The primary objective of the EO examination program is regulatory, emphasis on continued qualification of exempt organizations (Policy Statement 4-119, formerly P-7-20). IRM 1.2.1.5.36.

IRC 7602 gives examiners the authority to:

Examiners and managers are also responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3).

During an examination, examiners are responsible for:

Examiners and managers are also responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3).

The table lists commonly used acronyms and their definitions.

The following are related sources that provide guidance on the procedures outlined in this IRM section:

The Reporting Compliance Case Management System (RCCMS) is used to create and control examination cases.

Cases in RCCMS have an electronic copy of the return and / or related research material regarding the case.

Examiners working cases may prepare, develop and store workpapers within the RCCMS system. Users may also use Microsoft Office software and Adobe pdf files, along with forms, letters, and templates in the RCCMS repository.

Examiners may use Leadsheets, in RCCMS, which correspond to each section of Form 5773, EO Workpaper Summary (EO cases) or Form 4318, Examination Workpapers (FSL/ET cases).

Examiners may maintain in-process and completed workpapers in RCCMS and synchronize with the central database. The synchronization works as an automatic backup of stored data files in the central database server.

A RCCMS electronic case file should closely resemble a paper case file’s content. This includes all workpapers and pertinent source documents you use to determine whether there are any issues or changes that you’ll discuss or resolve before you close the case.

Compliance, Planning and Classification (CP&C) inputs tracking codes on all examination cases before they send them to the field.

The tracking codes identify an issue-category for risk-based compliance strategies approach to prioritizing EO examinations.

CP&C also puts the tracking codes on the cover sheet in the examination case file.

Administrative File refers to the file folders containing the:

Administrative Record File refers to the file folders prepared for Counsel in declaratory judgment cases, which may apply to any organization exempt under IRC 501(c), due to the enactment of the PATH Act. See IRM 4.75.32, Declaratory Judgment Cases and the Administrative Record.

Determination Administrative File is a file Rulings and Agreements, EO Determinations, Cincinnati, OH keeps. It contains the:

EO BMF Extract is a Business Master File (BMF) list of exempt organizations. The EO BMF Extract doesn’t include "self-declared" organizations. Refer to http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Business-Master-File-Extract-EO-BMF.

Tax Exempt Organization Search is an on-line search tool that allows users to select an exempt organization and check certain information about its federal tax status and filings. Refer to https://www.irs.gov/charities-non-profits/tax-exempt-organization-search. Tax Exempt Organization Search (formerly Select Check) consists of the following databases:

On-Line SEIN is a database containing images of all Forms 990, 990-EZ, 990-PF, 990-T, 4720, 1120-POL, and 8872. All images are scanned during processing in the Ogden Service Campus. No portions are redacted.

Filed Forms 8871 and 8872 is used to search for and view copies of all submitted Forms 8871, Political Organization Notice of Section 527 Status, and Forms 8872, Political Organization Report of Contributions and Expenditures (both paper and electronic filings). Refer to http://forms.irs.gov/app/pod/basicSearch/search?execution=e2s1.

Suspensions Pursuant to IRC 501(p) is provided on-line at http://www.irs.gov/charities-non-profits/charitable-organizations/suspensions-pursuant-to-code-section-501p.

IDRS is the Integrated Data Retrieval System, a major application of databases and operating programs that support IRS employees working active tax cases. This system allows IRS employees to take specific actions on taxpayer account issues, track status and post transaction updates to the Master Files (MF). IDRS updates are done in both a batch process and through online interactive real-time programs Command Codes. Employees take actions via IDRS for:

AIMS is the Audit Information Management System, which provides inventory and activity controls of active examination cases. AIMS links to IDRS to input status changes, adjustments, and case closing actions.

RCCMS is the acronym for the Reporting Compliance Case Management System. This system is used for electronic transmission of administrative files between the various examination functions (for example, classification to the examination group to the closing unit and then to special review) as well as the generation of workpapers.

WebETS is the acronym for the Web-based Employee Technical Time System. WebETS provides TE/GE employees a web-based application to:

Prepare workpapers from the moment the case is assigned through case closing. Record your actions as soon as you take them.

