4.86.2 Classification, Case Selection and Referral Procedures

Manual Transmittal

August 12, 2016

Purpose

(1) This transmits revised IRM 4.86.2, Indian Tribal Governments (ITG) Procedures, Classification, Case Selection and Referral Procedures.

Background

The IRS office of Indian Tribal Governments (ITG) was established in 2000 to serve as the primary contact in the IRS for federally recognized Indian tribes.

Material Changes

(1) This transmittal provides new text, reissues existing information, and reflects editorial and/or numbering changes throughout the section.

(2) Added tip reporting as a type of compliance activity in paragraph (4) and in paragraph (5) second bullet of IRM 4.86.2.2, General Classification Guidelines.

(3) Clarified ITG’s procedures when group managers order casework in IRM 4.86.2.3, Ordering Cases.

(4) Clarified IRM 4.86.2.4.3, General Examinations.

(5) Clarified IRM 4.86.2.6, Case Files.

(6) Changed IRM 4.86.2.7, Workload Selection Process. This section describes how ITG prioritizes its classified compliance activities in order to select the next-best-case on a nationwide basis.

(7) Revised IRM 4.86.2.8, Transferring Cases to ITG, for clarity.

(8) Deleted IRM 4.86.2.9.1, RICS.

(9) Deleted IRM 4.86.2.9.2, CAWR.

(10) Deleted IRM 4.86.2.9.3, Form SS-8 Worker Classification Determinations.

(11) Deleted IRM 4.86.2.9.4, Internal/External Leads and Referrals.

(12) Deleted IRM 4.86.2.9.5, Information Report Analysis System (IRAS).

(13) Deleted IRM 4.86.2.9.6, W-2/W-2G/1099/AP Analysis Program (W-2/1099 Program).

(14) Added new section IRM 4.86.2.10, Internal/External Databases/Systems, formerly IRM 4.86.2.9.7, Internal/External Databases/Systems. Renumbered all subsequent sections. Corrected the name of the ITG Inventory Control Database to ITG Inventory and Classification Database. Expanded internal databases to include the Tribal and Tax Database and the Tip Database.

(15) Renumbered IRM 4.86.2.11, Referrals, formerly IRM 4.86.2.10, Referrals.

(16) Revised IRM 4.86.2.11.1, General Procedures, formerly IRM 4.86.2.10.1, General Procedures. Added a "Reminder" to the instruction that ITG specialists shouldn’t "research" tribal entities using the Internet, IDRS or other IRS internal sources to develop leads.

(17) Updated IRM 4.86.2.11.2, Referral Involving Form 211 Application for Award for Original Information, formerly IRM 4.86.2.10.2, Referral Involving Form 211 Application for Award for Original Information, citations, titles, and revised text throughout for clarity.

(18) Renumbered IRM 4.86.2.12, Claims, formerly IRM 4.86.2.11, Claims.

(19) Retitled IRM 4.86.2.13, Compliance Initiative Projects (CIP), formerly 4.86.2.12, Compliance Project Guidelines and Procedures. Added text to define CIPs. Removed the remaining content in this section. Added new reference to see detailed procedures in IRM 4.17, Compliance Initiative Projects. Deleted these sections:

  • IRM 4.86.2.12.1, Compliance Projects

  • IRM 4.86.2.12.2, Market Segment Studies

  • IRM 4.86.2.12.3, Procedures

  • IRM 4.86.2.12.3.1, Development Phase

  • IRM 4.86.2.12.3.2, Implementation Phase

  • IRM 4.86.2.12.3.3, Analysis and Closure Phase

(20) Updated to meet the requirements of P.L. 111-274 (H.R. 946), the Plain Writing Act of 2010. The Act provides that writing must be clear, concise, well-organized, and follow other best practices appropriate to the subject or field and intended audience. See http://www.plainlanguage.gov for information on the Plain Writing Act.

Effect on Other Documents


This manual supersedes IRM 4.86.2, Classification, Case Selection, and Referral Procedures, dated June 23, 2015.

Audience


Tax Exempt and Government Entities (TE/GE)
Indian Tribal Governments

Effective Date

(08-12-2016)

Christie J. Jacobs
Director, Indian Tribal Governments
Tax Exempt and Government Entities

Overview

  1. This section discusses procedures for ITG Classification to:

    1. Order casework.

    2. Select cases using criteria.

    3. Prepare and establish case files for ITG specialists.

  2. Compliance and Program Management (CPM) gathers employment tax return information on federally recognized Indian tribes/enterprises through the Returns Information and Classification System (RICS). We use this information, and other classification tools, to identify entities for compliance checks and audits.

