4.71.17 Non-Return Unit Examinations

Manual Transmittal

December 03, 2018

Purpose

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

Background

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

Material Changes

(1) This IRM was reprinted to incorporate the changes noted in the section of this IRM titled Material Changes directly below. The changes were incorporated into the May 23, 2017, version of this IRM.

(2) Enhanced IRM 4.71.17.1, Program, Scope and Objectives, and the subsections thereunder, by adding more information on the internal controls regulating EP Examinations.

(3) IRM 4.71.17.1.1, Background, was added.

(4) IRM 4.71.17.1.2, Program Controls, was added.

(5) Added new section IRM 4.71.17.1.4, Contact Information for Business Units, to reduce the need for multiple edits to this IRM when contact information changes. The new section will also facilitate finding contact information.

(6) The name for ESSP (Examinations Special Support and Processing) was updated to TE/GE Closing Group throughout the document.

(7) Fax numbers have been replaced with efax numbers throughout the document.

(8) IRM 4.71.17.1.5, Safeguarding Personally Identifiable Information, was added to comply with the December 20, 2016 memorandum from the Director, Identity and Records Protection Privacy, Governmental Liaison and Disclosure, entitled Social Security Number Elimination and Reduction (SSN ER). This section augments compliance with the May 22, 2007 Memorandum (M-07-16) issued by the Office of Management and Budget (OMB) entitled Safeguarding Against and Responding to the Breach of Personally Identifiable Information to the Heads of Executive Departments and Agencies.

(9) Paragraph (4) of IRM 4.71.17.6.1, Procedures for IRA-based Plans Found to Be in Non-compliance and Not Resolved Through a Closing Agreement, was updated to reflect that IRC 4973 tax adjustments are now made on Form 5329.

(10) IRM 4.71.17.10 was modified to incorporate the June 22, 2018, Internal Guidance Memorandum (IGM) (TEGE 04-0618-0016) from the Director, Compliance Planning & Classification, with a subject line, Form 10904 Deletion Requests. The memorandum provides that TE/GE will use a uniform process to delete all account records (Masterfile (MF) and Non-Masterfile (NMF)) from AMIS.

(11) Revised to incorporate the October 5, 2018, Internal Guidance Memorandum (IGM) (TE/GE 04-1018-0024) from the Acting Director, Employee Plans entitled, Single Type of Examination. This memo eliminates the Office Correspondence Examination Program (OCEP) effective October 4, 2018. Instead, there is now a single type of examination that allows the agent and the group manager to determine, on a case by case basis, whether a visit to the taxpayer’s place of business is appropriate or if the examination should be worked through correspondence. Changes to the IRM eliminate references to OCEP throughout the document since the OCEP program has been eliminated.

(12) The IRM was revised throughout to provide additional instructions for DO 8-3 closing agreements.

(13) Made editorial changes, including changes for Plain Language (the Plain Writing Act of 2010), throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.17 dated May 23, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(12-03-2018)

Catherine L. Jones
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 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 determine 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. The primary objective of the Employee Plans examination program is regulatory, with emphasis on continued qualification of employee benefit plans (Policy Statement 4-119).

    1. The purpose of selecting and examining returns is to promote the highest degree of voluntary compliance with the tax laws governing plan qualification.

    2. This purpose is also to determine qualified plans’ extent of compliance and the causes of noncompliance with the tax laws.

    3. EP also examines plans to determine whether they meet the applicable qualification requirements in operation.

    4. See IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

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

    1. Have been given broad authority to consider and weigh conflicting information, data, and opinions.

    2. Will use professional judgement per auditing standards to find facts and apply the IRS’s position on issues of law to determine the correct tax liability.

    3. Will exercise this authority to obtain the greatest number of agreements to tax determinations without sacrificing the quality or integrity of those determinations. Also, we’ll use this authority to dispose of tax differences at the lowest level.

    4. See IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

  3. All examinations will be done per Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. See IRM 1.2.10, Servicewide Policies and Authorities, Policy Statements for Organization, Finance and Management Activities.

Program Controls

  1. EP Examinations established Mandatory Review, see IRM 4.71.14, Employee Plans Examination of Returns, EP Mandatory Review, to ensure examinations are conducted according to technical, procedural and administrative requirements.

  2. EP Examinations uses the Tax Exempt Quality Measurement System (TEQMS), which is the quality control system used to oversee the entire examination program.

  3. All examinations are done per the Taxpayer Bill of Rights in IRC 7803(a)(3).

Acronyms, Abbreviations 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
    FSLG Federal, State of Local Governments
    HCE Highly Compensated Employee
    IDRS Integrated Data Retrieval System
    IRA Individual Retirement Arrangement
    IRC Internal Revenue Code
    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)

     

Contact Information for Business Units

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

    1. Classification (case establishment on RCCMS and AMIS):*TEGE-CPC-Classification (tege-cpc-classification@irs.gov)

      Note:

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

    2. AIMS Coordinator:
      Efax: 855-821-0089
      Email: Charles.Mazzarisi@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 Assignmen
      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 1550
      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

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

    .

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. Agents should consult the analyst when they have questions about NRU exams.

  6. EP Examination developed exam technical guidance for these types of NRU exams:

    1. IRM 4.72.13 - IRC 403(b) plans.

    2. IRM 4.72.17 - SEPs and SARSEPs.

    3. IRM 4.72.18 - Non-Bank Trustee investigations.

    4. IRM 4.72.19 - IRC 457 plans

  7. The AIMS Non-Master File (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 uses 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’s not enough information available to determine if there is a filing requirement

    • Any other plan without a filing requirement

  9. You must initially contact a taxpayer in writing using one of these letters:

    • 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. Classification establishes all NRU cases on NMF AIMS and on RCCMS.

  2. 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.

  3. Classification establishes specific types of NRU cases on AIMS and RCCMS 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:

    * When you pick up any IRC 401(a) NRU plan for any reason and it doesn’t have an established project code, use project code 6221.

  4. When establishing NRU cases, Classification uses the most applicable source code (for example, they use source code 40 for a subsequent year pick-up).

  5. When you’re examining a non-filer case and determine it has a filing requirement:

    1. Solicit the delinquent return(s).

    2. Establish the case on AIMS Master File for the applicable MFT in IRM 4.71.17.2 (3). If the taxpayer has a Form 5500, Annual Return/Report of Employee Benefit Plan, filing requirement, follow the procedures 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.

  6. When you pick up an additional examination year for an NRU case you’re examining:

    1. Get your manager’s 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. After the group manager approves, email Form 5588 to Classification at the address in IRM 4.71.17.1.4, Contact Information for Business Units.

      Note:

      Manager: Include in your email the statute of limitations expiration 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.

  7. Use plan numbers as follows:

    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. If you examine additional plans for the same entity, number them with the next successive number (for example, 202, then 203).

    4. For IRC 403(b), IRC 457(b), and IRC 457(f) plans, use plan numbers beginning with 301. If you examine additional plans for the same entity, number them with the next successive number (for example 302, then 303).

    5. For SIMPLE IRA, SARSEP, and SEP IRA-based Plans, use plan numbers beginning with 901. If you examine additional plans for the same entity, number them with the next successive number (for example, 902, then 903).

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

    7. For consistency, if you pick up an additional year, use the same plan number or plan number series of the initial case.

  8. Classification uses 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.

  9. The NMF AIMS establishment is instantaneous. You can see a full account record using command code AMDIS (for example, 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:

    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 (3), 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 (3).

    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 (7). Leave blank for MFT 99 cases.

    16. Line 10 (P8): Enter the applicable plan type definer code. See IRM 4.71.17.2 (3). 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 (3), 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. It’s sometimes hard to find the taxpayer’s current information because NRU plan sponsors have not filed a return.

  2. For most NRU examinations, Classification completes and includes AIMS research in the case file.

  3. If the taxpayer's full address and contact phone number aren’t in the case file, research to find the taxpayer’s phone number using these sources::

    • Local phone directories on the internet and other ways

    • Accurint

    • The company name on the internet

    • Directory assistance

    • Integrated Data Retrieval System (IDRS) as described in paragraph (4) below

  4. Use the following additional IDRS research to find a current taxpayer address and phone number:

    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 EINs the taxpayer used for both business returns and employee plan returns.

  5. If you receive a letter you issued to a taxpayer back 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 you still can’t find the taxpayer, discuss with your group manager to determine if there are other ways to find them or if you should survey the case per 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 doesn’t have a statute date (because a return was not filed), other returns with statute of limitations are affected by the NRU plan examined.

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

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

    2. The statute date helps you and your group manager monitor the case for a timely referral or to pursue a Form 1040/1120 discrepancy adjustment, or pursue and assess applicable penalties, when necessary.

  3. For IRC 403(b) and IRC 457(b) examinations, the affected related return is 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 (for example, the statute date for the Form 941 for the quarter ending 12/31/2015 is 4/15/2019).

    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 aren’t controlled on the AIMS system.

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

    4. It’s advisable to also extend the statue of limitations on Forms 1040 for individual participants in some 403(b) and 457 examinations if the IRS 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, Agent Responsibilities and Procedures, consult with your manager about protecting statutes on Forms 1040 for impacted years.

    5. Steps to protect the Government's interest 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), you’re no longer responsible to protect the statute. When you make a timely referral, update the statute of limitations to alpha "EE" in RCCMS and NMF AIMS (for example 04/EE/2019).

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

      Note:

      Document your manager’s concurrence on Form 5464, (CCR).

    8. When you pick up a prior year and the related Form 941 statute has already barred (for example, the exam is being resolved through EPCRS and you’re opening prior years to verify correction), you may update the statute date for the IRC 403(b) and IRC 457(b) examination to alpha "EE"

      Note:

      Document your manager’s concurrence on the CCR.

    9. EP Exam, EO or FSLG may extend the statute of limitations for Form 941 using Form SS-10. See IRM 4.71.9 Exhibit 18 at IRM 4.71 - Employee Plans Examination Exhibits.

    10. When you secure Form SS-10 and your group has a scanner, scan the Form SS-10 and save it in RCCMS Office Documents folder using the RCCMS Naming Convention, regardless of whether EO or FSLG secures it. 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:

    Also, you may consider the related Form 1120 for a SEP, SARSEP, or SIMPLE IRA-based plan sponsor if you’re proposing potential discrepancy adjustments for 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 you establish the related Form 1040 discrepancy adjustment on AIMS and RCCMS, you may update the statute date for the SEP, SARSEP, SIMPLE IRA, or IRC 457(f) examination to alpha "EE" .

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

  5. Because a related Form 941, Form 1040 or Form 1120 can be affected by NRU examinations, follow the time frames in paragraph (5) of IRM 4.71.9.4, Agent Responsibilities and Procedures, when you begin an examination.

    1. Don’t start an NRU examination for a given year if the statute date for the related tax return will expire within 12 months unless you get your manager’s approval

      Example:

      Don’t start a SIMPLE IRA examination for the 2015 calendar tax year any later than April 15, 2019 (if the taxpayer timely filed the related Form 1040 and there were no extensions), because the 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 updates the NRU case through RCCMS when it receives the case.

  2. Update both RCCMS and NMF AIMS so they mirror each other as much as possible.

  3. When you request an update to a case 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, you’ll have to update the NMF AIMS account manually, outside of RCCMS.

  4. If your NRU case has an incorrect project code and/or activity code (for example, 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-CPC-Classification 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 before you transfer the record in RCCMS.

  5. See the following three examples and how to correct the account:

    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:
    • Change the activity code before you change the project code.

    • Since the groups can’t update the activity code in RCCMS, you must transfer these records back to Classification in RCCMS only (make sure the "Update AIMS" box is unchecked before you transfer the record in RCCMS) to make the appropriate changes to the RCCMS activity and NMF AIMS accounts.

    • When you transfer the RCCMS activity to Classification, send an email 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 alerts Classification of the need to look for the transfer request in RCCMS.

    • Classification makes the appropriate updates in RCCMS and NMF AIMS and transfers 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 can’t make any corrections to the RCCMS activity.

    • Therefore, the group must 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 then sends 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 you discovered during the exam 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 can’t update the activity code in RCCMS, transfer these activities 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 alerts Classification of the need to look for the transfer request in RCCMS.

    • Classification makes the appropriate updates in RCCMS and NMF AIMS and transfers the RCCMS activity back to the group.

Examination of SEPs, SARSEPS and SIMPLE Plans

  1. The EP examines a significant population of SEPs, SARSEPs and SIMPLE plans (collectively referred to as IRA-based plans).

  2. The Employee Plans IRA-based Plan compliance strategy:

    1. Examines current plan years

    2. Finds issues and seeks correction for current plan year operational and plan form (plan language) deficiencies

    3. Addresses 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 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 aren’t included in the plan

    2. The plan makes contributions for owner-employees or HCEs only, but doesn’t allow eligible rank and file employees 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 you discover an abusive or egregious situation, consider picking up years beyond current years (plan years beyond the plan year assigned and years in which the three year statute of limitations is still open).

    Note:

    You may go back to prior years per IRC 6501(e) and IRM 25.6.1.9.5.3, 25% Omission, (see for the conditions to apply the six-year statute to propose adjustments to 1040 returns.) Consult your manager before making adjustments to owner-employer and HCE Forms 1040 with six year statue of limitation dates. Also, you may apply IRC 4973 excise tax 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 contains a lead sheet with instructions and focused examination issues 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. See IRM 4.72.17, Employee Plans Technical Guidelines, Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee Pensions (SARSEPs) for technical guidance for SEP and SARSEP exams.

  8. You may also contact the IRA-based plan project analyst for help with your IRA-based plan exam.

  9. SEP/SARSEPs and SIMPLE IRA plans must comply with 408(k) and IRC 408(p) respectively, every year.

    1. If you determine that a SEP/SARSEP doesn’t comply with IRC 408(k) in a given year, that year of non-compliance stands alone and remains non-compliant until the sponsor enters into a closing agreement covering that specific year.

    2. An IRA-based plan that doesn’t comply in a particular year isn’t automatically considered non-compliant in a subsequent year. In order to be considered to be non-compliant in a subsequent year, the plan must have violated IRC 408(k) or 408(p) in the subsequent year.

      Note:

      IRA-based plans are different than qualified plans under IRC 401(a) in that the IRS doesn’t issue individual plan rulings for qualification for IRA-based plans. When EP finds an operational failure in an IRA-based plan and the taxpayer doesn’t agree to correct the issue, we treat each individual year with a failure as an ineligible plan year. IRS doesn’t deem subsequent plan years as automatically disqualified, as we do 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 doesn’t satisfy IRC 408(k) or a SIMPLE IRA doesn’t satisfy IRC 408(p):

    1. Discuss the issue with your manager and determine whether 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 give examples of acceptable correction methods for SEP, SARSEP, and SIMPLE IRA violations. Discuss reasonable methods of correction 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 you 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 you to select the type of plan (SEP, SARSEP or SIMPLE IRA).

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

    6. Likewise, if the IRC 408(p) violations are significant and can’t be resolved through Audit CAP, the SIMPLE IRA is considered to be non-compliant 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 either or both the:

    1. Discrepancy adjustment program (for income tax adjustments)

    2. By 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, you should address income and excise tax issues only in current plan years (years for which the Form 1040 statutes for highly compensated employees are still open), unless you determine the arrangement to be abusive and egregious.

    Note:

    Get your group manager’s approval 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 you determine an IRA-based plan is non-compliant and the plan sponsor doesn’t agree to correct the issue through a closing agreement or through SCP, plan years in which the failure occurs are considered ineligible years for contributions to participants. This results 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 the participants didn’t previously take amounts distributed into income.

    4. The plan sponsor is liable for IRC 4979 excise tax when the SARSEP fails the discrimination test in IRC 408(k)(6)(A)(iii) and doesn’t 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 you determine an IRA-based plan to be non-compliant and the issue is not resolved through a closing agreement, address the issue(s) 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, except that the participant is still entitled to the "traditional IRA contribution."

      Note:

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

    2. You and your manager determine which Form 1040 discrepancy adjustments to pursue (such as 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 you/manager decide to make a Form 1040 discrepancy adjustment.

    4. You prepare the 30-Day letter packages for any Form 1040 discrepancy adjustment related to an IRA-based plan will be prepared and mail them.

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

    6. When you close a discrepancy adjustment to Mandatory Review before you forward the NRU case to issue the 90-Day Letter, you’re 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. Include all supporting documentation for the discrepancy adjustment (such as the plan sponsor generated documents) in the case file.

      Note:

      If you are not planning to close the NRU paper case file with the discrepancy adjustment case, 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. 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. Individuals report IRC 4973 excise tax on Form 5329, which they may file along with Form 1040 or 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 individual never filed Form 5329, then the statute of limitations for IRC 4973 tax has not begun to run.

