This IRM section provides guidance for conducting examinations of Form 1040 NRP key case individual income tax returns.

Audience. The following IRS employees who participate in an National Research Program (NRP) individual income tax study are:

Director, Knowledge Development and Application under Research, Applied Analytics and Statistics (RAAS) is the policy owner.

NRP is the program office responsible for the oversight of the NRP studies.

For information about the National Research Program, visit the NRP website at: https://nrp.web.irs.gov.

Information specific to the NRP individual income tax returns study is addressed in the following IRM sections:

For detailed information on examining EIC, please refer to the procedures in IRM 4.22.8, NRP EITC Component of the Individual Reporting Compliance Study.

Additional guidance on NRP research and accurate data gathering requirements are outlined in IRM 4.22.4., Examination of NRP Returns.

It is recommended that cases with a Schedule C or F be assigned to revenue agents. The primary reasons for establishing these guidelines include the need to tour the business and the potential for e-business activities. Exceptions to this can be made by area Management on a case by case basis.

Contacting a taxpayer for an NRP examination adheres to existing examination guidance as outlined in IRM 4.10.2, Examination of Returns, Pre-Contact Responsibilities. Due to the importance of NRP results, all possible efforts should be made to contact NRP taxpayers whose cases are to be examined.

All initial taxpayer contacts to initiate an NRP examination must be made by mail using the following letters developed for NRP individual income tax key case examinations:

Send the following enclosures along with the initial contact letters.

Use standard examination letters for any other correspondence to taxpayers or their representatives. This would include, but not be limited to, confirmation letters, appointment letters for related returns, no-change letters, and no change with adjustment letters.

If the initial contact letter or certified (or registered) return receipt is returned undeliverable, see IRM 4.10.2.8.4, Undeliverable Initial Contact Letters, for additional guidance.

Review command code IMFOLT to determine if the taxpayer filed an amended return and whether it was processed by the Campus.

The RGS Return Setup information MUST be modified to reflect the processed amended return amounts.

If the amended return WAS NOT processed, DO NOT provide the amended return and supporting schedules to the NRP coordinator. DO NOT modify the RGS Return Setup information; however, DO consider the amended return information during the audit.

NRP cases are subject to the same audit reconsideration rules as any other examination as discussed in IRM 4.13, Audit Reconsideration.

When a closed NRP case is later accepted for an audit reconsideration, it is no longer part of the NRP study.

All NRP audit reconsideration cases must be worked on the applicable area RGS schema. The original NRP RGS exam record must be maintained on the NRP RGS schema. For instructions on copying the RGS file and working the audit reconsideration case refer to the Audit Reconsideration Cases and IRS Special Procedures for RGS and CEAS on the Exam System Knowledge Base.

Individual income tax examination guidelines contained in the NRP training module must be followed to ensure accurate examination and data capture.

SB/SE NRP examiners, managers, and reviewers must complete NRP Training, ITM #32289 NRP Examination Training Form 1040 Study, after receiving their first NRP case. The current course is sufficient for any year under examination. Examiners, reviewers, and group managers with NRP cases must complete the NRP Training on an annual basis.

All NRP cases are worked on a separate NRP RGS schema. Instructions for gaining access to the specific NRP RGS schema are provided in the NRP training course, ITM #32289, NRP Examination Training Form 1040 Study.

Do NOT create the NRP key case in RGS. NRP key cases are created by the NRP office and include all applicable case building information and issue creation. Refer to the NRP training course, ITM #32289, NRP Examination Training Form 1040 Study, for instructions about accessing and downloading the NRP key case file.

All Information Document Requests (IDRs) must be tailored to each return and the issues identified. IDRs must list the specific records and documents that the taxpayer should provide.

Examination of all classified issues is mandatory. The Classified Issue List in RGS Case File Documents provides a list of all classified issues.

Prior, subsequent, or related returns are not required to be picked up for NRP cases. The examiner will determine whether to expand the scope of the audit. If expanding the scope of the audit to other returns, follow standard examination procedures and do not use NRP Lead Sheets. NRP lead sheets are used for the key case year only. Any prior, subsequent and related returns, must be established on the NRP RGS 1040 schema with Source code 91, Project code 0674 and the same tracking code as the key case year.

NRP taxpayers are held to the same standard of proof required in a regular examination. Follow existing guidelines in IRM 4.10.7.3, Evaluating Evidence, for determining the proper examination depth for each issue.

Data is compiled from the NRP examination; consistency and accuracy are essential. Therefore, guidance provided in the NRP Issue Reference Guide must be followed. The guide provides specific information on various issues including:

A T-Account must be completed as part of the financial status analysis. If the T-Account shows a potential for unreported income, a formal indirect method should also be considered.

Minimum income probes are required on all NRP cases. Information on the minimum income probes is contained in IRM 4.10.4.3., Minimum Requirements For Examination of Income.

All NRP cases closed must go through area NRP coordinator for final data testing and transmission, see IRM 4.22.6.8, Transmission of Electronic Data to NRP Databases for the Form 1040 Study.

For NRP key cases, ALL adjustments must be made and included on the Form 4549, regardless of size.

The tax computation must be run after modifying any adjustment data. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

When adjustments are proposed, and the deficiency is either $0 or set to $0 by the examiner (see # 2 above), use Disposal Code "01 - No change with adjustments". Zero Deficiency reports require ONLY one report and should follow regular examination closing procedures.

When no adjustments are made, a valid no-change case will require two tax computations and two reports.

For the NRP Form 1040, Individual Income Tax Study, the transmission of all final case data is performed by the area NRP coordinator.

Once the group manager has reviewed the closed case and completed the NRP manager Closed Case Review Checksheet, the case file is forwarded to the area NRP coordinator for final data testing and transmission.

The electronic NRP RGS case file is forwarded to the appropriate area NRP coordinator RGS group. Any paper case file may also be forwarded to the area NRP coordinator or held by the exam group according to area practices. The case will be updated to AIMS Status Code 41 to reflect the case is in transit to the area NRP coordinator.

Once the area NRP coordinator acknowledges receipt of the case file, the AIMS Status Code is updated to 43.

The NRP coordinator will merge the case into their NRP RGS inventory and conduct the data testing and transmission to the NRP databases. Any identified data errors must be corrected by the NRP coordinator or returned to the exam group for correction before the case can be closed.

After the NRP data has passed all consistency tests, the case may be updated on AIMS and forwarded to the appropriate destination for final processing. If the paper file was held by the exam group, area PSP will provide the field group an electronic copy of F3210 and inform field group to mail physical case file to CCP or Technical Services.

The NRP coordinator will re-transmit and test case data if data was changed after the last testing. If Technical Services makes changes to the issues or RAR, this new data will have to be captured by the NRP coordinator before the case closes to CCP.

Various processes will be used to ensure quality NRP cases. These include: