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Part 4. Examining Process

Chapter 4. AIMS Processing

Section 12. Examined Closings, Surveyed Claims, and Partial Assessments (Cont. 5)

4.4.12  Examined Closings, Surveyed Claims, and Partial Assessments (Cont. 5)

4.4.12.4 
Examined Closings/Surveyed Claims

4.4.12.4.57 
Item 45: NOL Indicator

4.4.12.4.57.2  (06-01-2002)
Carryback and/or Carry-Forward Tax Periods Related To the NOL

  1. Enter a "2" in Item 45 for all carryback and/or carryforward tax periods related to the case in which you entered a "1" in Item 45 even if the NOLD was examined and the final result was a no change.

4.4.12.4.57.3  (06-01-2002)
Non-NOL Years Offset by Carryover

  1. Enter a "3" in Item 45 for tax periods in which adjustments on the return were offset either in part or full by a carryover if the carryforward year return is not picked-up.

4.4.12.4.58  (06-01-2002)
Item 46: Credit C/F Amount

  1. This item is used if you made adjustments to a credit that was carried forward but did not pick-up the carryforward year return. Enter the amount that was disaIlowed.

  2. Example: you examined the 199712 return and disallowed the foreign tax credit for $5,000, $2,000 of which was carried forward to 199812. You did not pick up 199812 since it had not been filed.
     199712 Form 5344, Item 46 = $2,000
     199712 Form 5344, Item 12 = $3,000

4.4.12.4.59  (06-01-2002)
Item 47: Credit Type

  1. Enter the type of credit that was disallowed in Item 46. If more than one type of credit was disallowed enter " M" for multiple.
     A = Reserved
     B = Business Energy Credit
     C = Reserved
     E = Experimental Credit; Research and
     F = Foreign Tax Credit
     G = Reserved
     H = Historical Restoration Credit
     I = Investment Tax Credit
     J = Reserved
     K = Reserved
     L = Low Income Housing Credit
     M = Multiple
     N = Reserved
     O = Other
     P = Reserved
     Q = Reserved
     R = Reserved
     S = Reserved
     T = Tight Formation Gas Credit
     U = Reserved
     V = Vehicle Credit; Qualified Electric
     W = Reserved
     X = Reserved
     Y = Reserved
     Z = Reserved

4.4.12.4.60  (06-01-2002)
Item 49: Secondary Business Code

  1. The 5 digit secondary business code should be input if the AIMS data base does not contain the correct SBC.

4.4.12.4.61  (06-01-2002)
Item 50: Employee Group Code

  1. The examiner’s four-digit employee group code is a required entry for all examined returns. No entry is necessary for surveyed claims.

    1. 1XXX is used for revenue agent groups

    2. 2XXX is used for tax auditor/tax resolution representative groups

    3. 5000 through 5999 is used for all Examination Branch programs at campus

  2. Employee Group Codes 1000, 1998, 2000, 2072, 2998 or 2999 are not valid entries for closings.

4.4.12.4.62  (06-01-2002)
Item K: Tax Examiner

  1. The name of the tax examiner that prepared the Form 5344 should be entered in the space provided.

4.4.12.4.63  (08-01-2003)
Item 400: CIC Case

  1. If the case is a Coordinated Industry Case, an "L" should be entered in this field by the industry having primary responsibility for the CIC examination.

  2. If the AIMS data base currently contains Aging Reason Code 04, the computer will automatically generate an " L" even if it is not input.

4.4.12.4.64  (06-01-2002)
Item 401: Whipsaw Indicator

  1. Where the Government’s interest is being protected by making the same adjustment against the same taxpayer for different tax periods, or against two or more taxpayers, an alpha indicator (K=Key case, R=Related case) must be entered to identify the case as a Whipsaw case.

  2. The input of this indicator will prevent the duplication of statistics.
    "K" AIMS Tables will reflect results
    "R" AIMS Tables will reflect return but no results

  3. If there are additional issues on the return that have been adjusted, the indicator should be used only if the majority of the adjustments were due to the whipsaw.