  3. See IRM 4.86.2.9, Classification Tools, for other classification tools.

General Classification Guidelines

  1. Classification is the process of determining:

    • Whether ITG should select a return for compliance activities.

    • What issues should be the primary focus of the compliance activity.

    • What type of compliance activity we should conduct.

  2. CPM classifies all cases to ensure we maintain adequate internal controls.

    Exception:

    Customer assistance cases may either be generated within the group or recommended by CPM based on case selection criteria.

  3. CPM’s case selection process for compliance activities is structured to avoid bias. As much as possible, the classification process should provide an internal control structure that includes both:

    • Checks and balances to ensure that no one person has the authority and ability to initiate compliance activities.

    • Objective case selection criteria that CPM uses when classifying cases for compliance activities.

  4. Compliance activity casework is defined as one-on-one contact with customers such as:

    • customer assistance

    • compliance checks

    • information return audits

    • tip reporting

    • employment tax return audits

  5. CPM provides various services to the ITG group managers, including:

    • Filling orders for cases.

    • Recommending the type(s) of compliance action in IRM 4.86.2.2 (4).

    • Reviewing and classifying returns.

    • Establishing cases on the Audit Information Management System (AIMS).

    • Establishing cases on the TE/GE Reporting Compliance Case Management System (RCCMS).

    • Assigning claims.

Ordering Cases

  1. Before an ITG group manager orders inventory from CPM, they should:

    1. Reconcile their inventory to AIMS, RCCMS, and the Inventory and Classification Database.

    2. Ensure that all cases are properly assigned.

  2. After the manager completes the inventory analysis, he/she contacts the Assistant to the Director to request inventory.

  3. The Assistant to the Director:

    1. Evaluates the work request.

    2. Discusses with the ITG group manager.

    3. Suggests work movement within the group, as needed.

  4. If there’s no available work, the Assistant to the Director looks at other available work within ITG field groups. If the Assistant to the Director wants to transfer work from another group, he/she notifies CPM to move or reassign the cases, identified by the Inventory Control Number (ICN). If there’s no available work, the Assistant to the Director requests new work from CPM.

Establishing Cases by Type

  1. The method CPM establishes a case depends on the type of compliance activity they recommend.

Customer Assistance Cases

  1. Either CPM or the ITG specialist establishes customer assistance cases on RCCMS.

    • Use Activity Code 100 to establish pre-filing activities on RCCMS for the period(s) involved. ITG specialists charge time on WebETS to Activity Code 100.

    • Use Activity Code 108 to establish post-filing activities on RCCMS for the period(s) involved. ITG specialists charge time on WebETS to Activity Code 108.

Compliance Check Cases

  1. Establish Title 26 compliance checks on RCCMS using Activity Code 590. ITG specialists charge time on WebETS to Activity Code 590.

  2. Establish Title 31 Bank Secrecy Act (BSA) compliance checks on RCCMS using Activity Code 591. ITG specialists charge time on WebETS to Activity Code 591.

General Examinations

  1. CPM establishes returns, on RCCMS/AIMS, using the next-best-case or other types of cases, such as referrals, claims, or Taxpayer Advocate Service Operations Assistance Request (OAR).

ITG Database

  1. ITG Databases are designed to track all audit, tip and compliance check work assignments. CPM gives all work assignments an Inventory Control Number (ICN).

  2. When setting up a work assignment, input the ICN before the name on the name line in RCCMS. A penalty case has the same ICN as its related case, but with a "P" added after the ICN.

  3. CPM closes the case on the ITG Database when it closes to Status 90 on RCCMS.

Case Files

  1. Generally, CPM builds RCCMS/AIMS case files before they assign cases to the field. They include information helpful to the ITG group manager and ITG specialist. Although the information CPM includes varies based on the type of recommended compliance activity, case files may include:

    • Classification Sheet

    • RICS data

    • Background information

    • Tribe and related entity information

    • Integrated Data Retrieval System (IDRS)/AIMS data.

    • Referral information

Workload Selection Process

  1. The ITG Workload Selection Process uses a data driven approach to identify the next-best-case for workload selection by using formulas from the ITG Inventory and Classification Database. For identified work, they apply an impact score of 1-4 and a noncompliance score from A-D. The impact is generally based on the size of the entity, while the noncompliance score is based on the degree of noncompliance. This allows ITG to prioritize its classified compliance activities in order to select the next-best-case.

