taxpayer.

    2. The statute is held open for refund or credit up to the amount of the claim subject to the limitation on the amount provided by the look back rules of IRC 6511(b) (for example, for a refund claim filed within the 3-year period, the amount is limited to the tax paid during the 3 years immediately preceding the filing of the claim, plus the period of any extension of time for filing the return).

    3. Alpha code "AA" should not be used if there are issues which could result in additional assessment of tax or penalties.

    4. If the statute for assessment is open when you receive a claim, enter the actual statute expiration date, rather than "AA" , on the statute control records.

    5. Update the statute controls "AA" only after you’re sure there’s no likelihood of a tax or penalty assessment and you’ve determined that the refund amount has not already been paid to the taxpayer.

    6. Prepare Form 895-EP when updating the statute of limitations to alpha code "AA" .

    7. An appropriate statement in the "Remarks" section of Form 895-EP would be: "The return was inspected and there are no material issues other than those on the claim and the claimed refund has not been paid."

    8. Even though the assessment statute has expired, other adjustments can be made to taxable income to partially or fully offset the otherwise allowable claim for refund. If the claimed refund has been paid to the taxpayer, then no offsets can be made after expiration of the assessment statute of limitations.

    9. Alpha code "AA" may be used for formal claims, informal claims, and for taxpayer requests for abatement of unpaid tax (AIMS source code 73 - Taxpayer Request, also known as Audit Reconsiderations).

  10. Alpha "AB" is used when a particular tax for a particular period is addressed in a properly executed closing agreement

    1. Alpha code "AB" designates that the statutory limitation pertaining to the period of time for assessment of tax for the taxable period is no longer pertinent because any applicable tax has been addressed in or waived by a closing agreement that has been properly executed by both the taxpayer and a delegated IRS official.

    2. The month (MM) and year (YYYY) entries accompanying the AB alpha code are the month and year the statute expired, absent the properly executed closing agreement waiving the assessment statute of limitations.

  11. Alpha code "CC" is used to reflect tax periods covered by a Form 10498–B or memorandum signed by an Area Manager or Director in TE/GE, stating that no consent to extend the statute should be secured.

    1. An appropriate statement in the "Remarks" section of Form 895-EP would be: "Concurrence memorandum approved on [date signed by the Area Manager or Director]."

    2. Alpha code "CC" may also be used with a tax return under joint investigation which has a statutory period for assessment that expired before the return was established on AIMS.

    3. If Criminal Investigation withdraws from the joint investigation prior to the expiration of the statute, the statute controls should be updated to reflect the normal statute expiration date, or other applicable alpha code if some other exception to the normal three-year assessment statute applies.

  12. Alpha code "EE" is used when a return has not been filed and the statute of limitations has not begun to run.

    1. It would not be appropriate to use alpha code "EE" for a Form 5330 that is due for a prohibited transaction if a Form 5500 series return was filed for the period in which the prohibited transaction occurred or was deemed to occur.

    2. It would not be appropriate to use alpha code "EE" for a Form 990-T if UBI was adequately disclosed on the related Form 5500 series return.

    3. It would not be appropriate to use alpha code "EE" for a Form 1040 or Form 1120 discrepancy adjustment prepared by EP.

    4. Use alpha code "EE" for a SFR Form 5329 or Form 5330 for excise tax other than IRC 4975 excise tax.

    5. It would be appropriate to use alpha code "EE" for a SFR Form 5500 series return.

    6. It would be appropriate to use alpha code "EE" for a SFR Form 990-T when UBI is not adequately disclosed on the related Form 5500 series return.

    7. It would be appropriate to use alpha code "EE" for an IRC 403(b) or IRC 457(b) examination when you make a timely referral to EO or FSL/ET (whichever business unit has jurisdiction over the taxpayer), for a related Form 941. See IRM 4.71.9.7 (3), Monitoring the Statute Date on a Non-Return Unit (NRU) Case.

    8. It would be appropriate to use alpha code "EE" for an IRC 403(b) or IRC 457(b) examination when you and your manager determine that there are no tax consequences to the related Form 941 or that any amount of tax on the Form 941 is determined to be insignificant by your group manager. See IRM 4.71.9.7 (3), Monitoring the Statute Date on a Non-Return Unit (NRU) Case.

    9. It would be appropriate to use alpha code "EE" for an IRC 403(b) or IRC 457(b) examination when you pick up a prior year and the related Form 941 statute has already barred.

      Example:

      You’re resolving the exam issue via EPCRS and opening prior years to verify correction). See IRM 4.71.9.7, Monitoring the Statute Date on a Non-Return Unit (NRU) Case.

    10. The month and year appearing with alpha code "EE" represent the date that is six years from the date the SFR posted.

      Example:

      If the SFR posted on 04/15/2017 the statute date on RCCMS and AIMS should be reflected as 04/EE/2023.