4.4.12.4.64.1  (06-01-2002)
Related Returns

  1. The primary case information should be entered on the Form 5344, Item 405–408, of the related case.

4.4.12.4.65  (06-01-2002)
Item 402: International Examiner’s Time

  1. Enter the percentage of the total time (Item 28) that represents the International Examiner’s time.

4.4.12.4.65.1  (06-01-2002)
Example

  1. The total time spent on the case (including the international examiner’s time) is 125 hours. The international examiner spent 15 hours on the case, therefore the entry in this field should be 12 (15/125=12).

4.4.12.4.65.2  (06-01-2002)
Revenue Base Protection

  1. Do not include the international examiner’s time spent on Revenue Base Protection issues in this calculation.

4.4.12.4.66  (06-01-2002)
Item 403: International Exam Results

  1. Enter the percentage of the exam results (agreed and unagreed) that is due to the international examiner’s involvement.

4.4.12.4.66.1  (06-01-2002)
Example

  1. Exam results is $10,000. The portion attributable to the international examiner is $1,500, therefore the entry in this field should be 15 (1,500/10,000=15).

4.4.12.4.66.2  (06-01-2002)
Revenue Base Protection

  1. Do not include Revenue Base Protection results due to the international examiner.

4.4.12.4.67  (06-01-2002)
Item 404: Form 720

  1. When a Form 720 is established on AIMS, the data base contains only one abstract code which is located in the activity code field. All activity codes that were examined must be entered in Item 404.

  2. Entries for the total time spent on the case and all assessments are made on the front of the Form 5344.

  3. Entries for AIMS statistical reporting purposes are made in Item 404a – 404d on the back of the form.

4.4.12.4.67.1  (08-01-2003)
Item 404a: Abstract Code

  1. Enter the abstract code for each abstract that was examined.

  2. If more than one abstract code was examined, do not enter an abstract code that was no-changed on the first line of 404a, unless the disposal code that was entered on the front of the Form 5344 is also a no-change disposal code. Enter the abstract code that resulted in a change on the first line if the disposal code on the front of the Form 5344 is a changed disposal code. If the disposal code for the first abstract code is not consistent with the disposal code entered in Item 13, the case will appear on the Accomplishment Error Register and the results of the audit will not be reflected on the AIMS tables until the correction is input.

4.4.12.4.67.2  (08-01-2003)
Item 404b: Disposal Code

  1. Enter the appropriate disposal code for each abstract code examined.

  2. See IRM 4.4.12.4.67.1.

4.4.12.4.67.3  (08-01-2003)
Item 404c: Time

  1. Enter the time charged to the examination for each abstract code examined.

  2. The total of all Item 404c entries must total the amount entered in Item 28.

  3. 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 "3" for 15 minutes

    • Enter a "5" for 30 minutes

    • Enter a "7" for 45 minutes

4.4.12.4.67.4  (06-01-2002)
Item 404d: Exam Results

  1. Enter the tax adjustment amount for each abstract code examined.

  2. The total of all Item 404d entries must equal the total of the computer generated Examination results.

4.4.12.4.67.5  (06-01-2002)
Flip/Flop Issue

  1. When a taxpayer has reported an excise tax under an incorrect abstract number, Examination will adjust the excise tax to report it under the proper abstract. In such cases, there will be no additional tax that is assessed. These offsetting adjustments are closed with Disposal Code 01. Item 15 will reflect the decrease (-) to the incorrect abstract number and the corresponding increase (+) to the correct abstract, Item 404 a–c will reflect the abstract codes, disposal code and abstract time for each abstract reflected in Item 15. However, the exam results entered in Item 404d is zero. Zero abstract results are entered because the Item 404 results must equal the Exam Results which in flip-flop cases are zero.

4.4.12.4.67.6  (06-01-2002)
Multiple Abstracts Examined

  1. Below, are procedures for processing returns with multiple abstract codes.

4.4.12.4.67.6.1  (06-01-2002)
No Change Abstract

  1. If multiple abstract codes are examined and one is a no-change, do not list the no-change code first. If the disposal code entered in Item 13, is greater than 02, the case will appear on the accomplishment error register.

