4.71.16 Employee Plans Large Case Examinations

Manual Transmittal

December 06, 2018

Purpose

(1) This transmits revised IRM 4.71.16, Employee Plans Examination of Returns, Employee Plans Large Case Examinations.

Background

The procedures herein should be followed when conducting a Large Case examination (plan with 2,500 participants or more).

General program agents should refer to the following processes and procedures as an audit tool for examining retirement plans with 2,500 or more participants and support activity with Large Business and International (LB&I) and Exempt Organizations (EO).

This IRM section provides supplemental information for procedures specific to Large Case examinations.

Material Changes

(1) This IRM has been revised to reflect the elimination of the Employee Plans Team Audit (EPTA) Program, but to maintain the overall procedures when examining retirement plans with 2,500 participants or more.

(2) This IRM has been renamed as, Employee Plans Examination of Returns, Employee Plans Large Case Examinations.

(3) Other minor editorial changes, including revisions to reflect plain language requirements, were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.16 dated July 7, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(12-06-2018)


Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Overview

  1. Purpose: IRM 4.71.16, Employee Plans Examination of Returns, Employee Plans Large Case Examinations, provides the basic examination procedures that will enable Employee Plans (EP) agents and their managers to conduct Large Case examinations.

  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.

Background

  1. EP Examination is the division designated to determine if a retirement plan is qualified under IRC 401 and the underlying regulations, and therefore, exempt from tax under IRC 501.

  2. The Employee Plans examination program’s primary objective is regulatory, emphasizing continued qualification of employee benefit plans (Policy Statement 4-119 and IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.) EP selects and examines returns to:

    1. Promote the highest degree of voluntary compliance with the tax laws on plan qualification.

    2. Determine qualified plans’ extent of compliance and the causes of noncompliance with the tax laws.

    3. Determine whether such plans meet the applicable qualification requirements in operation.

  3. Under Policy Statement 4-117, EP agents and managers are:

    1. Given broad authority to consider and weigh conflicting information, data, and opinions.

    2. To use professional judgement according to auditing standards to make findings of fact and apply the IRS’s position on issues of law to determine the correct tax liability.

    3. To exercise this authority to obtain the greatest number of tax determination agreements without sacrificing the quality or integrity of those determinations and to dispose of tax differences at the lowest level. See IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

  4. All examinations will be done in accordance with Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. See IRM 1.2.10.37, Policy Statement 1-236.

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 and Forms

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

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    Audit CAP Audit Closing Agreement Program
    CAS Computer Audit Specialist
    CCR Case Chronology Record
    CECA Checksheet for Employee Plans Compliance Activities
    CIS Case Identification Specialist
    EDS Employee Plans Determination System
    EP Employee Plans
    EPCU Employee Plans Compliance Unit
    EO Exempt Organizations
    ESAIN Employee Plans Standard Audit Index Numbers
    FSLG Federal, State and Local Governments
    IDR Information Document Request (Form 4564)
    IDRS Integrated Data Retrieval System
    IRC Internal Revenue Code (Code)
    LB&I Large Business and International Division
    MAP Multiemployer Plan
    NOPA Notice of Proposed Adjustments
    NRU Non-Return Unit
    RAR Revenue Agent Report
    RCCMS Reporting Compliance Case Management System
    SCP Self-Correction Program
    SEC Securities and Exchange Commission
    SRS Specialist Referral System
    TE/GE Tax Exempt & Government Entities Division
    TEP Team Examination Program
    TEQMS Tax Exempt Quality Measurement System

     

    Forms and Pubs

    Form Name
    Form 886-A Explanation of Items
    Form 906 Closing Agreement on Final Determination Covering Specific Matters
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 2848 Power of Attorney and Declaration of Representative
    Form 3210 Document Transmittal
    Form 4564 Information Document Request
    Form 4764-B Large Case Audit Plan
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5464 Case Chronology Record
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5666 TE/GE Referral Information Report
    Form 5701 Notice of Proposed Adjustment
    Form 5772-A Employee Plans (EP) Workpaper
    Form 5773-A Employee Plans (EP) Workpaper Summary Continuation
    Form 6490 EP/EO Technical Time Report
    Form 6782 Certification of Financial Interest in a Work Assignment
    Form 8821 Tax Information Authorization

     

Definitions

  1. Case Identification Specialist (CIS) is responsible for identifying the Large Case universe.

  2. Large Case Team is an examination team made up of:

    1. The Large Case Manager

    2. The Large Case Team Coordinator

    3. EP agent(s)

    4. Any additional Large Case Team members as needed: CAS, the Area Actuary, EP Counsel, and other agents working under the direction of the Large Case Manager.

  3. Large Case Audit Plan is a written document containing the examination scope, distribution of work assignments, examination procedures, time estimates, and special instructions.

  4. Large Case Manager refers to the Large Case group manager. They are responsible for organizing, controlling, and directing Large Case field agents in conducting the Large Case examinations.

  5. Large Case Team Coordinator is a Large Case Team member who, in addition to being responsible for specific examination assignments, coordinates duties in planning and executing a team examination.

  6. Large Case Engagement Agreement is a written document containing agreements made with the Taxpayer, information for Taxpayer and IRS personnel and the examination’s estimated completion date. Preparation of the Large Case Engagement Agreement is optional unless required by the case manager. See IRM 4.71.16.8.4, The Large Case Engagement Agreement.

  7. Large Case Examination File consists of all the documents prepared and secured during an examination. Examples of examination file documentation include:

    1. The closing letter

    2. RARs including specialists’ reports

    3. Closing agreements (Form 906), Audit CAP checksheet, and Maximum Payment Amount

    4. SCP checksheet

    5. Correspondence and correspondence log

    6. IDRs and IDR log

    7. IDR responses

    8. Plan documents and amendments

    9. Forms 5500

    10. CECA checksheet

    11. Examination workpapers and supporting exhibits

    12. Minutes of conferences held with the Taxpayers and representatives

  8. Focused Examination is a process agents use to determine if the plan is operating with the provisions of the Internal Revenue Code. The Large Case Team examines pre-selected issues and any additional issues determined by the Large Case Team, emphasis is placed on evaluating the overall compliance level of the plan using specific examination techniques, and pursuing the examination to a point of reasonable assurance that the plan is qualified.

  9. IDR Log - A document used to track the status of IDRs issued. See IRM 4.71.16.6, Responsibilities of the Large Case Team Coordinator.

  10. Internal Controls are the Taxpayer's policies and procedures used to identify, measure and safeguard plan operations to avoid material misstatements of plan information.

  11. Opening Conference is a meeting of the Large Case Team and the Taxpayer’s personnel to discuss: internal controls, coordination, accommodations, and the general scope of the examination. Employees from LB&I, EO, or FSLG may also be present.

  12. Planning Meeting is a meeting(s) with the Large Case Manager and Large Case Team members to discuss the scope of the examination and to review the case. At the conclusion of the meeting(s), the Large Case Manager and the Large Case Team coordinator will determine those areas that will be included in the Large Case Audit Plan. The LB&I coordinator, EO TEP Coordinator, Support Specialist manager(s), etc. may also be invited to these meetings at the discretion of the Large Case Manager.

  13. Pre-contact Analysis is a study of available information to establish the initial scope and depth of the examination. This includes discussions with the Taxpayer to obtain or clarify return information. Use information you gain at the opening conference to supplement your pre-contact analysis. This helps construct the Large Case Audit Plan.

  14. Risk Analysis is a process, which evaluates the potential benefit derived from examining an issue or a return, compared to the cost of resources required to perform the examination. The accuracy and reliability of the internal control systems and processes are important items to consider when completing a risk analysis.

  15. Status Meetings are scheduled meetings with the Taxpayer to discuss case progress, items pending and time line for completion.

  16. Support Specialists are actuaries, commodity and financial products agents, engineers, excise tax agents, economists, international examiners, CAS, Exempt Organizations agents, Tax-Exempt Bonds agents, Indian Tribal Government specialists, and any other specialist necessary. Use of the automated Specialist Referral System (SRS) to request their help.

  17. Support Specialist's Manager participates in managing the specialist(s)’ activities assigned to the Large Case.

    Note:

    The Large Case Manager has primary responsibility for all matters pertaining to the audit.

  18. Taxpayer refers to a business, person or trust that is associated with a qualified retirement plan(s). This would include MAP, IRC 403(b) and IRC 457 plans. There are three potential Taxpayers in a Large Case examination: the sponsoring employer, the trust, and the plan participants or their beneficiaries.

Overview of Large Case Examinations

  1. Large Case examinations involve the largest qualified retirement plans.

    1. Most of the plans selected as a Large Case exam have at least 2500 participants.

    2. Occasionally, managers assign a plan with less than 2500 participants when the smaller plan is associated with a LB&I Taxpayer or for training purposes.

  2. Large Case agents generally conduct focused examinations of large and complex employee plans.

  3. Large Case agents evaluate and analyze the plan sponsor's internal controls, systems and processes to help them identify the examination areas, such as eligibility, participation, coverage, vesting, assets, distributions, accruals, forfeitures, and other compliance issues.

  4. Large Case agent(s) always verify that the plan is qualified in form for all years under examination. Therefore agents must review the plan document and all amendments in effect for the year(s) under examination.

  5. Large Case procedures and guidelines:

    1. Promote uniformity and consistency in administering Large Case examinations.

    2. Help the Large Case Manager and Large Case Team Coordinator with their examination responsibilities.

    3. Help orient prospective Large Case Team members to Large Case examination concepts and techniques.

  6. Unless otherwise stated, the procedures for general program examinations apply to Large Case examinations.

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 paragraph (4) of IRM 4.71.1.21, 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

Identification of Large Case Taxpayers

  1. A Large Case examination is an examination of an entity meeting the Large Case examination criteria.

  2. TE/GE considers the following factors (among others) when selecting an examination:

    1. Emerging issues

    2. Market segment impact

    3. SEC information

    4. Resource location

    5. Referral information

    6. Field input

    7. Tax shelter information

    8. Media attention

    9. Impact on plan participants

    10. Input from the EPCU

Large Case Jurisdiction

  1. The EP examination program ensures compliance with the qualification provisions of the Code. See IRM 4.71.1.3, Examination Jurisdiction.

  2. EP has responsibility for these returns:

    1. Form 5500 series returns

    2. Non-return Units for IRC 403(b)/457 plans

    3. Form 5330

    4. Form 990-T

    5. Form 1040/1120 discrepancy adjustments

Coordination with LB&I, EO, and FSLG

  1. The Large Case Manager will contact the responsible LB&I, EO, or FSLG manager when a selected case is assigned to a Large Case agent.

  2. The Large Case Manager may include the LB&I, EO or FSLG manager or coordinator during the pre-planning stages of the Large Case examination to enlist their participation in the Large Case planning process.

Responsibilities of the Large Case Manager

  1. The Large Case Manager is responsible for the activities of all members assigned to the Large Case examination. The Large Case Manager must be personally involved in the progress of the exam.

  2. The primary responsibilities of the Large Case Manager are:

    1. Coordinating and planning the examination with the LB&I, FSLG, or EO team manager, if necessary

    2. Coordinating with Area Counsel and the EP actuary, if necessary

    3. Consulting with the Large Case Team Coordinator to determine plans and plan years to examine

      Note:

      These decisions will depend on program objectives, agent availability, and Taxpayer resources.

    4. Conducting examination visits, as necessary, while the Large Case examination is in progress

    5. Facilitating and approving the Large Case Engagement Agreement (if prepared), the Large Case Audit Plan, and all substantial changes to the audit plan and examination procedures

    6. Ensuring that all financial and conflict of interest disclosures were made by each team member

    7. Conferring with the Large Case Team Coordinator and Large Case Team members, on a continuing basis, to determine the progress of the examination

    8. Consulting with the Large Case Team Coordinator when problems develop such as delays in responses to IDRs

    9. Participating in meetings with the Taxpayer

    10. Reviewing the workpapers and reports of each Large Case Team member at various points during the examination process and at the conclusion of the examination

    11. Ensuring that the Large Case Team Coordinator has obtained appropriate written contact authorization from the Taxpayer

    12. Approving expansion or contraction of issues in the Large Case Audit Plan including expanding to other years and related returns

    13. Reviewing and approving Notices of Proposed Adjustments

    14. Approving Employee Plans Compliance Resolution System (EPCRS) checksheets (CAP & SCP)

    15. Reviewing and approving the closing letter(s)

Responsibilities of the Large Case Team Coordinator

  1. The primary responsibilities of the Large Case Team Coordinator are:

    1. Preparing the Large Case Audit Plan and the optional Large Case Engagement Agreement

    2. Obtaining proper disclosure written authorization and Form 2848 signed by an authorized official of the Taxpayer

    3. Coordinating the day-to-day activities of the examination

    4. Protecting the statute of limitations

    5. Coordinating the assignments, receipt of information and progress of Large Case Team members (including specialists assigned to the plan examination)

    6. Coordinating the correspondence between Large Case Team members and the Taxpayer (help team members and specialists with IDR follow-up and timely involve all levels of management, if necessary)

    7. Serving as the point of contact for the prompt and orderly flow of information

    8. Coordinating with the CAS to make sure the team receives records on time to conduct the examination, including record retention agreements, if necessary

    9. Reviewing Form 4764-B proposed by Large Case Team members

    10. Approving Form 5701-A prior to Large Case Manager approval

      Note:

      See IRM 4.71.16, Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 5701-A.

    11. Advising Large Case Team members including LB&I, EO, or FSLG of developing issues

    12. Preparing a write-up of the history of the company, owners and plans

    13. Coordinating the review of the internal controls and preparing an analysis identifying the strengths and weaknesses in the systems and processes to consider when preparing the audit plan

    14. Advising and assisting Large Case Team members in complying and understanding agreements made at the opening conference

    15. Timely informing the Large Case Manager of any problems between the Taxpayer and Large Case Team member or problems between Large Case Team members

    16. Receiving and reviewing Large Case Team member IDRs to ensure uniformity, clarity, and avoidance of duplication, (this includes coordinating the issuance of the IDRs with the LB&I, EO, or FSLG team coordinator)

    17. Maintaining files of retained copies of all IDRs and making timely follow-ups

    18. Maintaining the IDR Log (see IRM 4.71.16, Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an IDR Log)

    19. Participating in the development and resolution of issues

    20. Assimilating all Large Case Team members’ workpapers into one overall Large Case

    21. Drafting the closing letter(s) for the Large Case Manager's approval

Planning the Large Case Examination

  1. The planning process is one of the most important case activities.

  2. The Taxpayer should be involved in the planning process.

  3. The Large Case Manager will take an active role in assisting the Large Case Team Coordinator in this process.

  4. The Large Case Manager should consider other matters such as the prevailing economic factors.

  5. The Large Case Manager and the Large Case Team Coordinator should evaluate the need for support assistance when planning the examination.

  6. If the Taxpayer is engaged in an issue identified for specialization and coordination (e.g., abusive tax avoidance transaction (ATAT) issues), the Large Case Team Coordinator will contact the designated specialist for advice and help.

