Part 4. Examining Process

Chapter 71. Employee Plans Examination of Returns

Section 27. Form 5329 Examination Procedures

4.71.27 Form 5329 Examination Procedures

Manual Transmittal

December 23, 2020

Purpose

(1) This transmits revised IRM 4.71.27, Employee Plans Examination of Returns, Form 5329 Examination Procedures.

Material Changes

(1) Changed the name and content of IRM 4.71.27.1.5 from, "Contact Information for Business Units," to "Related Resources" . Contact Information is now found in Exhibit 13 of IRM 4.71.1 - Employee Plans Examination Exhibits. The renamed section contains a link to the Exhibit.

(2) Updated IRM 4.71.27.5 to omit obsoleted procedures to establish a Form 5329 on RCCMS and AIMS.

(3) Added Letter 531-B as the designated 90-Day Letter for Form 5329 examinations.

(4) Revised IRM 4.71.27.6.1(4) and 4.71.27.6.5(4) to incorporate the provisions of the October 29, 2019, Interim Guidance Memo (IGM) NHQ-01-1019-001, with the subject line, Clarification of Policy for Use of Fax in Taxpayer Submissions, from the Deputy Commissioner for Services and Enforcement.

(5) Revised paragraph (4) of IRM 4.71.27.9.1 to remind letter users that revised Letter 2005 replaced Letter 2005-B.

(6) Added paragraphs (3) and (4) to IRM 4.71.27.10, Statute of Limitations for Form 5329, to reference the new RCCMS Statute Validation Process when the statute date is 270 days or less.

(7) Revised IRM 4.71.27 to incorporate the provisions of the July 28, 2020, IGM TEGE-04-0720-0014 with the subject line, Interim Guidance on Fully Electronic (100% Paperless) Cases, from the Director, EP Examinations.

(8) Revised IRM 4.71.27 to incorporate the provisions of the July 31, 2020, IGM TEGE-04-0720-0018 with the subject line, Elimination of Requirement to Use Paper Form 895/895-EP, from the Deputy Commissioner, TEGE.

(9) Revised IRM 4.71.27 to incorporate the provisions of the September 22, 2020, IGM TEGE-04-0920-0021 with the subject line, Interim Guidance on Reporting Compliance Case Management System (RCCMS) Electronic Case Policy, from the Deputy Commissioner, TEGE.

(10) Revised IRM 4.71.27 to incorporate the provisions of the September 28, 2020, IGM TEGE-04-0920-0024 with the subject line, Revision to Activity, Disposal, Source and Status Codes, from the Deputy Commissioner, TEGE.

(11) Revised IRM 4.71.27 to incorporate the provisions of the November 23, 2020, IGM TEGE-04-1120-0025 with the subject line, Location of IRM Exhibits for EP Examination Employees, from the Director, EP Examinations.

(12) Revised IRM 4.71.27 to incorporate the provisions of the December 14, 2020, IGM TEGE-04-1220-0026 with the subject line, Requirement to use Form 5773-A (Rev. 12-2020), and eliminating required use of Form 5772-A, from the Director, EP Examinations.

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

(14) Other minor IRM editorial changes were made for:

  • Updating organizational terms, titles, and acronyms. Updating or correcting references and citations, added links to references.

  • Updating for changes in disposal codes and letter renumbering.

  • Updating for broken links.

Effect on Other Documents

This supersedes IRM 4.71.27 dated October 29, 2019.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(12-23-2020)


Eric D. Slack
Director, Employee Plans
Tax Exempt and Government Entities

4.71.27.1 (10-29-2019)

Program, Scope, and Objectives

  1. Purpose: IRM 4.71.27, Employee Plans Examination of Returns, Form 5329 Examination Procedures, provides the basic examination procedures that will enable EP agents and their managers to examine, process and close Form 5329.

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

  3. Program Owner: Director, EP Examinations.

  4. Program Authority: EP Examinations derives its authority to conduct examinations, resolve issues and determine tax liability 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:
      • Examine any books, papers, records or other data necessary to complete an exam.
      • Take testimony under oath to secure additional information needed.
      • Issue summons for information necessary to complete an examination.
      • Ask about any offense connected to the administering or enforcing of the Internal Revenue laws.

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

      Note:

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

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

4.71.27.1.1 (10-29-2019)

Background

  1. Employee Plans (EP) Examinations division determines if a retirement plan is qualified under IRC 401 and the underlying regulations, and therefore, exempt from tax under IRC 501.

  2. The EP Examination program’s primary objective is regulatory, emphasizing continued qualification of employee benefit plans (Policy Statement 4-119). EP selects and examines returns to:

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

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

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

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

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

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

    3. To exercise this authority to obtain the greatest number of tax determination agreements without sacrificing the quality or integrity of those determinations and to dispose of tax differences at the lowest level.

  4. All examinations are done in accordance with Policy Statement 1-236, Fairness and Integrity in Enforcement Selection.

4.71.27.1.2 (10-29-2019)

Program Controls

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

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

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

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

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

    Note:

    See also Pub 5169.

  4. The IRS is fully committed to protecting the privacy rights of taxpayers and employees. Privacy laws are included in the IRC, the Privacy Act of 1974, the Freedom of Information Act, and IRS policies and practices.

    1. For more information about these laws, visit the FOIA Library on the irs.gov website.

    2. For questions concerning privacy, send an email to *Privacy.

    3. For question concerning disclosure, send an email to *Disclosure.

    For questions concerning privacy, send an email to *Privacy. For question concerning disclosure, send an email to *Disclosure.

4.71.27.1.3 (10-29-2019)

Acronyms, Abbreviations Forms, and Publications

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

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    ARDI Accounts Receivable Dollar Inventory
    CCR Case Chronology Record
    EEFax Enterprise Electronic Facsimile
    EP Employee Plans
    GCM General Counsel Memo
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IRA Individual Retirement Account
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    MFT Master File Tax
    NRU Non-Return Unit
    PLR Private Letter Ruling
    POA Power of Attorney
    RAR Revenue Agent Report
    RCCMS Reporting Compliance Case Management System
    RGS Report Generation Software
    SARSEP Salary Reduction Simplified Employee Pensions
    SB/SE Small Business /Self-Employed Division
    SEP Simplified Employee Pension
    SIMPLE Savings Incentive Match Plan for Employees of Small Employers
    SFR Substitute for Return
    SNOD Statutory Notice of Deficiency
    SOL Statute of Limitations
    SSN Social Security Number
    TEQMS Tax Exempt Quality Measurement System
    TIN Taxpayer Identification Number (e.g., SSN)
     

    Forms and Pubs

    Form Name
    Form 870-EP Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment
    Form 872 Consent to Extend the Time to Assess Tax
    Form 886-A Explanation of Items
    Form 1040 U.S. Individual Income Tax Return
    Form 2848 Power of Attorney and Declaration of Representative
    Form 3198-A TE/GE Special Handling Notice
    Form 3210 Document Transmittal
    Form 3244-A Payment Posting Voucher - Examination
    Form 4549-E Income Tax Discrepancy Adjustments
    Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
    Form 5456 Reviewer’s Memorandum - EP/EO
    Form 5464 Case Chronology Record
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5599 TE/GE Examined Closing Record
    Form 5650 EP Examined Closing Record
    Form 5666 TE/GE Referral Information Report
    Form 5773-A Employee Plans (EP) Workpaper Summary Continuation
    Form 8821 Tax Information Authorization
    Form 9814 Request for Mail/Shipping Service
    Form 10904 Request for Record Deletion from AIMS
    Letter 531-B 90-Day Letter - Form 5330 Excise Tax, Form 990-T Tax or Form 5329 Tax
    Letter 2005 30-Day Letter - Form 5330, Form 990-T, and Form 5329
    Pub 1 Your Rights as a Taxpayer
    Pub 594 The IRS Collection Process
    Pub 1020 Appeal Procedures EP Examinations
     

4.71.27.1.4 (10-29-2019)

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

    .