Transferring Cases to ITG

  1. Only cases pertaining to federally recognized Indian tribal governments/enterprises may be transferred to ITG. CPM may evaluate a transferred case with ITG management before they accept the transfer. CPM considers:

    • current workload

    • specialist availability

    • statute of limitations

    • historical data

    • policy

Classification Tools

  1. Classification tools:

    1. Help to identify entities that meet any one of the various case selection criteria for compliance activities.

    2. Consists of databases, reports, referrals, etc.

  2. CPM uses these classification tools:

    1. Returns Information and Classification System (RICS)

    2. Combined Annual Wage Report (CAWR)

    3. Form SS-8 Worker Classification Determinations

    4. Internal/External Leads and Referrals

    5. Information Report Analysis System (IRAS)

    6. W-2/W-2G/1099/AP Analysis Program (W-2/1099 Program)

    7. Internal/External Databases

    8. IDRS Research

Internal/External Databases/Systems

  1. CPM may use internal and external databases to help classify work or generate work for the field groups.

  2. Internal databases include, but are not limited to:

    • RICS

    • IDRS

    • ITG Inventory and Classification Database

    • Tribal and Tax Database

    • Tip Database

  3. External databases are databases available from outside sources. Examples of external databases include, but are not limited to:

    • Federal Audit Clearing House – Image Management System (IMS)

    • Public Access to Court Electronic Records (PACER)

    • LexisNexis/Accurint

Referrals

  1. An information/referral item is a document or other communication (e.g. telephone call) ITG receives from a source inside or outside the IRS which alleges potential noncompliance with federal tax laws.

General Procedures

  1. CPM evaluates the referral for audit or other compliance potential.

  2. ITG group managers and specialists may submit leads to CPM using Form 5666, TE/GE Referral Information Report, and attaching any supporting documentation that provides additional details about potential noncompliance. Send referrals from all sources to CPM immediately for consideration.

    Reminder:

    ITG specialists shouldn’t "research" tribal entities using the Internet, IDRS or other IRS internal sources to develop leads.

  3. If the referral isn’t related to a federally recognized Indian tribe/enterprise, then CPM sends it to the appropriate function.

  4. If the referral has audit or compliance potential, CPM:

    1. Establishes a case.

    2. Prepares a case file based on the type of action recommended.

    3. Assigns it to an ITG field group.

Referral Involving Form 211 Application for Award for Original Information

  1. Refer to IRM 25.2, Information and Whistleblower Awards, for detailed procedures. ITG is required to coordinate Category “B” Informant Claim and/or Whistleblower activities with the Government Entities Whistleblower Coordinator (GE WC).

  2. If an audit is warranted, the ITG Whistleblower Coordinator (ITG WC) constructs the audit file for the ITG specialist with these documents:

    1. Form 211, Application for Award for Original Information

    2. Form 11369, Confidential Evaluation Report on Claim for Award

    3. Evidence provided by the whistleblower

    4. Tax return(s)

    5. IDRS prints

    6. Confidential envelope for case return to the ITG WC

  3. When the ITG specialist completes the audit:

    1. Include the whistleblower claim file with the audit administrative case file in a sealed confidential envelope provided by the ITG WC. The whistleblower claim file should contain the Form 211, Application for Award for Original Information,Form 11369, Confidential Evaluation Report on Claim for Award, and the evidence provided by the claimant.

    2. Don’t include any whistleblower information in the administrative file. It should only contain the tax return(s) and IDRS prints.

    3. Notify the ITG WC when you’re ready to close the case to CPM and fax any necessary documents the ITG WC requests.

  4. The ITG WC sends the award claim file to the Whistleblower Office (WO) to remove the informants' claim examiner (ICE) indicator.

  5. Once the ICE Unit at the Ogden Campus releases the ICE indicator, the ITG WC coordinates with the GE WC to close the administrative file to the Government Entities Closing Unit.

Claims

  1. Claims are a source of work and considered priority work. Generally, CPM receives claims with issues that can’t be addressed at the campus level. They classify and assign them within 30 days of receiving them.

Compliance Initiative Projects (CIP)

  1. CIPs are any activities involving contact with specific taxpayers and collection of taxpayer data within a group or segment, using either internal or external data to identify potential areas of noncompliance within the group or segment, for the purpose of correcting the noncompliance.

  2. ITG may use the strategic planning process to select unique projects to include in the work plan. Projects are distinguishable from general casework by their targeted purpose. Projects serve several purposes:

    • Address areas of known noncompliance through enforcement, guidance, or education.

    • Gather information about an emerging issue to develop a strategy to address the issue.

    • Measure the overall compliance level of the segment or customer group.

    • Answer specific questions about a market segment.

  3. See IRM 4.17, Compliance Initiative Projects, for detailed procedures.