Internal Revenue Manual § 4.10.16 - Examination Operational Automation Database (eoad)

4.10.16 Examination Operational Automation Database (EOAD)

Manual Transmittal

July 23, 2024

Purpose

(1) This transmits revised IRM 4.10.16, Examination of Returns, Examination Operational Automation Database (EOAD).

Material Changes

(1) Minor editorial changes have been made throughout this IRM. Also, website addresses and IRM references were reviewed and updated as necessary.

(2) Updated exhibits to reflect current codes in effect.

(3) IRM 4.10.16.1 added to conform to the new internal control requirements described in IRM 1.11.2, Internal Controls.

(4) IRM 4.10.16.2 Wage & Investment division renamed to Taxpayer Services.

(5) IRM 4.10.16.2.1 deleted and moved to internal controls.

(6) IRM 4.10.16.2.2.1 (2) added telephone number.

(7) IRM 4.10.16.2.2.2 (1) added Administrative Issues, Statutory Issue, General Income Issue, and Declassified Issue.

(8) IRM 4.10.16.2.2.2 (2) bullet list changed to a table.

(9) IRM 4.10.16.2.2.3 (3) a added note for NRP cases.

(10) IRM 4.10.16.2.2.3 (3) c added Agreed amount.

(11) IRM 4.10.16.2.2.4 (1) added see IRM 4.10.15 for additional information on Form 5344.

(12) IRM 4.10.16.2.3 (1) deleted verbiage related to IMS standup and copying cases to external media.

(13) IRM 4.10.16.2.4 (1) added state for clarity.

Effect on Other Documents

This material supersedes IRM 4.10.16, dated March 23, 2016.

Audience

Employees in the Small Business and Self-Employed (SB/SE), Large Business and International (LB&I), Tax Exempt and Governmental Entities (TE/GE), and Taxpayer Services operating divisions who conduct examinations of income tax returns (Forms 1040, 1120, 1120S, and 1065).

Effective Date

(07-23-2024)

Timothy J. Bilotta
Director, Examination Operations, Performance Planning and Analysis
Small Business/Self-Employed Division

4.10.16.1 (07-23-2024)

Program Scope and Objectives

1. Purpose: This IRM section provides guidance on record keeping for examination results and tracks the effectiveness of the examination classification process. Examination Operational Automation Database (EOAD) provides data that tracks examination results by issue. This data is used to enhance the ability to identify specific areas of non-compliance based on examination results and track the effectiveness of the examination classification process. EOAD is used to track examination results for National Research Program (NRP) examinations and analyzed by the Government Accountability Office (GAO) and Treasury Inspector General for Tax Administration (TIGTA) as part of their audits of IRS examination activities. In addition, EOAD data is used to fulfill disclosure of examination results under agreements with state and local taxation agencies.

2. Audience: These procedures apply to all examinations of Individual (Form 1040), Corporate (Form 1120), S Corporation (Form 1120S), and Partnership (Form 1065) returns.

3. Policy Owner: The Director, Examination Planning Performance and Analysis – Small Business/Self Employed is responsible for EOAD.

4. Program Owner: Examination Planning Performance and Analysis – Small Business/Self Employed is the program owner of EOAD.

5. Primary Stakeholders:

   • Taxpayer Services

   • SB/SE

   • LB&I

   • TE/GE

   • Independent Office of Appeals (Appeals)

6. Program Goals: Identify specific areas of non-compliance based on examination results and track the effectiveness of the examination classification process.

4.10.16.1.1 (07-23-2024)

Background

1. EOAD electronically extracts data from Report Generating Software (RGS), collected by Correspondence Examination Automation Support (CEAS) and the Issue Management System (IMS) at the time cases are closed electronically.

4.10.16.1.2 (07-23-2024)

Authority

1. Authority and purpose is pursuant to IRC 6103(h)(1) which provides for disclosure of returns and return information to officers and employees of the Department of the Treasury (including IRS) whose official duties require access for tax administration.

4.10.16.1.3 (07-23-2024)

Responsibilities

1. Capture of EOAD data is mandatory for all examinations of Individual (Form 1040), Corporate (Form 1120), S Corporation (Form 1120S), and Partnership (Form 1065) returns.

2. EOAD data must be entered for all examined issues, both adjusted and non-adjusted items, as well as all classified issues including those that are no-changed or subsequently declassified.

4.10.16.1.4 (07-23-2024)

Program Management and Review

1. Program Reports include:

   • Issue Frequency Report

   • Issue Report

   • No-Change Analysis Report

   • Penalty Amount Report

   • Tax Credit Amount Report

   • Taxpayer Report

2. Program Effectiveness: The data collection process from RGS is tested annually. The closed cases on EOAD are matched against closed cases on the Audit Information Management System (AIMS) monthly to determine the rate of collection of EOAD data. Collection rates below 95% are investigated further to determine if systemic issues are preventing data collection.

4.10.16.1.5 (07-23-2024)

Program Controls

1. EOAD relies on the General Support Systems (GSS) common controls associated with the IRS Enterprise Active Directory domain structure to uniquely identify and verify the identity of each user. Direct access to the server is currently limited to the System Administrators and EOAD programmers.

2. Dissemination of EOAD data to internal customers is done via a shared drive controlled by Information Technology (IT). Password protected data files for respective business operating divisions are placed in separate folders on the shared drive. Each data file has a unique password. Requests to access the data are submitted via WebAD\Qwert system and are reviewed by the EOAD business contact. Upon approval, the internal customer is approved for access to the drive. Once access is approved, the mapping instructions and password are shared with the customer.

4.10.16.1.6 (07-23-2024)

Terms/Acronyms/Definitions

1. The following table defines terms relevant to this program that are used throughout this IRM section:

   Terms

   Term	Definition
   Audit Information Management System (AIMS)	The Audit Information Management System is a computer system used by Appeals, Examination, and TE/GE to control returns, to input assessment/adjustments into the Master File and to provide management reports. IRM 4.4 covers Examination’s use of AIMS and describes the data elements for AIMS.
   Internal Revenue Code (IRC)	The Internal Revenue Code is prepared and published by the Office of the Law Revision Counsel (“OLRC”) of the U.S. House of Representatives pursuant to 2 U.S.C. 285b. The Code contains the general and permanent laws of the United States, organized into titles based on subject matter.
   Issue Management System (IMS)	The Issue Management System is an electronic case management application for examiners, specialists, managers and others. IMS is a program that uses 2 different interfaces. One is a Web based application that requires no program installation and the other is a client-based application requiring installation by Information Technology. It supports existing and new examination processes. The application provides the Estate and Gift Tax program with case management tools needed to support planning, selection and examination. IMS is an official electronic record-keeping system used to store federal electronic records.
   Report Generating Software (RGS)	RGS is a audit software program that is used by Examination, it supports an electronic case file and is used from pre-audit through case closure.
   Standard Audit Index Number (SAIN)	The SAIN is a numbering system for examination issues.
   Uniform Issue List (UIL)	The Uniform Issue List is a list of codes used to track examination issues for various reports.

    

2. The following table defines acronyms frequently used throughout this IRM section:

   Acronyms

   Acronym	Definition
   AIMS	Audit Information Management System
   BMF	Business Master File
   CCP	Centralized Case Processing
   CEAS	Correspondence Examination Automation Support
   EOAD	Examination Operational Automation Database
   GAO	Government Accountability Office
   GSS	General Support Systems
   IIC	International Individual Compliance
   IMF	Individual Master File
   IMS	Issue Management System
   IT	Information Technology
   LAN	Local Area Network
   LB&I	Large Business & International
   MFT	Master File Tax
   NAICS	North American Industry Classification System
   NRP	National Research Program
   PBA	Primary Business Activity
   POD	Post of Duty
   RGS	Report Generating Software
   SAIN	Standard Audit Index Number(s)
   SB/SE	Small Business/Self-Employed
   SSSN	Secondary Social Security Number
   TE/GE	Tax-Exempt and Government Entities
   TIGTA	Treasury Inspector General for Tax Administration
   TIN	Taxpayer Identification Number
   UIL	Uniform Issue List

    

4.10.16.1.7 (07-23-2024)

Related Resources

1. The following IRMs are related to workpapers and reports:

   • IRM 4.10.9, Workpaper System and Case file Assembly

   • IRM 4.10.15, Examination of Returns, Report Generation Software (RGS)

   • IRM 4.46.6, LB&I Examination Process, Workpapers and Reports Resources

   • IRM 1.1.16.6.1.6, Examination System and Projects

   • IRM 1.1.16.5.4.3, Examination Data Management (EDM)

4.10.16.2 (07-23-2024)

Examination Operational Automation Database (EOAD)

1. EOAD provides data that tracks examination results by issue. This data is used to enhance the ability to identify specific areas of non-compliance based on examination results and track the effectiveness of the examination classification process. EOAD is used to track examination results for NRP examinations and analyzed by GAO and TIGTA as part of their audits of IRS examination activities. In addition, EOAD data is used to fulfill disclosure of examination results under agreements with state and local taxation agencies. Therefore, it is important that data inputs are accurate.

2. Data is captured by Small Business/Self-Employed (SB/SE), Large Business & International (LB&I), and Taxpayer Services examiners for examinations of all Forms 1040, 1120, 1120S, and 1065 using Report Generation Software (RGS) and Issue Management System (IMS) software.

3. The focus of this IRM is on data entries in RGS and IMS that are captured by EOAD but generally do not affect tax computations. It is very important that examiners take great care in properly entering EOAD data since there is no subsequent review process to correct EOAD errors.

4.10.16.2.1 (04-26-2011)

Capture of EOAD Data Using RGS

1. EOAD data is captured by RGS from examiners' inputs on the following screens in RGS:

   • Create Case screen

   • Case Information screen

   • Contacts screen

   • Issue screen

   • Tax Computation (IMF) and Create Report (BMF) screens

   • Form 5344

   • Compliance Evaluation screen

4.10.16.2.1.1 (07-23-2024)

Create Case, Case Information, and Contacts Screens

1. Create Case screen - the following data is captured:

   • Taxpayer identification number (TIN)

   • Secondary social security number (SSSN)

   • Form type

   • Master file tax (MFT) code

   • Tax period

   • Source code

   • Activity code

   • Project code

   • Tracking code

   • Post of duty (POD) code

   • Audit Information Management System (AIMS) assignee codes

2. Case Information screen - the following data is captured:

   • Name

   • Telephone number

   • Address

   • Filing state code

   • Filing zip code

   Based on the examiner's inputs in:

   • Return due date

   • Extended due date

   • Received date

   • Substitute for return checkbox

   RGS will generate a delinquency indicator for EOAD to indicate:

   • The return was filed timely

   • A valid extension was filed

   • The return was delinquent (filed late)

   • A return was not filed (i.e. substitute for return cases)

3. Contacts screen - captures identification and contact information for the return preparer and representative(s). The proper completion of this information allows the ability to identify and address egregious return preparers.

4.10.16.2.1.2 (07-23-2024)

Issue Selection Screen

1. The examiner creates issues in RGS using the drop down "Actions" menu to select the option that best describes the issue. The menu options are:

   • Administrative Issues - Are automatically created by RGS (can also be added manually if necessary). Administrative lead sheets automatically insert into administrative issues.

   • New Issue – This is an issue that has been identified by the examiner who has determined that it warrants additional inspection. New Issues are not Classified Issues nor are they directly related to a Classified Issue.

   • Classified Issue – This is an issue that has been identified through the issue classification process and appears on a Classification Check Sheet. All Classified Issues must be added and commented upon even if they are subsequently declassified. If a Classified Issue is declassified, check the declassified box on the issue adjustment screen. Add an adjustment record with the issue categorized as though it was examined. Enter the issue amount from the return in both the Per Return and Per Exam fields and select a Declassified Issue Reason Code.

   • New Issue Resulting From Classified Issue – This is an issue that can be directly traced back to a classified issue. For example, a classified balance sheet item could lead to one or more profit and loss items. These subsequent Profit and Loss issues would be identified as New Issue Resulting From Classified Issue.

   • Statutory Issue – This issue is created by RGS when a tax computation is run. These issues cannot be deleted and are assigned a "Reference" code of 599.

   • General Income Issue -This issue is created by RGS from examiner entries in "General Income" on the 1040 workcenter. These issues are assigned a "Reference" code in the 5xx series.

   • Declassified Issue - This issue is created by the examiner declassifying a classified issue.

   Note:

   Issues from different lines on a tax return must be created separately using the appropriate issue code and should not be combined.

2. Once an issue is added, the examiner uses a pull-down menu in the IMF Code field to identify the issue. See Exhibit 4.10.16-1 for a complete list of IMF Issue Codes. The initial drop down menu selections are:

   Menu Selection	Definition
   Form 1040 Exemptions and Income	Self-explanatory
   Form 1040 Taxes and Credits	Self-explanatory
   Premium Tax Credit and Health Care	Self-explanatory
   Schedule A	Self-explanatory
   Schedule C	Self-explanatory
   Schedule D	Self-explanatory
   Schedule E	Self-explanatory
   Schedule F	Self-explanatory
   Form 2106	Self-explanatory
   Generic Income, Expense and Tax Credits	Self-explanatory
   999999 - Statutory Adjustment	Self-explanatory
   699999 - Impact of DeMinimus Issues	Self-explanatory
   Campus/Service Center	Self-explanatory
   4NRP - Q Table	Self-explanatory
   99999 - Change/No Change	Self-explanatory
   Miscellaneous Issues	Self-explanatory

3. BMF issues are identified using the drop down menus in the SAIN, Standard Audit Index Number, field. See Exhibit 4.10.16-2, and Exhibit 4.10.16-3, respectively, for complete lists of sub-chapter S and partnership SAIN Codes. See IRM 4.46.6, LB&I Examination Process, Workpapers and Reports Resources, for a complete list of Corporate SAIN codes.

4.10.16.2.1.3 (07-23-2024)

Issue Adjustment Screen

1. Once issues are identified, the Issue Adjustment screen is accessed using the "Add" function box.

2. To promote accuracy and reduce time spent, EOAD fields should be completed concurrently with the examination of issues to the greatest extent possible.

3. The following fields are captured by EOAD on the Issue Adjustment screen:

   1. Categorization - this selection determines how RGS will calculate the tax resulting from the adjustment. "The RGS Issue Reference Guide" is available for download at the Exam System Knowledge Base. This guide provides detailed instructions to examiners on how to properly categorize an adjustment based upon the IMF Issue Code selection to ensure RGS performs a proper tax calculation and that accurate EOAD data is captured.

      Note:

      For NRP Cases follow the NRP Issue Reference Guide located on the NRP Website -https://nrp.web.irs.gov/training.html#tab=tab1.

   2. Per return, Per exam amounts.

   3. Agreed amount - is the amount of the adjustment the taxpayer agrees with. If the taxpayer does not agree to all or part of the adjustment, modify or remove the agreed amount.

   4. Reason Code – a two-digit code that identifies the reason for the adjustment, why the issue was no changed, or declassified. The examiner should follow the drop down menus in RGS to select the code that best describes the reason the issue was or was not adjusted. See Exhibit 4.10.16-4.

      Note:

      Adjustments to Earned Income Credit issues or originating from Flow Through Entities require the selection of specific Reason Codes. Reason Codes for adjustments from Flow Through Entities are further divided to identify the Flow Through case as either NRP or Non NRP. For all other issues, select the code that best fits the reason the issue was or was not adjusted.

   5. Uniform Issue List (UIL) Code - SB/SE examiners are not required to complete this field.

   6. Rental Type Code – This field is completed for Form 1040 - Schedule E Rental Issues only in RGS. The drop down menu for this field is only activated on issues with Schedule E Rental IMF Issue Codes. Select the code that best describes the rental from the categories Residential, Vacation, or Commercial Rental. See Exhibit 4.10.16-5 for a complete list of Rental Type Codes.

   7. PBA/NAICS Code Per Return (Issue) – For all Form 1040 Schedule C or F and all Forms 1065, 1120, and 1120S issues, this field should be completed to reflect the code as reported by the taxpayer. The North American Industry Classification System (NAICS) will be used for returns for tax periods after 199811. The Primary Business Activity (PBA) Codes will be used for tax periods prior to 199812. The four-digit PBA Code should be expanded to six digits by placing two zeroes (00) before the code.

   8. PBA/NAICS Code Per Exam (Issue) – For all Form 1040 Schedule C or F and all Forms 1065, 1120, and 1120S issues, enter the NAICS code from the series of pull-down menus that best identifies the type of business for the issue being examined. NAICS codes will be used for returns for tax periods after 199811. PBA codes will be used for tax periods prior to 199812. The four-digit PBA code should be expanded to six digits by placing two zeroes (00) before the code. Code "000000" should be selected for issues involving Form 1040 Schedule E income subject to self-employment tax.

      Note:

      If the examiner is fully disallowing the schedule or return, such as in an IRC 183 adjustment, they should choose "D" to remove the NAICS code.

4.10.16.2.1.4 (07-23-2024)

Completion of RGS Tax Computation and Form 5344

1. Before the Compliance Evaluation Screen can be completed certain RGS actions must be taken. The tax computation must be completed using RGS and all required fields in the RGS Form 5344 must be completed. Then the Form 5344 must be validated. See IRM 4.10.15, Examination of Returns, Report Generation Software (RGS) for additional information on Form 5344.

4.10.16.2.1.5 (01-02-2013)

Completion of the Compliance Evaluation Screen

1. PBA/NAICS Code Per Return – This code reflects the principal business of the taxpayer and can be found on the return. In the case of Forms 1040 with multiple Schedules C or F, it is the code for the schedule with largest gross receipts per the return. North American Industry Classification System (NAICS) codes will be used for returns for tax periods after 199811. Primary Business Activity (PBA) codes will be used for tax periods prior to 199812. The four-digit PBA code should be expanded to six digits by placing two zeroes (00) before the code.

2. PBA/NAICS Code Per Exam – This is the corrected code, based on the examiner’s determination for the principal business of the taxpayer. In the case of Forms 1040 with multiple Schedules C or F, it is the code for the schedule with largest gross receipts after completion of the examination. RGS provides a series of pull-down menus to assist the examiner in selecting the correct code. NAICS codes will be used for returns for tax periods after 199811. PBA codes will be used for tax periods prior to 199812. The four-digit PBA code should be expanded to six digits by placing two zeroes (00) before the code.

3. Primary Occupation Code (Form 1040 only) – This is a three-digit code that identifies the occupation of the taxpayer with the largest source of wage income for the year being examined. This code should be selected based on the taxpayer’s largest source of wage income per exam regardless of whether the largest source is from the primary or secondary taxpayer. This field will be completed where the taxpayer is both a wage earner and self-employed. If no wages are earned, no code is entered. RGS provides a series of pull-down menus to assist the examiner in selecting the correct code.

4. Amount Paid at Closing – This is the total amount paid for the applicable tax period at the time the examination was concluded or before the examination case is closed from the group.

5. Study Type – This field will be left blank currently. It is a three-digit field that will be used to track cases for special surveys or research studies (not the same as current project codes).

6. Upon completion of all fields, the Compliance Evaluation screen must be validated, saved, and printed. The printed copy must be placed in the case folder on top of the case file.

4.10.16.2.1.6 (03-23-2016)

Forwarding EOAD Data using RGS

1. SB/SE and LB&I, International Individual Compliance (IIC) examiners will forward all closed cases by Local Area Network - Report Generating Software (LAN-RGS) unless that functionality is unavailable. The EOAD data is included in the electronic case file by the forwarding process.

2. Forms 1040, 1120, 1120S, and 1065 examinations which could not be completed using LAN-RGS must be notated as such on the Form 3198, Special Handling Notice for Examination Case Processing. Any cases not fulfilling the requirements of IRM 4.4.12.11, EOAD Data Capture Procedures, will be returned to the originating examination group.

4.10.16.2.2 (07-23-2024)

Capture of EOAD Data Using IMS

1. The IMS system captures the EOAD data in a format that can be shared with state and local taxation agencies.

2. EOAD data is automatically extracted by IMS at case closure based upon examiners' inputs on various IMS screens. Instructions detailing the proper input of data in IMS can be found in the IMS Client program.

3. For cases completed using IMS, EOAD data is included in the electronic case file by the forwarding process.

4.10.16.2.3 (07-23-2024)

Forwarding EOAD Manually - Centralized Case Processing (CCP) Responsibility

1. If a disclosure is made to a state agency whose code is manual or not compatible with AIMS, or if the disclosure is of Non-Master File (NMF) information, the reporting will be done manually by preparing Form 5466-B, Multiple Record of Disclosure. Additional information regarding disclosure reporting requirements can be found at IRM 11.3.37, Record keeping and Accounting for Disclosures.

2. State agency codes can be found in IRM Exhibit 11.3.37-4, State Agency Codes.

3. Instructions for Form 5466-B, preparation can be found at IRM Exhibit 11.3.37-6, Multiple Record of Disclosure.

Exhibit 4.10.16-1

IMF Issue Codes

Note:

For all the Schedule C, Schedule E, and Schedule F issues, the IMF Code displays an X to indicate the number of the schedule being adjusted, for example, 4C101, 4C201 or 4C301.

Exhibit 4.10.16-2

Sub Chapter S SAIN Codes

Exhibit 4.10.16-3

Partnership SAIN Codes

Exhibit 4.10.16-4

Reason Codes

Exhibit 4.10.16-5

Rental Type Codes