1.4.40 SB/SE Compliance Field Examination Group Manager

1.4.40.1  (08-01-2003)
Introduction

  1. This section is a supplement to the general guidelines for all managers contained in IRM 1.4, Resource Guide for Managers.
  2. This section is directed at the first level manager in an area examination group.
  3. General guidelines are also found at these websites:
    1. Administrative Procedures for Managers, APM Guide Web Site (http://apm.web.irs.gov/),
    2. Performance Management & Recognition Index (http:shr.web.irs.gov/pers/pmr.htm),
    3. Strategic Human Resources (shr.web.irs.gov/index.htm),
    4. SB/SE Manager’s Knowledge Portal (http://sbse.web.irs.gov/br/)
    5. IRS-NTEU Agreement Links (http://awss.web.irs.gov/personnelservices/WRB/WRBagree.htm)
  4. Additional resource: Managers Toolkit for Income Examinations-Trng 5620-002 (3-2003)-Catalog #89134N.

1.4.40.1.1  (08-01-2003)
Examination Operating Divisions

  1. Compliance activities are divided into those that required face-to-face interaction and those that do not. A significant field presence ensures that taxpayers are afforded the opportunity to meet face-to-face with IRS Compliance staff when needed.
  2. The key operational units are four operating divisions, each serving a set of taxpayers with similar needs:
    1. W & I—Wage and Investment represents individual taxpayers including those who file jointly, with wage and investment income. Compliance issues are found on a limited range of issues such as dependent exemptions, credits, filing status and deductions.
    2. SB/SE—Small Business and Self-Employed includes fully or partially self-employed individuals and small businesses. This group has much more complex dealings with the IRS than the wage and investment taxpayers. Since business income and a range of taxes are involved, compliance issues are complex.
    3. LMSB—Large and Mid-Size Businesses serve corporations with assets over $10 million. Many complex issues such as tax law interpretation, accounting and regulation, and international issues are involved.
    4. TE/GE—Tax-Exempt and Government Entities include pension plans, exempt organizations and governmental entities, representing a large economic sector with unique needs. This group generally pays no income tax but pays billions in employment taxes and income tax withholding. The IRS is charged with administering detailed and complex provisions of law that are generally not intended to raise money, but to ensure that these entities stay within the policy guidelines that enable them to maintain their tax-exempt status, and are compliant with employment tax law.

1.4.40.2  (08-01-2003)
SB/SE Organization Structure

  1. The SB/SE Division is organized around three major processes called operating units:
    1. Pre-filing–Taxpayer Education and Communication (TEC)
      This operating unit provides professional service based on analysis of customer needs and provides timely communication and consistent guidance to stakeholders and taxpayers. This unit is organized geographically into 16 Areas.
    2. Filing–Customer Account Services (CAS)
      This operating unit is responsible for assisting customers in submitting accurate tax returns and remitting the proper amount of tax. CAS focuses on processing returns timely and accurately, assisting customers with account specific questions, and adjusting their accounts when necessary.
    3. Post-filing–Compliance
      This operating unit seeks to increase overall compliance and fairness as well as provide educational guidance and outreach. This unit is organized into 14 geographic areas and is located in five campuses.
  2. The organizational framework for the Compliance structure is:
    1. Compliance Services–handles those compliance activities not requiring significant face-to-face interaction with taxpayers. See IRM 1.4.17.1(4).and
    2. Compliance Policy–examination and collection staff ensure policies and procedures are consistent and reflect organizational priorities. See IRM 1.4.17.1(5) and the SBSE Compliance Policy website for additional information.
    3. Compliance Field–geographically structured field exam and collection groups deployed to handle exam and collection activity requiring significant face-to-face interaction with the taxpayer. The field organization is segmented into areas, territories and groups. A territory includes both exam and collection groups. See IRM 1.4.17.1(6).

1.4.40.2.1  (08-01-2003)
Compliance Field Structure

  1. Territory Manager — The territory manager is responsible for administering the annual business plan at the territory level. Balanced measure targets are set at the operating unit level, area level and territory level. You should comply with any request given by the Territory Manager.
  2. Other Group Managers — You must work together with the other managers within your territory to ensure that all examinations are completed. Each manager has a special area of expertise. You will find that, at some point in time, you may need the expertise of that person in order to accomplish a task within your group. It is important to cultivate good working relationships with your peers.
  3. Technicians — Your employees are your most important asset. It is essential that you establish an atmosphere of mutual respect and trust with each of these individuals. Your success or failure depends largely on your ability to effectively maintain quality relationships with your technicians. You alone cannot succeed as a manager; you must have the support and assistance of all your examiners. It is your responsibility to create a climate for success.
  4. Group secretary and clerical employees — Effective clerical support is essential to the efficient operation of your group. Once trained, your group Secretary and other clerical employees can assume many administrative duties which otherwise represent a substantial drain on your time. Do not ignore your clerical assistants. Show a sincere interest in their work related problems and concerns, take action to assure they are fully trained, and take an active interest in their career development.
  5. Technical Services (Examination)—Technical Services (TS) is responsible for proper administration of Examination Quality Measurement System (EQMS) and support for quality improvement initiatives; post-examination case review; preparation of Statutory Notices of Deficiency; bankruptcy coordination on examined cases; TEFRA coordination; Counsel and Appeals liaison; TAS liaison; Disclosure liaison; suspense files and technical assistance. TS also has responsibility for miscellaneous Exam programs, such as oversight of IRC § 1033 and Rev. Proc. 92-29 inventories.
    1. The review of cases by TS does not relieve the group manager of having primary responsibility for ascertaining that a quality examination was conducted.
    2. Communications between TS and your group regarding reviewed cases will generally be by memorandum or Form 3990. Cases will be returned for further development when there is substantial error, fraud indicators, serious administrative omissions, to correct errors of benefit to the taxpayer, and when other items or circumstances exist so that the case cannot be processed.
    3. Examiners can also receive feedback without the case file being returned if the error is specific, recurring, and/or the feedback will foster improvement.
    4. TS memoranda should be given prompt and appropriate attention. In most instances, the case should be returned to TS within 60 days of receipt. If you disagree with the findings of TS, you should discuss the matter with the Technical Services Group Manager.
  6. Technical Services (Collection)—Technical Services assistance is provided for the casework performed by the collection compliance groups through the provision of technical services. This assistance includes resolving collection issues related to levy and sale procedures, Federal Tax Lien issues, RACS coordination, Collection Due Process, Jeopardy and Termination Assessments, Counsel and Appeals liaison and many other areas that require functional expertise.

