4.1.5. Case Building, Classification, Storage and Delivery

(1) PSP is responsible for identifying, selecting, and delivering returns to SB/SE Field Exam. Those returns can come from a variety of sources. This section addresses case building, classification, and delivery of the returns.

(1) IRM 1.1.16.5.5.3, Exam Case Selection.

(2) IRM 1.2.1.2.36, Policy Statement 1-236, Fairness and Integrity in Enforcement Selection.

(3) IRM 1.2.1.5.7, Policy Statement 4-9, Highest Integrity Expected.

(4) IRM 1.2.1.5.10, Policy Statement 4-21, Selection of Returns for Examination.

(1) Director, Exam Case Selection (ECS) is the executive responsible for providing policy guidance on the selection of cases and delivery of inventory for SB/SE Examination.

(2) Program Manager, Field Case Selection is the program manager responsible for providing policy guidance on the selection of cases and delivery of inventory for SB/SE Field Exam.

(3) The PSP Territory Manager is the territory manager responsible for the selection of cases and delivery of inventory within an SB/SE Exam Area.

(1) The following are systems or reports that may be used to monitor the classification, storage, and delivery of inventory.

• A-CIS

• Compliance Date Environment (CDE) Inventory Report

• CDE select rates (CDE Select Rate Report)

• Status 06 report of CDE inventory

• Unstarted (Status 10 and below) returns by status code, Tables 36 and 37, SSIVL, or ERCS Tableau.

• Volume and timing of return orders (Classification/Order Plan)

• New starts (A-CIS Open and Closed Case databases or ERCS Tableau)

• Return Order and Delivery System (ROADS)

• Exam Plan

• Starts & DIF Mix Report (WPA)

• ERCS Tableau

• CDE Tableau

• Program Control Database data extract

(1) This is a list of acronyms and their definitions.

(1) See IRM 4.1.1.1.6, Terms for a listing of common terms used in PSP.

(1) IRM 4.1.1, Planning, Monitoring, and Coordination.

(2) IRM 4.1.2, Workload Identification and Survey Procedures.

(1) Case building tools help determine whether a return should be selected for audit, what issues should be audited, and how the audit should be conducted.

(2) Case building data provides taxpayer specific research to identify possible compliance issues.

(3) Case building data in conjunction with the return (original, CDE facsimile or Modernized E-File (MeF) print) provides a broader working knowledge of the taxpayer's financial activities to make an informed decision to accept or examine specific items on the return.

(4) Case building data can corroborate items on the return so they don't have to be raised with the taxpayer.

(1) IDRS is an internal database accessed by various command codes, each of which provides specific information.

(2) IDRS can provide:

1. Current name, address, and filing status

2. Income sources and amounts

3. Audit activity

4. Filing requirements

5. Bankruptcy/ Collectability indicators

6. Filing status and number of dependents

7. Prior names and addresses

8. Filing and payment transactions

9. Cross reference to other taxpayer identification numbers (TINS)

10. Prior adjustment to the tax liability that could impact the exam issue

(3) The IDRS information should be compared against the return information to determine if there are discrepancies, amended returns, or activity after the return was filed.

(4) An IDRS Command Code Job Aid can be found at http://serp.enterprise.irs.gov/job-aids/command-code/command-code.html

(1) FinCEN provides an on-line database containing reports of cash transactions in excess of $10,000. Cash transactions include deposits, withdrawals, check cashing, wire transfers, sales and redemption of money orders, travelers’ checks or stored value, casino activity, payments for certain services and information on foreign bank accounts. In addition, FinCEN reports cash and/or other monetary instruments in excess of $10,000 used as payment for certain goods.

(2) FinCEN provides the following forms:

1. FinCEN Report 112, Currency Transaction Report, for cash transactions in excess of $10,000, filed by financial institutions and non-bank financial institutions.

2. FinCEN/ IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, filed by businesses when cash and/or monetary instruments of $10,000 or more are received for goods or services.

3. FinCEN Report 114, Foreign Bank Account Report filed by an individual, if the aggregate value of foreign accounts exceeds $10,000.

(3) FinCEN data can be used to generate leads for potential unreported income, money laundering transactions and other tax avoidance schemes.

(4) Consider FinCEN activity in relation to the overall financial status of the taxpayer. FinCEN "hits" along with Information Returns Processing (IRP) documents, CDE 3 year facsimiles, and taxpayer locator data will provide a better picture of the taxpayer’s financial situation. Compare the contents of these case building tools with the return.

(1) Taxpayer locator services (e.g. Accurint) provides information on an individual or business, and is designed as a general combination report with data from multiple sources to provide a snapshot of the subject's identity.

(2) At least one consumer reporting agency is scanned and the information found is utilized to search over 2 billion public records and generate a single report that may include:

• Complete name, Also Known As (AKA), Doing Business As (DBA)

• Current and previous addresses

• Social security number

• Driver license number

• Phone numbers

• Date of birth

• Aliases

• Bankruptcies, liens, and judgments

• Corporate ownership

• UCC (Uniform Commercial Code) filings

• Real property ownership

• Professional licenses

• Aircraft and watercraft ownership

• Pilot licenses

• E-mail addresses

• Internet domains

• Recreational vehicles

• Hunting and fishing licenses

• Concealed weapons permit

• Financial information for businesses

• Possible criminal records

• Possible relatives

• Possible associates

(3) This information is useful in determining the taxpayer’s lifestyle or business history and aids in determining net worth.

(4) Examples of public search data that could indicate audit potential include, but are not limited to:

• Deed transfer information could reflect sales not reported on tax return.

• Corporate affiliations where there are no indications of corporate earnings on the return

• Property ownership not reflected on the return as either personal residence or rental property

• Professional licenses could demonstrate income earning potential not reflected on the tax return

• Vehicle searches ownership data (type of vehicle, purchase price, owner name and address) could reflect high cost asset acquisition in excess of earnings reported on the tax return.

• Address history data contains up to five addresses for the taxpayer in the most recent to least recent order. This data could aid in the financial status analysis when determining high and low cost living areas.

• Boat and plane registration could reflect ownership of high cost assets in excess of earning potential reflected on the tax return.

• Possible family relationships for owners with different names

(1) The RPD is a repository of return preparers who prepare and sign 10 or more returns. It contains more than 500 data elements and can be used as an investigative tool when researching return preparers for compliance and misconduct issues.

(2) Some of the items RPD can provide (this list is not all-inclusive):

• Counts of returns filed

• PTIN information

• Outreach and prior return preparer contact

• Complaints, referrals and leads received

• Stats on the type of returns filed

• Phone number or software used

• EFIN information used

• Refund and refundable credit percentages based on returns filed

(3) The RPD information could be used to determine potential discrepancy in income reporting, level of employee/employer relationship, and potential IRC 6694 and IRC 6695 penalty application.

(4) Questions regarding RPD case building material or any additional information regarding a return preparer can be made to your Area RPC at https://portal.ds.irsnet.gov/sites/vl051/Lists/Return%20Preparer%20Coordinators%20RPCs/AllItems.aspx

(1) Field Exam achieves national standards for processing by using file folder colors on cases. This subsection provides guidance to establish a uniform list of file folders colors exam will use to identify specific types of cases. The use of colored folders also helps Centralized Case Processing (CCP) when closing cases.

(2) For case building purposes, whether performed by area PSPs or at the campus, the following file folder color guidelines will be used:

1. Red – Case with a statute date expiring within 180 days or Prompt Determination

2. Yellow – Headquarter approved usage only. Purpose of use will change periodically as interim guidance is issued

3. Orange – IRS Employee audit

4. Purple – NRP

5. Light Blue – Claims (This includes innocent spouse; injured spouse; and any other type of claim)

(3) The list above is not all-inclusive. From time to time, there will be various projects that will require the use of a particular color folder not listed above.

(4) If a case falls into more than one of the above listed categories, place the folders in the color order listed above from outermost folder to innermost.

(1) Classification should be conducted by an experienced examiner who has received appropriate tax law training. Examiners with specialized expertise may be used to classify business returns. Classification using online systems (such as CDE and Modernized E-file (MeF)) can be done at remote locations via approved procedures. See IRM 4.103.1.7, CDE Procedures.