  7. The Large Case Manager and Large Case Team Coordinator should become familiar with the Taxpayer’s business operations. They will review and analyze the following to determine staffing requirements, specialists needed, and the general approach to the examination:

    1. Plan returns

    2. Plan sponsor’s returns

    3. Other planning sources (see IRM 4.71.16.7.3, Other Planning Sources)

  8. Upon completion of the preliminary review, the Large Case Team Coordinator will summarize the following items:

    1. Issues which should take priority in the examination

      Note:

      The Large Case Team Coordinator should consider the internal controls analysis when selecting the examination issues.

    2. Overall scope and approach to the examination

    3. Specialists and non-specialists members needed

    4. Estimated completion date

  9. The Large Case Team Coordinator will notify all specialists who will be involved in the examination and advise them of:

    1. The date, time, and place of any scheduled meeting(s)

    2. The scheduled starting date of the examination

    3. The description of data available for review

Review of Returns in the Planning Process

  1. The Large Case Manager and Large Case Team Coordinator should review related returns to determine:

    1. The size and complexity of the case

    2. Comparison of items for the year(s) under examination with like items in prior and subsequent years as appropriate

    3. The existence of large or unusual questionable items

    4. Location of subsidiaries of the primary Taxpayer(s)

Requesting Support Staffing

  1. The Large Case Manager and the Large Case Team Coordinator should evaluate the need for support assistance when planning the examination.

  2. The Large Team’s first contact with a support group to obtain a CAS specialist to help is through SRS. The Large Case Team Coordinator should forward the support request as soon as the need is determined.

  3. It is important to bring the CAS into the planning process as early as possible because they often provide valuable planning tools. The Large Case Team Coordinator should request help from CAS through the SRS.

  4. The Large Case Team Coordinator should request assistance from the Area Actuary or TE/GE Area Counsel when the need is determined.

Other Planning Sources

  1. The Large Case Manager and the Large Case Team Coordinator may wish to consult other sources such as:

    1. The Taxpayer's web site (organizational structure, business activities, etc.)

    2. Trade associations

    3. Published media reports

    4. Governmental agency audit reports (e.g., SEC reports)

    5. IDRS

    6. Employee Plans Determination System (EDS)

    7. Accurint Service

    8. Yk1 Analysis Tool

    9. Other Large Case Managers and Team Coordinators who have examined similar entities

Time Planning

  1. The Large Case Manager and the Large Case Team Coordinator will estimate the duration of the examination based on the following factors:

    1. Scope and complexity of examination areas selected

    2. Location and availability of records

    3. Extent of computer assisted examination techniques

    4. Coordination with LB&I, EO, or FSLG

    5. Experience of the Large Case Team Coordinator and Large Case Team members

    6. Travel time (on-site vs. support)

    7. Taxpayer's staffing and cooperation

Financial Interests and Disclosure

  1. The Large Case Manager will ensure that each Large Case Team member (including specialists, support examiners, and accounting aides) is aware of and understands the statute requiring disclosure of any financial interest or conflicts, which might create a real or apparent conflict of interest.

  2. At the start of every examination, each Large Case Team member will report any financial interests that are potential conflicts of interest.

    1. For this purpose, use the Large Case Financial Interest Disclosure form. See IRM 4.71.16, Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the Large Case Financial Interest Disclosure Form.

    2. Each Large Case Team member must complete and sign a separate form.

    3. See Policy Statement 4-6 found in IRM 1.2.13.1.4, Policy Statement 4-6, and Policy Statement 4-7 found in IRM 1.2.13.1.5, Policy Statement 4-7.

  3. The Large Case Manager will:

    1. Review each Financial Interest Disclosure form

    2. Determine whether a potential conflict of interest may exist

    3. Sign each form

  4. In instances where a potential conflict of interest may exist:

    1. The Large Case Manager and the applicable Large Case Team member will complete Form 6782. As an example, a potential conflict of interest may exist if the Large Case Team member owns publicly traded securities of the Taxpayer valued at more than $15,000. See the instructions to Form 6782.

    2. If the Large Case Manager determines that a financial interest (as defined in the Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. part 2635, subpart D) does not exist, the Large Case team member will remain on the team.

      Note:

      A key factor in this determination is whether the Large Case Team member's work on the case will cause others to question the member's impartiality and independence.

    3. If the Large Case Manager determines that a financial interest may exist, the Large Case Manager will not permit the member to work on the case.

    4. The Large Case Manager may seek legal advice from the Ethics and General Government Law Branch of General Legal Services if they need assistance in making their determination. In such cases, the Large Case Manager will remove the member from the case until it is determined that there is no financial conflict of interest.

  5. The Large Case Manager will certify to their Area Manager that there is no conflict of interest with respect to their personal or financial interest using the Large Case Financial Interest Disclosure Form. See IRM 4.71.16, Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the Large Case Financial Interest Disclosure Form).

  6. In instances where a potential conflict exists, the Large Case Manager will follow the disclosure procedures and complete the certification form discussed in the handbook for the Rules of Conduct.

  7. Save the Financial Interest Disclosure form in the RCCMS Office Documents folder using the RCCMS Naming Convention.

Conducting the Large Case Examination

  1. This section describes the following elements of the Large Case examination:

    1. Notice of Examination

    2. Opening Conference

    3. Internal Controls

    4. Large Case Engagement Agreement

    5. Large Case Audit Plan

    6. Large Case Workpapers

Notice of Examination

  1. The Large Case Team Coordinator signs the "Notice of Examination Letter" and mails it to the Taxpayer early in the examination process, either before or with the initial IDRs.

