4.71.17 Non-Return Unit Examinations

Manual Transmittal

May 23, 2017

Purpose

(1) This transmits revised IRM 4.71.17, Employee Plans Examination of Returns, Non-Return Unit Examinations.

Background

IRM 4.71.17 provides guidance and information to assist agents in working Non-Return Unit (NRU) examinations.

Material Changes

(1) IRM 4.71.17.1, Program, Scope and Objectives, and the subsections thereunder, were added to meet the new internal controls requirements.

(2) Paragraph (3)d was added to IRM 4.71.17.4, Monitoring the Statute of Limitations Expiration Date (Statute Date) on an NRU Case, referencing the need to protect the statute of limitations on related Forms 1040 in certain instances when adverse action is taken on 403(b) or 457 exams.

(3) IRM sections 4.71.17.6, Examination of SEPs, SARSEPS and SIMPLE Plans, and IRM 4.71.6.1, Procedures for IRA-based Plans Found to Be in Non-compliance and Not Resolved Through a Closing Agreements, were updated to reference new IRM 4.71.27, Form 5329 Examination Procedures.

(4) The title of IRM 4.71.17.7 was updated to Procedures for Correction of Eligible IRC 457(b) Non-Government Plan Failures.

(5) Minor editorial changes, including revisions to reflect plain language requirements, were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.17 dated March 10, 2016.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(05-23-2017)


Lisa J. Beard
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program, Scope and Objectives

  1. Purpose: IRM 4.71.17, Employee Plans Examination of Returns, Non-Return Unit Examination Procedures, provides the basic examination procedures that will enable Employee Plans (EP) agents and their managers to examine plans that have no filing requirements.

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

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

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

Background

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

Acronyms and Forms

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

    Acronyms

    AIMS Audit Information Management System AIMS
    ATAT Abusive Tax Avoidance Transaction
    CAP Closing Agreement Program
    CCR Case Chronology Record
    CECA Checksheet for Employee Plans Compliance Activities
    EIN Employer Identification Number
    EO Exempt Organizations
    EP Employee Plans
    EPCRS Employee Plans Compliance Resolution System
    EPCU Employee Plans Compliance Unit
    EPTA Employee Plans Team Audit
    ESSP Examinations Special Support and Processing (Closing Unit)
    FSLG Federal, State of Local Governments
    HCE Highly Compensated Employee
    IDRS Integrated Data Retrieval System
    IRA Individual Retirement Arrangement
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    MFT Master File Tax
    NMF Non-Master File
    NRU Non-Return Unit
    RCCMS Reporting Compliance Case Management System (
    SARSEP Salary Reduction Simplified Employee Pensions
    SEP Simplified Employee Pensions
    SIMPLE Simple Retirement Accounts


    Forms and Pubs

    Form Name
    Form 906 Closing Agreement on Final Determination Covering Specific Matters
    Form 941 Employer's Quarterly Federal Tax Return
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    Form 1065 U.S. Return of Partnership Income
    Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc
    Form 1120 U.S. Corporation Income Tax Return
    Form 1120S U.S. Income Tax Return for an S Corporation
    Form 2848 Power of Attorney and Declaration of Representative
    Form 4549-E Income Tax Discrepancy Adjustments
    Form 4759 Address Information Request - Postal Tracer
    Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5464 Case Chronology Record
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5588 TE/GE Non-Master File Request
    Form 5596 TE/GE Non-Examined Closings
    Form 5599 TE/GE Examined Closing Record
    Form 5650 EP Examined Closing Record
    Form 5666 TE/GE Referral Information Report
    Form 8821 Tax Information Authorization
    Form 10329 Transmittal Sheet-Related Cases
    Form 10904 Request for Record Deletion from AIMS
    Form SS-10 Consent to Extend the Time to Assess Employment Taxes
    Form W-2 Wage and Tax Statement
    Pub 590-A Contributions to Individual Retirement Arrangements (IRAs)


Overview of Non-Return Units

  1. TEGE, Employee Plans (EP) often examines retirement plans for which no return is filed. These are called Non-Return Units (NRU).

  2. This IRM provides procedures for examining NRU cases.

  3. The general examination guidelines found in IRM 4.71.1, Overview of Form 5500 Examination Procedures, also apply to NRU exams.

  4. An EP analyst will be designated to oversee specific NRU projects.

  5. The analyst should be consulted when specific questions arise.

  6. Examination guidelines have been developed for these different types of NRU exams:

    1. IRM 4.72.13 provides technical guidance for examining IRC 403(b) plans.

    2. IRM 4.72.17 provides technical guidance for examining SEPs and SARSEPs.

    3. IRM 4.72.18 provides technical guidance for Non-Bank Trustee investigations.

    4. IRM 4.72.19 provides technical guidance for examining IRC 457 plans.

  7. The AIMS NMF is programmed to include MFT 74 for the following types of NRU cases:

    • IRC 403(b) plans

    • IRC 457(b) plans

    • IRC 457(f) plans

    • IRC 401(a) Governmental plans

    • Simplified Employee Pensions (SEP IRA)

    • Salary Reduction Simplified Employee Pensions (SARSEP IRA)

    • Simple Retirement Accounts (SIMPLE IRA)

  8. The NMF AIMS is programmed to include MFT 99 for the following types of NRU cases:

    • Non-Bank Trustee/Custodian Investigations

    • Promoter Penalty Investigations

    • Return Preparer Penalties

    • Non-Filer Cases

    • Penalties for Failure to Disclose a Reportable Transaction - IRC 6707A

    • Other plans for which a return was not filed and there is not enough information available to determine if there is a filing requirement

    • Any other plan without a filing requirement

  9. The initial contact with the taxpayer must be in writing through the use of a 1346 series letter. The following 1346 series letters are available for use:

    • Letter 1346-A, SIMPLE Plan Field Examination Appointment Letter

    • Letter 1346-B, SEP Field Examination Appointment Letter

    • Letter 1346-C, IRC 457 Plan Field Examination Appointment Letter

    • Letter 1346-D, IRC 403(b) Plan Field Examination Appointment Letter

    • Letter 1346-E, IRC 412(i) Non-Return Unit Examination Appointment Letter

    • Letter 1346-G, Non-Return Unit Examination Appointment Letter

Establishment of NRU Examinations

  1. The decision to examine specific plans is made by EP Examinations, Planning and Programs and the EP examination Areas, following the established case selection criteria. See IRM 4.71.26, Case Selection Criteria.

  2. Classification establishes all NRU cases on NMF AIMS and on RCCMS by Classification.

  3. Group managers should use the Classification Examination Return Order Request Form to request 403(b), 457 and IRA-based Plan case work from Classification. See IRM 4.71.17 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for the Classification Examination Return Order Request Form.