    11. Update the case to alpha code "EE" through RCCMS by selecting alpha code "EE" on the "alpha day" line in the first RCCMS "General" tab. Do this after the SFR Form 990-T, Form 5330, or Form 5500 is processed, the return is posted and the exam is established on AIMS.

      Note:

      When updating the statute to alpha code "EE" you must also select aging reason code 26 in the "Codes" tab of RCCMS to keep alpha code "EE" from falling off of AIMS (i.e., the statute will revert back to the original statute date if aging reason code 26 is not input). Make sure the "Update AIMS" box in RCCMS is checked when the update is transmitted.

    12. If you receive a a late filed return from a taxpayer, replace the alpha code "EE" statute designation with the true statute expiration date based on the date the return was received by the IRS.

    13. Get AIMS transcripts throughout the examination, at least once every six months, to check for posting of a filed return (such as transaction code 976 or 977).

  13. Alpha code "II" , Form 1040 - Other Taxes, is used for non-income tax issues related to Form 1040.

    1. Do not use alpha code II for Forms 1040 related to Form 5329 exams (for example, the statute date of Forms 1040 related to Forms 5329 under exam should no longer be updated to alpha code "II" ).

    2. Alpha code "II" can be used when IRS determined there are no income tax issues of material tax consequence on the Form 1040 return, which require examination or the assessment statute has already expired for the income taxes.

    3. Since the extended tax assessment statute resulting from the non-filing of Other Taxes only applies to the tax liability relating to the Other Tax and does not apply to the income tax ASED, decide carefully that no income tax issues are present on the return before you update the statute to alpha code "II" .

    4. If there are income tax issues of tax consequence based on inspection of the Form 1040 and the period for assessment of the income taxes has not expired, don’t update the statute to alpha code "II" . Take action to protect the income tax assessment statute of limitations.

  14. Alpha code "OO" , False Return, is used when the IRS is relying on the provisions of IRC 6501(c)(1), relating to the filing of a false or fraudulent return with the intent to evade tax, to keep the statute open.

    1. If fraud is proven, there is no limit on the period for assessment.

    2. The taxpayer cannot undo the fraudulent return by filing a non-fraudulent amended return. See Badaracco v. Commissioner, 464 U.S. 386 (1984).

    3. If the original return is fraudulent, an increase in the tax liability can be assessed at any time.

    4. As a general rule, the IRS relies on IRC 6501(c)(1) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

    Note:

    The IRS has the burden of proof with respect to fraud.

  15. Alpha code "PP" , Non-taxable EP Return, is used only for Form 5500 series returns and with the following guidelines:

    1. The group manager must determine with certainty that Form 1041 won’t be due for the period under examination, or if a timely referral is made to the Exam Functional Unit (such as SBSE), that EP is no longer responsible for protecting the statute of limitations on Form 1041.

      Note:

      When a timely referral is made to an Exam Functional Unit for tax due on Form 1041, the statute of limitations may be updated to alpha code "PP" (with group manager approval) within the time frames listed in IRM 4.71.9.9 (15) below.

    2. The group manager ensures that Form 895-EP is appropriately noted and initialed by the agent and the group manager.

    3. The group manager ensures that a memorandum of explanation (signed by the manager and detailing the reasons for not extending the statutory period) is attached to the Form 895-EP in the case file, and a copy of the memo is sent to the Area Manager.

    4. Unless the exception stated in the next paragraph, only the examining group may update the statute to alpha code "PP" when there are between 60 and 270 days remaining on the statute of limitations.

    5. When you/your manager decide to pick up an examination of Form 5500 for a prior year for which the statute of limitations has expired or has less than 271 days remaining, immediately update the statute of limitations to alpha code "PP."

      Note:

      Include a memorandum of explanation (signed by the group manager) detailing the reasons for opening an examination of a prior year's return in the case file and/or save it in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.9 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the memo.

    6. If we later determine that alpha code "PP" was inappropriate, you may need to complete Form 3999 per IRM 4.71.9.12, Barred Statute Reporting - Form 3999, Statute Expiration Report.

    7. Include a copy of the AIMS print in the case file (or RCCMS) to verify the date the statute was updated to alpha code "PP."

  16. Alpha code "WW" , Failure to Provide Information with Respect to "Listed Transactions" , is used to indicate that, per IRC 6501(c)(10), the period for assessment of tax for to a "listed transaction" that the taxpayer failed to disclose as required under IRC 6011 won’t expire before one year after the earlier of either: i) the date the taxpayer discloses the transaction per prescribed procedures (see Rev. Proc. 2005-26, or subsequently published guidance) or ii) the date a "material advisor" meets the requirements of IRC 6112 for a request by the Secretary under IRC 6112 relating to the transaction.

