Mandatory Referral Criteria for CAS Assistance – IRM 4.47, Computer Audit Specialist, describes the mandatory referral criteria for Computer Audit Assistance on examinations.

Optimal Utilization of Computers - The use of a CAS is intended to effect the optimal utilization of computers in tax examinations.

Early Involvement of CAS in Planning Process - The CAS has the expertise to assist the team manager in planning the depth and scope of the examination. Accordingly, the CAS should be requested and involved in the case as early as possible in step one of the planning process for the purpose of performing a systems analysis, stratification and any other applications deemed appropriate by the CAS and team manager. CAS involvement in the planning process is recommended 90 -180 days prior to the case opening whenever possible.

Utilization of CAS Throughout the Examination - The CAS is LMSB's information specialist and should be used throughout the examination for advice and the application of innovative computer programs. The CAS gains familiarity with the taxpayer’s financial accounting processes regarding electronic data (available files, accounting code translations, summarization of detail information, etc.) for the years under audit. Financial accounting systems, information technology systems (mainframe vs. network server platforms), internal control, etc., are areas that the CAS will usually have an adequate base of knowledge to comment on or to provide assistance. Situations may arise during the examination or additional examination areas may be discovered where further assistance may be helpful.

Evaluation and Reconciliation - One of the most important duties the CAS performs is an evaluation of the taxpayer's Electronic Data Processing (EDP) systems. This process identifies useful computer files and provides the CAS with invaluable knowledge of the taxpayer's computer system. It also includes reviewing internal controls which could indicate issues of potential noncompliance. An important part of this process is to reconcile the electronic files to books and returns.

Download of Records - CASs are able to download data for the teams to use on most cases. Most CIC cases require the combining of files, although some EDP systems are centralized. Team managers should provide full support to the CAS in the attempt to perform a systems/record analysis. Appropriate contacts within the corporation should be arranged for the CAS. The personnel available should include tax department, accounting, and data processing personnel who understand the inner workings of the data processing phase of their division. The CAS must work closely with all team members to ensure that all files appropriate and useful to the examination are identified for retention.

Computer Examination Applications – The CAS has knowledge of and experience with the utilization of many different computer applications that add efficiencies to the examination. Brainstorming to identify additional applications designed to solve specific problems should be encouraged.

CAS Work Product – The CAS examination plan, activity record and work product documentation must be included in the LMSB case file.

Post-Examination Critique by CAS - The CAS should be available to discuss the prior applications, suggest changes or improvements and update the Record Retention Limitation Agreement at or near the conclusion of the examination, if appropriate. This can be accomplished by having the CAS, or CAS manager participate in the post-examination critique. Also, the CAS will provide written reports on these items. This fact must be documented if the CAS is not available.

Mandatory Referrals – IRM 4.60, International Procedures, describes the mandatory referral criteria for international examiner assistance on audits.

Effective Audits of Foreign Transactions - The United States tax laws that relate to overseas activity are exceedingly complex and difficult to administer. It is necessary to make full use of international examiners trained in this complex area in order for the Service to effectively audit foreign transactions.

International Examiner Involvement in Audit Planning - IRM 4.60 describes the major features of the International Enforcement Program. The team manager should be familiar with this chapter which includes functional responsibilities and specific instructions for early referral to the international manager. Early involvement of the international examiner in the planning stages of the examination is essential for those cases having substantial foreign transactions. This facilitates timely development of plans for examination of issue areas peculiar to foreign operations and facilitates more timely development of international tax issues.

Challenges to International Tax Law Enforcement - The principal challenges to effective international tax law enforcement are the complexities of the laws involved and the difficulties encountered in obtaining records from which a proper determination of U.S. tax effect can be made. The expertise of international examiners and the availability of advice and assistance from the Office of Pre-Filing and Technical Guidance can dispel much of the mystery inherent in this area of tax law. The team manager should be fully conversant with the record keeping requirements of sections 905, 964, 6001, 6038, 6038A and 6046A and the corresponding regulations. The team manager should also be conversant with the methods for obtaining these documents from foreign countries. (See IRM 4.46.3.10, Use of LMSB International).

International Examiner’s Work Product - The international examiner’s examination plan, activity record, and work product documentation must be included in the LMSB case file.

Mandatory Referrals – IRM 4.48, Engineer Program, describes the mandatory referral criteria for Engineer assistance on audits.

Engineer Expertise – Today’s business climate consists of specialization and rapidly changing technology. Team managers have specially educated and trained engineers as potential team members who can add value to examinations. The engineers bring education, experience, expertise, and special training to the examination. Many engineers have credentials or certifications in technical and valuation areas beyond their formal education. These credentials or certifications were earned from nationally recognized professional associations such as appraisal societies and societies of professional scientists, foresters, and engineers.

Engineer Involvement in Examination Planning - The engineer should be involved in the early planning stages of the examination. The engineer should have the opportunity to review all available information about the taxpayer to be examined such as the planning file, prior reports, tax returns, reports to stockholders, etc. One very important step, often overlooked or delayed, is a tour of the taxpayer's premises for the purpose of observing the physical assets of the taxpayer. The engineer is better equipped to recommend potential examination areas if these steps are taken.

Engineer Resources Available on National Basis - The engineer manager will seek assistance from other engineer teams or seek the assistance of outside experts to provide the needed expertise to the examination in situations that arise where the locally available engineering staff does not have a required specialist in a particular field.

Engineer Specialist’s Work Product - The engineer specialist’s examination plan, activity record, and work product documentation must be included in the LMSB case file.

Mandatory Referrals - IRM 4.49, Economist Program, describes the mandatory referral criteria for economist assistance on audits.

Need for Economist Assistance – Economists can assist the team manager with the ever growing development of various tax avoidance schemes involving business transactions between related parties doing business in different countries. These foreign transactions raise substantial examination problems outside the traditional accounting or tax audit function.

Economist Involvement in Examination Planning - The economist should be involved in the early planning stages of the examination. The economist should have the opportunity to review all available information about the taxpayer to be examined such as the planning file, prior reports, tax returns, reports to stockholders, etc.

Economist Expertise - The economists provide economic assistance on a broad range of tax issues. Economic analysis covers issues such as valuation of intangibles, determination of transfer pricing of cross-border transactions, shipping rates, royalties, commissions, discounts and the valuation of goodwill in acquisitions.

Economist Resources Available on National Basis - The economist manager will seek assistance from other economist teams or seek the assistance of outside experts to provide the needed expertise to the examination in situations that arise where the locally available economist staff does not have a required expertise in a particular field.

Economist Specialist’s Work Product - The economist specialist’s examination plan, activity record, and work product documentation must be included in the LMSB case file.

Mandatory Referrals – IRM 4.37, Financial Products and Transactions Handbook, describes the mandatory referral criteria for Financial Products and Transactions Specialist assistance on examinations.

Early Involvement of the Financial Products Specialist - LMSB team managers and team coordinators should involve financial products and transactions specialists early in the examination to identify industry-related issues and to achieve uniform compliance on an industry-wide and issue basis.

Financial Products Specialist Expertise - Financial products and transactions specialists are revenue agents who possess broad expertise in tax law and who have been given special training involving futures, options, government securities and other financial products. They are available to assist the team by participating in the planning and examination process. These specialists understand financial terminology, operations of the markets and industry practices, as well as the varied systems of accounting and record keeping associated with financial industries.

Financial Products and Transactions Specialist’s Work Product - The financial products and transactions specialist’s examination plan, activity record, and work product documentation must be included in the LMSB case file.

Mandatory Referrals - IRM 4.23, Employment Tax Handbook, describes the mandatory referral criteria for employment tax assistance on examinations.

Overall Employment Tax Program - IRM 4.23 describes the overall employment tax program, objectives, organization and responsibilities. IRM 4.23 requires the team manager to employ a specialist familiar with employment tax problems.

Early Involvement of the Employment Tax Specialist – LMSB teams should involve employment tax specialists (ETS) early in the CIC/IC examination to identify employment tax issues and to achieve uniform compliance on an industry-wide and issue basis.

ETS Involvement in Examination Planning - The ETS is able to assist in the planning process for the LMSB examination to identify employment tax issues and is familiar with CIC/IC protocols and procedures. The ETS is responsible for preparing the employment tax examination plan and associated risk analysis.

Control of Employment Tax Returns - The employment tax team manager controls the employment tax returns, while the team manager exercises primary case control. The ETS works very closely with the team manager, team coordinator and other team members in all aspects of the employment tax examination.

Currency of Examinations - IRM 4.46.3.6.4, Excise and Employment Tax, discusses options available to the examination team and the taxpayer when the employment tax examination is more current than the income tax examination.

Assigned Specialists - The various specialists previously discussed in this section are those specifically assigned or available to assist in the regular income tax examination.

Excise Tax Specialist -The great majority of cases in the LMSB program involve taxpayers liable for one or more different types of excise taxes. The team manager, during the initial review of the taxpayer, should determine if a taxpayer has a potential excise tax liability, and if so, a request for excise specialist assistance should be made. The Excise Tax Handbook, IRM 4.24, describes the Excise Tax Program and IRM 4.46.3.6.4, Excise and Employment Tax, requires centralized control of this area by the team manager. The initial review conducted by the team manager may fail to reveal any excise tax liability or credits claimed. The team manager, in these cases, should consult with the excise tax manager to identify possible areas of noncompliance.

TEGE Examinations - Employee Plans (EP) specialists are not LMSB employees. However, it is the responsibility of the team manager to refer cases with EP issues to TEGE. The EP examination must be coordinated with the income tax examination in any case selected for examination by EP specialists.

Pre-Filing and Technical Guidance Assistance - Technical advisors (TAs) are positions that have been established and are part of the overall network of the Pre-Filing and Technical Guidance (PFTG) program. The function of the TA is to initiate and monitor nationwide coordination of issues that cross industry lines and to provide assistance on these issues to examination teams. Information regarding the TA program can be found at IRM 4.40, Technical Advisor Program.

Use of Resources Outside the Primary Group - The use of resources outside the group where the case is assigned is an important and unique feature of LMSB. This concept allows the team manager to utilize special talents on a Service-wide basis to meet the needs of the examination. A team member’s knowledge, including the knowledge of assisting or supporting team members outside of the primary group, of local conditions or an industry, brought together with the team manager's knowledge of the overall case, provide the most effective examination team.

Assistance Team Members - Assistance team members are revenue agents or specialists who are assigned to a case in the same industry as the primary case, but are located in an examination group that does not have primary responsibility for control of the case. Team members providing assistance can be located in the same or a distant geographic area.

Support Team Members - Support team members are revenue agents or specialists who cross industry lines to provide expertise or staffing needs to a case assigned to another industry. Support team members may be located in the same or a distant geographic area.

Operations Located Outside the Organization or Geographic Area of the Primary Case - Industry and coordinated industry cases frequently have subsidiaries, divisions, branches and/or plants located in geographical areas other than the primary case location. Examination of various segments of a case can be accomplished from a single location or multiple locations.

All Segments of a Case Should be Reviewed and Examined as Needed - The team manager must determine whether examination work would be most effective if performed in the remote locale. Team managers should avoid traditional practices which adversely affect the examination, such as:

Consider Prior Audit Use of Assistance or Support - The primary team manager will consider comments from prior post-examination critiques in determining assistance or support needs for a case.

Primary Team Manager Involvement and Effectiveness of the Examination - The effectiveness of an examination bears a direct relationship to the degree of involvement by the team manager. Primary team manager involvement with assistance or support team members at the examination site is imperative to the conduct of a quality examination. His or her involvement facilitates better communication between assistance and support team members, the taxpayer, and the primary team. Team manager involvement and knowledge are paramount to a streamlined LMSB examination process.

Team Manager Visits to All Case Examination Sites - Team manager visits to all case sites are encouraged as a means to:

Methods for Assistance or Support Examinations - The team manager must determine the most efficient method of examining entities located outside of the jurisdiction of the primary group. Factors which favor the use of assistance or support personnel are:

Site Facility Visits - The team manager may find it necessary to visit the facility in question in order to determine whether an assistance or support role is warranted. The team manager may, in lieu of a personal visit:

Other Options to Assistance or Support Examinations - Conducting the examination from the location of the primary group is another option available to a team manager. (See IRM 4.46.3.9.12.8, Primary Team Traveling to Other Geographic Areas for additional guidance.)

Prepare Form 4485, LMSB Request for Assistance or Support Resources, 120 Days In Advance - Form 4485 will be prepared for each case when needs outside the primary group have been identified. Form 4485 should be prepared and routed at least 120 days prior to the start of the examination.

Forwarding Form 4485 Related to Needs within the Assigned Industry- Form 4485 identifying needs within an industry will be forwarded through normal routing channels to the territory manager most likely to provide needed resources.

Forwarding Form 4485 Related to Needs Outside of the Assigned Industry - Form 4485 identifying needs outside the assigned industry will be forwarded through normal routing channels to the Director of Field Operations of the other industry.

Only One Form 4485 May Be Required - Only one Form 4485 per case should be prepared for each geographic area. Multiple entities belonging to the same case unit and requirements for different skills can be set out in one request.

Unusual Requirements or Skills Should Be Identified in the Form 4485 - Form 4485 should contain information about any unusual requirement or special skills needed.

Response to Form 4485 Required In 10 Calendar Days - Groups receiving Form 4485 will respond to the originator within 10 calendar days of receipt with an information copy to the originating and receiving territory managers.

Supporting Territory Manager - The assisting or supporting territory manager should assign the Form 4485 to a team manager with resources in the identified geographic area.

Assistance or Supporting Team Manager Will Contact Primary Team Manager - The primary team manager will be contacted by the assistance or support team manager to properly plan the examination and provide the type of personnel needed.

Team Managers Agree On Scope of Requested Assistance - Team managers will share information and reach agreements on:

Coordination with Assistance or Support Territory Manager - The assistance or support team manager should advise his or her territory manager of the resources needed for the examination and the leadership to be expected from each team manager based on the shared information and agreements reached.

Direct Communications between Assistance or Support Team Member and Primary Team Manager - The assistance or support team manager will arrange for direct communications between the primary team manager and designated team member once the team member is assigned.

Modification to Requested Assistance or Support - Circumstances may require modifications to previously approved resources. The primary team manager should immediately modify existing commitments by memorandum or an amended Form 4485, LMSB Request for Assistance or Support Resources, when this occurs. Assistance or support groups will be notified of changes in start or end dates, staff needs or time requested, as soon as those changes are decided.

Requests for Modifications from Assistance or Support Group - Changes in requested resources may result from inquiries or suggestions from the assistance or support group. These may be changes to start dates, the number and type of examiners needed, examination time, examination plan preparation, follow-up procedures, or other pertinent matters.

Assistance or Support on Entities Not Previously under the Control of the Primary Team Manager - Assistance or support managers will be consulted during the planning process when the current examination involves an entity previously under the control of another manager.

Assistant Team Manager - An assistant team manager may be designated for significant examinations that would benefit from local, on-site supervision. Some conditions which may warrant an assistant team manager are:

Assistant Team Manager Functions - Some of the principal ways in which assistant team managers should function are:

Written agreement - On-site supervision involves a delegation of team manager authority. It is desirable to set out in writing what is expected of the assistant team manager. Team managers should keep in mind that although they are delegating authority, they retain overall responsibility for examination results.

Form 4485 Does Not Communicate Complete Details - Form 4485, LMSB Request for Assistance or Support Resources, identifies resource needs and facilitates assignment of resources. Information provided initially is not expected to contain complete details as to what is needed of each team member or specialist. Assignment of the request opens a channel of communication between the assistance or support team and the primary team. Communication will be essential to perfect the role of distant team members.

Need for Additional Communication - Efficiency of teamwork depends upon communication, cooperation and commitment between the primary team manager and assistance or support group personnel. The rapport needed can be firmly established by the primary team manager if:

Support or Assistance Communications with the Taxpayer - It is critical for the support or assistance team member to include the primary team manager or primary team coordinator in discussions with the taxpayer.

Open Communication – Communication channels must remain open at all times between the assistance or support team and the primary team.

Use of Periodic Calls between Primary Team and Assistance or Support Team - Periodic calls to the distant team to discuss progress of the examination plan and any changes in start dates will permit the assistance or support team to plan its work more effectively.

Visits to Assistance or Support Teams - Visits to assistance or support teams during the planning phase may be warranted. The complexity and overall importance of the assignment may determine the need for visits prior to the opening conference. Refer to IRM 4.46.3.9.12.8, Primary Team Traveling to Other Geographic Areas, below, when planning these visits.

Changes In Time and Planned Starting Dates Must Be Communicated to Assistance or Support Team - The primary team manager should be constantly aware of the need to keep the distant team currently advised regarding changes in time requested and planned starting dates.

Requests for Additional Assistance or Support Time – Requests for additional time will follow the same procedures and approval as required for the original request. This includes submission of a new Form 4485, LMSB Request for Assistance or Support Resources.

Primary Team Visits to Assistance or Support Audit Site - The primary team manager, in certain instances, may find it more advantageous to send primary team members to other areas to make on-site examinations or to assist a distant agent. Factors to be considered in this respect include the following conditions:

Information in Criminal Investigation Files - CI files may contain helpful information about:

Training Available From CI – CI agents may be available for training sessions on interviewing techniques and other topics of a general nature related to its work. These sessions may be accomplished during group meetings or in continuing professional education classes.

In-Depth Probes – CI is the team manager’s prime source of information for planning in-depth probes. CI may have information on successful techniques for penetrating unusual practices designed to conceal the facts about transactions.

Designation of CI Coordinators - The Special Agent in Charge (SAC), CI will designate a Fraud Specialist as the local CI coordinator to interact with LMSB and the other operating divisions. This specialist has the responsibility for assisting LMSB in the identification of information of interest to the LMSB agent.

Copy of LMSB Annual Plan To Be Provided To CI - LMSB headquarters should furnish CI a copy of the annual plan listing the CIC examinations to be started in the ensuing fiscal year. This will provide time for CI to compile information which may be useful in examination planning.

Team Manager’s Initial Contact with CI - The team manager should contact the CI Fraud Specialist during the initial planning phase of each CIC examination to determine what information and assistance is available to identify areas for an in-depth probe.

CI Participation Is Limited – CI participation in planning the examination will be limited to pre-contact assistance.

Indications of Fraud by Third Parties - In-depth probes may turn up indications of fraud by third parties being examined under the control of the team managers. Team managers will follow regular fraud referral procedures if indications of fraud by third parties are found. See IRM 25.1, Fraud Handbook.

Discontinuation of Coordination of Third Party Examinations - Team managers should discontinue coordination of the third party examination if there are indications of fraud unless there appears to be good reason for retaining control.

Continuation of LMSB Examination After Discovery of Indications of Third Party Fraud – Team managers should continue the LMSB examination and maintain close coordination with the Criminal Investigation manager having responsibility for the fraud investigation of the third party.

Early Involvement of Technical Advisors - The LMSB Planning Process (the five step process), requires that the technical advisor (TA) be contacted in all identified CICs. This is also recommended for ICs having business activities in an identified industry. It is essential that this contact be made by the team manager as early as possible in the planning process.

Technical Advisor Attendance at Planning and Orientation Sessions - The team manager should invite the TA to attend the planning meeting and appropriate orientation sessions conducted by the taxpayer if the TA’s involvement in the case will be significant.

Technical Advisor Assistance in Planning the Audit - The TA will provide the team manager with information relative to a particular industry or issues that will be helpful in setting the scope and depth of the examination. The team manager should be aware of the TA's role in emerging issues and other controlled issues for TAs. See IRM 4.40.3, Coordinated Issues and IRM 4.51.2, LMSB Administrative Guidance. This will include:

Technical Advisor Workload - It is recognized that a TA may not be able to personally assist in every examination plan, but he or she will attempt to participate in as many cases as possible. Alternative means of involvement should be considered in cases where the TA cannot participate in the planning meetings and decisions. Alternatives can include:

Team Manager/Team With Limited or No Industry Experience - The TA is expected to play a more active role in assisting in the development of the examination plan in those situations where team managers or teams are assigned a case in which they have limited or no industry experience.

Other Factors Affecting Extent of Technical Advisor Involvement - The extent to which the TA is involved in a particular case will be determined by factors such as the size of the industry, time available and particular case circumstances.

Issues Can Transcend Industry Lines – Team managers should keep in mind that many issues transcend industry lines. Technical Advisors will assist in ensuring that consistent treatment is accorded to all taxpayers irrespective of their industry designation

Coordinated or Other Issues with Broad Application - Questions will arise relative to various issues during the examination of a LMSB case. The team manager will contact the TA when the question involves a coordinated issue or other issues which have broad application.

Technical Advisor’s Knowledge of Issues – Technical advisors are in a position to serve as a valuable source of information for the team manager because of their responsibility to maintain a current knowledge of problem areas and issues within their area of expertise.

Coordinated Issues Must Be Considered and Developed - Identified coordinated issues must be considered and developed by each team.

Technical Advisor Concurrence on Presentation of Coordinated Issues - The team manager is required to provide the TA with a copy of the Form 5701, Notice of Proposed Adjustment, after development of a coordinated issue, but before proposal of the issue to the taxpayer. The issue proposal will be furnished to the taxpayer following receipt of the TA's concurrence.

Deviations to Policies Associated with Coordinated Issues - The team manager, in isolated situations, may decide with the concurrence of the TA not to pursue a coordinated issue in a particular examination. The request for the TA's concurrence will include a comprehensive discussion of the rationale for the decision. Team managers may propose resolution of coordinated issues that deviate from the coordinated position with the concurrence of the TA and the TA’s Manager.

Providing Technical Advisors with a Copy of the Post-Examination Critique – The team manager, upon request from a TA, will provide a copy of the post-examination critique report to the TA if one is available.

Technical Advisor Participation in Critique Meetings - TAs may participate in critique meetings with the taxpayer or the examination team in selected situations. Those situations will be determined through mutual agreement of the TA and the team manager.

Responsibilities of the Technical Advisor - The Technical Advisor will be involved in the planning process and the establishment of an effective communications network among managers examining cases within the TA’s industry or issue area involving specific coordinated issues. Additionally, the TA will have responsibility, with the concurrence of the Industry Director, for the successful conduct of industry-wide studies and any industry-wide meetings considered necessary. Issue TAs will be available to assist in any industry-wide meetings in which their issues are determined to be significant.

TA Role on Coordinated Issues vs. Noncoordinated Issues - The TA role is different depending upon whether the TA is providing assistance with respect to a coordinated issue or a noncoordinated issue. Participation is based upon resources and materiality. TAs will be limited in what they can do for IC examiners because of shorter planned examination spans in IC cases.

Responsibilities of the Team Manager - It will be necessary for the team manager and Technical Advisors to communicate and cooperate with each other in order for the TA programs to be successful. Technical Advisors are authorized to request written status reports from team managers either on a one time or recurring basis regarding the status, development, and treatment of issues in an examination. Team managers should provide timely responses to TA requests for information. Efforts will be made by the TA to utilize documents already created for the purpose of securing information.

Follow-Up Requests For Information From Technical Advisors - TAs are instructed to route written follow-up requests for any forms, reports, etc., to the team manager.