4.70.12. Planning the Examinations

(1) Generally, the examination of any return is the responsibility of the group in which the case is assigned. However, it may become necessary to transfer a return to another examiner in the group, another group or another Area after the examination has begun. You may transfer an examination if it promotes conducting an effective and efficient examination. It is the examiner's responsibility (with agreement from the group manager) to determine if the request for case transfer meets the criteria for transfer and to prepare the case for transfer if the criteria are met.

(2) Management can initiate the transfer of an unopened examination to another group when requested.

(3) Management initiates a case transfer from one examiner to another through RCCMS if, for whatever reason, the current examiner can’t complete the work.

(4) Upon agreement for transfer:

1. Secure a SOL extension, as necessary.

2. Complete Form 2363-A, Request for IDRS Input for BMF-EO Entity Change, if a transfer is due to a permanent change of address.

3. Notify CP&C EO Referrals if the case is the result of a referral.

4. The manager transfers the case via RCCMS.

(5) A minimum of 13 months must remain on the SOL at the time of the transfer (26 CFR 301.7605-301.7605-1(e)(4)). If all other considerations are satisfied except the 13 month period, obtain the taxpayer's written agreement to secure a one-year extension of the SOL.

(6) A transfer should not be made after a statutory notice of deficiency (SNOD), 90-day letter, is issued.

(1) Usually, the examination is conducted where the taxpayer is physically located, has its principal office, carries out business transactions, and maintains its books and records. However, you may receive a taxpayer and/or representative request to transfer the examination to another location. IRC 7605 gives the Secretary authority to reasonably set the time and place of an examination.

(2) For guidance on processing taxpayer and/or representative requests to transfer the place of examination, see 26 CFR 301.7605-1(e)(2). For case transfer purposes, "representative" means a person that the taxpayer has properly designated by executing Form 2848. Generally, the IRS grants a request under the following circumstances:

• The taxpayer's address is no longer where an examination has been scheduled.

• The taxpayer's books, records, and source documents are maintained at a location other than where the examination has been scheduled.

(3) The request to transfer the place of the examination must be in writing (26 CFR 301.7605-1(e)). It must include the following information:

1. Reason the requested location is more efficient for the examination.

2. Taxpayer's current address, phone number, and current principal place of business.

3. Address/location of taxpayer's books, records, and source documents.

4. Information as to who possesses the required records and is available to expediently resolve issues.

5. Available resources in the area to which the taxpayer requests transfer, if known.

6. Other factors that show how conducting the examination at a particular location poses undue inconvenience to the taxpayer.

   Note: We will not approve requests for transfers from individuals authorized to receive tax return information using Form 8821 Tax Information Authorization.

(4) Evaluate a request for transfer on a case-by-case basis. Consider these factors:

1. Organization's current address.

2. Location of the organization's business.

3. Location of the organization's books and records, including vouchers, invoices, cancelled checks, and other documents usually maintained at the business site.

4. Location where the IRS can perform the examination most efficiently.

5. Availability of the IRS's resources at the location to which the organization requests a transfer.

6. Other circumstances that indicate conducting the examination at a particular location would create undue inconvenience to the organization.

(1) All factors need not be present to determine the case grade. Only one factor must be present to raise the grade of the plan.

(2) GS-13: Factors include plans described below for Grade 13 plans.

1. Participants > 1,000.

2. Multiemployer plan.

3. Leveraged ESOP / TRASOP / KSOP.

4. Defined benefit (DB) average benefit test.

5. Separate line of business rules.

6. IRC 403(b) plan for an educational organization which is a state, a political subdivision of a state, or an agency or instrumentality of any one of these.

7. Cash balance plans (conversions) and hybrid plans.

8. IRC 457 plans.

9. Governmental and church plans (> 999 employees).

(3) GS-12: Factors include plans described below for Grade 12 plans without Grade 13 factors.

1. Determination application for the same plan was graded as a GS-12 case.

2. Participants > 200 and < 1,001.

3. Defined benefit (DB) plan terminations.

4. DB safe harbor plans with permitted disparity.

5. DB collectively bargained plans.

6. Target benefit plans.

7. ESOP / TRASOP / KSOP (not leveraged).

8. Defined contribution (DC) plans using the average benefit test.

9. Affiliated service group status.

10. Cash balance plans (no conversion issues).

11. IRC 412(3) fully insured plans.

12. Governmental and church plans (< 1,000 employees).

13. Orphan plans.

(4) GS-12: Factors include plans described below for Grade 12 403(b) plans without Grade 13 factors.

1. The IRC 403(b) plan is sponsored by an organization recognized by the IRS as aIRC 501(c)(3) organization.

2. The sponsor employs fewer than 1,000 employees.

3. There are no related IRC 457 plan features.

(5) GS-11: Factors include plans described below for Grade 11 plans without Grade 13 and Grade 12 factors.

1. Collectively bargained or terminated DC plans.

2. DC plans with permitted disparity.

3. Plans using the ratio percentage test.

4. DB safe harbor plans without permitted disparity (non-integrated).

5. IRC 408(k) or IRC 408(p) plans (Simplified Employee Pensions (SEP) or SIMPLE IRA).

6. All other plans without Grade 12 and 13 factors.

7. Plans with fewer than 201 participants.

(6) Plan types not listed (for example, IRC 401(k) or IRC 401(m)) are graded by the number of participants in the plan.

(7) Case Grade Adjustments.

1. Some factors that may increase the case grade include failures relating to:

Funding and actuarial matters.

Asset valuation issues (for example, investments in limited partnerships.)

Prohibited transactions.

Unrelated business income.

Complex IRC 415 issues.

Nondiscrimination issues (for example, general test, aggregation, restructuring, and cross testing).

Exclusive benefit.

Orphan plan status discovered on Grade 11 plans.

2. Other factors that may increase the case grade include:

Significant complications caused by the IRC 414(b), (c) and (n) rules.

Coordination with the Department of Labor (DOL) and/or Pension Benefit Guaranty Corporation (PBGC).

3. Factors that may decrease the case grade include:

Involvement of an actuary, OJI, senior examiner, or group manager.

Case impact is limited (for example, a 5500-EZ returns or a minor adjustment).

Examination doesn’t address complex issues justifying the higher grade (for example, an exam where the higher graded issues aren’t considered during the course of the examination when instructed by the manager).

(1) Cases are graded as Grade 9 when they have fewer and less complex issues. The table below shows a Grade 9 case assignment’s maximum thresholds for gross receipts or assets.

(2) Grade 11 cases are those in which:

1. You need experience as necessary to determine and resolve issues and apply established laws, precedents and methods frequently used and generally applicable;

2. May have complicated features involving controversy or a number of interrelated issues;

3. The impact of case decisions may extend beyond the organization or metropolitan area because of the scope of activities or the nature of the issues.

(3) The table below shows a Grade 11 case assignment maximum thresholds for gross receipts or assets.

(4) Grade 12 cases are those that have major issues with difficult or complex legal or accounting problems and require extensive investigation to resolve problems, such as:

1. Direct precedent isn’t available or appropriate.

2. Controversy due to interpretation or adaptation of precedents.

3. Complications involving interrelated questions of a factual, financial, legal or accounting nature.

4. Issues impacting larger organizations of regional or national stature or that may arouse public attention.

(5) The table below shows a Grade 12 case assignment’s maximum thresholds for gross receipts or assets.

(6) Grade 13 cases are those which have major issues significantly affected by the lack of applicable precedents or the presence of conflicting precedent. Therefore:

1. Investigation of issues requiring ingenuity.

2. Resolution of issues requiring considerable tact and discretion.

3. Complexities necessitating a high degree of experience and sophistication.

4. Decisions that may involve substantial and/or large sums of money or large numbers of people, with the possibility of widespread public attention.

5. Complications that could occur, involving intricately related major issues or unusual issues with conflicting or nonexistent precedents.

(7) The table below shows a Grade 13 assignment’s threshold for gross receipts or assets.

(1) Annual total tax liability on the return is used to determine the case grade of Employment Tax cases.

(2) TE/GE follows IRM 4.23.19, Employment Tax Case Assignment and Grading Criteria, with regard to lower graded new hires and training cases.

(1) These criteria are derived from position description factors listed in OPM standards. Work graded using this Case Assignment Guide reflects complexity and impact equivalent to those specified in OPM standards for that grade, assuming normal supervision.

(2) The type of return, type of bond issue, and issue price reported on the return are used to determine the TEB examination case grade. The following criteria provide probable case grades based on these criteria subject to adjustment with examination group manager concurrence as described below.

(1) Group managers should make sure accurate data is available for financial planning and grade structure changes.

(2) Group managers can assign appropriately higher level work for developmental purposes.

(3) Group managers should not evaluate an examiner’s performance based on case grading.

(4) Group managers should not classify examiner’s positions based on case grading. For example, don’t:

1. Predict the appropriate overall grade level for the position of employees doing work assigned in accordance with it, or

2. Supersede OPM standards in any way.

(5) Group managers should not change examiner’s grade level when assessing higher or lower level cases for short periods of time.

(6) Group managers should monitor higher graded work by:

1. Restricting the scope to single issue items to reduce the grade.

2. Assigning the case to a senior examiner, while assigning the junior examiner to help in the examination.

3. Assigning the case to the junior examiner, while assigning a senior examiner to coach the junior examiner through the examination.

4. Reviewing Web-based Employee Technical Time System (WebETS) monthly to ensure that the time spent doesn’t exceed the 25 % threshold.

(1) The examiner should notify the Group Manager immediately upon the discovery of a feature/issue which may result in an increase or decrease of the grade level. Until the manager approves the change, the case grade will not be considered changed.

(2) The table below provides some examples of when the case grade may be increased or decreased:

(1) An organization must notify the IRS that it is operating as an IRC Section 501(c)(4) organization no later than 60 days after the date the organization was organized (that is, formed as a legal entity, called the “date of organization”), by electronically filing Form 8976, Notice of Intent to Operate Under Section 501(c)(4). The organization must pay the correct user fee, which is currently $50, through pay.gov. The process of filing Form 8976 and paying the user fee is referred to as an “IRC Section 506 notification”. This process is described in Rev. Proc. 2016-41 and Treas. Reg. § 1.506-1.

1. Applied for exemption under IRC 501(c)(4) by filing Form 1024, or

2. Filed at least one Form 990 Return of Organization Exempt From Income Tax or, if eligible, Form 990-EZ Short Form Return of Organization Exempt From Income Tax, or Form 990-N Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990EZ.

   Note: Entities with a date of organization on or before July 8, 2016, which didn’t file one of the two above-referenced forms, were required to submit Form 8976 by September 6, 2016.

(2) Penalties:

1. IRC 6652(c)(4)(A) imposes a penalty of $20 per day, up to a maximum of $5,000, for each day after the due date that an organization doesn’t submit Form 8976.

2. The penalty is automatically applied when organizations file Form 8976 more than 60 days after the date of organization. The penalty posts to a civil penalty module (MFT 13) and the IRS issues a CP 215, Civil Penalty notice to the organization.

3. The penalty can be abated if an organization’s failure to timely submit the Form 8976 was due to reasonable cause.

4. A similar penalty is imposed by IRC 6652(c)(4)(B) on organization managers who, in response to a written IRS request, don’t submit Form 8976 by the date specified in the written request.

5. SeeIRM 20.1.8.3.2.4, IRC 6652(c)(4) – Failure to Submit Notice of Intent to Operate as IRC 501(c)(4) Organization Under IRC 506, for additional information on the IRC 6652(c)(4) penalties.

(3) Form 8976 Processing:

1. After an organization submits Form 8976, the IRS reviews it to ensure that the organization has provided all required information (name, address, EIN, date of organization, state and country of organization, purpose statement). If Form 8976 is complete and filed timely, IRS updates master file status code to 36 and issues Letter 5822 (acknowledgement letter) electronically. If IRS doesn’t accept the Form 8976 for any reason, we issue Letter 5823 (notice of non-acceptance) and refund the user fee.

2. An organization’s Form 8976 isn’t an application within the meaning of IRC 6104 and isn’t open to public disclosure. The IRS doesn’t keep a publicly available database of filed Forms 8976. See section 7.01, Rev. Proc. 2016-41.

(4) Examiners must perform a filing check for Form 8976 during all examinations of IRC Section 501(c)(4) organizations.

1. For Forms 8976 filed beginning in January 2017, IDRS shows a date of organization (as given by the organization on Form 8976 - ORG DT:MM-DD-YYYY) and a date of IRC Section 506 notification (in other words, the Form 8976 user fee date - REG DT:MM-DD-YYYY). These new fields are displayed near the top of the first page of BMFOLO (before the EO submodule information).

2. BMFOLO doesn’t record Forms 8976 filed before January 2017. Consequently, you must contact the taxpayer to determine whether they filed Form 8976 before January 2017. Contact your group manager and TEGEDC, if necessary, if the taxpayer claims they filed Form 8976 before January 2017 but refuses to or can’t provide proof they filed.

3. If Form 8976 was timely filed or if the organization wasn’t required to file Form 8976, you must notate this conclusion on the Form 5773.

4. If Form 8976 was not filed, send a written demand, requesting the organization submit the Form 8976 by a specified date determined reasonable under the circumstances. You must verify that the Form 8976 is filed in response to your written demand by securing either proof of filing from the organization (for example, a copy of Letter 5822) or a BMFOLO showing that it was filed. See 2b below if the taxpayer refuses to file Form 8976 in response to the written demand.

(5) Consider Penalties: If you determine that the organization failed to timely file a completed Form 8976, consider the IRC 6652(c)(4) penalties.

1. Form 8976 filed late: If, in response to the written demand, the organization submits Form 8976 late, you don’t need to assess the penalties against the organization, because the penalty is automatically assessed when IRS issues the CP 215 Notice. Refer to IRM 20.1.1.3.2 Reasonable Cause, to determine whether the organization’s failure to timely submit a completed Form 8976 was due to reasonable cause. Document all determinations of reasonable cause in sufficient detail in the workpapers. Get a reasonable cause statement from the organization and include it in the RCCMS case file.

2. Failure to file Form 8976: If, in response to the written demand, the taxpayer fails to file Form 8976 by the date specified in the written demand, consult with your group manager and TEGEDC, as necessary, to discuss applying the penalty on the organization’s managers and/or other compliance actions. Document the discussion, penalty approval and/or compliance actions taken on the CCR.

(1) IRA based plans ( SEP, SIMPLE, SARSEP), IRC 403(b) not subject to ERISA, and IRC 457 plans do not have a filing requirement.

(2) When you’re examining an NRU case and determine it does have a filing requirement:

1. Solicit the delinquent return(s).

2. Establish the case on AIMS Master File for the applicable MFT.  If the taxpayer has a Form 5500, Annual Return/Report of Employee Benefit Plan, filing requirement, follow the procedures in IRM 4.70.13.9.4.1 EP Form 5500 Considerations.

3. Delete the NMF AIMS account (the NRU account) using Form 10904, following the procedures in IRM 4.70.14.2.1.2.4.2 EP NRU Cases Established in Error.

(3) If your NRU case has an incorrect project code and/or activity code (for example, the case is assigned as a SEP IRA case, and you later determine that the case is a SIMPLE IRA):

1. The case may be surveyed per group manager discretion.

   Note: Document the CCR accordingly.

2. The examination may continue at the group manager’s discretion.

   Note: Do not change the project code. Document the CCR to provide that the project is not accurate, but the decision was made by the group manager to continue the examination.

