IRS Audits - Part 4 Examining Process

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IRS Audits

4.1.3  Source of Returns—DIF and Ordering

4.1.3.1  (05-19-1999)
Overview

  1. This chapter discusses sources of returns.

  2. DIF (Descriminant Function) is a mathematical technique used to score income tax returns as to examination potential. These formulas were developed based on available TCMP data. Each return measured under DIF receives a DIF score. Generally, the higher the score, the greater the audit potential. The highest scored returns are made available to Examination upon request.

  3. DIF mathematical formulas are confidential and for official use only. The DIF score assigned to a return should not be disclosed.

4.1.3.1.1  (05-19-1999)
Types of DIF Returns

  1. The following types of returns are computer scored under the DIF System:

    1. Individual Returns

    2. Corporation Returns

    3. S Corporation Returns

    4. Partnership Returns

     

4.1.3.1.2  (05-19-1999)
Individual Returns

  1. All individual returns are computer scored under the DIF System. DIF returns are generally ordered in bulk, but some returns are delivered to Examination as Automatics for manual screening without a return order being placed. These returns are identified as Automatics by the use of Audit Codes. Audit Codes can be found on Form 5546, Examination Return Charge-Out. These Audit Codes are listed in Exhibit 4.1.3–1.

  2. Correspondence (CORR) returns are certain individual low and medium non-business returns that are conducive to correspondence examinations. Returns identified as "CORR" will not be ordered by area offices without prior written approval from the PSP Territory Manager.

4.1.3.1.3  (05-19-1999)
Corporation Returns

  1. Corporation returns having no balance sheet or assets under $10,000,000 are computer scored under the DIF System. Formula numbers are used to identify the asset classes when ordering corporate returns on Form 6897. High asset returns, activity codes 219 through 225, are not DIF scored and are delivered automatically to Classification at the Service/Customer Service Center. The Corporation DIF System includes:

    Activity
    Code
    Assets Formula
    203 No Balance Sheet 1
    209 Under $250,000 2
    213 $250,000 under $1,000,000 3
    215 $1,000,000 under $5,000,000 4
    217 $5,000,000 under $10,000,000 5

     

  2. Miscellaneous corporate returns are also not DIF scored. These returns may be sample ordered. These returns could be classified by screening them in the Statistics of Income (SOI) Division located at the Service/Customer Service Center before shipment to SOI at the Ogden Service Center. Miscellaneous corporate returns include:

    1120 PHC—LA Personal Holding Company—Low
      Asset
    1120 L Life Insurance Company
    1120 PC Property & Casualty Insurance
      Company
    1120 INAC—LA Inactive—Low Asset
    1120H Homeowners Association
    1120SF Designated Settlement Fund
      (IRC 468B)
    1120REIT Real Estate Investment Trust
    1120RIC Regulated Investment Company
    1120ND Nuclear Decommissioning Funds

     

  3. Certain corporation returns are identified as Specials. These returns are delivered to Examination for screening without a return order and are identified by Audit Codes. These Audit Codes are listed in Exhibit 4.1.3–2.

4.1.3.1.4  (05-19-1999)
S Corporation Returns

  1. S Corporation Returns having assets under $10,000,000 are computer scored under the DIF System. The S Corporation System includes:

    Activity Code Assets
    288 Under $200,000
    289 $200,000 under $10,000,000
    290 $10,000,000 and over
      (Automatic, if not DIF scored)

     

  2. Certain S corporation returns are identified as Specials. These returns are delivered to Examination for screening without a return order and are identified by Audit Codes. These Audit Codes are listed in Exhibit 4.1.3–3.