1.4.40.2.2  (08-01-2003)
Compliance Services–Case Management

  1. Case Processing (CP)—The major function of this staff is to process cases that are ready for closing.

1.4.40.3  (08-01-2003)
Role of the Group Manager

  1. This section describes your role as a group manager.

1.4.40.3.1  (08-01-2003)
Transition

  1. As an examiner you were only responsible for your work product. You were held accountable for the quality of the completed work assigned to you and you were responsible for the customer service provided to your internal and external customers.
  2. As a group manager, you will make the transition from being responsible for your actions alone to accepting responsibility for the actions of a group of employees. You must instill Agency values by the direction you give and the example you set.

1.4.40.3.2  (08-01-2003)
Role

  1. You are now responsible for the actions of others. You are a role model for your subordinates and your responsibility is to encourage change, and give suggestions to supervisors about new ways to accomplish the Service’s goals.
  2. You are now a developer of people and you accomplish this through:
    • transferring skills by sharing your own knowledge and experience
    • delegation of duties and empowerment
    • providing necessary training and developmental experiences for all employees; and
    • ensuring fair and equitable treatment of employees.
  3. The manager’s responsibilities are to:
    1. Ensure that the mission of the workgroup for which you are responsible and accountable is compatible with the overall mission of the IRS;
    2. Continuously communicate that mission to your employees;
    3. Coach your employees in how to meet that mission by providing specific techniques and goals towards accomplishment;
    4. Mentor your employees so they know that their short-term accomplishments may lead to longer-term development.

1.4.40.3.3  (08-01-2003)
Balanced Measures

  1. The Mission Statement for the IRS sets forth the overall purpose and direction of our operations. The mission focuses on three strategic goals:
    • Service to each taxpayer
    • Service to all taxpayers
    • Productivity through a quality work environment
  2. In order to assess progress in meeting these goals, the IRS developed a set of balanced measures in three major areas:
    • Customer Satisfaction
    • Business Results
    • Employee Satisfaction
  3. Customer Satisfaction–is defined as providing accurate and professional services to internal and external customers in a courteous and professional manner. Examples include:
    • Improving communication;
    • Providing timely service;
    • Empathizing with customers.
    • Becoming familiar with the surveys and national results;
    • Discussing how the IRS is using customer surveys with employees;

    The following examples from Examination Quality Measurement System (EQMS) Audit Standards provide in-depth analysis of the above examples and respective impact on the critical job elements:

    Employee’s Responsibility Manager’s Responsibility Critical Job Element Customer Satisfaction
    1B2-Was initial IDR clear/concise and appropriate
    •Tailor information requests to specific issues •Review IDRs in case file to determine if they follow the EQMS guidelines •3C-Written communication •Explanation of records required
    •Relate information to time periods in question
    •Phrase information requested in terms understandable to the taxpayer
    •Request only necessary information
    2A2-Were only material issues considered
    •Considered only material, or significant items on the key return •Determine if only material items were considered •5A-Completes work on time •Fairness of treatment by the IRS
    5C-Was the report tied/referenced to the workpapers
    •Adjustments per the workpapers should agree with Form 4318/4700 and audit reports •Determine if the Revenue Agent Report (RAR) is referenced to workpapers •3C-Written Communication •Ease of understanding the report received
    7D-Was the time span reasonable
    •Issue complexity and potential •Determine time span and determine if reasonable given issues, condition of books, etc. •5A-Completes work timely •Length of the audit process, from start to finish
    •Use of specialists and submission of referrals
    •Delays and postponements
    •Documentation in the case file to support the span of the examination and other problems that affect the use of time
    8B6-Was the level of managerial involvement appropriate
    •Taxpayer/representative procrastination •If overage, high time, understated income manager should be involved. •No correlation •Length of the audit process, from start to finish
    •Examiner procrastination
    •Mandatory involvement in unagreed issues
    •High time charged
    •Long time span
    •Understatement of income
    •Case reassignment practices
    •Taxpayer complaints
    •Follow-up properly on statute controls
    •POA bypass
  4. Employee Satisfaction–is defined as the measure made up of employee perceptions of the management practices, organizational barriers, and the overall work environment that affects their efforts to do a good job. It is not the simple process of making employees happy or improving the “smile factor” as it is often referred to. Examples include:
    • Having a dialogue with your employees about low results in areas such as trust, respect, and performance evaluation and continuing to craft joint solutions to their concerns;
    • Identifying your employees’ training needs and providing time for them to have effective training;
    • Being an advocate for employee workplace needs with the next level of management; and
    • Helping employees overcome all barriers that keep them from participating in satisfaction surveys.
  5. Business Results–is defined as generating a productive quantity of work in a quality manner and providing meaningful outreach to all customers. Examples include:
    • Identifying resources required for your employees to adequately perform their jobs and determining ways to obtain them;
    • Developing a workplan to achieve the group’s goals, and adjust it based on changes in organizational priorities;
    • Monitoring assigned budget to ensure proper use and adherence to plan;
    • Ensuring your group is organized to complete work in the most effective/efficient way;
    • Identifying staffing requirements based on the work processes and the work level of the group; finding ways to deal with fluctuation;
    • Monitoring the group’s results against the workplan and adjusting/problem solving to address and deviations;
    • Involving employees and encouraging them to find new ways to solve problems;
    • Interacting regularly with employees to identify opportunities for improving how work is accomplished; engaging them in developing improved approaches; and
    • Recognizing that the group’s work is part of a process that affects and is affected by other parts of the organization.

