4.24.1. Introduction to Excise Taxes

(1) For compliance purposes, it is essential that managers, senior management officials, examiners, and personnel at CEAC know and understand basic examiner responsibilities, controlling excise IRC sections, excise IRM sections, excise tax abstracts, and Excise Tax Program returns and claims, so that they will be better equipped to prepare and submit accurate excise reports.

(1) The most significant statutes affecting excise taxes are dedicated to general revenue or trust funds associated with specific excise taxes authorized by the applicable IRC sections listed in the table below.

(2) IRM 4.24, Excise Tax, provides Servicewide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of excise taxes, as well as case closings. IRM 4.24 serves as the foundation for consistent administration of excise taxes by various IRS operating divisions.

(1) Director, Examination - Specialty Policy, is the executive responsible for Excise Tax Examination policy and procedures.

(2) Director, Examination - Specialty Tax, is the executive responsible for Excise Tax Examination operational compliance.

(3) Chief, Estate & Gift Tax/Excise Tax Exam, is responsible for ensuring general information is communicated to and carried out by examiners for basic examiner responsibilities, excise IRC sections, excise IRM sections, materials about excise tax abstracts, and Excise Tax Program returns and claims.

(4) The examiner is responsible for dealing directly with external customers (i.e., taxpayers and/or authorized representatives) and internal customers (i.e., employees from other Business Operating Divisions). The examiner must provide quality service and apply the law with integrity and fairness to all customers, as well as effectively communicate with the taxpayer and minimize taxpayer burden. The examiner should assist taxpayers in solving tax problem(s) identified, including referring taxpayers to the IRS function that can assist most appropriately in resolving the issue(s).

1. Refer to IRM 4.10.1.3, Communication, for information about the responsibilities examiners should understand and apply in the performance of their duties.

2. Refer to IRM 4.24.25.5.3.2, Processing of Power of Attorney, to review IDRS command code CFINK to determine if a power of attorney (POA) exists for the taxpayer when Form 2848, Power of Attorney and Declaration of Representative, is on file.

3. Refer to IRM 4.24.25.5.3.2.2, Form 8821 , Tax Information Authorization, for information about protocols to observe when a valid Form 8821 is on file.

4. Refer to IRM 4.24.20.4.4.1, Excise Tax Enclosures with Correspondence to Representatives and Appointees, for guidance that describes examiner expectations when corresponding with authorized third parties.

5. Refer to IRM 4.24.25.5.13, D400 - Initial Taxpayer Contact Check Sheet, to document actions the examiner must consider when making initial contact.

6. Refer to IRM 13.1.7.2, Introduction to TAS Case Criteria, for information about referrals to Taxpayer Advocate Service (TAS) when outlined criteria are satisfied.

(1) Program Goals - The information explained in this IRM provides a general framework describing basic examiner responsibilities, excise IRC sections, excise IRM sections, excise tax abstracts, and Excise Tax Program returns and claims. The proper application of this information will equip Excise Tax Program managers, examiners, and personnel at CEAC who process excise returns and claims, to prepare and submit accurate excise reports, thereby increasing compliance.

(2) Program Reports - Information reporting of program objectives is included on Program Manager Monthly Briefings provided to Director, Examination - Specialty Policy. These reports provide reliable and timely information. Periodic program reviews are conducted to:

• Determine if procedures are being followed.

• Validate the policies and procedures.

• Identify and share best practices.

  Note: The quarterly Business Performance Review Reports provide updates on the status of the Whistleblower claims in Operating Division Subject Matter Expert status.

(3) Program Effectiveness - Program effectiveness is measured by the Exam Quality Review Staff, located in FSEQ. FSEQ supports the SB/SE Quality Improvement Program utilizing National Quality Review System to conduct independent case reviews from statistically valid samples of examination case work. National, area, and territory trend analysis on the quality attributes are used to establish baselines to assess program performance, identify opportunities to improve work processes, analyze causes for failure, assess the feasibility of possible solutions, and measure the success of quality improvement efforts.

(4) Annual Review - The Program Manager, Excise Tax Policy, is responsible for ensuring applicable subsections of IRM 4.24 are current, comprehensive, accurate, and the guidance provided promotes consistent tax administration.