(2) National SB/SE Classification Guidelines provide guidance to enable greater classification consistency nationwide and to select returns for audit with issues that are material in scope. The classification guidelines can be found at: http://mysbse.web.irs.gov/examination/tip/classification/default.aspx.

(3) Tax returns are to be selected and classified for audit by employees who will not be the examiner of the return.

(4) DIF returns are scored using algorithms/models designed to score returns and delivered in descending DIF score order for classification.

(5) All returns will be classified to select returns that contain significant issues likely to result in tax changes or that require audit to achieve voluntary compliance.

(6) All returns will be identified for assignment to an RA, TCO Grade 09 or lower (TCO-09), or a TCO Grade 11 (TCO-11). The designation as RA, TCO-09, or TCO-11 will be based upon the complexity of the issues involved and the degree of accounting and auditing skills required to conduct a quality audit. See IRM 4.1.5.3.2.6, Grading Returns (RA, TCO-11, TCO-09 or below), for additional information.

(7) Returns should be classified by examiners possessing experience commensurate with the type of return and activity code they are classifying.

(8) Individual returns selected for audit for revenue agents should contain issues requiring accounting skills of a revenue agent. Individual returns selected for audit not requiring the accounting skills of a revenue agent may be selected for audit for revenue agents if tax compliance officers (TCOs) (including traveling TCOs) are not available in the geographic location of the taxpayer or if the returns are needed for training.

(1) The primary objective in selecting returns for audit is to promote the highest degree of voluntary compliance on the part of taxpayers while making the most efficient use of finite examination staffing and other resources. Employees must exercise their professional judgment, not personal opinions, when making return selection decisions. The subsections below discuss the instructions for performing return classification.

(1) The PSP Territory Manager (or designee) has primary responsibility for assuring the quality of returns selected for audit whether classification is done at the campus or electronically. This is accomplished by assuring all classifiers have received appropriate training on tax law and area classification instructions. During each classification detail, the PSP Territory Manager (or designee) should review a representative sample of selected and accepted returns for each classifier and provide appropriate feedback to the classifier and PSP Classification Section Chief. See IRM 4.1.5.3.3.2, Review of Performance.

(2) For national or centralized classification details, the headquarters representative is responsible for assuring the quality of returns selected for audit. During each classification detail the headquarters representative should review a representative sample of selected and accepted returns for each classifier and provide appropriate feedback.

(3) Form 5126, Classification Quality Review Record, may be used to provide feedback.

(1) The goal of the classification guidelines is to achieve greater efficiency in the classification and examination processes. Select specific issues and do not select "all" expenses. "Other" expenses should only be selected when identifying the line with that name or when the expense details aren’t available (e.g., classification from a CDE print or transcript when large expense aren’t transcribed). When appropriate, the classifier should make a remark/comment explaining to the examiner that the classified issue is the non-transcribed expenses..

(2) The classifier should review IRM 4.1.5.3.4.2, Potentially Productive Issues on an Individual Business Return, to identify questionable business schedules during the classification process.

(3) Classify the appropriate income or expenses when a Schedule C, E, or F doesn’t appear to be a legitimate business. Notate the Remarks with Is this a legitimate business?.

(4) Hobby Loss – When a Schedule C, E, or F does not appear to be a business engaged in for profit (Hobby Loss), the examination should focus on whether the taxpayer has a profit motive. Classify Hobby Loss (Section 183) via Other Issue selection and explain in the General Comments. Review additional years using the 3-year CDE return, MeF, or IDRS prior to selecting Hobby Loss as an issue.

(5) Questionable Preparer - If a potential questionable preparer is identified, prepare Form 14719, SB/SE Return Preparer Referral and submit to the PSP contact assigned to the classification detail with a list of CDE Case File IDs and Workload Set IDs (or equivalent for non-CDE classifications). The PSP contact will coordinate with the area Return Preparer Coordinator who will decide if any further consideration of a program action against the preparer is warranted. Continue to classify the appropriate income or expenses on the return.

