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Part 4. Examining Process

Chapter 22. National Research Program (NRP)

Section 6. Area Office - Examination of Individual Returns

4.22.6  Area Office - Examination of Individual Returns

4.22.6.1  (10-01-2008)
Initiating Examinations

  1. All possible efforts should be made to contact taxpayers whose cases are to be examined.

  2. The initial contact Letters 2205-B (1-2006) for revenue agents and 3572-B (5-2007) for tax compliance officers (TCO) were developed for NRP Individual key case examinations. These letters will be used to arrange the appointment for all NRP Individual key case examinations. These letters request a taxpayer to call the examiner to schedule an appointment.

  3. For field examination cases the revenue agent can also make the initial contact by telephone. During the initial telephone contact it is important that the revenue agent ensures that the taxpayer knows that this is an NRP examination and covers the items discussed in L 2205-B. This should be documented in the case file. When the initial appointment is made by telephone, a follow-up letter will be mailed to the taxpayer confirming the time/place of the examination.

  4. Any other letters or correspondence to taxpayers or their representatives should utilize standard examination letters (correspondence). This would include but not be limited to confirmation letters, appointment letters for related returns, no-change letter, and no change with adjustment letter.

  5. Notice 1332 (1-2007), Notice 609 (12-2004) and Publication 4134 (3-2008) will be used as enclosures to the initial contact letters or the confirmation letter if the revenue agent makes the initial contact with the telephone. Notice 1332 explains to the taxpayer how and why their return was selected for an NRP examination.

  6. If no contact is made see the following IRM sections for guidance:

    1. IRM 4.10.2.7.2 - Locating the Taxpayer

    2. IRM 4.10.2.7.2.1 - Undeliverable Initial Contact Letters

    3. IRM 4.10.2.7.2.2 - Unlocatable Taxpayers - Mandatory Steps to Locate

    4. IRM 4.10.2.7.2.3 - Additional Resources for Locating Taxpayers (Optional)

    5. IRM 4.10.2.7.2.4 - IDRS/CFOL Command Codes Useful in Locating a Taxpayer

    6. IRM 4.10.2.7.2.5 - Using Credit Bureau Information to Locate Taxpayers

    7. IRM 4.10.2.7.2.6 - Third-Party Contacts

4.22.6.2  (04-22-2008)
Individual Examination Guidelines

  1. NRP research and accurate data gathering require that the following issues be captured in accordance to guidance provided in training Module D (Examination Guidelines) for this study:

    1. Internal Revenue Code Section 183 (not for profit activities)

    2. Passive Activity Losses

    3. Ministers/Self Employment Deductions

4.22.6.2.1  (04-22-2008)
Earned Income Tax Credit (EITC) Examinations

  1. Special programs conducted by the Service during the 1990s provided detailed information about EITC compliance. Detailed information more current than available from these earlier studies is needed. Rather than establishing a separate program to obtain this data, the Service is taking advantage of efficiencies of a combined program by incorporating the EITC objectives into the existing Individual NRP. Examiners assigned EITC returns are required to complete an additional training module. See IRM 4.22.8 for EITC examination guidelines.

4.22.6.3  (04-22-2008)
Case Management and NRP Monitoring

  1. This section contains information about Case Management and NRP Monitoring.

4.22.6.3.1  (10-01-2008)
Case Assignment

  1. NRP cases should only be assigned to examiners that have completed all applicable training modules. For examiners assigned tax year 2007 returns and did not take any training for tax year 2006 returns the following Modules are required:

    Module A - Articulate Overview

    Module B - NRP Overview

    Module C - Case Building & Classification Overview

    Module D - Examination Guidelines

    Module E - RGS

    Module G - NRP Lead Sheets

    Module H - Validation and Case Closing

    If the key case has Earned Income Credit (EIC) classified, the examiner also needs to complete Module I- EIC. Module J-Classification and Module K- Correspondence Examinations are taught in the classroom to specific examiners.

  2. Examiners that completed training for tax year 2006 returns will be required to take:

    Module F - NRP 2007 Update

    Module G - NRP Lead Sheets

    Module H - Validation and Case Closing

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

4.22.6.3.2  (04-22-2008)
NRP Program Office and Operating Division Program Monitoring

  1. The NRP Office, Small Business/Self Employed Operating Division Examination and International functions will analyze the data gathered from sample reviews and take appropriate action to ensure the quality of the NRP examinations.

4.22.6.3.3  (04-22-2008)
Area NRP Program Monitoring

  1. Various processes will be utilized to ensure quality NRP cases. These include group manager in-process reviews, mandatory non-evaluative closed case reviews and in-process reviews completed by the Area Quality Review Teams. In addition, NRP cases will be subject to the same national sample review as any operational examination.

4.22.6.3.3.1  (10-01-2008)
Group Manager Responsibilities

  1. Group managers are responsible for the NRP cases within their groups, including timely and priority assignment of NRP returns and counseling examiners on the scope/depth requirements of these examinations. Group managers are also responsible for maintaining a work flow throughout the entire examination cycle that will ensure timely quality completion of NRP returns.

  2. In-process reviews are critical in guaranteeing the highest quality of NRP cases. At a minimum an evaluative in-process review is required on the first case assigned to each NRP examiner. The in-process review should take place within 60 days of the first appointment. For revenue agents the evaluative review should take place after the concurrence meeting, if applicable, and when enough audit work has been completed for meaningful feedback on the quality of the examination. If the tax compliance officer was able to complete the examination after the first appointment the case should still be reviewed. As previously mentioned, the purpose of the review is to provide meaningful timely feedback. Any trends identified by the group manager should be shared with the Area NRP Territory Manager.

  3. Group managers will complete a 100% non-evaluative closed case review on all NRP examinations. The objective of the reviews is to ensure the overall quality of NRP examinations. Remember by checking "yes" the manager is indicating that the item (income probe, IDR etc) was properly completed by the examiner. If a "no" is checked the case should be returned to the examiner for clarification/corrections. These reviews will be completed electronically by the manager and documented on the NRP Group Manager Closed Case Review Checksheet (Non-Evaluative) and included in section 615 of the case file. NRP 100% closed case review will focus on the following:

    1. Technical correctness of the examination.

    2. Adherence to NRP examination guidelines (all classified issues completed), procedural requirements, and case closing/data accuracy requirements.

    3. Review of the NRP Questionnaire for accuracy and completeness and inclusion in the case file.

4.22.6.3.3.2  (04-22-2008)
Area Quality Review Teams

  1. Each Area will establish a NRP Quality Review Team. The Area NRP Review Team will consist of the NRP Area Territory Manager, group managers and other members deemed appropriate by the NRP Area Territory Manager. The purpose of the Review Team is to identify overall quality issues and determine if technical issues were examined in sufficient scope/depth and ensure correct technical conclusions were reached. The reviews will serve as a means to identify trends to be communicated with management and examiners involved in the study. Area Review Team reviews are non-evaluative.

  2. The Area Review Teams will complete a sample of in-process and closed case reviews. The NRP Area Territory Manager will be responsible for ensuring that the results of the reviews are communicated in their Area. A total of 20 in-process cases and 20 closed cases per Area will be reviewed. The mix of cases reviewed will be split evenly between revenue agent and TCO cases. The reviews will generally start in the third quarter of each fiscal year. The NRP Area Territory Manager will be responsible for developing the sample methodology for the cases to be reviewed. Any sample methodology is acceptable as long as a representative number of territories, groups and sample/activity codes are considered.

  3. The in-process reviews and closed case reviews will cover ten attributes. The closed case reviews will also cover a review of the NRP Questionnaire and accuracy of data capture.

4.22.6.3.3.3  (04-22-2008)
National Quality Review System (NQRS)

  1. NRP Individual cases and related returns will be subject to the same operational national review sample guidelines as other examinations.


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