  2. Use Letter 1346-I,"Notice of Examination Letter - Plans Identified" , when the specific plans under examination have been identified. Letter 1346-I identifies the specific plan(s) under examination. See IRM 4.71.16, Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a "Notice of Examination Letter."

  3. For Multiemployer Audit Program cases (MAP) use Letter 1346-M. See IRM 4.71.16, Exhibit 11 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1346-M. See also IRM 4.72.14, Multiemployer Plan Examination Guidelines.

    Note:

    MAP plans are plans covered by a collective bargaining agreement and should not be confused with Multiple Employer Plans (MEP).

Opening Conference

  1. The opening conference is a face-to-face meeting with authorized employees of the Taxpayer. The purpose of the opening conference is to:

    1. Discuss the case selection process

    2. Verify the Taxpayer’s size, dispersion, and all related entities

    3. Confirm the availability of the books and records

    4. Discuss the accounting system and compliance with Rev. Proc. 98-25, IRB 1998-19

    5. Arrange for the availability of information and documents at the start of the examination

    6. Arrange for flow of communications from the Large Case Manager and the Large Case Team Coordinator to the Taxpayer and vice versa

      Note:

      The TE/GE Secure Email program is available to exchange correspondence through secure email with Large Case Taxpayers if certain criteria are met and an agreement is reached with the Taxpayer through a memo of understanding. For information about the TE/GE Secure Email program, also known as Secure Enterprise Messaging System (SEMS), please see https://organization.ds.irsnet.gov/sites/tege-bsp/Automation_Support/SitePages/Secure%20Messaging%20with%20Large%20Taxpayers.aspx.

    7. Establish agreements as to accommodations for the team, including such items as secure office space, locked file cabinets, parking arrangements, and security badges

    8. Establish agreement that the coordinator will raise, discuss, and resolve issues as the examination progresses

    9. Establish agreement that the Taxpayer will prepare its protest to identified unagreed issues during the course of the examination

    10. Establish agreement regarding security of IRS and Taxpayer documents maintained on the Taxpayer's premises during the examination

    11. Establish agreement for response time frames of IDRs, Notices of Proposed Adjustments/Issues (NOPAs), etc.

      Note:

      Response dates for IDRs should be mutually agreed upon and in compliance with general program examination requirements.

    12. Discuss the scope and depth of the examination

    13. Plan a meeting with the Taxpayer and appropriate staff to discuss the Taxpayer's internal controls, processes and procedures for plan operations

    14. Provide an estimated completion date for the examination

  2. The Large Case Team Coordinator will obtain a written authorization that lists the names and titles of those individuals who have the authority to provide information and enter into agreements. This will help avoid potential miscommunication or inadvertent disclosure.

    1. The Large Case Team Coordinator may obtain the written authorization either at the opening conference or during the planning stages of the examination.

    2. An authorized official of the Taxpayer must sign the written authorization.

    3. If the authorization identifies an individual other than an employee(s) acting within the scope of their employment, such form should be similar to Form 8821, and all of its restrictions.

    4. Because the Large Case authorization form’s use is limited, it may be necessary to obtain a properly completed Form 2848 to address adjustments and negotiations. See paragraph (3) of IRM 4.71.1.9, Power of Attorney (Form 2848) and Tax Information Authorization (Form 8821).

  3. The Large Case Manager should ensure that:

    1. Taxpayer personnel designated to furnish information to Large Case Team members are those best qualified to give complete first-hand information.

    2. The Large Case Team Coordinator explains the roles of Large Case Team members, including who have authority to secure information and discuss issues.

  4. After concluding the opening conference, the Large Case Team Coordinator will prepare written minutes of the meeting which summarize all pertinent information developed and agreements made.

Internal Controls

  1. An analysis of the Taxpayer’s internal controls is an important part of conducting an Large Case examination.

  2. Large Case agents will be responsible for examining the internal controls of the plan sponsor, taking appropriate actions and recording the results of their actions and analysis in the case file.

  3. Internal controls are a system of procedures the Taxpayer and the plan administrator use to:

    1. Ensure and promote the information’s reliability and accuracy to administer the plan and calculate benefits per the written plan document.

    2. Ensure that the plan operationally complies with plan provisions and the Internal Revenue Code (Code).

    3. Safeguard plan participant benefits and the trust assets from fraud, waste and abuse.

  4. These systems and processes support plan operations and include:

    1. The process for keeping plans qualified in form under IRC 401(a) and other applicable Code sections

    2. Day to day operations of the plan(s) (both qualified and non-qualified plans)

    3. Payroll systems used to capture compensation data for benefit and testing purposes (e.g., allocations)

    4. Human Resources and Benefits Department actions (e.g. determination of eligibility)

    5. Process for determining pension expenses and deductions

    6. Trust investment strategies

    7. Distribution responsibilities

    8. End of year testing responsibilities

  5. In the early stages of the Large Case examination, the Large Case Team Coordinator will complete an appropriate analysis to determine the level of internal controls within the various systems and processes used by the Taxpayer to administer their plan(s) and capture data.

  6. The objectives of the analysis of internal controls is to:

    1. Obtain an understanding of the various systems utilized by the Taxpayer in the administration of their qualified retirement plan processes

    2. Obtain an understanding of how these systems work independently and how they interact with each other

    3. Verify the level of accuracy of the data input into the various systems

    4. Help develop the audit plan

  7. An effective analysis of internal controls will help the Large Case Team:

    1. Identify vulnerabilities in the plan sponsor's internal controls of their systems and processes

    2. Develop an audit plan that includes potential areas of non-compliance

    3. Obtain a confidence level in how well the internal controls are working in operation

    4. Revise the preliminary review and formulate an audit plan for the focused examination

    5. Expand or limit the scope of the examination

  8. Suggested methods and types of analysis include:

    1. Interviews of key personnel who exercise control over the various systems and processes

    2. Analysis of the information secured through interviews, internal control questionnaires and other resources

    3. Perform limited testing on systems and processes as appropriate

    4. Expand testing to areas identified for potential non-compliance

The Large Case Engagement Agreement

  1. The Large Case Engagement Agreement has two purposes.

    1. To formalize the groundwork for an examination, which will be consistent with the concepts of the Large Case Program.

    2. To prevent misunderstandings of commitments and agreements made.

  2. The Large Case Engagement Agreement is optional. As an alternative, the Large Case Team Coordinator may document all agreements discussed at the opening conference in the minutes. See IRM 4.71.16, Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the Large Case Engagement Agreement.

Preparation of the Large Case Engagement Agreement
  1. The Large Case Team Coordinator will complete the Large Case Engagement Agreement following the opening conference and should be completed in the early stages of the examination.

  2. The pre-contact analysis, the preliminary survey of the plan sponsor’s records, and the opening conference should provide the information necessary for the preparation of the Large Case Engagement Agreement.

  3. The Large Case Engagement Agreement should clearly identify, in writing, the agreements made with the Taxpayer.

  4. The Large Case Manager and the elected officer, or Taxpayer’s delegate, should each sign the Large Case Engagement Agreement acknowledging the matters covered and agreements made at the opening conference.

Commitments and Content of the Large Case Engagement Agreement
  1. Taxpayer and IRS commitments regarding examination activities should be realistic. Both the Large Case Team and the Taxpayer should make every effort to meet these commitments, particularly in the following areas:

    1. The date to begin field work on the examination

    2. The location of the examination

    3. Records required

    4. Space and equipment required

    5. Requests for information (IDR due dates in general)

    6. Requests for statute extensions

  2. In seeking commitments from the Taxpayer, the Large Case Manager should make certain that the individual they are dealing with:

    1. Is an elected corporate officer, trustee, or delegate, who can provide information and enter into agreements regarding examination procedures

    2. Will be responsible for notifying primary individuals in the Taxpayer’s organization of the arrangements affecting them

  3. Regarding lines of communication, the Large Case Manager should make certain that:

    1. The written authorization agreement lets Large Case Team members know the authorized individuals in the Taxpayer’s organization who will furnish information, discuss tax matters, negotiate adjustments and approve adjustments to tax returns.

    2. Taxpayer employees designated to furnish information to Large Case Team members are the best-qualified persons to give complete first-hand information. This may include people responsible for preparing the examination documents.

Large Case Audit Plan

  1. The purpose of the Large Case Audit Plan is to outline the scope, depth and special techniques of the examination and to provide information for Large Case Team members of their specific assignments.

  2. With this information Large Case Team members will:

    1. Be in a position to make the best use of their time.

    2. Know their role in the examination, how to proceed with the assignment and, if necessary, the information to develop for other Large Case Team members.

  3. Use Form 4764 (Large Case), or similar computer generated form. See IRM 4.71.16, Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a Large Case Audit Plan on Form 4764 (Large Case).

Workpapers

  1. Use standardized workpapers and reports and create a single file or report.

  2. State procedures for labeling and controlling electronic data.

  3. Use the same workpaper standards as for general program examinations. See IRM 4.71.1.15.1, EP Workpapers for quality workpaper standards.

Workpaper Indexing
  1. Consistently index workpapers by using the Employee Plans Examination Standard Audit Index Number (E-SAIN) system. See IRM 4.71.16, Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for a list of ESAIN numbers with descriptions.

  2. You can also use the E-SAIN system to:

    1. Assign work in the audit plan

    2. Develop standard examination procedures and workpapers (commonly done on Form 4764-B). See Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764-B.

    3. Identify the subject and organize IDRs

    4. Link exhibits to the workpapers

  3. The Large Case Manager can approve another method of indexing workpapers in appropriate circumstances; however, the system used must be consistent for all Large Case Team members assigned to the case.

Monitoring the Large Case Examination Progress

  1. This section describes the roles of the Large Case Manager and the Large Case Team Coordinator in the examination process.

Role of Large Case Manager

  1. The Large Case Manager must monitor the Large Case examination progress.

  2. The primary monitoring techniques are visits and meetings with Large Case Team members and the Taxpayer.

  3. The Large Case Manager should plan visits, whether on-site or at any other location, with the following objectives in mind:

    1. Determine that communications are open

    2. Evaluate the effectiveness of the Large Case Engagement Agreement (if prepared) and the Large Case Audit Plan, making necessary adjustments when appropriate

    3. Check on progress

    4. Identify problems

    5. Provide instructions for corrective action

    6. Evaluate personnel

    7. Help resolve issues

  4. The Large Case Manager should maintain a case file which contains the information necessary to stay informed of the status of the case. Examples of items that may be included in the file are:

    1. Large Case Engagement Agreement (if prepared)

    2. Form 4764 (Large Case) and updates. See IRM 4.71.16, Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764 (Large Case).

    3. List of Support Specialists involved in the examination

    4. Minutes from Status Meetings, and

    5. Status report of the examination

  5. The Large Case Manager is encouraged to maintain any other data that is useful in managing the case.

  6. The Large Case Manager should consider a risk analysis at various intervals during the examination to assess the viability of issues and appropriateness of the resources used.

    Note:

    The Large Case Manager and the Large Case Team Coordinator determine the format and timing of the risk analysis.

  7. The Large Case Manager will regularly communicate with the Large Case Team Coordinator to monitor the progress of the examination.

Role of the Large Case Team Coordinator

  1. The Large Case Team Coordinator is the first Large Case Team member selected by the Large Case Manager.

  2. During the examination, the Large Case Team Coordinator is the focal point for communication with the Large Case Team members.

  3. The Large Case Team Coordinator is responsible for:

    1. Planning the examination including the analysis of the internal controls

    2. The assignment of examination responsibilities to Large Case Team members

    3. Regularly reporting the issues found and the progress of the examination to the Large Case Manager

    4. Meeting with the Taxpayer to discuss issues and the progress of the examination

Visits

  1. On-site visits and meetings are important elements of the Large Case Manager's involvement in the case. The Large Case Manager should avoid delegating this responsibility to others.

  2. During a visit, the Large Case Manager may:

    1. Determine whether the team is working examination issues in priority order and whether modifications to the audit plan altering the scope and depth of the examination are appropriate and timely

    2. Review progress on action items generated during previous reviews

    3. Review examination issues in process and discuss with the Large Case Team Coordinator the need to expand, contract, or redirect examination activity

    4. Review examination issues not in process and determine what, if any, impact subsequent events have had on their potential for adjustment

    5. Review Form 5701-A for completeness and accuracy prior to issuing

    6. Review Form 4764-B and other completed workpapers to ensure that the audit trail is well documented and issues are being properly developed

    7. Review IDR log and IDR turnaround time

  3. There are several types of visits, depending on the stage of examination. These include:

    1. Planning visits to develop the Large Case Engagement Agreement (if prepared) and the Large Case Audit Plan

    2. Monitoring visits with Large Case Team members and the Taxpayer while the examination is underway

    3. Status Meetings

    4. Problem-solving visits with Large Case Team members and the Taxpayer

    5. Visits with Large Case Team members to develop a uniform presentation of proposed issues to the Taxpayer

  4. During a visit to an examination site, the Large Case Manager may need to meet with the appropriate levels of company management to discuss the progress of the examination and to resolve any potential problems.

Information Document Request (IDR) Process

  1. The IDR process gives the Large Case Team a structured process to use when gathering information during an examination.

  2. During the opening conference, the Large Case Manager and Large Case Team Coordinator will discuss the process for IDR management and meet with the Taxpayer to determine the IDR response times. The resulting agreement will be included in the opening conference minutes and the Large Case Engagement Agreement.

  3. The Large Case Team Coordinator should maintain an IDR log to monitor IDR status and follow up when an IDR response is delinquent. See IRM 4.71.16, Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the IDR Log.

  4. The Large Case Team Coordinator should contact the Taxpayer to discuss problems that exist and reasons for the delay.

    1. If necessary, the Large Case Manager should be involved.

    2. The Large Case Team Coordinator should document these discussions for future tracking.

  5. Subsequent discussion actions include:

    1. Evaluating other means or sources for obtaining the requested or needed information

    2. If necessary, preparing and issuing a follow-up IDR to the delinquent IDR. The response date for the follow-up IDR should be a reasonable date based on discussions with the Taxpayer. In many instances, the follow-up IDR should include the original IDR attached.

  6. If the responses to requests for information continue to be delinquent, the Large Case Team will consider serving a summons where pursuit of the issue is necessary and insufficient facts exist to develop or resolve the issue. The Large Case Team Coordinator should consult with Area Counsel for guidance in the preparation and issuance of the summons.

Documentation of Management Actions

  1. The Large Case Team Coordinator should document significant Large Case management activity, which may modify the approved Large Case Audit Plan. Examples of significant modifications are:

    1. Expansion of the examination scope that will require a significant increase in planned time

    2. Contraction of the examination with a significant reduction in staff time

    3. A redeployment of personnel

    4. A change in emphasis of the examination areas regardless if the overall planned time is significantly changed

    5. Any other changes not previously identified

Delinquent Returns Secured

  1. Large Case Team members are responsible for securing and processing:

    1. Delinquent Forms 5330 in accordance with the procedures in IRM 4.71.5, Form 5330 Examinations

    2. Delinquent Forms 990-T in accordance with the procedures in IRM 4.71.10, Form 990-T Examinations

    3. Delinquent Forms 5500 in accordance with the procedures in IRM 4.71.1.21, Amended, Substitute and Secured Forms 5500

Completing the Large Case Examinations

  1. When an individual Large Case Team member completes his or her portion of the examination, the following actions are required:

    1. Prepare Form 5701 (NOPA), Form 886-A, or other report and discuss any pending proposed issues with the Large Case Team Coordinator and Large Case Manager to obtain their concurrence.

