The IRS Tax Exempt and Government Entity (TE/GE) division publicly released a memorandum providing guidance and implementing the TE/GE examination process used in all TE/GE examinations. This guidance defines the overall TE/GE examination process and includes definitions of key terms related to the examination process.
Read the TE/GE memo: TEGE-04-0920-0020 [PDF 49 KB] (dated September 22, 2020)
The memo explains that the TE/GE examination process provides an organizational approach for conducting examinations from the first contact with the taxpayer through the final stages of issue resolution and case closure. The memo further notes that not all examinations are the same in scope, size, and complexity; therefore, portions of the guidance may be more applicable to some cases than others.
The TE/GE memo lists the three phases to the TE/GE examination process—planning, execution, and resolution.
The planning phase of the examination process determines the scope of the exam. Issues selected for examination are to have the broadest impact on compliance regardless of the size and type of entity or organization. Once the examiner determines the issues for examination, the examiner will work to establish effective steps to complete the examination in a timely manner. TE/GE processes and procedures for conducting an examination, along with an overview of taxpayer rights, will be explained at the opening conference.
The examination plan will be issue-focused and include:
The plan is intended to be nimble and agile and when warranted adjusted throughout the examination. The examiner must obtain managerial concurrence upon development, and/or subsequent modification, of the plan.
Concerning the execution phase, the memo notes that issue development includes determining the facts; applying the law to those facts; and understanding the various tax or compliance implications of the issue. The parties will conduct interactive discussions, using the Information Document Request (IDR) process to develop the facts. Every effort is to be made to resolve any factual differences. If required, Notices of Proposed Adjustment will be provided throughout this phase to present the government’s legal position to the taxpayer. The entity or organization’s response to these proposals will allow the examiner to gain an understanding of the entity or organization’s position to facilitate issue resolution at the earliest appropriate point.
The goal of the resolution phase is to reach agreement, if possible, on the tax or compliance treatment of each issue examined and if necessary, issue a Revenue Agent Report (RAR) or closing agreement to the taxpayer. Starting with the development of the issue and continuing through resolution, early and frequent discussions are crucial for a complete understanding of the respective merits of an issue. During this phase, examiners are directed to consider alternative dispute resolutions (such as Fast Track Settlement) when appropriate.
A new functionality has been added to aid organizations in tracking the development of examinations from selection of cases through the entire examination process.
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