4.1.3.2  (05-19-1999)
Inventory and Delivery Reports

  1. A list of Inventory and Delivery Reports that are available and the exhibits where they can be found are as follows shown in the following figure:

     

    Figure 4.1.3-1

    Report Exhibit
    1040–1, AO Individual Inventory and Delivery Report 4.1.3–4
    1040–2, AO Individual Inventory and Delivery Analysis 4.1.3–5
    1040–3, SC Individual Inventory and Delivery Report 4.1.3–6
    1040–5, Individual Amended Returns Inventory and Delivery Report 4.1.3–7
    1040–6, AO/SC Individual Inventory and Delivery Report (Correspondence Returns) 4.1.3–8
    1120–1, AO Corporate DIF Inventory and Delivery Report 4.1.3–9
    1120–2, AO Corporate Inventory and Delivery Analysis Report 4.1.3–10
    1120–3, AO 1120S and 1120F Inventory and Delivery Report 4.1.3–11
    1065–1, DO Partnership Inventory and Delivery Report 4.1.3–12
    1065–2, DO Partnership Inventory and Delivery Analysis Report 4.1.3–13
    1041, Fiduciary Inventory and Delivery Report 4.1.3–14
    1066–1, AO Real Estate Mortgage Investment Concuit Inventory and Delivery Report 4.1.3.15

     

  2. The top section of the Inventory and Delivery Reports (1040–1, 1065–1, 1120–1, 1120–3) indicates the number of returns available for ordering. The bottom of the reports indicates the number of returns that have been delivered for screening by examination class and DIF score range for each file year. All returns identified on these reports have a DIF score which is above the National DIF cutoff score. These reports are cumulative for all returns received, processed and delivered to Examination during a file year. At certain times of the year, there will be available Inventory and Delivery Reports for two different file years. You should make sure you are utilizing the correct file year report.

4.1.3.3  (05-19-1999)
Guidelines for Ordering Returns

  1. The PSP Support Manager is responsible for submitting orders so that returns are received ratably during the fiscal year. Ratable is defined as a manner of ordering so that all returns with similar DIF scores, regardless of the filing date, have an equal chance of being delivered to Classification.

  2. Current file year individual DIF returns (Activity Codes 530 through 539) will be ordered so that deliveries for total individual returns, when measured as a percent of the total Individual Examination Return Plan, will not exceed the following:

    1. 65 percent before Cycle 52.

    2. 85 percent before Cycle 13.

    3. 108 percent Cycle 26.

     

  3. There is an exception to the guidelines set in (2). Any orders in excess of these guidelines must be approved by the PSP Territory Manager. Your order may be increased if any of the following conditions are met:

    1. The Area has a high dependence on DIF work for general program expectations;

    2. The Area has a substantial hiring authority; or

    3. The Area has low select rates which makes it impossible to accumulate sufficient training returns throughout the year while maintaining an appropriate tax auditor workload.

     

  4. Due to numerous fiscal year corporate and other BMF filings, high potential BMF returns are added to inventory throughout the entire file year. To ensure equal treatment of BMF taxpayers, BMF returns must be ordered in a ratable manner.

  5. Each Service/Customer Service Center will provide a schedule for ordering and classifying to the PSP Support Manager.

  6. All return orders will be submitted to the Service/Customer Service Center, ATTN: Chief, Classification Section in accordance with local procedures.

4.1.3.3.1  (05-19-1999)
Ordering Individual DIF Returns

  1. Form 6356, Individual DIF Returns Order, will be used to order individual DIF returns. Instructions for completing Form 6356 are found on the back of the form. Returns may be ordered from any cycle for orders from regular DIF inventory and only from odd cycles for orders from DIF CORR inventory.

  2. Areas are expected to order returns for the entire area. However, you have the capability for ordering or excluding returns for a specific post-of-duty. You should keep these orders to a minimum since it deviates from working the highest DIF returns first. These types of orders are:

    1. POD Exclusion Order—Where there is an excess workload at one or more posts-of-duty, the POD(s) may be excluded from any order cycle. A maximum of 17 PODs my be excluded each cycle. You should be aware that if you place an area-wide order subsequent to a POD exclusion order, returns previously excluded may fall out.

    2. POD Supplement Order—Where there is a workload shortage at a specific POD, a supplemental order may be submitted.

     

  3. Inventory and Delivery Report 1040–1 (Exhibit 4.1.3–4) shows the number of DIF returns available for ordering and the number of returns delivered for screening by examination class and DIF score range for each file year. This report also provides the number of Minimum Tax and Alternative Minimum Tax returns (combined under TXPREFRET). This is a cumulative report which is generated every even cycle for each file year.

  4. Inventory and Delivery Analysis Report 1040–2 (Exhibit 4.1.3–5) provides statistical data on individual returns processed and on returns delivered, including specials. This report is generated every cycle for the first 40 cycles and every even cycle thereafter.

