Internal Revenue Manual - 4.71.9 Statute Control Procedures

Part 4. Examining Process
Chapter 71. Employee Plans Examination of Returns
Section 9. Statute Control Procedures

4.71.9.1 (03-01-2006)
Overview of Statute Control Procedures

The following guidance is provided to establish uniform procedures for statute controls on EP examination cases.
These procedures amplify and supplement the statute procedures in IRM 25.6, "Statute of Limitations" .
Additional procedures may be implemented per Area Manager discretion.

4.71.9.2 (03-01-2006)
Organizational Goals

Unagreed cases should have at least one (1) year left on the statute when the case is submitted to Mandatory Review to provide adequate time for administrative case processing.
Agreed cases (including no-change cases) should have at least six (6) months left on the statute when the case is submitted to the closing or review functions to provide adequate time for administrative case processing.
Use red folders to identify cases with less than 210 calendar days remaining on the statute.

4.71.9.3 (03-01-2006)
Group Manager Responsibilities and Procedures

Group managers are responsible for maintaining continuous statute controls on AIMS and EPIC for assigned and unassigned returns. All returns, in which issues are being examined, should be controlled on AIMS and EPIC.
The EP Inventory Control System (EPIC) should be utilized to the fullest extent to ensure that all statutes of limitation are properly verified and protected.
1. Select "Reports" from the EPIC Main Menu.
2. Select Item 13, "Statute Control" .
3. Utilize options, 1 - 4, to manage statutes.
  
  Note:
  
  Option 2, " Form 895 Statute Log" is most helpful as it provides a printout of all open cases in statute date order. By having the agents make corrections to this printout, the manager can make subsequent updates to both EPIC and AIMS.
4. Any activity completed under EPIC should be reconciled with the AIMS 4.0 Table.
The group manager should notify the agent of those assigned returns where the period of limitations will expire within 210 days. This notification should be accomplished by furnishing the agent with a partially completed Form 895, Notice of Statute Expiration.
The group manager should ensure that the agent properly updates Form 895 with relevant statute information and returns a copy of the form within ten days from the date it was furnished. This information should include the status of any statute updates.

Note:

A copy of the Form 895 (with appropriate notations) should be attached to the outside of the case file.
When a decision is made not to extend the statutory period, the manager should ensure that:
1. Form 895 is appropriately noted and initialed by the agent and the group manager.
2. A memorandum of explanation (signed by the manager) is attached to the Form 895, detailing the reasons for not extending the statutory period.
  
  Note:
  
  Place a copy of the memo in the case file and send a copy of the memo to the Area Manager. This will serve to support the decision not to extend the statutory period.
3. At least 60 days prior to the statute expiration, but no more than 180 days, both AIMS and EPIC have been updated to reflect documentation of this decision by use of alpha code "PP" - Non-taxable EP Return.
  
  Note:
  
  The "PP" code may be used in this instance when it is determined with certainty that the non-taxable return will not be converted to a taxable return. If it is later determined that the use of this alpha code was inappropriate, a Form 3999 may be required as outlined in IRM 4.71.9.7.
4. A copy of the AIMS print is included in the file to verify the date of the update action to "PP" the statute.
5. The case file is in a red folder.

The group manager should attempt to ensure that cases closed from the group have the following periods of time remaining on the statutes of limitations:

Types of Cases	Days Remaining on Statute
a. Agreed	at least 180 days
b. Unagreed	at least one year
c. All cases in which revocation is proposed (whether agreed or unagreed)	at least one year

Note:

In instances where deviation from these time frames is necessary, a memo should accompany the case file providing an explanation by the group manager of the reasons the case was submitted with less than the above time frames. A copy of this memo should be forwarded to the respective Area Manager.

Red Folders - Group managers should ensure that all cases with less than 210 days remaining on the statutory period are placed in a red folder.
For any case closed to Examination Support Processing (Brooklyn) or Examination Special Support (Baltimore), or closed to Mandatory Review with less than 180 days remaining on the statutory period, the group manager should:
1. Notify the receiving manager telephonically, via e-mail, or by fax of the transfer.
2. Hand carry, use overnight mail or use an express delivery service to ship the case to the receiving group.
3. Follow-up with the receiving manager to ensure the case is received timely.
For any case transferred between Areas or field locations with less than 18 months remaining on the statutory period, the group manager should:
1. Discuss the case with his/her Area Manager and receive concurrence. Upon receiving concurrence, that Area Manager should contact the prospective "receiving" Area Manager and receive concurrence before a transfer can be made.
2. Hand carry, use overnight mail or use an express delivery service to ship the case to the receiving group that will perform the examination.
3. Follow-up to ensure the case is received timely.
When transferring cases between Areas or groups, the manager should ensure that:
1. Both copies of Form 895 (if applicable) accompany the case file, and
2. Form 3210 is generated on EPIC.
When a statute of limitations is being extended, the group manager should ensure that Form 872 (or Form 872-H) is properly completed and executed.
Additional procedures that may be implemented per Area Manager discretion should also be followed.

