4.71.10 Form 990-T Processing

Manual Transmittal

September 25, 2017

Purpose

(1) This transmits revised IRM 4.71.10, Employee Plans Examination of Returns, Form 990-T Examination Procedures.

Background

IRM 4.71.10 provides guidance and information to assist agents in the identification of unrelated business income (UBI) and gives procedures for examining and closing Form 990-T, Exempt Organization Business Income Tax Return, secured during the examination of a Form 5500 series return.

Material Changes

(1) IRM 4.71.10.1, Program, Scope and Objectives, and the subsections thereunder, were added to meet the new internal controls requirements.

(2) IRM 4.71.10.5, Unagreed Cases, was revised to incorporate the September 1, 2017 memorandum from the Commissioner, Tax Exempt and Government Entities entitled, Interim Guidance on Cases Subject to Mandatory Review, which provides that EP Exam groups will begin sending out 30-Day Letters for Forms 990-T, effective October 1, 2017.

(3) IRM 4.71.10.6, Cases Returned From Appeals, was added.

(4) IRM 4.71.10.6, Forms 990-T Established on AIMS and RCCMS in Error, in the previous published version has been renumbered to be IRM 4.71.10.7.

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

Effect on Other Documents

This supersedes IRM 4.71.10, Employee Plans Examination of Returns, Form 990-T Examination Procedures, dated September 6, 2016.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(09-25-2017)


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

Overview of Form 990-T Examinations

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

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

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

  2. Purpose: IRM 4.71.10, Employee Plans Examination of Returns, Form 990-T Examination Procedures, provides the basic examination procedures that will enable EP agents and their managers to properly process Form 990-T, Exempt Organization Business Income Tax Return, examinations.

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

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

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

Authority

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

Program Controls

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

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

    Note:

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

Acronyms, Forms, and Publications

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

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    ARDI Accounts Receivable Dollar Inventory
    BMF Business Master File
    CCR Case Chronology Record
    EIN Employer Identification Number
    EO Exempt Organizations
    EP Employee Plans
    EPCU Employee Plans Compliance Unit
    ESOP Employee Stock Ownership Plan
    ESSP Examinations Special Support and Processing (Closing Unit)
    GCM General Counsel Memo
    IDRS Integrated Data Retrieval System
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    MFT Master File Tax
    OCEP Office/Correspondence Exam
    PLR Private Letter Ruling
    POA Power of Attorney
    RAR Revenue Agent Report
    RCCMS Reporting Compliance Case Management System
    REIT Real Estate Investment Trust
    SFR Substitute for Return
    SOL Statute of Limitations
    TC Transaction Code
    TEQMS Tax Exempt Quality Measurement System
    UBI Unrelated Business Income

     

    Forms and Pubs

    Form Name
    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 886-A Explanation of Items
    Form 895-EP Notice of Statute Expiration
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1041 U.S. Income Tax Return for Estates and Trusts
    Form 1725 Routing Slip
    Form 2848 Power of Attorney and Declaration of Representative
    Form 3198-A TE/GE Special Handling Notice
    Form 3210 Document Transmittal
    Form 3244-A Payment Posting Voucher - Examination
    Form 4442 Inquiry Referral
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5456 Reviewer’s Memorandum - EP/EO
    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 5772-A Employee Plans (EP) Workpaper
    Form 5773-A Employee Plans (EP) Workpaper Summary Continuation
    Form 8821 Tax Information Authorization
    Form 9814 Request for Mail/Shipping Service
    Form 10904 Request for Record Deletion from AIMS
    Form 13133 Expedite Processing Cycle
    Form SS-4 Application for Employer Identification Number
    Pub 1 Your Rights as a Taxpayer
    Pub 594 The IRS Collection Process
    Pub 598 Tax on Unrelated Business Income of Exempt Organizations
    Pub 1020 Appeal Procedures EP Examinations

     

Overview of Form 990-T Examinations

  1. This IRM provides guidance and information to assist agents in the identification of UBI and provides procedures for examining and closing a Form 990-T, Exempt Organization Business Income Tax Return, secured during an examination of a Form 5500.

  2. A Form 990-T is secured during the examination of a Form 5500 series return when it is discovered that the trust assets have produced income that is taxable under IRC 511 as UBI.

  3. A Form 990-T is secured to report UBI of a trust exempt under IRC 501(a) if the gross income from all unrelated businesses is $1,000 or more.

  4. Unrelated debt-financed income, as defined in IRC 514, can be deemed to be UBI and subject to taxation. "Debt-financed income" is discussed in IRM 4.71.10.2.4, Unrelated Debt-Financed Income.

  5. Some examples of an exempt trust engaging in UBI are:

    1. Investing as a limited partner in a partnership carrying on an unrelated trade or business

    2. Purchasing securities on margin

    3. Investing in a partnership set up to invest in securities

    4. When an S Corporation maintains an ESOP and the ESOP fails IRC 409(p), Schedule K-1 income flowing to the ESOP is UBI

  6. In addition to the information contained in this IRM, you will find helpful information covering UBI and unrelated debt financed income in Pub 598 and chapter 12 of the 2005 EP Exam CPE.

Unrelated Business Income

  1. IRC 512(a)(1) defines UBI as the gross income derived from any unrelated trade or business regularly carried on, less the deductions which are directly connected with the carrying on of the trade or business.

  2. IRC 513(a) defines an unrelated trade or business as any trade or business, the conduct of which is not substantially related to the exercise of the purpose for the trust’s exemption under IRC 501(a).

  3. IRC 513(b) defines an unrelated trade or business for purposes of a trust under IRC 501(a) to be any trade or business regularly carried on by such trust or by a partnership of which the trust is a member.

Examples of an Unrelated Trade or Business

  1. The determination of a trade or business is based on a facts and circumstances basis. The regulations under IRC 513 provide examples and guidance on what constitutes a trade or business.

  2. Some examples of an unrelated trade or business are:

    1. An organization involved in real estate construction and development invests some of its retirement plan trust assets in land adjacent or near its own development projects. Subsequent to the subdivision and improvement of the land it is sold with the belief that any gains will not be subject to taxation. If these sales are carried on in a regular and continuous manner, the trust could be considered to be in the real estate business and therefore subject to UBI taxation under IRC 511.

      Note:

      To discover such activities, review the trust’s books and records, any real estate closing statements, deeds or public records.

    2. Rental of personal property (other than personal property leased with real property) is another example of UBI. The leasing of automobiles, office machines, computers, signs and vending machines are some examples of personal property that would constitute UBI.

      Note:

      Any personal property (especially vending machines) in the trust would be an indication of UBI and should be carefully reviewed.

    3. The trust could invest in real estate and use the land for farming, but income from the farmed land would be considered UBI. Such income is often part of the "other income" as shown on the 5500 return.