  5. Individual returns cannot be ordered from the current file year until cycle 18. For orders prior to cycle 26,Override Code "1" will be entered in Column 80 of Form 6356 to override the computer block.

  6. Previous file year individual returns cannot be ordered after cycle 26 of the current file year. Override Code "9" will be entered in Column 80 of Form 6356 to override the computer block. Approval is needed from the Territory PSP Manager to utilize this override code.

  7. Alternative Minimum Tax returns may be ordered using Form 6356 with Indicator Code "W" entered on the order form.

  8. Areas may use the DIF CORR Inventory to secure returns for training purposes either on an area or POD basis. Form 6356 is used and must clearly indicate that the order is for training returns. Inventory and Delivery Report 1040–6 (Exhibit 4.1.3–8) reflects DIF CORR inventory by score range and deliveries to the service/customer service center or area. Orders must be made in odd cycles.

  9. The Amended Returns inventory contains Category B (paid) claims as defined in the LEM. Form 8199, Amended Returns Order, is used to place orders. Table 1040–5 (Exhibit 4.1.3–7) is the Inventory and Delivery Report for Amended Returns. These claims are ordered by the year in which the claims were filed, not by the tax year of the returns for which the claim applies. The highest dollar claims will be delivered first. The following categories of amended returns may be ordered:

    1. Adjustments to Income

    2. Filing Status and Exemptions

    3. Tax Computations

    4. Credits

    5. Itemized Deductions

    6. Schedule C or F

    7. Schedule D and Form 4797

    8. Schedule E

    9. Other Taxes

    10. Multiples—any combination of the above categories.

    11. Other—reasons not covered in above categories.

     

4.1.3.3.2  (05-19-1999)
Ordering Corporation Returns

  1. Form 6897, Corporation Returns Order, will be used to order corporation returns. This form is separated into two sections, Corporation DIF Returns Order and Miscellaneous Corporation Returns Order. Instructions for completing Form 6897 are found on the back of the form. Returns may be ordered from odd numbered cycles only.

  2. Areas are expected to order returns for the entire area. However, you have the capability for ordering or excluding returns for a specific post-of-duty. You should keep these orders to a minimum since it deviates from working the highest DIF returns first. These types of orders are:

    1. POD Exclusion Order—Where there is an excess workload at one or more posts-of-duty, the POD(s) may be excluded from any order cycle. A maximum of 7 PODs may be excluded each cycle.

    2. POD Supplemental Order—Where there is a workload shortage at a specific POD, a supplemental order may be submitted.

     

  3. Corporate DIF Inventory and Delivery Report 1120–1 (Exhibit 4.1.3–9) shows the number of DIF returns available to order for screening and the number of DIF returns which have been delivered by DIF score range.

  4. Corporate DIF Inventory and Delivery Analysis Report 1120–2 (Exhibit 4.1.3–10) provides data on corporations processed and on returns in inventory or delivered, including specials and automatics. BMF returns will not be ordered from the current file year inventory until after processing cycle 26 of the current file year.

  5. 1120S DIF and 1120F Inventory and Delivery Report 1120–3 (Exhibit 4.1.3–11) provides data on corporate returns processed and on returns in inventory or delivered, including specials and automatics.

  6. Indicator Codes are entered on Form 6897 to designate the type of returns ordered as shown in the following figure:

     

    Figure 4.1.3-2

    Indicator  Explanation
    0 The highest scored returns in inventory will be delivered. Valid for all types of DIF scored returns.
    1 Reserved.
    2 Taxable Inventory Returns. Valid for only the following returns:
     a. 1120L
     b. 1120PC
     c. 1120 PHC (low asset)
    3 Non Taxable Income Inventory Returns. Valid for only the following returns:
     a. 1120L
     b. 1120PC
     c.  Inactive (low asset)
     d. 1120 PHC (low asset)
    5 To be used to order corporation returns of the current file year prior to Cycle 27.

     

  7. Orders of miscellaneous returns in the taxable income category are filled from the top of the "file" (highest income to zero.)