4.71.27.1.5 (12-23-2020)

Related Resources

  1. Find contact information for individuals and business units referenced in this IRM in IRM 4.71.1 - Exhibit 13.

  2. See IRM 4.5.2, TE/GE AIMS Manual - TE/GE Examined and Non-Examined Closures for help completing Form 5599 (optional).

  3. See Document 6476 for help completing Form 5599 (optional).

  4. See IRM 20.1.2, Penalty Handbook, Failure to File/Failure to Pay Penalties, for information on preparing Form 13496.

4.71.27.1.6 (12-23-2020)

Overview of Form 5329 Examinations

  1. This section provides procedures for examining and closing Form 5329.

  2. Except for IRC 72(t) tax, Form 5329 taxes aren’t part of a discrepancy adjustment case.

    Reminder:

    Don’t use Form 4549-E with a Form 5329 case.

  3. Although often filed with a Form 1040, Form 5329 is a distinct return from the related Form 1040.

  4. Form 5329 has its own statute of limitations date. The statute of limitations for tax required to be reported on Form 5329 begins to run when Form 5329 is filed.

  5. When we examine Form 5329 returns, we may collect additional taxes under IRC 4973, Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities, or IRC 4974, Excise Tax on Certain Accumulations in Qualified Retirement Plans.

  6. EP generally picks up Form 5329 during an examination of:

    • Form 5500 series return (Form 5500)

    • A Non-Return Unit (NRU)

    • IRA-based plans not required to file a Form 5500 (SEP, SARSEPs and SIMPLE)

  7. A Form 5329 examination may originate when you determine during the:

    1. Form 5500 examination, that the plan is not qualified under IRC 401(a), and plan distributions were rolled into an IRA (traditional or Roth IRA). The entire amount of all rollovers from the non-qualified plan to either type of IRA are subject to IRC 4973 tax.

    2. IRA-based plan examination, that the plan doesn’t comply with IRC 408. For each year the plan is non-compliant, contributions made on behalf of each participant in excess of the "traditional IRA deduction" limit under IRC 219(b) are excess contributions subject to IRC 4973 tax.

      Note:

      See IRM 4.71.17.6.1, Procedures for IRA-based Plans Found to Be in Non-compliance and Not Resolved Through a Closing Agreement.

    3. Form 5500 examination, that a participant or beneficiary didn’t receive the required minimum distributions under IRC 401(a)(9). The amounts required to be distributed are subject to excise tax under IRC 4974.

  8. The taxpayer that has the tax issue files Form 5329.

    Example:

    John and Jane Caribou jointly file a Form 1040. If Jane Smith has an excess contribution to an IRA, she’d file Form 5329 for IRC 4973 tax using her SSN. If both John and Jane have excess contributions to their respective IRAs, they’d file separate Forms 5329.

  9. Address IRC 72(t) on Form 4549-E using current RGS software. Don’t address IRC 72(t) issues on Form 5329.

    Note:

    For statute of limitations purposes, IRC 72(t) tax is treated as income tax.

    Note:

    See IRM 4.71.4, Employee Plans Examination of Returns, Discrepancy Adjustments, for Form 1040 discrepancy adjustments procedures.

  10. Establish all "agreed" delinquent Forms 5329 RCCMS and AIMS when tax due is $500 or more in any year.

    Example:

    If a taxpayer owes IRC 4973 tax of $400 and $600 for 201812 and 201912, respectively, request and establish delinquent Forms 5329 on RCCMS and AIMS for both years.

    Note:

    If tax due is less than $500 in each year you’re considering, solicit Forms 5329 and establish on RCCMS and AIMS at your manager's discretion.

  11. IRM 4.71.27.6, Processing Agreed Forms 5329 for AIMS processing requirements for "agreed" Forms 5329 you secure during an exam. An "agreed" Form 5329 is one in which the taxpayer files a Form 5329 and reports the correct amount of tax.

    Note:

    The tax doesn’t need to be paid for a case to be "agreed" .

  12. IRM 4.71.27.9, Unagreed Cases for AIMS processing requirements for "unagreed" Forms 5329 you secure during an exam.

  13. See IRM 4.71.2, Overview of IDRS and Non-Master File Transcript Requests for a description of different IDRS command codes when conducting internal research related to Forms 5329,

    Note:

    When a taxpayer files Form 5329, either with Form 1040 or separately, IRS computer systems establish a MFT 29 module. Use command code IMFOLT with the taxpayer’s SSN to determine if the taxpayer filed a Form 5329.

    Caution:

    A MFT 29 module doesn’t always establish correctly when the taxpayer files Form 5329 with their Form 1040, so research IDRS using other command codes (for example, RTVUE, IMFOLT, etc.).

4.71.27.2 (12-23-2020)

Form 5329 Due Dates

  1. Form 5329 is due at the same time the taxpayer’s Form 1040 is due, including extensions.

  2. If the taxpayer didn’t have an extension to file their Form 1040 or the taxpayer isn’t required to file a Form 1040 for that year, the due date is April 15th of the year following the year in which the tax is attributable.

4.71.27.3 (12-23-2020)

General Procedures for Form 5329 Examinations

  1. Follow basic examination techniques and guidelines as detailed in IRM 4.71.1, Overview of Form 5500 Examination Procedures.

    1. Secure and review source documents substantiating the additions to income tax and/or excise tax.

    2. Use Form 5773-A and workpapers to document your examination findings on potential tax and penalty issues.

  2. Give complete and accurate calculations of tax and applicable penalties to the taxpayer and POA. See IRM 20.1, Penalty Handbook, and IRM 20.1.8, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties, for guidance on penalties.

    Reminder:

    If the taxpayer has a representative, the Form 2848 must specifically list Form 5329 and the type of tax to be the representative for Form 5329. They may add this line item to the Form 2848 for a Form 1040.

  3. When working a claim filed on a Form 5329, follow the procedures in IRM 4.71.8, EP Claims.

4.71.27.4 (12-23-2020)

Initial Contact with the Taxpayer

  1. In most cases, Form 5329 examinations are initiated as a result of issues we discover in a related Form 5500 or NRU examination.