The workpapers consist of standardized forms for EO and FSL/ET (Form 4318, 5773, 5464, 9984), examiner generated supporting workpapers, and when appropriate, copies of documents or other materials secured during the examination.

Prepare the following standardized forms, listed in order of importance, for EO examination cases:

Form 5773 or Form 4318 and Form 5774 present an indexed system of the workpaper material. These forms are designed as working tools for pre-contact planning and to use during the examination. Their purpose is to organize the examiner's workpapers, provide a summary of the findings, and provide reminders as to procedures to perform or issues to consider.

Use Form 5464 Case Chronology Record (CCR) or Form 9984 Examining Officer’s Activity Record (EOAR) (FSL/ET cases) to record actions taken on the case, contacts made, follow-up dates and time expended. The form is a historical record and a quick reference for Tax Exempt Quality Measurement System (TEQMS) attributes. Update the CCR at the same time you take actions.

Include on the CCR/EOAR all direct examination time charged to the case. The time must agree with the direct examination time as reported on WebETS. When you’re ready to close the case reconcile the total time on the CCR/EOAR and WebETS to the total time on Form 5599, EO Examined Closing Record.

Indicate on the CCR/EOAR the date that you received the case and dates of pre-contact planning activities.

Include in the CCR/EOAR, at a minimum, the following entries for pre-contact work:

Include in the CCR/EOAR, at a minimum, the following entries for work performed after initial contact:

Include in the CCR/EOAR, at a minimum, the following entries for management involvement:

Since it is part of the examination trail, the CCR/EOAR may be disclosed to the taxpayer under the Freedom of Information Act. Ensure entries are professional, accurate, and concise. If a CCR entry is lengthy (for example, a long phone call), place this information on a separate workpaper indexed to the CCR/EOAR.

It’s critical to properly document all delays in case the CCR/EOAR is used in an interest abatement case. See IRC 6404(e) to determine if a deficiency is attributable in whole or in part to any unreasonable error or delay on the IRS’s part.

Form 5773 EO Workpaper Summary (EO cases) or Form 4318, Examination Workpapers Index (FSL/ET cases) are vital elements of the entire examination process. Use the Form 5773 or Form 4318 to:

The header contains the name of the organization, the Taxpayer Identification Number (TIN) and the page number of the Form 5773.

The table that makes up the main body of the workpaper is split into four columns:

Each section of the main body of the Form 5773 contains pre-contact comments in each examination topic.

In the subsections after the pre-contact comments, summarize the procedures you took and conclusions reached and have fully documented in a separate workpaper. Sometimes, you may not have a separate workpaper, as the findings may be summarized in a single sentence.

If an examination subtopic doesn’t apply, enter "Not applicable" or "N/A" in the blank examination procedure/conclusion cell (beneath the pre-contact comments), and explain briefly why it’s not applicable.

Use the fourth column to reference workpapers using an index.

Complete the relevant sections of Form 5773 as you complete each workpaper. If you later revise the workpaper, update the Form 5773 to make it consistent with the workpaper.

Use this form in examinations of private foundations. Prepare it in addition to the Form 5773.

Complete Form 5774 as follows:

Prepare workpapers describing the examination techniques, research conducted and the conclusions reached.

Your supporting workpapers consist of:

Use judgment in determining workpaper content. Every workpaper in the file should have some relevance to accomplishing the examination objectives.

It’s rarely necessary to have a large amount of transcriptions of minutes or governing instruments in your file. Prepare a brief description of the information in the governing instruments, minutes, etc. Documents can be scanned and saved as supporting documents, if necessary.

You may develop your own format, as long as you include all the necessary information and adequately document the actions you took.

Examiner’s workpapers format can vary. However, generally, each workpaper has the following:

When there are multiple returns in an examination, such as a Form 990 and a Form 990-T, prepare a separate Form 5773 / Form 4318 and separate set of workpapers for each type of return.

The primary case file, generally the Form 990, should contain a complete set of workpapers that adequately addresses all issues raised. Related case files for Forms 990-T, 941, 940, etc. need only contain workpapers relevant to the issues on the related returns.

You may copy and include in the related case files relevant portions of the Form 990 examination file.

Secure confidential information for the case file from unauthorized disclosure. Generally, consider information that wouldn’t be disclosed to the taxpayer, if a request were made under provisions of the Freedom of Information Act (FOIA), as confidential or sensitive in nature.

Secure confidential information in To Be Opened by Addressee Only envelopes. Use Sensitive But Unclassified (SBU) Cover Sheet as a cover for the case file, to alert others to the sensitive nature of the information.

The protection of the SOL is a high priority for all employees. Once assigned, you are primarily responsible for properly identifying the statute of limitation period in order to protect the government's interests. You are responsible for protecting the SOL on:

As soon as a case is assigned:

Review the following sources, as appropriate and document in the case file:

Don’t initiate an examination of a return:

If the criteria in (3) applies, but not conducting an examination may result in a. through d. below, get your GM’s approval if you determine an examination should be done. Document the approval and basis for the decision in the CCR/EOAR, the Form 5773 / Form 4318 or a separate workpaper:

Control the SOL on each return assigned. Per IRM 25.6.23.6.1, Statute Controls in Examination, perform the following procedures for returns with less than 180 days prior to the statute expiration date. For EO and FSL/ET purposes, do these actions when 270 days remain on the SOL:

If you request a consent to extend the statute, advise the taxpayer of their rights to:

Use the proper extension form to extend the SOL:

Give the taxpayer a copy of Publication 1035, Extending the Tax Assessment Period. Document actions you took in the case file.

If you discover a potentially expired SOL, complete Form 3999, Statute Expiration Report.

When an organization applies for exempt status, the application, related paperwork, and the disposition of the application are retained. This file is referred to as the "determination administrative file." In the pre-contact planning stage, secure and request a copy of the organization's determination administrative file. This helps you determine whether the organization is operating in the manner for which it was originally given exemption.

Cincinnati will send the determination administrative file via OCS, CD-ROM, or secured email.

Receipt of the determination administrative file isn’t necessary before the initial contact. When you receive the file see IRM 4.75.10.10.1.

For basic information on EO examinations and researching the IDRS account information, see Exhibit 4.75.10-1 Examiners without IDRS access are to use the forms listed in the exhibit to request basic information and submit to their manager for approval. The manager then forwards the form to a designated individual with IDRS access to do the research.

At a minimum, IDRS research requests should include AMDISA, BMFOLO/INOLES, BMFOLI, and BMFOLT. BMFOLR, BRTVU, and BMFOLU as needed to provide supplemental information. For specific command codes, use the IDRS Command Code Job Aid, at http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/command-code.dr/idrs_command_codes_job_aid.htm.

Use the table below to see common command codes and the information they produce:

To obtain NMF transcripts, you may email your request to wi.kcspc.nonmaster.file.team@irs.gov or fax request using Form 3210 Document Transmittal, to IRS Accounting Operations ANMF Team, 333 W. Pershing Rd. Kansas City, MO 64999, (888) 981-6483. To follow-up on a request, call (816) 499-5445. Identify an IDRS NMF account by the TIN followed by the letter "N."

The explanation of the codes displayed in BMFOLO and INOLES can be found in Document 6379, Exempt Organizations Management Information Systems Codes.

Verify the taxpayer filed all returns they are liable to file, including prior and subsequent year returns.

Determine if the organization has any past due balances. If they do, this might be something to investigate further during the examination. Consider whether inurement or private benefit played a role in the organization being unable to pay the balance.

Consider all returns filed by the taxpayer. Some may not necessarily appear under filing requirements. These include related entity returns, employment tax returns, information returns, excise tax returns, pension plan returns, and political returns. This is important when drafting the initial IDR.

Use three additional command codes depending on the issues presented in the case file. These command codes are BMFOLU, PMFOLS, and IRPTRR.

IRPTRR prints can be sent to the RICS (Return Inventory Control System) using destination code R. To get IRPTRR prints sent to RICS, contact an examination Planning and Review analyst.

