EP – Unagreed Form 5500 Examination Procedures

If the qualification issue is not resolved through EPCRS or a DO 8-3 closing agreement, follow the procedures in this subsection.

Solicit Forms 1041 from the trustee. See IRM 4.70.14.2.4.2.1.1, EP - Solicitation of Form 1041.

Pick up prior and subsequent year Forms 5500 for examination (at your group manager’s discretion, and in some cases, the area manager’s or the Director, EP Examinations’ discretion).

In general, expand the examination to include subsequent year Forms 5500 that are due.

If you do not include the subsequent year returns in the examination, the group manager prepares a written statement in the case chronology, memo, or email to include in the workpapers, giving the reasons the subsequent years are not included.

You may need to open an examination of a year in which the normal statute of limitations has expired. This happens when the IRS has determined that an operational issue has occurred that retroactively disqualifies the plan.

The IRS's ability to pursue a qualification issue in any year is not impacted by the Form 1041 statute of limitations. The Form 1041 statute of limitations expiration for any given year doesn’t prevent the IRS from pursuing a qualification issue in that year (see Christy and Swan Profit Sharing Plan v. Commissioner, T.C. Memo 2011-62).

If you solicit plan or trust records for a given plan year, that year is considered to be under examination and you must establish the Form 5500 on AIMS and RCCMS even if the Form 5500/1041 statute has expired. If the statute of limitations has already expired, update the statute to alpha code "PP" per IRM 4.70.12.3.7.7, Use of Alpha Codes.

Document your decision to examine (or not) related years in the CCR.

Include your group manager's agreement to examine prior years via a confirmation email or by signing the CCR.

See IRM 4.70.12.3.6.1, Specific Filing Checks, for procedures to open an examination of a related or prior or subsequent year Form 5500 that has been filed and IRM 4.70.13.9, Delinquent, Amended and Substitute for Returns, for delinquent and substitute Form 5500 procedures.

Begin (at your manager’s discretion) Form 1040 discrepancy adjustments (when there is a taxable event) on all or some plan participants or at a minimum, those individuals with substantial tax impact, depending on workload considerations. See the discrepancy adjustment procedures in IRM 4.70.15, Discrepancy Adjustments.

Before starting a discrepancy adjustment, secure an AMDISA print to determine if a Form 1040 examination is already in process.

If you don’t do a discrepancy adjustment, explain why on the CCR.

Begin (at your manager’s discretion) a Form 1120 discrepancy adjustment on the plan sponsor per the discrepancy adjustment procedures in IRM 4.70.15, Discrepancy Adjustments.

Before starting a discrepancy adjustment, secure an AMDISA print to determine if a Form 1120 examination is already in process.

You may need to ask SB/SE for help to generate the income tax adjustment on Form 4549-E.

EP examiner mails the 30-Day Letter (Letter 3605) for Forms 1040/1120 discrepancy adjustments (See IRM 4.70.15, Preparation of the Discrepancy Adjustment Package). When you do a discrepancy adjustment with (or because of) a proposed revocation/non-qualification, you work the discrepancy adjustment files with the proposed revocation/non-qualification. The discrepancy adjustment file continues to be part of the proposed revocation/non-qualification package and you process both 30-day Letter packages to the taxpayer at the same time.

If you do not pursue a discrepancy adjustment, explain why on the CCR.

Make timely referrals to the applicable EFU (LB&I SB/SE, and W&I) on Form 5666, if either:

The trustee does not file the solicited Forms 1041.

You do not do Forms 1040 or 1120 discrepancy adjustments.