This IRM provides guidance for completing required responsibilities and analyses before an examination is initiated, pre-contact planning of the examination, and instructions for contacting taxpayers.

By law, the Service has the authority to conduct examinations under Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, Chapter 78, Discovery of Liability and Enforcement of Title, Subchapter A, Examination and Inspection, which includes, but is not limited to, the following Internal Revenue Code (IRC) sections:

The Director, Examination Headquarters, is the executive responsible for providing policy and guidance for SB/SE Examination employees and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.5.5, Examination Headquarters, for additional information.

The Director, Examination Field and Campus Policy, reports to the Director, Examination Headquarters, and is responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.16.5.5.1, Examination Field and Campus Policy, for additional information.

Field Examination General Processes, which is under the Director, Examination Field and Campus Policy, is the group responsible for providing policy and procedural guidance on standard examination processes to field employees. See IRM 1.1.16.5.5.1.1, Field Examination General Processes, for additional information.

All examiners must perform their professional responsibilities in a way that supports the IRS Mission. This requires examiners to provide top quality service and to apply the law with integrity and fairness to all.

Income tax examiners and their managers should thoroughly acquaint themselves with the examination procedures and information contained in this IRM, as well as other resources, such as those listed in IRM 4.10.2.1.6 below.

The following table contains a list of terms used throughout this IRM.

The following table lists commonly used acronyms and their definitions used throughout this IRM:

The following IRMs contain additional guidance and information examiners will use:

Helpful information can be found on websites and knowledge bases including, but not limited to the following:

The IRC limits the time in which the government may make an assessment of tax. Examiners have the primary responsibility for identifying and protecting the statutes of limitations for returns in their custody. IRM 25.6.23.5.1.2, Screening for Statute Accuracy, provides guidance for verifying statute dates. Failure to protect the statute of limitations can result in disciplinary action.

If the statute of limitations is imminent, or if it has already expired on the assigned return, the return should be immediately brought to the group manager's attention to determine the appropriate disposal of the return.

The statute of limitations to assess tax can be extended with the taxpayer’s consent. Examiners must obtain the approval of the group manager before requesting a statute extension. The need for a consent should be clearly identified before it is solicited and the group manager’s approval documented in the case file. See IRM 25.6.22.2.1, Assessment Statute Extension, for a listing of some of the conditions that allow for a statute extension.

Prior to opening a return, examiners must consider the 26/27 month examination cycle, defined in (2) below. A return should not be opened for audit if the audit and all processing cannot be completed within the 26/27 month examination cycle, unless:

The 26/27 examination cycle is the time period in which the audit and disposition of an income tax return should be completed; it begins on the due date of the return or the date the return is filed, whichever is later. To ensure adherence with Rev. Proc. 57-6,1957-1 C.B. 729, SB/SE Field Examination follows a 26-month examination cycle for individual returns and a 27-month examination cycle for business returns (e.g., Forms 1120, 1041, 1065, etc.). Adhering to the 26/27 month examination cycle generally allows the audit and all processing (e.g., appeal, assessment, etc.), through and including the issuance of the closing letter, to be completed within the original statute of limitations.

To fall within the 26-month examination cycle, an individual return with a 3-year (36 month) statute should have 10 months remaining after all processing is complete. A business return with a 27-month examination cycle, should have 9 months remaining on the statute after processing is complete.

Returns with the following source code, project code, push code and status code features are exempt from the requirement to complete the examination and other processing within the 26/27 month examination cycle as shown in the table below. These guidelines are not applicable to Forms 706 and 709.

With group manager approval, the 26/27 month examination cycle may be exceeded if failure to conduct the examination would:

If the initial return screening indicates the examination cycle cannot be met and circumstances warrant exceeding the 26/27 month examination cycle, the matter should be discussed with the group manager. The discussion must be documented in the case file and address justification for exceeding the 26/27 month examination cycle, identified issues, and actions needed to complete the audit.

IRM 1.2.1.5.4, Policy Statement 4-6, Examiner May Not Examine Return if Relationship Impairs Impartiality, prohibits examiners from examining or surveying a tax return if a relationship impairs impartiality. A conflict of interest exists if an examiner’s personal relationship(s) or private interest (usually of a financial or economic nature) conflict, or raise a reasonable question of conflict, with the examiner’s public duties and responsibilities.

Examiners must avoid any situation which creates a conflict of interest or creates a reasonable question of a conflict of interest with their official duties. Statutory penalties for established violations include fines and/or imprisonment.

An examiner assigned a return which might create a real or apparent conflict of interest must immediately bring this matter to the attention of the group manager.

Examiners should never initiate, terminate, or in any way modify audit actions based on requests from certain Executive Branch employees (specifically the President, Vice President, employees of the executive offices of the President or Vice President, or any other cabinet level official with the exception of the Attorney General). Any requests received by an examiner that violate this prohibition should be reported to the Treasury Inspector General for Tax Administration (TIGTA). Examiners should always consult with the group manager if anyone, other than the group manager, requests actions related to ongoing or potential examinations.

If an examiner is assigned a return described in this section, the tax return should be returned to the group manager for reassignment.

IRM 1.2.1.5.3, Policy Statement 4-5, Restrictions on Examiners’ and Specialists’ Consecutive Survey or Examination Responsibilities, prohibits an examiner or specialist from examining or surveying a tax return of a taxpayer for more than five consecutive years (60 months) from date of assignment. If the examination is in process at the five consecutive year point, the examiner or specialist is allowed to complete the examination provided the current cycle or audit has less than 12 months remaining from the five consecutive year point. An examiner or specialist will not be reassigned to the same taxpayer for the examination of one intervening tax period or surveying of two intervening tax periods.

Group managers are also subject to P-4-5 restrictions and are responsible for monitoring assignments for their examiners to ensure proper case assignment practices are followed.

If an examiner is assigned a return described in paragraph (1) above, the tax return should be returned to the group manager for reassignment.

Examiners must review IDRS and CFOL information to determine if another IRS function (e.g., AUR) is working with the taxpayer. See CFOL Express to identify IDRS command codes that can be used to determine if another IRS function is working with the taxpayer.

If another function is working with the taxpayer, contact the employee assigned the case and determine the extent of their involvement. Facts and circumstances of the involvement may affect the examination of the return. The examiner should discuss the case with the group manager before proceeding with the audit.

If the Automated Underreporter (AUR) Unit issued a CP 2000 notice (Request for Verification of Unreported Income, Payments, or Credits) to the taxpayer, a TC 922 will be on the module. If a TC 922 is on the module:

The examiner must perform a thorough review of the case file to identify LUQ items. The examiner begins with the issues identified on the classification check sheet (if available), then reviews the items below.

The definition of an LUQ item will depend on the examiner’s perception of the return as a whole and the separate items that comprise the return. Some factors to be considered when identifying LUQs are:

Examiners are expected to examine all LUQ items. However, it is not intended that examiners should consider every possible issue. For instance, it is not proper for examiners to make a detailed analysis of a specific account unless the potential adjustment will materially affect the tax liability or will be important from a compliance viewpoint. In addition, examiners are expected to adequately explain the items which are examined and the LUQ items which are accepted without examination.

Complete the required pre-contact minimum income probes as outlined in the table below. See IRM 4.10.4, Examination of Income, for additional guidance.

During the pre-contact phase of the audit, examiners should use internal sources of information, including IDRS and CFOL, to complete required filing checks. See IRM 4.10.5.2.2(1), Internal Sources of Information, for guidance.

Examiners must determine whether prior, subsequent and known related returns are filed. See IRM 4.10.5.2.1, Filing Verification, for additional information.

For all types of returns (i.e., business and nonbusiness), the examiner must complete a comparative analysis to assist in determining the audit potential of the year under examination, as well as prior and subsequent year(s). For guidance on completion of a comparative analysis, see IRM 4.10.5.3.1, Analysis of Prior and Subsequent Returns. The comparative analysis will be used throughout the examination (e.g., minimum income probes including horizontal analysis).

The examiner must document their comparative analysis and findings; see IRM 4.10.5.2.4, Case File Documentation, for guidance.