(4) When you request an update to an NRU case on RCCMS, check the AIMS box so that the update is also done on NMF AIMS.

(1) During your examination, determine if the plan sponsor is current with their filing requirements for other federal tax or information returns. We perform filing checks to save resources, increase compliance and reduce multiple contacts with taxpayers. We check various returns under the jurisdiction of LB&I, SB/SE or W&I (collectively referred to as Examination Functional Units). See Policy Statement 4-4 in IRM 1.2.1.5.2, Servicewide Policies and Authorities, Servicewide Policy Statements.

(2) Use internal sources of information such as IDRS to verify the taxpayer filed prior and subsequent year Forms 5500 series returns, related returns and other required returns. Using internal sources reduces the taxpayer’s burden of providing copies of returns during your examination. You can use ERTVU to view the Form 5500 line items to determine examination potential for prior and subsequent Forms 5500 returns.

(3) For all examinations,verify the plan sponsor filed:

• Form 5500 for the prior and subsequent plan year being examined by reviewing an EMFOL print.

• Form 940, Form 941 and an income tax return ( Form 990, Form 1040, Form 1065, Form 1120) for the periods corresponding to the plan year under examination.

  Example: If you’re examining the plan year ending 6/30/2018, verify that the plan sponsor filed Forms 941 for the last two quarters of 2017 and the first two quarters of 2018 and Forms 940 for 2017 and 2018. Likewise, verify that the plan sponsor filed Form 1120 for the 6/30/2018 tax year (or the tax year in which the plan year ends) by reviewing a BMFOLI print.

• Forms directly related to your examination issues.

  Example: Classification selected plan distributions for examination. You must verify Form 1099-R were filed for plan distributions.

  Note: The Form 1099-R may have been filed using the EIN of the custodian of the plan assets and not the EIN of the plan sponsor.

(4) For training cases, certain designated special project cases, cases with extenuating circumstances (such as fraud, egregious non-compliance, undisclosed transactions) with your group manager's written approval, or other cases requiring an in-depth review, verify the plan sponsor filed:

1. All related Forms 5500 series, 5330, and 990-T returns. A related return is defined as a Form 5500 filed by the plan sponsor or an affiliated employer (e.g., member of a controlled group or an affiliated service group) for another plan.

2. Income and employment taxes reported on Form W-2 and Form 1099-MISC.

3. Form 1099-R for plan distributions.

(5) If the taxpayer hasn’t filed a required return, try to get the taxpayer to file a delinquent return (unless fraud or willful failure to file is indicated).

(6) If the taxpayer refuses to file a required return and the return is:

• Under EP jurisdiction, discuss the issue with your manager and determine whether to start an examination of that year.

• Not under EP jurisdiction, refer to the appropriate unit on Form 5666.

(7) If you determine that an issue exists on:

• A return that is not under EP jurisdiction, refer it to the appropriate unit on Form 5666.

• The related income tax return (such as Form 1120 or Form 1040), determine if you should do a discrepancy adjustment or refer it to the appropriate Examination Functional Unit. See IRM 4.70.15, TE/GE Exam Discrepancy Adjustments.

(8) During an EP examination, verify that the plan sponsor filed Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and Form 941, Employer’s Quarterly Federal Tax Return, for the same period as that of the 5500 examination.

1. This verification should be done during the pre-examination analysis phase of the examination using IDRS command code BMFOL.

2. Certain parts of plan examinations may reveal that the plan sponsor/employer has an employment tax issue.

   Example: During the initial interview you discover that the employer uses contractors, subcontractors, commissioned employees and casual labor and excludes those individuals from the plan. During your review of eligibility and coverage you review the Form 1099-MISC the employer filed. Based on your interview and a review of the Forms 1099-MISC you find that the employer misclassified employees as independent contractors and determine that the plan failed IRC 410. See IRM 4.23.5, Technical Guidelines for Employment Tax Issues, for helpful information on determining whether an individual is an employee or independent contractor.

3. If you determine that a possible classification issue exists, contact an Employment Tax Specialist through the Specialist Referral System.

(9) Employers must comply with the Form W-4 requirements according to 26 CFR 31.3402(f)(2)-1(g). Employers are required to keep records of all remuneration paid to employees and authorized IRS personnel are allowed to inspect employee withholding certificates (Form W-4) (IRC 6001 and 26 CFR 31.6001-5(a)).

1. Be alert to possible withholding issues. During an examination of a plan, EP reviews Form W-2 to verify certain items for plan qualification, such as compensation and deferrals. While reviewing the Forms W-2, you may discover a Form W-4 withholding issue, such as employees who have little or no income tax withholding. In certain instances, you may want to obtain RTVUE prints for questionable employees.

2. If you determine that the taxpayer has questionable Form W-4, make copies of the Forms W-4 for those employees who are still employed by the taxpayer and forward them to the W-4 Coordinator at the appropriate Service Center. The following information must be contained on each Form W-4: Employee name, address and SSN; Employer name, address and EIN; Marital status and number of allowances claimed by the employee; Date of the W-4; and items pertaining to exempt status (complete when applicable).

3. Make sure the Forms W-4 that you send to the Service Center's W-4 Coordinator are legible and complete. Submit Form W-4 to the Service Center’s W-4 Coordinator, where the taxpayer files Form 941, at the earliest date possible on Form 3210. See Form 941 instructions for the appropriate Service Centers. Provide the employer’s name, address, EIN and the number of forms attached in the body of the Form 3210. If the employer has not filed any Forms W-4 with the IRS and the Forms W-4 are questionable, notate the Form 3210 with a note indicating multiple questionable Forms W-4 are attached. Specify in the workpapers that you sent the Forms W-4 to the Service Center.

(10) IRC 6041 through IRC 6053 provide the reporting requirements for certain information returns that should be inspected. Generally, the regulations require the reporting of items such as payments made in the course of trade or business to another person, payments of dividends, payments of interest, payments of wages, or cash receipts in excess of $10,000.

1. It is important that taxpayers timely file these returns as required.

2. See the specific return and instructions to the applicable return for more information on filing requirements.

3. Examples of information returns that should be inspected include: Other Forms 5500 filed by the employer; Form 1099-R and Form 1096, which are related to plan distributions; Form W-2;Form 8300, involving plan assets; Form 945, related to distributions from the plan; and Form 1042.

4. The adequacy of taxpayer’s records is a critical factor in determining the scope of the examination. Normally, continue the examination to a point where it is reasonably certain that the information return requirements have been fulfilled. Generally, a detailed examination (including any penalty consideration) is warranted if available information indicates that: Information returns were not filed, income amounts were materially incorrect as reported or the time required to make the necessary verifications and/or to get copies of the incorrect or delinquent information returns justifies improving voluntary compliance (payor or payees).

5. If you discover that the entity has not filed returns or forms that are under the examination jurisdiction of EO/GE or one of the Examination Functional Units’ (LB&I, SB/SE or W&I), prepare and forward Form 5666 to Classification.

6. There are three specific areas where you may identify an invalid SSN:

1. The SSN cannot be attributed to any specific person (e.g., the SSN is not a valid SSN).

2. The SSN belongs to someone who is deceased.

3. The SSN belongs to a living person other than the person identified as a plan participant.

Note: If you find participants using invalid SSNs, consult your manager, forward a Form 5666 to the Referral Specialist in Classification. Classification will then forward this information to one of the SB/SE Identity Theft Coordinators.

7. To satisfy the required filing checks, your workpapers must document the steps taken and support the conclusion noted for filed returns.

(11) Document your workpapers to show your examination steps and conclusions to satisfy the required filing check requirements.

(1) A filing check is always required for:

• Form 990 in the case of any IRC 501(c) organization or IRC 4947(a)(1) trust, not a private foundation and not a black lung benefit trust.

• Form 990-EZ in the case of any IRC 501(c) organization or IRC 4947(a)(1) trust, not a private foundation and not a black lung benefit trust.

• Form 990-N in the case of any IRC 501(c) organization other than a private foundation, except those ineligible to fileForm 990-N  listed in Form 990-N (e-Postcard).

• Form 5578 in the case of any IRC 501(c)(3) organization not filing Form 990 or Form 990-EZ that operates, supervises, or controls a private school.

• Form 990-PF in the case of any private foundation or IRC 4947(a)(1) trust treated as a private foundation.

• Form 990-BL in the case of any black lung benefit trust exempt under IRC 501(c)(21).

• Form 1065 in the case of any religious or apostolic organization under IRC 501(d).

• Form 5227in the case of any IRC 4947(a)(2) split-interest trust.

• Form 990-T in the case of any IRC 501(c) organization or government-owned college and university.

• Form 1120 in the case of any taxable private foundation that is a corporation or unincorporated association.

• Form 1041in the case of any IRC 4947 trust, or any taxable private foundation that is a trust.

• Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (not applicable to IRC 501(c)(3) organizations.

• Form 941, Employer’s Quarterly Federal Tax Return.

• Form 944, Employer’s Annual Federal Tax Return.

• Form 945, Annual Return of withheld Federal Income Tax.

• Form W-2, Wage and Tax Statement.

• Form W-3, Transmittal of Wage and Tax Statements.

• Form 1096, Annual Summary and Transmittal of U.S. Information Returns, including Form 1099 series.

• Form 1099-MISC, Miscellaneous Income.

• Form 1099-NEC, Nonemployee Compensation.

• Form 1099-C, Cancellation of Debt (particularly with respect to officers and directors).

• Prior and subsequent year returns for each of the above.

  Example: (1) EO examiner is assigned an IRC 501(c)(3) organization that’s exempt from taxes and is filing Form 990 per EO BMF and it has employees. The examiner must conduct a filing check for Form 990 series and Form 941 for the current, prior and subsequent years. The examiner isn't required to check for Form 1120 and Form 940. These returns are outside the organization’s sphere of influence (returns a taxpayer can’t possibly file). The examiner will determine whether the organization is actually required to file any other return or notice at the conclusion of the exam.

  Example: (2) EO examiner is assigned an IRC 501(c)(12) electrical cooperative. The examiner must check for the filing of Form 1120 as well as Form 990. Form 1120 is not outside the organization’s sphere of influence because an IRC 501(c)(12)organization that fails the 85% member income test for a specific tax year is required to file Form 1120 instead of Form 990 for that tax year. For the tax years the cooperative filed a Form 990 , check for the filing of Form 990-T also. See Notice 92-33 ,1992-2 C.B. 363.

  Example: (3) The FSL/ET examiner is assigned a local government entity. The examiner must check for filing of Form W-2, Form 1099, and Form 941 for the current, prior, and subsequent years. Other forms may be required such as Form 945 and Form 720.

(2) Consider penalties under IRC 6651 and IRC 6652 for late or non-filed returns.

(3) See Exhibit 4.70.12-1, EO Filing Check Guidance Table, for a list of returns that are subject to required or waiver-eligible filing checks.

(4) You can waive filing checks with managerial approval for certain returns. Group managers can waive a filing check for a return or return category if you show substantial compliance exists, or if specified conditions or circumstances warrant a waiver. Refer to a return’s instructions to better ascertain the need to waive a filing check.

1. The waiver must be properly authorized and documented.

2. Document a manager’s authorization on the CCR and applicable workpaper. Include the reason used to support the waiver, and an analysis if the waiver is based on a computation.

   Note: An approved waiver of a filing check doesn’t relieve you from exercising due diligence in ensuring equitable and fair tax administration in any exam.

3. Authorization and documentation can take the form of a group manager’s memo to the group specifying conditions or circumstances to justify a waiver. You can reference the group manager’s memo on Form 5773, at section.

4. Check for the filing of returns listed in the succeeding paragraphs, absent a waiver.

5. In general, for any IRC 170(c) organization involved in fund-raising or receives donated property, check for:

Form 8282, Donee Information Return

Form 8870, Information Return for Transfers Associated with Certain Personal Benefit Contracts

IRC 8899, Notice of Income from Donated Intellectual Property

Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes

6. In general, for any organization involved in gaming, check for:

Form 730, Monthly Tax Return for Wagers

Form 11-C, Occupational Tax and Registration Return for Wagering

Form W-2G, Certain Gambling Winnings

7. In general, for any educational, research or health care provider organization, check for:

Form 1098-E, Student Loan Interest Statement

Form 1098-T, Tuition Statement

Form 8899, Notice of Income from Donated Intellectual Property

Form 1099-Q, Payments from Qualified Education Programs (Under Section IRC 529 and IRC 530)

Form 1099-MISC, Miscellaneous Income (for reporting royalties)

8. In general, for any applicable large employer organization as defined by IRC 4980H or provider of minimal essential health coverage, check for:

Form 1094-B, Transmittal of Health Insurance Coverage Statements

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns

Form 1095-B, Health Insurance Coverage

Form 1095-C, Employer-Provided Health Coverage

Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code

9. In general, for any organization with a food or beverage establishment or social club where tipping is customary, check for Form 8207, Employer’s Annual Information Return of Tip Income and Allocated Tips.

10. In general, for organizations with international or foreign features, or with foreign workers and contractors, check for:

Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding

Form 8288, U.S. Withholding Tax Return for Disposition by Foreign Persons of U.S. Real Property Interests

FBAR, Report of Foreign Bank and Financial Accounts

11. In general, for organizations that issue bonds, check for Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues and Form 8038-T, Arbitrage Rebate and Penalty in Lieu of Arbitrage Rebate.

12. In general, for organizations that may be involved in reportable or abusive transactions, check for:

Form 4720, Return of Certain Excise Taxes on Charities and other persons under Chapters 41 and 42 of the IRC

Form 8300, Reports of Cash Payments Over $10,000 Received in a Trade or Business

Form 8870, Information Return for Transfers Associated with Certain Personal Benefit Contracts

Form 8886, Reportable Transaction Disclosure Statement

Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction

13. In general, for organizations making political expenditures, or for political organizations, check for:

Form 4720, Return of Certain Excise Taxes on Charities and Other persons Under Chapters 41 and 42 of the IRC.

Form 8871, Political Organization Notice of Section 527 Status

Form 8872, Political Organization Report of Contributions and Expenditures

Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

14. See  Exhibit 4.70.12-1, EO Filing Check Guidance Table, at the second column, for a complete list of filing checks that are required but are waiver-eligible.

(5) You are not required to explain your decision not to conduct a filing check for the returns and statements that are optional or not required.

1. If information obtained from the case file, outside sources, internal databases, or from the conduct of the exam, indicates potential non-compliance, you may conduct a compliance check.

2. Optional filing and compliance checks include:

(6) Consider the following examination steps:

1. Identify returns that should be filed during the filing check phase.

   Example: Salaries are reported on Form 990, but Form 941 are not filed.

   Example: Bingo income is reported on Form 990, but Form 990-T wasn’t filed to report the regularly carried-on sale of pull tabs or concessions.

2. Reconcile related returns with line items shown on the primary return under examination.

3. If the examination reveals transactions with related organizations, or the sharing of facilities, inspect pertinent related returns for accurate reporting.

4. During the examination of a Form 990, Form 990-EZ, Form 990-PF  or Form 990-BL where the facts and circumstances warrant, inspect the officers’ personal income tax returns by securing a RTVUE printout to determine whether all gross income items (from the EO exam) have been reported.

5. If an officer didn't properly report all items of gross income, prepare a discrepancy adjustment report. If a full examination is warranted, complete Form 5666, TE/GE Referral Information Report, or Form 5346, and forward to CP&C Referrals for consideration by the appropriate function.

6. Group manager: Refer an approved information report to CP&C Referrals for transmittal to the appropriate division for consideration.