1.4.40.3.4  (08-01-2003)
Accomplishments

  1. Your accomplishments will be measured by leadership competencies tied in with the Balanced Measurement System. Refer to the APM and Strategic Human Resources websites for more information. The leadership competencies are grouped by Primary Core Responsibility Areas:
    • Leadership
    • Employee Satisfaction
    • Customer Satisfaction
    • Business Results
    • EEO

1.4.40.3.5  (08-01-2003)
Managing Statistics

  1. Refer to IRM 1.5.1, Organization, Finance and Management, Managing Statistics in a Balanced Measurement System Handbook.
  2. No goals or targets will be set for ROTERs (Records of Tax Enforcement Results).

1.4.40.3.6  (08-01-2003)
Annual Examination Goals

  1. Everything about planning and business unit performance revolves around balanced measures. Employee Satisfaction, Customer Satisfaction, and Business Results objectives are set at Headquarters by all SB/SE business functions. In Compliance, balance measures targets are set at the operating unit level, area level and territory level. Examination and Collection workplans are developed down to the territory level.
  2. Goals resulting from this planning process are broad and will remain in place for several years or until the desired improvement is achieved.
    1. Effectiveness reflects how well we apply our resources as indicated by Direct Exam Time (DET), rates, etc. This category will also ensure that the auditing standards are consistently applied. EQMS will measure improvement in this area.
    2. Cycle Time refers to the timeliness of our work from the initiation of the examination to the final closure. The Service maintains a continual effort to reduce the cycle time in an effort to minimize taxpayer burden.

    The common thread which permeates and holds these two elements together is Quality.

  3. The second category of goals arises from specific targets set in the annual work plan. These are usually stated in terms of the number of technical staff years to be devoted to specific program areas. For example, the Service could set annual compliance goals in the currency and banking areas (Title 31 and Form 8300 compliance) to address potential noncompliance surrounding the cash economy.

1.4.40.3.7  (08-01-2003)
Definition of Terms

  1. In order to properly understand the business plan goals that are set, you must know the meaning of some key terms. These include:
    Staff Year Approximately 2000 Hours
    DESY Direct Exam Staff Year
    DET Direct Exam Time (Total DESYs)
    Rate Hours Per Return
    Average Rate Average Time Per Return
    WIP Rate Cumulative Time Return is in Process
    Cycle Time
    (Turnover)    		 Length of Time a Return is in
    Process (Status 12 to 80/90)
    Base Inventory Inventory Necessary to Stay in Operation
    Coverage Percentage of Examinations to
    Returns Filed

1.4.40.3.8  (08-01-2003)
Dealing With Taxpayers/External Customers

  1. As Customer Satisfaction is one of the balanced measures, every contact with someone outside the Service should offer the opportunity to enlighten and to build the image of the Service. Customer Service must be a basic consideration in external communication. All external communications must be targeted to meet the needs of the receiver. Internal terms and acronyms must be avoided. All external communications must be professional in tone and scope in order to secure cooperation.
  2. Quality contacts with taxpayers require consistently fair, impartial, reasonable, and competent service. We must continuously recognize and respect the rights and the personal dignity of every taxpayer. Remember that first impressions are lasting; encourage your employees to approach each encounter with a taxpayer in a manner that will create favorable impressions.
  3. Various sections of the Internal Revenue Code provide explicit details of employee responsibilities. These code sections should be reviewed often with your group and you should ensure complete compliance with the spirit of the law.
  4. Because of the congressional intent of the Taxpayer Bill of Rights, first-line managers should be alert for unfavorable or less than acceptable behavior in contacts with the public. This is particularly important in positions that require public contact in a public setting (i.e., examiners). In those settings, consideration should be given to some type of follow-up to monitor the public perception of the quality of our customer service.
  5. In dealings with representatives, you and your employees should be knowledgeable about Treasury Department Circular 230. This publication contains the rules governing the recognition of attorneys, certified public accountants, enrolled agents, and all other persons representing taxpayers before the IRS.
  6. All employees are obligated to respect the rights and personal dignity of each taxpayer at all times. Examiners and managers can be firm without being curt or impolite and can agree to disagree.
  7. Examiners are required to obtain manager’s review of customized letters before mailing to taxpayers/representatives.

1.4.40.3.8.1  (08-01-2003)
Taxpayer Complaints

  1. The good relationships we establish are not always the objects of public attention, but poor relationships often are. Angry or complaining taxpayers who have not been satisfied are likely to talk about their treatment by the Service.
  2. Carefully listen to taxpayer concerns for indications of improper examination practices. Remember that every concern is serious to the taxpayer and deserves your consideration. The complexities of tax administration and unfamiliar procedures can be the source of many complaints. In many cases, a simple explanation or clarification is sufficient to resolve the misunderstanding. Taxpayers have the right to know not only what is needed, but also why.
  3. One of your responsibilities is to mediate between your employees and the dissatisfied taxpayer. Let the taxpayer fully explain his side of the complaint. Neither agree nor disagree with the taxpayer until you have heard your employee’s response to the complaint. Avoid quick answers until you are in a position to make a fair and objective decision. By agreeing with the taxpayer without hearing your employee’s side of the story, you may be treating your employee unfairly.
  4. When you get all the facts, decide whether you or your employee will respond to the complaint. Response to the taxpayer’s complaint should be made promptly.