To decrease the Accounts Receivable Dollar Inventory (ARDI) and increase the quality of assessments, examiners should consider collectibility when evaluating audit potential and setting the scope of an examination. Collectibility will be based on the taxpayer's current financial condition and not the tax return (which reflects the taxpayer’s past financial condition).

Form 5546, Examination Return Charge-Out Sheet, may provide alerts to potential collectibility issues. Examiners should review this form for collectibility indicators. See IRM 4.20.1.2.1, Collectibility Considerations, for a listing and definition of collectibility indicators and steps to take when evaluating collectibility potential during the pre-contact phase.

If Form 5546 is not in the file, the examiner must pull an AMDISA print to determine if there are any collectibility indicators. See IRM 4.20.1.2.1.

Not all taxpayers lacking the means to satisfy additional tax liabilities will be identified. Examiners should be alert for indications in the file that collectibility may be a factor to consider; e.g., the taxpayer is deceased, or the taxpayer is a defunct corporation and the issue of transferee liability is not present. Form 9439, Collectibility Evaluation Form, may be used to help document collectibility.

If collectibility is an issue in an assigned case, the group manager should be alerted as soon as the issue is discovered. Managers will make the final determination whether to survey the return or to limit the scope/depth of an examination. If a determination is made:

Examiners are required to document their evaluation of collectibility on Lead Sheet 100-02, Revenue Agent (or TCO) Audit Plan, a supporting workpaper indexed to Lead Sheet 100-02, Form 9984, or Form 1900 (if surveyed). If collectibilty is an issue, the reasons for the decision to survey or examine the return must be documented.

A return will be surveyed after assignment if, after conducting the initial return screening, in-depth pre-contact analysis, and/or evaluating the audit potential the following conditions are met:

In accordance with IRC 7508, examiners must not conduct examinations on taxpayers on active duty to a combat zone, plus during any period hospitalized thereafter, plus 180 days. Also, ongoing examinations involving any individual identified as a combat zone taxpayer should be closed immediately, unless there is a compelling reason to suspend the examination. See IRM 4.2.1.4, Combat Zone, for guidance.

Under certain conditions, a return may be surveyed after the taxpayer has been contacted, but before records have been inspected. This could include instances where the taxpayer is deceased, has a terminal illness, or there are other extraordinary circumstances that may warrant the survey of the return. Letter 1024, Return Accepted as Filed, must be issued by the group if a decision is made to survey the return after taxpayer contact. Letter 1024 is signed by the group manager.

For guidance on survey after assignment documentation and closing procedures, see IRM 4.10.2.5.2.

Procedures for surveying returns after assignment are as follows:

An electronic print generated from the following systems or IDRS command codes can be used to survey the return:

Examiners must document Form 1900 with the reason for the survey and all actions taken to support the decision, including conclusions from the in-depth pre-contact analysis (if required), with the surveyed tax year.

When a return is closed survey after assignment, disposal code 32 must be used.

One of the following forms must be used to close a return as survey after assignment:

Examiners must also document the reason to survey a return after assignment using a Survey Reason Code (SRC) on the closing form (Form 5546 or Form 5351). The SRC will be entered on ERCS when the return is closed from the group.

The SRC values and definitions for survey after assignment are:

For cases closed survey after assignment, examiners must save the following documents to RGS Case File Documents using established file naming conventions. See RGS File Naming Conventions Job Aid.

Examiners must save the following documents to RGS Office Documents using established file naming conventions. See RGS File Naming Conventions Job Aid.

When the case is ready to close, the examiner must move the RGS file to the CEAS file server and notify the group manager by e-mail.

Generally, examiners should charge time devoted to surveying returns after assignment to Activity Code 615, Survey.

Claims for refund (including amended returns and informal claims) of income, estate, and gift taxes may be surveyed after assignment if it is determined that the claim issue is clearly allowable and the return does not otherwise warrant examination.

Examiners must complete Form 1900 to explain why the claim is being surveyed. Instructions for completing the "Tax liability reported" , "Claim allowable" , and "Tentative allowance approved" sections of Form 1900 are listed below. Also, see IRM 4.10.2.5.2, for additional guidance regarding required documentation.