  2. After you gather adequate documentation and decide to pursue a tax issue, notify the impacted taxpayer in writing of the Form 5329 examination.

    1. Issue an individually designed letter (for example, a modified Letter 1346 or Letter 1474) explaining pertinent facts, law, government position, and tax calculations ( if applicable, include IRC 6651(a) penalty calculations).

    2. Solicit the filing of Forms 5329 for all years in which returns are due.

    3. If you’re assessing additional tax on a year a Form 5329 was filed, use Form 870-EP to secure agreement on the additional assessment of tax. See IRM 4.71.27 - Exhibit 1 for an example of a completed Form 870-EP.

    4. Include penalty calculations if penalties are being imposed. The failure to file and failure to pay penalties under IRC 6651(a) are applicable to delinquent Forms 5329.

      Note:

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

    5. Solicit payment of tax and applicable IRC 6651(a) penalties to stop further interest charges from accruing.

    6. Send Pub 1 if not previously given to the taxpayer with the modified initial appointment letter.

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

4.71.27.5 (12-23-2020)

Overview of Establishing Forms 5329 on RCCMS and AIMS

  1. Establish Forms 5329 on RCCMS and AIMS after either:

    1. You secure a delinquent Form 5329 from the taxpayer and the return is processed per IRM 4.71.27.6, Processing Agreed Forms 5329.

    2. The taxpayer refuses to file a Form 5329. See IRM 4.71.27.9, Unagreed Cases.

  2. In most cases involving IRC 4973 tax, an adjustment on Form 5329 happens at the same time we do a Form 1040 discrepancy adjustment; usually the amount of the discrepancy adjustment is the same amount subject to tax. Whether the taxpayer fully agrees, partially agrees or is in complete disagreement with the issues, establish two separate case files (one for the Forms 1040 and one for the Forms 5329).

    Note:

    See IRM 4.71.4, Employee Plans Examination of Returns, Discrepancy Adjustments, if a discrepancy adjustment is warranted

    .

  3. When the Kansas City Service Center processes a delinquent Form 5329, the return posts as MFT 29 on IMF.

  4. When the taxpayer refuses to file a delinquent Form 5329, prepare Form 3177, and send it to the EP AIMS Coordinator for processing. See IRM 4.71.27.9.2, Form 3177 - Substitute for Return Procedures.

    Note:

    It normally takes two weeks for the MFT 29 tax module to post once the AIMS Coordinator inputs the form.

  5. Once the entity module has been created and the return has posted, establish the case on RCCMS and AIMS through RCCMS. See IRM 4.71.27.5.1, Establishing Forms 5329.

  6. Close agreed Forms 5329 that are due or delinquent per IRM 4.71.27.6.3, Closing Agreed 5329 Examinations.

  7. At the first indication that a case is unagreed (for example, the taxpayer refuses to properly file a Form 5329 that is due) follow substitute for return (SFR) procedures per IRM 4.71.27.9, Unagreed Cases.

  8. When examining a Form 5329 return that was previously filed by the taxpayer (such as claims and cases you’ve determined the taxpayer reported insufficient tax), research IDRS.

    1. Get a transcript of the account (IMFOLT and IMFOLR prints) for MFT 29 with the taxpayer’s SSN for the applicable year to verify the filed status of the return and the amount of tax assessed. The return was processed on Individual Master File (IMF) if a TC "150" is present.

    2. Verify the statute date displayed on IDRS is accurate for the return filed.

4.71.27.5.1 (12-23-2020)

Establishing Forms 5329

  1. Once the Kansas City Service Center processes the delinquent secured return, an entity module has been created and the return has posted, establish the case on RCCMS and AIMS through RCCMS.

    1. See IRM 4.71.27.6.1, Processing Delinquent Forms 5329 Received from the Taxpayer.

    2. If the taxpayer refuses to file a Form 5329 that is due, follow the procedures in IRM 4.71.27.9.2, Form 3177 - Substitute for Return Procedures to create an entity module.

  2. From the RCCMS main window, select "File," then "New," then "Compliance Activity" :

    • Select "Validate for Establish."

    • Check the AIMS box so your establishment will take place on RCCMS and AIMS.

    • Enter the SSN for the primary taxpayer in the "TIN" field.

      Note:

      The default in the box next to TIN is "0" for a valid TIN.

    • Select the "Name" button, which will give you a pop up "Name" box for you to complete.

      1. Ensure you input the correct name information on each line.

      2. Click "OK" when finished.

      3. The "Name" field in the "Compliance Activity" window will populate based on your entries in the pop up window.

    • Click on the "Address" button and fill in the taxpayer’s address.

    • For the "General" tab:

      1. For "Type" select "5329 Return."

      2. For "Activity Code" select "269."

      3. Input the tax period.

      4. Input the return due date.

      5. Input the return received date.

      6. Input the statute date.

    • For the "Codes" tab:

      1. Input the "Name Control."

      2. Input the "Project Code."

        Note:

        This is normally the "Project Code" of the lead examination.

      3. Input the "Source Code" . Source code 50 should always be used if the return has posted as evidenced by TC 150.

      4. For "Master File Type" , select IMF.

      5. Input the "Status Code."

      6. For "Grade" , enter the grade of the related case.

      7. Input the "Related Return Source Code" .

        Note:

        This will usually be the Source Code of your lead examination.

      8. For "Return Requisition Code" , select "3 - Return, Chargeout and Labels Not Requested."

      9. For "MFT Code" , select 29.

      10. Ensure that the "Related Return" box is checked.

      11. Ensure that the "Flowthru" box is not checked.

      12. Input the Reason for request/Related return.

      13. Input comments as appropriate.

      14. Select "Save and Close."

  3. Do not save an individual 5329 activity in the Form 5500 or Form 1040 or other lead examination case on RCCMS because it is a potential disclosure issue.

    1. Save the Form 5329 for a taxpayer in its own case.

    2. Combine only the activities for multiple years of the same 5329 for the same taxpayer.

    3. Confirm that the "New Case" option is selected in RCCMS. This establishes the Form 5329 as its own activity in its own case.

4.71.27.6 (12-23-2020)

Processing Agreed Forms 5329

  1. A delinquent Form 5329 is considered "agreed" when Form 5329 is filed and the amount of tax reported is correct or the taxpayer agrees with your proposed tax adjustment.

    1. You must establish all "agreed" delinquent returns on RCCMS and AIMS when the tax due is $500 or more in any one year.

      Example:

      If taxes in the amounts of $400 and $600 are due in 201812 and 201912, respectively, you must establish delinquent Forms 5329 on RCCMS and AIMS for both years

    2. If tax is less than $500 in all years being considered, solicit Forms 5329 and establish them on RCCMS and AIMS at your manager's discretion.

  2. When you receive a delinquent Form 5329 return from the taxpayer, process it per IRM 4.71.27.6.1, Processing Delinquent Forms 5329 Received from the Taxpayer.

  3. Secure an IMFOLT print to determine that the return has posted on the IMF MFT 29 module.

    Note:

    Don’t establish the case on RCCMS and AIMS until a return or SFR has posted on the MFT 29 IMF module for the applicable year.