    1. If neither the taxpayer nor the "material advisor" disclose the required information, the period of time for assessment of any tax with respect to the "listed transaction" is unlimited.

    2. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question and IRC 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period prescribed by IRC 6501(a).

    3. IRC 6707A(c)(2) defines a "listed transaction" as a transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction.

    4. IRC 6501(c)(10) should generally be relied upon to extend the period for assessment only in those instances when the normal three year statute for the year has expired.

    5. The statute may be updated to alpha code "WW" when you’ve determined that IRC 6501(c)(10) applies and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(10), (3) written Area Counsel approval is obtained in advance of the normal three-year assessment statute expiration date, and (4) written Area Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

      Note:

      Area Counsel's written approval must be maintained in the case file.

    6. In order to determine if the one-year period under IRC 6501(c)(10) has started to run, consult Rev. Proc. 2005-26, or subsequently published guidance, to determine if the taxpayer or "material advisor" has complied with the requirements contained in the applicable published guidance.

    7. The statute is one year after the earlier of the date the taxpayer discloses the transaction, as discussed in the above-referenced revenue procedure, or the date that a "material advisor" meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112 relating to the transaction.

    8. The statute date determined under IRC 6501(c)(10) can be extended by consent agreement (Form 872) but the agent needs to bear in mind that consent agreements to extend the IRC 6501(c)(10) statute date only apply to the period for assessing the liability related to the "listed transaction" .

    9. The group manager will ensure that Form 895-EP is appropriately noted and initialed by the agent and the group manager.

    10. A copy of the AIMS print will be included in the case file (or RCCMS) to verify the date of the statute was updated to alpha code "WW" .

  17. Alpha code "XX" is used on RCCMS to designate that a return preparer penalty under IRC 6694(b) may be assessed at any time.

    1. Alpha code "XX" should not be used to reflect an alpha code statute on AIMS.

    2. Return preparer penalty controls for penalties under IRC 6694(a) and IRC 6695 are to reflect a date three years after either the due date of the return (without regard to an extension of time to file) or the date the return or claim for refund with respect to which the penalty is assessed was filed, whichever is later.

    3. Alpha code "XX" can be used to designate that a return preparer penalty under IRC 6713 for preparer’s unauthorized disclosure or use of taxpayer information may be assessed at any time.

    4. Alpha code "XX" can also be used to designate that the penalties under IRC 6700 and IRC 6701 for promoting abusive tax shelters and aiding and abetting understatement of the tax liability, respectively, may be assessed at any time.

Special Procedures for All Mangers in TE/GE

  1. Group managers and Managers, Special Review Group 1, EP Mandatory Review, TE/GE Closing Group and Classification are responsible for maintaining statute controls for returns under their jurisdiction. This will be accomplished by the following procedures.

    1. The statute control clerk or other designated employee will annotate the statute expiration date of all incoming returns on a case-tracking sheet.

    2. The manager or a designated individual will verify the statute of limitations date and initial the tracking sheet as appropriate.

    3. All cases received with less than 180 days on agreed cases or 365 days on unagreed cases should be assigned as soon as possible.

    4. The statute control file will be checked at least monthly and, where required, the reviewers will secure consents extending the statute and update AIMS and RCCMS on assigned cases.

Procedures for Table 4.0

  1. Each month the EP AIMS Coordinator will forward AIMS Table 4.0 to all groups.

  2. Managers should review Table 4.0, verify statutes and resolve all problems identified on the table.

  3. Statute analysis will be completed monthly for all groups.

  4. A completed chart containing imminent or potential expired statutes will be provided to Compliance Planning and Classified Planning and Monitoring management.

Table 4.0 Procedures for Group Managers

  1. Generally, once per quarter, a group receives the Table 4.0 with instructions from the EP AIMS Coordinator outlining steps for working the table and returning it for verification.

    Note:

    Area Managers may request the Table 4.0 more often than once per quarter.

  2. The group checks the Table 4.0 cases listed against group statute control files and the returns or other return information, such as BMFOL, EMFOL, IMFOL or RTVUE, to ensure the current statute expiration dates are reflected on the table. See IRM 4.71.2, Overview of IDRS Transcripts, for procedures for requesting transcripts of accounts and various IDRS command codes that can be used for research during the course of an examination.

  3. Use the table as a check to ensure that proper statute control actions are taken.

  4. Immediately take any actions if you discover discrepancies and update AIMS and RCCMS.

  5. Complete the Table 4.0 review within 10 workdays.

  6. When the group finishes their review of Table 4.0, verifies all statute dates and resolves all problems, send the Table to the AIMS Coordinator per the instruction memo or to Compliance Planning and Classified Planning and Monitoring management.

    Note:

    Always send a copy to the EP AIMS Coordinator.