7. If an organization potentially violated the provisions of IRC 4980B concerning the continuation of health care benefits, prepare Form 5666 or Form 5436 and send to CP&C Referrals for forwarding to the appropriate PSP outside of EO.

(7) Inspect withholding and other statements retained by a payer organization on the Form W-4, Form W-4P, Form W-9 or Form 5754 series. In the case of organizations or governments with non-resident alien employees or foreign payees, inspect withholding statements on Form 8233, Form W-8BEN, Form W-8ECI, Form W-8EXP or Form W-8IMY.

(1) Employment tax is the primary part of the examination in the case of FSL/ET. Review all employment tax returns to ensure filing compliance.

(2) In general, for federal, state or local governments, check for timely and correct filing for the current, prior, and subsequent years of:

• Form W-2, Wage and Tax Statement.

• Form 1099 series.

• Form 941, Employer’s Quarterly Federal Tax Return.

• Form 945, Annual Return of Withheld Federal Income Tax.

• Form 720, Quarterly Federal Excise Tax Return.

(1) Make sure that the Indian tribal governments and related businesses/enterprises’ are properly coded as tribal entities. Check INOLES for BOD Code, BOD Client Code (CC), Employment Code (EC) and make sure they have the correct filing requirements (FR) listed. If the BOD, CC, EC and FR aren’t correct, update the necessary changes using the Tribal/Entity Information Update Form. After completing the form, click on the SUBMIT button to send to CP&C for input.

(2) Use Integrated Data Retrieval System (IDRS) command code INOLES to identify an Indian tribal government/enterprise(s) by these codes:

• Business Operating Division (BOD)

• Client code (CC)

• Employment code (EC)

(3) Entities wholly owned by Indian tribes are under the jurisdiction of Tax Exempt and Government Entities/Indian Tribal Governments. Tribes may be involved in businesses/enterprises that aren’t wholly owned, such as partnerships and joint ventures with other tribes or non-tribal entities. The IRS BOD with jurisdiction (TE/GE, SB/SE or Large Business & International (LB&I)) is generally determined by the level of ownership.

(4) If the BOD classification is unclear, then these situations will be resolved at the lowest managerial levels in the IRS units involved. If the group manager(s) can’t agree, the issue is raised to the next level of management until resolved.

(5) ITG entities are identified on IDRS by BOD code "TE", employment code "I" and client code "I".

(6) If an ITG entity has issued a tax-exempt bond, the CC could be a "1" instead of an "I".

(7) If an ITG entity was at one time exempt under IRC 501(c), the EO section may show at the bottom of the INOLES display. This EO section is for historical purposes. If the EO status code (STS-CD) is active, this means the entity's IRC 501(c) exempt status is still in effect, subject to EO oversight and not an ITG entity. If the EO status code is inactive, this means the EO tax exempt status is no longer in effect, and it’s an ITG entity if an Indian tribal government(s) owns more than 50 percent. See Document 6209, IRS Processing Codes and Information, Section 13.10.(3), Status Codes - Master Files and AIMS, for a list of active and inactive status codes.

(8) Verify the Employer's Annual Federal Unemployment (FUTA) Tax Return, filing requirement (FR) on INOLES is correct. The FR for ITG entities is either "3" (compliant - not required to file) or "4" (non-compliant - required to file). Most of the time, the Form 940 FR is "3" indicating that the organization has elected not to be subject to Federal Unemployment Tax Act (FUTA) by participating in the state unemployment system.

(9) For more information, see IRM 4.10.5, Required Filing Checks; IRM 4.23.3.6.3, Procedures for Required Filing Checks and Scope of Employment Tax Examinations; and IRM 4.23.3.6.2, Required Filing Checks for Non-Employment Tax Cases, for procedures for verifying the filing of required returns by the taxpayer and assessing the examination potential of these returns.

(1) Complete a pre-contact analysis for all examinations.

(2) Use the Tax Exempt Bond Workpaper Summary, or an equivalent document, to prepare an exam plan. Ask your manager for input in developing the plan.

(3) Analyze the following information, if applicable, during your pre-contact analysis:

• Form 8038 series information return filed for the bond issuance.

• For direct-pay bonds, related Form 8038-CP returns.

• Form 8038-T and Form 8038-R returns.

• The Official Statement. If there is an Official Statement for the bonds, it should be available on EMMA (https://emma.msrb.org).

• Material event notices, redemptions, pricing information, refundings, tenders, and any other relevant information to the examination and financial statements. Consult EMMA.

• Code sections, regulations, court cases, revenue rulings and procedures applicable to the case.

• IDRS research (see IRM 2.3.1, Section Titles and Command Codes for IDRS Terminal Responses and IRM 2.4.1, Section Titles and Command Codes for IDRS Terminal Input) conducted on issuers, conduit borrowers, and related parties.

• Pertinent state and federal agency reports or files, such as audit reports, minutes of meeting, and annual financial reports.

• Issuer and borrower internet websites.

• Any other information obtained through internet search engines and other sources (for example, Guidestart-990 Returns or EDGAR-SEC Filings).

(4) Document the steps you took in your pre-contact analysis in the workpapers.

(5) Notify your group manager if the issuer or borrower is under exam by another TEB examiner, TE/GE functions, or operating division. Your manager will coordinate with the group manager of the unit controlling the related examination as indicated on the AMDISA. If there is an open examination of a conduit borrower, determine:

• The years under examination.

• The status of the examination.

• Any extensions of the statutory period for assessment.

(6) Continue the examination planning throughout the exam. Because the general information returns filed to report bond transactions provide very limited information, you may plan a significant portion of the examination after you receive the response to the initial Information Document Request (IDR).

(7) Develop an IDR tailored to your exam plan and the examination scope.

(8) Prepare the appropriate initial contact letter (using Letter 6031) to send to the issuer with the IDR, Pub 1 and the Supplement to Form 2848.

(1) Review the prior and subsequent years of the primary return assigned to you for proper filing and to evaluate examination potential. Using the returns, complete an analysis, comparing the changes in the over the three-year period, looking to identify any large or questionable differences. Recognize any trends, either positive or negative, that are present or developing during the three years.

(2) Determine whether significant differences or trends may warrant establishing the prior or subsequent tax year’s return for examination.

(3) A review of prior and subsequent year’s returns is essentially equivalent to the classification of a return to determine if an examination is necessary. If the group manager hasn’t approved the examination, don't request books and records related to those returns.

(4) Document in the workpapers whether prior and subsequent years’ returns were reviewed and explain why an exam wasn't warranted.

(5) If, during the examination, information is obtained that indicates potential substantive noncompliance in subsequent years for which returns haven't yet been filed by the taxpayer, obtain managerial approval to open the year(s) on Non-Master File.

(6) An examination of prior or subsequent year returns may be warranted if:

• Noncompliance exists.

• An issue is developed during the examination of an originally assigned return that carries back or forward to other years’ returns.

• There is a large, unusual or questionable item that must be resolved.

• The adjustment in the examination year is likely to be treated the same in another tax year.

• There are carryback or carryforward issues.

(7) If adjustments are made to the return(s) under examination, document the reasons other years weren't opened for examination.

(8) Obtain and document in the workpapers or the CCR, group manager approval to extend an examination into the prior or subsequent years.

(9) Examine prior or subsequent year return(s) concurrently with the assigned return. Ensure sufficient time remains on the statute of limitations before starting an examination of a prior or subsequent year return. See IRM 25.6, Statute of Limitations.

(10) Inform the taxpayer of the decision to expand the examination to include a prior or subsequent year’s return by issuing Letter 5968, Prior or Subsequent Year Pickup, or for EP, Letter 1346-J, Employee Plans Prior Year, Subsequent Year and Related Return Pick-Up. Verify the presence or absence of an audit indicator on a related return before initiating the examination. If an audit indicator is present, take appropriate steps to coordinate before contacting the organization.

(11) In order to establish cases on AIMS using retained copies of the taxpayer’s returns, create a module on RCCMS as soon as you know an examination will be initiated. Request establishment with the Update AIMS check box selected for Business Master File (BMF) modules.

(12) If it is not possible to secure the original return or if closing would be delayed by awaiting receipt of the original, close the case based on the taxpayer’s retained copy. If the taxpayer doesn't provide a copy, secure BRTVUE and RTVUE prints internally. Original returns must be obtained in the following instances:

• Unagreed cases involving fraud

• Jeopardy assessments

• When the closing is on the basis of a notice of deficiency

(13) Generally, examinations of prior and subsequent year returns will be limited to the issue(s) giving rise to the examination of the originally assigned return. However, the returns would still be reconciled to the taxpayer’s books and records, just as the originally assigned return.

(14) If you discover that the taxpayer hasn't filed returns or forms, the examination of which are within the jurisdiction of another function or Operating Division, prepare Form 5666 or Form 5346 and send to the CP&C Referrals for transmittal to the appropriate function.

(1) Group managers are responsible for the continuous overall supervision of statute controls for assigned and unassigned returns in the group. When group managers receive cases in the group:

1. Ensure policies to verify the statute of expiration is accurate, including proper determination of assessment statute expiration date (ASED) or any alpha codes used or to be used.

2. Properly identify statute expiration dates on tax returns and/or information returns (filed and non-filed).

3. Closely monitor all controlled cases to protect all statutes of limitations to prevent their expiration.

(2) Notify the examiner in writing when an assigned return’s statute of limitations will expire within 270 days.

(3) Ensure the examiner documents on the CCR they have completed the statute validation process in RCCMS. Refer to RCCMS Change Document for Release 3.5.0/3.5.1 for detailed description of the new RCCMS feature, started July 2020, for statute validation.

(4) See IRM 25.6.22.5.13, Manager's Responsibilities When Signing Consents.

(5) For EP ensure the additional steps have been followed:

(6) See IRM 4.70.12.3.7.10, Timeline for Closing Examined Returns, to ensure cases closed from the group have the required time remaining on the statute of limitations prior to case closure.

(7) Ensure all short statute cases have been placed in a red folder (Form 10364-A), when closing with a paper case file.

(1) Examiners are responsible for:

1. Identifying and protecting the statute of limitations for returns in their inventory, including all primary and related returns covered by the scope and depth of exams being conducted. You are also responsible for protecting the statute of limitations for subsequent tax years if there is a potential tax effect.

2. Verifying the correctness of the statute of limitations date shown on RCCMS/AIMS for each return in their inventory and verifying ASED alpha day codes.

3. Initiating and completing the Statute Validation process in RCCMS.

   Note: For any case (AIMS and non-AIMS) with less than 270 days left on the statute of limitations, or otherwise meeting control criteria, follow the instructions in the RCCMS Change Document for Release 3.5.0/3.5.1 to validate the statute through your manager. Cases coming to closing groups with less than 270 days on the statute require the validation process to have been completed before submission.

4. Document on CCR you have completed the statute validation process in RCCMS.

(2) See IRM 25.6.1, Statute of Limitations Processes and Procedures, IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent, and IRM 25.6.23, Examination Process-Assessment Statute of Limitations Controls. To the extent the procedures in this IRM impose tighter controls than those in IRM 25.6, Statute of Limitations, use the procedures in this IRM.

(3) Maintain "statute controls" for all short statute returns under examination, whether or not controlled on AIMS.

(4) You may not begin an examination or requisition any return for examination if fewer than 12 months remain on the statute unless you get your Program Manager’s approval.

1. Obtain managerial approval before you open an examination of a return with fewer than 12 months remaining on the statute.

2. Document the approval and justification, or disapproval on the CCR.

3. Consider factors such as the amount of potential tax liability and the impact on plan participants before opening a year with a short statute.

4. If you/your manager decide to examine a return with 270 days or less remaining of the statute of limitations, submit a request for AIMS/RCCMS establishment and statute validation.

(5) Review the following sources to verify statute of limitations date, as appropriate, and document in the case file:

1. IDRS

2. AIMS

3. Received date stamped by the campus on the face of the original return.

4. Postmark date on the envelope in which the return was mailed, if attached.

   Caution: If unable to determine the actual postmark date and/or received date, use the most conservative date.

(6) If the criteria in (4) applies, but by not conducting an examination may result in a. through d. below, get your GM’s approval if you determine an examination should be conducted. Document the approval and basis for the decision in the CCR, the workpaper summary sheet or a separate workpaper, as appropriate:

1. Serious criticism of the IRS’s administration of the tax law.

2. Inconsistent treatment of similarly situated taxpayers.

3. The establishment of a precedent that seriously hampers IRS subsequent attempts to take corrective action.

4. The loss of a substantial amount of tax revenues.

(7) If you determine that the statute date is incorrect: See IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS, for proper alpha coding of the assessment statute expiration date (ASED).

(8) After you determine the correct statute date and update it, if necessary, continue to monitor the statute date to protect the government's interest.

1. The statute date doesn’t change unless you update it to reflect an executed statute extension or to an alpha statute code.

2. The group manager and specialist must continue to monitor the statute.

3. Use inventory validation guidelines, monthly reconciliation of AIMS Table 4.0, Returns with Statute Date Pending, and RCCMS, to ensure you start statute control procedures within 270 days of its expiration.

(9) If you discover a potentially expired statute of limitation, complete Form 3999, Statute Expiration Report.

(10) When preparing Form 872-H for a trust with a fiscal year end, the trust year is converted to a calendar year when there is a possible qualification issue. See IRM 4.70.12.3.8.6, Securing Consents for Form 5500 and Form 1041.

(11) When you propose to disqualify a qualified plan, which would result in the conversion of a Form 5500 series return to a taxable return, you are responsible for controlling and protecting the statute until either.

(12) For any examination involving revocation or non-qualification, you must prepare and timely forward, necessary referrals to the appropriate Examination Functional Unit (EFU) (for example, SB/SE) responsible for the Form 1041 trust return. Consider making a preliminary referral based on the proposed revocation issues. Include any necessary supporting documentation that will help SB/SE calculate the correct tax to be reported on Form 1041.

(13) Follow these procedures when you refer to an EFU for tax due on Form 1041:

1. Either secure a statute extension on Form 872-H to extend a short statute, or with your group manager’s approval, update the statute of limitations on the corresponding Form 5500 return to alpha code "PP". See IRM 4.70.12.3.7.7, Use of Alpha Codes.

2. When the statute is updated to alpha code "PP" (for example, 12/PP/2018), prepare a memo of explanation justifying the use of alpha code "PP", obtain your manager’s signature on the memo.

3. Forward a copy of the memo to your Area Manager.

(14) Follow these special procedures for project code 6451, 404 Deduction Only (CIP Support), examinations:

1. Update the statute of limitations to alpha code "PP" immediately upon assignment.

2. When you expand the scope of a project code 6451 examination to include an IRC 401(a) issue and the statute of limitations is still open for that year, the general statute of limitation procedures contained in this IRM apply and you must protect the statute of limitations for Form 5500 / Form 1041.

3. When you expand the scope of a project code 6451 examination to include an IRC 401(a) issue and the statute of limitations is closed for that year, the statute of limitations on RCCMS and AIMS should continue to reflect alpha code "PP" for that year. If Form 5500 examinations are opened in later years for which the statute is still open, the general statute of limitations procedures contained in this IRM apply and you must protect the statute of limitations for Form 5500 / Form 1041.

(15) Include a memorandum of explanation (signed by the group manager) detailing the reason for the examination and the update of the statute to alpha code "PP" in the case file.

(1) To protect the government’s interest, you must be able to determine the statute of limitations expiration date for the assessment of tax for returns that are within TE/GE’s jurisdiction.