  4. Specific types of NRU cases are established as follows:

    Project Code Project Code Description Form Activity Code MFT EP Plan Type
    6040 EPTA IRC 403(b) Plan 5500 370 74 2
    6041 EPTA IRC 457(b) Plan 5500 370 74 2
    6044 EPTA IRC 457(f) Plan 5500 370 74 0
    6046 EPTA Governmental IRC 401(a) Plan 5500 383 74 DB=1; DC=2
    6048 EPTA (Reserved) 5500 370 74 2
    6213 IRC 403(b) Plan 5500 370 74 2
    6214 IRC 457(b) Plan 5500 370 74 2
    6215 IRC 457(f) Plan 5500 370 74 0
    6217 IRA Trust Compliance 5500 370 74 2
    6218 Governmental IRC 401(a) Plan 5500 383 74 DB=1; DC=2
    6219 Special Emphasis Governmental Plan 5500 383 74 DB=1; DC=2
    6221 Special Emphasis (Reserved)* 5500 370 74 0
    6433 SIMPLE IRA-based Plans 5500 370 74 2
    6436 IRC 412(i) Plans 5500 412 74 1
    6452 Special Emphasis (Reserved) 5500 383 74 2
    6453 SARSEP IRA 5500 383 74 2
    6454 SEP IRA 5500 383 74 2
    6506 EPCU IRC 403(b) UA 5500 370 74 2
    6182 Non-Bank Trustee Investigation 8278 182 99 N/A
    6422 Promoter Investigation 8278 505 99 N/A
    6424 Promoter Investigation - Support 8278 505 99 N/A
    6436 IRC 6707A Penalty Case 8278 505 99 N/A
    Various Preparer Penalty 8278 501 - 505 99 N/A
    Various Non-Filer ATAT Case 8278 507 99 N/A
    Various Non-Filer Non-ATAT Case 8278 508 & 549 99 N/A

    Note:

    * Any IRC 401(a) NRU plan picked up as an examination for any reason without an established project code should be established under project code 6221.

  5. When establishing NRU cases, Classification will use the most applicable source code (e.g., source code 40 is used for a subsequent year pick-up).

  6. When a non-filer case is being examined and it is determined that a filing requirement exists, the agent will:

    1. Solicit the delinquent return(s).

    2. Establish the case on AIMS Master File for the applicable MFT. If the taxpayer has a Form 5500, Annual Return/Report of Employee Benefit Plan, filing requirement, follow the procedures found in IRM 4.71.1.21, Amended, Substitute and Secured Forms 5500.

    3. Delete the NMF AIMS account (the NRU account) using Form 10904, following the procedures in IRM 4.71.17.10, NRU Cases Established in Error.

  7. When picking up an additional examination year for an NRU case being examined:

    1. Obtain group manager approval.

    2. Complete Form 5588, TE/GE Non-Master File Request and email it to your group manager for approval. See IRM 4.71.17.2.1 and IRM 4.71.17 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5588.

    3. Upon approval the group manager will email Form 5588 to Classification at the following email address: *TE/GE-EP-Classification.

      Note:

      The email should include the statute of limitations statute date (statute date) of the related return that could be impacted by the NRU case. Classification will use this statute date in the RCCMS file for the NRU.

  8. When a 403(b)/457 Coordinator wants to establish a year for an IRC 403(b) or IRC 457 case, he or she will:

    1. Complete Form 5588 for each year being established, if there is no 5500 return that has been filed for the 403(b) plan.

    2. Email Form(s) 5588 to the EP 403(b)/457 Project Analyst with a copy to Classification (*TE/GE-EP-Classification).

    3. Email a completed Classification Sheet for each exam requested for establishment with focused audit issues selected for that taxpayer.

      Note:

      The email to the Project Analyst and Classification should include the statute date of the related return that could be impacted by the NRU case. Classification will use this statute date in the RCCMS file for the NRU. See IRM 4.71.17.4, Monitoring the Statute of Limitations Expiration Date (Statute Date) on an NRU Case.

      Note:

      Per current procedures, each EP Exam Area develops exam case listings following selection methodology agreed to by the 403(b)/457 Compliance Planning Group. These case listings are then approved by the 403(b)/457 Manager Champion, EPP Examination Manager and the Director, EP Examination for Area selection.

  9. Use plan numbers in the following manner:

    1. A plan number is required for MFT 74 NRU cases.

    2. MFT 99 NRU cases should not have a plan number.

    3. For Governmental IRC 401(a) plans, use plan numbers beginning with 201. Additional plans examined for the same entity should be numbered with the next successive number (e.g., 202).

    4. For IRC 403(b), IRC 457(b), and IRC 457(f) plans, use plan numbers beginning with 301. Additional plans examined for the same entity should be numbered with the next successive number (e.g., 302).

    5. For SIMPLE IRA, SARSEP, and SEP IRA-based Plans, use plan numbers beginning with 901. Additional plans examined for the same entity should be numbered with the next successive number (e.g., 902).

    6. For NRU cases that were established with a plan number that does not follow the guidelines in paragraphs c) through e), the plan number initially assigned will continue to be utilized.

    7. For consistency, if an additional year is picked up, the same plan number or plan number series of the initial case should be used.

  10. Classification will use the command code AMNON to establish cases. See IRM 4.71.17 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for AMNON input instructions.

  11. The NMF AIMS establishment is instantaneous. A full account record can immediately be viewed through command code AMDIS (e.g., AMDIS 70-1234567N).

Preparation of Form 5588

  1. Use Form 5588 to establish NRU cases on RCCMS and NMF AIMS.

  2. Complete the following line items on Form 5588 as noted.

    1. Line 2 (P1-35): Enter the taxpayer’s name.

    2. Line 3 (P1-35): Enter the taxpayer's street address.

    3. Line 4 (P1-25): Enter the taxpayer's city.

    4. Line 5 (P1-2): Enter the taxpayer's state.

    5. Line 5 (P4-15): Enter the taxpayer's zip code.

    6. Line 5 (P17-28): Enter the taxpayer Identification Number (TIN) and File Source "N" .

    7. Line 6 (P1-6): Enter the tax period being examined.

    8. Line 6 (P8-13): For MFT 74 cases enter "5500" . For MFT 99 cases enter "8278" .

    9. Line 7 (P1-8): Leave blank for MFT 74 cases. Enter the statute date for MFT 99 cases.

    10. Line 8 (P1-2): Enter the applicable source code.

      Note:

      Use source code 40 for subsequent year or prior year pick-ups.

