Part 4. Examining Process

Chapter 70. TE/GE Examinations

Section 7. Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures

4.70.7 Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures

Manual Transmittal

December 04, 2024

Purpose

(1) This transmits revised IRM 4.70.7, TE/GE Examinations, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures.

Background

The quality of a TE/GE examination is based on the adherence to TE/GE’s examination IRMs. This manual section identifies Special Review’s responsibilities and the TEQMS procedures, for reviewing, measuring and reporting, on the quality of TE/GE examinations (exams).

Material Changes

(1) Updated IRM 4.70.7.1 to be titled Program Scope and Objectives and to include internal controls as outlined in IRM 1.11.2.2.4, Address Management and Internal Controls.

(2) Updated IRM 4.70.7.5, Case Return Criteria, and IRM 4.70.7.5.1, Special Review Procedures for Returned Cases, to incorporate IGM, TEGE 04-0822-0032.

(3) Made editorial changes throughout to change references to the Tax Exempt Quality Measurement System User Guide (TUG) to include a reference to Document 13441 since it is now an official published document.

(4) Made minor editorial changes throughout (capitalization, spelling, spacing).

Effect on Other Documents

This IRM supersedes IRM 4.70.7 dated October 8, 2021.

Audience

Tax Exempt and Government Entities

Effective Date

(12-04-2024)

Adrian F. Gonzalez, Director
Compliance Planning and Classification
Tax Exempt and Government Entities

4.70.7.1 (12-04-2024)

Program Scope and Objectives

  1. Purpose: IRM 4.70.7 identifies SR’s responsibilities and TEQMS procedures, for reviewing, measuring and reporting on the quality of TE/GE exams. SR will:

    1. Apply TEQMS to their review of closed exams (status 51 or 90) selected for review.

    2. Offer suggestions to improve the quality in TE/GE exams.

    3. Report the organizational scores.

    4. Analyze and prepare an error trends report for each function.

  2. Audience: TE/GE employees in SR.

  3. Policy Owner: Director, Compliance Planning & Classification

  4. Program Owner: Issue Identification (ID) & Special Review (SR) (an entity within Compliance Planning and Classification (CP&C)

  5. Primary Stakeholders: TE/GE leadership, TE/GE examination and closing unit functions.

4.70.7.1.1 (08-22-2018)

Background

  1. Treasury Regulation Part 801 mandates certain quality measures for TE/GE exams.

    1. The CP&C operation was created in May 2017.

    2. EP and EO Special Review groups, under the former Examination Planning and Review unit in the respective exam functions were moved to CP&C.

    3. CP&C and SR responsibility to review and report case quality for all TE/GE exams was established.

4.70.7.1.2 (12-04-2024)

Authority

  1. Treasury Regulation Part 801, Balanced Measurement System for Measuring Organizational and Employee Performance, put in place the IRS Balanced Measurement System. This system supports the IRS’s overall mission by:

    1. Assessing organizational performance through key measures.

    2. Scoring cases numerically for quality.

4.70.7.1.3 (12-04-2024)

Roles and Responsibilities

  1. Issue ID and Special Review program manager is responsible for overseeing the Special Review program in general and providing final approval for TEQMS reports before distribution.

  2. Special Review managers are responsible for:

    • Participating in consistency reviews.

    • Ensuring the accuracy of quality reviews.

    • Reviewing and distributing quality reports.

    • Training new reviewers.

    • Communicating with TE/GE examination employees and managers with reports and presentations.

  3. Special reviewers are responsible for:

    • Evaluating exam cases and reporting TEQMS results.

    • Reviewing randomly selected, closed exam cases for quality.

    • Compiling and analyzing quality review results.

    • Giving U.S. statistical and error trend analysis to managers and examiners through the area managers.

    • Identifying quality improvement opportunities.

    • Training new reviewers.

    • Participating in consistency reviews.

    • Communicating with TE/GE examination employees and managers with reports and presentations.

4.70.7.1.4 (12-04-2024)

Program Controls

  1. The Special Review program consists of two groups of reviewers responsible for the quality review of all TE/GE examination cases.