4.4.12.4.67.6.2  (06-01-2002)
More Than 9 Abstracts

  1. If more than 9 abstract codes are examined, check the box in the lower right portion of this item and attach additional Forms 5344 as necessary.

4.4.12.4.67.6.3  (08-01-2003)
Revenue Base Protection

  1. If the examination included RBP (claim for refund), the RBP time and dollars protected must be entered on the front of the Form 5344. This figure must represent the total RBP time and RBP dollars protected for all abstract codes. The results for the RBP will be reflected on the AIMS tables, under the primary Abstract Code on the AIMS data base. Change the abstract code to represent the abstract that the claim is filed against if it is not already the primary code. The Item 404 entries must NOT include RBP figures.

4.4.12.4.67.6.4  (06-01-2002)
Secured Delinquent Returns

  1. Effective January 1, 1999, Item 404 must not include the amount of the delinquent return. The entire amount of the delinquent return secured by Examination and forwarded to the campus for processing, must be entered in Item 414.

4.4.12.4.68  (06-01-2002)
Related Return Section

  1. Required entry for all examined returns worked by:

    1. Revenue Agents in a 1XXX Employee Group Codes,

    2. Tax Auditors/Tax Resolution Representative in 2XXX Employee Group Codes, and

    3. Correspondence Examination Examiners in 5XXX Employee Group Codes.

    4. Exempt from this requirement are TEFRA cases in 58XX Employee Group Codes.

  2. The information entered must be from the primary return which is the initial return that started the examination.

  3. If several returns were assigned initially, the Examining Officer will designate one return as primary.

  4. An audit label may be used but the name control must be lined out and Item 408 entered separately.

  5. Missing or conflicting information will cause a terminal reject.

4.4.12.4.68.1  (06-01-2002)
Primary Return Entries

  1. Only Item 408 needs to be completed.

  2. Enter "P" in Item 408. The computer will generate the primary return information from the front of the F5344.

4.4.12.4.68.2  (06-01-2002)
Related Return Entries

  1. Item 405 is for TIN of primary return.

  2. Item 406 is for MFT of primary return.

  3. Item 407 is for Tax Period of primary return.

  4. Item 408 is for Related Return Alpha Code of "S" .

4.4.12.4.69  (06-01-2002)
Item 410: Aging Reason Code

  1. Enter if applicable.

4.4.12.4.70  (06-01-2002)
Item 411: Payment Code

  1. Required on all cases (except employee group code 58XX)

  2. To determine whether the account is full paid or part paid, consider the tax, penalty and interest, adjusted by credits per the examiner’s report. Use the interest amount from the examiner’s report even if a payment is secured at a later date.

    Example:

    Examiner’s report dated June 1, 1997, shows a balance due of $5,000, interest is $100. A check is received on August 1, 1997 for the entire amount per the RAR. Consider this full paid even though there will be 2 more months of interest charged after the assessment is made.

  3. It is not a requirement to check Master File for payments.

  4. Select the code based on the payment status of the account at the time of closing from the group.

  5. No other codes may be used without Headquarters approval.

4.4.12.4.70.1  (08-01-2003)
Valid Codes

  1. Following are the valid payment codes.

    F = full paid Amount shows on RAR paid in full; may be unpaid accruals - Frozen refund or payment which covers the balance due in full.
    P = part paid Includes frozen refund or payment does not cover balance due (also used where there will be an offset from other tax periods that will not completely satisfy the liability).
    N = no payment Changed cases when refund was not frozen, no payment or agreement received, no change cases, overassessment cases, Appeals cases if no payment received.
    O = total offset Overassessments from other tax periods that will offset all of the tax.

4.4.12.4.71  (06-01-2002)
Item 412: Installment Agreement Code

  1. Required on all cases except EGC 58XX.

  2. Select the code base on whether an installment agreement was secured.

    1. I = Installment agreement received (This includes Estate Tax Return installment agreements under IRC Section 6166.)

    2. C = Coordinated with collection

    3. N = No installment agreement received

4.4.12.4.72  (06-01-2002)
Item 414: Delinquent Return Amount

  1. Effective January 1, 1999, this field will replace Item 34, Adjustment Amount field for delinquent returns secured by Examination and forwarded to the campus for the processing of the TC 150.

4.4.12.4.72.1  (06-01-2002)
Taxable Returns

  1. Enter the balance due or refund amount (excluding penalties) per the delinquent return.

4.4.12.4.72.2  (06-01-2002)
Non-taxable Returns

  1. Enter the amount of the ordinary net income/loss or special allocation items per the delinquent return.

4.4.12.4.72.3  (06-01-2002)
Excise Tax Returns

  1. Enter the total of all abstract codes in Item 414. DO NOT make an entry in Item 404 for the delinquent amount. The amount entered in Item 414 will be credited to the Activity/Abstract Code that appears on the AMDISA. You must change the Activity/Abstract Code if you want the delinquent return credited to a different code.

4.4.12.4.72.4  (06-01-2002)
AIMS Checks

  1. If Item 414 is entered, Item 37, Delinquent Return Code must also be entered and vice versa.

  2. If Item 414 is entered, Item 13 Disposal Code must be 01 or 03–13 (Not valid with DC 02 and 34).

4.4.12.4.73  (06-01-2002)
Item 415: Amended Return Amount

  1. In the past, if a taxpayer filed an amended return with the campus, even if it was due to an ongoing examination, we could not take "credit" for the adjustment. To accurately capture the examiners’ efforts, a new Item 415 is being initiated. This entry is only valid if Master File shows that the examination was started BEFORE the taxpayer filed the amended return or an original return if the TC 150 is a Substitute for Return (SFR). Enter the amount of the TC 29X that has posted to Master file if the return was filed, as a result of an ongoing examination. A current transcript must be included in the case file supporting the amount entered in Item 415. The TC 42X date must be prior to the TC 29X.

4.4.12.4.73.1  (06-01-2002)
Taxable Returns

  1. Enter the amount of the TC 29X less any credits posted. In most cases this is the balance/refund due.

4.4.12.4.73.2  (06-01-2002)
Non-taxable Returns

  1. Enter the adjustment amount to income/loss.

4.4.12.4.73.3  (06-01-2002)
Examples

  1. An examination is being conducted an business expenses are being disallowed resulting in a proposed deficiency of $20,000. Instead of signing an agreement, the taxpayer sends an amended return to the campus no longer claiming these expenses. The campus assesses additional tax in the amount of $20,000. If the TC 290 for $20,000 posts AFTER the TC 42X, enter $20,000 in Item 415.

  2. An examination is being conducted an business expenses are being disallowed resulting in a proposed deficiency of $20,000. Instead of signing an agreement, the taxpayer sends an amended return to the campus reporting additional income resulting in additional tax of $10,000. Since this was not an issue included in the examination, no entry is allowed in Item 415 EVEN if the TC 290 was posted after the TC 420. The $20,000 for the disallowance of the business expenses will be reflected in the TC 300 amount.

  3. An examination is being conducted on a non-filer. The TC 150 posted at Master File represents the SFR that Exam submitted. The taxpayer sends an original return to the campus and the center assesses $10,000 in tax and $3,000 in withholding credit. Enter $7,000 in Item 415 IF the TC 42X date is prior to the TC 29X. If the SFR had not posted, delinquent return (Item 414) procedures should be followed if the TC 42X preceded the TC 150.

4.4.12.4.74  (08-01-2003)
Item 416: Fax'd Agreement

  1. Enter a "1" if the agreement was received by fax. For EGC 5XXX only.

4.4.12.5  (06-01-2002)
Disposition of Form

  1. For regular closures see IRM 4.4.28, Terminal Input.

4.4.12.5.1  (06-01-2002)
Closures to Appeals

  1. Staple the Form 5344 to the front of the tax return. It is not necessary to send the Form 5344 to the campus as a source document.

4.4.12.5.2  (06-01-2002)
CEP Cases

  1. The large case manager will forward completed copy of the Form 5344 to the primary Industry’s Director, Field Operations.