    11. Line 8 (P4-6): Enter the applicable activity code. See IRM 4.71.17.2 (4), Establishment of NRU Examinations.

    12. Line 9 (P1-2): Enter the applicable MFT code (MFT 74 or 99) as detailed in IRM 4.71.17.2 (4).

    13. Line 9 (P4): Enter "3" .

    14. Line 10 (P1-2): Enter the applicable status code (either "10" or "12" ).

    15. Line 10 (P4-6): Enter the applicable plan number. See IRM 4.71.17.2 (9). Leave blank for MFT 99 cases.

    16. Line 10 (P8): Enter the applicable plan type definer code. See IRM 4.71.17.2 (4). Leave blank for MFT 99 cases.

    17. Line 10 (P16-19): Enter a special definer code only if there is a special definer code listed on the AMDISA print of the initial NRU return examined. Otherwise, leave blank. If entered, must be 0000-9999.

    18. Line 11 (P1-3): Enter the Primary Business Code.

      Primary Business Code Area
      401 Northeast
      402 Mid-Atlantic
      403 Great Lakes
      404 Gulf Coast
      406 Pacific Coast
      410 Exam Programs and Review
    19. Line 11 (P11-14): Enter the group number assigned to the case.

    20. Line 12 (P1-4): Enter the four character name control.

    21. Line 12 (P6-9): Enter the special project code. See IRM 4.71.17.2 (4), Establishment of NRU Examinations, above.

    22. Reason for Request: Enter "Establish NMF AIMS."

    23. Requester/Date: Enter the examiner's name and current date.

    24. Approved By/Date: Enter the approving manager's name and current date.

  3. See IRM 4.71.17 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5588.

Locating the Taxpayer

  1. Obtaining the taxpayer's current contact information can be an issue since NRU plan sponsors have not filed a return.

  2. For most NRU examinations, Classification will complete and include AIMS research in the case file.

  3. If the taxpayer's full address and contact phone number are not in the case file, do additional research to locate the taxpayer and obtain a contact phone number. You can do the following research to find the taxpayer's phone number if not provided in the case file:

    1. Review local phone directories by internet and other means.

    2. Conduct research on Accurint.

    3. Research the company name on the internet.

    4. Utilize directory assistance.

    5. Conduct additional research on the Integrated Data Retrieval System (IDRS) as described in IRM 4.71.17.3 (4).

  4. The following additional IDRS research can be helpful in finding a current address and phone number for the taxpayer:

    1. IDRS command code ERTVU may give the taxpayer’s phone number or plan sponsor’s phone contact.

    2. Command code INOLE with a definer "T" gives information for both business and employee plan information.

    3. Command codes PMFOL and IRPTR also show addresses and phone numbers.

      Note:

      This information is generated from information documents such as Form W-2, or Form 1099-R.

    4. Command code NAMEE provides an EIN if only the taxpayer’s name and at least a city and state are known. Information obtained from this command code will show EIN used for both business returns and employee plan returns.

  5. If a letter issued to a taxpayer is returned as undeliverable, you can do a postal tracer with the US Postal Service by completing Form 4759, with the "agency return address" filled out on the form.

  6. If the taxpayer still can’t be located, discuss the issue with your group manager to determine if there are other avenues to locate the taxpayer or if the case should be surveyed in accordance with IRM 4.71.17.9, Surveyed Cases.

Monitoring the Statute of Limitations Expiration Date (Statute Date) on an NRU Case

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

  2. RCCMS must be utilized to track the statute date of the affected related return.

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

    2. The statute date will assist the agent and group manager in monitoring the case for a timely referral or pursuit of a Form 1040/1120 discrepancy adjustment, or pursuit and assessment of applicable penalties, when necessary.

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

    Note:

    The last quarterly Form 941 return is due by 1/31 and has a three year statute date from 4/15 (e.g., the statute date for the Form 941 for the quarter ending 12/31/2013 is 4/15/2017).

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

    2. The Form 941 return for IRC 403(b) and IRC 457(b) examinations will not be controlled on the AIMS system.

    3. Even though the Form 941 statute date will not be controlled through AIMS for the tax years reviewed, take the proper steps to protect the Government’s interests for any potential tax adjustments to that return before the statute of limitations expires.

    4. It may be expedient to also extend the statue of limitations on Forms 1040 for individual participants in some 403(b) and 457 examinations. This would be the case if the Service is proposing adverse action that would cause participant’s account balances to be taxable.

      Note:

      If the statute of limitations for Form 1040 for affected participants is not within the time frames stated in IRM 4.71.9.4 (2), Agent Responsibilities and Procedures, consult with your manager about protecting statutes on Forms 1040 for years that are impacted.

    5. Steps to protect the Government's interest would include making a timely referral on Form 5666 with EO or FSLG to ensure the Form 941 statute is protected for any adjustments being proposed.

    6. When you make a timely referral to EO or FSLG (whichever business unit has jurisdiction over the taxpayer), the responsibility to protect the statute no longer rests with you. When a timely referral is made you may update the statute of limitations to alpha "EE" in RCCMS and NMF AIMS (e.g., 04/EE/2017).

    7. The statute date for the IRC 403(b) and IRC 457(b) examination may be updated to alpha "EE" when you and your manager determine that there are no tax consequences to the related Form 941 or that any amount of tax on the Form 941 is determined to be insignificant by your group manager.

      Note:

      Concurrence by the manager must be documented on Form 5464, (CCR).

    8. The statute date for the IRC 403(b) and IRC 457(b) examination may be updated to alpha "EE" when you pick up a prior year and the related Form 941 statute has already barred (e.g., when the exam is being resolved through EPCRS and prior years are being opened to correct an issue).

      Note:

      Concurrence by the manager must be documented on the CCR.

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

    10. Form SS-10 may be secured by EP Exam or by EO or FSLG.

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

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

    Note:

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

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

    2. If the related Form 1040 discrepancy adjustment is actually established on AIMS and RCCMS, the statute date for the SEP, SARSEP, SIMPLE IRA, or IRC 457(f) examination may be updated to alpha "EE" .

    3. The statute date for the SEP, SARSEP, or SIMPLE IRA examination may also be updated to alpha "EE" in RCCMS and NMF AIMS when the agent and group manager determine that the SEP/SARSEP is in compliance with IRC 408(k) or the SIMPLE IRA is in compliance with IRC 408(p).

  5. Because a related Form 941, Form 1040 or Form 1120 can be affected by NRU examinations, agents should follow the time frames in IRM 4.71.9.4 (5) when beginning an examination.

    1. Unless group manager approval is obtained, agents should not start an NRU examination for a given year if the statute date for the related tax return will expire within 12 months.

    2. For example, an agent should not start a SIMPLE IRA examination for the 2012 calendar tax year any later than April 15, 2015 (if the related Form 1040 was timely filed and there were no extensions), since starting the examination after that date would leave less than one year on the related Form 1040 statute date.

  6. Follow the procedures IRM 4.71.9, Statute Control Procedures, when protecting the statute date for related tax returns.

Updates to an NRU Case

  1. The exam group will update the NRU case through RCCMS once it is received.

  2. It is important that both RCCMS and NMF AIMS are updated and mirror each other as much as possible.

  3. When an update to a case is requested on RCCMS, check the AIMS box so that the update is also done on NMF AIMS.

    Note:

    In order for the AIMS update to be done through RCCMS, the RCCMS account and the NMF AIMS account must match exactly (EIN, Plan Number, Plan/Tax Period, etc.). Otherwise, the NMF AIMS account will have to be updated manually, outside of RCCMS.

  4. If you are assigned an NRU case with an incorrect project code and/or activity code (e.g., the case is assigned as a SEP IRA case and you later determine that the case is a SIMPLE IRA):

    1. Complete Form 5588 with the correct activity code and project code, and include an explanation of the issue in the "Reason for Request" box.

    2. Email the form to Classification at tege.ep.classification@irs.gov to update RCCMS and the NMF AIMS account to the correct project code and/or activity code.

    3. Transfer the RCCMS file to Classification for them to make the change in RCCMS and NMF AIMS.

      Note:

      Make sure the "Update AIMS" box is unchecked prior to transferring the record in RCCMS.

  5. The following three examples illustrate situations and the solutions to correct:

    Example 1:
    Situation: A NRU exam was initially assigned as a SIMPLE plan in RCCMS and NMF AIMS. During the examination, the agent discovers that the SIMPLE plan is actually a SEP or SARSEP plan. In addition, there were no AIMS updates to the original record through RCCMS (the AIMS Established field in RCCMS is blank).
    Solution:
    • The activity code must be changed prior to changing the project code.

    • Since the groups are not able to update the activity code in RCCMS these records have to be transferred back to Classification in RCCMS only (make sure the "Update AIMS" box is unchecked prior to transferring the record in RCCMS) to make the appropriate changes to the RCCMS activity and NMF AIMS accounts.

    • When the RCCMS activity is transferred to Classification, an email should be sent to Classification with a revised Form 5588 (with the correct activity and project code) and an explanation of the issue with the RCCMS activity and NMF AIMS account. This will alert Classification of the need to look for the transfer request in RCCMS.

    • Classification will make the appropriate updates in RCCMS and NMF AIMS and transfer the record back to the group in RCCMS.

    Example 2:
    Situation: The same facts as Example 1 except the NMF AIMS account has been updated through RCCMS (AIMS Established field has a "Yes" in RCCMS).
    Solution:
    • In this situation, Classification cannot make any corrections to the RCCMS activity.

    • Therefore, the group will have to complete Form 10904 to correction disposal the RCCMS activity and NMF AIMS account. Follow the procedures in IRM 4.71.17.10, NRU Cases Established in Error.

    • The group will then send a new Form 5588 (using source code 81, the correct activity code and project code and change the plan number to 902) to Classification to have the new record established and assigned to the group in RCCMS and NMF AIMS.

    Example 3:
    Situation: A RCCMS activity and NMF AIMS account was initially assigned as a SEP exam but during the examination it was determined that the plan is actually a 401(k) plan that is not required to file a Form 5500 (under the asset requirement to file 5500-EZ). In addition there were no AIMS updates to the original record through RCCMS (the "AIMS Established" field in RCCMS is blank).
    Solution:
    • In this situation, various fields must be corrected in RCCMS.

    • Since the group is not able to update the activity code in RCCMS, these activities have to be transferred back to Classification in RCCMS only (make sure the "Update AIMS" box is unchecked prior to transferring the record in RCCMS) to make the appropriate changes in RCCMS and NMF AIMS.

    • When the RCCMS activity is transferred to Classification, an email should be sent to Classification with a revised Form 5588 and an explanation of the issue with the RCCMS activity and NMF AIMS account. This will alert Classification of the need to look for the transfer request in RCCMS.

    • Classification will make the appropriate updates in RCCMS and NMF AIMS and transfer the RCCMS activity back to the group.

Examination of SEPs, SARSEPS and SIMPLE Plans

  1. The examination of SEPs, SARSEPs and SIMPLE plans (collectively referred to as IRA-based Plans) makes up a significant part of the EP exam program.

  2. The Employee Plans IRA-based Plan compliance strategy is comprised of the following:

    1. Examining current plan years

    2. Finding issues and seeking correction for current plan year operational and plan form (plan language) deficiencies

    3. Addressing abusive and egregious IRA-based Plans

  3. Examine only current years (years where the three year statute of limitations is still open on related Forms 1040 for HCEs or non-highly compensated participants with significant income tax adjustments) unless the issues found are abusive or egregious.

  4. Examples of IRA-based Plan abusive or egregious situations are:

    1. The taxpayer has significant numbers of rank and file employees who met the plan’s eligibility requirements but are not included in the plan

    2. The plan makes contributions for owner-employees or HCEs only, but has eligible rank and file employees not being allowed to participate

    3. Plan contributions for owner-employees or HCEs are substantially in excess of the annual contribution limits and/or in excess for multiple plan years

    4. Salary deferrals made by participants are not being deposited into their IRA accounts.

  5. If an abusive or egregious situation is discovered on examination, you should consider picking up years beyond current years (plan years beyond the plan year assigned for examination and years where the three year statute of limitations is still open) to ensure compliance.

    Note:

    You may go back to prior years as outlined in IRC 6501(e) and IRM 25.6.1.9.5.3, 25% Omission, for the conditions on application of the six-year statute to propose adjustments to 1040 returns. You should consult your manager for adjustments to owner-employer and HCE Forms 1040 with six year statue of limitation dates. In addition IRC 4973 excise tax can be applied in abusive or egregious situations in prior years if the statute is not barred by the taxpayer's filing of a Form 5329.

  6. Each IRA-based Plan case file assigned to the group will contain a lead sheet with instructions and specific focused examination issues that you should address on your audit.

    Note:

    The same focused examination method that applies to Form 5500 exams, applies to IRA-based Plans. See IRM 4.71.1.5, Scope of the Examination.

  7. IRM 4.72.17, Employee Plans Technical Guidelines, Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee Pensions (SARSEPs), provides technical guidance for SEP and SARSEP exams.

  8. You may also contact the IRA-based Plan Project Analyst when guidance is needed during the examination of any IRA-based Plan.

  9. SEP/SARSEP compliance with IRC 408(k) and SIMPLE IRA compliance with IRC 408(p) is determined on a year-by-year basis.

    1. If it is determined that a SEP/SARSEP is not in conformity with IRC 408(k) in a given year, that year of non-conformity stands alone and remains in non-conformity until a closing agreement is entered into covering that specific year.

    2. An IRA-based Plan that does not conform in a particular year is not automatically considered to be in non-compliance in a subsequent year. In order to be considered to be non-compliant in a subsequent year, IRC 408(k) or 408(p) must also be violated in the subsequent year.

      Note:

      IRA-based Plans are different than qualified plans under IRC 401(a) in that the IRS does not issue individual plan rulings for qualification for IRA-based Plans. When EP finds an operational failure in an IRA-based Plan and the taxpayer does not agree to correct the issue, each individual year with a failure is treated as an ineligible plan year. Subsequent plan years are not automatically disqualified as they are with a 401(a) plan.

  10. Use Letter 992-B, SARSEP and SIMPLE Plan No Change Closing Letter, if there are no examination issues.

  11. When you determine that a SEP/SARSEP does not satisfy IRC 408(k) or a SIMPLE IRA does not satisfy IRC 408(p):

    1. Discuss the issue with your manager and determine whether or not the violation can be corrected through the Audit Closing Agreement Program (Audit CAP) or through the Self-Correction Program (SCP).

    2. Coordinate any closing agreement with the Area CAP Coordinator. Rev. Proc. 2013-12 and Rev. Proc. 2015-27 provide examples of acceptable correction methods for SEP, SARSEP, and SIMPLE IRA violations. Reasonable methods of correction should be discussed with the CAP Coordinator.

    3. If the examination is resolved through SCP, use Letter 1744-A to close the exam.

      Note:

      Letter 1744-A contains an option under "Type of Plan" that allows the agent to select the type of plan (SEP, SARSEP or SIMPLE IRA).

    4. If the examination is resolved through Audit CAP, use Letter 1744-G or Letter 1744-H (as applicable) to close the exam.

      Note:

      Letter 1744-G and Letter 1744-H contain an option under "Type of Plan" that allows the agent to select the type of plan (SEP, SARSEP or SIMPLE IRA).

    5. If the IRC 408(k) violations are significant and are not resolved through Audit CAP, the SEP is considered to be in non-compliance with IRC 408(k).

    6. Likewise, if the IRC 408(p) violations are significant and cannot be resolved through Audit CAP, the SIMPLE IRA is considered to be in non-compliance with IRC 408(p).

    Note:

    See IRM 4.71.17.6.1, Procedures for IRA-based Plans Found to Be in Non-compliance and Not Resolved Through Audit, for procedures for non-compliant plans not corrected through Audit CAP.

  12. Address income and excise tax issues not resolved through Audit Closing Agreement Program (Audit CAP) or a DO 8-3 closing agreement, through the discrepancy adjustment program (for income tax adjustments), and/or through securing Forms 5329 (for IRC 4973 excise tax), and/or through securing delinquent Forms 5330 (for IRC 4979 excise tax).

    Note:

    Priority should be given to pursuing discrepancy adjustments for highly compensated employees (as defined by IRC 414(q)). Secure your manager’s approval before initiating a discrepancy adjustment and document concurrence on Form 5464 (CCR).

    Note:

    See IRM 4.71.4, Discrepancy Adjustments, IRM 4.71.27, Form 5329 Examination Procedures, and IRM 4.71.5, Form 5330 Examination Procedures.

  13. As a general rule, income and excise tax issues should be addressed only in current plan years (years for which the Form 1040 statutes for highly compensated employees are still open), unless the arrangement is determined to be abusive and egregious.

    Note:

    Group manager approval is required to address issues in years where Form 1040 statutes are barred.

  14. See IRM 4.71.17.8, Closing an NRU Case, for closing procedures.

Procedures for IRA-based Plans Found to Be in Non-compliance and Not Resolved Through a Closing Agreement

  1. When an IRA-based Plan is determined to be non-compliant and the plan sponsor does not agree to correct the issue through a closing agreement or through the Self-Correction Program (SCP), plan years associated with those failures (i.e., any year in which a failure occurs) would be considered ineligible years for contributions to participants, resulting in the following tax consequences:

    1. All contributions allocated to participant accounts become taxable to the individual in the year for which they are made.

      Note:

      Individuals are entitled to make the "traditional IRA contribution" for that year. See Pub 590-A.

    2. Contributions made on behalf of each participant in excess of the "traditional IRA contribution" limit are excess contributions subject to IRC 4973 excise tax.

    3. IRC 72(t) tax applies to excess amounts distributed from the IRA-based Plan to the extent that amounts distributed were not previously taken into income.

    4. The plan sponsor is liable for IRC 4979 excise tax when the SARSEP fails the discrimination test described in IRC 408(k)(6)(A)(iii) and does not timely correct.

      Note:

      IRC 4979 excise tax applies even when the SEP is determined to not satisfy the requirements of IRC 408(k), unless the SEP is determined to not satisfy the requirements of IRC 408(k) from its inception. See IRC 4979(e).

  2. When an IRA-based Plan is determined to be non-compliant and the issue is not resolved through a closing agreement, the primary recourse of addressing the issue(s) is through Form 1040 discrepancy adjustments.

    1. When an IRA-based Plan is non-compliant, all contributions allocated to participant accounts become taxable to the individual in the year for which they are made, with the exception that the participant is still entitled to the "traditional IRA contribution" .

      Note:

      This is applicable only for the years in which the IRA-based Plan is determined to be non-compliant.

    2. You and your manager will determine which Form 1040 discrepancy adjustments to pursue (i.e., highly compensated participants or non-highly compensated participants with significant income tax adjustments).

    3. Follow the procedures in IRM 4.71.4.4.5, Preparation of the Discrepancy Adjustment Package, when the decision has been made to make a Form 1040 discrepancy adjustment.

    4. The 30-Day Letter packages for any Form 1040 discrepancy adjustment related to an IRA-based Plan will be prepared and mailed out by the agent.

    5. Follow the procedures in IRM 4.71.4.6.1, Disagreement by the Taxpayer, if the taxpayer files a Protest to Appeals or does not agree with the proposed discrepancy adjustment within the allotted time-frame.

    6. When closing a discrepancy adjustment to Mandatory Review to review before forwarding the case to Appeals or to issue the 90-Day Letter, you are strongly encouraged to close the related NRU paper case file(s) and the NRU RCCMS case file(s) to Mandatory Review as a ride-along case. All supporting documentation for the discrepancy adjustment (e.g., plan sponsor generated documents) must be included in the case file.

      Note:

      If you are not planning to close the NRU paper case file as a ride-along, call the Manager, EP Mandatory Review to discuss the case.

  3. A SEP/SARSEP or SIMPLE IRA failure will normally result in two tax issues on Form 1040 discrepancy adjustments:

    1. The addition to income of the amount of excess contribution in the current year (the amount allocated to the participant’s account in excess of the amount allowed as a "traditional IRA contribution" )

    2. IRC 4973 excise tax on excess contributions for the current year and any excess contributions carried forward from prior years

  4. The 6% excise tax under IRC 4973 is imposed on the individual participants, and applies to all excess contributions to an IRA until the excess amounts (plus earnings) are either distributed to the individual or absorbed as traditional IRA contributions in later years.

    1. An individual has until the due date of their Form 1040 (April 15 plus extensions) to distribute the excess to avoid the tax.

    2. There is no requirement that excess monies have to be removed, but they will be taxed accordingly until there is no longer an excess.

    3. IRC 4973 excise tax is reported on Form 5329, which may be filed along with Form 1040 or filed separately.

    4. The filing of Form 5329 starts the running of the statute of limitations for purposes of IRC 4973 excise tax. This means that the Form 5329 has its own statute date that is not linked to the statute date of a Form 1040. If the Form 5329 was never filed, the statute of limitations for IRC 4973 tax has not begun to run.

    5. If the related Form 1040 statute of limitations is open and the decision is made to pursue a discrepancy adjustment on the participant’s Form 1040, IRC 4973 excise tax should be addressed as a discrepancy adjustment issue through RGS and reflected on Form 4549-E.

    6. If SB/SE or W&I has the related Form 1040 under exam, you may refer the IRC 4973 issue to SB/SE or W&I on Form 5666.

    7. You may pursue IRC 4973 tax on Form 5329 even if an adjustment to income is not also being made.

      Note:

      RCCMS and AIMS are now programmed to control Form 5329 (MFT 29) exams. See IRM 4.71.27, Form 5329 Processing Procedures.

  5. IRC 72(t) tax applies to excess amounts distributed to individuals from a SEP, SARSEP or SIMPLE IRA to the extent that amounts distributed were not previously taken into income.

  6. If a SARSEP is determined not to meet the requirements of IRC 408(k)(6):

    1. IRC 4979 excise tax is imposed on the plan sponsor.

    2. IRC 4979 excise tax applies to excess contributions determined for a SARSEP under IRC 408(k)(6)(A)(iii), if the SARSEP was qualified at any time.

    Note:

    The statute of limitations for IRC 4979 begins to run with the filing of Form 5330.

    Note:

    A SARSEP that fails IRC 408(k) may also result in the adjustments discussed in IRM 4.71.17.6.1 (3).

  7. Appeal rights are not offered to the employer for an IRA-based Plan that is found to be in non-compliance with the Internal Revenue Code and is not resolved through Audit CAP. IRA-based Plans in non-compliance are therefore not subject to mandatory review, although as discussed in paragraphs b), c) and d) below, Appeal rights would be offered for related returns.

    1. Do not, therefore, prepare a 30-Day letter with a Revenue Agent Report (RAR) for the NRU examination.

    2. As discussed in IRM 4.71.17.6.1 (2), with group manager approval, taxable adjustments will be proposed as discrepancy adjustments on the related Forms 1040 of plan participants (normally highly compensated participants), and appeal rights are provided for any related Form 1040 discrepancy adjustment.

      Note:

      The procedures of IRM 4.71.4, Discrepancy Adjustments, should be followed for Forms 1040 or 1120 picked up in conjunction with the SEP, SARSEP or SIMPLE IRA examination; however, the 30-Day Letter will be mailed out by the agent.

    3. You may also pick up Forms 5330 for IRC 4979 as discussed in IRM 4.71.17.6.1 (6). If you do, follow the procedures in IRM 4.71.5, Form 5330 Examination Procedures. Appeal rights would be offered if you have an unagreed Form 5330.

    4. You may also pick up Forms 5329 related to IRC 4973 excise tax as discussed in IRM 4.71.17.6.1 (4). If you do, follow the procedures in IRM 4.71.27, Form 5329 Examination Procedures. Appeal rights would be offered if you have an unagreed Form 5329 exam.

  8. Prepare Letter 1758-A to close a SEP or SARSEP examination that is determined to be non-compliant and is not resolved through a closing agreement. Letter 1758-A should:

    1. Specify the year(s) the SEP does not meet the requirements of IRC 408(k), and it should clearly state why the SEP does not meet the requirements of IRC 408(k).

    2. Specify the consequences of failure to meet the requirements of 408(k), including a list of participants with excess contributions and the amount of excess contributions.

    3. Inform the SEP sponsor of the requirement to notify plan participants of their excess amounts and the applicability of IRC 4973 tax on the excess monies that are not withdrawn (plus earnings). See IRM 4.71.17 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1758-A.

  9. Prepare Letter 1758-D to close a SIMPLE IRA examination that fails to comply with IRC 408(p) and is not resolved through SCP or CAP. Letter 1758-D should:

    1. Specify the year(s) the SIMPLE IRA does not meet the requirements of IRC 408(p), and clearly state why the SIMPLE IRA does not meet the requirements of IRC 408(p).

    2. Specify the consequences of failure to meet the requirements of 408(p), including a list of participants with excess contributions and the amount of excess contributions.

    3. Inform the SIMPLE IRA sponsor of the requirement to notify plan participants of their excess amounts and the applicability of IRC 4973 tax on the excess monies that are not withdrawn (plus earnings). See IRM 4.71.17 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1758-D.

Procedures for Correction of Eligible IRC 457(b) Non-Government Plan Failures

  1. When you examine an IRC 457 plan and determine that the plan doesn’t satisfy the requirements to be an eligible plan under IRC 457(b), take the following steps:

    1. Do not offer or discuss resolution through a DO 8-3 closing agreement with the plan sponsor until items b) thru i) are completed.

    2. Prepare a Revenue Agent Report (RAR) following the guidelines as set forth in IRM 4.71.3.4.3, Revenue Agent Report.

    3. Prepare an Audit CAP Checksheet providing the appropriate information for the case.

      Note:

      The Audit CAP Checksheet requires the amount of total trust assets to be reported. If the amount is not known by the employer, list "N/A" as the amount of total trust assets.

    4. Forward the RAR and Audit CAP Checksheet to your 403(b)/457 Area Coordinator.

    5. Upon receipt of the RAR and Audit CAP Checksheet, the 403(b)/457 Area Coordinator will review these documents.

    6. If the 403(b)/457 Area Coordinator determines that the RAR or the Audit CAP Checksheet is incomplete, he/she will contact the agent to clarify any issues, facts and circumstances, or applicable laws.

    7. If the 403(b)/457 Area Coordinator determines that the RAR and Audit CAP Checksheet are complete, he/she will forward these documents to the 403(b)/457 Project Analyst for consideration of resolution with a DO 8-3 closing agreement.

    8. The 403(b)/457 Project Analyst will review the information and provide the 403(b)/457 Area Coordinator with the appropriate action to be taken that is consistent with similar actions taken under the Service’s Voluntary Compliance Program.

    9. The 403(b)/457 Area Coordinator will review the 403(b)/457 Project Analyst’s recommendation and provide you with instructions to resolve the case.

    10. If resolution through a DO 8-3 closing agreement is recommended, coordinate with your Area CAP Coordinator to resolve the case under the procedures set forth in IRM 4.71.3.3.2, DO 8-3 Closing Agreements.

    11. If resolution using a DO 8-3 closing agreement isn’t recommended, proceed to apply the ineligible plan rules as set forth under IRC 457(f) and IRM 4.72.19.24, Ineligible Plans.

    Note:

    See IRM 4.72.19, IRC 457 Examination Guidelines, for assistance in determining whether the plan is an eligible IRC 457 plan.

Closing an NRU Case

  1. Prior to closing any NRU examination, conduct a closing conference with the taxpayer or taxpayer's representative (POA) either in person or by telephone. In the closing conference:

    1. Inform the taxpayer and/or POA that the audit has been completed.

    2. Inform the taxpayer and/or POA that a closing letter will be issued.

    3. Inform the taxpayer and/or POA of the years and returns covered by the letter.

    4. Discuss with the taxpayer and/or POA of the issues found during the exam.

    5. Discuss with the taxpayer and/or POA the actions taken to resolve the issues and prevent future occurrences.

    6. Document the CCR that the closing conference occurred and the content of the conversation.

  2. When an agent "validates a case for closure" in RCCMS, any field that appears in red must be completed. These fields correspond to the required items on Form 5650 and Form 5599 as detailed below.

  3. Form 5650 should be completed for all "unagreed" MFT 74 NRU examinations. The following line items on Form 5650 should be completed as noted:

    1. P7-18: Enter the taxpayer’s EIN followed by an "N" .

    2. P21-22: Enter the MFT code.

    3. P24-29: Enter the tax period.

    4. P31-34: Enter the name control.

    5. P59-61: Enter the plan number.

    6. C: Enter the name of the taxpayer.

    7. Item 13: Enter the applicable disposal code. See IRM 4.71.1.22.3, Disposal Codes.

      Note:

      If the disposal code is 15, an entry in item 613 is required.

    8. Item 28: Enter the examiner’s time on the case.

    9. Item 30: Enter the technique code:
      2 – Office/Correspondence Exam (OCEP) - full scope
      4 – Field exam - full scope
      6 – OCEP - limited scope/focused exam
      7 – Field exam - limited scope/focused exam

    10. Item 31: Enter the examiner’s grade.

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

    12. Item 33: Enter the examiner’s last name, leave a space and then enter the examiner's first initial.

    13. Item 40: Enter the current fiscal year project code. If there is none, enter 0000.

    14. Item 42: If the disposal code is 15, enter the appropriate Accounts Receivable Dollar Inventory (ARDI) code.

    15. Item 50: Enter the examiner’s group number.

    16. Item 416: Enter a "1" if a closing agreement was secured via fax. If not, leave blank.

    17. Item 602: Enter excise tax picked up during the exam that is not reflected on Form 5599 of a related Form 5330 exam.

      Note:

      Item 613 was added to Form 5650. The sanction amount for a closing agreement should now be entered in item 613 instead of item 602

    18. Item 603: Enter any penalties picked up during the exam that is not reflected on Form 5599 of a related Form 5330 exam.

    19. Item 604: Enter totals from line 603.

    20. Item 605: An entry is required when disposal code 13 is used. Enter the amount of proposed adjustments referred to an Examination Functional Unit (for example, SB/SE) for the specific plan and year to which the Form 5650 relates. Do not enter an amount on this line if the case is being closed disposal code 15.

    21. Item 606: Enter deductions claimed for contributions to the specific plan and year to which the Form 5650 relates. If the amount deducted is $0 or $1, enter $1.

    22. Item 607: Enter total trust assets as of the end of the plan year. Must be at least $1.

    23. Item 608: Enter the number of participants that were directly affected by the examination. Must enter 0 if none are directly affected (item cannot be left blank).

    24. Item 609: Enter plan type (1) for a defined benefit plan or (2) for a defined contribution plan.

    25. Item 610: Enter the applicable Issue Code(s) that relate to the Disposal Code. Only one Issue Code for Disposal Code 02 (issue code 37Z) should be entered. Issue Codes should relate to the issues found during the examination. If a Disposal Code other than 02 is used then up to three Issue Codes can be entered. Any remaining spaces should be filled in with zeros. See Document 6476 for a list of Issue Codes.

    26. Item 612: Enter the applicable NAICS Code (see Doc. 6476).

    27. Item 613: Enter the sanction amount of any closing agreement. It is a required field when closing an MFT 74 using Disposal code 15 (RCCMS 106). If a closing agreement involves more than one year, enter the amount in the earliest year only and $1 in the other years.

    Note:

    See IRM 4.71.17 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5650.

    Note:

    Form 5650 is no longer required to be completed for MFT 74 NRU cases that are closed "agreed" .

  4. Form 5599 should be completed for all MFT 99 NRU examinations. Complete the following line items on Form 5599 as noted:

    1. P7-18: Enter the taxpayer’s TIN followed by a "N" .

    2. P21-22: The MFT is 99.

    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 – Penalties (+): Enter the applicable Penalty Reference Number and the amount of penalties that are being assessed (if applicable). See chapter 11 of Document 6209 for Penalty Reference Numbers.

    7. Item 13: Enter the applicable disposal code.

    8. Item 14: Enter the statute expiration date.

    9. Item 28: Enter the examiner’s time on the case.

    10. Item 30: Item 30: Enter the technique code:
      2 – Office/Correspondence Exam (OCEP) - full scope
      4 – Field exam - full scope
      6 – OCEP - limited scope/focused exam
      7 – Field exam - limited scope/focused exam

    11. Item 31: Enter the examiner’s grade.

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

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

    14. Item 35: If the disposal code is 15, enter the dollar amount of the sanction or if no sanction enter $1.

    15. Item 40: Enter the applicable project code.

    16. Item 42: If the disposal code is 15, enter the appropriate Accounts Receivable Dollar Inventory (ARDI) code.

    17. Item 50: Enter the examiner’s group code.

    18. Item 414: Leave blank unless the disposal code is 06.

    Note:

    See IRM 4.71.17 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5599.

  5. Complete all of the appropriate RCCMS closing actions, making sure the "Update AIMS" box is checked.

  6. Ensure the applicable paper forms have been completed: Form 5650 or Form 5599 (or Form 5596 for surveyed cases).

  7. Prepare the applicable closing letter that pertains to the specific NRU case. The letter will be mailed out in accordance with general EP examination procedures. See IRM 4.71.1.22.1, Closing Procedures for Agreed Form 5500 Examinations, for a list of applicable closing letters.