      Note:

      The Large Case Team Coordinator should raise issues throughout the examination per agreements made during the opening conference or per the Large Case Engagement Agreement.

    2. Discuss proposed issues directly with the appropriate Taxpayer official per the protocol list discussed during the opening conference (generally with the Large Case Team Coordinator or the Large Case Manager present).

    3. Complete his or her portion of the workpapers and forward them to the Large Case Team Coordinator.

    4. Report case time to the Large Case Team Coordinator if the case is not ready to close.

    5. Close the case on WebETS (Form 6490) when all Large Case Team members have completed their examination segment and the case is closed

      Note:

      Each Large Case Team member will close the case on their individual WebETS, although the Large Case Team Coordinator is the only one who has the case reflected in actual inventory in RCCMS.

  2. The workpapers should support the conclusions reached in each segment of the examination. See IRM 4.71.1.15, Workpapers.

  3. Large Case Team members will forward all supporting workpapers to the Large Case Team Coordinator for assimilation into the final examination case file.

  4. NOPAs or other Large Case Team member reports must be included as a part of the examination case file.

  5. After the Large Case Team Coordinator completes and assembles the examination case file, he or she will forward it to the Large Case Manager for review.

  6. When examining a Taxpayer in conjunction with LB&I, EO, or FSLG, the Large Case Team Coordinator will prepare a closing coordination memo and forward it to the appropriate LB&I, EO, or FSLG case manager when the case is closed. See IRM 4.71.16, Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for a sample report to LB&I.

  7. The closing coordination memo should include the following:

    1. A summary of the examination results

    2. Plans for any future examinations

    3. A copy of the closing letter(s)

    4. A copy of the closing agreement (if applicable)

    5. Any other information needed or requested by LB&I, EO, or FSLG

  8. The Large Case Team Coordinator may schedule a closing conference at their discretion and the discretion of the Large Case Manager. See IRM 4.71.16.10.1, Closing Conference.

Closing Conference

  1. The purpose of the closing conference, if held, is to discuss the results and the effectiveness of the Large Case examination.

  2. Those attending the closing conference typically include the Large Case Team Coordinator, any designated Large Case Team member, and any individual designated by the Taxpayer.

  3. The Large Case Team Coordinator will prepare minutes of the closing conference and include them in the Large Case examination case file.

Review of the Large Case

  1. The Large Case Manager is responsible for review of the case to:

    1. Determine compliance with IRM procedures and guidelines

    2. Evaluate potential Tax Exempt Quality Measurement System (TEQMS) deficiencies

    3. Review closing documents

    4. Review examination closing letter(s)

  2. Managers of specialty groups will be responsible for issue development and documentation of any separate specialty reports issued. Specialty reports will also be included in the EP case file.

Closing the Large Case Examination

  1. Follow the Form 5500 examination closing procedures (unless noted differently) in IRM 4.71.1.22.1, Closing Procedures for Agreed Form 5500 Examinations.

  2. Prepare a closing letter for each return and non-return unit (NRU) examined.

    Note:

    Closing letter(s) for a Large Case are the same as for any other EP examination.

  3. Closing letter(s) will be mailed at the group level or hand delivered to the Taxpayer.

    Note:

    Document your Form 5464 (CCR) with the date the letter was mailed or delivered.

  4. The Large Case Team Coordinator will coordinate with LB&I, EO, and FSLG on the issuance of the closing letter(s).

  5. The Large Case Manager will document the review of closing letter(s) on the file copy of the closing letter(s) or on Form 5464.

  6. To the extent possible, the Large Case Team Coordinator must save all workpapers, forms and letters generated by the Large Case Team members in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    Note:

    If the Large Case Team Coordinator cannot save any portion of the Large Case examination file within RCCMS, they must maintain it in hard copy or saved on a secured CD or retractable USB.

    Note:

    Form 5772 and Form 5773 are optional for Large Case examinations.

  7. For all "unagreed" cases, follow the "unagreed" examination procedures found in IRM 4.71.

    1. Process "unagreed" Form 5500 examinations in accordance with IRM 4.71.3, Unagreed Form 5500 Examination Procedures and EP Exam Closing Agreements.

    2. Process "unagreed" Form 5330 examinations in accordance with IRM 4.71.5.9, Unagreed Cases.

    3. Process "unagreed" Form 990-T examinations in accordance with IRM 4.71.10.5, Unagreed Cases.

  8. The group will close the Large Case examination case(s) on RCCMS and AIMS and send related paper files to the TE/GE Closing Group with Form 3210. See IRM 4.71.1.22, Report Writing and Closing Procedures.

Assessment of Specialist Team Members Performance

  1. At the conclusion of each Large Case examination involving personnel from a supporting area, the Large Case Manager will consider whether to submit written comments regarding the Large Case Team members' work to the appropriate manager.

  2. The Large Case Manager should present the performance assessment of an Large Case Team member in a detailed narrative form.