  7. Contact the EP AIMS Coordinator with any questions on Table 4.0.

Table 4.0 Procedures for EP AIMS Coordinator

  1. Upon receipt of worked AIMS Tables 4.0 from the groups, the EP AIMS Coordinator will:

    1. Analyze each table to ensure that group managers have taken proper and timely actions.

    2. Perform additional IDRS research on cases closed from the group level for more than five weeks.

      IF the research shows that the case is THEN
      closed (status 90) Note this on the Table 4.0 and don’t take further action.
      open The group manager is asked to send copies of the group's Form 3210 to the AIMS Coordinator. These documents will be analyzed to determine if further action is warranted.
    3. Thirty days after the AIMS Tables 4.0 have been distributed to the groups, the AIMS Coordinator will provide a report to the Director, EP Exam identifying any significant problems encountered and listing those groups that didn’t return the report.

Barred Statute Reporting - Form 3999, Statute Expiration Report

  1. This section outlines responsibilities for EP managers, agents and other personnel for reporting barred statutes.

  2. Form 3999 is used to report barred statutes on returns requiring statute control. See IRM 4.71.9 Exhibit 19 at IRM 4.71 - Employee Plans Examination Exhibits.

  3. Form 3999 should be prepared for each taxpayer involved in returns assigned for examination and/or controlled on AIMS and/or RCCMS when the statutory period is reflected as expired.

  4. One of the primary uses of the Form 3999 is to identify potential systemic problems or issues and recommendations for corrective actions.

Time Frames for Form 3999

  1. Within 10 calendar days of discovery of a potentially expired statute, the individual who discovers the potential statute expiration must prepare a preliminary Form 3999 and forwarded through the appropriate Area Manager to submit to the Director, EP Examinations.

  2. A final Form 3999 can be prepared as the initial report, if all of the necessary information is available at the time of discovery.

  3. The final Form 3999, if not submitted as the initial report, should be prepared within 60 calendar days of the date of the preliminary report.

Responsibility for Preparing Form 3999

  1. The individual discovering the potential statute expiration is responsible for preparing both:

    • The preliminary barred statute report.

    • A narrative of the facts and circumstances, with a time line, leading up to the potential statute expiration.

  2. The manager of the function or area who possesses the return with the potentially expired statutes is responsible for preparing the final Form 3999.

Instructions for Preparing Form 3999

  1. Only Items 1 through 12 of Form 3999 are completed when a preliminary report is submitted. However, if all of the facts are known at the time of discovery and the 10 day time frame can be met, then a final report can be submitted in lieu of a preliminary report.

  2. A preliminary report should include a brief narrative of how the statute expired with a time line illustration of the processing of the case leading to the statute expiration.

  3. The following signatures are required for the preliminary Form 3999:

    • The group/unit manager

    • The Area Manager or the Manager, EP Mandatory Review (as applicable)

    • The Director, EP Examinations

  4. Make three copies of the completed preliminary report and distribute as follows:

    1. Place one copy for the case file.

    2. Send a copy to the Area Manager.

    3. Send a copy to the Manager, EP Mandatory Review.

  5. Send the original completed preliminary report to the Director, EP Examinations, routed through the Area Manager.

Instructions for the Final Form 3999

  1. The completion of most line items is self-explanatory. However, close attention should be given when completing the following line items.

    1. Item 12a: List the years or periods expired.

    2. Item 12b: List the date of statute expiration.

    3. Item 12c: List the amount of deficiency or over-assessment.

    4. Item 13: Provide information on the status and location of the return at the time of statute expiration. If it is not determinable where a case was on the date of expiration, specify the location of the return at date of discovery.

    5. Item 14: Provide an explanation of why the statute expired with appropriate comments reflected on the back of the form, or an attachment as necessary.

    6. Item 15: Provide corrective action taken or recommended to prevent recurrence of statute expiration. In the event disciplinary action is proposed, it should be explained in Item 15 without identifying the responsible employee. This will be the subject of a separate report.

      Note:

      A sample narrative might begin as follows: "No changes to procedures are recommended. If procedures in place had been properly followed, expiration would not have occurred."

  2. Also include the following information in the final report:

    1. The proposed disciplinary action or the reason why no disciplinary action is merited. Disciplinary action will be the subject of a separate memorandum, as an attachment to the Form 3999.

    2. Any change in the facts from date of discovery of the expired statute to the date of preparation of the final Form 3999 (if applicable).

    3. Narratives from other affected functions cited in the preliminary report (as applicable).

Distribution of Completed Final Form 3999

  1. Once a final Form 3999 is completed, distribute three copies and the original as follows:

    1. Send the original to the Director, EP Examinations, routed through the Area Manager.

    2. Place a copy in the case file.

    3. Send a copy to the Area Manager.

    4. Send a copy to the Manager, EP Mandatory Review who will maintain copies for trend review.

Resolving Disputes

  1. The Director, EP Examinations will resolve any disputes.