Document the pertinent information reviewed and conclusions reached. You may document this information in a pre-contact workpaper, on the IDRS/AIMS printouts or in the appropriate sections of Form 5773 / Form 4318. If marked on the IDRS printouts, scan and upload the documents to RCCMS, unless the markup is performed within a PDF file.

A filing check is verifying the filing of a return.

A filing check can be as simple as reviewing IDRS printouts with return information, such as BMFOLI and BMFOLU, but may also include inspecting filed returns, BRTVU prints or images of filed returns, obtained first from non-taxpayer sources.

Review other documents that accompany the return, including:

If items are identified on the Classification sheets, document the decision as to whether to examination the items.

If the examination is a referral, consider what information to obtain to address the issues raised and determine the viability of the referral. Consider a third-party contact with the informant if warranted.

If the group receives a fed/state referral case per IRM 4.75.5.3:

Before you review a primary return, or Form 990-T, it is important for you to become familiar with the requirements for exemption for that entity, as well as any related issues of a taxable nature (employment taxes, unrelated business income, excise taxes, etc.).

Create a workpaper briefly documenting the various requirements and examination guidelines for the type of organization. Include a brief summary of the key requirements on Form 5773.

Review the return for completeness to determine if all required line items and attachments are present. If information is missing, make a note to question the organization and organization's representative and obtain it.

Review schedules, statements, extensions and return attachments for questions and possible issues:

Use Form 5773 / Form 4318, to note potential examination concerns as you review the return.

Review the organization's statement of accomplishing its program services.

Analyze the income sources such as "other revenue."

Review the compensation section to determine if compensation is reasonable or if there are questionable sources of compensation.

Consider any LUQ items. LUQ should include anything unusual that potentially impacts tax-exempt status or foundation status. LUQ items include income, disbursements, assets, liabilities and fund balance. Document the reason for any LUQ item that wasn’t considered an issue. LUQ items fall into at least four categories:

Review the return for missing items. Are items that you would expect to find on the return not there? Check the math. What appears to be an error may actually indicate a missing item.

Look for indications of activities that may affect exempt status or tax liability.

Obtain the prior and subsequent years' returns from On-Line SEIN, either by your own direct authorized access, or by asking your manager, who assigns the request to an authorized employee to retrieve the files and print them to PDF.

Using the Forms 990, complete an analysis, comparing the changes in the revenues, expenses, assets, and liabilities over the three-year period, looking to identify any large or questionable differences. Recognize any trends, either positive or negative, that are present or developing during the three years.

Make note of any items identified that you should incorporate in the initial interview.

Research all issues that appear likely to arise based on your review of the return and determination administrative file to the extent necessary to develop the pre-contact plan. Although it’s important to become familiar with identified issues, especially issues that haven’t been previously examined, it is equally important not to expend a large amount of time researching an issue that may become a non-issue once the examination is in process.

In your post of duty, you have hardcopy research materials and you have electronic research resources. Some of the electronic research tools currently available:

State Agencies - In certain examinations, it is prudent to check state, county and local departments that have jurisdiction over exempt organizations, particularly those recognized as exempt under IRC 501(c)(3). Many state agencies maintain internet web sites that provide access to public records such as corporations and property. Also, an increasing number of states and/or counties have departments with which exempt organizations must register if they solicit charitable donations or engage third-party fund-raisers to solicit for them.

Many organizations maintain their own internet web sites. These web sites can provide useful information concerning an organization. You can retrieve images of previous web pages from http://www.archive.org.

Secure copies of Articles of Incorporation from the Secretary of States.

If you determine during the pre-contact phase that you need help from a TE/GE field specialist or one in another operating division, submit a request as soon as possible to avoid unnecessary delay in resolving the issues. These may include:

Use the online Specialist Referral System at https://srs.web.irs.gov to request assistance from a field specialist.

Referrals to Employee Plans: When you’re unsure of whether to request EP help for a related plan or to refer to EP Classification to determine the merits of an examination, complete Form 4632, Employee Plans Referral. When completing Form 4632, use Form 4632-A, Employee Plans Referral Checksheet, or Form 4632–B, Employee Plans Referral Checksheet-For EO IRC 403(b)/457 Plans, as appropriate. Special Review has an EP examination tool to help you determine if a referral is necessary. Contact Manager, Special Review for a copy of this tool.

