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IRS Audits

Chapter 4. AIMS Processing

Section 12. Examined Closings, Surveyed Claims, and Partial Assessments (Cont. 4)

4.4.12  Examined Closings, Surveyed Claims, and Partial Assessments (Cont. 4)

4.4.12.4 
Examined Closings/Surveyed Claims

4.4.12.4.39 
Item. 28: Examiner’s Time

4.4.12.4.39.8  (06-01-2002)
Form 720

  1. The total time spent on the case must be reported in Item 28. Item 404(c) must reflect the time reported in Item 28 allocated to each abstract code examined.

4.4.12.4.39.9  (06-01-2002)
Assisting Other Agencies

  1. Include time spent on cases open in examination.

4.4.12.4.39.10  (06-01-2002)
Computing the Time

  1. Examination time must be as accurate as possible although this does not require maintaining a strict time record.

4.4.12.4.39.10.1  (08-01-2003)
Field Audit Time

  1. Reported in whole hours only.

  2. Effective 1/1/2004, time can be reported in 15 minute intervals. Enter the following number in the fraction section of Item 28.

    • Enter a "0" for 00 minutes

    • Enter a "3" for 15 minutes

    • Enter a "5" for 30 minutes

    • Enter a "7" for 45 minutes

     

4.4.12.4.39.10.2  (06-01-2002)
CEP Case Time

  1. TOTAL amount of time spent on the case by both the primary and support areas.

4.4.12.4.39.10.3  (08-01-2003)
Office Audit Time

  1. Reported in full hours and tenths of hours.

  2. Enter the total time shown on the case jacket, Form 4607, Examination Action and Time Record.

  3. Effective 1/1/2004, time can only be reported in 15 minute intervals. Enter the following number in the fraction section of Item 28.

    • Enter a "0" for 00 minutes

    • Enter a "3" for 15 minutes

    • Enter a "5" for 30 minutes

    • Enter a "7" for 45 minutes

     

4.4.12.4.39.10.4  (06-01-2002)
Service Center Exam Time

  1. The actual technical time applied must be entered on each return closed in all Campus Examination Operations programs. Time reporting for EGC 5XXX will continue to be tracked by tenths.

  2. See IRM 4.18, Examination Operations at Service Centers, for additional information.

4.4.12.4.39.11  (06-01-2002)
Claims for Refund (RBP)

  1. Do not include time spent on claims for refund. RBP time must be reported in Item 23.

4.4.12.4.39.11.1  (06-01-2002)
Example

  1. 4 hours spent on an examination

      Form Form
    Office Audit 4502 5344
    RBP time = 1 hours (P) Item 23=1 hr.
    Regular time = 3 hours (R) Item 28=3 hrs.

     

4.4.12.4.40  (06-01-2002)
Item 30: Examination Technique

  1. An entry of 1-4 or 6-7 is required for all examined returns.

4.4.12.4.40.1  (06-01-2002)
Claims

  1. No entry is made for surveyed claims.

4.4.12.4.40.2  (06-01-2002)
Revenue Agent (EGC 1XXX)

  1. Enter "3" for Revenue Agent.

4.4.12.4.40.3  (08-01-2003)
Tax Auditor/Tax Resolution Representative (EGC 2XXX)

  1. Enter the most recent code shown as " Technique Code" on Form 4607, Examination Action and Time Record, limited to:

    1. 1

    2. 2

    3. 6 — Only valid with Disposal Codes 01, 08, 10, 12 or 13.

    4. 7 — Only valid with Disposal Codes 10 or 13.

     

4.4.12.4.40.3.1  (06-01-2002)
Exceptions

  1. If a "1" has been entered on the Form 4607, enter "1" regardless of the most recent code shown.

4.4.12.4.40.4  (08-01-2003)
Service Center Exam (EGC 5XXX)

  1. A "2" = Correspondence Examination

  2. A "6" = No Response - valid if:

    • Disposal Code = 01 (Effective January 2004)

    • Disposal Code = 10

     

  3. A "7" = Undeliverable Mail - valid if:

    • Disposal Code = 01 and there is a claim amount present

    • Disposal Code is 13 for any case with an undeliverable statutory notice of deficiency.

     

4.4.12.4.41  (06-01-2002)
Item 31: Examiner’s Grade

  1. Enter the two digit grade of the examiner who closed the case.

  2. 03–14 are valid entries

4.4.12.4.41.1  (06-01-2002)
Revenue Agent

  1. Entry of 05, 07, 09, 11–14 required

4.4.12.4.41.2  (06-01-2002)
Tax Auditor/Tax Resolution Representative

  1. Entry of 03–09 or 11 required

4.4.12.4.41.3  (06-01-2002)
Service Center Exam

  1. Entry of 03–09 or 11 is optional

  2. Will default to a Grade 7 if not completed.

4.4.12.4.42  (06-01-2002)
Item 32: Grade of Case

  1. Group managers determine grade of case for all returns with a 1XXX employee group code.

  2. The final grade level of difficulty is determined when the examination has been completed. The manager will consider both the primary and related returns to determine the grade level.

4.4.12.4.42.1  (06-01-2002)
Primary Returns

  1. The entry for the primary return is composed of 3 digits and must be entered starting in the left most position.

4.4.12.4.42.2  (06-01-2002)
Related Returns

  1. The related returns are graded to be the same as the primary return therefore the same three digit code is used followed by an "R" .

    1. Enter the primary return information in Item 405–408 for each related return.

     

  2. No matter how selected or when assigned, include:

    1. returns filed for prior or later tax periods for the same taxpayer,

    2. related returns for the same tax period as the primary return,

    3. related returns for prior or later tax periods than the primary return.

     

  3. When the related entities are examined by other examiners, each manager grades the separate entities as separate cases and the "R" is not entered.

4.4.12.4.43  (06-01-2002)
Item 33: Examiner’s Name

  1. This item is required for area examinations only. Enter the last name and first initial only.

4.4.12.4.44  (06-01-2002)
Item 34: Adjustment Amount

  1. This field is used to reflect:

    1. delinquent returns secured by Examination

      Note:

      Effective 1/1/1999, this field is no longer used for delinquent returns. See See IRM 4.4.12.4.73. for cases closed after 12/31/1998.

       

    2. adjustments to non-taxable returns.

     

  2. Dollars only field—Do not enter cents

  3. Circle "plus" to reflect increase in income; "minus" to reflect a decrease.

4.4.12.4.44.1  (06-01-2002)
Adjustment to a Non-taxable return

  1. Enter the amount on Line 2 and Line 5.a.(1), Line 5.b.(1), etc. from Form 4605. Do not include adjustment amounts that are included more than once.

4.4.12.4.44.2  (06-01-2002)
Example:

  1. Sch K–1 has certain portfolio income and expense items that are shown on Line 4 and 11. An adjustment made portfolio income would be shown on Form 4605 as an "adjustment to portfolio income" and also as an "adjustment to investment income included in portfolio income" . To prevent adjustment amounts from being duplicated, do not include adjustments made to "investment income included in portfolio income" and investment expense in deductions related to portfolio income:

  2. If case is being closed to Appeals as unagreed, enter the entire adjustment amount in Item 34 and leave Item 18 blank.

4.4.12.4.44.2.1  (06-01-2002)
Validity Checks

  1. If the examination results in a no change (DC 01 or 02), Item 34 must be blank.

4.4.12.4.45  (06-01-2002)
Item 35: Manual Assessment Amount

  1. Enter the net of all adjustments that are processed using the quick (manual) assessment procedures.

  2. If more than one quick assessment has been processed, ensure that this entry is the total of all assessments processed. See IRM 4.4.12.4.47.8.

4.4.12.4.45.1  (06-01-2002)
Tax Adjustments

  1. Include the net total of all tax adjustments.

4.4.12.4.45.2  (08-01-2003)
Penalty Adjustments

  1. EFFECTIVE 1/1/98, DO NOT INCLUDE penalty adjustments. (i.e. TC160, 305, 320, Credit Reference #680, 681, and 682).

4.4.12.4.45.3  (06-01-2002)
Tax Credit Adjustments

  1. The net total of all credits (i.e. Reference Numbers 764, 765, 806, 807) if processed as part of the quick assessment.

4.4.12.4.45.4  (06-01-2002)
Interest Adjustments

  1. Do not include interest adjustments.

4.4.12.4.45.5  (08-01-2003)
MFT 31

  1. If the same tax will be assessed against both taxpayers, such as petitioning/non-petitioning cases, DO NOT enter the NMF Assessment amount in Item 35, otherwise enter the NMF tax assessment amount in Item 35.

4.4.12.4.45.6  (08-01-2003)
Non-Master File Assessments

  1. If the same tax will be assessed against both taxpayers, such as petitioning/non-petitioning cases, DO NOT enter the NMF assessment amount in Item 35.

  2. If different tax will be assessed such as culpable spouse cases, enter the amount of the NMF assessment in Item 35.

4.4.12.4.45.7  (06-01-2002)
Reference Number Adjustments

  1. Do not include reference number adjustments which are only used to update information fields on Master File or alert Master File to make special interest computations (i.e. Reference Numbers 221, 320, 878, 881, 882, 885, 886, 887, 888, 889, 890, and 999).

4.4.12.4.45.8  (06-01-2002)
Reopened Cases

  1. Include prior manual assessments on reopened cases if the case was reopened with AMSTUR or AMSTUB (TC 300 indicator will = 6. Do not include prior manual assessment amounts on reopened cases if the case was reopened with AM 424.

4.4.12.4.45.9  (06-01-2002)
Validity Checks

  1. AIMS contains numerous computer checks that are based on the disposal code and the Examination Results.

4.4.12.4.45.9.1  (06-01-2002)
No Change Cases

  1. This entry is not valid on:

    1. no change (DC 01 or 02) cases, or

    2. non-taxable returns (Activity Codes 224, 287–290, 480–483, and 992).

     

4.4.12.4.45.9.2  (08-01-2003)
Changed Cases

  1. There are cases that are truly changed cases, but have no examination results. These cases will require an amount of $1 in Item 35 with a Disposal Code of 12 in Item 13. Some examples of these cases are:

    1. Barred assessment cases

    2. Interest assessment only

    3. Tax assessments that are offset by credits

    4. Penalty Only cases

     

4.4.12.4.46  (06-01-2002)
Item 36: Hash Total

  1. All items that are to be included in the hash total have shaded fields on the Form 5344.

  2. The computer will compare the hash total entered in Item 36 to the total of individual items as entered by the terminal operator. This will insure the accuracy of the input of individual entries.

4.4.12.4.47  (06-01-2002)
Item 37: Delinquent Return

  1. Item 37 must always be completed when closing delinquent returns picked up during the examination and sent to the campus for processing.

  2. This entry is what gives Examination credit for a delinquent return pick-up on Table 37.

  3. If the delinquent return is incorporated into the examination, this item must be blank.

  4. If Item 37 is entered, Item 414 is required.

4.4.12.4.47.1  (06-01-2002)
Valid Code

  1. Segregate the delinquent returns secured by MFT code. For each MFT code:

    If there is: Then enter a:
    One delinquent return "T" in Item 37
    > one delinquent return "T" on 1st Form 5344 and an "R" on all the others

     

4.4.12.4.48  (06-01-2002)
Item 38: Fraud Condition Cd

  1. Enter "F" if criminal prosecution has been successfully concluded.

  2. Enter "C" if the 75% fraud penalty was asserted under IRC 6663.

4.4.12.4.49  (08-01-2003)
Item 39: Disclosure Code

  1. The appropriate three digit state agency code is entered when disclosure is made to a state agency. The entry of this field causes a TC 120 to be generated. See IRM 4.4.28 for a list of the codes.

4.4.12.4.50  (06-01-2002)
Item 40: Project Code

  1. When assignment of a project code is required and the AIMS data base is carrying an incorrect project code or no project code, enter the designated three digit code.

4.4.12.4.51  (08-01-2003)
Item 41: No Change Issue Codes (IMF ONLY)

  1. Identifies examined issues that resulted in no change to taxable income. The no-change issues codes are stored at Master File and can be viewed using IMFOLZ/BMFOLZ. If a subsequent return is examined, these codes are printed on the Form 5546.

  2. Enter eight-digit code without periods or dashes from Publication 1102, Uniform Issue List.

  3. Up to five entries may be made. If more than 5 no change issues, enter the code for the five most significant issues.

  4. A list of No-Change Issue Codes can be found on the AIMS web site.

  5. Effective 1/1/2004, alpha codes will be valid in Item 41.

4.4.12.4.51.1  (06-01-2002)
No Changes Disposal Codes

  1. Required when closing examinations with DC 01 or DC 02.

4.4.12.4.51.2  (06-01-2002)
Changed Disposal Code

  1. Should be used with other examined disposal codes if one or more classified issues result in a no change to taxable income.

4.4.12.4.51.3  (08-01-2003)
Adjusted Issues with a No Change Disposal Code

  1. In some cases, all examined issues are adjusted yet the return is closed as a Disposal Code 01 or 02 due to other circumstances, such as negative taxable income, offsetting adjustments and de minimum tax liability. In these cases, enter all 9's in Item 41.

4.4.12.4.52  (08-01-2003)
Item 43: Posting Delay Code

  1. The posting of the adjustment can be delayed from 1-6 cycles.

4.4.12.4.53  (06-01-2002)
Item I: Reviewer

  1. Reviewer’s signature and date must be entered in this field if the return was reviewed.

4.4.12.4.54  (06-01-2002)
Item J: CATP Case

  1. The box should be checked if the case is part of the Coordinated Agent/Tax Auditor Program.

  2. The Aging Reason Code 50 must be entered on the data base before closing to ensure that the case is included in the CATP reports.

4.4.12.4.55  (06-01-2002)
Item K: Tax Examiner