(2) See IRM 25.6.1, Statute of Limitations Processes and Procedures, and IRM 25.6.1.6.4, Statute of Limitations Chart for Tax Returns, for statute of limitations chart for tax returns.

(3) The guidelines to determine the statute of limitation for assessment are in IRM 25.6.1.9, Assessments. IRC 7502 states that a timely mailed return is treated as timely filed. The Assessment Statute Expiration Date (ASED) is computed as shown below:

(4) For purposes of the statute of limitation, IRC 6501(b)(2) provides a "deemed" filing date for taxes imposed by the following chapters of the Internal Revenue Code:

• Chapter 3 - Withholding of Tax on Nonresident Aliens and Foreign Corporations.

• Chapter 4 - Taxes to Enforce Reporting on Certain Foreign Accounts.

• Chapter 21 - Federal Insurance Contributions Act.

• Chapter 24 - Collection of Income Tax at Source on Wages.

  Note: If a return of tax imposed by chapter 3, 4, 21, or 24 for any period ending with or within a calendar year is filed before April 15 of the succeeding calendar year, such return shall be considered filed on April 15 of such calendar year.

(5) The statute of limitations is extended from three years to six years from the date the return is filed or deemed filed, whichever is later in the following circumstances, and as detailed in IRM 25.6.1.9.5.3:

1. 25% omission of income taxes. The statute of limitations is extended from three years to six years from the date the return is filed or deemed filed, whichever is later, if there has been a substantial omission of 25% of the amount of gross income properly includible on the return. See IRC 6501(e)(1) and 26 CFR 301.6501(e)-1(a). This does not apply to employment tax returns (Forms 940/941/944) that underestimate originally reported wages.

2. Exceptions to statute of limitations. In the following circumstances, there is no assessment statute of limitations. See IRC 6501(c).
   • False or fraudulent returns
   • Failure to file a returns
   • Willful attempt to defeat or evade tax in any manner

3. In the following circumstances, the assessment statute of limitations is altered. See IRC 6501(c).
   •Certain amended returns
   Extension of the statute by agreement

4. IRC 4940 Tax: If a private foundation omits from its primary return tax imposed by IRC 4940 an amount of tax properly includible which is in excess of 25% of the amount of tax imposed by IRC 4940 which is reported on the return, the tax may be assessed at any time within six years after the return was filed. If a private foundation discloses in its return (or in a schedule or statement attached thereto) the nature, source, and amount of any income giving rise to any omitted tax, the tax arising from such income is counted as reported on the return in computing whether the foundation has omitted more than 25% of the tax reported on its return. See IRC 6501(e)(3) and 26 CFR 301.6501(e)-1(c)(3)(i). IRC Chapter 41 and IRC Chapter 42 Excise Taxes (Other than IRC 4940): If a public charity or a private foundation, trust, or other organization, as the case may be, fails to disclose an item subject to tax under IRC 4911, IRC 4912, IRC 4941(a), IRC 4942(a), IRC 4943(a), IRC 4944(a), IRC 4945(a), IRC 4951(a), and IRC 4952(a).

5. IRC 4953, and/or IRC 4958 in its primary return (or a schedule or statement attached thereto), the tax arising from any transaction not disclosed may be assessed at any time within six years after the return was filed. See IRC 6501(e)(3) and 26 CFR 301.-6501(e)-1(c)(3)(ii).

6. Form 5330. There has been an omission of more than 25% of the excise tax due, unless disclosure of the item giving rise to the tax was made in a manner that adequately apprises the Secretary of the existence and nature of the item. See IRC 6501(e)(3) and 26 CFR 301.6501(e)-1(c).

7. IRC 4953, and/or IRC 4958 in its primary return (or a schedule or statement attached thereto), the tax arising from any transaction not disclosed may be assessed at any time within six years after the return was filed. See IRC 6501(e)(3) and 26 CFR 301.-6501(e)-1(c)(3)(ii).

(6) Never rely on the existence of a six-year statute without the concurrence of TEGEC, as documented in a counsel memorandum or secured e-mail.

(7) As a general rule if no return is filed, the statute of limitation doesn't start to run. Primary returns filed by a public charity, private foundation, or non-exempt charitable trust are an exception to the general rule as the filing of a primary return by these entities starts the running of the statute of limitation for some income and excise tax returns in the circumstances described below:

1. The filing of a primary return which discloses sufficient facts to apprise the IRS of the potential existence of unrelated business taxable income begins the running of the period of limitations on assessment of tax on Form 990-T, Rev. Rul. 69-247, 1969-1 C.B. 30.

2. The filing of a primary return which discloses sufficient facts to apprise the IRS of the potential existence of tax on political expenditures may begin the running of the period of limitations on assessment of tax on Form 1120-POL even though Form 1120-POL was not filed based on the rationale applied to unrelated business income in Rev. Rul. 69-247, 1969-1 C.B. 303.

3. A primary return filed by a public charity, a private foundation, a non-exempt charitable trust, or a IRC 501(c)(4) starts the running of the period of limitations on the assessment of excise tax on a Form 4720 filed or required to be filed by the organization, private foundation or trust and on Form 4720 filed or required to be filed by foundation managers and/or disqualified persons. The filing of the primary return starts the running of the period of limitations on assessment of excise tax on Form 4720 even if the transaction, act, or failure to act that gives rise to the excise tax on Form 4720 isn’t disclosed on the primary return. The filing of a Form 4720 by the organization, foundation manager or disqualified person doesn't start the running of the statute of limitation. See IRC 6501(l)(1) and 26 CFR 301.6501(n)-1.

4. The filing of a primary return by a taxpayer, who determines in good faith that they are an exempt organization under IRC 501(c), starts the running of the statute of limitation, if the organization is later held to be a taxable organization. See IRC 6501(g)(2) and 26 CFR 301.6501(g)-1(b). (Applies to both organizations ruled as exempt by EO Determinations and to AIMS status 36 cases.)

(8) The filing of a Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, doesn't start the running of the statute of Limitation. The Form 990-N is recorded on BMFOLT with a Transaction Code (TC) 150 and a DLN sequence that begins with "93489". The Form 990-N isn’t actually a form and doesn't constitute a return for statute purposes. However, for DC purposes, Form 990-N is treated as a primary return.

(9) The assessment period is extended to 60 days after IRS receives the amended return. See IRC 6501(c)(7). An amended return doesn't extend the statute expiration date unless the return meets both of the following conditions:

1. An income tax return received within 60 days before the ASED.

2. The amended return shows the taxpayer owes additional tax.

(10) A substitute for return prepared by the IRS, under the authority of IRC 6020(b), is treated as if no return was filed. If a taxpayer signs an IRS prepared return, it becomes a regular return and the statute of limitation begins on the signature date.

(11) An invalid return will not start the running of the statute of limitation. Under the present case law, the following factors must exist for the return to be valid:

1. There must be sufficient information to calculate tax liability.

2. The document must purport to be a return.

3. There must be an honest and reasonable attempt to satisfy the requirements of the tax law.

4. The taxpayer must execute the return under penalties of perjury.

   Caution: These factors don't take into account the processing concerns that an incomplete return presents for the Service. Therefore, approach any question concerning the validity of a return missing a form or schedule with the presumption that there’s sufficient data to calculate the tax liability.

(12) Take the most conservative approach and protect the three-year statute, if possible, even though a six year statute appears applicable, or when it appears that the return is false or fraudulent.

(13) Obtain written approval from TEGEDC before pursuing a six year statute of limitations.

(1) Although a NRU does not have its own statute date (because a return was not filed), there are returns with statute of limitations affected by the NRU plan under examination.

(2) Use RCCMS to track the statute date of the affected related return.

1. On the RCCMS NRU case, enter the statute date of the related Form 941, Form 1120, Form 1120-S, Form 1065, or Form 1040, (as applicable) affected by the NRU examination.

   Note: Generally, the Form 1040 for each of the S-Corporation owners is going to be the controlling return for the statute of limitations. Examiners should protect the statutes for the Forms 1040 of the S-Corporation owners, if it is believed there will be income tax consequences on those returns flowing from adjustments made to the Form 1120-S.

   Note: The rules concerning whether the controlling return for the statute of limitations is the Form 1065 or the income tax return of each partner are complicated and factually dependent. Examiners should contact TEGEDC when the plan sponsor is a partnership, and it is believed there will be adjustments resulting in income tax consequences.

2. The statute date will help you and your manager monitor the case for a timely referral or pursuit of a Form 1040/1120 discrepancy adjustment, or pursuit and assessment of applicable penalties, when necessary.

(3) For IRC 403(b) and IRC 457(b) examinations, the affected related return will be the last quarterly Form 941 filed for the tax year examined.

1. Initially, Classification uses the normal statute date of the related Form 941 for IRC 403(b) and IRC 457(b) examinations for RCCMS statute control purposes.

2. EP won’t control the Form 941 return for IRC 403(b) and IRC 457(b) examinations on AIMS since EP does not have jurisdiction to examine Forms 941.

3. Even though EP does not control the Form 941 statute date on AIMS for the applicable tax years, protect the Government’s interests for any potential tax adjustments to that return before the statute expires.

4. Steps to protect the Government's interest would include making a timely referral on Form 5666 with Exempt Organizations (EO) (or whichever business unit has jurisdiction over the taxpayer) to ensure the Form 941 statute is protected for any proposed adjustments.

5. When you make a timely referral to EO (or whichever business unit has jurisdiction over the taxpayer), the responsibility to protect the statute no longer rests with you. When you make a timely referral, update the statute of limitations to alpha code "EE" in RCCMS and NMF AIMS (for example, 04/EE/2018).

6. You may update the statute date for the IRC 403(b) and IRC 457(b) examination to alpha code "EE" when you and your manager determine that there are no tax consequences to the related Form 941 or the Form 941 tax is insignificant.

   Note: Document your discussion with your manager and his/her concurrence on the CCR.

7. You may update the statute date for the IRC 403(b) and IRC 457(b) examination to alpha code "EE" when you pick up a prior year and the related Form 941 statute has already barred.

   Example: You are resolving an examination issue through Employee Plans Compliance Resolution System (EPCRS). As part of resolution, you open prior years for correction. Although you don’t create an AIMS account for the 403(b) return, you may update the 403(b) statute using alpha code EE.

   Note: Document your discussions with your manager and his/her concurrence on the CCR.

8. The statute of limitations for Form 941 is extended by Form SS-10. See Employee Plans Examination Exhibits.

9. Form SS-10 may be secured by EP Examinations or by EO or FSL/ET.

   Note: If Form SS-10 is secured by EP, the EP group manager can countersign Form SS-10 for the IRS.

10. When secured, and the group has a scanner, scan the Form SS-10 and save it in RCCMS Office Documents folder using the RCCMS Naming Convention, regardless of whether EO or FSL/ET secures it. If not scanned, place a copy of the SS-10 in the paper case file.

(4) When updating the statute of limitations for a Form 941 that is not under examination (the examination is not established on AIMS by either EO, SB/SE or LB&I), complete Form 3177 as follows:

1. Initiator. Enter the examiner’s name and phone number.

2. Date. Enter the current date.

3. Taxpayer Name. Enter the name of the Taxpayer.

4. EIN OR SSN. Enter the TIN of the Taxpayer.

5. TRC. Highlight "560" and enter the new statute date as MM/DD/YYYY.

6. MFT Code. Enter 01 for Form 941.

7. Taxable Period. Enter the taxable period being extended as YYYYMM.

8. Send through secure email or efax the completed Form 3177 and Form SS-10 to the manager of the TE/GE Closing Group in Brooklyn. The efax number is 855-821-0089.

9. The Efax Cover Sheet should contain the following note: "Please update the statute on Form 941. The return is not controlled on AIMS."

(5) For SEP, SARSEP, SIMPLE IRAs, and IRC 457(f) examinations, the related return(s) affected will normally be Form 1040 for the tax years under examination for the individual participants.

1. Initially, EP Classification uses the normal statute date of the related Form 1040 for SEP, SARSEP, SIMPLE IRA, and 457(f) examinations for control purposes on RCCMS.

2. If you establish the related Form 1040 discrepancy adjustment on AIMS and RCCMS, you may update the statute date for the SEP, SARSEP, SIMPLE IRA, or IRC 457(f) examination to alpha code "EE".

3. You may update the statute date for the SEP, SARSEP, or SIMPLE IRA examination to alpha code "EE" in RCCMS and NMF AIMS when you and your manager determine that the SEP/SARSEP complies with IRC 408(k) or the SIMPLE IRA complies with IRC 408(p).

(6) The statute for a nonbank trustee investigation (NBTI) is similar to other NRU statutes in that NRUs don't have their own statute date because there is no return. The statute of a NBTI is related to the period assigned.

1. There is no means to extend the NBTI statute. The statute can only be alpha coded to "EE". The statute date may be updated to alpha code "EE" when examiner and manager determine it's warranted.

   Example: The statute expires within 12 months. The NBTI statute can't be updated using RCCMS like all other NRUs. The NBTI statute must be updated using Form 5595, see IRM 4.5.1.6.9.1, Form 5595, TE/GE Update.

(7) Because related 1040 and 1120 tax returns can be affected by NRU examinations, examiners should review IRM 4.70.12.3.8.4, EP Statute of Limitations for Form 1040 and Form 1120, before opening an examination of a particular year.

(8) Because a related Form 941, Form 1040 or Form 1120 can be affected by NRU examinations, follow the time frames in IRM 4.70.12.3.7.2, Examiner Responsibilities and Procedures, when beginning an examination.

(1) A statute of limitations to assess tax can be extended with the taxpayer’s consent:

1. Clearly identify the need for a consent before you solicit it.

2. Obtain your group manager's approval before you request a taxpayer to execute a consent and document the approval in the case file.

3. See IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent, for instructions on obtaining consents, and see IRM 25.6.22.2.1(3), Assessment, for a list of some conditions that allow a statute extension.

(2) Use the following forms to extend certain types of statutes:

(3) The IRS must prepare the consent in duplicate (three copies if there is a designated representative), not the taxpayer or the POA.

(4) IRS must notify taxpayers of their right to: refuse to extend the limitation period, request the extension be limited to particular issues and request the limitation period be limited to a specific date IRC 6501(c)(4)(B). You must inform the taxpayer of his or her rights every time you ask them to extend the statute of limitations. Notify the taxpayer by mailing:

1. Appropriate transmittal letter; see below: IRM 4.70.12.3.7.6, Letters Used to Transmit Executed Consents.

2. Pub 1035, Extending the Tax Assessment Period, (latest revision).

3. Form 872, Form 872-H, or Form SS-10, whichever is appropriate.

(5) Managers must review the statue extension package before mailing to the taxpayer.

(6) If the taxpayer or representative signs the consent form, do the following immediately upon receipt:

1. Inspect the signed forms for errors, markings and edits, signature, date and title of an authorized individual.

2. Stamp all signed consent forms with the received date.

3. Submit all signed consent forms to your group manager for signature.

4. Upload executed consent form in the RCCMS case file.

5. Prepare and issue Letter 929 or Letter 1343 for the taxpayer, enclosing the executed extension form.

6. If there is a designated representative, prepare Letter 937-A enclosing a copy of the executed consent form.

7. Update the statute date on RCCMS (manually on Form 5595 if needed), Keep a copy of Form 5595 for the case file.

8. Complete the statute validation and request manager approval in RCCMS.

9. Document these actions on the CCR.

   Note: You may accept consents by efax if you have contacted the taxpayer by phone or in-person and documented the CCR with the contact date and noted that the taxpayer wishes to send the Form 872, Form SS-10 or Form 872-H by efax. See IRM IRM 25.6.22.5.1, Fax Signatures.

(7) Consents with alterations, erasures and corrections should not knowingly be provided to the taxpayer for signature, regardless of how slight or immaterial.

(8) If the taxpayer has made alterations on the consent, it is preferred you prepare a new consent for the taxpayer’s signature.

1. However, if the alterations on the consent are acceptable to the IRS, the taxpayer has initialed each alteration, and there is not sufficient time to perfect the consent, the IRS representative signing the consent may initial alterations and sign the consent.

2. Advice of TEGEDC must be sought before accepting an altered consent.

(9) The IRS will not make changes to a consent form after execution by the taxpayer.

(10) If later discovered that consents mailed to the taxpayer contain errors prepare and mail corrected consents to the taxpayer. Use Letter 1817-A Letter to Taxpayer Regarding Consents - EP to:

1. Solicit corrected consents to the taxpayer.

2. Solicit Form 56 if Form 872-H is received with Form 56.

(11) No Reply. If the taxpayer doesn’t reply to your request to extend the statute date by the due date:

1. Discuss the next course of action with your group manager.

2. If follow-up is the next course of action, issue Letter 928 Request to Extend Statute - Follow-up, enclosing Pub 1035.

(12) Refusal to Extend the Statute. If a taxpayer won’t extend the statute of limitations for assessment:

1. Discuss the next course of action with your group manager.

2. Generally, inform the taxpayer that not extending a statute date could jeopardize its ability to appeal. Per IRM 8.20.5.3.1.2(2), Verifying Administrative File Contents, Appeals requires at least 365 days remain on the statute date when they receive the case. For cases previously returned to the examination group by Appeals, Appeals requires at least 180 days remain on the statute date. See IRM 8.20.5.3.1.2(2), Exception; and IRM 8.2.1.4(1), Step 1, Exception.

(13) When the statute of limitation is extended or updated to an alpha code, RCCMS and AIMS must be updated to reflect the current statute date.

(14) Document the completion date, extension dates and consents to extend the statute, or refusal to extend the statute, on the CCR.

(1) Use the following letters to send consents to the taxpayer with copies to the POA:

(2) If the taxpayer has a POA, you must mail a copy of the same documents mailed to the taxpayer to the POA. Use cover Letter 937-A, Transmittal Letter for Power of Attorney, to mail the documents.

(3) When you mail Letter 907-A or Letter 1343 (EO & EP) to the taxpayer, include the following items as enclosures:

1. Copy of the executed consent form (Form 872, Form SS-10 or Form 872-H),

2. Pub 1035,

3. Form 56 (if the consent pertains to Form 1041 or Form 990-T), and

4. A self-addressed return envelope.

(4) If the applicable return is a jointly filed Form 1040 and both spouses are residing at the same mailing address, then mail or present one complete set of documents, which contains Letter 907-A addressed to both spouses at the common address, Pub 1035 and copy of Form 872.

(5) If the applicable return is a jointly filed Form 1040 and you determined that both spouses are not residing at the same address, document the separate addresses in the CCR and mail separately a complete set of documents, which contains Letter 907-A, Pub 1035 and copy of Form 872, to each spouse and document the CCR with the date and fact that you mailed one set of documents to each spouse.

(6) The taxpayer must send you the original executed consent form (Form 872, Form SS-10 or Form 872-H).

1. The form should be executed by an authorized IRS representative.

2. Upload the executed consent form in the RCCMS case file and mail the original back to the taxpayer.

(7) Per IRS Delegation Order 25-2 (see IRM 1.2.2.15.2), group managers and reviewers (grade GS-11 or higher) are authorized to sign consents.

(8) Persons officially acting for someone authorized to sign consents may sign consents.

(9) The IRS official executing the consent should enter the date in the space provided to the right of his/her signature.

(10) Save a copy of all letters mailed in the RCCMS Office Documents folder using the RCCMS Naming Convention.

(1) In some cases, you may enter a two-digit alphabetic code designating a special statute situation in the day (DD) position of the statute date on AIMS and RCCMS.

(2) Use ASED alpha codes to indicate that special conditions exist that affect a statute expiration date. See Exhibit in IRM 25.6.23-3, Instructions for Updating the Statute on AIMS.

(3) If authorized, you can use alpha code PP for TE/GE non-taxable returns, if there is no income tax, such as an MFT 67 converted to a taxable return.

(4) In non-filer situations, update the statute to alpha code "EE" after the AIMS record for the non-filed tax period is established.

(5) Most alpha codes apply only when precise requirements of the law are met. The alpha code should be used only when it is clear that all essential elements of the applicable law are present.

(6) The below are commonly used Alpha Codes for TE/GE:

(7) Alpha code "AA" can be used to designate a claim for refund/credit/abatement that was timely filed by the taxpayer if all of the following conditions are met:

1. A decision has been made that there are no other issues on the return which warrant an assessment,

2. 180 days or less remain in the statute of limitations for assessment, and

3. The claimed refund/abatement has not been paid.

Use of alpha code "AA"

Alpha code "AA" designates the taxpayer timely filed a claim for refund/credit and you’ve decided there are no other issues on the return which will warrant an additional assessment and the claimed refund has not been paid to the taxpayer. The statute is held open for refund or credit up to the amount of the claim subject to the limitation on the amount provided by the look back rules of IRC 6511(b) (for example, for a refund claimed filed within the 3-year period, the amount is limited to the tax paid during the 3 years immediately preceding the filing of the claim, plus the period of any extension of time for filing the return). If the statute for assessment is open when you receive a claim, enter the actual statute expiration date, rather than "AA", on the statute control records. Update the statute controls to "AA"only after you’re sure there’s no likelihood of a tax or penalty assessment and you’ve determined that the refund amount has not already been paid to the taxpayer. Complete the statute validation and submit for manager approval in RCCMS when updating the statute of limitations to alpha code "AA". An appropriate statement in the “Comments” section when requesting the statute validation approval would be”: “The return was inspected and there are no material issues other than those on the claim and the claimed refund has not been paid.

When NOT to use alpha code "AA"

If the claimed refund/abatement has been paid. If there are issues which could result in additional assessment of tax or penalties.

(8) Alpha code "AB" is used when a particular tax for a particular period is addressed in a properly executed closing agreement:

1. Alpha code "AB" designates that the statutory limitation pertaining to the period of time for assessment of tax for the taxable period is no longer pertinent because any applicable tax has been addressed in or waived by a closing agreement that has been properly executed by both the taxpayer and a delegated IRS official.

2. The month (MM) and year (YYYY) entries accompanying the AB alpha code are the month and year the statute expired, absent the properly executed closing agreement waiving the assessment statute of limitations.

(9) Alpha code "AD" is indicates that the examination is limited to IRC 3121(q), Tips Included for Both Employee and Employer Taxes. Employment taxes for tip income not reported to the employer is the only issue. See IRM 4.23.7.8, Statute of Limitations for Tip Examinations, for additional information.

(10) Alpha code "CC" is used to reflect tax periods covered by a Form 10498-B or memorandum signed by an Area Manager or Director in TE/GE, stating that no consent to extend the statute should be secured.

1. An appropriate statement in the "Comments" section of the statute validation request would be: "Concurrence memorandum approved on [date signed by the Area Manager or Director]."

2. Alpha code "CC" may also be used with a tax return under joint investigation which has a statutory period for assessment that expired before the return was established on AIMS.

3. If Criminal Investigation withdraws from the joint investigation prior to the expiration of the statute, the statute controls should be updated to reflect the normal statute expiration date, or other applicable alpha code if some other exception to the normal three-year assessment statute applies.

(11) Alpha code "EE" is used when a return has not been filed and the statute of limitations has not begun to run.

1. The month and year appearing with alpha code "EE" represent the date that is six years from the date the SFR posted.

   Example: If the SFR posted on 04/15/2017 the statute date on RCCMS and AIMS should be reflected as 04/EE/2023.

2. Update the case to alpha code "EE" through RCCMS by selecting alpha code "EE" on the "alpha day" line in the first RCCMS "General" tab. Do this after the SFR is processed, the return is posted and the examination is established on AIMS.

   Note: When updating the statute to alpha code "EE" you must also select aging reason code 26 in the "Codes" tab of RCCMS to keep alpha code "EE" from falling off of AIMS (i.e., the statute will revert back to the original statute date if aging reason code 26 is not input). Make sure the "Update AIMS" box in RCCMS is checked when the update is transmitted.

3. If you receive a a late filed return from a taxpayer, replace the alpha code "EE" statute designation with the true statute expiration date based on the date the return was received by the IRS.

4. Get AIMS transcripts throughout the examination, at least once every six months, to check for posting of a filed return (such as transaction code 976 or 977).

(12) Alpha code "II" is used when is used for non-income tax issues related to Form 1040.

1. Do not use alpha code II for Forms 1040 related to Form 5329 examinations (for example, the statute date of Forms 1040 related to Forms 5329 under examination should no longer be updated to alpha code "II").

2. Alpha code "II" can be used when IRS determined there are no income tax issues of material tax consequence on the Form 1040 return, which require examination, or the assessment statute has already expired for the income taxes.

3. Since the extended tax assessment statute resulting from the non-filing of Other Taxes only applies to the tax liability relating to the Other Tax and does not apply to the income tax ASED, decide carefully that no income tax issues are present on the return before you update the statute to alpha code "II".

4. If there are income tax issues of tax consequence based on inspection of the Form 1040 and the period for assessment of the income taxes has not expired, don’t update the statute to alpha code "II". Take action to protect the income tax assessment statute of limitations.

(13) Alpha code “OO” is used when the IRS is relying on the provisions of IRC 6501(c)(1), relating to the filing of a false or fraudulent return with the intent to evade tax, to keep the statute open.

1. If fraud is proven, there is no limit on the period for assessment.

2. The taxpayer cannot undo the fraudulent return by filing a non-fraudulent amended return. See Badaracco v. Commissioner, 464 U.S. 386 (1984).

3. If the original return is fraudulent, an increase in the tax liability can be assessed at any time.

4. As a general rule, the IRS relies on IRC 6501(c)(1) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

   Note: The IRS has the burden of proof with respect to fraud.

(14) Alpha code "PP" is used only for the following returns and with the following guidelines:

1. Unless the exception stated in the next paragraph, only the examining group may request to update the statute to alpha code "PP" with no less than 60 days remaining on the statute andno more than 270 days remaining on the statute.

2. When you/your manager decide to pick up an examination of Form 5500 series for a prior year for which the statute of limitations has expired or has less than 271 days remaining, immediately update the statute of limitations to alpha code "PP".

3. The group manager must determine with certainty that Form 1041 won’t be due for the period under examination, or if a timely referral is made to the Examination Functional Unit (such as SBSE), that EP is no longer responsible for protecting the statute of limitations on Form 1041.

   Note: When a timely referral is made to an Examination Functional Unit for tax due on Form 1041, the statute of limitations may be updated to alpha code "PP" (with group manager approval).

4. All reasonable attempts were made to extend the ASED and documented the reasons for not extending.

5. Determine with certainty that applicable forms won’t be due for the period under examination, or if a timely referral is made to the Examination Functional Unit (such as SB/SE) that TE/GE is no longer responsible for protecting the statute of limitations on said forms.

6. If there’s to be a converted return, the tax will be within the tolerance described in IRM 25.6.1.13.2.4(1)a, Identifying Barred Statute Cases.

7. Have a valid reason to keep the examination open. Simply needing or wanting more time to close an examination without further justification isn’t a valid reason to use alpha code PP.

   Example: A valid reason includes your need to further develop the facts for the examinations of related returns, which are best gathered within the context of the Form 990 examination. Note than an examination of a related return could affect the findings of the Form 990 examination.

8. Follow the following steps for obtaining approval to use alpha code "PP":

Examiners:	Obtain TEGEDC’s written opinion on the use of alpha code "PP". TEGEDC requires 45 days to provide a written opinion. Submit your request for a written opinion in enough time to allow your manager to comply with the timeframe window in the previous paragraph. For EP, Include a memorandum of explanation (signed by the group manager) detailing the reasons for opening an examination of a prior year's return in the case file and/or save it in the RCCMS Office Documents folder using the RCCMS Naming Convention. See Employee Plans Examination Exhibits for an example of the memo Complete the statute validation and submit for manager approval in RCCMS and prepare, sign and date the memorandum of explanation certifying that the conditions in the previous paragraph were satisfied (except for the timeframe condition). If approved, immediately update the statute date to alpha code PP on AIMS, RCCMS and complete the statute validation and submit for manager approval in RCCMS. Upload the memorandum of explanation to the RCCMS case file and log the approval on CCR.
Group Managers:	Within 7 calendar days of receipt, approve the request by signing and dating the memo. Submit the memo to the area manager. The area manager won’t accept a request if it isn’t received within the timeframe window in the previous paragraph. Ensure the statute validation has been completed in RCCMS. Ensure that a memorandum of explanation (signed by the manager and detailing the reasons for not extending the statutory period) is uploaded in the RCCMS case file, and a copy of the memo is sent to the area manager.
Area Managers:	Within 7 calendar days of receipt, approve the request by signing and dating the memo. A non-response is not approval.

9. Include the following items in the Memorandum of Explanation:

The returns and years for which alpha code PP is requested.

Estimate of any penalty for each return, and a description of reasonable cause if so established.

Actual statute expiration date for each return.

The reason for the request to use alpha code PP.

The examination steps and issues that remain, and an estimated closing date.

The dates a statute extension was solicited.

An explanation why a statute extension wasn’t needed or wasn’t executed after extension requests.

Statement of certainty the Form 990 or Form 990-EZ won’t result in a converted tax return.

If there will be a converted income tax and penalty, include an estimate of the tax and penalty.

Signature lines for the examiner, GM, and area manager.

Attach TEGEDC’s written opinion.

10. If we later determine that alpha code "PP" was inappropriate, you may need to complete Form 3999 per IRM 4.70.12.3.7.8, Barred Statute Reporting - Form 3999, Statute Expiration Report.

11. Include a copy of the AIMS print in the case file (or RCCMS) to verify the date the statute was updated to alpha code "PP".

12. The use of alpha code "PP" doesn’t relieve you from carefully monitoring normal statute expiration dates for all examined returns.

(15) Alpha code "WW" is used is to indicate that, per IRC 6501(c)(10), the period for assessment of tax for to a "listed transaction" that the taxpayer failed to disclose as required under IRC 6011 won’t expire before one year after the earlier of either: i) the date the taxpayer discloses the transaction per prescribed procedures (see Rev. Proc. 2005-26), or subsequently published guidance) or ii) the date a "material advisor" meets the requirements of IRC 6112 for a request by the Secretary under IRC 6112 relating to the transaction.

1. If neither the taxpayer nor the "material advisor" disclose the required information, the period of time for assessment of any tax with respect to the "listed transaction" is unlimited.

2. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question and IRC 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period prescribed by IRC 6501(a).

3. IRC 6707A(c)(2) defines a "listed transaction" as a transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction.

4. IRC 6501(c)(10) should generally be relied upon to extend the period for assessment only in those instances when the normal three year statute for the year has expired.

5. The statute may be updated to alpha code "WW" when you’ve determined that IRC 6501(c)(10) applies and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(10) written TEGEDC approval is obtained in advance of the normal three-year assessment statute expiration date, and (4) written area manager approval is obtained in advance of the normal three-year assessment statute expiration date.