Limit your request for specific items that are pertinent to the purpose of the examination, and that are needed to complete the examination.

Tailor the IDR to the specific organization you are examining. Don’t use a shotgun approach. A shotgun request is based on a pre-set template requesting for every possible record, regardless of whether it’s pertinent to the examination.

Explain in the IDR why items are being requested. This helps to increase customer satisfaction with the examination process.

When preparing an IDR:

If you request more than one item with regard to a specific issue, group the items on one IDR and number or letter each item on the IDR.

Don’t request documents that are available internally, such as copies of the Forms 941, 940, and other tax returns, unless they contain information not readily available on an IDRS printout.

Prior to issuing an IDR, you and the taxpayer should agree on a response due date, which may also be an appointment date. If you can’t agree on a response due date, assign a reasonable response due date.

Initial IDRs Only. You can elect to issue your initial IDR with your initial contact letter, or after issuing the initial contact letter, such as at the examination site.

Initial IDRs Only. During the first personal contact or phone-call in IRM 4.75.10.8, and after you have issued the initial contact letter, discuss:

Initial IDRs Sent with Initial Contact Letters. Depending on the size of the organization, whether the records are available electronically, and other factors, you can request that the organization mail certain documents in advance of the appointment to help complete the examination as promptly as possible. Inform the organization they can send electronic storage media (CD, thumb drive, flash drive) if the records too voluminous. These documents can include:

See Exhibit 4.75.10-2 for a sample IDR.

The contact person may prefer to email documents in response to your IDR. Make sure to inform them that email isn’t a secure method of communication but the IRS will accept information via email.

If you must issue additional IDRs after your first request, you should use Letter 5464 to transmit the request to the taxpayer.

The initial IDR must:

In addition to physical documents, you can request written answers to questions and/or the completion of questionnaires.

Documents to consider requesting based on the facts and circumstances of the case may include the following:

When requesting documents such as invoices, vouchers, and receipts, it’s best to ask for a sample by tailoring the request to a specific account, period of time, or set of documents, in lieu of requesting all invoices, vouchers, and receipts.

If the list of requested records includes copies, specify if you are requesting the organization to make copies you can:

It is advisable to include a statement on the initial IDR indicating that you’ll likely request additional records as the examination progresses.

For all information documents, include the following information in the header of the request:

Include the following information in the bottom of the request:

To ensure a taxpayer is properly prepared for an appointment and the requested information is available, it’s a best practice to follow-up with them two or three business days before the IDR response due date.

When the taxpayer responds to your IDR, make your best efforts to review the response by the agreed upon date noted on the IDR.

If the taxpayer’s response is complete:

If the taxpayer’s response is incomplete or they fail to respond:

If the taxpayer fails to respond to the extension in IRM 4.75.10.7.3 (3) or if the response is still incomplete you may:

Make every effort to review IDR responses within 10 business days of receipt of documents.

Notify the taxpayer of your review.

If for some reason your review will be delayed, notate the delay in the CCR.

If the requested information isn’t received after a second extension, begin the Enforcement Process.

During your review, if you determine the IDR response is incomplete:

If the taxpayer responds to the IDR Delinquency Notice, review the response within 10 business days.

If the taxpayer provides a complete response:

If the taxpayer doesn’t respond or the response is incomplete:

As a best practice, you may use an IDR Log to help you track the IDRs you issued to taxpayers.

Using an IDR Log is optional and may not be helpful on all cases; however, use it if it helps. See Form 5699, Information Document Request Log.

For every examination of an organization described in IRC 501(c), that was granted tax-exempt status after October 2013 (Ruling Date 201310 in the EOBMF) obtain a copy of the organization’s current organizing documents, including amendments, from the state authority online or directly from the organization.

Review the organizing documents to determine whether they contain the required language for the type of exemption granted.

Review the organizing documents and the application for tax exemption, including supporting documents, in the determination file.

If you secure conformed copies of amended organizing documents after the start of the examination to satisfy organizational requirements, issue Letter 3609 No Change Advisory, to the organization.