4.71.9.4 (03-01-2006)
Agent Responsibilities and Procedures

The agent is responsible for complying with the provisions of IRM 25.6, Statute of Limitations, as amplified by these procedures. Agents should always be aware that the person in possession of the return is ultimately responsible for the protection of the statute of limitations.
The agent is responsible for not only protecting the statute of limitations for the year under examination, but also for subsequent years if there is a potential tax effect.
Without prior managerial approval, an agent cannot begin an examination or requisition any return for audit if fewer than twelve (12) months remain on the statute. Agents must obtain managerial approval before opening an examination of a return with fewer than 12 months remaining on the statute. The approval and justification, or disapproval should be documented in the case chronology record of the case file.
Agents are not required to pick up a " prior year" return merely to protect the government's interest. A "prior year" return is defined as any year before the year under examination.
1. The agent shall discuss with his/her group manager the necessity of picking up any "prior year" return. Compelling reasons should be substantial in terms of tax liabilities or issues with substantial compliance impact.
2. The approval and justification, or disapproval should be documented in the case chronology record of the relevant case file.
3. If the decision is made to examine a prior year, a request for AIMS establishment and a Form 895 (if applicable) should be submitted to the manager at the same time.
Utilize Form 872 when extending a statute of limitations for a Form 5330, Form 1040, Form 1120, or Form 990-T.
Utilize Form 872-H when extending a statute of limitations with respect to a Form 1041 related to Form 5500.
As a result of the IRS Restructuring and Reform Act of 1998, IRC section 6501(c)(4)(B), requires that the taxpayer has the right to: refuse to extend the limitation period, request the extension be limited to particular issues and request the limitation period be limited to a specific date. The agent must:
1. Inform the taxpayer of his or her rights on each occasion when the taxpayer is requested to extend the statute of limitations.
2. Make this notification to the taxpayer by sending Letter 907-A and Publication 1035 (latest revision) when Form 872 or Form 872-H are mailed or given to the taxpayer.
  
  Note:
  
  The current revisions of Forms 872 and 872-H contain notification of taxpayer rights in the body of the form.
Agents should take the most conservative approach and protect the three-year statute of limitations, if possible, even though a six-year statute appears applicable. This protects the interest of the government in the event it is subsequently determined that the six-year statute is not applicable. As such, the agent should secure a consent to extend the statute prior to the expiration of the three-year statute. If an agent and his/her manager determine that the six-year statute can be pursued, be aware that the burden of proof shifts to the government to support such six-year statute. Area Counsel's written advice regarding the applicability of the six-year statute must be obtained and maintained in the case file.
The agent should make sure that when a statute extension is to be secured on a trust with a fiscal year end, the conversion to a calendar year taxable period is made for purposes of properly completing the statute extension form(s). If the qualified status of the plan is revoked, the trust becomes taxable and Form 1041 becomes due each calendar year.
When an agent is proposing revocation of a qualified plan, which would result in the conversion of a Form 5500 series return to a taxable return, the agent is responsible for controlling and protecting the statute until such time as:
1. A Form 1041 is secured and the case is timely forwarded for closure within TE/GE, or
2. The matter is referred to the appropriate examination function (i.e. SB/SE) by the use of Form 5666, TE/GE Referral Information Report.
For any examination involving revocation, the agent is responsible for preparing and forwarding necessary referrals to the appropriate examination functional unit (e.g., SB/SE or LMSB) responsible for the Form 1041 trust return in a timely manner. The agent should consider a preliminary referral based on the issues contained in the proposed revocation. Include with the referral any necessary support used to prepare the Form 1041.
1. In this instance, where a timely referral was made to the examination function, the use of alpha code "PP" to update the statute of limitations on AIMS for the 5500 series return may also be appropriate.
2. A memorandum of explanation detailing the use of alpha code "PP" in this instance should be signed by the manager and attached to Form 895 with a copy also placed in the case file of the 5500 series return.
3. Additionally, a copy of the memo should be forwarded to the Area Manager by the group manager.

4.71.9.5 (03-01-2006)
Determining the Statute of Limitations Expiration Date

To protect the government's interest in statute cases, the EP agent must be able to determine the statute of limitations expiration date for the assessment of tax for returns within the jurisdiction of EP. Returns under the jurisdiction of EP include:
1. Forms 5500 series returns,
  
  Note:
  
  As discussed in IRM 4.71.9.5.1 below, consents related to Forms 5500 are actually secured for Forms 1041 for the related trust.
2. Forms 5330 (See IRM 4.71.5),
3. Forms 990-T for unrelated business income related to plan assets of an examined Forms 5500, and
4. Forms 1040/1120 discrepancy adjustments (See IRM 4.71.4).
The normal statute of limitations for all returns under EP jurisdiction (except for Forms 5330 for excise tax under IRC 4975) expires three years from the due date of the return or the date filed, whichever is later. A return is deemed filed on the due date of the return if filed on or before its due date. See IRC 6501.
The normal statute of limitations for Forms 5330 for excise tax under IRC 4975 is based on the filing of the related Form 5500. The statute of limitations generally expires three years from the due date of the related Form 5500 return or the date the related Form 5500 was filed, whichever is later. See IRM 4.71.9.5.2 for a more detailed discussion.
The statutory period is sixyears from the date the return is filed or deemed filed, whichever is later, in cases where:
1. In the case of Forms 1040, Forms 1120, or Forms 990-T, there has been a substantial omission of gross income on the return which is in excess of 25% of the amount of gross income stated on the return. See IRC 6501(e)(1).
2. In the case of Forms 5330, there has been an omission of more than 25% of the excise tax due under Subtitle D (Chapters 41 through 44), unless disclosure of the item giving rise to the tax was made in a manner that adequately apprises the Secretary of the existence and nature of the item. See IRC section 6501(e)(3) and Treas. Reg. section 301.6501(e)-1(c).
The three and six year rules do not apply when false or fraudulent returns are filed with the intent to evade tax. In these instances, the tax may be assessed or collected at any time.
Agents should take the most conservative approach and protect the three-year statute, if possible, even though a six year statute appears applicable, or when it appears the return is false or fraudulent.
Written approval from Area Counsel is required whenever a statute of limitations beyond three years is being pursued.

4.71.9.5.1 (03-01-2006)
Statute of Limitations for Form 5500/1041

The normal statute of limitations date expires three years from the later of the due date of the Form 5500 or the date Form 5500 was filed with Schedule P.
The Schedule P is considered the annual return of an employee benefit trust. It is sufficient to begin the running of the statutory period if:
1. The trustee signs the Schedule P, and
2. The Schedule P is filed with the Form 5500 series return.
Although proper filing of the Schedule P guarantees the running of the statute of limitations, the Form 5500 may be sufficient to start the running of the statute if:
1. A trustee signed a filed Form 5500 series return and is identified as such on the return, and
2. There is sufficient data on the return to calculate the tax liability of the trust.
Although proper filing of the Schedule P guarantees the running of the statute of limitations, a conservative approach should be taken and the three year statute of limitations should be protected based on the date Form 5500 was filed.

4.71.9.5.2 (03-01-2006)
Statute of Limitations for Forms 5330

For Chapter 43 excise taxes other than IRC sections 4975 and 4979A, the statute of limitations commences to run only when the Form 5330 is filed or due, whichever is later. Examples of excise taxes where the filing of Form 5330 begins the running of the statute are:
1. IRC section 4971 - Failure to meet minimum funding standards. Form 5330 for excise tax under IRC 4971 is due by the later of the last day of the 7th month after the end of the employer’s tax year, or 8¹/₂ months after the last day of the plan year that ends with or within the employer’s tax year. The employer is responsible for filing Form 5330.
2. IRC section 4972 - Nondeductible contributions to qualified employer plans. Form 5330 for excise tax under IRC 4972 is due by the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. The employer is responsible for filing Form 5330.
3. IRC section 4973(a)(3) - Excess contributions to a section 403(b)(7)(A) custodial account. Form 5330 for excise tax under IRC 4973 is due by the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. The individual who is liable for the tax under section 4973(a)(3) is responsible for filing Form 5330.
4. IRC section 4976 - Maintaining a funded welfare benefit plan that provides a disqualified benefit during any tax year. Form 5330 for excise tax under IRC 4976 is due by the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. The employer is responsible for filing Form 5330.
5. IRC sections 4978 and 4978A - Certain ESOP dispositions. Form 5330 for excise tax under IRC 4978 is due by the last day of the 7th month after the end of the tax year of the employer or other person who must file the return. The employer is responsible for filing Form 5330.
6. IRC section 4979 - Excess contributions to plans with cash or deferred arrangements. Form 5330 for excise tax under IRC 4979 is due by the last day of the 15th month after the close of the plan year to which the excess contributions or excess aggregate contributions relate. The employer is responsible for filing Form 5330.
7. IRC section 4980 - Reversion of qualified plan assets to employers. Form 5330 for excise tax under IRC 4980 is due no later than the last day of the month following the month in which the reversion occurred. The employer is responsible for filing Form 5330.
In general, for Forms 5330 filed for IRC section 4975 excise tax:
1. The three-year statute of limitations will commence to run on the date the administrator files the Form 5500 series return in which the prohibited transaction is sufficiently disclosed. See IRC section 6501(l)(1).
2. If the filed Form 5500 does not disclose the prohibited transaction, the six-year statute period applies. The excise tax may be assessed at any time within six years after the later of the date the Form 5500 series return was filed or due.
  
  Note:
  
  Written approval from Area Counsel is required whenever a statute of limitations beyond three years is being pursued. Agents should take the most conservative approach and protect the three-year statute, if possible, even though a six year statute appears applicable.
For prohibited transactions under IRC section 4975 involving a discrete act (one-time occurrence, such as a sale), even though the taxes are imposed annually, there is only one period of limitations applicable to all the tax attributable to the prohibited transaction. Therefore, the filed or due date to be used in determining the statute of limitations date is limited to that of the initial Form 5500 return filed for the period in which the discrete act occurred.
1. It is the filing of the Form 5500 for the plan year in which the prohibited transaction occurs that starts the running of the statute of limitations for IRC 4975 excise tax for a discrete act, not only for the Form 5330 for the year in which the prohibited transaction occurred, but also for all subsequent year Forms 5330 reporting tax for that transaction.
2. The IRS must assess all excise taxes on a discrete transaction, even those payable in later tax years, before the statute of limitations expires for the tax year in which the transaction initially occurred. The IRS cannot assess any excise tax on a prohibited transaction payable in any year, once the statute has expired for the taxable year of the disqualified person in which the transaction occurred if that prohibited transaction is a discrete act.
3. See IRM 4.71.9.6.2(3) below for instructions on preparing Form 872 for a prohibited transaction that is a discrete act.
For a prohibited transaction that is considered a continuing transaction, such as a loan or lease, the situation is different.
1. In addition to the original transaction, a new transaction is deemed to occur on the first day of each subsequent taxable year of the disqualified person. The amount involved is reported and taxed in the initial tax year and again in each subsequent tax year until the original transaction is corrected.
2. The filing of the Form 5500 return for the year in which the prohibited transaction first occurred starts the running of the statute of limitations for purposes of the tax on the actual transaction occurring in that plan year. It does not start the running of the statute of limitations for the transactions deemed to occur in subsequent plan years.
3. There are separate statute of limitations for the transactions deemed to occur in each subsequent year. It is the filing of the Form 5500 return for each subsequent plan year that starts the running of the statutes for transactions deemed to reoccur in such years.
4. Unlike a discrete act, the statutory period may expire for the act engaged in the first year, but the tax may be assessed for subsequent acts deemed to have occurred for which the statutory period has not expired.

4.71.9.5.3 (03-01-2006)
Statute of Limitations for Forms 990-T

If the trust has unrelated business taxable income for the taxable year of $1,000 or more, the trust is required to file a Form 990-T, Exempt Organization Business Income Tax Return.
Form 990-T is due on the 15th day of the fourth month following the close of the taxable year of the trust.
If the trust files a Form 990-T, then the Form 990-T is the return that begins the running of the statute of limitations on the Form 990-T.
If the Form 990-T is not filed, the statute of limitations starts to run based upon the Form 5500 return if:
1. The plan administrator files the Form 5500 series return, and
2. The Form 5500 discloses sufficient information to reveal the existence of unrelated business income (UBI).
If the trust reported UBI on the Form 5500 series return, and the amount of omitted gross income from unrelated business activity is greater than 25% of the reported gross income from unrelated business activity, the statute of limitations period is six years from the date the Form 5500 series return was filed. See IRC section 6501(e).
If the Form 990-T is not filed, and the criteria in paragraph (4) are not met, the statute of limitations does not begin running.
If the trust files Form 990-T and the amount of omitted gross income from unrelated business activity is greater then 25% of the reported gross income from unrelated business activity, the statute of limitations period is six years from the date the Form 990-T return was filed.

4.71.9.5.4 (03-01-2006)
Statute of Limitations for Forms 1040 and Forms 1120

The normal statute of limitations for Forms 1040 and Forms 1120 expires three years from the due date of the return or the date filed, whichever is later. A return is deemed filed on the due date of the return if filed on or before its due date.
Forms 1040 are due on April 15 immediately following the end of the tax year of the individual.
Forms 1120 are due on the 15th day of the third month following the end of the tax year of the corporation. For example, Form 1120 for a tax year ending December 31, 2002 is due on March 15, 2003.

4.71.9.6 (03-01-2006)
Preparation and Processing of Consents to Extend the Statute of Limitations

The most current version of Form 872-H should be used when extending a statute of limitations with respect to a Form 1041 related to Form 5500.
The most current version of Form 872 should be used when extending a statute of limitations for a Form 5330, Form 1040, Form 1120, or Form 990-T.
The consent should be prepared by the IRS, not by the taxpayer or the taxpayer’s representative.
The consent should be prepared in duplicate.
Consents with alterations, erasures, and corrections should not knowingly be provided to the taxpayer for signature, regardless of how slight or immaterial.
If the taxpayer has made alterations on the consent, it is preferred that a new consent be prepared for the taxpayer’s signature. However, if the alterations on the consent are acceptable to the Service, the taxpayer has initialed each alteration, and there is not sufficient time to perfect the consent, the Service representative signing the consent may initial alterations and sign the consent. Advice of Area Counsel should be sought before accepting an altered consent.

Note:

The Service will not make changes to a consent form after execution by the taxpayer.
Both consents must be executed with the original signature(s) of the taxpayer(s) or valid Power of Attorney, and returned to the IRS. Preparer/taxpayer signature stamps or carbon signatures will not be permitted when signing consent forms.
Consents should not be accepted via fax.
After both consent forms have been executed by an authorized IRS employee, one original will be maintained in the case file and the second original will be returned to the taxpayer.
Per IRS Delegation Order #42, the Director, Employee Plans is authorized to sign consents (Form 872 or Form 872-H). Per TE/GE Delegation Order #6, Group Managers and Reviewers (grade GS-11 or higher) are delegated the authority to sign consents on behalf the Director, Employee Plans.

4.71.9.6.1 (03-01-2006)
Securing Consents for Forms 5500/1041

When a Form 5500 examination is closed from the group, there should be at least 180 days remaining on the statute of limitations if the case is agreed and one year if the case is unagreed. If at all possible, obtain a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case.
Consents related to a Form 5500 are secured with respect to Form 1041, U.S. Income Tax Return for Estates and Trusts.
The most current version of Form 872-H should be used when extending a statute of limitations for a Form 1041 related to a Form 5500.
Form 56, Notice Concerning Fiduciary Relationship must also be sent to the trustee(s) for completion when extending the statute of limitations on a trust.
The statute of limitations for a Form 1041 related to a Form 5500 expires the later of:
1. The due date of the Form 5500 (the last day of the seventh month after the end of the plan year), or
2. The date the Form 5500 was filed.
Generally, it is the Schedule P attached to the Form 5500 that begins the running of the statute of limitations on the Form 1041. The Schedule P is considered the annual return of an employee benefit trust or custodial account. It is sufficient to begin the running of the statutory period if the following requirements are met:
1. The trustee must sign the Schedule P, and
2. The Schedule P was filed with the Form 5500 series return.
Although proper filing of the Schedule P guarantees the running of the statute of limitations, the Form 5500 may be sufficient to start the running of the statute of limitations if:
1. A trustee signed a filed Form 5500 series return and is identified as such on the return, and
2. There is sufficient data on the return to calculate the tax liability of the trust.
Regardless of whether or not the trustee files a Schedule P, agents should secure extensions if they find indications that the trust is or will lose its qualified status.
Once a plan is no longer qualified under IRC section 401(a), income earned by the trust becomes taxable.
1. The trust must file a Form 1041 for those years during which the plan is disqualified and the statute of limitations is open.
2. The Form 1041 is filed on behalf of the trust by the trustee.
3. The trust is responsible for paying the tax, and the trustee is responsible for making sure the Form 1041 is filed and the taxes are paid.
4. It is the trustee who must sign the statute extension form (Form 872-H) in order for the extension to be valid.
5. The consent to extend the statute of limitations (Form 872-H) must be signed by a current trustee, which may be a different individual than the person who was trustee when Form 5500 was filed.
Utilize Form 872-H, Consent to Extend the Time to Assess Tax on a Trust, when extending a statute of limitations with respect to a Form 1041 related to Form 5500.
Since an examination of Form 5500 may result in the revocation or disqualification of the plan, consents must be secured for the trust for the calendar year.
The statute of limitations on the trust year runs with the filing of the Form 5500 for the plan year in which the trust year ends . For example, if the plan year ending 6/30/2002 is being examined and it is determined that issues exist that may result in revocation or disqualification of the plan:
1. Form 872-H would be secured for the trust year ending 12/31/2001. If the Form 5500 for the 6/30/2002 plan year was filed timely on 1/30/2003, the statute of limitations for the trust year ending 12/31/2001 would expire on 1/31/2006.
2. Form 872-H would be secured for a short trust year (7/1/2001 through 12/31/2001) if the 6/30/2002 plan year is the initial year of proposed revocation or disqualification.
3. If the plan disqualification extends to an earlier plan year, Form 872-H would be secured for the entire 2001 calendar year.
4. The statute of limitations for the trust year ending 12/31/2002 would be based on the Form 5500 for the plan year ending 6/30/2003. The statute of limitations for the trust year ending 12/31/2002 would expire on 1/31/2007 if the Form 5500 for the 6/30/2003 plan year was timely filed.
Generally, the name of the trust listed on the applicable Form 5500 Schedule P (line 2a) should be listed on the "Name(s)" line of Form 872-H.
The plan number should also be included on the "Name(s) " line.
Generally, the trust’s EIN listed on the applicable Form 5500 Schedule P (line 2b) should be listed on the "Taxpayer Identification Number " line in the header of Form 872-H.
1. If it is clear that the EIN listed on line 2b of the Schedule P is the plan sponsor’s EIN, then research should be conducted to determine if the trust has an EIN. This determination can be made by asking the plan sponsor or trustee if the trust has its own EIN. Additionally, the existence of a trust EIN may be revealed through the review of documentation received during the examination of plan assets.
2. If is determined that the trust does have an EIN, then the correct trust EIN should be used on Form 872-H.
  
  Note:
  
  The correctness of an EIN can be verified through IDRS research with the INOLES command code (i.e., INOLES75-0000000).
3. If the trust does not have an EIN, and the plan sponsor's EIN was listed on line 2b of Schedule P, the plan sponsor's EIN may be used on Form 872-H.
4. Alternatively, if the trust does not have its own EIN, an EIN can be obtained for the trust by filing Form SS-4.
5. If no Schedule P was filed or if line 2b is left blank, and the trust EIN cannot be determined, EP Area Counsel should be contacted for guidance.
Input the taxpayer's name and current address on the appropriate lines
Input the word"Income" on the "Kind of tax" line of Form 872-H.
Input a date on the "Expiration date" line of Form 872-H that is far enough in the future to allow ample time for the case to process.
Form 56 should be completed in accordance with Exhibit 4.71.9-7. Part III, items 2, 3, and 4 should be completed with the information contained on the Form 872-H for which the Form 56 is requested/required. Form 56 must be mailed to the trustee along with Form 872-H.
The trustee(s) must sign Form 872-H exactly as his/her name appears on Form 56. The trustee must be a current trustee.
Delegation Order 42 gives the Director, Employee Plans the authority to sign consents (i.e., Form 872-H) on behalf of the IRS. This Delegation Order further delegates the authority to sign consents on behalf of the Director, Employee Plans to Group Managers and Reviewers grade GS-11 or higher.
Make sure the consent is dated on the "Date signed" line next to the signatures.
See Exhibit 4.71.9-1 for an example of a completed Form 872-H.

4.71.9.6.2 (03-01-2006)
Securing Consents for Forms 5330

The most current version of Form 872 should be used when extending a statute of limitations for a Form 5330.
When a Form 5330 examination is closed from the group, there should be at least 180 days remaining on the statute of limitations if the case is agreed and one year if the case is unagreed. If at all possible, obtain a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case. A case is considered agreed if the issue giving rise to the excise tax has been corrected and Form 5330 (or Form 870) has been filed for the correct amount of tax.
Remember that for Chapter 43 excise taxes, other than for prohibited transactions (IRC 4975), the statute of limitations commences to run only when the Form 5330 is filed or due, whichever is later, so preparation of Form 872 is only necessary if a Form 5330 was filed, the tax reported is incorrect, and the statute of limitations is less than the number of days specified in paragraph (2) above. See IRM 4.71.9.5.2 above for additional information on determining the statute of limitations.
Remember that for IRC 4975 excise tax, the statute of limitations is based on the statute of limitations date of the Form 5500 series return filed for the plan year in which the prohibited transaction occurred. The normal statute of limitations date is three years following the later of the date the Form 5500 was filed or due.
When preparing Form 872 to extend the statute of limitations for a Form 5330 for any excise tax listed in IRM 4.71.9.5.2 other than tax under IRC 4975 for a discrete prohibited transaction, it should be completed as follows:
1. List the complete name of the person or entity responsible for filing the Form 5330 on the "Name(s)" line.
2. List the employer identification number (EIN) or social security number (SSN) of the person responsible for filing the Form 5330 in the " Taxpayer Identification Number" block.
3. List the current address of the person or entity responsible for filing the Form 5330 on the address line.
4. Insert "excise" as the type of tax.
  
  Note:
  
  When listing the type of tax it is also acceptable to list the specific Code section (e.g., IRC section 4975 excise).
5. Enter the tax period for which the statute is being extended.
6. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for the case to process.
7. Delegation Order 42 gives the Director, Employee Plans the authority to sign consents (i.e., Form 872-H) on behalf of the IRS. This Delegation Order further delegates the authority to sign consents on behalf of the Director, Employee Plans to Group Managers and Reviewers grade GS-11 or higher.
8. Make sure the consent is dated on the "Date signed" line next to the signatures.
9. See Exhibit 4.71.9-3 for an example of a Form 872 for a Form 5330.
For prohibited transactions involving adiscrete act, the agent must obtain an extension that covers not only the tax year of the disqualified person for the year in which the act occurred, but also each subsequent year. The preferred way to do this is to prepare a restricted consent that specifies the type of tax (IRC 4975 excise tax) and the initial year in paragraph (1) of Form 872. The consent should include an additional paragraph (3) that lists the plan year of the discrete act and each subsequent tax year beginning with the second tax year and ending with the current tax year. For example, if a discrete prohibited transaction occurred on July 1, 2001 involving a disqualified person with a calendar tax year and the consent is being mailed on July 10, 2005, paragraph (3) would read as follows: "This consent also applies to returns filed for the periods ended December 31, 2002; December 31, 2003; December 31, 2004; and December 31, 2005 for tax attributable to prohibited acts occurring during the plan year ending December 31, 2001." See Exhibit 4.71.9-2 for an example of Form 872 for a discrete prohibited transaction.

Note:

For discrete acts, the statute is technically extended for each affected taxable year if a consent is obtained with respect to the year in which the prohibited transaction occurred. However, obtaining an extension that covers each year will resolve any questions as to whether later years have closed because specific extensions were not obtained for those years.
For prohibited transactions involving either discrete or continuing transactions:
1. More than one disqualified person may be involved in the same prohibited transaction. In such cases, all of the parties are jointly and severally liable.
2. Secure the consent to extend the statutory period from all disqualified persons who may be subject to tax on the prohibited transaction.
3. While each disqualified person must sign a separate consent, only one must pay the tax.
4. Obtaining a statute extension for the Form 5500 does not extend the statute of limitations for IRC 4975 excise tax on a prohibited transaction that occurred in that plan year.

4.71.9.6.3 (03-01-2006)
Securing Consents for Forms 990-T

If the trust has engaged in activities which result in unrelated business taxable income (UBI), the trust is required to file a Form 990-T for those years during which the trust has engaged in such activities and for which the statute of limitations is open.
The Form 990-T is filed on behalf of the trust by the trustee.
The trust is responsible for paying the tax, and the trustee is responsible for making sure the Form 990-T is filed and that the taxes are paid.
It is the trustee who must sign the statute extension form (Form 872) in order for the extension to be valid.
If the trust is required to file a Form 990-T, the taxable year of the trust is the same as the plan year of the trust. Because the trust does not lose its exempt status due to UBI, if the plan is on a calendar year, the Form 990-T will be filed based upon a calendar year. If the trust is on a fiscal year, the Form 990-T will be filed based upon the plan’s fiscal year. The Form 872 must reflect the plan year of the trust as the period being extended.
Make sure the consent is dated on the "Date signed" line next to the signatures.

4.71.9.6.4 (03-01-2006)
Securing Consents for Forms 1040 and Forms 1120

The most current version of Form 872 should be used when extending a statute of limitations for a Form 1040 or Form 1120.
When a Form 1040 or Form 1120 discrepancy adjustment is closed from the group, there should be at least 180 days remaining on the statute of limitations if the case is agreed and one year if the case is unagreed. If at all possible, obtain a statute extension if the statute will expire within 210 days on an agreed case and one year on an unagreed case. A case is considered agreed if Form 4549-E is signed by the taxpayer.
Form 872 should be completed as follows:
1. The consent should be prepared using the same name(s) as that under which the return was filed, unless since filing, there has been a name change. In this case, the consent should be prepared using both names (e.g., Mary J. Smith, formerly Mary J. Brown).
2. For a jointly filed Form 1040, the names of both spouses should be listed (e.g., William L. Smith and Jane M. Smith).
3. List the employer identification number (EIN) or social security number (SSN) in the "Taxpayer Identification Number" block. For a jointly filed Form 1040, it is only necessary to list the primary SSN.
4. Insert "income" as the type of tax.
5. The taxpayer’s current address should be used, rather than the address shown on the return. The current address should be determined based on the best information available, including IDRS, correspondence from the taxpayer, etc.
6. Enter the tax period for which the statute is being extended.
7. The year covered by the consent should be stated in full, including the month, day, and year.
8. Input a date on the "Expiration date" line of Form 872 that is far enough in the future to allow ample time for the case to process.
9. The consent must be signed by a corporate officer. when extending the statute for a Form 1120.
10. The consent must be signed by both spouses when extending the statute for a jointly filed Form 1040.
11. If the taxpayer's name has changed, the signature line should reflect the current name.
12. Make sure the consent is dated on the "Date signed" line next to the signatures.

4.71.9.6.5 (03-01-2006)
Letters Used to Transmit Consents

The following letters are used to transmit consents to the taxpayer or Power of Attorney (POA):
1. Letter 907-A is used to transmit the applicable consent forms (two originals of each consent) to the taxpayer or POA. See Exhibit 4.71.9-4.
2. Letter 928 is used as a follow-up to Letter 907-A when the requested consents have not been timely received from the taxpayer. See Exhibit 4.71.9-5.
3. Letter 929 is used to transmit the original executed consent form to the taxpayer or POA. See Exhibit 4.71.9-6
  
  Note:
  
  Two original executed consent forms should be received from the taxpayer. Both forms should be executed by an authorized IRS representative. One original should be included in the case file and the other original should be mailed back to the taxpayer.
When Letter 907-A is mailed to the taxpayer, include the following items as enclosures:
1. Two copies of the consent form (Form 872 or Form 872-H),
2. Publication 1035,
3. Form 56 (if the consent pertains to Form 1041 or Form 990-T), and
4. A self-addressed return envelope.

4.71.9.7 (03-01-2006)
Managers Responsibilities and Procedures

Managers, EP Special Review, EP Mandatory Review and EP Classification are responsible for maintaining statute controls for returns under their jurisdiction. This will be accomplished by the following procedures.
1. The statute control clerk or other designated employee will annotate the statute expiration date of all incoming returns on a case-tracking sheet.
2. The manager or a designated individual will verify the statute of limitations date and initial the tracking sheet as appropriate.
3. All cases received with less than 180 days on agreed cases or 365 days on unagreed cases should be assigned as soon as possible.
4. The statute control file will be checked at least monthly and, where required, the reviewers will secure consents extending the statute and update AIMS and EPIC on assigned cases.
5. Special Review/Mandatory Review/Classification personnel assigned and in possession of a return are responsible for complying with the provisions of this IRM and IRM 25.6.

4.71.9.8 (03-01-2006)
Procedures for Table 4.0

Each month the EP AIMS Coordinator will forward AIMS Table 4.0 to all groups (including all EP Examination Programs and Review sections).
Managers should review Table 4.0, verify statutes and resolve all problems identified on the table.

4.71.9.8.1 (03-01-2006)
Table 4.0 Procedures for Group Managers

Generally, every month the Table 4.0 will be received by the group, accompanied by instructions from the EP AIMS Coordinator outlining steps for working the table and returning it for verification.
Upon receipt of Table 4.0, the cases listed therein should be checked against group statute control files and the returns or other return information, such as BMFOL, EMFOL, IMFOL or RTVUE, to ensure the current statute expiration dates are reflected on the table.
When necessary, AIMS Form 5595 should be utilized for updating AIMS data to reflect the correct statute expiration date.
The table should otherwise be used as a check to ensure that proper statute control actions are taken.
Actions needed should be taken immediately and resultant AIMS and EPIC update actions made.
Resolution of the Table 4.0 should be accomplished within 15 days of receipt.
When review of Table 4.0 is complete, all statute dates verified and all problems resolved, the table should be forwarded to the Area Manager or Manager, EP Examination Programs and Review as appropriate.
A copy should also be forwarded to the EP AIMS Coordinator through the Manager, EP Examination Special Support (ESS).
The EP AIMS Coordinator should be contacted with any questions that arise regarding the working of Table 4.0.

4.71.9.8.2 (03-01-2006)
Table 4.0 Procedures for Manager, EP Examination Special Support

Upon receipt of worked AIMS Tables 4.0 from the groups, the Manager, EP Examination Special Support will forward the tables to the EP AIMS Coordinator for processing.

The EP AIMS Coordinator will:

Analyze each table to ensure that proper and timely actions have been taken by the group managers.

Perform additional IDRS research on cases closed from the group level for more than five weeks.

IF the research shows that the case is	THEN
• closed (status 90),	the Table 4.0 will be so annotated and no further action will be taken.
• open,	the group manager will be requested to forward copies of the group's Form 3210 to the AIMS Coordinator. These documents will be analyzed to determine if further action is warranted.

Thirty days after the AIMS Tables 4.0 have been distributed to the groups, the AIMS Coordinator will provide a report to the Manager, EP Exam Programs and Review which will identify any significant problems encountered and list those groups that did not return the group report.

4.71.9.9 (03-01-2006)
Form 3999, Statute Expiration Report

This section outlines responsibilities for EP managers, agents and other personnel for reporting barred statutes in accordance with IRM 25.6.
Form 3999, Statute Expiration Report, is used to report barred statutes on returns requiring statute control.

4.71.9.9.1 (03-01-2006)
Use of Form 3999

Form 3999 should be prepared for each taxpayer involved in returns assigned for examination and/or controlled on AIMS when the statutory period is reflected as expired.
One of the primary uses of the Form 3999 is to identify potential systemic problems or issues and recommendations for corrective actions.

4.71.9.9.2 (03-01-2006)
Time Frames for Form 3999

Within 10 days of discovery of a potentially expired statute, a preliminary Form 3999 should be completed and forwarded through the appropriate Area Manager to the Manager, EP Exam Programs and Review for submission to the Director, EP Examinations.
A final Form 3999 can be prepared as the initial report, if all of the necessary information is available at the time of discovery.
The final Form 3999, if not submitted as the initial report, should be prepared within 60 calendar days of the date of the preliminary report.

4.71.9.9.3 (03-01-2006)
Responsibility for Preparing Form 3999

The individual discovering the potential statute expiration is responsible for preparing:
1. the preliminary barred statute report, and
2. a narrative of the facts and circumstances, with a time line, leading up to the potential statute expiration,
  
  Note:
  
  It should be noted that this does not mean that this person solely, if at all, was responsible for the expiration of the statute.
The responsibility for preparing the final Form 3999 is with the manager of the function or Area having possession of the return with the potentially expired statute.

4.71.9.9.4 (03-01-2006)
Instructions for Preparing Form 3999

Only Items 1 through 12 of Form 3999 are completed when a preliminary report is submitted. However, if all of the facts are known at the time of discovery and the 10 day time frame can be met, then a final report can be submitted in lieu of a preliminary report.
A preliminary report should include a brief narrative of how the statute expired with a time line illustration of the processing of the case leading to the statute expiration.

The following signatures are required for the preliminary Form 3999:

The group/unit manager,
The Area Manager or the Manager, EP Exam Programs and Review, or the Manager, EP Mandatory Review (as applicable), and
The Director, EP Examinations.

Note:

IF the statute was barred in a...	THEN forward the preliminary report to the...
• field group,	Area Manager.
• group under EP Exam Programs and Review	Manager, EP Exam Programs and Review

Make three copies of the completed preliminary report and distribute as follows:
1. Place one copy for the case file.
2. Send a copy to the Area Manager or Manager, EP Exam Programs and Review (as applicable).
3. Send a copy to the Manager, EP Mandatory Review.
Send the original completed preliminary report to the Director, EP Examinations, routed through the Manager, EP Exam Programs and Review.

4.71.9.9.5 (03-01-2006)
Instructions for the Final Form 3999

The completion of most line items is self-explanatory. However, close attention should be given when completing the following line items.
1. Item 12a: List the years or periods expired.
2. Item 12b: List the date of statute expiration.
3. Item 12c: List the amount of deficiency or over-assessment.
4. Item 13: Provide information on the status and location of the return at the time of statute expiration. If it is not determinable where a case was on the date of expiration, specify the location of the return at date of discovery.
5. Item 14: Provide an explanation of why the statute expired with appropriate comments reflected on the back of the form, or an attachment as necessary.
6. Item 15: Provide corrective action taken or recommended to prevent recurrence of statute expiration. In the event disciplinary action is proposed, it should be explained in Item 15 without identifying the responsible employee. This will be the subject of a separate report.
  
  Note:
  
  A sample narrative might begin as follows: "No changes to procedures are recommended. If procedures in place had been properly followed, expiration would not have occurred."
Also include the following information in the final report:
1. The proposed disciplinary action or the reason why no disciplinary action is merited. Disciplinary action will be the subject of a separate memorandum, as an attachment to the Form 3999.
2. Any change in the facts from date of discovery of the expired statute to the date of preparation of the final Form 3999 (if applicable).
3. Narratives from other affected functions cited in the preliminary report (as applicable).

4.71.9.9.6 (03-01-2006)
Distribution of Completed Final Form 3999

Once a final Form 3999 is completed, three copies and the original are to be distributed as follows:
1. Send the original to the Director, EP Examinations, routed through the Manager, EP Exam Programs and Review.
2. Place a copy in the case file.
3. Send a copy to the Area Manager or Manager, EP Exam Programs and Review (as applicable).
4. Send a copy to the Manager, EP Mandatory Review who will maintain copies for trend review.