   Note: TEGEDC's written approval must be maintained in the case file.

6. In order to determine if the one-year period under IRC 6501(c)(10) has started to run, consult Rev. Proc. 2005-26, or subsequently published guidance, to determine if the taxpayer or "material advisor" has complied with the requirements contained in the applicable published guidance.

7. The statute is one year after the earlier of the date the taxpayer discloses the transaction, as discussed in the above-referenced revenue procedure, or the date that a "material advisor" meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112 relating to the transaction.

8. The statute date determined under IRC 6501(c)(10) can be extended by consent agreement (Form 872) but the examiner needs to bear in mind that consent agreements to extend the IRC 6501(c)(10) statute date only apply to the period for assessing the liability related to the "listed transaction".

9. The group manager will ensure the statute validation is completed and submitted for manager approval in RCCMS.

10. A copy of the AIMS print will be included in the case file (or RCCMS) to verify the date of the statute was updated to alpha code "WW".

(16) Alpha code "XX" is used is used on RCCMS to designate that a return preparer penalty under IRC 6694(b) may be assessed at any time.

1. Alpha code "XX" should not be used to reflect an alpha code statute on AIMS.

2. Return preparer penalty controls for penalties under IRC 6694(a) and IRC 6695 are to reflect a date three years after either the due date of the return (without regard to an extension of time to file) or the date the return or claim for refund with respect to which the penalty is assessed was filed, whichever is later.

3. Alpha code "XX" can be used to designate that a return preparer penalty under IRC 6713 for preparer’s unauthorized disclosure or use of taxpayer information may be assessed at any time.

4. Alpha code "XX" can also be used to designate that the penalties under IRC 6700 and IRC 6701 for promoting abusive tax shelters and aiding and abetting understatement of the tax liability, respectively, may be assessed at any time.

(1) Form 3999, is used to report barred statutes on returns requiring statute control. See Employee Plans Examination Exhibits.

(2) Form 3999 should be prepared for each taxpayer involved in returns assigned for examination and/or controlled on AIMS and/or RCCMS when the statutory period is reflected as expired should be prepared for each taxpayer involved in returns assigned for examination and/or controlled on AIMS and/or RCCMS when the statutory period is reflected as expired.

(3) One of the primary uses of the Form 3999 is to identify potential systemic problems or issues and recommendations for corrective actions.

(1) Group managers must notify the receiving manager of the closing unit or review function, via secure email, that a short statute return is forthcoming. Advance written notification includes:

• The returns and years being closed.

• Actual statute expiration date for each return.

• The reason for the short statute condition.

• The dates a statute extension was solicited.

• The amount of tax and penalty for the short statute returns.

• An explanation why a statute extension wasn’t needed or wasn’t executed after extension requests.

• Documentation of the approval of the area manager or program manager before closure.

(1) The group manager does the final review of cases before closing to Appeals, function specific closing unit, mandatory review or to the TE/GE Closing Group. Each recipient needs sufficient time for processing. See the table below for actions to take when a case meets certain deadlines:

(1) An imminent statute return is a return with 90 days or less remaining until the statute expiration date.

(2) For imminent statute returns subject to a mandatory review, examiners assume the responsibility for preparing final closing letters including 90-day letters.

(3) Examiners:

1. For instructions on preparing a final adverse determination letter (FADL), see IRM 4.70.14.6.9.2, EO – Final Adverse Determination Letter Case Processing.

2. For instructions on preparing a SNOD, see IRM 4.8.9, Statutory Notices of Deficiency.

3. For instructions on preparation of Letter 3523, Notice of Employment Tax Determination Under IRC 7436. See IRM 4.8.10, Notice of Employment Tax Determination Under IRC 7436.

4. Arrange for pre-issuance review of the draft 90-day letter with TEGEDC. Refer also to the TE/GE Area Counsel Directory.

5. Review functions are not available for pre-issuance review.

6. With the group manager’s approval, send the completed 90-day letter package to the appropriate area address in order to obtain the signatures on the 90-day letter. Include pre-addressed mailing envelopes with the package.

   Note: TEGEDC's approval is not required for agreed declaratory judgment cases.

   Reminder: TEGEDC generally requires up to 45 days to provide legal advice.

(4) Area Office:

1. Regarding the SNOD and Letter 3523, Notice of Employment Tax Determination Under IRC 7436, the area manager signs and issues the 90-day letter to the taxpayer via certified mail.

2. Regarding the FADL, forward the two copies of the FADL to the Manager, FSL/ET (or designee) for signature. The Manager, FSL/ET (or designee) will return the signed FADLs to the area office for issuance via certified mail.

   Exception: ITG Technical prepares and issues all Statutory Notices of Deficiency and Notice of Employment Tax Determination Under IRC 7436, and suspends the case in ITG Technical during the 90-day period.

(5) Examination groups indicate on Form 3918-A, the following:

1. The 90-day letter that was issued and the date issued. See the "Other" checkbox (or the "Stat Notice Issued Date" checkbox), located in the "Mandatory Review/Operations, Planning & Review" section of the form.

2. The recomputed statute date after issuing an SNOD or Letter 3523, Notice of Employment Tax Determination Under IRC 7436. See IRM 4.5.2-5, Computation of Statute Dates.

   Note: There is no recomputed statute date after issuing a FADL.

(6) If you had not issued a 30-day letter by the time a statute date is imminent, do the following:

1. Consult with TEGEDC whether to issue a substitute transmittal letter in lieu of a 30-day letter.

2. If the substitute transmittal letter is to be issued, determine the content, format, timing and issuance of the letter with TEGEDC.

3. Include in the transmittal letter why a standard 30-day letter can’t be issued if so advised by Counsel.

4. Include the most recent Taxpayer Advocate Service (TAS) paragraph in the cover letter by reviewing TAS paragraphs in recently published 30-day letters.

5. Enclose your report of examination if so advised by Counsel.

6. Issue the substitute transmittal letter transmitting your report of examination, either before or on the day of issuance of the 90-day letter to which it pertains.

(7) Close the imminent statute case to Mandatory Review for suspense and storage within five (5) business days of issuance of the 90-day letter.

(1) Group managers and Managers, Mandatory Review, TE/GE Closing Group and Classification are responsible for maintaining statute controls, when applicable, for returns under their jurisdiction. This will be accomplished by the following procedures.

1. The statute control clerk or other designated employee will annotate the statute expiration date of all incoming returns on a case-tracking sheet.

2. The manager or a designated individual will verify the statute of limitations date and initial the tracking sheet as appropriate.

3. All cases received with less than 180 days on agreed cases or 365 days on unagreed cases should be assigned as soon as possible.

4. The statute control file will be checked at least monthly and, where required, the reviewers will secure consents extending the statute and update AIMS and RCCMS on assigned cases.

(1) When an IRC 401(a) plan has a qualification failure there is no statute of limitations on the number of plans years designated as not qualified. An IRC 401(a) plan is not qualified from the point at which a qualification failure first occurs.

(2) A non-qualified trust must file Forms 1041 to report income for each tax year. The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends.

(3) The normal statute of limitations date expires three years from the later of the due date of the Form 5500 series return or the date the Form 5500 series return is filed.

(4) If a Form 5500 is not filed, but is required to be filed, and you prepare a substitute for return that is established on AIMS and RCCMS, update the statute of limitations on AIMS and RCCMS to alpha code "EE" per IRM 4.70.12.3.7.7, Use of Alpha Codes.

(5) The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends.

(6) See the Statute Expiration Chart to help you determine the statute of limitations for Forms 1041. Complete this chart and place it in the case file. See Employee Plans Examination Exhibits for the Form 1041 Statute Expiration Chart.

(1) For Chapter 43 excise taxes other than IRC 4975, the statute of limitations commences to run only when the Form 5330 is filed or due, whichever is later. Examples of excise taxes where the filing of Form 5330 begins the running of the statute are:

(2) In general, for Form 5330 filed for IRC 4975 excise tax:

1. The three-year statute of limitations begins to run on the date the administrator files the Form 5500 series return. See IRC 6501(l)(1).

2. If the filed Form 5500 does not adequately disclose the prohibited transaction, the six-year statute period applies. The excise tax may be assessed at any time within six years after the later of the date the Form 5500 series return was filed or due.

   Note: Written approval from TEGEDC is required in order to rely on a six-year statute of limitations.

(3) Even if the disqualified person files Form 5330 and pays the excise tax, it is the filing of the applicable Form 5500 series return that starts the running of the statute of limitations for IRC 4975 excise tax.

(4) For prohibited transactions under IRC 4975 involving a discrete act (one-time occurrence, such as a sale), even though the taxes are imposed annually, there is only one period of limitations applicable to all the tax attributable to the prohibited transaction. Therefore, the filed or due date to be used in determining the statute of limitations date is limited to that of the initial Form 5500 return filed for the period in which the discrete act occurred.

1. It is the filing of the Form 5500 for the plan year in which the prohibited transaction occurs that starts the running of the statute of limitations for IRC 4975 excise tax imposed on a disqualified person for a discrete act. The Form 5500 filed for the year in which the discrete act occurred governs the Form 5330 statute of limitations for the initial year in which the prohibited transaction occurred, and also for all years within the taxable period. The taxable period ends on the earlier of: i) Mandatory Review mailing of the notice of deficiency (90-Day Letter), ii) the assessment of the excise tax under IRC 4975(a), or iii) the correction of the prohibited transaction.

2. The IRS must assess all excise taxes on a disqualified person for a discrete transaction, even those payable in later tax years, before the statute of limitations expires for the tax year in which the transaction initially occurred. The IRS can’t assess any excise tax on a prohibited transaction payable in any year, once the statute has expired for the disqualified person’s tax year in which the transaction occurred if that prohibited transaction is a discrete act.

3. See IRM 4.70.12.3.8.8, Securing Consents for Form 5330, for instructions on preparing Form 872 for a prohibited transaction that is a discrete act.

(5) For a prohibited transaction that is considered a continuing transaction, such as a loan or lease, the situation is different.

1. In addition to the original transaction, a new transaction is deemed to occur on the first day of each subsequent taxable year of the disqualified person. The amount involved is reported and taxed in the initial tax year and again in each subsequent tax year until the original transaction is corrected.

2. The filing of the Form 5500 return for the year in which the prohibited transaction first occurred starts the running of the statute of limitations for purposes of the tax on the actual transaction occurring in that plan year. It does not start the running of the statute of limitations for the transactions deemed to occur in subsequent plan years.

3. There are separate statutes of limitations for the transactions deemed to occur in each subsequent year. The filing of the Form 5500 return for each subsequent plan year starts the running of the statutes for transactions deemed to reoccur in that year.

4. Unlike a discrete act, the statutory period may expire for the act engaged in the first year, but IRS may assess the tax for subsequent acts deemed to have occurred for which the statutory period has not expired.

5. Excise tax related to a year for which the statute of limitations has expired may not be tiered into later years.

(6) If the excise tax omitted, without adequate disclosure on a filed return, is greater than 25% of the excise tax initially reported, the statute of limitations period is six years.

(7) Filing Form 5330 for one type of excise tax does not start the running of the statute of limitations for another type of excise tax. Examiners should contact Counsel if this situation occurs.

(1) If the trust has unrelated business taxable income for the taxable year of $1,000 or more, the trust is required to file a Form 990-T. See 26 CFR 1.6012-2(e).

(2) Form 990-T is due on the 15th day of the fourth month following the close of the taxable year of the trust.

(3) If the trust files a Form 990-T before filing a Form 5500, then the Form 990-T is the return that begins the running of the statute of limitations on the Form 990-T.

(4) If the Form 990-T is not filed, the statute of limitations starts to run based upon the Form 5500 return if the Form 5500 series return is filed.

(5) If the Form 990-T is not filed, and the criteria in IRM 4.70.12.3.8.3(4), EP Statute Control Procedures, are not met, the statute of limitations does not begin to run.

(6) If the trust files Form 990-T and the amount of omitted gross income from unrelated business activity, without adequate disclosure is greater than 25% of the reported gross income from unrelated business activity, the statute of limitations period is six years from the date the Form 990-T return was filed.

(1) The normal statute of limitations for Forms 1040 and Forms 1120 expires three years from the due date of the return or the date filed, whichever is later. A return is deemed filed on the due date of the return if filed on or before its due date.

(2) Forms 1040 are due on April 15th following the end of the tax year of the individual.

(3) Forms 1120-S are due on the 15th day of the third month following the end of the tax year of an S corporation. Except for tax years ending on June 30 and beginning before 2026, Forms 1120 are due on the 15th day of the 4th month after the end of the tax year of a C corporation. A six-month extension is allowed from that date. For tax years ending June 30 and beginning before 2026, Forms 1120 for C corporations are due on the 15th day of the third month following the end of the tax year, and a seven-month extension is allowed from that date.

(4) If the gross income omitted on the Form 1040 or Form 1120 return, without adequate disclosure is greater than 25% of the reported gross income, the statute of limitations period is six years from the date the applicable return was filed.

(1) An EP examiner would typically check to see if a Form 5329 is filed to report excise / additional taxes under:

1. IRC 4973 – Excise Tax on excess contributions to certain tax-favored accounts and annuities.

   Exception: Section 4973(a)(3) tax on excess contributions to section 403(b)(7)(A) custodial accounts is reported on a Form 5330.

2. IRC 4974 – Excise tax on certain accumulations in qualified retirement plans.

3. IRC 72(t) – Additional 10 Percent Tax on Early Distributions from Qualified Retirement Plans

(2) Generally, the statute of limitations for Form 5329 is governed by the later of the due date or filing date of the Form 5329 except for the tax due under IRC 72(t).

(3) The IRC 72(t) tax is governed by the later of the due date or filing date of the Form 1040. (The reason is because the IRC Section 72(t) tax is an additional income tax, not an excise tax.)  Also see IRM 25.6.1.9.4.3, Forms Reporting More Than One Item of Tax.

(4) The statutory period for assessment of tax is six years from the date the return is filed when a determination is made that there has been an omission of more than 25% of the tax due, without adequate disclosure. See IRC 6501(e)(3).

(5) TEGEDC must be consulted in situations where a Form 5329 was filed reporting one kind of excise tax, but the examiner wants to pursue a different excise tax that is also reportable on the Form 5329.

(6) Examiners review the Form 1040 of the taxpayer when pursuing the IRC 4973 or IRC 4974 excise tax against that taxpayer. The examiner should check whether anything (even a "0" or "zero") was reported on the Form 1040 regarding the IRC Section 4973 or IRC Section 4974 excise tax (either on the Form 1040 itself or on an attached schedule). Consult TEGEDC in situations where the taxpayer did report something on the Form 1040 regarding an excise tax.

(7) IMF will automatically calculate a statute of limitations date for a Form 5329 established on AIMS; however, we can’t rely on the calculated date to correctly reflect the statute date for a SFR for IRC 4973 excise taxes.

(8) Update the statute of limitations to alpha code "EE" when no return has been filed and the statute of limitations has not started.

(9) If AIMS and/or RCCMS reflects an incorrect statute date, notify your manager and update the statute of limitations through RCCMS with the "Update AIMS" box checked.

(1) Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

(2) Consents related to a Form 5500 are secured for the related Form 1041.

(3) Use the most current version of Form 872-H when extending a statute of limitations for a Form 1041 related to a Form 5500.

(4) Also send Form 56 to the trustee(s) for completion when extending the statute of limitations on a trust. See Employee Plans Examination Exhibits for an example of a completed Form 56.