If after discussion with the GM, you propose a revocation for not satisfying organizational requirements, issue Letter 3618, 30-Day Letter - Proposed Revocation of Exempt Status.

For guidance on what constitutes a conformed copy of an organizing or enabling document, see Pub 557, Tax-Exempt Status for Your Organization; Instruction 1023; Instruction 1023-EZ; or Instruction 1024

The following is a discussion of workpapers typically prepared by independent accountants:

Tax reconciliation workpapers, unlike audit workpapers, should be requested at the beginning of an examination. These workpapers are needed since they include the final amounts that should tie the filed return to adjusted trial balance to the general ledger.

Using electronic records to conduct examinations makes the examination more efficient.

Determine during the initial contact if the organization uses an electronic records accounting system.

If they do, modify the initial IDR. Examples of items to request:

The legal authority for requesting records in electronic format is IRC 6001, 26 CFR 1.6001-1(a) and -1(e), Rev. Rul. 71–20, 1971-1 C.B. 392, and Rev. Proc. 98-25, 1998-1 C.B. 998. Rev. Proc. 98–25, 1998-1 C.B. 998 doesn't exempt a taxpayer from providing electronic records, if such records exist.

If the taxpayer fails to contact you after 10 business days have elapsed, call the taxpayer or designated representative. See IRM 4.75.10.8.2.

Immediately inform them of:

If both the taxpayer and the representative contend they didn’t receive the initial contact letter:

If the taxpayer received the initial contact letter, set an appointment or call the duly authorized designated representative to set an appointment. See IRM 4.75.10.8.3 and IRM 4.75.10.8.2.2

Before your first personal contact by telephone:

Examiners working tax related matters must immediately provide the taxpayer the following (Restructuring and Reform Act of 1998, Section 3705):

To the extent possible, set your examination appointment at approximately 30 days from the date of contact but no later than 45 days, to allow time for the documents to arrive 10 to 14 days prior to the examination. This will allow time to review documents prior to the field visitation. Shorter time frames are permissible, with managerial approval.

When contacting the taxpayer, schedule the initial appointment and any follow-up appointments at a time agreeable to the taxpayer and/or representative. This helps reduce the number of rescheduled appointments and avoid case delays. Schedule the examination during normal business hours and without regard to seasonal fluctuations of the taxpayer's business hours. It is customary to accommodate the taxpayer in the case of religious or secular holidays.

The taxpayer and/or representative may request to postpone the suggested initial appointment date. Allow up to an additional 45 days after the first action on the case. If the taxpayer or representative attempts to further postpone the appointment, discuss with your GM.

Usually the initial appointment is scheduled with the taxpayer, but the taxpayer isn’t required to be present at the initial interview per IRC 7521(c). You may conduct the interview with anyone who is authorized by the taxpayer. However, that person must have firsthand knowledge of the information requested and confirm that the information obtained can be relied upon.

If at any time the contact person requests the examination be conducted with a person who doesn't have the authority to receive confidential tax information, request them to send proper authorization before you discuss any confidential tax information with the designated individual.

The following table shows the primary acts that can or can’t be performed by an individual holding a valid POA or a written or verbal TIA during the examination process.

A POA may only sign a return on behalf of the taxpayer in very limited circumstances. 26 CFR 1.6012-1(a)(5) permits a recognized representative may sign the return on behalf of a taxpayer if it is specifically authorized in the POA (Form 2848), Power of Attorney and Declaration of Representative and the taxpayer:

Only individuals who are recognized to practice before the Service and aren't under suspension or disbarment from practice can be designated as a recognized representative. Corporations, associations, partnerships and other persons who aren't individuals can’t be appointed as a recognized representative. See the Form 2848 for a list of individuals who are permitted to practice before the Service.

The IRS will accept a non-IRS form. Attach a completed Form 2848 so the form can be processed to the CAF system. See IRM 1.25.1.2.1 (5), Power of Attorney and Form 2848, for a list of required information.

A signed and dated statement made by the representative should also be attached to the non-IRS POA form. The statement must contain the same declarations contained in Part II of Form 2848.

Form 2848 or Form 8821 can indicate a specific use by making an entry on line 4 for a specific issue authorization. For examples of specific-use authorizations, see IRM 21.3.7.8.12, Specific Use Authorizations.

If you receive a specific-use POA form, attach a copy to the document to which it relates. The representative keeps the original form. Specific-use forms aren't recorded on the CAF system and therefore, don't have to be forwarded to a CAF unit. A specific-use form doesn't revoke any prior POA forms. The POA form guidelines and instructions other than this and the preceding paragraph apply to general POA forms only.

The persons who can be designated as a POA, as listed and fully described on Form 2848, include:

Taxpayers and representatives may not use signature stamps when signing POA forms. Original signatures are required.

IRS accepts a faxed POA form and generally recognizes it. If there is some indication of forgery, the representative can be required to produce the original.

A valid POA form submitted by a taxpayer is always required to be honored unless the criteria for bypassing the POA are met.

The IRS is authorized to accept written consents authorizing the disclosure of return information to a designee of the taxpayer (26 CFR 301.6103(c)-1(c)).

Generally, the TIA you receive during an examination is a general-purpose TIA and is recorded on the CAF system. However, you may receive a limited/specific TIA for a specific issue.

If you receive a specific-use TIA attach a copy to the document to which it relates. The appointee keeps the original TIA. You don’t have to send the TIA to the CAF unit because a specific-use TIA isn’t recorded on the CAF system. A specific-use TIA doesn't revoke any prior TIA. The guidelines and instructions for a TIA in IRM 4.75.10 other than this and the preceding paragraph apply to a general TIA only.

Any individual, trust, corporation, association, partnership, and federal, state, local, and foreign government agency or sub-units of such agency can be appointed to receive confidential tax information under a TIA.

The organization can use Form 8821, Tax Information Authorization, or any separate written document meeting the requirements of 26 CFR 301.6103(c)-1(b)(1). For a list of required elements, see IRM 21.3.7.5.1, Essential Elements for Form 2848 and Form 8821.

If a POA on Form 2848 or Form 8821 is complete and valid, complete the block labeled "For IRS Use Only" with the examiner's name, phone number, function, and date the form was received.

If a non-IRS POA form is complete and valid, date stamp the front of the form.

Fax a copy of Form 2848 or Form 8821 to the CAF unit of the appropriate Campus (Memphis, Ogden or Philadelphia) within 10 workdays of the received date.

Record on the CCR, the date you received and verified the POA or TIA form and the date you sent it to the appropriate campus.

If the CAF unit rejects the form, they issue L861C to the taxpayer. IDRS command code ENMOD indicates a notice was sent.

Attach the original to the back of the first page of the return. If the form covers more than one tax period, make copies and attach one to each return covered.

The form should be readable without removing staples.

Staple any subsequent POA or TIA form you received to the top of the prior forms in the same manner.

Send correspondence and notices to the taxpayer and the authorized representatives as requested in Item 2 of Form 2848 per 26 CFR 601.506(a).

Send copies of correspondence and other written communications to the authorized appointee if Form 8821 item 5a is checked," If you want copies of tax information, notices, and other written communications sent to the appointee on an ongoing basis check this box," or if the TIA is submitted in a document other than Form 8821, the document specifically requests copies be sent to the appointees.

Use Letter 3597 to send the correspondence.

IRS employees are authorized to accept a taxpayer's verbal consent to disclose return information to parties helping the taxpayer to resolve a federal tax matter (26 CFR 301.6103(c)-1(c)(2)). The regulation also clarifies that the taxpayer can verbally approve IRS disclosures to someone accompanying the taxpayer at in-person meetings with the IRS, or participating in a phone conversation between the taxpayer and IRS.

See IRM 11.3.3.2.1, Requirements for Oral Authorization for procedures on verbal authorizations.

Review of the determination administrative file:

Review any technical advice memoranda and correspondence received from the organization.

Review the organization’s governing instruments to identify:

The focus of your determination letter review should verify that the code section recognized matches what is on IDRS, whether there was an addendum (caveats), and when the letter was dated. (In the event of a revocation to the date of exemption, this date will be required to input on Form 6018, Consent to Proposed Action.)

