The Excise Tax Examination Reports should contain all the information necessary to ensure a clear understanding of the adjustments and document how the tax liability was computed. Examination reports (unlike work papers) are legally binding documents and, when executed, serve as the basis for assessment and collection action. Based on this importance, Excise Tax Examiners should take all necessary steps to ensure report accuracy.

Excise Tax Examiner contact information will be provided to the taxpayer when a report is issued. Refer to IRM 4.10.1.6.9 Providing Taxpayers with Employee Contact Information.

The Excise Tax Examiner is required to utilize management specified report generating software system and utilize the appropriate lead sheets and templates for all Excise tax case examinations and Form 637 compliance reviews.

Refer to IRM 4.10.8 Report Writing for additional information.

The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) requires the Service to include an explanation of the examination and collection process, as well as information about assistance from the Taxpayer Advocate with any first audit report and with any formal 30 day letter. Publication 3498, The Examination Process, will be used for this purpose. Publication 3498 incorporates Publication 1, 5, and 594 into one document.

Publications sent to the taxpayer should always agree with the enclosures listed on the cover letter to avoid confusion.

Publications are not required to be included in No Change reports.

Separate reports reflecting changes are prepared based on the type of return filed. For example, adjustments made to Form 720 and Form 2290 cannot be included on the same audit report.

A single report covering all periods examined will be prepared if excise taxes, reported on the same return, have been examined concurrently.

When multiple abstracts are examined on the same return, each abstract should be listed separately.

Excise tax adjustments should not be incorporated into income tax reports.

The selection of a return for examination can result in a variety of different reporting situations.

The return can be-

The term "unagreed" refers to cases where the taxpayer does not agree in full to the proposed adjustments. The definition of "excepted agreed" may be found in IRM 4.10.8.4."Partially agreed" refers to cases where the taxpayer agrees to some, but not all, of the proposed adjustments. See IRM 4.10.8.5.

The following is a listing of the type of excise reports and the forms that will be used. Also included will be any instructions that pertain directly to that type of report.

For claims examination reports see IRM 4.24.8.4.

Under the IRS Restructuring and Reform Act of 1998 (PL. 105-206), once jurisdiction of a case is transferred to Appeals, the Excise Tax Examiner is prohibited from ex parte communication with the Appeals Officer assigned the case. Also see Rev. Proc. 2000-43, Prohibition of Ex Parte Communications Between Appeals Officers And Other Internal Revenue Service Employees.

If Appeals cannot resolve the case (to the taxpayer's satisfaction), the taxpayer's only recourse will be paying the additional tax when assessed and filing a claim for refund within the applicable statutory period of limitations. Upon disallowance of the claim or six months from the date the claim was filed, the taxpayer may then file suit in the U.S. District Court or U.S. Federal Court of Claims to recover the monies.

Appeals procedures for unagreed income tax cases are generally applicable to excise tax cases, with the exception of the statutory notice provisions which do not apply to excise taxes.

If, as a result of the issuance of a thirty-day letter, the taxpayer requests that the Appeals Office reviews the case findings, the service must abide by that request if certain requirements are met.

For any case where the total amount of proposed additional tax, additions to tax and penalties, proposed overassessment, or claimed refund, credit, or abatement for any tax period, does not exceed $25,000, a request for an Appeal may be made using small case procedures. These procedures require a written request for Appeals consideration, stating the issues and grounds for the disagreement.

A formal written protest is required for any case in which the deficiency exceeds $25,000 for any one period.

Formal written protests are reviewed at the group level, as designated by management, within seven days of receipt to determine whether:

A taxpayer's formal written protest must include the following:

If the taxpayer's representative submits the protest for the taxpayer, the representative may include a substitute for the taxpayer's declaration described in the above paragraph. The declaration will state:

The protest should be returned to the taxpayer if incomplete and additional time should be granted to perfect the document.

The case should be returned to the Excise Examiner for further development if the protest contains information warranting consideration. Cases returned for additional development should be considered priority work and given expedited consideration. If the Excise Tax Examiner or group manager feel that there is something in the protest that does not change the determination, but requires further comment or explanation and is not confidential in nature, a rebuttal can be prepared and included in the case file before it is sent to Appeals. If a rebuttal is prepared, a copy should also be provided to the taxpayer.

The group manager is given discretion to meet with taxpayers to discuss disputed issues in an attempt to resolve the issues, obtain agreement, and limit taxpayer burden. A written statement must be in the case file that contains evidence of the manager's involvement in the unagreed case and what attempts were made to resolve the disputed issues.

If the taxpayer verbally requests a transfer of jurisdiction for an Appeal, and the written protest is complete, the case file will be sent directly to the local Appeals office serving the transferor's Territory. This procedure applies even if the taxpayer has requested a hearing in an Appeals office other than the one servicing the transferor's Territory.

A case can be transferred to Appeals with a copy of the taxpayer's return if:

Requests from Appeals for additional information or further verification of facts in a protested case will be completed expeditiously.

See IRM 4.10.8.16.6 for appeal rights for inadequate taxpayer records cases.

For a discussion of Inadequate Taxpayer Records and for appropriate procedures, see IRM 4.10.8.16. Use Mandatory Administrative Form A-105, Administrative Check Sheet, to document and address inadequate records notice.

At the conclusion of an excise tax examination, the Excise Tax Examiner will discuss their findings with the taxpayer.

Whenever agreements are solicited, Publication 3498 should be provided to the taxpayer.

The proposed adjustments, resulting tax liability, penalties, and interest and the appeals procedures should be discussed with the taxpayer. For information regarding penalties see IRM 4.24.9.

If the taxpayer agrees with the findings, they will sign Form 5384, Excise Tax Examination Changes and Consent to Assessment and Collection.

In attempting to reach agreement, examination personnel have the authority and responsibility to reach a definite conclusion based on a balanced and impartial evaluation of all evidence. This authority does not extend to considerations of the hazards of litigation. This is in keeping with Policy Statement P-4-40 which encourages disposition of tax differences at the lowest level. See IRM 1.2.1.4.14 for the policy statement.

If the taxpayer has not offered to pay by the time an agreement has been obtained, the Excise Tax Examiner will solicit payment of the tax due, including accrued interest and any applicable penalty.

A separate Form 3244-A, Payment Posting Voucher-Examination, shall be prepared for each taxpayer and tax period.

The Excise Tax Examiner will advise the taxpayer of the present interest rate and explain the advantage of making an advance payment, i.e., accrual of interest will stop as of the date of payment. Generally, interest will be computed by the Excise Tax Examiner and should be included in the payment from the taxpayer.

An Excise Tax Examiner can accept payment by check or money order, but not cash.

If the taxpayer agrees to the adjustment of the liability but cannot pay, the Excise Tax Examiner should refer the taxpayer to Collection. See IRM 4.20.3, Soliciting Payment.

If a taxpayer designates any part of an advance payment for penalty or interest, the payment will be applied as designated by the taxpayer.

IRM 8.13.1, Closing Agreement Manual, contains information and instructions regarding closing agreements under IRC 7121 for all types of taxes.

The United States Tax Court has no jurisdiction over cases involving the excise taxes reported on Forms 720, 2290, 730, and 11–C. These cases may be litigated in either the United States District Court or the United States Federal Court of Claims after payment of the tax by filing a suit for refund of the tax.

The following Alternative Dispute Resolution (ADR) programs may apply to excise tax examinations.

FTM is offered by the IRS designed to expedite case resolution. FTM may be initiated at the conclusion of an examination/collection determination. FTM is not intended to replace the Manager’s Conference. The mediation session is designed to help facilitate communication between the Taxpayer and Compliance (Examination/Collection) and help resolve unagreed issue(s). The process involves an Appeals Officer who has been trained in mediation, the Taxpayer, and the Excise Tax Examiner. Stringent time frames have been established in order to provide Taxpayers a more timely resolution of tax disputes. The entire process is estimated to be completed within an average of 30-40 days. During the FTM process the case will remain in Compliance jurisdiction. Ex Parte rules are waived by the taxpayer. The Appeals Officer does not have settlement authority and the case resolution is based traditional application of the facts to the law. See Rev. Proc.2003-41.

FTS- LMSB is described in Rev. Proc. 2003-40. The Appeals Officer does have settlement authority and the case may be resolved on the hazards of litigation. In Announcement 2006-61 the IRS extended FTS to SBSE for a two year test period for taxpayer's in Chicago, Houston, and St. Paul/Minneapolis. FTS has expanded to Philadelphia, Laguna Nigel, San Diego/Riverside in FY 2008.

Form 5344 is used as an input document to the Audit Information Management System (AIMS), which captures the closing information on examined cases. The system also transmits Form 5344 adjustment information to the Master File to update taxpayer account records.

Excise field groups are required to use the Excel version of Form 5344 found on the Excise web page at http://sbse.web.irs.gov/EX/Org/RA/Reengineering/Reengineering.htm .

Excise field groups are responsible for completion of the following items:

Excise Tax Examiners should refer to the AIMS web site at http://sbse.web.irs.gov/AIMS/ for current case closing information and procedures.

Excise Tax Examiners should also refer to the excise web site at http://sbse.web.irs.gov/EX/Org/RA/Reengineering/Reengineering.htm for a list of filled in Form 5344 templates for certain case closings and detailed line by line instructions.