Purpose: The procedures, which were in this IRM, pertained to the Examination Audit Process. The removed procedures do not pertain to the AIMS Information Technologies (IT) System, which is the subject of this IRM. New IRM references for the procedures previously located in this IRM are listed in the material changes. This section provides general instructions for processing Individual Retirement Account (IRA), Education Savings Accounts and Medical Savings Account Adjustments, as they pertain to Centralized Case Processing (CCP). CCP procedures remaining in this IRM will be included in the new IRM 4.38.1, Examination Processing, Centralized Case Processing, Organization and Responsibilities.

Audience: The audience for this IRM Section will be Examination CCP.

AIMS Policy Owner: The Director: SB/SE Technology Solutions who is under the Director, Operations Support.

Program Owner: Exam Systems and Programs, Customer Service.

Program Goals: This chapter contains information and procedures on processing Individual Retirement Account (IRA), Education Savings Accounts and Medical Savings Account Adjustments for examination employees.

IRM deviations must be submitted in writing to the Director Small Business and Self-Employed (SB/SE) following instructions from IRM 1.11.2.2.4.3, Internal Management Documents System - Internal Revenue Manual (IRM) Process.

The procedures, which were in this IRM, pertained to the Examination Audit Process. The procedures do not pertain to the AIMS IT System, which is the title of this IRM. IRM references are given in the material changes, for the procedures previously located in this IRM. CCP procedures, remaining in this IRM, will be included in the new IRM 4.38.1, Examining Processing Centralized Case Processing (CCP), Organization and Responsibilities.

Headquarter Examination is responsible for all policy and procedures related to CCP.

This chapter contains procedures for Individual Retirement Arrangements (IRA), Education Savings Account and Medical Savings Account adjustments made by Examination.

A Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts assessment can be made during a Form 1040, U.S. Individual Income Tax Return, audit. The assessment appears in other taxes on Form 4549, Income Tax Examination Changes, and will be identified as an IRA Tax on Form 4549, Report of Income Tax Examination Changes.

The Form 5329 includes both Income Tax and Excise Tax. When Form 5329 is used, an Income Tax assessment is indicated by Master File Tax Code (MFT) 30 and an Excise Tax assessment is indicated by MFT 29.

For more information on IRAs - See IRM 21.6.5, Individual Tax Returns - Individual Retirement Arrangements (IRA), Coverdell Education Savings Accounts (ESA), Archer Medical Savings Accounts (MSA) and Health Savings Accounts (HSA).

Form 5329 is used by the taxpayer to report additional taxes. The table below describes the Part Number on Form 5329, the corresponding reference number and the type of tax (income or excise).

Secure the transcripts below to determine whether the taxpayer paid additional tax or filed Form 5329.

Examinations of Form 1040 may result in a no change or adjustment to a Form 5329.

AIMS controls must be established for the individual taxpayer's MFT 30 account.

If the outcome of the audit is a no change, do not process the no change to the IRA account.

If the outcome of the audit is a change, follow the procedures below.

If the adjustment is to Part I or II of Form 5329, the adjustment is included in the Transaction Code (TC) 300 amount on Form 5344, Examination Closing Record. The "Other information" section of Form 4549 should indicate the IRA taxes are all income taxes. If the adjustment is a change, the assessment is included in "Plus other taxes" , (Line 10.) on Form 4549.

If any or all of the adjustment is to Parts III through VIII of Form 5329, the Form 4549 will include the excise tax adjustment as part of other taxes. In addition, the section titled "Other Information" on Form 4549 should explain the type of other taxes.

The explanation of "Plus other taxes" in Section 10, will be included as part of the individual report if other issues on Form 1040 are under audit. Form 886-A, Explanation of Items, attached to Form 4549 should identify the adjustment and applicable Internal Revenue Code sections. In joint returns, the spouse(s) to whom the excise tax is applicable should be specified. The adjustment must be made on the MFT 29 module. Therefore you must research (CC IMFOL ‘I’) to see if an MFT 29 module exists.

Research IDRS to determine if there is an MFT 29 account on Master File.

Review the entity information for MFT 30 and MFT 29. If the entity is not correct, prepare Form 2363, Master File Entity Change. Extreme care must be taken to ensure that the Form 2363 is input to the correct MFT account. If the change is only for the MFT 29 account, include "MFT 29 - IRA" in bold letters, on the top portion of the form.

Normally Form 2363 input to the MFT 30, Individual Master File (IMF) module will cause automatic updating of the MFT 29, IRA account if the IMF filer(s) is also an IRA filer(s). It will not be necessary to prepare Form 2363 for input to the IRA module unless the information to be updated on the IRA account is different than what is being input to the MFT 30 module.

If Form 2363 is to be prepared, input the form one cycle prior to the input of the adjustment document (i.e., Form 5344). An exception to this is if a name change or address change was previously input directly to the MFT 29 account. When this situation exists, a name or address change input to the MFT 30 account will not automatically change the IRA name or address. Only another Form 2363 input to the MFT 29, IRA account or subsequent IRA return posting will change the IRA address or name.

Form 2363 entries include:

Research IDRS to determine if there is an MFT 29 account on Master File.

If a MFT 29 account does not exist, an MFT 29 account must be established.

If advance payments have been made, a separate Form 3244-A, Payment Posting Voucher - Examination, must be prepared for income tax or IRA excise tax. Annotate "IRA MFT 29" in the "Remarks" section of Form 3244-A.

Research IDRS to determine if a payment has been made for the MFT 29 module but has been applied to the MFT 30 module. Use Form 2424, Account Adjustment Voucher, to transfer any available credit from the MFT 30 module to pay a liability on the MFT 29 module, or vice versa.

Case files containing IRA adjustments will be identified on Form 3198, Special Handling Notice for Examination Case Processing, by checking the box in the "Special Features" section titled "Individual Retirement Account (IRA) Adjustments".

In lieu of a separate Form 5344, for the MFT 30 adjustment and one for the MFT 29 adjustment, an attachment to Form 5344- IRAF Adjustments document was developed to assist in the closing of IRA cases. The document can be found at: IRAF Adjustments-Attachment to Form 5344. Attach a copy of the completed document to the Form 5344.

The following procedures apply only when an IRA account indicator is present and the adjustment is being processed with CC AMCLS "I" .

The group will follow the procedures below:

Complete Form 5344, using the information completed by the group on the "IRAF Adjustments - Attachment to Form 5344" document for the processing of MFT 29 adjustment(s). See link below. IRAF Adjustment - Attachment to Form 5344.

Below are the valid Item Number entries required on Form 5344 to process an MFT 29 adjustment.

After the MFT 29 adjustment is made, make a printout of the CC AMDIS to accompany the MFT 30 case file. The final closing of the MFT 30 module can now be input using IDRS CC AMCLS "E" .