4.4.12.6  (06-01-2002)
Closing Instructions for Cases with RGS Reports

  1. For offices that are on the LAN system, the RGS data is stored on the LAN, other offices store the data on the disk that is retained with the case file.

4.4.12.6.1  (06-01-2002)
Examining Officer

  1. Upon completion of the examination, the examining officer is responsible for completing the Form 5344 screens, running the validation program, and printing the validated Form 5344. Most of the entries that were manually entered by the Examination group or by Case Processing Support now flow from the Examining Officers report to the RGS Form 5344. The remaining items are completed with simple yes/no answers, system prompts, and pop-up screens.

4.4.12.6.1.1  (06-01-2002)
Group Closing of Unagreed Cases

  1. For cases that are being closed from the group unagreed (NOT CLOSING TO APPEALS), use Disposal Code 10 for the purpose of running the validating program. Once a statutory notice is issued and the case defaults, the Form 5344 will already be prepared. If the case requires special handling or it does not default, a revised Form 5344 will be generated.

4.4.12.6.1.2  (06-01-2002)
Employee Group Code 1XXX Cases

  1. The grade of a case must be entered for validation purposes. The Examining Officer will use the pop-up screens provided for completing this entry. The GS-TYPE entry 11 and below, 12 or 13, will be completed as follows:

    1. If the manager has made a determination as to the grade, enter that GS-TYPE.

    2. If the grade determination has not been made by the manager, the Examining Officer will select the GS-TYPE corresponding to their current GS level. The group manager will make the final grade determination and if necessary revise the Form 5344.

4.4.12.6.1.3  (06-01-2002)
Special Handling Cases

  1. If the case file requires special handling, complete the Form 5344 screens as usual, run the validation program and generate the Form 5344. Prepare Form 3198 and forward case file to the locally designated personnel for special processing.

4.4.12.6.2  (06-01-2002)
Closing Personnel

  1. Closing Personnel may be in the groups or a central location depending on local option. They will receive the case files from the Examining Officers for final processing. Cases requiring special handling will be identified by Form 3198.

4.4.12.6.2.1  (06-01-2002)
Non-Special Handling Cases

  1. RGS cases not identified as requiring special handling, are not required to have the Form 5344 verified by the employee assigned to close the case if the Form 5344 has been validated. (If Item 36, Hash Total is present. F5344 has been validated). Since the information appearing on the Form 5344 flows from the RGS Examination Report and the validation program has been utilized by the examining officer, additional verifying of the entries is no longer required. These files should be assembled, closed through AIMS, and shipped to the campus.

4.4.12.6.2.2  (06-01-2002)
Special Handling Cases

  1. RGS cases identified as requiring special handling should be processed by a Special Processing Examiner or locally designated personnel. Upon final resolution of the case, a revised Form 5344 will be generated and the same closing procedures as stated above.

4.4.12.7  (08-01-2003)
EOAD Data Capture Procedures

  1. EOAD Data Capture Procedures

    1. All SBSE and LMSB Forms 1040, 1120, 1120S, 1065, and Employment Tax closed case files should include a data diskette. All diskettes should be labeled with the taxpayer’s name and TIN. The labels of diskettes not created with RGSNT should also include the business unit from which the case originated, and the software used to create the diskette [RGS (DOS), BNA CTAA, or Employment Tax]. Exceptions to this requirement would include:
      (1)Closed cases completely processed in a Local Area Network (LAN) environment that do not require diskettes.
      (2) Cases forwarded for processing where RGSNT was not used that are so identified as such by a special handling notice.

    2. All SBSE and all LMSB diskettes should be removed from the case file and processed to capture EOAD data using the appropriate software for the diskette in question. CPS personnel should presume that diskettes were created using RGSNT unless otherwise labeled. Since the appropriate data capture software may change from time to time, the AIMS website will provide up to date information on what software should be used and how to secure updated versions. For cases being forwarded to CPS without diskettes for closure entirely in a LAN environment, EOAD data will be captured through the LAN using software provided for this purpose.

    3. EOAD data from unagreed cases forwarded for issuance of a statutory notice should not be captured until after the case closes by default or other method.

    4. EOAD data from unagreed cases forwarded to Appeals should be captured prior to the case file being forwarded to Appeals using one of the two diskettes provided in these cases.

    5. All SBSE and LMSB closed cases should also include a Compliance Evaluation Screen (CES) printout that should have been placed in the case file on top of the AIMS Closing Document, Form 5344. Exceptions to this are SBSE cases worked with RGS (DOS) and cases not worked with the software cited in subsection 4.4.12.7(1)(a)(2) above. Closed cases forwarded to CPS by LAN from SB/SE and LMSB that do not require closed case diskettes must still include CES printouts. Any case requiring the inclusion of a closed case diskette and/or a CES printout that is missing these items should be returned to the originating group with a request to provide the missing item(s).

    6. Within five days after the end of the AIMS Cycle, data collected by the various EOAD data collection programs will be forwarded to Headquarters using data encryption and transmission software provided for this purpose by the EOAD office. Procedures for both the accumulation of EOAD data and its transmission will vary based on software being used over time. The AIMS website will provide updated procedures for this purpose.

  2. All data disks, regardless of source, will be forwarded to the Area Office Compliance Automation Specialist for recycling once EOAD procedures in 4.4.12.7.(1) are completed.

  3. If a case is being forwarded to Appeals, the disks must remain in the case file. Upon final closing the disk will be disposed of as stated in IRM 4.4.12.7.(2).

Exhibit 4.4.12-1  (06-01-2002)
Item 15 Reference Numbers for Forms 706 and 709

Reference: Text 4.4.1 2.4.26


Reference Numbers for:

Form 706 Estate Tax Return MFT 52
Form 706GS (D) Generation-Skipping Transfer Tax Return for Distributions MFT 78
Form 706GS (T) Generation-Skipping Transfer Tax Return for Terminations MFT 77
Form 709 Gift Tax Return MFT 51
Item Reference Numbers (IREF) are used to update certain informational fields on the Master File and they do not adjust tax, credits or exam results.
VALID
AIMS
MFT'S 		    MASTER FILE
FIELD TO
ADJUST 		NOTES
51 52 77 78 074 IREF GST Tax When a decrease would reduce the posted amount to a negative amount, Master File will adjust the posted field to zero. IREF#’S 074–077, the total tax adjustment may consist of one or all of these types of tax depending on the dates of validity and whether adjustment to a specific tax is warranted. The SUM of the IREF#’s used to reflect the change in tax, must equal the TC 30X amount entered in Item 12 of the Form 5344.
– B * * 075 Section 4981A Tax Same as # 074.
– B * * 076 Estate Tax Same as # 074.
C – – – 077 Gift Tax Same as # 074.
– * * * 078   Interest assessment for state death tax credit taken but not paid. The related dollar amount must be greater than zero. TC 340 must be present
Credit Reference Numbers (CREF#) adjust tax, penalties or credits and are included in exam results.
      CREF#  
* B * * 680 If a positive amount is entered, a TC 240 will be posted and appropriate CP 210/220/910/920 issued.
If a negative amount is entered, TC 241 will be posted and appropriate CP 210/220/910/920 issued.
D B * * 681   Same as # 680
D B * * 682   Same as # 680
E B * * 686   Same as # 680
* = Valid for all tax periods
– = Not valid for this MFT or tax period
A = Valid after 8611
B = Valid with tax period 0000
C = Valid through 9012
D = Valid after 7912
E = Valid after 8909

Exhibit 4.4.12-2  (08-01-2003)
Item 15 Reference Numbers for Form 720

Reference: 4.4.12.4.26


Reference Numbers for:

Form 720 Excise Tax Return MFT 03
The following are the IRS Numbers found on the Form 720, preceded by "0" . These codes are used to update the excise trust funds. They do not adjust tax, credits or exam results. Effective January 1995, reference numbers 001–199 are all valid for all tax periods on AIMS. Make sure the number entered is present on the Form 720 for the tax period used.
IREF#    
001 —  
002 —  
003