4.70.7.1.5 (10-08-2021)

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    BMF Business Master File
    CP&C Compliance Planning and Classification
    DCI Data Collection Instrument
    EP Employee Plans
    EPMF Employee Plans Master File
    EO Exempt Organizations
    GE Government Entities
    IDRS Integrated Data Retrieval System
    FSL/ET Federal State and Local Governments/Employment Tax
    IMF Individual Master File
    IRM Internal Revenue Manual
    IRS Internal Revenue Service
    ITG Indian Tribal Government
    MFT Master File Tax Account
    MR Mandatory Review
    NMF Non-Master File
    RCCMS Reporting Compliance Case Management System
    SR Special Review
    TEB Tax Exempt Bonds
    TE/GE Tax Exempt & Government Entities
    TEQMS Tax Exempt Quality Measurement System
    TIN Taxpayer Identification Number
    TUG TEQMS User Guide
    WebETS Web-based Employee Technical Time System
     

    Forms

    Form Name
    Form 886-A Explanation of Items
    Form 3198-A TE/GE Special Handling Notice
    Form 5456 Reviewer’s Memorandum
    Form 5457 Response to Reviewer’s Memorandum
    Form 5595 TE/GE Update
     

4.70.7.1.6 (12-04-2024)

Related Resources

  1. Reviewers conduct quality reviews based upon requirements found in TE/GE examination IRMs.

4.70.7.1.7 (08-22-2018)

Program Overview

  1. TEQMS measures the quality of TE/GE examinations and offers ratings and comments at the national level.

  2. TEQMS has three quality measures:

    1. Proper Identification, Development and Resolution of Issues

    2. Taxpayer Communication (Internal & External)

    3. Timeliness

  3. Each quality measure evaluates elements essential to an exam. Elements are:

    1. Individually rated (20 total).

    2. Written as questions for the specific measure.

    3. Coded with specific reason codes (quality priorities) for the reviewers to consider when rating an element NO.

  4. The reviewer:

    1. Evaluates the managerial, technical and procedural actions taken in the exam case by rating each element as YES, NO, or N/A, according to the instructions in the function-specific appendices of Document 13441, Tax Exempt Quality Measurement System (TEQMS) User Guide (TUG).

    2. Uses the IRM as a basis for evaluating quality.

  5. Reviewers, group managers and examiners, should reference the TUG (Document 13441) for their specific business function for a complete list of:

    1. Elements

    2. Reason codes

    3. Explanations

    4. Examples

4.70.7.1.8 (12-04-2024)

Program Benefits

  1. SR expects the following benefits from exam quality review reporting:

    1. Improve customer satisfaction and protection of taxpayer rights in TE/GE examinations.

    2. Obtain data to give quality management reports and address improvement opportunities.

    3. Increase consistency in exams.

    4. Identify possible training or continuing professional education needs.

4.70.7.1.9 (08-22-2018)

Staffing

  1. Reviewers in SR should be experienced and highly competent employees who:

    1. Have a comprehensive knowledge of accounting and auditing principles and superior skill in interpreting and applying tax laws, regulations, and court decisions.

    2. Have an understanding of the IRM and how it is applied.

    3. Can perform managerial case reviews.

    4. Have a fair and impartial attitude.

    5. Merit the highest respect and cooperation of other employees.

    6. Assume responsibility and act positively.

    7. Communicate ideas and opinions clearly, tactfully and objectively.

    8. Apply good judgment.

    9. Exercise individual initiative.

  2. Applicants may be selected for an SR reviewer detail as follows:

    1. Full-time, 3-year assignment (may be extended to meet workload demands).

    2. Full-time, 90-day or longer assignment (to handle sudden increases in workload).

    3. Collateral duty reviewer assignment, not to exceed 25% of the examiner’s time during a one to three-year period.

4.70.7.2 (10-08-2021)

TEQMS Case Selection

  1. SR only reviews closed examinations. They don’t review surveyed cases.

  2. The Reporting Compliance Case Management System (RCCMS) samples and selects TEQMS cases for each function by: MFT, activity codes, disposal codes and project codes.

  3. Mandatory Review (MR) cases are not part of the TEQMS sample universe.

  4. All taxpayer returns, related returns and prior/subsequent year returns count as one review case.

  5. SR determines the number of cases selected for review by multiplying an annual selection rate to the anticipated number of RCCMS case closures.

  6. Exam cases are sampled for review selection when the exam group closes them to status 51 or 90 on RCCMS.

  7. The TE/GE closing unit processes the selected closed cases and sends the paper file, if any, to SR. The system automatically transfers the electronic case file to SR upon closure.

4.70.7.3 (12-04-2024)

Review Procedures

  1. SR conducts exam reviews using the guidance in the TUG, Document 13441 .

  2. The Data Collection Instrument (DCI) is embedded in RCCMS. Reviewers answer DCI questions on each selected case. The DCI automatically populates the taxpayer information for the key/primary case, the reviewer’s name and time applied, the evaluative elements and four non-measured questions. See Document 13441 for specific instructions for completing the DCI.

  3. After completing the DCI, the reviewer transfers the electronic RCCMS case to the SR manager and returns the paper file, if any, to the closing unit.

4.70.7.4 (08-22-2018)

Program Controls

  1. The annual sample size is designed to represent the population of examinations conducted during the fiscal year.

  2. The SR manager reviews the reviewer’s work.

  3. SR does consistency reviews to ensure that reviewers are consistent in the way they evaluate cases.

    1. Each reviewer reviews the same case.

    2. The SR group compares and discusses the reviewed case.

    3. The SR group discusses discrepancies in their TEQMS ratings and agrees on the final rating.

    4. The SR manager or reviewer takes minutes to record the rationale used to evaluate and rate the case based on its specific set of facts and circumstances. SR considers the minutes when updating the TUG, Document 13441.

  4. SR runs RCCMS case selection reports and tests them to ensure the RCCMS algorithm has captured the complete and appropriate population.

  5. SR tests and validates the DCI and TEQMS reports when changes are made to the RCCMS TEQMS algorithm or the DCI.

  6. The SR manager reviews and approves TEQMS reports and case returns.

4.70.7.5 (12-04-2024)

Case Return Criteria

  1. Subject to the concurrence required in IRM 4.70.7.5.1(2)(b), SR may reopen and return cases they review to the group if either:

    1. There is clear evidence that the entity under exam had significant qualification failures and the examiner made an incorrect determination.

    2. The examiner did not address evidence of taxpayer or representative fraud, malfeasance, collusion, concealment or misrepresentation, or

    3. There is an error in case closing which would likely result in serious criticism of the IRS’s administration of tax laws or involves net additional tax of at least $50,000 (exclusive of penalties and interest).

  2. The SR manager may, at his/her discretion, return related and any prior/subsequent year returns in RCCMS associated with a returned TEQMS case considering:

    1. Whether the separating of related return(s) would complicate case closure.

    2. Whether a return in the file has a statute of limitation date which will expire within one year.

    3. Which year(s) were affected by the failure(s) that warrants the case return.

    4. Whether the failure(s) were corrected per a closing agreement.

    5. The area and group manager’s input.

  3. The SR manager keeps a log of cases returned to the exam groups.

4.70.7.5.1 (12-04-2024)

Special Review Procedures for Returned Cases

  1. Reviewer: After reviewing the case per Document 13441, (TUG), determine whether the case meets the return case criteria in IRM 4.70.7.5, Case Return Criteria.

  2. If you determine the case meets the return case criteria:

    1. Prepare a summary and discuss it with the SR manager for concurrence.

    2. Upon consultation with the Issue ID and Special Review program manager, the SR manager will prepare and supply a case summary to the function’s director requesting concurrence on case return.

    3. If approved, the reviewer prepares Form 5456 (or similar form) to the examiner who worked the case. See IRM 4.70.7.5.1.1, Completion of Form 5456, for instructions.

    4. Provide detail on the Form 5456 to indicate the reasons the case is being returned. Explain the facts, law, conclusion, and the reviewer’s position.

    5. Include Forms 5456 in the case file.

    6. The SR manager contacts the director or area manager of the exam group that conducted the exam to discuss the case details.

    7. If the case is still on AIMS, the reviewer prepares Form 5595 (or similar forms) to reopen the exam and updates the case status on AIMS. See IRM 4.70.7.5.1.2, instructions for completing Form 5595.

    8. SR emails Form 5595 to the TE/GE AIMS coordinator for input.

      Note:

      The TE/GE AIMS coordinator can’t reopen cases per AIMS programming until after 40 days but not beyond six months of the status 90 date.

    9. The TE/GE AIMS coordinator processes Form 5595 (or similar forms) and updates the case to the applicable AIMS status code and gives the SR manager an IDRS AMDISA print to show the update. The SR manager adds the AMDISA to the RCCMS case file.

    10. The SR manager will update the case to the applicable RCCMS status code, and transfers the case in RCCMS to the group. (The case stays in the updated (reopened) status until closed from the group).

    11. The SR manager mails the paper case file, if any, to the manager of the group that conducted the exam.

4.70.7.5.1.1 (10-08-2021)
Instructions for Completing Form 5456

  1. Complete Form 5456 as follows:

    1. Insert the group number after the group manager salutation

    2. Box 1: Check advisory, correction, or inquiry

    3. Box 2: identify the last examiner to work the case

    4. Box 3: enter the date returned to the group

    5. Box 4: list the name, form, EIN, and plan name and number (EP only)

    6. Box 5: enter the year, use hyphens if multiple periods

    7. Box 6: indicate whether the case has a short statute

    8. Box 7: check examination

    9. Box 8: check sample review

    10. Box 9: check applicable box

    11. Box 10: enter date and initials if indicating an error in the examiner’s computations, if applicable

    12. Box 11: enter the pages of the examiner’s report that have computation errors, if applicable

    13. Box 12: write a detailed explanation why the case is being returned.

    14. Box 13: electronically sign (e-sign the memo (on all pages) after completing the remaining boxes

    15. Box 14: electronically signed by the SR Manager

    16. Box 15: check the type of error

    17. Box 16: check the specific error, if applicable

4.70.7.5.1.2 (08-22-2018)
Instructions for Completing Form 5595

  1. Complete Form 5595 as follows:

    1. Line 1 (P1-6) – Check the box "CC AMSTU" . Insert definer "R" .

    2. Line 8 Originator – reviewer signs.

    3. Line 9 Approved by – SR manager (or designee) signs.

      Note:

      The form can be electronically signed.

    4. In the numbered boxes, beginning with box 00, include the following information for all accounts which need to be reopened: the taxpayer’s name, taxpayer identification number (TIN), MFT, tax period, name control, and status code. Input different TIN types separately. Complete a separate Form 5595 for each EPMF, IMF, BMF, and NMF account.

    5. If there is a plan/report number, provide that information (For EP, enter the plan number for both MFT 74 and MFT 76 accounts).

4.70.7.5.2 (10-08-2021)

Group Procedures for Returned Cases

  1. Group: When you receive a returned case:

    1. Control the case on AIMS, RCCMS and the examiner’s WebETS report.

    2. If the AIMS account was not reopened, contact classification to get the return properly re-established.

    3. Control the case’s statute of limitations.

  2. Examiner: Reopen Closed Examination Cases.

    1. Issue Letter 6109, Reopened Closed Examination Case, to the taxpayer with your director's signature.

    2. Include a Form 886-A or similar attachment with the Letter 6109 to explain: why the case is being re-examined, what issues the taxpayer must address, and what actions the taxpayer must take.

    3. Monitor and extend the statute of limitations, as applicable.

  3. Examiner: When you’re ready to re-close the case:

    1. Prepare Form 5457 (or similar form) detailing the resolution and correction of the reviewer’s issues and/or any other response.

    2. Keep Form 5456 in the case file.

    3. Include a copy of Form 5457 in the paper case file and in the RCCMS office documents folder.

    4. Update the closing record in RCCMS.

    5. Revise other input items in the closing record as necessary.

    6. Prepare Form 3198-A (in RCCMS and paper file) indicating "Reopened Case and Response to Reviewer’s Memorandum."

    7. Comment in the RCCMS closing record to send both the electronic file and the paper file, if any, to SR.

  4. Examiner: Prepare a revised closing letter to reclose the case.

    1. Clearly indicate on the revised closing letter that it supersedes and replaces the prior closing letter issued on MM/DD/YYYY, due to the case being reopened.

    2. Keep the original closing letter in the file and add the revised closing letter to RCCMS.

    3. If including a paper letter, don’t date stamp the revised letter.

    4. Do not mail the revised closing letter to the taxpayer or representative, SR will mail it.

  5. Group: Reclose the case.

    1. Send an e-mail to the SR manager alerting him/her of the case reclosure.

    2. Manually update the case to status 20 in AIMS using CC AMSTU.

    3. Update the case to status 49 in RCCMS and transfer the RCCMS case file to the SR group.

    4. Send the electronic files and paper files, if any, to SR.

4.70.7.5.3 (10-08-2021)

Final Closure by Special Review and Closing Unit for a Reopened Case Returned from the Group

  1. SR receives and reviews the returned case and completes the following actions for agreed cases:

    1. The reviewer dates, signs and mails the revised closing letter to the taxpayer and the taxpayer’s representative (if applicable).

    2. SR closes the case to TE/GE Closing Unit with Form 5595 requesting manual update to status 51.

    3. SR closes the "reopened" RCCMS file to TE/GE Closing Unit in status 51 with the "Update AIMS" box unchecked.

    4. If the examiner established additional years or related returns (for example, they examined returns in addition to the reopened exam(s)), SR sends the "new" cases to TE/GE Closing Unit requesting status 51 updates with the "Update AIMS" box checked.

    5. SR mails the paper case file, if any, to the TE/GE Closing Unit as follows:

      Function Address
      EO Internal Revenue Service
      TE/GE EO Closing Unit
      MC: 4980 DAL
      1100 Commerce St.
      Dallas, TX 75242
      EP Internal Revenue Service
      TE/GE EP Closing Unit
      2 Metrotech Center
      100 Myrtle Avenue Sixth Floor
      Brooklyn, NY 11201
      FSL/ET, ITG & TEB Internal Revenue Service
      GE Closing Unit
      MS 6510, Attn: Tricia Wilson
      1973 N Rulon White Blvd
      Ogden, UT 84404

      Note:

      When TE/GE Closing Unit receives a closed case, they update the AIMS account(s) manually.