(5) The statute of limitations for a Form 1041 related to a Form 5500 expires three years from the later of:

1. The due date of the Form 5500 (the last day of the seventh month after the end of the plan year), or

2. The date the Form 5500 was filed.

(6) Once a plan is no longer qualified under IRC 401(a), realized income earned by the trust becomes taxable.

1. The trust must file a Form 1041 for those years during which the plan is disqualified and the statute of limitations is open.

2. The Form 1041 is filed on behalf of the trust by the trustee.

3. The trust is responsible for paying the tax, and the trustee is responsible for making sure that the Form 1041 is filed and the taxes are paid.

4. The trustee (or authorized representative) must sign the statute extension form (Form 872-H) in order for the extension to be valid.

   Note: If the trust has multiple trustees, review the trust document to determine if multiple trustees are required to sign Form 872-H. If the trust document doesn’t specifically require the signature of more than one trustee, the signature of one trustee is sufficient.

   Note: You (the examiner) must verify fiduciary authority to ensure the validity of the consent. You can verify this by reviewing the plan and/or trust instrument. Include in the case file a copy of the documentation under which the fiduciary derives the authority to act and which documents the fact that such authority remains in full force and effect on the date the consent is signed by the fiduciary.

5. Form 872-H must be signed by a current trustee and dated, which may be a different individual than the person who was a trustee when Form 5500 was filed.

(7) Use Form 872-H when extending a statute of limitations for a Form 1041 related to Form 5500.

(8) Since an examination of Form 5500 may result in the revocation or disqualification of the plan, consents must be secured for the trust for the calendar year.

(9) The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends. For example, if the plan years ending September 30, 2016 and September 30, 2017 are being examined and it is determined that issues exist that may result in revocation or disqualification of the plan:

1. Form 872-H would be secured for the trust year ending 12/31/2015. If the Form 5500 for the 9/30/2016 plan year was filed timely on 4/30/2017, the statute of limitations for the trust year ending 12/31/2015 would expire on 4/30/2020.

2. Form 872-H would be secured for a short trust year (10/1/2015 through 12/31/2015) if the 9/30/2016 plan year is the initial year of proposed revocation or disqualification (for example, the plan sponsor failed to include eligible employees in the plan and you determined that this issue didn’t occur in the 9/30/2015 plan year).

   Note: See Employee Plans Examination Exhibits for an example of a completed Form 872-H for a short tax year.

3. If you need to extend the statute of limitations for the trust year ending 12/31/2016, you’d complete Form 872-H for the trust year ending 12/31/2016 for a full calendar year (1/1/2016 through 12/31/2016). The statute of limitations would be based on the Form 5500 for the plan year ending 9/30/2017. The statute of limitations for the trust year ending 12/31/2016 would expire on 4/30/2021 if the Form 5500 for the 9/30/2017 plan year was timely filed on 4/30/2018.

   Note: When you must extend the statute of limitations for the trust year ending 12/31/2016, do not neglect to also extend the statute for the trust year ending 12/31/2015. See Employee Plans Examination Exhibits for an example of a completed Form 872-H for the short tax year (12/31/2015) and the subsequent full trust year (12/31/2016).

4. If the plan disqualification extends to an earlier plan year, Form 872-H would be secured for the entire 2015 calendar year (for example, the plan sponsor failed to amend the plan timely for EGTRRA, or the plan sponsor failed to include eligible employees in the plan in an earlier plan year).

   Note: See Employee Plans Examination Exhibits for an example of a completed Form 872-H for a full trust year.

(10) Generally, the name of the trust should be listed on the "Name(s)" line of Form 872-H, unless since filing, there has been a name change.

(11) If the trust name has changed since the applicable Form 5500 was filed, prepare the consent using both the current trust name and the former name of the trust (for example, "XYZ Profit Sharing Trust, formerly XYZ ESOP Trust").

(12) Include the plan number on the "Name(s)" line.

(13) If the trust has its own EIN, list it on the "Taxpayer Identification Number" line in the header of Form 872-H.

1. Do not use the plan sponsor's EIN on Form 872-H.

2. If the trust does not have an EIN, then leave the "Taxpayer Identification Number" line on Form 872-H blank.

3. Research to determine if the trust has an EIN: Ask the plan sponsor or trustee if the trust has its own EIN. Also, review all documentation you received when reviewing the plan assets for the existence of a trust EIN.

   Note: Verify that the trust EIN is correct via IDRS research with the INOLES command code (i.e., INOLES 75-0000000).

4. If the trust does not have its own EIN, the taxpayer can obtain an EIN for the trust by: i) filing Form SS-4 (see Form SS-4 instructions) or ii) online at Form SS-4 Instructions . See IRM 4.70.12.3.8.13, Obtaining a Trust EIN.

(14) List the current address on the appropriate lines.

(15) List the word "Income" on the "Kind of tax" line of Form 872-H.

(16) List a date on the "Expiration date" line of Form 872-H that is far enough in the future to allow ample time for case processing.

(17) List the following information in the "Internal Revenue Service Signature and Title" section:

1. List the name of the authorized individual's name (for example, group manager's name) who will sign the consent on the "IRS Official's Name" line.

2. List in the title of the authorized individual (such as Manager, Group 7672) on the "IRS Official's Title" line.

(18) Complete Form 56. See Employee Plans Examination Exhibits.

(19) Mail Form 56 to the trustee along with the two original Form 872-H.

(20) The trustee(s) must sign both Forms 872-H exactly as his/her name appears on Form 56. The trustee must be a current trustee.

(21) Per IRS Delegation Order 25-2 (see IRM 1.2.2.15.2), group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

(22) Persons officially acting for someone authorized to sign consents may sign consents.

1. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned.

2. Attach the document giving authority to act to the IRS’s copy of the consent.

(23) Make sure the consent is dated on the "Date signed" line next to the signatures.

(1) Use Form 872-H to extend the statute of limitations for a master trust.

(2) When extending a statute of limitations related to a master trust, secure a statute extension for the entire master trust.

(3) When completing Form 872-H, and Form 56 for a master trust:

1. Use the name of the master trust.

2. Use the EIN of the master trust (all have an EIN).

3. Use the address of the master trust.

   Note: If the trustee is an institution then the name on the Form 56 will be the name of the institution and then an individual will sign the Form 56 on behalf of the financial institution. But that individual person is not the trustee. The financial institution is.

(4) If the taxpayer or POA requests a restricted consent, including a restricted consent that attempts to limit the consent to the plan under examination, the restricted consent must be approved by TEGEDC prior to its execution. If the taxpayer or POA requests that restrictive language be added to a consent, the restrictive language must be approved by TEGEDC prior to the execution of the restricted consent.

(5) Form 872-H must be signed by the trustee of the master trust.

(6) Since the name of the master trust is being used on Form 872-H, document the CCR and the workpapers to explain that plan assets are invested in a master trust and that Form 872-H was secured to extend the statute of limitations on the master trust.

(7) Update the statute of the Form(s) 5500 under examination in RCCMS for the plan year(s) that correspond to the years of the master trust that were extended with Form 872-H.

(1) Use the most current version of Form 872 when extending a statute of limitations for a Form 5330.

(2) Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

(3) A Form 5330 examination is considered agreed if:

1. The issue giving rise to the excise tax has been corrected (in the case of IRC 4971 and IRC 4975 excise tax), and

2. The responsible party has filed Form 5330 (or signed and submitted Form 870-EP) for the correct amount of tax.

   Note: A case is considered to be an agreed case if these two items occur, even if no taxes have been paid at the time the case is ready to close.

(4) Remember that for Chapter 43 excise taxes, other than for prohibited transactions (IRC 4975), the statute of limitations starts to run only when the Form 5330 is filed or due, whichever is later. For all excise taxes other than IRC 4975, prepare Form 872 only if:

1. Form 5330 was filed,

2. The tax reported is incorrect, and

3. The statute of limitations is less than the number of days specified above.

   Note: See IRM 4.70.12.3.8.2, EP Statute of Limitations for Form 5330, for additional information on determining the statute of limitations for Forms 5330.

(5) Remember that for IRC 4975 excise tax, the statute of limitations is initially based on the Form 5500 series return filed for the plan year in which the prohibited transaction occurred. The normal statute of limitations date is three years following the later of the date the Form 5500 was filed or due.

(6) Prepare Form 872 to extend the statute of limitations for a Form 5330 for any excise tax listed in. IRM 4.70.12.3.8.2, EP Statute of Limitations for Form 5330 other than tax under IRC 4975 for a discrete prohibited transaction as follows:

1. List the complete name of the person or entity responsible for filing the Form 5330 on the "Name(s)" line.

2. List the EIN or SSN of the person responsible for filing the Form 5330 in the "Taxpayer Identification Number" block.

3. List the current address of the person or entity responsible for filing the Form 5330 on the address line.

4. For IRC 4975 excise tax, insert "IRC 4975 excise" as the type of tax.

5. For all other excise tax, insert "excise" as the type of tax.

6. Enter the tax period for which the statute is being extended.

   Note: The tax period must be the taxpayer’s tax year and not the plan year.

7. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

8. Fill in the name and title of the authorized individual who will sign on behalf of the IRS (normally the group manager).

   Note: IRS Delegation Order 25-2 authorizes group managers and reviewers (grade GS-11 or higher) to sign consents (Form 872 or Form 872-H).

   Note: Effective December 21, 2018, digital signatures by Service personnel are allowed when executing statute extensions by consent.

9. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

10. Make sure the consent is dated on the "Date signed" line next to the signatures.

11. See Employee Plans Examination Exhibits for an example of Form 872 for a continuing prohibited transaction (IRC 4975 excise tax).

(7) For prohibited transactions involving a discrete act, you must obtain an extension that covers not only the tax year of the disqualified person for the year in which the act occurred, but also each subsequent year.

1. The preferred way to prepare an extension is to complete a restricted consent that specifies the type of tax (IRC 4975 excise) and the initial year in paragraph (1) of Form 872.

2. Include in the consent an additional paragraph (6) that lists each subsequent tax year beginning with the second tax year and ending with the current tax year.

   Example: Assume a discrete prohibited transaction occurred on July 1, 2014, during the plan year ending December 31, 2014. Also assume that the transaction involves a disqualified person with a calendar tax year. If the consent is being mailed on October 10, 2017, paragraph (6) would read as follows: "This consent also applies to returns filed for the periods ended December 31, 2015, December 31, 2016, and December 31, 2017, for tax attributable to prohibited acts occurring during the plan year ending December 31, 2014."

3. See Employee Plans Examination Exhibits for an example of Form 872 for a discrete prohibited transaction.

   Note: For discrete acts, the statute is technically extended for each affected taxable year if a consent is obtained for the year in which the prohibited transaction occurred. However, obtaining an extension that covers each year will resolve any questions as to whether later years have closed because specific extensions were not obtained for those years.

(8) For prohibited transactions involving either discrete or continuing transactions:

1. More than one disqualified person may be involved in the same prohibited transaction. In such cases, all of the parties are jointly and severally liable.

2. Secure the consent to extend the statutory period from all disqualified persons who may be subject to tax on the prohibited transaction.

   Note: Remember that, initially, the three-year statute of limitations will commence to run on the date the administrator files the Form 5500 series return.

3. While each disqualified person must sign a separate consent, only one must pay the tax.

4. Obtaining a statute extension for the Form 5500 does not extend the statute of limitations for IRC 4975 excise tax on a prohibited transaction that occurred in that plan year.

(1) If the trust has engaged in activities which result in UBI, the trust is required to file a Form 990-T for those years during which the trust has engaged in such activities and for which the statute of limitations is open.

(2) If the trust files a Form 990-T prior to the filing of a Form 5500, then the Form 990-T is the return that begins the running of the statute of limitations on the Form 990-T. If the Form 990-T is not filed, examiners should take the conservative approach and assume the filing of the Form 5500 starts the SOL running on the Form 990-T.

(3) The Form 990-T is filed by the trustee(s) on behalf of the trust.

(4) The trust is responsible for paying the tax, and the trustee is responsible for making sure the Form 990-T is filed and that the taxes are paid.

(5) The trustee must sign the Form 872-H in order for the extension to be valid.

(6) Also send Form 56 to the trustee(s) for completion when extending the statute of limitations on a trust. See Employee Plans Examination Exhibits for an example of a completed Form 56.

(7) If the trust is required to file a Form 990-T, the taxable year of the trust is the same as the plan year of the trust. A trust does not lose its exempt status due to UBI; therefore, if the plan is on a calendar year, the Form 990-T is filed based upon a calendar year. If the trust is on a fiscal year, the Form 990-T is filed based upon the plan’s fiscal year. The Form 872-H must reflect the plan year of the trust as the period being extended.

(8) Prepare Form 872-H to extend the statute of limitations for a Form 990-T as follows:

1. List the name of the trust on the "Name(s)" line of Form 872-H.

   Note: If the trust name has changed since the applicable Form 5500 was filed, the consent should be prepared using both the current trust name and the former name of the trust (for example, "XYZ Profit Sharing Trust, formerly XYZ ESOP Trust").

2. List the employer identification number (EIN) of the trust in the "Taxpayer Identification Number" block.

   Note: Do not use the plan sponsor's EIN. If the trust doesn’t have an EIN, the trustee must get one before a consent can be secured for Form 990-T. See IRM 4.70.12.3.8.13, Obtaining a Trust EIN, for the procedures in obtaining a trust EIN.

3. List the current address of the trust on the address line.

4. Insert "income" as the type of tax.

5. Enter the tax period for which the statute is being extended.

   Note: For Form 990-T this would be the same period as the plan year.

6. Input a date on the "Expiration date" line of Form 872-H that is far enough in the future to allow ample time for case processing.

7. Type the name of the authorized individual's name (e.g., group manager's name) who will sign the consent on the "IRS Official's Name" line.

8. IRS Delegation Order 25-2 (see IRM 1.2.2.15.2) provides that group managers and Reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

   Note: Effective December 21, 2018, digital signatures by Service personnel are allowed when executing statute extensions by consent.

9. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

10. Make sure the consent is dated on the "Date signed" line next to the signatures.

(9) See Employee Plans Examination Exhibits for an example of Form 872-H for Form 990-T.

(1) Use the most current version of Form 872 when extending the statute of limitations for a Form 1040 or Form 1120.

(2) Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

(3) Complete Form 872 as follows:

1. Prepare the consent using the same name(s) as that under which the return was filed, unless since filing, there has been a name change. If the name changed, prepare the consent using both names (for example, "Mary J. Smith, formerly Mary J. Brown").

2. For a jointly filed Form 1040, list both spouses’ names (for example, William L. Smith and Jane M. Smith).

3. List the EIN or SSN in the "Taxpayer Identification Number" block. For a jointly filed Form 1040, list only the primary SSN.

4. Insert "income" as the type of tax.

5. Use the taxpayer’s current address, rather than the address shown on the return. Determine the current address based on the best information available, including IDRS, correspondence from the taxpayer, etc.

6. Enter the tax period for which the statute is being extended.

7. State the year covered by the consent in full, including the month, day, and year.

8. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

9. Type the name of the authorized individual's name (for example, group manager's name) who will sign the consent on the IRS Official’s Name line.

10. The consent must be signed and dated by a corporate officer when extending the statute for a Form 1120.

11. The consent must be signed and dated by both spouses when extending the statute for a jointly filed Form 1040.

    Note: Alternatively, each spouse (or former spouse, if the taxpayers are no longer married) may sign two copies of separate Forms 872.

12. IRS Delegation Order 25-2 (see IRM 1.2.2.15.2) provides that group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872 or Form 872-H).