    1. Periodically request an IMFOLT print to confirm that the IRS has processed and posted Form 5329. When the return posts, a 150 transaction code (TC 150) will be reflected on the account.

      Note:

      It normally takes four to eight weeks for the Kansas City Campus to process a return once they receive it.

    2. Establish the case on RCCMS and AIMS when the return has been filed and there is a TC 150 reflecting that the return has posted on IMF.

      Note:

      The case must be fully established on RCCMS and AIMS before you close the case to the TE/GE Closing Group.

  4. Close agreed Forms 5329 per IRM 4.71.27.6.3, Closing Agreed Form 5329 Examinations.

  5. Follow the SFR procedures in IRM 4.71.27.9, Unagreed Cases, if tax is due on a delinquent Form 5329 and the taxpayer refuses to file.

  6. Process Forms 5329 you receive from the taxpayer for years not yet due per IRM 4.71.27.6.2, Securing Forms 5329 Not Yet Due.

4.71.27.6.1 (12-23-2020)

Processing Delinquent Forms 5329 Received from the Taxpayer

  1. Date stamp all delinquent Forms 5329 with the IRS received date as soon as possible after you receive them from the taxpayer.

  2. Verify that the Form 5329 received is the most current version of the form.

  3. Verify the accuracy of the entire Form 5329, making sure the following items are correct:

    1. The filer's name. It must match the name on the INOLES for the applicable SSN.

      Note:

      If the filer's name does not match what’s on INOLES, the return will reject at the Kansas City Campus.

    2. The amount of tax. Also verify that it’s reflected on all applicable lines of the return and that supporting schedules are complete.

    3. The tax year.

    4. The SSN.

    5. The return is signed by the taxpayer.

  4. Taxpayer filing an original tax returns via fax, EEFax, or email is only be allowed as part of a return perfection process (for example, securing a missing schedule or missing signature) IRS initiated or in the post-filing/non-filing activities. IRS can receive tax returns via fax as part of return perfection even if a taxpayer’s signature is required since Chief Counsel has advised that in circumstances where we’ve contacted the taxpayer has been made and documented it, faxed signatures are legally sufficient.

  5. If you processed Form 3177 as a SFR per IRM 4.71.27.9.2, and the taxpayer files a delinquent return with you, process the secured return as an amended return. See IRM 4.71.27.6.5, Amended Forms 5329.

    1. Check block "H" at the top of the first page of Form 5329, indicating it’s an amended return.

    2. Write "AMENDED RETURN SECURED BY TE/GE: EMPLOYEE PLANS" at the top of Form 5329.

  6. If you receive payment, process checks per Government Accountability Office (GAO) recommendations:

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

    2. Enter the check information (date of check, check number, amount, payer, IRS recipient name and date received) into your group’s required logbook.

    3. Group manager: Review the agent-prepared Form 3244-A and Form 3210, compare it to the Form 3244-A and sign the Form 3210. The person who prepares the Form 3244-A can’t be the same person who signs the Form 3210.

      Note:

      Make sure you use the current version of Form 3244-A.

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

      Note:

      The Kansas City Submission Processing Campus returns the acknowledgement copy of Form 3210 to the originator through EEFax.

    5. Send the check along with the Form 5329 package by express mail (next day) to the Kansas City Submission Processing Campus by close of business the day after you receive it.

      Note:

      If you can’t mail the check to Kansas City the same day you receive it, secure it overnight in a locked cabinet.

    6. Put the check along with the completed Form 3244-A in a separately addressed envelope and put that envelope in the express mail envelope.

    7. If you don’t receive the acknowledgement copy of Form 3210 from the Kansas City Service Campus within 10 days after mailing, contact the Service Campus. Document these actions in the group logbook.

  7. If you don’t receive payment, send the Form 5329 package as soon as administratively possible (preferably within three business days) to the Kansas City Campus.

  8. Write in bold red letters on the top margin of the original return: "DELINQUENT RETURN SECURED BY TE/GE EMPLOYEE PLANS."

    Reminder:

    Leave room in the upper right corner for the Service Campus to enter the DLN.

  9. Prepare the delinquent Form 5329 package to send to the Service Campus:

    1. Form 3210

      • Address Form 3210 to the P&A Analyst. See IRM 4.71.1 - Exhibit 13 for the P&A’s Analyst’s contact information.

      • In the body of the Form 3210:

        1. List the forms secured (Form 5329), the taxpayer’s name and SSN, and the tax years being sent.

        2. If payment is received also list the check number and the amount of the check.

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

          Note:

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

      Note:

      See IRM 4.71.27 - Exhibit 2 for an example of a completed Form 3210.

    2. If you receive payment, complete Form 3244-A for each year for which the taxpayer paid as follows and place the Form 3244-A and check in a separately addressed envelope per IRM 4.71.27.6.1 (6)(f) above.

      1. SSN: Enter the SSN.

      2. Form number/MFT: Enter 5329/29

      3. Tax period: Enter the tax year.

      4. Transaction date: Enter the date the payment was received.

      5. Taxpayer name, address and zip code: Enter the taxpayer’s identifying information.

      6. Transaction Data: List the entire amount received for the year under transaction code 610 (Remittance With Return) and the same amount under "Total payment." Also list $0 next to transaction code 570.

      7. Remarks: List the check number and amount of the check. If the check represents payments for more than one year, list each year and the amount applied to each year.

      8. Prepared by: Enter the agent’s name and group number.

        Example:

        A Form 3244-A is required for each year for which payment is received. For example, if you receive a check from the taxpayer for $5000 that includes payment of $2000 for 201812 and $3000 for 201912, prepare a Form 3244-A for 201812 showing $2000 next to transaction code 610 and a second Form 3244-A for 201912 with $3000 next to transaction code 610. List the total amount of the check in the "Remarks" section of the Forms 3244-A.

        Note:

        See at IRM 4.71.27 - Exhibits 3 and 5 for an example of a completed Form 3244-A.

    3. Form 3198-A (attached to each Form 5329 you are processing):

      • List your name, address, ID number, phone number, Primary Business Code (PBC), and group number in the "Required Entries" section.

        Reminder:

        PBCs are as follows:
        Northeast 401
        Mid-Atlantic 402
        Great Lakes 403
        Gulf Coast 404
        Pacific Coast 406

      • List the taxpayer's SSN, MFT 29, year of the attached Form 5329, taxpayer's name, and name control in the "Required Entries" section.

      • List all years for which the taxpayer’s Forms 5329 are being processed simultaneously, with the applicable statute date.

      • Write in the "Other Instructions" section, instructions on whether IRC 6651(a) penalties apply. If you’re not assessing penalties, write and highlight: "Do Not Assess Penalties, Reasonable Cause Established."

        Note:

        IRC 6651(a) penalties will automatically be assessed by the Kansas City Campus unless you give specific instructions not to. Penalties will be assessed if you don’t attach Form 3198-A.

        Note:

        Document your workpapers the basis for assessing or not assessing of IRC 6651(a) penalties. Update your CCR with discussions and your manager’s decisions about assessment or non-assessment of IRC 6651(a) penalties.