(1) Refer to Exhibit 4.24.1-1 for acronyms and their definitions used throughout this IRM.

(1) The Excise Tax Program is required to follow all relevant Servicewide examination procedures and those set forth in the SB/SE examining process IRM. Guidance relating to examining and processing Excise Tax Program returns and claims can be found in:

1. IRM 4.24.2, Form 637 Excise Tax Registrations, which provides an overview of Form 637.

2. IRM 4.24.5, Large Business and International (LB&I) Examination Program Procedures for Excise Employees, which provides technical guidance and information processing steps necessary to prepare accurate excise tax examinations with LB&I issues.

3. IRM 4.24.6, Technical Guidance and Information Processing for Excise Tax Examination Issues, which provides technical guidance and information processing steps necessary to prepare accurate Excise Tax Examination reports.

4. IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement, which provides general guidelines and report writing procedures for Excise Tax Program managers, examiners, and personnel at the Cincinnati and Ogden campuses who process claims for refund or credit.

5. IRM 4.24.9, Excise Tax Penalties Guidance, which provides technical guidance about penalties pertaining to Excise Tax Program returns and claims, and other excise compliance activities.

6. IRM 4.24.10, Appeals Referral Procedures, which provides specific information for Excise Tax Program managers and examiners who refer excise cases to Appeals. A taxpayer has the right to appeal an IRS decision in an independent forum that allows for a fair and impartial administrative appeal.

7. IRM 4.24.13, Overview of Excise Fuel Compliance Program, which contains general information, as well as specific procedures pertaining to an overview of fuel tax inspection, work planning, Issue Management System (IMS), time reporting, taxpayer outreach and education, referrals, Fed/State agreements, third party contacts, fraud referrals, and bribery awareness.

8. IRM 4.24.14, Excise Fuel Compliance Safety, Uniform, and Motor Vehicle Requirements, which provides directives, authorities, and responsibilities for the Fuel Compliance Program to promote a proactive safety and health culture that supports the IRS mission, ensures that Excise Tax Program FCOs, FCAs, and managers comply with federal, state, and local regulations, as well as, IRS safety and health rules, policies, and laws, which prevent injuries, illnesses, and accidents involving FCOs, FCAs, and operate government leased motor vehicle for official government business per the regulations.

9. IRM 4.24.15, Excise Fuel Compliance Inspection, Sampling, and Shipping, which contains procedures for all inspection types identified in IRM 4.24.15.2, Overview of Fuel Tax Inspection. Additionally, it is imperative for the safety of the employees that they follow proper sampling and shipping procedures, which is addressed in this section.

10. IRM 4.24.16, Excise Fuel Compliance Report Writing, Case Processing, and Appeals Procedures, which contains procedural guidance pertaining to report writing, case processing, and Appeals case routing procedures.

11. IRM 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures, which contains detailed procedural guidance for ExSTARS reporting compliance.

12. IRM 4.24.18, Excise Case Selection (ECS), which provides guidance for the ECS function in identifying, classifying, and delivering inventory for compliance action.

13. IRM 4.24.20, Excise Tax Report Writing Guide, which provides guidance emphasizing that Excise Tax Program managers and examiners must take all necessary steps to ensure examination report accuracy.

14. IRM 4.24.21, Case Closings, which provides guidance emphasizing that it is essential Excise Tax Program managers, senior-level officials, and examiners understand and correctly follow the technical guidance and closing processes explained in this IRM section.

15. IRM 4.24.22, Campus Procedures for Excise Taxes, which provides guidance to the Cincinnati Centralized Specialty Tax operation for addressing/resolving taxpayer correspondence, telephone inquiries, and Taxpayer Assistance Center’s issues relating to excise tax issues.

16. IRM 4.24.23, Operational Procedures and Responsibilities for Form 637 Excise Tax Registrations and Secure Airport Terminals (SATs), which explains the operational roles, responsibilities, and procedures relating to Form 637, as well as procedures pertaining to a SAT Designation.

17. IRM 4.24.24, Form 637 Registration Files: Administrative Procedures for Initial Applications and Case Reviews, which describes the administrative procedures for the Form 637 Registration Group on Form 637 initial applications and case reviews, that include creating, maintaining, and monitoring Form 637 Registration files, the Issue Management System (IMS) process, workflow, and monitoring registrants using the Form 637 Indicator on Business Master File in IDRS.

18. IRM 4.24.25, Issue Management System (IMS), Notebook, and Workpapers, which explains the procedures related to the mandatory use of IMS and Notebook, as well as provides guidance for the preparation of workpapers specific to Excise Tax Program returns and claims.

(2) The Taxpayer Advocate Service (TAS) may be of assistance to taxpayers experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal procedures or who believe that an IRS system or procedure is not working as designed. Publication 1546, The Taxpayer Advocate Service is Your Voice at the IRS, provides contact and additional information. The program is designed to alleviate taxpayer hardships that arise from systemic problems or the application of the IRC. For more detailed guidance, refer to the Taxpayer Advocate - Contact Us.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language, and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. For additional information, refer to IRC 7803(a)(3) or to the Taxpayer Bill of Rights.

(4) Procedures, laws, and regulations on a wide variety of excise-related examination issues are addressed on the Excise Tax Knowledge Base Homepage.

(1) Generally, the scope is indicated on the classification check sheet. The classification sheet is issued to the examiner in IMS. An electronic file copy is maintained by Excise Case Selection - Workload Selection and Delivery.

(2) The scope of an excise examination should include other significant issues identified during the excise examination in addition to the original issue identified on the classification check sheet. For example, while initially conducting a claim examination, the examiner should consider the taxpayer’s entire business activity, as well as other potential excise tax liabilities to determine if the examination should be expanded beyond the claim. Normally, the significant issue addressed on the classification check sheet should be addressed during the excise examination and documented in the workpapers.

(3) The examiner must consult with the manager before expanding the scope of an excise examination to additional periods or related entities. Document the substance of the conversation on Form 9984, Examining Officer’s Activity Record.

(4) The examiner must continually assess the facts and apply judgment to expand or contract the scope of the excise examination as needed. Decisions must be documented on Form 9984.

(5) The examiner must exercise judgment in determining the depth of the excise examination to help with estimating the time needed to complete it. The examiner should consider all the following:

1. Availability of evidence

2. Complexity of the issue

3. Materiality of the issue

4. Accuracy of books and records

5. Strength of internal controls

6. Applicability/appropriateness of Form 637 registrations

(1) The proper use of time is an essential element of a quality examination or compliance review. Examiners are responsible for the day-to-day management of cases assigned. They are accountable for completing work efficiently, as well as performing quality examinations or compliance reviews. Both the number of hours charged to a case and the span of time a case is open must be reasonable.

(2) Factors used to determine the reasonableness of time charged and the length of time a case is open can include but are not limited to the following:

1. Issue complexity and development

2. Condition of books and records

3. Taxpayer/representative cooperation

(3) Timely actions by the examiner serve to reduce taxpayer burden.

(4) In-process cases are generally considered overage when they have been in status "12" (started) for 270 calendar days or more.

(1) It is mandatory that the examiner, manager, and any other employee involved in the excise examination process, document all actions taken in the case file. These actions must be recorded on Form 9984 in IMS.

(2) The following information must be recorded on Form 9984:

1. Date of activity

2. Location of activity

3. Contact code

4. Remarks/notes/actions taken

5. Time charged for each activity

6. Periods of inactivity, such as extended leave, training, and work details

(1) Excise taxpayers make payment for excise tax as follows:

• Remit excise taxes with the Form 720. Refer to IRM 20.1.4.10.5, De Minimis Exception to Deposit Requirements Form 720, for more detailed guidance.

• Electronically deposit excise taxes using the Electronic Federal Tax Payment System (EFTPS). Refer to IRM 21.7.1.4.8.1, Electronic Federal Tax Payment System (EFTPS), for more detailed guidance.

  Note: For additional information about EFTPS, refer to the Electronic Federal Tax Payment System website.

(1) Excise taxes are distinguished in the IRS system by abstracts and are referred to as an "IRS No." on Form 720 to identify the type of excise tax.

(2) There are two major groups of excise taxes. They are:

• Fuel related; and

• Non-fuel related.