Claims should be stamped with the "survey after assignment" imprint and signed/dated by both the examiner and the group manager (see IRM 4.10.2.5.2 above).

Examiners must prepare Form 5344, Examination Closing Record, for claims closed as a survey after assignment. See IRM 4.10.11.2.5, Claims for Refund - Survey After Assignment, Disposal Code 34, for additional guidance.

Any claim which, if allowed, would produce an overpayment, requiring reporting to the Joint Committee on Taxation ($2,000,000 refund; $5,000,000 for C corporations) may be allowed without examination (surveyed). However, the claim can be surveyed only after notification is received from the Joint Committee that the Service may proceed with disposition of the claim, as proposed in the report submitted to the Joint Committee, under the provisions of IRC 6405(a). See IRM 4.36.3.4, Survey After Assignment Criteria, for instructions on how to survey a Joint Committee case.

For surveyed estate or gift tax claims see IRM 4.25.1.6, Surveying Returns Selected for Examination.

If a return is received from another area and the other area only made the initial contact with the taxpayer, without beginning the examination and/or inspecting the taxpayer’s books and records, the receiving area can apply the survey after assignment procedures if the return does not warrant examination. Letter 1024, Return Accepted as Filed, should be used to notify the taxpayer. Letter 1024 is signed by the group manager.

International feature returns that meet the mandatory referral criteria of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, may be surveyed only after the international referral is rejected.

An international referral is made using the Specialist Referral System (SRS). See IRM 4.46.3.2.6.2, International Referrals - Supporting Documentation and Informal Assistance, for guidance on international referrals.

Examiners must use their professional judgment to set the scope of the examination. Examiners should only work issues of merit and conclude the examination when the issues no longer warrant examination. Additional guidance is provided in the following sections:

If inventory is classified as an issue, examiners will verify that inventories are reported correctly. If inventories are not examined but classified, examiners must document why inventories do not warrant examination on Lead Sheet 100-02, or a supporting workpaper indexed to Lead Sheet 100-02. See IRM 4.10.3.9.4.3, Inventories, for additional guidance.

Depth is the extent to which an issue is developed. It demonstrates the degree of intensity and thoroughness applied in order to make a determination as to the correctness of an item.

Examiners must exercise judgment in determining the depth required for the examination. Determining the depth of the examination for different issues will help to estimate the time needed to complete the examination. The following factors should be considered:

Preliminary research of the applicable IRC sections, treasury regulations, rulings, and court cases, concerning the proper tax treatment of a particular issue, should be performed on the issues identified in the pre-contact analysis. This will assist in the development of specific interview questions, determine possible audit procedures, and help determine what information should be included on the IDR. It is critical that examiners become familiar with the issues on the return. Extensive research, however, should not be conducted until the facts of the issues are established. See IRM 4.10.7, Issue Resolution.

Secure the prior audit file(s), including report(s), from the CEAS database to determine the issues previously proposed and any problems encountered during the examination. If the prior audit file is not available in CEAS, ask the taxpayer for a copy of the report or request the administrative file from the Campus.

Specialists are available to provide assistance with developing and resolving significant complex tax issues. Generally, requests for specialist assistance must be made through the Specialist Referral System (SRS), see IRM 4.10.2.7.5.1. For requests that cannot be accessed through SRS, see IRM 4.10.2.7.5.2.

Mandatory referrals should be made as soon as possible; but, no later than 30 days after the initial appointment or Group Manager Concurrence Meeting (GMCM) (when required), whichever occurs first. Non-mandatory referrals should be requested as early in the examination as the need is identified.

Time required to work the issue by the specialist (including travel time) is included in the case. It is important to determine the projected tax from the specialist issue versus the time required to develop the issue. Cases which would result in minimal change to the taxpayer’s tax liability should not be referred.

Informal advice should be sought where the issues do not appear to warrant assignment of a specialist, but assistance is required. For specialists requested through the SRS, request a "Consultation" identifying the specific area(s) where assistance is needed in the "Additional Comments" field.

SRS referrals are automatically tracked. The system will automatically follow up with the manager if a response has not been made.

For referrals made outside of the SRS, a log of referrals from the examination group should be maintained.

Generally when a specialist is involved in a case, the examiner maintains control of the income tax return and its management. In some instances, the specialist may control non-income tax returns.

Specialist(s) assigned to the case should meet with the examiner and the taxpayer (if appropriate) to discuss the issue, information required, time for information to be presented, and an estimated completion date of the report.

Disagreements on proposed adjustments between the examiner and specialist should be elevated to their respective managers for resolution.

Rejected cases may be referred again based on additional information developed during the examination. If the case was rejected due to workload priorities, a specialist may be made available on a consulting basis for significant issues. For those specialist groups available through SRS, informal questions should be submitted using SRS. For specialist groups not available through SRS, arrangements for consultations should be made with the approval of both managers.

Documentation of consideration of referrals should be made for all entities meeting the mandatory referral criteria. If a case is referred, a copy of the referral is sufficient. If the case was not referred, the reasons for not referring a case should be documented in the workpapers or the activity record.

Examiners must send the taxpayer the appropriate initial contact letter listed in IRM 4.10.2.8.1.1 (Office) and IRM 4.10.2.8.1.2 (Field).

Examiners should mail the initial contact letter to the taxpayer’s last known address. The Service is required to exercise due diligence to find and use the taxpayer’s last known address. Generally, the last known address is the address on Master File unless the taxpayer has provided "clear and concise" notification. For a definition of what constitutes "clear and concise" notification, see IRM 4.10.2.11.

Prior to issuing the initial contact letter, examiners must:

If a power of attorney is not on file for the year(s) under examination, generally initial contact is made with the following:

Examiners must use approved form letters to schedule and confirm examination appointments.

For examinations involving a joint tax return, initial contact letters must be sent separately to both parties at the appropriate address. See IRM 4.10.1.2.2.1, Separate Notice Requirements, for additional information.

The following documents must be mailed to the taxpayer with the initial contact letter:

If the taxpayer does not respond to the initial contact letter and it is not returned as undeliverable, follow the procedures in IRM 4.10.2.8.3.

If the letter is returned undeliverable, follow the procedures in IRM 4.10.2.8.4.

Whether the taxpayer or representative responds to the initial callback letter, or the examiner contacts the taxpayer by telephone after 14 calendar days have expired since the initial contact letter was mailed, during the initial telephone conversation examiners must:

During the initial conversation by telephone or in person, examiners must confirm receipt of Pub 1, explain and discuss the taxpayer’s rights as outlined, and answer any questions the taxpayer may have concerning their rights. See IRM 4.10.1.2.1, Taxpayer Bill of Rights (TBOR), for additional guidance.

If the taxpayer fails to respond to the initial contact letter after 14 calendar days, and it was not returned as undeliverable, or the taxpayer does not "show" for the initial appointment when a TCO sent a firm appointment letter (Letter 2202), examiners must determine why the taxpayer is not responding.

Follow-up attempts must be made to contact the no response taxpayer (including by telephone) to encourage the taxpayer to schedule an appointment. If practicable, a revenue agent may conduct a field visit to the taxpayer’s residence and/or business.

If follow-up attempts to contact the taxpayer or representative by telephone (or field visit) are successful, examiners must follow the procedures in IRM 4.10.2.8.2 to conduct the initial conversation. In addition, to confirm the initial appointment:

If follow-up attempts to contact the taxpayer or representative are not successful, examiners must reissue the initial contact letter or send Letter 2295, Follow-up to Initial Contact Letter. Letter 2295 advises the taxpayer their tax liability will be changed based on information on hand, or a summons may be issued. The original initial contact letter or Letter 2295 must be sent by:

Examiners can use the unique article number to check the United States Postal Service (USPS) online feature called "USPS Tracking" , to determine the delivery status of the certified or registered mail.

Office Examination: Follow the procedures below depending on the results of the return receipt:

Field Examination: Follow the procedures below depending on the outcome of the return receipt:

If the taxpayer does not respond or cannot be located, in addition to addressing income, examiners must consider the following:

If the initial contact letter or certified (or registered) return receipt is returned undeliverable, the following steps must be taken to determine if a more current address or contact information can be obtained. If third party contacts will be made, see IRM 4.11.57, Third-Party Contacts, for guidance.

Additional resources that may help to identify a more current address for the taxpayer are listed below:

If a more current address cannot be identified after following the steps above, prepare and send Form 4759, Address Information Request - Postal Tracer. A postal tracer can be used to:

If a more current address for the taxpayer is identified after completing all the steps above, examiners should reissue the initial contact letter using certified (or registered) mail, return receipt requested. See IRM 4.10.2.8.3 for additional guidance.

If a more current address cannot be identified after completing all the steps above, examiners may contact third parties such as the taxpayer’s employer, return preparer, representatives (use CFINK), banks, brokerage houses, mortgage companies and other third-party payor(s), if known.

If a "deliverable" address is identified (e.g., return receipt indicates signed, refused, or unclaimed) and the taxpayer does not respond to the initial contact letter, examiners must follow the procedures in IRM 4.10.2.8.3.

If the steps set forth above do not result in a "deliverable" address, examiners must follow the procedures in IRM 4.10.2.8.6.

Examiners must document all steps taken to identify a current address on Form 1900-B, Unlocatable Taxpayer Checksheet.

Examination employees can use their asset locator service to access information that is currently available in the short consumer credit report. Consequently, there is no need to request this report from Collection to locate a taxpayer.

Examiners must be alert to the appropriate use of credit bureau reports. There are two types of reports:

Examination is prohibited by the Fair Credit Reporting Act (F.C.R.A.) from using full consumer credit reports, if the reports were originally obtained for collection of a balance due. Therefore, examiners cannot request a full consumer credit report from Collection. If examiners need a full consumer credit report, a third-party summons must be issued to the credit reporting agency. Refer to F.C.R.A 15 U.S.C. 1681b(a) and IRM 25.5.4.5.6, Statutory Limitations on Acquiring Credit Reports From a Consumer Reporting Agency-Summons Required.

If the taxpayer cannot be located, a decision must be made whether the audit will continue. The examiner and group manager must consider if an assessment is appropriate when a taxpayer is not locatable.

There are instances where an examination report should be issued in order to preserve voluntary compliance. The list below provides some examples but is not all inclusive:

If an assessment is deemed appropriate, close the case to Technical Services for issuance of a statutory notice of deficiency using the following procedures:

If an assessment is deemed not appropriate, close the case using the following procedures:

Examiners must document the reasons for issuing a report or surveying the return in the case file.

Generally, the initial appointment will be scheduled with the taxpayer. However, taxpayers have the right to representation at any time during the examination process.

If the taxpayer wants representation prior to scheduling the initial appointment, the examiner must allow the taxpayer a minimum of 10 business days to secure representation before taking any follow-up action to schedule the appointment. For additional information, see IRM 4.11.55.3.1.1, Request for Representation - Suspension of Interview, and IRM 4.10.3.3.7.2, Request for Representation - Suspension of Interview.

The examiner must be willing to talk to anyone who is authorized by the taxpayer. IRC 7521(c) states that when a taxpayer has executed a written power of attorney to represent the taxpayer in any interview, IRS cannot require the taxpayer's presence without issuance of a summons. However, the representative must commit to having first-hand knowledge of the taxpayer’s business operations and affirm that the examiner can rely on the information provided. In addition, the representative should agree to provide follow-up information timely if he or she is unable to provide responses to questions at the initial interview. See IRM 4.11.55.3.1, Taxpayer’s Presence Required, for additional information.

If the taxpayer will be represented in the examination, proper authorization is required:

When a valid Form 2848 or Form 8821 has been received from the taxpayer, the initial appointment must be scheduled with the representative. A copy of Letter 3254 must be mailed to the taxpayer, see IRM 4.10.2.8.1.2(4)(b) for information on Letter 3254.

If the taxpayer's representative calls to obtain taxpayer account or return information, the examiner must ensure they are, in fact, speaking with the representative designated on the Form 2848, by asking for the taxpayer's name and TIN, and representative's name and identification number.

Examiners will use their judgment to determine whether an authorized representative is sufficiently knowledgeable; however, examiners should take all reasonable steps to work effectively with authorized representatives. See IRM 4.11.55.4, By-Pass of a Representative, for additional guidance.

Procedures for handling assertions of accountant/client privilege can be found in IRM 4.11.55.3.3, Privileged Communications, and IRM 4.10.20, Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers.

IRC 7605(a) states, in part, that "the time and place of examination shall be such time and place as may be fixed by the Secretary and as are reasonable under the circumstances." It is the Service's goal to set the time and place for the examination to maximize the convenience of the taxpayer within the constraints of sound and efficient tax administration.

Office Examination: Generally, the examination will be conducted in the IRS office closest to the taxpayer’s residence, providing the office has appropriate office examination personnel. In extenuating circumstances, the examiner may meet with the taxpayer at the taxpayer’s home or place of business. This situation could occur due to the nature of the taxpayer’s business or due to the incapacity of the taxpayer. See 26 CFR 301.7605–1.

Field Examination: Revenue agents have the responsibility to determine the most reasonable place to conduct the examination based on the circumstances. See IRM 4.10.2.9.2.1. Generally, the location of a taxpayer’s representative will not be a consideration in determining the place of the examination.

The definition of books and records means not only the bookkeeping and accounting records, but also the vouchers, invoices, canceled checks, and other source documents usually maintained at the business site.

If a taxpayer or a representative requests an accommodation for a physical or mental disability, examination personnel should make every effort to accommodate the request. The provisions of Policy Statement 1-47 (P-1-47) (see IRM 1.2.1.2.12(1), Reasonable Accommodations for People with Disabilities), regarding requests for reasonable accommodation by taxpayers or representatives with disabilities must be considered when scheduling the appointment.

If the examiner does not feel safe in the taxpayer’s place of business, the examiner should leave the examination site and call the group manager or contact TIGTA. The examiner should request that the taxpayer come to the IRS office for subsequent appointments. For further information concerning potentially dangerous taxpayers, see IRM 4.2.1.3.1, Potentially Dangerous Taxpayer (PDT) and Caution Upon Contact (CAU) Indicators; IRM 25.4.1, Potentially Dangerous Taxpayer; and IRM 25.4.2, Caution Upon Contact Taxpayer.

If the authenticity of an IRS employee’s credentials is questioned by police, taxpayers, or POAs, refer to the guidance provided at Field Employees Credential (ID) Verification Program. The Field Employees Credential (ID) Verification Program provides local law enforcement and taxpayers a unique and necessary means to connect with credible contact representatives who can verify an IRS field representative is a current employee of the IRS.

Examiners will schedule examinations during normal business hours of the Service and without regard to seasonal fluctuations in the business hours of the taxpayer or their representative.

Examiners may encounter problems attempting to schedule the initial appointment during the initial contact with the taxpayer.

Examiners will attempt to minimize scheduling problems for taxpayers and representatives. It is expected that examiners will accommodate taxpayers for religious or secular holidays.

If the examiner finds that the initial appointment must be rescheduled, the examiner will attempt to contact the taxpayer by telephone to reschedule the appointment as soon as the conflict arises. If the examiner cannot personally contact the taxpayer due to illness or other emergency, the group manager or group clerk will attempt to telephone the taxpayer to reschedule the appointment or to advise the taxpayer that the examiner will contact them to reschedule the appointment.

If the taxpayer asks to reschedule the initial appointment, the examiner will attempt to accommodate the taxpayer when the request is reasonable. However, examiners must not allow taxpayers to delay the examination by continually rescheduling the initial appointment.

The examiner has the authority to allow the rescheduling of the initial appointment for a valid reason one time. Any subsequent requests by the taxpayer to reschedule the initial appointment must be approved by the group manager.

Whenever possible, the initial appointments will be rescheduled within 14 days from the previously scheduled appointment. If the appointment cannot be scheduled within 14 days, the examiner can extend this period. However, group manager approval is required in order to reschedule an initial appointment beyond the 45 day time frame. The examiner must document the reason(s) for rescheduling beyond the 45 day time frame on Form 9984.

Examiners will document all rescheduled appointments, the reasons for the rescheduling, and group manager discussion and approval (when required), on Form 9984.

Whenever the initial appointment is rescheduled, a confirmation letter will be mailed to the taxpayer with the new appointment date and time unless there is not time for the taxpayer to receive the confirmation letter prior to the rescheduled appointment (e.g., appointment is rescheduled for the next day).

On office examination cases, the examiners will prepare the Form 4564 to mail to the taxpayer with the initial contact letter. On field examination cases the Form 4564 will generally be sent with the appointment confirmation letter. See IRM 4.10.2.8.1.1 and IRM 4.10.2.8.1.2.

Form 4564 will be used to document all requested information and documents needed to support items being examined. The Form 4564 will list the specific records, information, and documents the taxpayer should have available at the initial interview. Examiners should always carefully consider what data is necessary. Requests should be specific and should avoid requesting more information than is essential to resolve the issues identified.

Facts in each case will determine what is considered an adequate description of the requested data. A Form 4564 must sufficiently specify the books, papers, records, or other data. The request should also include the particular activity and time period. For example:

It is advisable to include a statement on the Form 4564 indicating that the examiner will probably request additional records as the examination progresses. This may help prevent a misunderstanding about the scope and depth of the examination.

Examiners may have access to pro-forma type IDRs that include a list of items which are commonly requested in examinations. Use of these pro-forma IDRs is acceptable; however, the examiner must be careful not to request everything on the list if some of it may not be relevant to the return under examination. The pro-forma Form 4564 must be modified to the particular return being examined.

The examiner may use either the electronic published version or a computer generated Form 4564. The 3-part form is designed to provide a taxpayer file copy; a copy for the taxpayer to submit with the records; and a requester file copy (i.e., copy for the case file).

The Form 4564 must always include a date for submission of the requested information or documents.

If it is necessary to make a second request for the same information or documents, the date(s) of previous request(s) will be entered in the appropriate space.

IRC 7602 and 26 CFR 301.7602-1(a) provide the examiner with the authority to request and receive the books, records, etc., necessary to properly examine an entity’s tax return.

When a taxpayer indicates a reluctance to provide the necessary records, the examiner must be insistent, yet courteous, in requesting the records. The following suggestions can be adopted in handling this situation.

Accountant’s workpapers used in the audit of tax records or in preparation of a tax return are not the property of the taxpayer and are not privileged information. Therefore, the workpapers can be summoned.

In general, there are three types of workpapers:

The Service has different policies for seeking access to each of the three types of documents listed above. The different policies are set forth in IRM 4.10.20.3, Service Policy for Requesting Audit or Tax Accrual Workpapers. Examiners should familiarize themselves with this section.

If it is necessary to issue a summons to secure workpapers, IRC 7603 provides that the records should be described with reasonable certainty. This requirement can be satisfied if the description of the records is specific and unambiguous, and the summoned party can reasonably identify the exact records sought.

The fact that the accounting firm whose workpapers are needed did not prepare the tax return in no way diminishes the authority by IRC 7602.

During the initial return screening of an individual tax return without a Schedule C or Schedule F, examiners must review Form 5546, if available, for any indication of an audit in the preceding two years. Information on Form 5546 should include:

If Form 5546 is not available, examiners must secure an IDRS command code IMFOLZ print for the two preceding tax years. All individual returns closed as a no-change require entry of IMF no change issue codes to allow AIMS to record the issues that were no-changed. The IMFOLZ will display the no change issue codes. See IRM Exhibit 4.10.16.-1, IMF Issue Codes, for a list of IMF issue codes.

If there is a prior audit, examiners should thoroughly research the CEAS database to secure prior audit information.

If the review indicated the taxpayer was audited in one or both of the two preceding tax years, determine if the taxpayer meets the criteria in IRM 4.10.2.13(1), and proceed as follows:

If an individual taxpayer responds to the initial contact by stating that an examination of the same issue(s) in either of the two preceding years resulted in no-change or a small tax change (deficiency or over assessment), and an appointment has been scheduled, advise the taxpayer that the appointment is postponed pending a review to determine if the examination should be continued.

Examiners must review the criteria in IRM 4.10.2.13(1) to determine whether the taxpayer qualifies for closing the examination using repetitive audit procedures.

Cases qualifying for repetitive audit should be closed as follows: