Title 26 Compliance Check Defined

A compliance check is a review conducted under Title 26 of the IRC to determine whether a TE/GE entity or organization is adhering to their federal tax and information return filing, reporting, and payment requirements. A compliance check is NOT an examination, and the taxpayer may legally choose not to participate. A compliance check does not directly relate to determining a tax liability for any period. The compliance check is a tool to help educate TE/GE entities, organizations, practitioners, plan sponsors and participants and encourage voluntary compliance.

The compliance check is not an inspection, or a request of books and records, nor does it include questioning whether a worker is an employee or independent contractor, nor does it ask how the taxpayer determined that a Form W-2 or 1099 should be filed.

During a compliance check do not:

Inspect books and records.

Discuss books and records.

Question whether a worker is an employee or independent contractor.

Ask how the taxpayer determined whether a Form W-2 or Form 1099 should be filed.

During a compliance check, do inspect filed information returns for indications that the amounts and information reported are complete and correct. This includes, but is not limited to, analysis of the following:

Form(s) W-2 to see whether withholding appears appropriate.

Form(s) W-2 and Form(s) 1099 for missing information, TIN, name, address, etc.

Duplicate filings (Form 1099 and W-2 to same payee) that may indicate fringe benefits are reported on Form 1099 or that a part of the wages is incorrectly characterized as non-employee compensation or rent. Whether the total number of Forms 1099 and amount paid is in line with the size and type of the entity (payer), i.e., should there be more or less.

A compliance check should include the review of the following filed tax returns and information returns as applicable (list should not be considered all inclusive):

Form 94X series.

Forms W-3, W-2, including Forms W-3c and W-2c, if applicable.

Form 1099 and Form 1096.

Form 1042.

Form 1042-S.

Form 990 or Form 990-EZ.

Form 990-PF.

Form 990-T.

Form 990-N.

Form 5500 series.

Form 4720.

Form 720.

Form 8038 series.

Other forms as applicable.

CP&C will establish compliance checks on the RCCMS using activity code 590 for all TE/GE Title 26 Compliance Checks, or activity code 591 for all TE/GE Title 31 Compliance Checks.

Compliance checks selected will be assigned electronically via RCCMS in status 10 to the ITG or TECU groups.

New cases are requested by management based on inventory needs. TECU or ITG Program Managers will coordinate with GE FAC when more cases are needed.

Cases are assigned to appropriate group by the FAC based on reported need.

Examiners will enter a line item for each compliance check project (TECU) or for each taxpayer (ITG). The hours for all compliance checks strategies will be tracked by activity code 590 for TECU or activity code 591 for ITG and project code assigned to each strategy in WebETS.

Hours reported in WebETS must match hours reported in the Examiner’s Time field on the RCCMS closing record Details tab and total hours reported on the RCCMS embedded CCR completed for each case.