      Note:

      All "other income" of a trust should be fully analyzed.

Exceptions to UBI for Exempt Trusts

  1. IRC 512(b) provides exceptions and limitations on UBI to exempt qualified retirement trusts.

  2. Some examples of exceptions to UBI are:

    1. Dividends, interest and annuities. All dividends, interest and annuities from regularly carried on trade or business and all deductions connected are not unrelated business income.

    2. Royalties. An example of an exempt royalty would be if a trust owns real estate and another person drills for oil on the site. The other person incurs all of the costs for the drilling and excavation and pays a royalty to the trust. Such royalties would not be UBI to the trust. However, if the trust had paid 50% of the development cost for a 50% ownership in the regularly carried on trade or business, the income would be deemed UBI to the trust.

    3. Gains or losses from the sale of property. Gains and losses from the sale, exchange, or disposition of property are generally not unrelated business income to the trust. This exception does not apply to stock in trade or other property of a kind which would be includible in inventory if on hand at the close of the taxable year, or property held primarily for sale to customers in the ordinary course of the trade or business.

    4. Rents. Income derived from the rental of real property, as part of a regularly carried on trade or business, is excluded from UBI to the trust. Rental income from personal property is subject to UBI. When both real and personal property are rented there are specific rules that apply. See 26 CFR 1.512(b)-1(c).

    5. Net operating losses. The net operating loss deduction provided in IRC 172 is allowed as a deduction when calculating unrelated business taxable income.

Commingled Investments

  1. Many qualified retirement trusts invest in commingled investments such as partnerships, joint ventures, pooled trusts, common trusts, real estate investment trusts (REIT) or some other type of combined investment. This gives the plan sponsor an opportunity to diversify the trust assets.

  2. These types of investments may or may not be subject to UBI depending on the facts and circumstances.

  3. Partnerships. Trusts can invest as either limited partners or general partners. The income derived by the trust is deemed to be of the same character and from the same source as if the trust, rather than the partnership, is the original recipient of the income. Therefore, a trust’s share of any partnership income is treated by the trust as if it is carrying on the trade or business of the partnership. The partnership income passes through the partnership to the trust. This applies to limited partnerships as well as general partnerships.

    1. For example, assume the trust is a partner in a partnership that specializes in REITs. The partnership's business is to research and then buy shares of REITs. Therefore, the income to the trust derived from the investment in the partnership is deemed to be income from an investment in a REIT. As noted below, a trust’s investment income from a REIT is not considered to be UBI. In this example, any income the trust receives from the partnership would not be UBI.

    2. A taxpayer may argue that an investment in a limited partnership is a passive investment and that any income would not be UBI since the trust has no active involvement in the management of the partnership. Rev. Rul. 79-222 explains that an investment by a trust in a limited partnership carrying on an unrelated trade or business will result in UBI.

    3. Additional information on partnership investments can be found in Rev. Rul. 74-197 and 26 CFR 1.512(c)-1.

  4. Pooled Trusts. Although a pooled trust is exempt from taxation, it may be subject to UBI. The tax is imposed at the trust level and is not taxed again when the UBI is distributed to the participating trust.

  5. Common Trusts. These are essentially the same as pooled trusts except that common trusts must have a bank as the trustee.

  6. Real Estate Investment Trusts (REITs).Rev. Rul. 66-106 and 26 CFR 1.856-1(e) provide that a trust's investment in a REIT is essentially the same as an investment in stock of a corporation. Therefore, any distributions from the profits or earnings from a REIT are deemed to be treated as dividends. Dividends are not treated as UBI to the trust. Therefore, income received by a trust from a REIT is not considered to be UBI.

Unrelated Debt-Financed Income

  1. Another form of UBI is income derived from debt-financed property. IRC 514(b)(1) defines debt-financed property as any property held to produce income and on which there is acquisition indebtedness at any time during the year.

  2. Examples of exclusions from debt-financed income:

    1. Debt-financed income that has already been taxed as a regularly carried on unrelated trade or business is not UBI. This is to prevent double taxation to the trust.

    2. Debt-financed income related to the use of an Exempt Loan made to an ESOP is not UBI. Per IRC 514(b)(1)(A)(i), any income derived from property which is substantially related to the purpose of the trust’s exemption would not be debt-financed income. Rev. Rul. 79-122 clarifies the exclusion of ESOP plans from being subject to debt-financed income.

    3. Acquisition indebtedness incurred by a qualified plan in acquiring or improving any real property is not UBI, provided that all of the conditions of IRC 514(c)(9) are satisfied. Refer to the conditions contained in IRC 514(c)(9) to see if this exemption applies.

  3. IRC 514(c)(1) defines acquisition indebtedness as the outstanding amount of:

    1. The indebtedness incurred by the trust in acquiring or improving property;

    2. The indebtedness incurred before the acquisition or improvement of property if such indebtedness would not have been incurred but for such acquisition or improvement; and

    3. The indebtedness incurred after the acquisition or improvement of property if such indebtedness would not have been incurred but for such acquisition or improvement and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition or improvement.

  4. Income from stocks purchased on margin would be debt-financed income.

  5. Any acquisition indebtedness incurred by a partnership flows through to the exempt trust the same way unrelated business taxable income flows through.

  6. See 26 CFR 1.514(a)-1 and Schedule E of Form 990-T for guidance in calculating debt-financed income.

Statute of Limitations for Forms 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.

  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, the statute of limitations begins to run on its filing date.

  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 plan administrator files the Form 5500 series return, and

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

  5. If the trust reported UBI on the Form 5500 series return, 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 5500 series return was filed. See IRC 6501(e).

    Note:

    Before you pursue a six year statute, secure the approval of your manager and Area Counsel.

  6. If the Form 990-T is not filed, and the criteria in IRM 4.71.10.3 (4) are not met, the statute of limitations does not begin running.

  7. 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:

    Before you pursue a six year statute, secure the approval of your manager and Area Counsel.

  8. See IRM 4.71.9.6.4, Securing Consents for Form 990-T, for guidance on completing Form 872-H, Consent to Extend the Time to Assess Tax on a Trust, to extend the statute of limitations for Form 990-T.

    Note:

    Form 872-H can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent to extend the time to assess tax.

General Procedures for Form 990-T Examinations

  1. Follow the usual examination techniques when examining a Form 990-T.

    1. Secure and review source documents substantiating the applicability of UBI tax.

    2. Set up a separate folder for each Form 990-T to be examined.

    3. Use Form 5772-A and Form 5773-A (or equivalent) to reflect documentation of the examination issues and conclusions.

  2. Once adequate documentation has been gathered and the determination has been made to pursue a tax issue, notify the impacted taxpayer in writing of the Form 990-T examination.

    1. Issue an individually designed letter (i.e., a modified Letter 1346 or Letter 1474) with an attached Revenue Agent Report (RAR) containing pertinent facts, law, government position, and UBI tax calculations (also include penalty calculations if applicable).

    2. Solicit the filing of Forms 990-T for all years in which returns are due (provided there is sufficient time remaining on the statute of limitations).

    3. Use Form 870-EP to secure agreement on the additional assessment of tax if additional tax is being assessed on a year when Form 990-T was previously filed (or a substitute Form 990-T was processed). See IRM 4.71.10 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 870-EP.

      Note:

      For purposes of UBI in a trust, Form 870-EP is signed by a trustee of the trust.

    4. Include penalty calculations if penalties are being imposed. IRC 6651(a) penalties are the penalties that are applicable to delinquent Forms 990-T.

      Note:

      See IRM 4.71.18.2, Failure to File and Failure to Pay - IRC 6651(a)(1) & (2), for a discussion on IRC 6651(a) penalties.

    5. Solicit payment of UBI tax with applicable penalties in order to stop interest from accruing.

    6. Send Pub 1, Your Rights as a Taxpayer, with the letter if not previously given to the taxpayer.

    7. Send a copy of the letter to any authorized POA.

  3. After you mail the letter, call the taxpayer to discuss the issue(s) being raised. Your phone call to the taxpayer should be:

    1. No earlier than fourteen calendar days after the letter is mailed, and

    2. No later than twenty one calendar days after the letter is mailed.

  4. A Form 990-T filed for UBI generated by trust assets should be filed by the trust using the trust EIN, not the plan sponsor's EIN. If the trust does not have a EIN, have the taxpayer complete and file a Form SS-4 or complete the application online at irs.gov to obtain one for the trust. See IRM 4.71.10.4.1, Obtaining a Trust EIN.

    Note:

    A Form 990-T sent to Ogden with an EIN that is used for any other purpose than for the filing of Form 990-T for the trust will not process at the Service Campus. The return will reject and a new trust EIN will have to be assigned causing a delay in the processing of the Form 990-T.

  5. Verify the trust EIN entity is established on the BMF.

    1. An entity should automatically establish when an EIN is assigned to the trust.

    2. Solicit an INOLES print to determine if a trust entity is established on AIMS.

  6. In general, the same procedures used to process a Form 5330 will be utilized to process Form 990-T.

    1. Forms 990-T will be established on AIMS and RCCMS by Classification after filed returns or substitute for returns (SFR) have been processed by the Ogden Service Campus and the return has been posted to the BMF as evidenced by a transaction code (TC) 150.

    2. If Form 990-T is secured, make a copy for the file and mail the original to the Ogden Service Campus.

    3. Prepare Form 5599.

      Note:

      Form 5599 is the closing document used to close Forms 990-T established on AIMS and RCCMS.

    4. Save a copy of Form 5599, Form 5772-A, Form 5773-A (or equivalent), all supporting workpapers and all other relevant documents in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.12.3, Assembly Guidelines for "Agreed" Examinations.

    5. Use Letter 2085-A as the closing letter for an agreed Form 990-T exam.

      Note:

      The agent will prepare the letter and it will be mailed to the taxpayer by the designated person in the group.

    6. Do not close an agreed Form 990-T examination until the return is processed and posted by the Ogden Service Campus (which is indicated by a TC 150) and the exam is fully established on RCCMS and AIMS.

    7. Before closing the case to ESSP in Brooklyn, update the status code to 51 on RCCMS and AIMS.

  7. See IRM 4.71.10.5, Unagreed Forms 990-T, and the subsections thereunder for unagreed procedures.

Obtaining a Trust EIN

  1. Solicit the trust EIN from the plan sponsor.

    Note:

    If the trust does not have an EIN, the plan sponsor must complete Form SS-4 and file or fax it to the appropriate IRS office listed on the instructions. Alternatively, the taxpayer can apply for an EIN for the trust online at irs.gov.

  2. If the plan sponsor provides a trust EIN, secure a BMFOLI print to make sure the EIN is not being utilized to file returns other than trust returns (e.g., Form 990-T or Form 1041).

    Note:

    A Form 990-T sent to Ogden with an EIN that is used for any other purpose than for the filing of Form 990-T for the trust will not process at the Service Campus. The return will reject and a new trust EIN will have to be assigned causing a delay in the processing of the Form 990-T.

  3. If the trust does not have an EIN and the plan sponsor will not obtain one, obtain one by faxing Form 4442 to the EO Entity Unit at Ogden Campus. The EEFax number is 855-306-0953. See IRM 4.71.10 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 4442.

  4. Obtaining a new EIN for the trust in a manner described in IRM 4.71.10.4.1 (3) will automatically establish an entity module.

Establishing Forms 990-T on RCCMS and AIMS

  1. Forms 990-T will be established on AIMS and RCCMS by Classification after filed returns or substitute for returns (SFR) have been processed by the Ogden Service Campus and the return has been posted to the Business Master File (BMF) as evidenced by a TC 150.

  2. Once a delinquent Form 990-T return is received from the taxpayer, process the case per IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer.

  3. At the first indication that a case is "unagreed" (e.g., the taxpayer refuses to properly file a Form 990-T that is due), prepare substitute for return(s) (SFR) and establish the returns on RCCMS and AIMS in accordance with IRM 4.71.10.5.2, Substitute for Return Package.

Processing Forms 990-T Received from the Taxpayer

  1. Date stamp all delinquent Forms 990-T with the IRS received date as soon as possible after receipt from the taxpayer.

  2. Verify the accuracy of the return:

    1. Ensure that the EIN listed on the return is a valid EIN for the trust. Obtain an INOLES print to make sure the EIN is for the trust and that the trust entity is present on AIMS.

      Note:

      A Form 990-T sent to Ogden with an EIN that is used for any other purpose than for the filing of Form 990-T for the trust will not process at the Service Campus. The return will reject and a new trust EIN will have to be assigned, causing a delay in the processing of the Form 990-T.

    2. Ensure that the trust year matches the plan year.

      Note:

      Unlike Form 1041, when filing a Form 990-T, trust years do not revert to a calendar year when the plan year is not on a calendar year.

    3. Ensure that the correct amount of tax is reported on the return.

    4. Ensure that the taxpayer signed the return.

    5. Ensure that the correct tax year is listed.

  3. Filing of original tax returns via fax will only be allowed as part of a return perfection process (e.g., securing missing schedule or missing signature) initiated by the IRS or in the post-filing/non-filing activities. Tax returns can be received via fax as part of return perfection even if a taxpayer’s signature is required since Chief Counsel has advised that in circumstances where contact with the taxpayer has been made and documented, faxed signatures are legally sufficient.

  4. If payment is received, process the check in accordance with GAO recommendations:

    1. Make sure the check is made out to the "United States Treasury" . If the payee line is blank or the check is made out to "IRS," overstamp the check with the "United States Treasury" stamp.

    2. The check information (date of check, the check number, amount, payer, IRS recipient name and date received) must be entered into the logbook required to be maintained by the group.

    3. After preparation of Form 3244-A and Form 3210, a group manager must review the Form 3210, compare it to the Form 3244-A and sign the Form 3210. The person who prepares the Form 3244-A cannot be the same person who signs the Form 3210.

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

      Note:

      The Ogden Submission Processing Campus is now returning the acknowledgement copy of Form 3210 to the originator through EEFax.

    5. Send the check along with the Form 990-T package via express mail (next day) to the Ogden Submission Processing Campus by the end of the next business day after receipt.

    6. If the check cannot be mailed to Ogden the same day it is received, secure it in a locked file overnight.

    7. Place the check along with the completed Form 3244-A in a separate addressed envelope inside the express mail envelope.

    8. If the acknowledgement copy of Form 3210 is not received back from the Ogden Service Campus within 10 days after mailing, contact the Service Campus to follow-up receipt of the check. Document these actions in the group logbook.

  5. If no payment is received, process the Form 990-T package as soon as administratively possible (preferably within three business days).

  6. Write in bold red letters on the top margin of the original return: "DELINQUENT RETURN SECURED BY TE/GE EMPLOYEE PLANS." Reminder: Leave room in the upper right corner for the DLN to be entered by the Service Campus.

  7. The prepared package forwarded to the Service Campus will contain the following:

    1. Form 3210.

    2. Any payments received (e.g., check) with Form 3244-A (placed in a separate addressed envelope per IRM 4.71.10.4.3 (4) f) above). See IRM 4.71.10 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3244-A.

    3. Form 13133, Expedite Processing Cycle. See IRM 4.71.10 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 13133.

      Note:

      If IRC 6651 penalties are not to be assessed, the agent must mark Form 13133 accordingly. Penalties will automatically be assessed by the Ogden Campus unless specific instructions are provided otherwise.

    4. Form 3198-A, TE/GE Special Handling Notice. See IRM 4.71.10 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3198-A.

      Note:

      Instructions regarding the assessment or non-assessment or IRC 6651(a)(1) and IRC 6651(a)(2) penalties should be written in the "Other Instructions" section on the bottom of the form. Normally penalties will be assessed by the Ogden Campus unless specific instructions are provided otherwise.

    5. Original Form 990-T.

    Note:

    Fasten items b) through e) in corresponding order with the payment on top and the return on the bottom.

  8. Mail Form 990-T packages without remittance to:

    IRS
    1973 N. Rulon White Blvd.
    Mail Stop 6052
    Ogden, UT 84404

  9. Mail Form 990-T packages with remittance less than $100,000 to:

    IRS
    Attn.: Teller Unit
    1973 N. Rulon White Blvd.
    Mail Stop 1999
    Ogden, UT 84404

  10. If the remittance is $100,000 or more, send an email to the teller unit to &CTR ODN Ogden Tellers with the following information:

    1. UPS tracking number

    2. Dollar amount of the remittance

    3. The city/state the package is being shipped from

    Note:

    See IRM 5.1.2.6.1, Large Dollar Remittances.

  11. If remittance is $100,000 or more, address Form 3210 to the physical address in IRM 4.71.10.4.3 (9), but to Mail Stop 2003 instead of Mail Stop 1999.

  12. The following additional actions are required upon receipt of a single remittance of $1 million or more:

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

    2. Call, email, or EEFax the liaison that you will be sending a single remittance of $1 million or more and provide the tracking number for the overnight package containing the remittance. See IRM 5.1.2.6.1.1, Remittance Over $1M.

  13. When addressing the Express Services Routing slip (Form 9814):

    1. The recipient name should be "Mail Supervisor" with the recipient phone number of (801) 620-3750. This is the case whether or not payment is remitted.

    2. The address listed on Form 9814 should match the address on Form 3210. Make sure the proper mail stop is used.

  14. Before mailing the Form 990-T package, a copy of the entire package should be made for the case file.

  15. Annotate in bold red letters on the top of the copy: "COPY OF DELINQUENT RETURN SECURED BY TE/GE: EP—ORIGINAL RETURN SENT TO OGDEN SC ON 00/00/00" (list the date mailed).

  16. Request a BMFOLT print to confirm that the return has posted. When the return posts, TC 150 will be reflected on the account.

    Note:

    It normally takes four to eight weeks for the Ogden Campus to process a return once it is received.

  17. When the return posts, complete the Related or Subsequent Year Form 5500, 5330 and 990-T Request Form (the Form) and forward it to your manager. See IRM 4.71.10 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of this form.

  18. The manager will send the approved Form to Classification via the Classification mailbox at *TE/GE-EP-Classification.

  19. Once the Form is received, Classification will process the request.

    Note:

    The AIMS account and RCCMS activity will be created within a few days in the group’s organization code.

Closing Agreed Forms 990-T

  1. Forms 990-T examinations are considered agreed when:

    1. Form 990-T is secured from the taxpayer reflecting the correct amount of tax, or

    2. A signed Form 870-EP is secured reflecting an agreed upon change to the tax previously reflected on a filed Form 990-T return, or

    3. The agent determines that no additional tax is due on a previously filed Form 990-T return that he or she examined.

      Note:

      Follow the procedures in IRM 4.71.8, EP Claims, when working a claim.

  2. Prepare Form 5772-A and Form 5773-A (or its equivalent) to document audit procedures and findings. Save a copy of these forms in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.12.3(5), Assembly Guidelines for "Agreed" Examinations.

  3. Make sure the RCCMS closing record is properly completed. When you "validate for close" in RCCMS, you must complete any field that appears in red.

  4. Generate a closing letter covering all Form 990-T years examined.

    1. Prepare Letter 2085-A when the examination results in no change to the tax reported on a filed Form 990-T. See IRM 4.71.10 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example.

    2. Prepare Letter 2087-A when a signed Form 870-EP is secured reflecting agreed upon change to the tax previously reflected on a filed Form 990-T return.

    3. All Form 990-T closing letters will be mailed out by the exam group.

    4. Save a copy of the closing letter in the RCCMS Office Documents folder. If the group has a scanner, scan the signed and dated closing letter into RCCMS.

  5. Use the following disposal codes as appropriate:

    Disposal Codes Conditions
    AIMS 02 (RCCMS = 107) If a previously filed return is examined and there is no change to the tax liability or a timely filed return is secured and there is no change to the tax liability.
    AIMS 03 (RCCMS = 102) The tax has been corrected on a previously filed return and the taxpayer agreed to the changes by signing a Form 870-EP.
    AIMS 06 (RCCMS = 208) A delinquent return was secured.
  6. Enter tax reported on the Form 990-T, secured during the examination, on line 414 of Form 5599 used to close the Form 990-T examination.

  7. Prepare Form 5599 in accordance with IRM 4.71.10.4.5, Preparation of Form 5599 for Agreed Form 990-T Exams, and save it in the RCCMS Office Documents folder.

  8. Close the agreed Form 990-T examination case file(s) and any related Form 5500 series returns to ESSP in Brooklyn when the RCCMS files are received from Classification and the return has fully posted on AIMS.

    Note:

    The case must be fully established on RCCMS and AIMS before the case is closed to ESSP.

  9. The following paper documents must be in a manila folder for all agreed Form 990-T files with a completed Form 10329, Transmittal Sheet-Related Cases, stapled on front:

    • Form 870-EP (if applicable)

      Note:

      Form 10329 is not required if there are no other paper files or if there are no related returns.

      Note:

      If the group has access to a scanner, these documents should also be scanned and saved in RCCMS.

  10. If not scanned and saved in RCCMS, the following additional paper documents must be in a manila folder for all agreed Form 990-T files with a completed Form 10329 stapled on front:

    • Form 872-H (if applicable)

    • Form 895-EP (if required to be prepared in accordance with IRM 4.71.9.3(2), Group Manager Responsibilities and Procedures)

    • Copy of the Form 990-T mailed to the Ogden Campus

    • A copy of the check for payment of tax, penalties or interest

    • Form 2848 or Form 8821 attached to the back of the first page of the return (if there is a valid 2848 or 8821 and it's not scanned into the RCCMS Office Documents folder)

    • Any other paper documents necessary to document the exam trail (that are not saved in the RCCMS Office Documents folder) should also be included in the paper file.

  11. If the case is closed with less than 180 days left on the statute of limitations, the paper case file must be placed in a red folder.

  12. Save all copies of workpapers, forms and letters that you prepared, in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    Note:

    Any documents scanned into RCCMS should be the final version of that document that includes the date and signature, if applicable. For example, if the exam closing letter is scanned into RCCMS, it must be a copy that includes the date the letter was mailed and the signature of the Director, EP Exam.

  13. If the group has a scanner, scan all relevant case related documents received from the taxpayer or POA and save them in RCCMS using the RCCMS Naming Convention.

  14. The applicable closing letter will be mailed out by the group manager (or designee).

    Note:

    Make sure the letter is dated and contains the signature of the Director, EP Exam.

  15. Update the status code to 51 on RCCMS and AIMS when it closes from the group.

  16. Close all agreed Forms 990-T to Support Processing on RCCMS and mail the case file to:

    Internal Revenue Service
    TEGE: ESSP
    2 Metrotech Center
    100 Myrtle Avenue
    Sixth Floor
    Brooklyn, NY 11201

Preparation of Form 5599 for Agreed Form 990-T Exams

  1. Form 5599 is required to be completed (and saved in RCCMS) for all Form 990-T exams. Complete the related fields as appropriate within the RCCMS activity.

  2. Complete the line items as follows:

    1. P7-18: Enter the EIN.

    2. P21-22: The MFT is 34.

    3. P24-29: Enter the tax period.

    4. P31-34: Enter the name control.

    5. C: Enter the name of the taxpayer.

    6. Item 12 – Tax Liability Adjustment: Enter a transaction code of 300 and $0 if no additional tax is being assessed above what is reflected on the return secured by the agent. If additional tax is being assessed above what was reported on a previously filed Form 990-T by utilization of Form 870-EP, enter a transaction code of 300 and the additional amount of tax being assessed.

      Note:

      If the agent previously forwarded an agreed delinquent return that the taxpayer voluntarily filed with the agent to the Ogden Service Campus, the tax assessment would have been made at the Service Campus when the return was previously processed. In that case, do not reflect an additional tax as being due in Item 12 to avoid a double assessment.

    7. Item 12 – Penalties (+): If Form 870-EP is signed by the taxpayer and the agent wants IRC 6651(a) penalties to be assessed, enter transaction code 160 and the amount of penalties that are being assessed. If a delinquent return is secured and the agent wants penalties to be assessed, penalties will be assessed by Ogden Service Campus when the delinquent return is processed, so no penalties should be listed on Form 5599 for a secured delinquent return.

      Note:

      If a delinquent Form 990-T is secured and forwarded to Ogden, the Service Campus will assess IRC 6651(a) penalties when the return is processed unless the agent provides instructions to the contrary in the "Other Instructions" section of the Form 3198-A that accompanies the delinquent return mailed to the Service Campus.

    8. Item 12 – Penalties (-): If IRC 6651(a) penalties on a secured return are assessed by mistake by the Service Campus, they can be abated on Form 5599 by entering, on this line, transaction code 161 and 271 (as applicable) and the dollar amount penalties are to be decreased and by entering transaction code 300 and $0 on the Tax Liability Adjustment line (item 12 - Tax Liability Adjustment).

    9. Item 13: Enter the applicable disposal code as follows:

      Disposal Codes Exam Outcome
      AIMS 02 (RCCMS =107) No change
      AIMS 03 (RCCMS = 102) Agreed tax change
      AIMS 06 (RCCMS = 208) Delinquent return secured
      AIMS 34 (RCCMS =103) Claims allowed in full (surveyed)

      Note:

      See Document 6476, Employee Plans Systems Codes, for definitions. Do not use AIMS disposal code 12 (RCCMS = 202) or AIMS disposal code 15 (RCCMS = 106) to close Forms 990-T.

    10. Item 14: If the statute of limitations has been extended, enter the statute expiration date.

    11. Item 15: This item will be left blank if the dollar amount in item 12 is $0. If line 12 contains a dollar amount (i.e., additional tax is being assessed on a previously filed return), then reference number 886 should be listed here with the additional amount of tax being assessed (additional tax being assessed is listed in both items 12 and 15). If accuracy related penalties are being assessed, list reference number 680 and the penalty amount.

    12. Item 28: Enter the agent’s time on the case.

    13. Item 30: Enter the technique code: 4 – Field exam; 2 – OCEP.

    14. Item 31: Enter the agent’s grade.

    15. Item 32: Enter the grade of the case in the blocks from left to right as two digits (i.e., Grade 9= 09).

    16. Item 33: Enter the agent’s last name; leave a space and then first initial.

    17. Item 37: Enter the delinquent return code. If there is only one delinquent return, enter a "T" . If there is more than one delinquent return, enter a "T" in the latest year and an "R" in all prior years.

    18. Item 40: Enter the project code if there is one. If not enter 0000.

    19. Item 42: Enter the ARDI Code, if applicable.

    20. Item 50: Enter the agent’s group code.

    21. Item 414: For delinquent returns, enter the amount of tax assessed for the year.

      Note:

      Make sure the box under item 50 on page one of the form is checked if an amount is entered in item 414.

  3. Save a copy of Form in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  4. See IRM 4.71.10 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5599 for an agreed Form 990-T exam with tax that is paid.

Amended 990-T Returns

  1. Previously filed Forms 990-T returns can be amended two ways:

    1. Filing an amended Form 990-T. Write "Amended Return Secured by TEGE Employee Plans" at the top of the return.

    2. Filing Form 870-EP (See IRM 4.71.10 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example).

  2. If an amended Form 990-T is received, process the return in accordance with the procedures listed in IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer, above with the exception that the words "delinquent return" should be substituted with the words "amended return" .

  3. If an executed Form 870-EP is received:

    1. Keep the original Form 870-EP in the case file.

    2. Do not send a copy to the Service Campus.

    3. Tax is assessed by Support Processing when the case is closed from Form 5599 when the additional tax is listed in item 12 (Tax Liability Adjustment) with a code of 300. Additional penalties should be listed in item 12 (Penalties) with a code of 160.

    4. If payment is received, prepare Form 3244-A in accordance with IRM 4.71.10 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits . Send Form 3244-A, along with the check and Form 3210 to the applicable address listed in paragraphs (8), (9), or (10) of IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer.

    5. Otherwise, process the case per IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer.

  4. Forms 870-EP can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent to assess tax by fax.

Unagreed Forms 990-T

  1. "Unagreed" cases are those cases in which the taxpayer disagrees with the agent’s position, or agrees only in part. The case is unagreed if either of the following conditions exist:

    1. The amount of initial tax shown on the return is in dispute.

    2. The taxpayer refuses to file a delinquent Form 990-T or sign Form 870-EP.

  2. At the first indication that the case will be unagreed, consult your group manager. Notate discussions with the group manager on the CCR.

  3. If the taxpayer refuses to file a delinquent Form 990-T:

    1. Prepare a substitute for return package. See IRM 4.71.10.5.2, Substitute for Return Package.

    2. Establish unagreed Forms 990-T on RCCMS and AIMS in the same manner as agreed returns.

    3. Follow the procedures set forth in IRM 4.71.10.4.1, Obtaining a Trust EIN, to obtain an EIN for the trust if the trust does not already have an EIN.

  4. Prepare and mail a 30-Day Letter package certified mail to the taxpayer (and POA if applicable). See IRM 4.71.10.5.1, 30-Day Letter Procedures, for instructions on what the agent is required to prepare.

    Note:

    In most cases, the 30-Day Letter will be mailed out by the agent. In the past, 30-Day Letters were mailed out by Mandatory Review, but effective October 1, 2017, the EP Exam groups will mail out 30-Day Letters. See IRM 4.71.10.5 (7) and IRM 4.71.10.5 (8) for two exceptions to the general rule that the agent will mail out the 30-Day Letter

  5. As part of the 30-Day Letter package, prepare a written Revenue Agent Report (RAR) explaining the basis of the proposed adjustments and citing the provisions of the law, regulations, published rulings, United States Tax Court and other court decisions on which the conclusions are based. See IRM 4.71.10.5.1.1, Revenue Agent Report (RAR).

  6. Verbally explain the issues either by telephone or through an arranged face-to-face meeting.

  7. If the Form 990-T is related to a plan that is being disqualified, the Form 990-T should be closed to Mandatory Review to issue the 30-Day Letter.

    Note:

    30-Day Letters related to Forms 5500 filed or due for years when plan revocation or non-qualification is being proposed are issued by Mandatory Review. 30-Day Letters for related Forms 990-T should be issued simultaneously.

  8. If the statute of limitations on the Form 990-T will expire within six months and the taxpayer refuses to extend the statute of limitations, the case should be closed to Mandatory Review to issue a 90-Day Letter.

    Note:

    In these instances call the Manager, EP Mandatory Review to discuss the short statute and the need to issue a 90-Day Letter.

  9. When the 30-Day Letter is mailed and the taxpayer timely files a valid Protest to Appeals, the case will be closed to Appeals. See IRM 4.71.10.5.3, Cases to Appeals.

  10. If within the taxpayer agrees and files Form 990-T or signs Form 870-EP, close the case per IRM 4.71.10.4.4, Closing Agreed Forms 990-T, and process any returns or checks received per IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer.

  11. If the taxpayer fails to timely file a valid Protest to Appeals, the case will be closed to Mandatory Review to issue a 90-Day Letter.

    1. Inform the taxpayer/representative that the case is being closed unagreed to EP Mandatory Review.

    2. Explain the appeals process to the taxpayer or POA. See Pub 1020.

    3. Review the case file for completeness and proper assembly.

    4. Flag the file for Mandatory Review using Form 3198-A, which is attached to the outside of the case file.

    5. Mail the case to:

      IRS EP Mandatory Review
      801 Broadway
      MDP 13
      Nashville, TN 37203

  12. As is the requirement for all exam cases, Form 5772-A, Form 5773-A (or equivalent) and other relevant workpapers must be prepared.

  13. Use the CCR to clearly reflect case activities and contacts with the taxpayer/representative.

  14. All unagreed cases going to Appeals or Mandatory Review require a paper copy of all workpapers, forms, letters, etc. assembled in accordance with IRM 4.71.12, Case File Assembly.

  15. Name all prepared workpapers, forms, and letters, using the RCCMS Naming Convention and saved in the RCCMS Office Documents folder.

    Note:

    It is not necessary to save files on a CD for the case file if the files are saved in RCCMS.

30-Day Letter Procedures

  1. Effective October 1, 2017, the EP Exam groups will mail out 30-Day Letters.

  2. The issuance of the 30-Day Letter gives the taxpayer 30 days to request a hearing with Appeals.

  3. The 30-Day Letter package for a Form 990-T exam consists of:

    1. Letter 2005-A (See IRM 4.71.14 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits)

    2. Pub 1

    3. Pub 594

    4. Pub 1020

    5. Form 870-EP

    6. RAR

    7. Return Envelope

  4. If the taxpayer timely files a protest to Appeals (including claims cases), the procedures in IRM 4.71.10.5.3, Cases to Appeals, will be followed.

  5. If a taxpayer agrees and files Form 990-T or signs Form 870-EP, close the case per IRM 4.71.10.4.4, Closing Agreed Forms 990-T, and process any returns or checks received per IRM 4.71.10.4.3, Processing Forms 990-T Received from the Taxpayer.

  6. If additional information is provided by the taxpayer that changes the government’s position, the agent will discuss resolution of the case with the group manager.

  7. If the taxpayer does not respond or chooses not to appeal, then the case will be closed to Mandatory Review to issue a 90-Day Letter, in accordance with IRM 4.71.10.5.4, Closing Unagreed Cases to Mandatory Review for 90-Day Review.

Revenue Agent Report (RAR)
  1. The RAR can be prepared on Form 886-A.

  2. The RAR should be divided into the following components:

    1. Issue(s)– The issue will be clearly stated. For example, the issue might be stated as follows: "Whether the XYZ Pension Trust has unrelated business taxable income under Internal Revenue Code (IRC) 512 for the taxable years ending December 31, 2014, 2015, and 2016?"

    2. Facts– The facts section of the RAR will include a brief history of the plan and provide pertinent details surrounding the issue. This section should also cite any plan provisions relevant to the issues raised.

    3. Law– The law section should contain the pertinent Code sections, regulations, revenue rulings, court cases, etc., that relate to the issue(s) raised. Do not cite General Counsel Memos (GCM) or Private Letter Rulings (PLR) as sources of authority in the RAR.

    4. Government's Position– This section should discuss each issue separately and apply the law and the facts relevant to each specific issue. This section should also provide a summary of taxes due and the applicability of penalties.

      Note:

      Total income (Form 990-T, line 13), total deductions (Form 990-T, line 29), unrelated business taxable income (Form 990-T, line 34) and total tax (Form 990-T, line 44), must be clearly listed in the RAR.

    5. Taxpayer's Position– This section should reflect the Taxpayer's position including any rebuttals with respect to the Government's position. If the taxpayer has not provided a position on the Issue(s), a simple statement to the effect that the taxpayer has not provided a response is sufficient.

    6. Conclusion– If the taxpayer provides a position on the issue(s), the RAR should contain a rebuttal to the taxpayer’s position. The Government’s position should be restated as a conclusion in all cases.

  3. Mandatory Review may be contacted for assistance in writing an RAR.

Substitute for Return Package

  1. When the taxpayer refuses to file a Form 990-T upon receiving a notice from you that a Form 990-T is due, prepare a substitute for return package.

  2. Write the words "Substitute for Return Prepared by TEGE: Employee Plans" on the top margin on the face of the return.

  3. Complete only the top portion of the substitute for return. Complete the tax year beginning and end, the name and address, and items B, D and G.

  4. Make sure the trust's EIN is used on the return and not the plan sponsor's EIN.

    Note:

    If the plan sponsor's EIN is used, the return will be rejected by the Service Campus. See IRM 4.71.10.4.1, Obtaining a Trust EIN, for procedures in obtaining a trust EIN if the trust does not have one.

  5. Leave the dollar amounts on the Form 990-T blank.

  6. Establish the Substitute for Return Form 990-T on RCCMS and AIMS in the same manner as agreed returns.

  7. Make sure each return is fully established on RCCMS and AIMS before it is closed to Mandatory Review.

  8. Attach Form 3198-A to the Substitute for Return. Include the following notation in the Special Instructions section of Form 3198-A: "Substitute for Return; Please process immediately."

    Note:

    These Forms can be found electronically within RCCMS.

  9. Mail the Substitute for Return to the Ogden Service Campus at the following address:

    IRS
    1973 N. Rulon White Blvd.,
    Mail Stop 6054
    Ogden, UT 84404

  10. When addressing the Express Services Routing slip (Form 9814), the recipient name should be "Mail Supervisor" with the recipient phone number of (801) 620-3753.

  11. When Ogden processes the Substitute for Return, a TC "150" with tax of $0 will be reflected on the corresponding BMFOLT print. A TC "150" must be present before tax can be assessed subsequent to the issuance of a statutory notice of deficiency.

  12. Periodically request a BMFOLT print until the return posts. When the return posts, a 150 transaction code (TC 150) will be reflected on the account.

    Note:

    It normally takes four to eight weeks for the Ogden Campus to process a return once it is received.

  13. When the return posts, complete the Related or Subsequent Year Form 5500, 5330 and 990-T Request Form (the Form) and forward it to your manager. See IRM 4.71.10 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of this form.

  14. The manager will send the approved Form to Classification via the Classification mailbox.

  15. Once the Form is received, Classification will process the request.

    Note:

    The AIMS account and RCCMS activity will be created within a few days in the Group’s organization code.

  16. 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 UBI is not adequately disclosed on the related Form 5500 series return.

Cases to Appeals

  1. If the plan trustee or Power of Attorney (POA) files a valid timely protest to appeal the issues reflected in the 30-Day Letter, the agent will evaluate any new facts or arguments presented and prepare a revised RAR rebutting, if applicable, the new information and position.

    Note:

    Provide the revised RAR to the taxpayer and POA, if applicable, under an individually-designed cover letter explaining the purpose of the revised RAR and the current case status (being processed to Appeals).

  2. If the protest does not alter the original conclusion, the agent will:

    1. Review the protest letter received from the taxpayer or POA to insure that it is a valid protest and notify the group manager (or designee) that a protest was received.

      Note:

      The elements needed for a valid protest are contained in Pub 1020.

    2. All cases moving to Appeals require a minimum of 12 months remaining on the statute of limitations.

    3. Update the RAR to address the protest and send a copy to the taxpayer and POA, if applicable.

    4. Complete the Appeals routing slip (Form 1725) for the case to go to the Appeals Office in Boston, MA (Office Code 121). See IRM 4.71.14 Exhibit 11 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 1725 for a case going to Appeals.

    5. If the return is a SFR Form 990-T and IRC 6651 penalties are being asserted, complete Form 13496 in accordance with IRM 4.71.10.5.3 (3). Attach Form 13496 to the back of the SFR. See IRM 4.71.14 Exhibit 22 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 13496.

    6. Complete Form 3198-A selecting the box, "Forward to Appeals" .

    7. Save all of the prepared forms and letters in the RCCMS Office Documents folder using the RCCMS Naming Convention, see IRM 4.71.1 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits.

    8. Assemble the case file in accordance with IRM 4.71.12, Case File Assembly Guidelines.

  3. If IRC 6651(a) penalties are to be assessed on a SFR, the IRS must certify the SFR Form 990-T per IRC 6020(b). Form 13496 is used to provide the certification.

    1. The SFR package includes Form 13496, the SFR (Form 990-T sent to the Service Campus) and the RAR (Form 886-A).

      Note:

      Total income (Form 990-T, line 13), total deductions (Form 990-T, line 29), unrelated business taxable income (Form 990-T, line 34) and total tax (Form 990-T, line 44), must be clearly listed in the RAR.

    2. Form 13496 must be completed with a live signature and be dated on or after the date the 30-Day Letter is signed and dated and before the 90-Day Letter is signed and dated.

    3. The completed Form 13496 must identify the taxpayer by name and contain the taxpayer identification number, purport to be a valid IRC 6020(b) return, and must be signed and dated.

    4. Form 13496 requires the number of pages in the SFR package be noted. List the total number of pages in the SFR package.

    5. Whenever the agent revises a report of proposed adjustments that increases the total tax liability of the taxpayer, a recertification is required on another Form 13496 signed and dated on (or after) the date of the revised report.

    6. When the report of proposed adjustments involves more than one tax year, a separate Form 13496 must be prepared for each year.