1.4.40.3.8.2  (08-01-2003)
Management Responsibility Regarding Right of Consultation

  1. IRC § 7521(b)(2) requires the examiner to stop the interview (unless required by court order) whenever a taxpayer requests to consult with a representative (any person, such as an accountant or attorney, who is permitted to represent taxpayers before the IRS).
  2. IRC § 7521(c) requires the examiner to obtain their immediate supervisor’s approval to contact the taxpayer instead of the representative, if the representative is responsible for unreasonably delaying the completion of a tax audit or collection action. See IRM 1.4.40.3.5.3 below.
  3. A taxpayer can file a civil suit against the IRS under IRC § 7433 if an IRS employee intentionally or recklessly disregards this provision of the tax code by denying the taxpayer the right to consult with a representative or bypassing the representative without proper approval.

1.4.40.3.8.3  (08-01-2003)
By-Pass of a Representative

  1. The appropriate authority for the by-pass procedure is § 601.506(b) of the Statement of Procedural Rules. The by-pass permits the examiner to contact the taxpayer directly and to request any information necessary to complete the examination. The representative still continues to be the representative of the taxpayer and copies of all correspondence given to the taxpayer will also be sent to the representative.
  2. The taxpayer should also be furnished copies of all correspondence and document requests provided to the POA. In many cases, the taxpayer may not be aware of a representative’s procrastination.
  3. An approved pattern letter (See Exhibit 1.4.40-9 and Exhibit 1.4.40-10) with your signature advises the representative of his/her responsibility in the conduct of the examination and conveys advance notice of a possible by-pass for failure to provide requested information. A copy is sent to the taxpayer and a copy is sent to the Area Return Preparer Coordinator and territory manager.
  4. It is important for a case file to be well documented as to the efforts made by the examiner and the tactics used by the POA.
  5. The permission to bypass must be obtained from the Territory Manager and the letter signed by the Territory Manager. The letter should outline the basis for the bypass. (See Exhibit 1.4.40-11 and Exhibit 1.4.40-12 pattern letters).
  6. The letter should be routed through the examiner’s manager, Return Preparer Coordinator and to the Territory Manager for signature.

1.4.40.4  (08-01-2003)
Workload Planning

  1. This section provides specific guidance on the processes and tools available to you as a manager. Included is information relative to the various automated systems for which you have responsibility for updating, maintaining, and safeguarding. In addition, the various reports available to assist in these tasks are introduced.
  2. This section identifies two general types of systems:
    1. Localized Systems: These are systems in which the majority of input, involvement, and use are within your group or Area. These systems primarily serve you while providing information to your internal customers.
    2. National Systems: These are the major case monitoring and control systems which monitor and control case management information and taxpayer account information for the country as a whole. Generally, direct group database involvement is very limited and these systems require greater internal control.
  3. Field and office examination group managers must maintain effective controls to:
    • Physically protect returns and return information.
    • Maintain an adequate inventory of tax returns.
    • Ensure the prompt movement of examinations.
    • Protect the statutes of limitations.
    • Process cases through the group.

1.4.40.4.1  (08-01-2003)
Importance of Quality of Case Databases

  1. The management of your group’s inventory and the accuracy of the case’s database is one of the primary activities of your job. Prompt, efficient attention to maintenance of the group’s inventory controls will make the first line manager’s job easier by:
    • Responding to both internal and external customers
    • Ensuring priority case work is readily identified and promptly worked
    • Identifying overage cases so they can receive prompt attention
    • Preventing the expiration of statutes
  2. Case database quality is equally important to our internal customers, as each of the various levels attempts to manage program direction, monitor progress, manage scarce resources, and accommodate changes in tax laws.

1.4.40.4.1.1  (08-01-2003)
Security and Integrity Concerns

  1. Access to automated systems, such as the Integrated Data Retrieval System (IDRS), Audit Information Management System (AIMS), and Examination Returns Control System (ERCS) — Each employee who is provided access to an IDRS terminal has been carefully identified and screened based upon his position. Each employee has also been “profiled” to limit the ability to view and change information. Examiners and their managers should have IDRS research capability only and are not to perform IDRS production functions. Managers are required to review IDRS usage reports to ensure this policy is followed.
  2. As a group manager, you are responsible for notifying the IDRS Security Officer in your territory of any changes in employee status. You must request changes in profiles or additions and deletions of employee access through the security officer.
  3. All requests for returns from any employee under your supervision must be submitted in proper form and must be authorized by you in writing prior to being filled.
  4. Your authorization for IDRS research by a Revenue Agent with ERCS controls of his case is not required.
  5. Accessing Employee Accounts — To protect the right to privacy of each employee of the Service, and to prevent an employee from altering their own account, access to an employee’s tax return information on IDRS is strictly prohibited. All requests made of an employee’s account are monitored and must be accounted for. Requests may be made only through Customer Service, and employees are prohibited from accessing their own account.
  6. Access to Group Inventory and Case Controls — To ensure the integrity of the database and group controls, you must ensure that only you and your secretary have access to group control files and computer data bases. You must take action to limit opportunities for others to gain access. With any group inventory and case control system the following rules must be enforced.
    1. Your systems must be password protected.
    2. Users must always log off when leaving the area of the terminal, even if only for a moment.
    3. Persons without a “need to know” should not be allowed to view information being displayed on a screen.
  7. Access to Incoming Mail — Incoming mail must be received and date stamped only by the group secretary (or a designee, if the secretary is absent). Receipts of cash, irregularities in the manner in which checks are written, or unusual letters must be brought to your attention immediately. All mail must be opened by the group secretary or designee. Therefore, personal mail should not be sent to any IRS office.

1.4.40.4.1.2  (08-01-2003)
Taxpayer Browsing Protection Act/UNAX

  1. The Taxpayer Browsing Protection Act, IRC § 7213A provides a criminal misdemeanor penalty for the willful, unauthorized inspection of tax returns or return information. See IRM 4.7.2.3 and IRM 21.2.2.3.2.
  2. Employees are required to complete an annual UNAX Awareness certification form. See http://apm.web.irs.gov/WII/wiiUNAX.htm for additional information.

1.4.40.4.1.3  (08-01-2003)
Control Systems for Cases

  1. Integrated Data Retrieval System (IDRS) — The system that the Service uses to access taxpayer account file information, Master File (MF) and Non-Master File (NMF). This system is the parent to all enforcement division management systems of the Service. Within the IDRS system are AIMS and PCS, both discussed below.
    1. Audit Information Management System (AIMS) — A computer system designed to provide information about the returns open in and charged to Examination. While a return is charged to Examination, the AIMS data base tracks its location, age and status. The accuracy of AIMS information is your responsibility, although the verification should be assigned to the group secretary. You must have a working knowledge of all AIMS procedures and reports for effective management control. AIMS training (provided during functional management training) provides instructions to group managers regarding their responsibilities.
    2. Partnership Control System (PCS) — A separate nationwide system which contains information regarding the examinations of flow-through entities (partnerships, S Corporations, Trusts) and the related investors. The system establishes a linkage between the key entity and the related returns. It ensures that all investor returns are established on AIMS and that the returns are charged to the Campus TEFRA/non-TEFRA function or to area examination personnel so that statutes may be protected and any necessary adjustments may be made later. PCS controls both TEFRA and Non-TEFRA entities. A PCS database for any given entity is established with information submitted at the group level. You are therefore responsible for the completeness and accuracy of the information submitted by the examiner.
  2. Examination Returns Control System (ERCS) — Consists of a central processing unit servicing remote terminal units located throughout the Area. As a return moves through the system, the ERCS database is updated to maintain a current record of the return. ERCS also includes an examiner time reporting system. An examiner’s case activity is added to the database. Management’s use of various ERCS reports are essential for an effective group operation.
  3. Updating ERCS will automatically update the Audit Technical Time Reporting System (ATTR) and AIMS. On a weekly basis, an AIMS tape is run against the ERCS database, and any differences are updated or a difference report is printed that must be reconciled (generally by your secretary). Refer to the ERCS IRM 4.7.5.
  4. Summary Examination Time Transmission System (SETTS) — Established to consolidate examiners’ time. This information is currently input at the group level from the time input document and transmitted to the Detroit Computing Center. SETTS is utilized in planning and monitoring time applications by organization codes, position codes, and activity codes. See IRM 4.9.1, Examination Technical Time Reporting.

1.4.40.4.2  (08-01-2003)
Case Control Procedures

  1. This subsection describes case control procedures.

1.4.40.4.2.1  (08-01-2003)
Requisitions of Returns

  1. When filed returns are needed, they are generally requisitioned on Form 5345, Examination Request Master File. The group manager must ensure that all entries on Form 5345 are properly completed, verify that there is a valid reason for the request, and approve the form. Returns requested in Status 10 should be kept to a minimum. A return will generally be requested in Status 10 when it is a related pickup and it has a high probability of being opened, but it cannot be opened immediately. Office examination returns will generally be requested in Status 12. Refer to the AIMS/Processing Handbook, IRM 4.4.
  2. Source Code 45 can be used to order returns for reference or information when an examiner is unable to obtain a copy. The source code must be changed to an examination source code, with managerial approval, within 30 days of receipt, or the case must be closed on AIMS and refiled. The reason for the request must be shown on the request card, and a copy of the card must be attached to the back of the tax return as a permanent record.
  3. When a return is requested there will be a six to eight-week period before it is received. Approximately two weeks after submission of Form 5345, the return will be charged to you on AIMS. The examination may be expedited by using a RTVUE in place of the original return (see local procedures) or by having the taxpayer provide a copy of the return.
  4. You must maintain the Form 5345 in a pending request file and ensure that prompt follow-ups are conducted by your secretary when necessary to secure receipt of the return. When the return is received, the request card and Form 5345 will be removed from the pending file and returned to the examiner for placement in the case file.

1.4.40.4.2.2  (08-01-2003)
Nonfiler Case Procedures

  1. Delinquent returns and substitutes for returns require special procedures. When you are ready to assign a nonfiler to an examiner, the following steps should be taken:
    1. Review Fraud Handbook, IRM 25.1, and discuss fraud consideration with your examiner.
    2. If firm indications of fraud are not present, the returns should be solicited. Returns are established on master file using Form 5345 and a push code.
    3. If a taxpayer does not provide a return prepare a substitute for return and proceed as in (b) above. See IRM 4.12.1, Nonfiled Returns, and IRM 4.4.9, Delinquent and Substitute for Return Processing.

1.4.40.4.2.3  (08-01-2003)
Updating Case Database

  1. It is your responsibility to ensure that case databases are timely and properly updated to reflect the correct status code, source code, statute date, organization code, claim amount, project code, and aging reason code. As the manager, you will be actively involved in the progress of each employee’s work. You should ensure that updates, which are the employees’ responsibilities, have been made.

1.4.40.4.2.4  (08-01-2003)
Use of AIMS Codes

  1. Source codes, status codes and project codes are important in that they allow for compilation of data regarding our inventory levels and composition, our areas of resource utilization, and program accomplishments.
  2. Push codes are used to allow controls to be instituted when no record of a return is present on master file.

1.4.40.4.2.5  (08-01-2003)
Closing of Returns

  1. Case closing is accomplished on ERCS and AIMS by use of Form 5344, Examination Closing Record, Form 5351, Examination Non-Examined Closing, and Form 4549, Income Tax Examination Changes. Cases may be closed through ERCS at the group level or in Case Processing. Verify procedures with your Area’s ERCS Coordinator. Refer to the ERCS Group IRM 4.7.5; and the AIMS/Processing Handbook, IRM 4.4 for a discussion of usage and proper preparation of these forms and for a discussion of disposal codes.

1.4.40.4.2.6  (08-01-2003)
Shipment of Returns

  1. Shipping returns requires the use of Form 3210, Document Transmittal, in order to track returns. Form 3210 can be manually prepared or generated by ERCS.
  2. This is to be completed by the sender and must identify the taxpayer’s name, SSN/EIN, tax period, to whom it is being sent, date sent, and transmittal code. The sender must sign and date the form and keep the last copy for group control. Upon receipt of the package, the recipient must sign Form 3210 and return the acknowledgment portion to the sender. Form 3210 can be prepared manually or generated from ERCS.
  3. The sender should use Form 3538, Document Transmittal Register, or equivalent, in monitoring the transmittal of tax returns or other information via Form 3210. If an acknowledgment is not received within 10 days, an immediate follow-up by phone or mail must be performed.

1.4.40.4.3  (08-01-2003)
Statute Controls

  1. ERCS must be continually updated to reflect accurate statutes of limitation dates on your entire inventory. Updates are made by use of Form 5348, Examination Update, which must be submitted at the time that a statute extension is approved and signed by you.
  2. The manager has the authority and responsibility to allow the normal assessment statute of limitations to expire if certain special conditions are present, as described more fully by the alpha codes in IRM Exhibit 25.6.23-3. For example, the examiner may have a NOL carryback year and a decision has been made to examine the source year only and not the carryback year. The statute will be updated to a BB statute within six months of the normal statute date. These alpha codes may also be used where a return with a previously expired statute has been requested.
  3. Group Statute Controls — For those cases in which the statute of limitations will expire within 210 days, a Form 895, Notice of Statute Expiration, should be issued to the employee charged with the return. It is the responsibility of the examining agent to reconcile the information on Form 895 and return to the manager within 30 days of receipt.
  4. The guidelines provide for a statute control file to be maintained for all returns in the manager’s custody including:
    • Individual returns
    • Corporate returns
    • Partnership returns
    • S Corporation returns
    • Employment tax returns
    • Penalty cases
    • Trust returns
  5. For general guidance in determining statute dates, see the Statute of Limitations Handbook, IRM 25.6. The following situations result in unique statute dates which require special attention and care.
    • Claims—Consents Extending Period of Limitation for Assessments
    • Carryback years resulting from a claim
    • TEFRA investor one year assessment statute
    • 90-day cases
    • Transferee liability cases
    • Prompt assessment requests under IRC § 6501(d)
    • Form 911, Application for Taxpayer Assistance Order (ATAO) to relieve hardship
    • Amended increases
    • SFR’s and subsequently filed returns
    • Penalties involving delinquent returns
    • Employee’s share of FICA on Form 1040
  6. The case file must be documented that managerial approval has been obtained to solicit a Consent to extend the statute of limitations from the taxpayer 180 days prior to the statute expiration date.
  7. RRA 98 imposed provisions that must be followed in soliciting a Consent to extend the statute of limitations. The provision requires the IRS to provide the taxpayer(s) or their authorized representatives with an explanation of their rights to decline to extend the assessment statute of limitations, or to request that any extension be limited to a specific period of time or to specific examination issues.
  8. In order to meet the provisions, Letter 907 and Publication 1035, Extending the Tax Assessment Period, must be provided to the taxpayer or representative. In the case of a joint return, both spouses must be separately notified. A copy of the Letter 907 should be attached with the consent to the return. The manager should verify the Letter 907 was properly issued before executing a consent. Although the manager has the authority to allow the normal assessment statute to expire in reliance on an extended statute, a Form 3999, Statute Expiration Report, is still required if the decision results in a barred deficiency or a “no-change” examination has not been documented prior to the assessment statute expiration.

1.4.40.4.3.1  (08-01-2003)
Statute Control File

  1. A control system can be manual, electronic or a combination of both. A control file must be maintained to monitor the following cases:
    • Statute expiration within 210 days
    • Previously extended returns
    • Prior year cases
    • All alpha statutes
  2. If a requested return has a statute which will expire in less than 210 days, Form 895 must be prepared, as in the normal manner, with the notation “Dummy” at the top.
  3. With an automated system, Form 895, Part 1, will be completed and placed in the statute control file, filed alphabetically by month and year of expiration. Part 2 is maintained on the top of the case folder.
  4. At case closing, Part I is pulled and placed in the case file of the applicable tax return.
  5. This control file must be continuously maintained and monitored and reconciled with AIMS Table 4.1 or Table 4.0, Returns with Statute Date Pending. AIMS Table 4.0 is essentially the same as Table 4.1, however, Table 4.0 lists returns charged to functional areas other than exam groups such as Technical Services, PSP and Case Support. The secretary should note and correct discrepancies.

1.4.40.4.3.2  (08-01-2003)
Preparation of Form 895

  1. ERCS generates Form 895 for each return in the group whose timely filed statute expires within a specific number of days, but at a minimum of 210 days.
  2. Even if an extension of the statute has been granted or the return was filed late, the statute is recomputed for the tax period and MFT for purposes of this selection.
  3. Any return with an alpha in the statute date for which an 895 has not been issued is included if the computed statute date expires within the specified time frame.
  4. Any return transferred to your organization code requires a Form 895 since the current group has not had statute notification.
  5. Although the ultimate responsibility rests with the assigned examiner, your secretary will generally identify affected cases and forward Forms 895 to examiners. You must emphasize that the responsibility for Forms 895 and statute protection rests with the examiner.
  6. Forms 895 must be monitored to ensure that they are returned to the manager within 30 days after initial preparation.

1.4.40.4.3.3  (08-01-2003)
Action 90 Days Before Expiration Date

  1. Ninety days before the expiration date of the statute you will take immediate action to protect the Government’s interest. You should immediately contact the Technical Services (Examination) Group Manager, concerning the issuance of a Statutory Notice of Deficiency.

1.4.40.4.3.4  (08-01-2003)
Expired Statutes

  1. IRM 25.6.14, Barred Assessments, discusses the use, preparation, and submission of Form 3999, Statute Expiration Report. Also, refer to IRM 4.8.8.11, Technical Services (Examination) and IRM 4.2.1.4, General Examination Information..
  2. A draft of Form 3999 is required to be submitted to your Territory Manager within 10 days of the date that the barred statute is discovered. Timely submission of this report is imperative.

1.4.40.4.4  (08-01-2003)
30-Day Case Controls — Field Groups

  1. Groups are responsible for suspense of 30-day cases. A control system must be maintained to monitor and provide timely follow-up action.
  2. IRM 4.4 discusses your responsibility with regard to these cases.
  3. Update to status code 13 should be accomplished for returns awaiting issuance of a 30-day letter or in group suspense once the letter has been issued. Generally, you continue to be responsible for this case since it remains charged to your group.

1.4.40.4.5  (08-01-2003)
Field Examination Inventory Management

  1. You must plan, monitor, and direct input of work to accomplish program priorities and effectively utilize resources.
  2. You must maintain within your group:
    • Sufficient quantity of unstarted returns
    • Appropriate categories of returns (as established in the Examination Plan)
  3. To do so, you must:
    • Consider experience and training level of your examiners
    • Anticipate and factor current and future priority work
    • Consider historical rates of related pickups
    • Anticipate details and other assignments of your examiners
  4. Consult your area procedures to determine the extent to which unstarted returns should be assigned to your examiners.

1.4.40.4.5.1  (08-01-2003)
Prior Year Considerations

  1. The Service established limits for requesting prior year returns. Prior file year returns will not be started:
    • After November 30 of the current file year for individual returns (IMF)
    • After February 28 of the next file year for business returns (BMF)

    Example 1–On December 1,2002, the current file year for an individual return would be the returns filed (TC 150) during 2001. The prior file year return would be all returns filed in 2000. The return filed in 2000 would become a “prior file year return” on December 1, 2002, and an examination should not be initiated.

    Example 2–A corporate tax return processed (TC 150) during the 2001 file year (in 2002) will not be started by an agent after February 28, 2003. Therefore, these corporation income tax returns will be surveyed during the month of February as excess workload.

  2. For purposes of this section, “file year” means the calendar year during which a Transaction Code 150 posts to the Master File.

1.4.40.4.5.2  (08-01-2003)
Inventory Types

  1. Your group’s work can be divided into three categories.
    1. Mandatory — Neither you nor your examiners have the authority or discretion to survey; these returns must be worked.
    2. Priority — Both you and your examiners are empowered to survey if case justifies such action. However, once the commitment is made to examine, it should be handled expeditiously.
    3. Discretionary — Both you and your examiners are expected to evaluate the degree of noncompliance before initiating the examination.
  2. Examples of priority cases include:
    1. Cases in which either the Government’s or the taxpayer’s interest is in jeopardy due to imminent expiration of the statute of limitations
    2. Bankruptcy or receivership cases where the date for filing claims is about to expire
    3. Tax shelters
    4. Cases returned by the Technical Services for reconsideration
    5. Requests for prompt examination or prompt determination cases
    6. Audit Reconsiderations
    7. Cases involving informants’ letters
    8. Claims for refund
    9. Overage cases
    10. Offers in Compromise
  3. Examples of discretionary cases include:
    1. DIF source returns
    2. Related/subsequent year pickups
    3. Compliance Initiative Projects
    4. Return Preparer Projects
    5. Nonfiler projects
    6. Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business) projects
    7. UI DIF

      Note:

      Due to a change in direction, the specific case category may have higher priority and no longer be discretionary.

1.4.40.4.5.3  (08-01-2003)
Securing Returns

  1. If priority returns are in process and your unstarted inventory is inadequate, you may need to order returns.
  2. When you need new work, consult your Territory Manager. When a decision is reached regarding the type of cases required, forward a request to the Manager, PSP. The Manager, PSP, monitors priorities, program requirements, and local directives and will coordinate with the group manager to furnish you the proper type of work.
  3. You should always be alert to the potential for areas of noncompliance and prepare project recommendations where practical. A project is a study, survey, or canvassing activity involving a limited number of taxpayers within a category, undertaken to identify noncompliance with the tax laws. Approval is required by the appropriate Service official before a project can be initiated.
  4. While there are a number of factors that affect the time it takes to receive returns, you need to be aware of the general time frames involved. These apply whether you are ordering single returns as related pickups, or the Manager, PSP, is ordering in bulk.

1.4.40.4.6  (08-01-2003)
Office Examination

  1. To manage the Office Examination Program effectively, it is essential that you, the group manager, understand its unique concepts.

1.4.40.4.6.1  (08-01-2003)
Planning and Scheduling for Appointments

  1. Planning and scheduling are important because of the volume of work handled by an office examination group. You need to consider the nature of your appointment scheduling, the receipt of direct assignment cases, downtime needs, Tax Compliance Officer/Tax Auditors (TCO/TA) leave requirements, TCO/TA availability, no-show rates, rescheduling needs and other variables.
  2. Generally examinations are generated by the weekly orders you place requesting returns from Centralized Files and Scheduling (CF&S). Other examinations will result from cases directly assigned to your group.
  3. In deciding whether and what type of returns to order, the following factors (at a minimum) must be considered:
    1. TCO/TA: The group manager must consider the number of examiners available at any given time, as well as which of those examiners are trained to examine business returns.
    2. Follow-up Time: Schedules should reflect an appropriate amount of time for examiners to take follow-up action(s) on in-process inventory. The amount of follow-up time is dependent on the number and complexity of in-process cases.
    3. No-show, Reschedule Rate: These factors should be considered when scheduling. Variations between posts of duty should be considered.
    4. Direct Assignment Cases: These returns are generally claims, TAS cases, informant cases, transfers, offers-in-compromise, etc. They should either be scheduled within 30 days of receipt or surveyed.

      Note:

      Offers-in-compromise based upon doubt as to liability cannot be surveyed.

    5. Previously Scheduled Appointments: TCO/TAs will already have scheduled interviews that must be considered before placing return orders.
    6. Business Return/Double Time Slot Cases: You must plan single time slot and double time slot interviews. Establishing the right mix of business and nonbusiness returns should be based on the grade level of TCO/TAs.
    7. Other Source Examinations: These returns should be expeditiously scheduled for interview or surveyed. If input for examination they should be updated to Status 12 immediately.

1.4.40.4.6.2  (08-01-2003)
Ordering Returns

  1. Returns must be ordered four to six weeks in advance to ensure that taxpayers have sufficient advance notice of their scheduled appointments. Once an order is placed, you must ensure that a sufficient number of TCO/TAs are available to conduct appointment interviews. Canceled appointments and delays in rescheduling causes taxpayers inconvenience and frustration, which undermines their confidence and detracts from proper customer service.
  2. You should consult your area procedures in preparing your return orders. In ordering returns, it is essential to maximize use of the available appointment slots for a given week.
  3. The Manager, Planning and Special Procedures (PSP) generally monitors and controls the ordering of returns to achieve a balanced examination plan.

1.4.40.4.6.3  (08-01-2003)
Centralized Files and Scheduling

  1. When placing a CF&S order, area procedures dictate the use of one of two methods to schedule appointment times:
    1. The appointment letter mailed by the campus will provide a date and time for the taxpayer to appear in your office, or
    2. The letter will request that the taxpayer call your office within a prescribed time period to schedule an appointment; this is the “call back ” method.
  2. The “call back” method is generally used. This method is more clerical support intensive, however, it normally produces fewer no shows/reschedules because the taxpayer/power of attorney has input up front as to the date/time of the appointment.

1.4.40.4.6.4  (08-01-2003)
Unassigned Inventory

  1. Returns must be carefully screened as they arrive to ensure:
    • Proper selection of issues
    • Priority returns are properly identified
    • Statutes are protected
    • Return is worthy of examination (i.e., adjustments can overcome the NOL, etc.)
    • Precontact analysis returns are properly identified
  2. Unassigned work should be classified and assigned or surveyed as soon as possible. Unassigned inventory must not be allowed to accumulate.

1.4.40.4.6.5  (08-01-2003)
Undeliverable Mail

  1. Once the examiner has determined who to contact, the person must be located. All reasonable attempts should be made to locate the taxpayer. See IRM 4.10.2.8.7 for minimum steps to be taken to locate the taxpayer.

1.4.40.4.6.6  (08-01-2003)
Time Accounting

  1. Time and attendance refers to the administration of leave for employees. Time and attendance is documented in the Single-Entry Time Recording (SETR) portion of the Totally Automated Personnel System (TAPS).
  2. Group managers are responsible for the following:
    • Ensuring that the time and attendance records for each of your employees are correct at the end of each week;
    • Administering the leave rules, regulations and procedures in accordance with established IRS policies, balancing the needs of both the Service and employees;
    • Ensuring that all work is assigned equitably;
    • Complying with all requirements for scheduling and documenting leave, including securing any required signatures;
    • Establishing leave schedules early in the year to provide for adequate coverage at all times, to afford employees the opportunity to use their annual leave, and to avoid forfeiture of leave and compensatory time;
    • Ensuring leave charges are properly recorded to the appropriate leave category;
    • Counseling employees on policies, regulations, and procedures related to leave and absence;
    • Identifying and correcting, by appropriate methods, leave abuse;
    • Requesting and receiving authorization for overtime and for compensatory time from the appropriate management level. This is usually done using Form 2787, Authorization and Report of Overtime Worked;
    • Reporting pay and leave issues to your servicing Transactional Processing Center (TPC) and working with them to resolve problems.
  3. Check the latest National Agreement with NTEU for significant changes that will impact time and attendance reporting.

1.4.40.4.6.7  (08-01-2003)
First Appointment Closures

  1. With a renewed emphasis on quality examinations, first appointment closures (FAC) should be encouraged without sacrificing quality or good customer service.
  2. The manager should consider the classified issues when determining the appropriate time slots for an examination. Consideration should be given for time required to prepare the report, complete the EOAD and solicit payment (i.e., preparing installment agreements, processing checks, etc.).
  3. If all the requested information is not furnished at the initial interview, consideration should be given to credible oral testimony to avoid subsequent appointments. If the majority of the information is missing or if the taxpayer appears to lack credibility, an Information Document Request (IDR) Form 4564, should be issued to the taxpayer and a subsequent date given for conclusion of the examination. The taxpayer should be advised that if the information is not provided on that date, a Revenue Agent’s Report (RAR) will be issued.

1.4.40.4.6.8  (08-01-2003)
Examination Technique Codes

  1. Examination Technique Codes should be accurate on the Form 5344, Examination Closing Document. The technique codes assist in monitoring effective case closings. Review IRM 4.4.1 for valid technique code entries. The acceptable techniques are:
    1. Initial Interview
    2. Correspondence
    3. No Show/No Response
    4. Undeliverable

1.4.40.4.6.9  (08-01-2003)
Storing Case Files

  1. Most cases should be stored in a central location in alphabetical order or purge date order.
  2. In a Post of Duty with no clerical support this may not be the system of choice. Area procedures will apply.
  3. Only cases which may be worked within five to ten days should be maintained at the tax auditor’s desk or in the “Overnight” file.
  4. Cases will be purged, worked, scheduled, followed up and/or closed according to ERCS action codes. See ERCS IRM 4.7.
  5. Cases should be set to purge on dates when tax auditors and/or clerks have available time to take the required action.
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