    Note: Effective December 21, 2018, digital signatures by Service personnel are allowed when executing statute extensions by consent.

13. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

14. Make sure the consent is dated on the "Date signed" line next to the signatures.

(4) Wherever practicable, any notice for a joint return must be sent separately to each individual filing the joint return. See Act section 3201(d) of RRA 98.

(1) Use the most current version of Form 872 when extending a statute of limitations for a Form 5329.

(2) Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

(3) Remember that the statute of limitations commences to run only when the Form 5329 is filed or due, whichever is later, so preparation of Form 872 is only necessary if:

1. Form 5329 was filed, and

2. The statute of limitations is less than the number of days specified above.

   Note: The IRC 72(t) tax is governed by the later of the due date or filing date of the Form 1040. (The reason is because the IRC Section 72(t) tax is an additional income tax, not an excise tax.) Also see IRM 25.6.1.9.4.3, Forms Reporting More Than One Item of Tax.

(4) Prepare Form 872, when extending the statute of limitations for a Form 5329, as follows:

1. List the complete name of the person responsible for filing the Form 5329 on the "Name(s)" line.

   Note: IRC 4973 and IRC 4974 do not have joint and several liability. So, the consent would only be executed by the person who is liable for the tax (even if they filed a joint Form 1040 with their spouse).

2. List the SSN of the person responsible for filing the Form 5329 in the "Taxpayer Identification Number" block.

3. List the current address of the person responsible for filing the Form 5329 on the address line.

4. List "excise" as the type of tax.

5. Enter the tax period for which the statute is being extended.

   Note: The tax period must be the taxpayer’s tax year and not the plan year.

6. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for case processing.

7. Fill in the name and title of the authorized individual who will sign on behalf of the IRS (normally the group manager).

   Note: IRS Delegation Order 25-2 authorizes group managers and reviewers (grade GS-11 or higher) to counter sign Form 872.

   Note: Effective December 21, 2018, digital signatures by Service personnel are allowed when executing statute extensions by consent.

8. Persons officially acting for someone authorized to sign consents may sign consents. Be cautious and document the authority for the acting assignment in case the person’s authority to sign the consent is later questioned. Attach the document giving authority to act to the IRS’s copy of the consent.

9. Make sure the consent is dated on the "Date signed" line next to the signatures.

(1) IRC 6707A imposes a penalty for failure to include "reportable transaction" information on a return.

(2) "Reportable transaction" means any transaction with respect to which information is required to be included with a return or statement because that transaction is of a type which the Secretary determines as having a potential for tax avoidance or evasion. See IRC 6707A(c)(1).

1. A "listed transaction" is a type of "reportable transaction".

2. A "listed transaction" is defined as a reportable transaction which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of IRC 6011.

(3) Generally, the initial statute of limitations period for purposes of IRC 6707A is determined by the statute of limitations for the applicable tax return(s) (Forms 1040, 1120 1120-S or 1065), which is the later of three years from the date the return is filed or due.

(4) If a "reportable transaction" exists, IRC 6011 requires that the transaction be reported on the applicable income tax return (Forms 1040, 1120, 1065) of the entities involved in the transaction.

(5) The taxpayer should file Form 8886 with the applicable tax return(s) and the Office of Tax Shelter Analysis (OTSA).

(6) If Form 8886 is not filed with the applicable tax return and with OTSA, additional time may be added to the normal three year statute of limitations per IRC 6501(c)(10).

(7) Per IRC 6501(c)(10), if a taxpayer fails to include on any return or statement for any taxable year any information with respect to a "listed transaction", which is required under IRC 6011 to be included with such return or statement, the time for assessment of any tax imposed by this title with respect to such transaction shall not expire before the date which is 1 year after the earlier of:

1. The date on which the Secretary is furnished the information so required, or

2. The date that a material advisor meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112(b) relating to such transaction with respect to such taxpayer.

(8) If the normal statute has expired, seek written approval from Counsel for support of the extended statute under IRC 6501(c)(10) for a "listed transaction".

1. Include Counsel’s written approval in the penalty case file.

2. Get the Counsel attorney’s contact information from the EP Abusive Tax Avoidance Transaction (ATAT) Coordinator.

   Note: The contact information for ATAT Program Coordinator is found on the TE/GE Fraud Awareness Knowledge Base at the ATAT Program Contacts link.

(9) Form 5500 is not subject to the IRC 6707A penalty.

(10) When an IRC 6707A penalty file is closed from the group, agreed cases should have at least 210 days remaining on the statute of limitations and unagreed cases, at least one year.

1. Solicit a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.

2. A case is considered agreed if Form 870-EP is signed by the taxpayer.

(11) When extending the statute on an IRC 6707A penalty case (Forms 1120, 1120-S, 1065, or 1040), prepare Form 872 (using the most current version) for each entity or person involved in the transaction as follows:

1. List the complete name of the person or entity on the "Names(s)" line of Form 872.

2. List the employer identification number (EIN) or social security number (SSN) on the "TIN" line of the Form 872.

3. List the current address of the person or entity on the "Address" line of Form 872.

4. If you’re extending both the income tax statute and IRC 6707A penalty statute, list "Income and IRC 6707A Penalty" on the "Kind of tax" line of Form 872.

5. If you’re extending the IRC 6707A penalty statute only, list "IRC 6707A Penalty" on the "Kind of tax" line of Form 872.

6. Enter the tax period for which the statute is being extended on the applicable line of Form 872.

7. Enter a date on the "xpiration date" line of Form 872 that is far enough in the future to allow ample time for the penalty case to process.

8. Include in the consent an additional paragraph (6) that reads as follows: "Without otherwise limiting the applicability of this agreement, this agreement also extends to the expiration date identified in paragraph (1) above, the period of limitations for assessing any penalty pursuant to IRC section 6707A, Penalty For Failure to Include Reportable Transaction Information with the Return, with respect to the taxpayers, kind of tax and tax periods identified above."

9. To extend the statute for a partnership (Form 1065), the Form 872 should be signed by the General Partner and not the Tax Matters Partner. Since there isn’t a line on the Form 872 for a General Partner to sign, strike through the words "Corporate Name" and insert "Partnership Name" and strike through "Corporate Officer" and insert "General Partner".

10. Type the name of the authorized individual's name (e.g., group manager's name) who will sign the consent on the "IRS Official's Name" line.

11. Per IRS Delegation Order 25-2, group managers and reviewers (grade GS-11 or higher) are authorized to sign consents (Form 872).

    Note: Effective December 21, 2018, digital signatures by Service personnel are allowed when executing statute extensions by consent.

12. Make sure the consent is dated on the "Date signed" line next to the signatures.

13. See Employee Plans Examination Exhibits for an example of a completed Form 872 for a IRC 6707A penalty case.

(12) Once a signed Form 872 has been secured and countersigned, update Non-Master File AIMS for the penalty case, AIMS (for the taxable return if the 872 covers it), and RCCMS.

(13) If the taxable return is established on AIMS, the group responsible for the return must update AIMS.

1. If the return is charged out to an SB/SE group, that group must update the statute.

2. If the return is not charged out to any group (the examination is not established on AIMS by either EP, SB/SE or LB&I), follow the instructions in IRM 4.70.12.3.8.12(14), Securing Consents for IRC 6707A Penalties, to update the statute on Master File using Form 3177.

3. If Form 872 is secured only for the IRC 6707A penalty, update only Non-Master File AIMS for the penalty case and RCCMS.

(14) When updating the statute of limitations using Form 3177 for a Form 1120, 1120-S, 1065, or 1040 for which an examination has not yet been established on AIMS, complete and process Form 3177 as follows.

1. Initiator – Enter the examiner’s name and phone number.

2. Date – Enter the current date.

3. Taxpayer Name – Enter the name of the Taxpayer.

4. EIN OR SSN – Enter the TIN of the Taxpayer.

5. TRC – Highlight "560" and enter the new statute date as MM/DD/YY.

6. MFT Code – Enter 02 for Form 1120, 06 for Form 1065, or 30 for Form 1040.

7. Taxable Period – Enter the taxable period being extended as YYYY/MM.

8. Efax the completed Form 3177, Form 872 and AMDIS print to the manager of the TE/GE Closing Group in Brooklyn. The efax number is 855-821-0089.

9. The Efax Cover Sheet should contain the following note: "Please update the statute on this return. The return is not controlled on AIMS."

10. See Employee Plans Examination Exhibits for an example of a completed Form 3177.

    Note: If a return is controlled on AIMS (an examination of the applicable return has been initiated), the group with the open examination must complete this update to the statute. Do not send it to the manager of the Support Processing Unit.

(1) This section is to be used when a trust has a required filing requirement for Form 990-T or Form 1041.

(2) Solicit the trust EIN from the plan sponsor.

(3) If the plan sponsor provides a trust EIN, secure a BMFOLI print to make sure the EIN is not being utilized to file returns other than trust returns (e.g., Form 990-T or Form 1041).

(4) If the trust does not have an EIN and the plan sponsor will not obtain one, obtain one by faxing Form 4442 to the EO Entity Unit at Ogden Campus. The e-fax number is 855-306-0953. See Exhibit 8 at  Employee Plans Examination Exhibits for an example of a completed Form 4442.

(5) Obtaining a new EIN for the trust will automatically establish an entity module.

(1) Requesting CP 2100 Data: Review PMFOLB for the entity and tax years needed. This will ensure research has been conducted and that CP2100 notices exist for the entity and years requested.

1. Send an encrypted email to *TE/GE CPC Case Assignment. The subject line of the email should include “Request for CP2100 recreates”. Include the PMFOLB prints for each tax year.

(2) Requesting IRPTR data: When IRPTR data is requested, the records populate to the IRPTR table on RICS. Once populated, the records are imported to Excel and manipulated into a useable format.

1. Review PMFOLS for the entity and tax years needed. This will ensure research has been conducted and that data exists for the entity and years requested.

2. Send an email to *TE/GE CPC Case Assignment. The subject line of the email should include “Request for IRPTR data”. Include the PMFOLS print for each tax year. Include the completed Form 15270 Information Returns Processing Transcript (IRPTR) Form.

3. Once the Excel report is created, it is sent to the recipient via Outlook or TEAMS, depending on the size of the file. In the event the file is too large for TEAMS, it can be saved and encrypted on a flash drive and then securely mailed to the recipient overnight.

(1) Non-Master File is used to control returns or entities that are not available from the Master File.

(2) Data for Non-Master File assessments are on the ANMF system. See Document 6209, Section 7 for Non-Master File transaction codes and other related information.

(3) Certain transactions in EP, such as closing agreement sanction payments, are posted on Non-Master File.

(4) The Non-Master File MFT code for closing agreements is 28.

(5) Get a Non-Master File transcript by faxing or emailing the Accounting Operations Department in the Kansas City Submission Processing Center.

(6) Prepare Form 10321:

1. Address the EEFax to the Kansas City Submission Processing Center.

2. Use the EEFax number for the Accounting Operations Department (888) 981-6493.

3. Send an email to *W&I KCSPC Non-Master File Team.

4. Include your name, address, phone and EEFax number.

5. Request in the bottom section of Form 10321, a Non-Master File transcript and list the name of the entity, TIN of the entity, MFT 28, and the tax period (e.g., "Please provide a Non-Master File transcript for XYZ Corporation; EIN XX-XXXXXXX; MFT 28; Tax period 201911").

   Note: If the transcript request is for a closing agreement, the tax period is the year and month the closing agreement is signed.

(7) A clerk in the Accounting Operations Department of the Kansas City Submission Processing Center will print the transcript and either email or EEFax it to you.

(1) Request access to the IDRS System, through the Business Entitlement Access Request System (BEARS).

(2) Reset an IDRS password using the self-service password management (PWMGT) tool within IDRS:

1. Activate the PWMGT tool by using command code PWACT. Follow the on-screen prompts.

2. Use the PWMGT tool, skip the password field in SINON screen and answer the security question in the PWMGT field. Follow the on-screen prompts.

   Note: If the PWMGT tool is inactive or becomes disabled, you’ll need to submit a reset password request through BEARS.

(3) Use the OS GetServices ticket process for all IDRS Service Change Requests, such as a request to:

• Unlock an employee’s profile or terminal, or

• Add command codes to the employee’s user profile.

  Note: Find instructions titled “IDRS OS GetServices Request” to submit an IDRS Service Request on the Data Security Tab under the TE/GE Automation Support Tab on the TE/GE SharePoint Site. See https://irsgov.sharepoint.com/sites/bspautomationsupport/SitePages/Home.aspx.

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

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

1. If yes, the organizational requirements have been satisfied.

2. If not, obtain the Determination Administrative File (determination file) in RCCMS.

3. If RCCMS doesn’t include the determination file, request a copy of the file by sending a secure email, attaching Form 14264, Request for EP or EO Administrative File form, to *TEGE Determinations Processing.

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

1. If the determination file indicated the organization attested it made conforming amendments as part of the determination process, but the examination reflects no attempt to implement the required changes, propose revocation after discussion with the manager.

2. If the organization attempted to implement the required changes but wasn’t successful, (e.g., the organization added a dissolution clause, which the examiner concludes still doesn’t satisfy the organizational test), inform the organization that it must amend its organizing document. Prior to closing the case, secure a conformed copy of the amendments consistent with IDR procedures.

3. If the determination file shows that the organization applied on Form 1023-EZ and doesn’t have organizing documents, propose revocation after discussion with the manager.

(4) If you secure conformed copies of amended organizing documents after the start of the examination to satisfy organizational requirements, issue Letter 1744, Change Due to Correction of Operations Closing letter, to the organization.

1. Close the case with DC 19, Amendment Secured, unless other issues require a higher priority DC.

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

1. Close the case with the proper revocation DC.

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

(1) ITG is the central point for all IRS contacts with federally recognized Indian tribes.

1. ITG is also responsible for ensuring that the IRS is in compliance with relevant Presidential Executive Orders that outline the relationships and protocols required in working with tribes.

2. The ITG staff is specially trained in the unique areas of tax law and protocol that apply to Indian tribes

(2) You must contact the local area ITG specialist before making initial contact on EO examinations related to ITG entities, or as soon as you’re aware of a relationship. For a current list of the local area contacts, see the ITG website.

(3) When an EO/ITG relationship is apparent, Classification includes a copy of the ITG contact listing in the file. However, there are no defining codes for these entities, so it's your responsibility to determine whether or not to contact ITG.

(4) Area manager: Monitor these cases monthly as sensitive cases, once they are identified.

(1) The critical concerns with federal entities are employment tax issues and information return reporting. While the number of federal entities is few, they have significant revenue impact due to their.

1. High volume of expenditures, both payroll and non-payroll.

2. Involvement with public sector employers and employees.

(2) Section 530 of the Revenue Act of 1978 and Section 218 of the Social Security Act do not apply to federal entities.

(3) Federal entities are excluded from penalty and interest provisions under Policy Statement 20-2 (formerly P-2-4), Penalties are used to Enhance Voluntary Compliance, IRM 1.2.1.12.2.

(4) There are unique protocols for working with federal entities, including the military.

(1) State and local government employees are covered for Social Security and Medicare (FICA) in one of two ways:

1. Section 218 Agreements.

2. Mandatory 1991 Social Security provisions for those who aren’t members of a public retirement system.

3. Mandatory Medicare.

(2) State and local governments make up a majority of FSL’s customers.

(3) Section 218 is one of the primary issues FSL addresses.

(1) Capture all case survey information on the RCCMS closing record: