Improvements Are Needed to Ensure Adequate Consideration of the Pickup of Prior and/or Subsequent Returns During Field Examinations

The Director, Examination, Small Business/Self-Employed (SB/SE) Division, should update the IRM with additional guidance on when it is appropriate to conduct an examination even though the statute is less than 12 months, and include statute extensions as an option to alleviate statute of limitation concerns.

The Director, Examination, Small Business/Self-Employed (SB/SE) Division, should provide additional training to field examiners on when to expand examinations into the prior and/or subsequent tax return years, including the use of split closing for cases nearing the statute limitation or over-age cases and requesting statute extensions as needed.

The Director, Examination, Small Business/Self-Employed (SB/SE) Division, should update the IRM with guidance on when field examiners should conduct a more detailed comparative analysis for individual nonbusiness returns and specific details on how it should be documented.

The Director, Examination, Small Business/Self-Employed (SB/SE) Division, should provide additional training to field examiners and managers to ensure that the Lead Sheet 130 includes an adequate explanation for not expanding to prior and/or subsequent year returns.

The Director, Examination, Small Business/Self-Employed (SB/SE) Division, should update the IRM to require that Form 5345-D include the manager's signature and update the form with a manager signature line. In addition, field examiners should be reminded of the need to retain the Form 5345-D in the case files of all years examined.