    5. Even if the related Form 1040 statute of limitations is open and you/manager decide to pursue a discrepancy adjustment on the participant’s Form 1040, the individual should still address IRC 4973 excise tax on Form 5329.

    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 we’re not adjusting income on Form 1040.

      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 the individuals didn’t previously include amounts distributed in income.

  6. If you determine a SARSEP doesn’t 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 found to be non-compliant with the Internal Revenue Code and not resolved through Audit CAP. Non-compliant IRA-based plans are therefore not subject to mandatory review. We would offer Appeal rights for related returns, though as discussed in paragraphs b), c) and d) below.

    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 your manager approval, propose taxable adjustments as discrepancy adjustments on the related Forms 1040 of plan participants (normally highly compensated participants), and provide appeal rights for any related Form 1040 discrepancy adjustment.

      Note:

      Follow the procedures of IRM 4.71.4, Discrepancy Adjustments, for Forms 1040 or 1120 picked up in conjunction with the SEP, SARSEP or SIMPLE IRA examination. However, you mail the 30-Day letter, not Mandatory Review.

    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. Offer appeal rights if you have an ungreed Form 5330.

    4. You may also pick up Forms 5329 for IRC 4973 excise tax as discussed in IRM 4.71.17.6.1 (3). 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 you determined to be non-compliant and wasn’t resolved through a closing agreement. Letter 1758-A should:

    1. Specify the year(s) the SEP doesn’t meet the requirements of IRC 408(k)

    2. Clearly state why the SEP does not meet the requirements of IRC 408(k).

    3. 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.

    4. Inform the SEP sponsor that they’re required to notify plan participants of their excess amounts and that IRC 4973 tax applies on the excess monies 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 wasn’t 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).

    2. Clearly state why the SIMPLE IRA does not meet the requirements of IRC 408(p).

    3. 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.

    4. Inform the SIMPLE IRA sponsor that they’re required to notify plan participants of their excess amounts and that IRC 4973 tax applies on the excess monies 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 eligible plan requirements under IRC 457(b):

    1. Don’t 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 4.71.3.6.3, Revenue Agent Report.

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

      Note:

      List the total trust assets on the Audit CAP Checksheet. If the employer doesn’t know this amount, list "N/A."

    4. Forward the RAR and Audit CAP Checksheet to your Area CAP Coordinator.

    5. The Area CAP Coordinator will provide you with instructions to resolve the case.

    6. If resolution through a DO 8-3 closing agreement is recommended, follow the procedures set forth in IRM 4.71.3.5.2, DO 8-3 Closing Agreements.

      Note:

      If the case is resolved through a DO 8-3 closing agreement, use Letter 1744-E to close the exam. The "Form Number" in the header of the letter should be "Non-Return Unit" . The first sentence in the body of the letter should be revised to read, "We have completed our examination of your plan for the above year(s)."

    7. If the project analyst doesn’t recommend resolving the issue via a DO 8-3 closing agreement, apply the ineligible plan rules per IRC 457(f) and IRM 4.72.19.25, Ineligible Plans.

    Note:

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

Closing an NRU Case

  1. Before you close any NRU examination, have 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 we’ve completed the audit.

    2. Inform the taxpayer and/or POA that we’ll issue a closing letter.

    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.

    Note:

    Agents aren’t required to complete Form 5650 for MFT 74 NRU cases that are closed "agreed" .

  3. Complete these lines on Form 5650 for all "unagreed" MFT 74 NRU examinations:

    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 – Correspondence Exam - full scope
      4 – Field exam - full scope
      6 – Correspondence Exam - 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 you’re closing the case with 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. Enter only one Issue Code for Disposal Code 02 (issue code 37Z). Issue Codes should relate to the issues found during the examination. If a Disposal Code other than 02 is used then you may enter up to three Issue Codes. Fill in any remaining spaces 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.

  4. Complete these lines on Form 5599 for all MFT 99 NRU examinations:

    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 – Correspondence Exam - full scope
      4 – Field exam - full scope
      6 – Correspondence Exam - 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 for the specific NRU case. The letter is mailed per 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.

    Note:

    Use Letter 1744-E to close the exams if you resolved an IRC 403(b) or IRC 457(b) plan via a DO 8-3 closing agreement. If no Form 5500 was filed, type in the "Form Number" in the header of the letter "Non-Return Unit" , and change the first sentence in the body of the letter should to "We have completed our examination of your plan for the above year(s)."