(6) Classify the appropriate income or expenses when there is a questionable preparer known to inflate expenses, understate income, or include fictitious schedules. Notate the "Remarks" section with "Questionable preparer."

(1) Corporate returns are identified by three categories; DIF, non-DIF, and automatics. Returns which do not meet automatic criteria, are scored under the DIF system. Returns which meet automatic criteria, regardless of size, are not computer scored. Automatic criteria are contained in IRM 3.11.16.10.1, Audit Codes.

(2) Screening procedures for DIF-scored 1120 returns are essentially the same as for other DIF returns.

(3) The corporate DIF system includes returns in Activity Codes 203 through 217. All other corporate returns are Non-DIF.

(4) Classification of the corporation return must include the balance sheet and Schedule M items. Substantial change in accounts receivable, reserve for bad debts, loans to or from stockholders, accounts payable, treasury stock, capital stock, or retained earnings would indicate an audit of these items may be warranted. In addition, such potential issues such as "Thin Corporation," IRC 531, substantial changes in accruals, and decreases in assets which are not accounted for on Schedule D of the return may be identified from an inspection of the balance sheet.

(5) All Schedule M items should be scrutinized to determine the difference between income shown on the books and taxable income shown on the tax return.

(6) The following general items must also be considered during classification:

1. Overall composition of the return. Is the return complete, containing all necessary information and schedules? Who prepared the return?

2. Data reported on the return compared to the norms and standards of the business or industry of the taxpayer.

3. Location of the business. This could have a bearing on the volume of business.

4. Prior Audit results as indicated on Form 5546, Examination Return Charge-Out Sheet.

5. The existence of controlled groups, interests in foreign corporations, deductions for facilities, or convention expenses.

(7) Significant issues identified on manually classified Form 1120 returns will be reflected on Form 10264, Revenue Agent - Classification Checksheet.

(1) Form 1120S returns are identified by three categories; DIF, non-DIF, and automatics. Returns which do not meet automatic criteria, are scored under the DIF system. Returns which meet automatic criteria, regardless of size, are not computer scored. Automatic criteria are contained in IRM 3.11.217.13.1, Audit Codes.

(2) Screening procedures for DIF scored 1120S returns are essentially the same as for other DIF returns.

(3) Significant issues identified on 1120S returns will be reflected on Form 10264, Revenue Agent - Classification Checksheet.

(1) Partnership returns are identified by three categories; DIF, non-DIF, and automatics. Returns which do not meet automatic criteria, are scored under the DIF system. Returns which meet automatic criteria, regardless of size, are not computer scored. Automatic criteria are contained in IRM 3.11.15.19.1, Audit Codes.

(2) Screening procedures for DIF scored partnership returns are essentially the same as for other DIF returns.

(3) Significant issues identified on partnership returns will be reflected on Form 10264, Revenue Agent - Classification Checksheet.

(1) Be cognizant of potential employment tax issues when classifying income tax returns.

(2) Known or probable areas on non-compliance are listed in IRM 4.23.3, Employment Tax - Examination Programs and Examination Planning Procedures.

(1) Be cognizant of potential excise tax liabilities when screening income tax returns. Be alert for:

1. Gasoline tax credit for aviation gasoline or gasoline used for non-highway purposes. The first credit is not allowable. The second instance indicates the taxpayer could be liable for highway use tax.

2. Taxpayers with trucking operations may be liable for highway use tax, the excise tax on heavy trucks and trailers, the excise tax on certain tires, and/or certain fuel excise taxes.

3. Returns indicating issuance of policies by foreign insurers. This would involve returns of insurance agencies, brokers, etc.

4. Returns reporting manufacturing or use of pistols, revolvers, and firearms.

   Example: Gun shops, target ranges, etc.

5. Returns reporting flying services or aircraft sales.

   Example: Charter service, flying schools, airplane repairs, etc.

(2) Excise classification procedures can be found in IRM 4.24.18.13, Classification.

(1) Screening of fiduciary returns requires consideration of issues specific to fiduciary returns. While income tax issues will not be overlooked, quality classification requires consideration of the following issues and areas:

1. Estate unduly prolonged (should not be more than 5 years unless very large) (Treas. Reg. 1.641(b)–3(a))

2. Business trust taxable as a corporation (IRC 7701(a)(3)) and Rev. Rul. 75–258. Or, it could be treated as a sham and the income is taxable to the grantor

3. Exemption — estate $600; simple trust $300; complex trust $100

4. Indication of multiple trusts, which may be taxable as one trust (Treas. Reg. 1.663(c)–1(b))

5. Minimum tax (IRC 56) — tax preference items and/or exemption not apportioned between the estate or trust and beneficiaries based on share of income; also, prorate for short year

6. Wrong tax rate schedule used

7. Foreign tax credit and job tax credit not apportioned between estate or trust and beneficiaries based on income

8. Trusts normally cannot show Subchapter 5 income (IRC 643(a))

9. Indication of income taxable to grantor or another (IRC 671 through IRC 678) (e.g., sale and leaseback among related parties)

10. Error in computation of distributable net income (DNI) (IRC 643(a))

11. Rental or other income (e.g. from non-probate assets) may be taxable to devisees (IRC 691)

12. Partnership income; decedent’s death before close of partnership taxable year. Share of partnership income erroneously included on Form 1040 instead of Form 1041

13. Special tax for trusts electing to report gain realized on the sale of property acquired from a transferor under installment method (IRC 691)

(2) Distributions to Beneficiaries should be considered including:

1. Beneficiaries not listed may not have picked up income

2. Estates are normally not required to distribute all income currently. No deduction is allowable if amount was not actually distributed

3. Estates and simple trusts normally do not distribute capital gains

4. Simple trusts must distribute all ordinary income (IRC 651) except income allocable to corpus (typically, capital gains)

5. Final year—all income deemed distributed, including capital gains (IRC 643(a)(3) and IRC 662(a)(2)

6. Losses or excess deductions are not distributable except in final year (IRC 642(h))

7. Distribution deduction may include: Specific legacy — not deductible (IRC 663(a)); or widow’s allowance — deductible if from current income (Treas. Reg. 1.661(a)–2(c)) and taxable to widow

8. Excess (accumulated) distribution may indicate a complex trust. A separate Schedule J may be missing — reported by beneficiaries (Throwback Rule IRC 665(b))

9. Administrative and other expenses may actually be a disguised distribution to beneficiary. Failure to file Form K–1 (e.g., family allowance)

10. Excess distributions may indicate payment of specific legacies on which estate may have realized a gain

11. Nonresident alien beneficiary — where Form 1042S, Foreign Person's U.S. Source Income Subject to Withholding filed and required amounts of tax withheld

12. Terms of governing instrument (local law issues)

13. Consider if the return is for a family trust

(3) Capital Transactions should be considered including:

1. Significant capital losses normally should not occur in the first year of an estate

2. Capital loss (net) is limited to a maximum of $3,000

3. Deduction limited to fiduciary’s portion of capital gains (IRC 1202)

4. Basis of assets: Estate of testamentary trust— inter-vivos trust—usually the donor’s basis (IRC 1015) or income in respect of a decedent (IRC 691)

5. Redemption of closely held stock may be dividend unless IRC 303 is complied with (IRC 302)

6. Sale or exchange between related parties for inadequate consideration

7. Estate tax marital deduction — executor satisfies pecuniary bequest with appreciated assets, thus triggering a capital gain

8. Specific bequest — executor satisfies with appreciated assets, thus triggering a capital gain

(4) Expenses and Deductions:

1. Allocation of expenses to tax-free income not made (IRC 265)

2. Depreciation taken (basis)

3. Allocation of expenses

4. Funeral and medical expenses not deductible (IRC 641(b) and IRC 162(a))

5. Other personal expenses and losses not deductible (IRC 641(b) and IRC 162(a)) (e.g. child care, funeral costs, medical expenses)

6. Administrative expenses (e.g. attorney and CPA fees, and executor commissions) not deductible unless waiver for estate tax purposes made (IRC 642(g)). Also, no "double deduction" allowed for selling expenses used to offset the sales price on a sale of property in determining gain or loss if deducted for federal estate tax purposes

7. Federal estate tax on income in respect of a decedent (computation omitted or erroneous) (IRC 691(c)). Estate tax examination will affect the computation

8. Inheritance taxes are not deductible (IRC 164(b)(4))

9. Charitable contributions — "set aside" amount is generally not deductible (IRC 642(c)(1)) unless the trust was created prior to October 10, 1969

10. Executor commissions or attorney fees appear unreasonable under local law guidelines

(1) Area Office work physically located in the Campus are stored in Employee Group Codes (EGCs) in the 10XX and 20XX series with returns separated based on type and status.

(2) For a current EGC listing with definitions, see the Employee Group Code (EGC) Contacts by selecting the AIMS Assignee Code (AAC) Contact Listings located at https://portal.ds.irsnet.gov/sites/vl091/lists/aims/contacts.aspx.

(3) Returns awaiting classification in Status 06 are stored in EGCs separated by paper filings and Mod e-File.

(4) As selected returns are received by CF&S from centralized classification, the AIMS status will be updated to Status 08 and the case updated to the appropriate EGC based on the direction provided by the PSP contact.

(5) If selected returns are maintained at the Campus, the selected returns will be placed inside a file folder and filed in AIMS serial number sequence.

(6) The PSP Territory Manager has sole authority to approve the survey of inventory stored at the Campus. The PSP Territory Manager will send written authorization instructing the surveys. CF&S will pull the surveyed returns, stamp them with a survey stamp, and package them for closing. CF&S will apply disposal code 35 to close the returns off AIMS.

(1) The PSP and CDE Employee Group Codes (EGCs) are in the 1850 to 1999 and 2850 to 2999 ranges with returns separated based on type as shown in the following table:

(2) For a current EGC listing with definitions, see the Employee Group Code (EGC) Contacts by selecting the AIMS Assignee Code (AAC) Contact Listings located at https://portal.ds.irsnet.gov/sites/vl091/lists/aims/contacts.aspx.

(3) Returns awaiting classification are in a CDE Workload Set or Status 06.

(4) CDE returns selected for examination are moved to Virtual Inventory which causes the establishment of the case on AIMS in Status 08.

(5) Non-CDE returns selected for examination during classification are updated to Status 08 through ERCS or AIMS.

(1) Periodically, there will be requests for returns assigned to an area office in status 08 EGC 2050, which indicates the return is part of the Centralized Scheduling Database (CSDB). These requests may come from exam personnel in the area or from functions other than exam, such as criminal investigation.

(2) Area personnel should be instructed to contact a PSP Territory Manager (or designee) if they need a return which is currently assigned to CF&S. In addition, area personnel should be instructed never to update a record from status 08 EGC 2050 even if they are working from a copy.

(3) Specific returns requested by an area examination function must be deleted from the CSDB. The return will be updated on AIMS to the requesting status and EGC by CF&S and forwarded to the area.

(4) Requests for returns from area functions other than exam are handled differently. The returns are assigned on AIMS to a specific area. The returns will be deleted from the CSDB and forwarded to exam in an area office for coordination with the requesting function. A copy will be provided to the requester until the original return is received in the area office.

(1) Employee returns require special processing depending on what system was used to classify the return.

(1) Problems identified with returns received from CF&S should be brought to the immediate attention of the CF&S manager by either the PSP Territory Manager or the group manager.

(2) It is important for the area PSP Territory Manager to have frequent discussions with CF&S management to keep abreast of the return orders and other issues.

(1) Centralized storage related return(s) are two or more returns for the same taxpayer where one or more of the taxpayer's returns are being maintained in centralized storage (status 08), while another return is open in an exam status 10 or 12.

(2) For returns located in the area office, the CF&S will pull the centralized stored return, update AIMS to status 10 for the same EGC as the other return(s) located in the area, and mail the return to that group for association.

(3) For returns located in correspondence examination (EGC 5XXX) no action will be taken.

(4) Multiple Returns: Multiple returns occur when two or more returns for the same taxpayer are concurrently maintained in centralized storage (status 08). CF&S will match the primary return to the multiple return, cross reference the folders, and file both returns in the file by the respective AIMS serial number.

(5) Survey of returns from centralized storage: It is the responsibility of the area PSP staff to inform the campus when it is time to survey returns from centralized storage. See IRM 4.1.2.11, Procedures for Surveying Inventory in PSP, for more information. Returns should be surveyed as they become out-of-cycle or more frequently if needed.

(6) EGC 2066 will also be used to store certain office examination returns with errors. Area PSP staff should review the EGC 2066 inventory to ensure these returns are properly addressed. There should be a minimum number of these returns.

(1) The ROADS Group Delivery Form determines the projected inventory needs within each Post of Duty (POD) within each Exam Group Code (EGC).

(2) The Group Delivery Form calculates the projected inventory needs to cover a period of time, normally 2 months. The inventory needs are calculated as follows.

1. The total need for returns to start is calculated by multiplying the number of examiners times the number of months of inventory times the average primary starts per month. See IRM 4.1.2.2.1, Return Starts Analysis.

2. The current primary status 10 inventory is calculated by adding the exam group’s primary status 10 inventory assigned to examiners in the POD to the primary status 10 unassigned inventory available for the POD.

3. The projected inventory need is calculated by subtracting the current primary status 10 inventory (step 2) from the total need for returns (step 1).

(3) The Return Classification coordinator (also known as Spigot or DIF coordinator) prepares the Group Delivery Form during the ordering cycle which typically occurs on a monthly basis. Once the Group Delivery Form is prepared, it is distributed to the Group Managers of the exam groups which typically occurs through e-mail. The Group Managers are then provided a period of time to provide any adjustments to the calculation before the inventory needs are fulfilled. Additionally, Territory Managers receive summary information via e-mail.

(1) The ROADS Delivery Model determines the cases to deliver to the exam groups. The cases selected satisfy the inventory needs determined in the ROADS Group Delivery Form.

(2) The Delivery Model selects returns from Status 08 optimizing the area’s delivery to the exam plan’s return mix. The necessary returns to support the Exam Plan mix are determined at the purpose group or workstream level. Additionally, for DIF inventory, the optimal mix is broken down to the Activity Code level. For each mix within the exam plan, the calculation of optimal returns is calculated by first finding the planned starts from the exam plan for the fiscal year to date through the cycle when the delivered returns will be started. Then, subtract the sum of the Fiscal Year to date primary starts and the current Status 10 inventory from the planned starts.

(3) The Return Classification coordinator (also known as Spigot or DIF coordinator) prepares the Delivery Model once any adjustments are received from the Group Delivery Form. Once the Delivery Model is used to determine the cases to be assigned to the exam groups, digital communications are sent to respective coordinators or systems providing the required information to deliver the identified inventory to the exam group. Subsequently, the Delivery Model creates e-mails to notify the exam group of the inventory they should expect to receive as well as communicating the originating coordinator, office, and/or system (e.g. CDE) which will deliver the cases.

(1) Returns are assigned from Central Storage and Centralized Files and Scheduling as outlined in IRM 4.1.5.4.1, Inventory Stored at the Campus.

(2) Field Exam cases are generally assigned to the receiving group in status 10 from Central Storage. Office exam cases are generally assigned to the receiving group from Centralized Files and Scheduling in status 10 as "Pre-contact" cases.

(1) All tax return information must be transferred via a Form 3210, Document Transmittal. The Form 3210 should be used to transfer returns outside of PSP or when a return is transferred from one coordinator’s EGC to another coordinator’s EGC. The sender must retain a copy of the Form 3210 for group control to monitor the transmittal. If acknowledgement is not received within 10 days, immediate follow-up should be made by phone, secured e-mail, or mail. The Form 3210 requirement applies to all tax returns and associated information despite the source, including but not limited to, the following:

• Original return

• Copy of original return

• Return facsimiles including: Compliance Data Environment (CDE) prints, TRDBV, and RTVUE/BRTVU

• Amended returns

• Other prints from IRS systems

• Documentation or prints from outside IRS systems

(2) If Form 3210 is generated by ERCS, the control copy must be monitored in ERCS until the Form 3210 is acknowledged by the recipient. Once acknowledged, the Form 3210 is retained on ERCS for one year.