Verify that the subsection shown in the exemption letter is the same as the subsection shown on IDRS, AIMS and the return.

In reviewing the determination application, note any descriptions of activities that were conducted or were planned on being conducted. Add questions about the activities to the initial interview.

Check for any change in address, accounting periods, activities, and income sources.

Using the tax reconciliation workpapers, if any, reconcile the return to the books and records. If no tax reconciliation workpaper is provided, use the trial balance in conjunction with the income statement and balance sheet. A sample format (not required) is as follows:

If you’re unable to complete the reconciliation, or identify material differences, whether by dollar amount or by percentage, make notes of questions to ask of the financial officers (or most knowledgeable person) of the organization.

Scan the general ledger, and select additional LUQ items to sample and/or question the organization at the initial appointment. Pay particular attention to compensation and/or financial transactions with officers. Review the document for possible excess benefit transactions, sources of income that could give rise to UBIT, or other liabilities.

Identify accounts or transactions to sample test the organization's internal controls. Prepare a second IDR, listing the items to be sampled. At the examination, you can use the request as a checksheet. As you sample items, remove them from the request, put them in the workpaper and note any items unavailable during the examination. Issue an IDR for the remaining issues before you leave the examination.

Record summaries on the Form 5773 or Form 4318 for the reconciliation of revenues and expenses, reconciliation of net worth, and method of accounting/internal controls. Add additional summaries for examination reports, sources of income, expenditure analysis, and nature of liabilities, as merited.

Scan the file for viruses while off the network.

If there are no viruses, save the file to your SBU folder. Keep the file for the duration of the examination. Only include relevant items from the taxpayer's data in RCCMS. Return the CD, DVD, or a flash/thumb drive to the taxpayer. If the taxpayer doesn't want it returned, follow established guidelines for disposing external media with PII.

Contact one of the QuickBooks User Team Members in your Area to convert the file and create reports in Excel.

Base the questions on your observations during the pre-contact analysis and issues that you’ll develop. Write them down or outline them. Leave enough space to jot down brief notes during the interview. Keep in mind that this doesn't limit the ability to ask additional questions. Be ready to ask for clarification or to follow up on responses.

Some main areas to cover are:

At the start of any interview, ask about representation (if not already represented) and determine the knowledge of the persons being interviewed with respect to Publication 1.

Questions about the history of the organization can either be general, such as asking for a complete history, or more pointed, discussing any items noted in the determination application, website of the organization or on the Forms 990.

Plan to discuss whether any changes were made to the organizing documents that weren’t already identified in the initial analysis and obtain explanations of any major changes.

In discussing the activities, include questions for any activities not clearly explained on the Form 990. Also, include follow up questions to obtain an overview of any activities that have been identified as potentially being non-exempt.

IRM 4.75.11.6, Internal Controls, discusses the internal controls portion of the initial interview.

IRM 4.75.12, Required Filing Checks, provides information on package audit procedures.

For any unrelated business activities, questions should focus questions on the six "W" questions: when, where, who, what, why and how.

If you need help developing questions, consult an assigned mentor, on-the-job instructor, or the GM.

If unable to locate the taxpayer and/or the initial contact letter is returned by the Post Office as undeliverable, find the taxpayer's current address using these steps:

If you can’t locate the taxpayer after following the applicable procedures in IRM 4.75.10.12.1 (1) above, send examination letters by certified mail to the organization’s last known address and the last known officers, as reported to the state or to the IRS, whichever was most recently reported.

List a response date on the letters, such as 30 days after the letter’s date.

In setting the initial appointment, you may receive a taxpayer request to transfer to another location. IRC 7602 gives the Secretary authority to reasonably set the time and place of an examination. Usually, the examination is conducted in the area where the taxpayer is physically located, has its principal office, carries out business transactions, and maintains its books and records.

For guidance on processing taxpayer and/or representative to transfer the place of examination, see 26 CFR 301.7605-1(e)(2). Generally, the IRS grants a request under the following circumstances:

Evaluate a request for transfer on a case-by-case basis. Consider these factors that must be considered are: