- 4.75.19.1 Introduction
- 4.75.19.2 Overview
- 4.75.19.3 Preparing and Processing Forms 5456 and 5457
- 4.75.19.4 Resolution of Disputes
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This section contains general procedures for preparing and responding to a reviewer's memorandum.
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Communications between the Review Staffs and agents are generally in the form of Reviewer's inquiry or advisory memorandums. Such memorandums are addressed to the examiner's group manager and are initially considered at that point.
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An advisory memorandum is prepared in cases where it is necessary to apprise the group manager and the agent of errors of omission or commission that have been accepted or corrected with no change in qualification, exempt status or tax liability. Advisory Memorandums do not require the case to be returned to the Group. Examples include:
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Errors on the Form(s) 5599
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Errors on the Form 2848, Power of Attorney (POA) Authorization that can be easily corrected by the review staff
Note:
If the Reviewer makes a correction to a POA, he/she must send a copy to the taxpayer and representative acknowledging the change
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Minor errors in closing letters such as typographical mistakes
Note:
A copy of the corrected and original letters should be maintained in the case file.
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Minor math errors in an agreed case that are in the government's favor and a corrected report of examination is not issued. Minor is considered to be an amount which is less than $100.
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An inquiry memorandum is prepared when it is necessary to return the case file to a group manager for additional development or action by the agent.
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A correction memorandum is initially prepared as an inquiry memorandum where the examiner's revised recommendations result in a change in tax liability, exempt status or private foundation status, or in an amendment to the enabling document. Resolution of the problem presented in an inquiry memorandum will produce one of four results:
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No revision since the inquiry involves a judgment area ultimately resolved on the basis of information in the original report without additional development of the case;
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No revision since the technical or procedural errors noted do not warrant the additional staff expenditure of time for correction based on potential results;
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Revised to reflect a change in the tax liability, foundation status or exempt status; or
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Revised to reflect an amendment to the enabling document, or to correct an inadequate report pertinent to qualification or exemption
IF THEN upon completion of review, the results produce the situation indicated in "a" It remains as an Inquiry Memorandum upon completion of review the results produce the situation indicated in "b" Redesignate it as an advisory memorandum upon completion of review, the result produces the situation indicated in "c" or "d" Redesignate it as a correction memorandum. -
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A commendatory memorandum is prepared when the reviewer believes the agent has performed exceptionally well on a case A memorandum may be prepared and signed by the appropriate Review Manager, to advise the examiners group manager.
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If the group manager concurs, a copy of this commendation is placed in the examiner's personnel folder.
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An agreed issue should not be reopened, nor should a new issue be raised by the reviewer unless the ground for such action is substantial and/or the potential effect upon the tax liability is material.
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Reviewer's memorandums are generally not prepared for TEQMS cases. These cases are closed prior to being selected for TEQMS and therefore must meet the reopening criteria to be returned to the group. Further, because TEQMS limits the feedback to the agent and manager, advisory memorandums would generally not be appropriate. Refer to IRM 4.75.26.10 for TEQMS case return criteria.
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Two forms, prepared in triplicate are used to assist reviewers and agents when responding to concerns addressed on reviewed cases,
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Form 5456, Reviewer's Memorandum - EP/EO
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Form 5457, Response to Reviewer's Memorandum - EP/EO.
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When preparing the Form 5456, the Reviewer should clearly designate each issue. If additional space is needed, a Form 886-A (Continuation Sheet) can be used.
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The Form 5456 should be completed as follows:
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Check " Inquiry" or " Advisory" as appropriate
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Complete Items 1, 2, 4 through 9, 12 and 13.
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If mathematical errors are found, record these errors by completing items 10 and 11.
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The Reviewer should forward the completed Form 5456, along with the case file, to the appropriate Review Manager for approval.
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The Review Manager, upon approval, will return two copies of the Form 5456 and the case file to the examiner's Group Manager. The Review Staff will retain the third copy for control purposes. However, the casefile will not be returned with an advisory or commendatory memorandum.
Note:
The Review Manager will advise the Group Manager by telephone of any examination cases being forwarded to his/her Group with less than 180 days before expiration of the assessment period.
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The group manager will initially consider the reviewer's memorandum. The group should reply within 60 days of receipt.
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If the group manager considers the memorandum inappropriate, such view should be presented, in writing, to the appropriate Review Staff Manager for resolution.
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Otherwise, the group manager should complete item 3 of Form 5456. The form is then forwarded to the agent. The group manager will maintain appropriate controls.
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The agent will reactivate the case on Form 6490, EP/EO Technical Time Report.
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The examining agent will prepare the Form 5457 as follows:
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Complete items 1-6 on Form 5457. If additional space is required, use Form 886-A.
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In completing item 5 of Form 5457, key the responses to the order of the reviewer's comments on Form 5456.
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If an item cited by the reviewer results in an adjustment that is explained in the examination report, another explanation on Form 5457 is not necessary. A notation as to the page of the report in which the item is adjusted will be sufficient.
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If an item cited by the reviewer does not result in an adjustment, include an explanation on Form 5457.
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If no mathematical adjustments are made, Form 5457 will be so annotated. This will facilitate processing of the case by the EO Closing Unit.
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The group manager will approve the action taken by the agent by completing item 7 of Form 5457.
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After approval, the case file and all copies of Forms 5456, 5457 and 886-A will be returned directly to the specific reviewer who initially reviewed the case.
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If that particular reviewer is no longer in Review, the case will be returned to the appropriate Review Manager for assignment to a current reviewer.
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Upon review and approval of the action taken by the agent, the reviewer will complete items 8-10 of Form 5457 and, if necessary, redesignate Form 5456 as either a correction or advisory memorandum by entering "X" in the appropriate block. If the inquiry memorandum is redesignated, items 15 and 16 should be completed.
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Copies of the Forms 5456, 5457 and 886-A will be included in the administrative file, after the final review and acceptance of the case by the Review Staff.
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The Review staff and the Examining examiner's Group Manager will also maintain a copy.
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In cases where the agent feels the Review Staff's position is inappropriate, he/she should specify the reasons on Form 5457 and return it to the appropriate Review Manager via his/her group manager.
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If after considering both positions, the group manager believes the Review Staff's position is appropriate, the agent will adopt the Review Staff's position in further dealings with the organization. Under no circumstances should the agent advise the organization, authorized representatives, or other interested parties of any internal disagreement with changes in the Service's position.
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If the group manager concurs with the examiner's dissent or has serious doubts regarding the reviewer's position, the group manager will, either through discussion or by approving Form 5457, advise the appropriate Review Staff Manager.
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In the event of any significant disagreement between Review and the groups regarding a Form 5456, a conference will be held between the affected group manager, his or her Area Manager, the appropriate Review Manager and the Manager, EPR, to resolve the issues. Ultimately, the decision of the Area Manager and the Manager, EPR is final.