  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, place the following paper documents 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 decide not to examine a return initially selected for examination. These cases may be closed by survey.

  2. After coordinating with the responsible EP Project Analyst and their Area Manager, group managers may survey a return, before or after assignment, if either:

    1. An examination is not warranted

    2. the number of returns assigned to the group exceeds the number that can be examined and timely processed.

  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 you found out it was not a SEP, SARSEP or SIMPLE IRA or because no contributions were made to an IRA-based plan.

  5. Close the case to the appropriate Closing Unit. For Closing Unit’s address see IRM 4.71.17.1.4, Contact Information for Business Units.

  6. The Closing Unit closes surveyed NRU cases using command code AMSOC.

NRU Cases Established in Error

  1. Sometimes an NRU case is established on RCCMS and AIMS in error.

  2. Before deleting the AMIS account through a Form 10904 deletion request, first contact Classification since they may be able to make the correction. For Classification's email address see IRM 4.71.17.1.4, Contact Information for Business Units.

  3. If Classification can’t make the correction to the AMIS account, delete the NRU:

    1. To delete the incorrect AIMS account, prepare Form 10904, Request for Record Deletion from AIMS, as follows:

      Field: Entry:
      Name of Taxpayer: Input the plan name.
      Name Control: Input the four digit name control.
      Taxpayer Identification Number: Input the EIN for the record being deleted.
      Plan Num.: Input the plan number for the record being deleted.
      Tax Period: Input the plan year for the record being deleted.
      Disposal Code: Select disposal code "33" .
      Other: Select "Error Account" ; Select "AIMS" .
      Reason for Request: Input a brief explanation of the requested correction.

      Note:

      See IRM 4.71.17 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 10904.

    2. Secure group manager and Area Manager approval on an electronic Form 10904.

    3. Post the approved Form 10904 in the RCCMS Office Documents folder.

    4. Secure AMDISA and INOLES prints for the account being deleted and save them in the RCCMS Office Documents folder.

    5. The group manager (or designee) updates the case to status 51 on AIMS and RCCMS when it is closed.

    6. Close the NRU examination on RCCMS (disposal code 901) and AIMS (disposal code 33) to the TE/GE Closing Group, requesting status "56" (Form 10904).

    7. The EP AIMS Coordinator deletes the account 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.

    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.

  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.

      Example:

      You’re assigned a SEP examination for the plan year ending 12/31/2016. You discover several operational errors and pick up examinations of the plan years ending 12/31/2017 and 12/31/2018. Assume that all three returns are closed as change cases. In this instance, you should prepare one CECA checksheet with 12/31/2016 as the primary year, and include the operational impact and explain the correction for all three years on the one 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 webpage: 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" so the reader doesn’t think you skipped the questions.

      Note:

      If you don’t answer all questions (for example, Questions 14A–14K), it may be returned to you to complete.

  7. It’s important to accurately report compliance results when you close the case.

    1. Complete and precise reporting helps EP capture our efforts and results and CP&C to further refine our compliance strategies.

    2. Examination results is vitally important for reporting purposes and 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 you completed the CECA checksheet and save the Form 5464 in the RCCMS Office Documents folder using the RCCMS Naming Convention.

      Note:

      Agents don’t have to email an electronic copy of the CECA checksheet to their managers or put a paper copy in the case file.

    3. Close the case to the group manager.

  9. When the group manager receives the closed case from the agent, he/she:

    1. Finds the CECA checksheet in the RCCMS Office Documents folder whether the case is "agreed" or "unagreed."

    2. Reviews 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" , securely emails an electronic copy of the checksheet to the CECA mailbox (*TE/GE-EP-CECA).

      Caution:

      When emailing a completed CECA checksheet, don’t include the plan name or the taxpayer name in the subject line.

    4. If the case is "unagreed" , does 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. If the case is "agreed," notes on the CCR (which was saved in RCCMS by the agent) that the agent completed the CECA checksheet, and the manager reviewed it and forwarded to the CECA mailbox.

    6. If the case is "unagreed," notes on the CCR (which was saved in RCCMS by the agent) that the agent completed the CECA checksheet, and the manager left the checksheet in RCCMS for Mandatory Review to process.