      Note:

      See IRM 4.71.14 Exhibit 22 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 13496.

  4. Prepare Form 5599 per IRM 4.71.10.4.5, Preparation of Form 5599 for Agreed Form 990-T Exams, but with the following differences:

    1. The disposal code in item 13 should be 07 (601 in RCCMS), Appealed—Protest to Appeals.

    2. Do not make an entry on item 12 of Form 5599.

    3. Enter Appeals Office Code 121 in RCCMS and on item 16 of Form 5599.

    4. Enter the tax and failure to file penalties in item 18 of Form 5599 and on the "Unagreed Amount" line in tab 3 in the Closing Records tab in RCCMS.

  5. Make sure the RCCMS closing record is properly completed. When you "validate for close" in RCCMS, you must complete any field that appears in red.

  6. Before closing the case, make sure the following items are prepared electronically and placed in RCCMS:

    1. Dated 30-Day Letter to the taxpayer with all attachments

    2. Taxpayer’s valid protest letter with all attachments (scanned)

    3. RAR revised to address Taxpayer’s Protest including rebuttal to Taxpayer’s Position with individually-designed letter used to send the RAR with rebuttal to the Taxpayer (and POA, if applicable)

    4. Completed Form 1725

    5. Completed Form 5599, (as applicable)

    6. Copy of the return

  7. Before going to Appeals, the case will be reviewed by the group manager or their designee.

  8. The group manager or designee will send an email to Lead Tax Examining Technician in Examinations Special Support and Processing (ESSP or the EP Closing Unit) and to the Manager, ESSP, attaching the following items and a Form 3210, listing all of the items included:

    1. Dated 30-Day Letter to the taxpayer with all attachments

    2. Taxpayer’s valid protest letter with all attachments (scanned)

    3. RAR revised to address Taxpayer’s Protest including rebuttal to Taxpayer’s Position with individually-designed letter used to send the RAR with rebuttal to the Taxpayer (and POA, if applicable)

    4. Completed Form 1725

    5. Completed Form 5599

    6. Copy of the return

  9. The group manager or designee will close the case on RCCMS to ESSP.

  10. When ESSP accepts the case and puts it in status 51, the group manager or designee will box up the paper case files and mail them with Form 3210 listing all returns to Appeals.

    Note:

    The Appeals address is:
    Internal Revenue Service
    Attn: Boston Appeals Office
    10 Causeway, Room 493
    Boston, MA 02222-1047

  11. When the acknowledged Form 3210 is returned from Appeals, the group manager or designee will send a copy to the Manager, ESSP.

  12. If information is received in the group while the case file is in appellate review, the Appeals Office will be notified of such information immediately.

Closing Unagreed Cases to Mandatory Review for 90-Day Review

  1. Send unagreed Forms 990-T to Mandatory Review if:

    1. The taxpayer fails to timely file a valid Protest to Appeals.

    2. The Form 990-T is related to a plan that is being disqualified, the Form 990-T should be closed to Mandatory Review to issue the 30-Day Letter.

      Note:

      30-Day Letters related to Forms 5500 filed or due for years when plan revocation or non-qualification is being proposed are issued by Mandatory Review. 30-Day Letters for related Forms 990-T should be issued simultaneously.

    3. If the statute of limitations on the Form 990-T will expire within six months and the taxpayer refuses to extend the statute of limitations, the case should be closed to Mandatory Review to issue a 90-Day Letter.

      Note:

      In these instances call the Manager, EP Mandatory Review to discuss the short statute and the need to issue a 90-Day Letter.

  2. Inform the taxpayer/representative that the case is being closed unagreed to EP Mandatory Review.

  3. Review the case file for completeness and proper assembly.

  4. Flag the file for Mandatory Review using Form 3198-A, which is attached to the outside of the case file.

  5. Prepare Form 5599 per IRM 4.71.10.4.5, Preparation of Form 5599 for Agreed Form 990-T Exams, except:

    1. Leave the disposal code blank on Form 5599, but use disposal code 601 on RCCMS.

    2. Do not make an entry on item 12 of Form 5599.

    3. Enter the tax and failure to file penalties in item 18 of Form 5599 and on the "Unagreed Amount" line in tab 3 in the Closing Records tab in RCCMS.

  6. Prepare a paper copy of all workpapers, forms, letters, etc., assembled in accordance with IRM 4.71.12, Case File Assembly.

  7. Save electronic versions of all agent prepared workpapers, forms, letters, etc. in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  8. Forward the unagreed case to Mandatory Review in status 20 on RCCMS and AIMS, and mail the case file to the following address:
    IRS EP Mandatory Review
    801 Broadway
    MDP 13
    Nashville, TN 37203

    Note:

    If the case is later returned to the group from Mandatory Review with a Form 5456 Inquiry or Correction Memorandum, the case will be updated to status 13. The case will remain in status 13 until the case is closed from the group.

Cases Returned From Appeals

  1. Periodically, cases may be returned to the group from Appeals for further development.

    Note:

    Since Appeals does not use RCCMS, only the physical case files will be returned to the group. AIMS will be updated accordingly. The RCCMS case files should be pulled from the RCCMS Case Library and assigned to the agent working the returned case.

  2. When the agent receives the case, it will be given high priority to work.

  3. After reviewing the case file and the memo from Appeals, the agent and the group manager will meet to discuss the issues raised by Appeals.

    1. If the agent can easily remedy the Appeals Officer's concerns, the agent will address the issue(s) and process the case in the appropriate manner.

    2. The agent will receive permission from the group manager before initiating any communication with Appeals. The manager will determine whether the proposed communication is necessary and whether it is an ex parte communication covered by RRA 98 limitations. See IRM 8.1.10, Ex Parte Communications for the rules on ex parte communications.

  4. When the work is complete, the case should either be returned to Appeals or closed per group manager instruction.

Forms 990-T Established on AIMS and RCCMS in Error

  1. There are occasions when Forms 990-T are established on RCCMS and AIMS in error (i.e., it is later determined that tax is not due after the case has been established).

  2. If Form 990-T is established in error on AIMS:

    1. Complete Form 10904 and fax or email it to the EP AIMS Coordinator in ESSP. The fax number is (443) 853-5647.

      Note:

      On Form 10904, make sure the box next to disposal code 33 is checked. If the return has not posted (there is no TC 150 posting), make sure the box next to AM424D is checked.

    2. Obtain manager and Area Manager approval through electronic signatures on Form 10904.

    3. Save the electronically signed Form 10904 inside the Office Documents folder in RCCMS for the case being deleted.

    4. Close the RCCMS account to ESSP with disposal code 901 (error account).

    5. Update the case to status 51 on AIMS and RCCMS when it is closed.

    6. The account will then be deleted by the EP AIMS Coordinator when the RCCMS record is received.