  8. Save all copies of workpapers, forms and letters you generated 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 for 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.

  9. 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.

  10. For "agreed" NRU exams, the following paper documents must be in individual folders for each year with a completed Form 10329 stapled on front (listing not only the return in the folder but also all related exams):

    • Form 2848 or Form 8821 (if secured and not scanned and saved in the RCCMS Office Documents folder)

    • Form 906 (if applicable)

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

      Note:

      Form 10329 is not required if there are no related returns.

Surveyed Cases

  1. Under certain circumstances, a group may determine not to examine a return initially selected for examination. These cases may be closed by survey.

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

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

  4. Use closing Letter 1024-B if a SEP, SARSEP or SIMPLE IRA exam is surveyed after contact was made with the taxpayer because it was determined not to be a SEP, SARSEP or SIMPLE IRA or because no contributions were made to an IRA-based Plan.

  5. Close the case to ESSP.

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

NRU Cases Established in Error

  1. There are occasions when an NRU case is established on RCCMS and AIMS in error.

  2. When this happens, contact Classification to see if the issue can be corrected without deleting the case. Classification's group mailbox is : tege.ep.classification@irs.gov.

  3. If the NRU is established in error on AIMS and the case must be deleted:

    1. Complete Form 10904.

      Note:

      On Form 10904, make sure the box next to disposal code 33 is checked. See IRM 4.71.17 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 10904.

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

    3. Fax or email Form 10904 to the EP AIMS Coordinator in ESSP. The fax number is (443) 853-5647.

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

    5. The RCCMS account will be closed to ESSP with disposal 901 (error account).

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

Checksheet for Employee Plans Compliance Activities (CECA Checksheets)

  1. You must complete a CECA checksheet for all EP examinations when an NRU exam results in a "change" closure (all disposal codes except 02).

    1. List tax amounts, from a Form 5330 or Form 990-T that is picked up in relation to the NRU exam, on the checksheet that is completed for the NRU exam.

    2. Do not complete a separate CECA checksheet for a related Form 5330 or Form 990-T exam.

      Note:

      Results from a Form 5330 or Form 990-T exam that has no related Form 5500 exam will not be reported on any CECA checksheet.

    3. Input income tax amounts from a Form 1040 or Form 1120 discrepancy adjustment that you picked up during the NRU exam on the checksheet for the NRU exam.

    4. Do not complete a separate CECA checksheet for a Form 1040/1120 discrepancy adjustment.

      Note:

      Results from a Form 1040 or Form 1120 discrepancy adjustment that has no related NRU exam will not be reported on any CECA checksheet.

  2. Complete one checksheet for each plan under examination.

    1. Complete only one checksheet that incorporates all years when multiple years for the same plan are under audit.

    2. Example:

      You are assigned a SEP examination for the plan year ending 12/31/2013. You discover several operational errors and pick up examinations of the plan years ending 12/31/2014 and 12/31/2015. Assume that all three returns are closed as change cases. In this instance, you should prepare one CECA checksheet with 12/31/2013 as the primary year, and ensure that the operational impact and restoration explanation pertaining to all three years is rolled into the single checksheet.

  3. Complete a separate checksheet for each plan examined.

  4. Complete a CECA checksheet for "change" cases for special project cases that have their own special checksheet for the project. Prepare two checksheets: a CECA checksheet and the special project checksheet.

  5. Download the current version of the CECA Checksheet from the EP Examination web site using this link: Checksheet for EP Compliance Activities (CECA).

  6. When completing the CECA checksheet:

    1. Always set the Adobe View Percentage to "100%" . Using this setting will help you to complete "No" in Questions 12B, 12C and 12D, if applicable.

    2. Turn-off the Auto-Complete feature in Adobe: open an Adobe document; select Edit, then Preferences; within the Categories column, select Forms; set Auto-Complete to "Off" .

      Note:

      You may receive error messages for punctuation when answering "zero" to a question (for example, Questions 14A-14K). You can eliminate these error messages by turning-off the Auto-Complete feature in Adobe.

    3. Always provide an answer to every CECA question, even if the answer is "zero" . Leaving a question "blank" gives the impression that the questions were skipped.

      Note:

      If you do not answer some questions on the checksheet, (for example, Questions 14A–14K), it may be returned to you for completion.

  7. It is important that compliance results are accurately reported at the time of case closure.

    1. Complete and precise reporting is essential to the mission of EP to ensure that our efforts and results are correctly captured.

    2. Even though the effect behind the scenes may not be visibly seen, this information is vitally important for reporting purposes as well as for determining future compliance initiatives.

  8. After completing the CECA checksheet:

    1. Save the CECA checksheet in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    2. Annotate the Case Chronology Record (Form 5464) that the CECA checksheet has been completed and save the Form 5464 in the RCCMS Office Documents folder using the RCCMS Naming Convention.

      Note:

      An electronic copy of the CECA checksheet is no longer required to be emailed by the agent to his/her group manager.

      Note:

      A paper copy of the CECA checksheet is no longer required to be placed in the case file.

    3. Close the case to the group manager.

  9. When the group manager receives the closed case from the agent, the following actions related to the CECA checksheet will be taken:

    1. The group manager will access the CECA checksheet in the RCCMS Office Documents folder.

    2. The group manager will review the completed CECA checksheet, ensuring that all questions have been answered and that the entered data is within the statistical norms for the type and size of the taxpayer plan reviewed, and the type of change issue(s) documented.

    3. If the case is "agreed" , after completing his/her review of the CECA checksheet, the group manager shall securely email an electronic copy of the checksheet to the CECA mailbox (*TE/GE-EP-CECA).

      Note:

      When emailing a completed CECA checksheet, do not include the plan name or the taxpayer name in the subject line of the email since the subject is not secure.

    4. If the case is "unagreed" , the group manager will not mail an "electronic copy" of the checksheet to the CECA mailbox.

      Note:

      EP Mandatory Review will email the CECA checksheet to the CECA mailbox for all "unagreed" cases.

    5. Whether the case is "agreed" or "unagreed" , a copy of the CECA checksheet will be saved in the RCCMS Office Documents folder.

    6. If the case is "agreed" , the Case Chronology Record (which was saved in RCCMS by the agent) shall be annotated by the group manager that the CECA checksheet was completed by the agent, reviewed by the manager, and forwarded to the CECA mailbox.

    7. If the case is "unagreed" , the Case Chronology Record (which was saved in RCCMS by the agent) shall be annotated by the group manager that the CECA checksheet was completed by the agent, reviewed by the manager, and left within RCCMS for processing by Mandatory Review.