      Note:

      Attach a return specific Form 3198-A to each Form 5329.

    4. Original delinquent return

      Note:

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

  10. Before mailing the Form 5329 package, scan a copy of the entire package and save in the RCCMS case file using the RCCMS Naming Convention.

  11. Address the Express Services Routing slip, Form 9814, use the "P&A Analyst" and phone number in the Exhibit for recipient whether or not you receive payment.

  12. Mail the return package to the P&A Analyst. See IRM 4.71.1 - Exhibit 13 for the P&A’s Analyst’s contact information.

  13. Periodically request an IMFOLT print to confirm that the return was processed. When the return posts, a 150 transaction code (TC 150) will be reflected on the account.

    Note:

    It normally takes four to eight weeks for the Kansas City Campus to process a return once they receive it.

  14. When the return posts, establish the return on RCCMS and AIMS through RCCMS.

4.71.27.6.2 (12-23-2020)

Securing Forms 5329 Not Yet Due

  1. If the tax extends into a taxable year for which a Form 5329 is not yet due:

    1. Notify the taxpayer of their requirement to file Form 5329 and pay the tax shown for the taxable year.

    2. If the taxpayer chooses to voluntarily file the Form 5329 return with you, check the accuracy of the return, prepare the Form 5329 package, and forward it to the Kansas City Submission Processing Campus per IRM 4.71.27.6.3, Closing Agreed Form 5329 Examinations.

      Note:

      Write, "RETURN SECURED BY TE/GE: EMPLOYEE PLANS" at the top of the return. Do not prepare or submit Form 3198-A.

  2. Establish the return(s) on RCCMS and AIMS at the group manager's discretion since the return is not yet due. See the rules for the establishment of delinquent returns in IRM 4.71.27.6 (1), Processing Agreed Forms 5329.

  3. If you establish the return on RCCMS and AIMS, follow the procedures for delinquent secured returns in IRM 4.71.27.6.1, Processing Delinquent Forms 5329 Received from the Taxpayer, with the exception that you should use disposal code 02 (disposal code 107 on RCCMS).

  4. If the group manager decides not to establish the returns on RCCMS and AIMS and there’s a related Form 5500 examination, list the tax for the Form 5329 years not established on the "EP taxes" line of the RCCMS Closing Record of the related Form 5500 examination.

  5. If the taxpayer does not voluntarily file the Form 5329, prepare Form 5666 and either email it or regular mail to Classification. See IRM 4.71.1 - Exhibit 13 for Classification’s contact information.

4.71.27.6.3 (12-23-2020)

Closing Agreed Form 5329 Examinations

  1. Forms 5329 examinations are considered agreed when you:

    1. Secure Form 5329 from the taxpayer reflecting the correct amount of tax, or

    2. Get an executed Form 870-EP from the taxpayer reflecting an agreed change to the tax previously reflected on a filed Form 5329 return, or

    3. Determine that no additional tax is due on a previously filed Form 5329 return that you’ve examined.

      Note:

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

  2. Prepare Form 5773-A and workpapers to document examination procedures and findings and save them in the RCCMS Office Documents folder.

  3. Use Letter 2085-B as the closing letter for an agreed Form 5329 examination.

    1. Prepare the letter and mail it to the taxpayer (you or the designated person in the group mails it.)

    2. Save a copy of the closing letter in the RCCMS Office Documents folder. Scan the signed and dated closing letter and save in the RCCMS Office Documents folder.

  4. Use the following disposal codes:

    Disposal Codes Conditions
    AIMS 02 (RCCMS = 107) If a previously filed return is examined and there is no change to the tax liability, or a timely filed return is secured and there is no change to the tax liability reported.
    AIMS 03 (RCCMS = 102) The taxpayer agrees with the tax by signing Form 870-EP.
    AIMS 06 (RCCMS = 208) A delinquent return was secured (the taxpayer filed a delinquent Form 5329).
    AIMS 08 (RCCMS = 213) When the examination discloses an operational or administrative practice that, if continued or enlarged, would have an adverse impact upon the plan in the future.

  5. Complete the RCCMS Closing Record tabs per IRM 4.71.27.6.4, Completion of RCCMS Tabs for Agreed Form 5329 Examinations.

  6. Close the agreed Form 5329 examination case files and any related Form 5500 series returns to the TE/GE Closing Group in Brooklyn when the RCCMS files are fully posted on AIMS.

    Note:

    The case must be fully established on RCCMS and AIMS before your close the case to the TE/GE Closing Group.

    Note:

    Save an AMDISA print showing full establishment of the case on AIMS in RCCMS.

  7. You must establish on RCCMS and AIMS all agreed delinquent returns original returns if one return has tax of $500 or more. See IRM 4.71.27.6.

  8. As applicable, scan and save the following documents into the RCCMS Office Documents folder for all agreed Form 5329 files:

    • Form 10329

    • Form 872

    • Form 870-EP

    • Copy of the Form 5329 mailed to the Kansas City Campus

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

    • Form 2848 or Form 8821

    • Any other paper documents necessary to document the examination trail

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

    Note:

    Documents scanned into RCCMS should be the final version of that document that includes the date and signature, if applicable. For example, if you scan the examination closing letter into RCCMS, it must be the copy that includes the date you mailed the letter and the signature of the Director, EP Examinations.

  10. Scan all relevant documents received from the taxpayer or POA and save them in RCCMS using the RCCMS Naming Convention.

  11. Group manager or designee:

    • Mail the closing letter.

      Note:

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

    • Close the case on RCCMS with the "Update AIMS" box checked. Update the status 51.

    • Close all agreed Forms 5329 on RCCMS and AIMS to the TE/GE Closing Group in Brooklyn. See IRM 4.71.1 - Exhibit 13 for the mailing address.

4.71.27.6.4 (12-23-2020)

Completion of RCCMS Tabs for Agreed Form 5329 Examinations

  1. Validate cases for closure in the RCCMS closing record using the table below.

    Note:

    Complete all items highlighted in red.

    Note:

    Refer to IRM 4.5.2, TE/GE Examined and Non-Examined Closures, and Document 6476 for additional Information.

    RCCMS TAB ITEM EXPLANATION
    General Penalty Reason Code No entry unless penalties previously assessed are being abated. See Exhibit 4.5.2-2, TE/GE Penalty Reason Codes, of IRM 4.5.2, TE/GE Examined and Non-Examined Closures for applicable codes.  
    General Disposal Code
    102= "Agreed Tax Change" (Form 870-EP was signed by the taxpayer)
    107= "No Change"
    208= "Delinquent Return Secured" (a delinquent Form 5329 is secured from the taxpayer)    		  
    General ARDI Code An entry is required if the disposal code is "102" or "208" .  
    General Closing With Make the appropriate selection in the drop down menu, but in most cases select "electronic prints"  
    Details Examiner’s Time Time must be entered in whole hours and in tenths of hours.  
    Details Technique Code
    6- Office correspondence exam
    7 – Field exam - limited scope    		  
    Details Examiner’s Name Last name, first name  
    Details Delinquent Return Code If disposal code is 208 and entry is required.  
    Individual/Business (1 of 3) Agreement Date Insert the date the signed Form 870-EP is received (if applicable).
    Individual/Business (1 of 3) Assessment Information Tax Enter transaction code (TC) 300 and $0 if you aren’t assessing additional tax above the amount the taxpayer reported on the Form 5329 you secured. If you’re assessing additional tax on Form 870-EP, enter TC 300 and the additional amount of tax being assessed.

    Note:

    If you previously forwarded an agreed delinquent return that the taxpayer voluntarily filed with you to the Kansas City Service Campus, the tax assessment would have been made at the Service Campus when the return was processed. To avoid double assessment, do not reflect an additional tax amount.

    Note:

    With Form 870-EP, assessments are made by the TEGE Closing Group.
    Individual/Business (1 of 3) Assessment Information Penalties If Form 870-EP is signed by the taxpayer and IRC 6651 penalties are being assessed, enter TC 160 with the corresponding amount for the IRC 6651(a)(1) penalty, and TC 270 with the corresponding amount for the IRC 6651(a)(2) penalty.

    Note:

    If you secure a delinquent Form 5329 and forward it to Kansas City, the Service Campus automatically assesses the IRC 6651 penalties unless you instruct them not to in the "Other Instruction" section of the Form 3198-A accompanying the delinquent return when you mail it to the Service Campus.

     

    Note:

    If the Service Campus erroneously assesses IRC 6651 penalties, they can be abated by entering TC 161 (for IRC 6651(a)(1)) and TC 271 (for IRC 6651(a)(2)), as applicable, with the corresponding amounts.
    Individual/Business (1 of 3) Reference Number If you’re assessing additional tax from Form 870-EP (i.e., you entered TC 300 with an additional tax assessment), then you must list a reference number (manual abstract code) here with the additional amount of tax being assessed. For example, use reference number 160 if the issue is excess contributions (IRC 4973)(a)(1) and use reference number 162 for IRC 4974 tax.  
    Individual/Business (1 of 3) Interest Leave blank. Interest will be assessed by the Service Campus.
    Individual/Business (2 of 3) Delinquent Return Amount For disposal code 208, enter the amount of tax on Form 5329.  

4.71.27.6.5 (12-23-2020)

Amended Forms 5329

  1. Previously filed Forms 5329 returns can be amended two ways:

    1. Filing an amended Form 5329 and checking block "H" for amended return.

    2. Securing an executed Form 870-EP (See IRM 4.71.27 - Exhibit 1 for an example of a completed Form 870-EP).

  2. If an amended Form 5329 return is filed with block "H" selected, process the return per IRM 4.71.27.6.2, Securing Forms 5329 Not Yet Due, except you must write "AMENDED RETURN SECURED BY TE/GE: EMPLOYEE PLANS" on the top of Form 5329.

  3. If you receive an executed Form 870-EP:

    1. Scan the form and save it in the RCCMS Office Document folder using the RCCMS Naming Convention.

    2. Assess the additional tax and IRC 6651 penalties through the RCCMS Closing Records, Individual/Bus. (1 of 3) tab per the instructions in the table under paragraph (1) of IRM 4.71.27.6.4.

      Caution:

      Do not enter the revised tax and penalty amount. Enter only the increase for each item.

  4. You may accept Forms 870-EP by EEFax or email if you’ve made taxpayer contact and documented the date of contact and the taxpayer’s preference to submit the consent to assess tax by EEFax or email in the case history.

    Note:

    To document the origin of an email or EEFax, keep the incoming email or EEFax that identifies the origin. Save the email or EEFax cover page as correspondence in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  5. Process payments you receive per IRM 4.71.27.6.1, Processing Delinquent Forms 5329 Received from the Taxpayer.

4.71.27.7 (12-23-2020)

Case File Assembly

  1. Close all cases fully electronic.

  2. Save all workpapers, returns, forms, letters, etc., in the RCCMS Office Documents folder using the RCCMS Naming Convention.

4.71.27.8 (12-23-2020)

Abatement of Penalties

  1. If the Service Center assessed penalties on a secured return in error and:

    1. the case is still open, you can abate them through the RCCMS Closing Records, Individual/Bus. (1 of 3) tab per the instructions provided in the table under paragraph (1) of IRM 4.71.27.6.4 using transaction code 161, Abatement of Delinquency Penalty, and 271, Manual Abatement of Failure to Pay Tax Penalty, (as applicable).

    2. the case is closed, contact the TE/GE Closing Group manager to get them abated using Form 3870.

4.71.27.9 (12-23-2020)

Unagreed Cases

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

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

    2. The taxpayer refuses to file a delinquent Form 5329 or sign Form 870-EP.

  2. When you first realize that a case is unagreed, consult your group manager and document your discussion on the Form 5464 (CCR) accordingly.

    Reminder:

    You must record all group manager involvement on the CCR.

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

  4. If the taxpayer refuses to file a delinquent Form 5329, follow the substitute for return procedures IRM 4.71.27.9.2, Form 3177 - Substitute for Return Procedures.

  5. Establish unagreed Forms 5329 on RCCMS and AIMS in the same manner as agreed returns. See IRM 4.71.27.6, Processing Agreed Forms 5329.

  6. Prepare and mail a 30-Day Letter package by certified mail to the taxpayer (and POA if applicable). See IRM 4.71.27.9.1, 30-Day Letter Package, for instructions on what you must prepare.

    Note:

    In most cases, the agent mails the 30-Day Letter package. See IRM 4.71.27.9 (10) and IRM 4.71.27.9 (11) for two exceptions to the general rule.

  7. As part of the 30-Day Letter package, prepare a written Revenue Agent Report (RAR) explaining the basis of the proposed adjustments and citing the provisions of the law, regulations, published rulings, United States Tax Court and other court decisions on which the conclusions are based. See IRM 4.71.27.9.1.1, Revenue Agent Report (RAR).

  8. After you mail the letter, call the taxpayer 14 to 21 calendar days to discuss the issue(s) being raised and update the case to status 13.

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

  10. Make sure the case has at least 12 months remaining on the statute when Appeals receives the case.

    1. You may need to send Form 872 with the 30-Day Letter to make sure Appeals has at least 12 months when they receive the case.

    2. Consider processing time when you mail out the 30-Day Letter.

      Note:

      For this reason, it’s advisable to include Form 872 with the 30-Day Letter if 15 months or less remain on the statute.

    3. If the taxpayer refuses to extend the statute, the taxpayer basically forfeits their Appeal rights. Prepare the 90-Day Letter package (SNOD) using Letter 531-B for Mandatory Review to issue.

  11. If the statute of limitations on the Form 5329 expires within 12 months and the taxpayer refuses to extend the statute of limitations, close the case to Mandatory Review to issue the 90-Day Letter package.

    Note:

    Contact the Manager, EP Mandatory Review to discuss the short statute and the need to issue a 90-Day Letter. Document the CCR accordingly.

  12. If the Form 5329 is related to a plan that is being disqualified, and the plan disqualification has a direct affect on whether or not the Form 5329 is due, close the Form 5329 to Mandatory Review to issue the 30-Day Letter.

    Note:

    Mandatory Review issues the 30-Day Letters related to Forms 5500 filed or due for years when plan revocation or non-qualification is being proposed. They also issue 30-Day Letters for related Forms 5329. Mandatory Review issues the 30-Day Letter packages at the same time.

  13. When you mail the 30-Day Letter and the taxpayer files a valid protest to Appeals, close the case to Appeals. See IRM 4.71.27.9.3, Cases to Appeals.

  14. If the taxpayer agrees and files Form 5329 or signs Form 870-EP, close the case per IRM 4.71.27.6.3, Closing Agreed Form 5329 Examinations, and process any returns or checks received per IRM 4.71.27.6.1 (6), Processing Delinquent Forms 5329 Received from the Taxpayer.

  15. If the taxpayer fails to timely file a valid protest to Appeals, close the case to Mandatory Review to issue a 90-Day Letter.

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

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

  16. Prepare Form 5773-A and other relevant workpapers as you do for all examination cases.

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

  18. Complete the following before you transfer a case to Appeals or Mandatory Review:

    • Scan all paper documents you exchanged with the taxpayer including envelopes or anything the taxpayer or representative marked.

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

    • Keep all records you upload into RCCMS or determine are no longer relevant to the case file per normal record retention requirements outlined in IRM 1.15.2.

  19. When closing a case unagreed, prepare the RCCMS Closing Record tabs per IRM 4.71.27.9.4, Preparation of RCCMS Tabs for Unagreed Form 5329 Examinations.

  20. Follow the statute procedures in IRM 4.71.9.3, Group Manager Responsibilities and Procedures, and IRM 4.71.9.4, Agent Responsibilities and Procedures, for both Forms 5329 and any related Forms 5500 examinations you close to Mandatory Review.

  21. Make sure the case is fully established on RCCMS and AIMS before you close the case to Appeals or Mandatory Review.

  22. Update the case on RCCMS to disposal code 601 if it is going to Appeals and disposal code 604 if it is going to Mandatory Review, and close the case to your group manager.

  23. Group manager/designee: If the case is going to:

    1. Appeals, make sure the case is processed per IRM 4.71.27.9.3, Cases to Appeals.

    2. Mandatory Review, update the case to status 20 on RCCMS and AIMS and close the case and related 5500 to Mandatory Review.

      Note:

      Before you close to Mandatory Review, contact the Manager, EP Mandatory Review to discuss the case and get mailing instructions

  24. Immediately send any correspondence the agent/field group receives after case closing to Mandatory Review immediately to associate with the case file.

4.71.27.9.1 (12-23-2020)

30-Day Letter Package

  1. In most instances the agent mails the 30-Day Letter package. See IRM 4.71.27.9 (10) and IRM 4.71.27.9 (11) for two exceptions to the general rule.

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

  3. 30-Day Letters are used to furnish taxpayers a copy of the final examination report and advise them of their appeals rights when they don’t agree with the results of an examination.

  4. The 30-Day Letter package consists of the following items, most of which are available within RCCMS:

    1. Letter 2005

    2. Agent generated schedules reflecting calculations of tax and penalties

    3. Agent generated RAR, which is used to support the assertion of taxes and penalties See IRM 4.71.27.9.1.1, Revenue Agent Report (RAR), below.

    4. Agent generated Form 870-EP. See IRM 4.71.27 - Exhibit 1 for an example of a completed Form 870-EP. Penalties, if applicable, must be listed using the format on the exhibit.

    5. Pub 1020

    6. Pub 1

    7. Pub 594

4.71.27.9.1.1 (12-23-2020)
Revenue Agent Report (RAR)

  1. Prepare the RAR on Form 886-A, which is available within RCCMS. See IRM 4.71.27 - Exhibit 8 for a sample RAR.

  2. Organize the RAR into the following parts:

    1. Issue(s)– Clearly state the issues. For example, if the issue is IRC 4973 tax, the issue might be stated as follows: "Whether an excess contribution to John Smith’s IRA results in an IRC 4973 tax liability for the taxable years ending December 31, 2012, 2013, and 2014?"

    2. Facts– Include a brief history of the plan and provide pertinent details surrounding the issue. Also cite any plan provisions relevant to the issues raised.

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

    4. Government's Position– Discuss each issue separately and apply the law and the facts relevant to each specific issue. Also give a summary of taxes due and the applicability of penalties.

    5. Taxpayer's Position– Reflect the taxpayer's position including any rebuttals the taxpayer has made to the Government's position. If the taxpayer hasn’t provided a position on the Issue(s), include a simple statement to the effect that the taxpayer has not provided a response.

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

  3. Contact Mandatory Review for help writing your RAR.

4.71.27.9.2 (12-23-2020)

Form 3177 - Substitute for Return Procedures

  1. When the taxpayer refuses to file a Form 5329 (after receiving notice that a Form 5329 is due), establish the MFT 29 tax module on IDRS for each year you’re pursuing tax by preparing a Form 3177 as follows:

    1. The initiator is the agent.

    2. The date is the date Form 3177 and the SFR were prepared by the agent

    3. The name is the individual owner of the IRA or Plan account.

    4. Check the “Other” box and notate:
      "TC 971 AC 144; XREF TIN: SSN-SS-NSSN; XREF MFT 29" , when the tax is attributable to the primary taxpayer on a jointly filed Form 1040 or the individual filer of a Form 1040 when the filing status is Single, Head of Household or Married Filing Separately.
      If the tax is owed by the secondary taxpayer on a jointly filed return, then the SSN used in "X-REF TIN" will be that of the secondary taxpayer (this will establish an IRAF account on that SSN.)

      Example:

      For a completed Form 3177 see IRM 4.71.27 - Exhibit 9

      Note:

      Prepare a Form 5329 for each year an adjustment is being pursued.

    5. Email Form(s) 3177 with IDRS research showing no MFT 29 module exists for the period(s) being established to the AIMS Coordinator (or designee) for processing.

      Note:

      The AIMS Coordinator contact information is found in IRM 4.71.1 - Exhibit 13.

    6. The EP AIMS Coordinator (or designee) will input each form within three business days to establish each year.

      Note:

      It normally takes about two weeks for the tax module to post.

  2. Secure a IMFOLI and/or IMFOLT print after about two weeks from the time Form 3177 is processed. When the tax module posts the applicable years will be reflected in the MFT 29 module and a TC 150 will be present in the IMFOLT transcript.

  3. Once the entity module has been created, establish the case on RCCMS and AIMS through RCCMS using the procedures in IRM 4.71.27.5.1, Establishing Forms 5329.

  4. Update the statute of limitations to alpha code "EE" per IRM 4.71.9.9(12), Use of Alpha Codes.

    Note:

    The year reflected should be six years from the date the SFR posted. For example, if the SFR posted on 10/21/2020, the statute date should be 10/EE/2026.

    Note:

    Since no return has been filed, the statute of limitations has not begun to run.

  5. When the return is fully established on RCCMS and AIMS, close the case unagreed to Appeals or Mandatory Review as applicable.

    Note:

    Find contact information for Appeals and Mandatory Review in IRM 4.71.1 -Exhibit 13 .

4.71.27.9.3 (12-23-2020)

Cases to Appeals

  1. If the taxpayer or POA files a protest to appeal the issues proposed in the 30-Day Letter, determine if the protest is valid.

  2. If the protest is valid, notify your manager/designee that you received a protest, update the RAR and provide it to the taxpayer and POA, if applicable.

    1. If the protest is only a request that the case be sent to Appeals, revise the RAR to reflect that request.

    2. If the protest presents new facts or arguments, revise the RAR to address (agree or rebut) the new information.

    Note:

    Include a letter explaining the purpose of the revised RAR and the current case status (being processed to Appeals) with the revised RAR.

    Note:

    See Pub 1020 for the elements needed for a valid protest.

  3. Follow these steps to close the case to Appeals:

    1. Make sure all cases moving to Appeals have at least 12 months remaining on the statute of limitations.

    2. Complete the Appeals routing slip (Form 1725) and use the Appeals Office (Office Code 131). See IRM 4.71.14 - Exhibit 11 for an example of Form 1725 for a case going to Appeals.

    3. If the return is a SFR Form 5329 and you’re asserting IRC 6651 penalties, complete Form 13496 per IRM 4.71.27.9.3 (4). See IRM 4.71.14 - Exhibit 22 for an example of Form 13496.

      Caution:

      An SFR, in and of itself, does not constitute a return under IRC 6020(b). For the purpose of asserting the Failure to Pay Penalty, this additional step must be taken.

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

    5. Save all of the prepared forms and letters in the RCCMS Office Documents folder using the RCCMS Naming Convention, see IRM 4.71.1 - Exhibit 2.

  4. If you’re assessing IRC 6651(a) penalties on an SFR, the IRS must certify the SFR Form 5329 per IRC 6020(b). Use Form 13496 for the certification.

    1. Include in the SFR package: Form 13496, the SFR (Form 5329 sent to the Service Campus), the RAR (Form 886-A) and Form 5438.

    2. The taxpayer signature on the Form 13496 must be an original signature and dated on or after the date the 30-Day Letter is signed and dated and before the 90-Day Letter is signed and dated.

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

    4. List the total number of pages in the SFR package on Form 13496.

    5. When you revise a report of proposed adjustments that increases the total tax liability of the taxpayer, you must do another recertification on another Form 13496 signed and dated on (or after) the date of the revised report.

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

      Note:

      See IRM 4.71.14 - Exhibit 22 for an example of Form 13496.

  5. Prepare the RCCMS Closing Record tabs per IRM 4.71.27.9.4, Preparation of RCCMS Tabs for Unagreed Form 5329 Examinations. When you "validate for close" in RCCMS, you must complete any field that appears in red.

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

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

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

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

    4. Completed Form 1725

    5. Copy of the return

    6. SFR package and Form 13496, if applicable

  7. Group manager/designee: Review the case before you send it to Appeals:

    1. Email the AIMS Coordinator and to the TE/GE Closing Group manager, notifying them that the case is being transferred to go to Appeals. Find their contact information in IRM 4.71.1 - Exhibit 13

    2. Update the case in RCCMS to status 51 and close the case to TE/GE Closing Group.

  8. The TE/GE Closing Group updates the case to status 81 and transfers the RCCMS case files to Appeals.

  9. Immediately notify and send information the agent/group receives after closing the case to Appeals.

4.71.27.9.3.1 (10-29-2019)
Cases Returned From Appeals

  1. Periodically, Appeals may return cases to the group for further development.

  2. Treat returned cases as high priority work.

  3. After reviewing the case file and the memo from Appeals, discuss the issues Appeals raised with your manager.

    1. If you can easily remedy the Appeals Officer's concerns, address them and process the case as usual.

    2. Get your manager’s permission before you communicate with Appeals. The manager will determine whether the proposed communication is necessary and whether it is an ex parte communication covered by RRA 98 limitations. See IRM 8.1.10, Ex Parte Communications, for the rules on ex parte communications.

  4. When you’re done, return the case to Appeals or close it per your manager’s instruction.

4.71.27.9.4 (12-23-2020)

Preparation of RCCMS Tabs for Unagreed Form 5329 Examinations

  1. Validate cases for closure in the RCCMS closing record using the table below.

    Note:

    Complete all items highlighted in red.

    Note:

    Refer to IRM 4.5.2, TE/GE Examined and Non-Examined Closures, and Document 6476 for additional Information.

    RCCMS TAB ITEM EXPLANATION
    General Disposal Code
    601 = Appealed - Protest to Appeals (Cases going to Appeals)

    604 = "Unagreed - Without Protest" (Case going to Mandatory Review to issue a 90-Day Letter)
    General Closing With Make the appropriate selection in the drop down menu, but in most cases select "electronic prints"
    General Appeals Office Code Enter 131 if the case is going to Appeals.
    Details Examiner’s Time Time must be entered in whole hours and in tenths of hours.
    Details Technique Code
    4 - Field exam - full scope

    7 – Field exam - limited scope
    Details Examiner’s Name Last name, first name

4.71.27.10 (12-23-2020)

Statute of Limitations for Form 5329

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

    1. If a Form 5329 is not filed, there is no SOL date.

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

  2. The statutory period for assessment of tax is six years from the return filed date when Area Counsel determines the taxpayer has omitted more than 25% of the tax due. See IRC 6501(e)(3)).

    Note:

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

  3. Make sure the statute of limitations reflected in the RCCMS Compliance Activity, General tab (1 of 2), is completed and is correct.

  4. When the statute date is 270 days or less, complete the RCCMS Statute Validation Process:

    1. Check the "Statute Valid" check box in the RCCMS Compliance Activity, General tab (1 of 2).

    2. Select "Actions" , "Request Statute Validation," complete the "Comment" box and submit the request for your manager’s approval.

  5. IMF automatically calculates a statute of limitations date for a Form 5329 established on AIMS.

    Caution:

    Don’t rely on the automatic SOL date for a IRC 4973 SFR.

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

    Note:

    The year reflected should be six years from the date the SFR posted. For example, if the SFR posted on 10/21/2020, the statute date should be 10/EE/2026.

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

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

4.71.27.11 (10-29-2019)

Forms 5329 Established on AIMS in Error

  1. Sometimes Forms 5329 are established on RCCMS and AIMS in error (for example, we later determine that tax is not due after establishment).

  2. If Form 5329 is established in error on AIMS:

    1. 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" .

      Note:

      If the return has not posted (there is no TC 150 posting), make sure the box next to AM424D is checked.
      Other: Select "Error Account" ; Select "AIMS" .
      Reason for Request: Input a brief explanation of the requested correction.

      Note:

      See IRM 4.71.5 - Exhibit 12 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, INOLES and BMFOLT 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. The EP AIMS Coordinator deletes the account when they receive the RCCMS record.