  8. Orders of miscellaneous returns in the non taxable income category are filled from the top of the "file" (greatest loss to zero.)

  9. Only one indicator code may be used for returns in each examination class in the same cycle. However, different indicator codes may be used for different examination classes in the same cycle.

4.1.3.3.3  (05-19-1999)
Ordering Partnership

  1. Form 6162, Partnership Returns Order, will be used to order DIF partnership returns. Instructions for completing Form 6162 are found on the back of the form. Returns may be ordered monthly.

  2. POD orders are not available.

  3. The Inventory and Delivery Report 1065–1 (Exhibit 4.1.3–12) shows the number of Partnership returns available for ordering and the number of Partnership returns delivered for classification, by DIF score range, Examination Class and file year.

  4. The Inventory and Delivery Report 1065–2 (Exhibit 4.1.3–13) provides analytical data on Partnership returns processed, inventoried and delivered for classification, including Automatics and Specials.

  5. Indicator Codes are entered on Form 6162 to designate the type of returns ordered as follows:

    Indicator Code Explanation
    0 Should be entered on all orders for Form 1065.
    5 To be used to order partnership returns of the current file year prior to Cycle 27.

     

  6. Section 761(a) Partnership Returns, Investment groups that are not required to file partnership returns, selected for examination by the Service/Customer Service Center will be forwarded to their respective areas.

4.1.3.3.4  (05-19-1999)
Ordering Fiduciary Returns

  1. Form 5337, Fiduciary Returns Order, will be used to order fiduciary returns. Instructions for completing Form 5337 are found on the back of the form. Returns may be ordered monthly.

  2. POD orders are not available.

  3. The Inventory and Delivery Report 1041 (Exhibit 4.1.3–14) shows the number of Fiduciary returns available for ordering and the number of Fiduciary returns delivered for classification during the file year. This report provides the following information:

    1. Table 1—Nonautomatic Fiduciary Returns. The total number of Fiduciary returns available, the total number of returns delivered for the current cycle and delivered (cumulative) during the file year.

    2. Table 2—Automatic Fiduciary Returns. The total number of Fiduciary returns delivered for the current cycle and delivered (cumulative) during the file year.

     

  4. Indicator Codes are entered on Form 5337 to designate the type of returns ordered as follows:

    Indicator Code Explanation
    0 Should be entered on all orders for Form 1041.
    5 To be used to order Fiduciary returns of the current file year prior to Cycle 27.

     

4.1.3.3.5  (05-19-1999)
REMIC

  1. U.S. Real Estate Mortgage Investment Conduit (REMIC) REMIC returns can be ordered using Form 8757, U.S. Real Estate Mortgage Investment Conduit Income Tax. Returns may be ordered monthly.

  2. The Inventory and Delivery Report 1066–1 (Exhibit 4.1.3–15) shows the number of REMIC returns available for ordering and the number of REMIC returns delivered for classification by Examination Class for the file year.

Exhibit 4.1.3-1  (05-19-1999)
Individual Returns Audit Codes

Audit Code   Explanation
A Reserved
B Missing Schedules/Forms. These are returns with a missing Schedule C, D, E or F, Form 4797, Form 8829 and/or Form 8824.
C Form 8283, Non-Cash Charitable Contributions. Refer to Law Enforcement Manual.
D High Income Nonfiler.
E Service Center use only.
F Service Center use only.
G Service Center use only.
H International. Refer to LEM.
J Special Use. Returns assigned this audit code will be inventoried and must be ordered if needed.
K Preparer Manually Identified or Form 8275, Disclosure Statement under Section 6661 is present. These returns are manually identified to be included in the Return Preparer Program and Refund Scheme/Refund Mill Returns Program. These returns are referred to Examination in instructions from Criminal Investigation.
L Joint Committee Cases or Passive Activity Loss.
M Local Option.
N Form 1040NR. Special Use for the Philadelphia Service Center only.
P Alternative Minimum Tax. Missing schedule on which the taxpayer has been contacted but failed to submit a Form 6251, Alternative Minimum Tax Computation.
Q Administrative Adjustment request. Form 8082, Notice of Inconsistent Treatment or Amended Return.
R Reserved.
S Reserved.
T Special Use for International.
U Reserved.
V Self-Employment Tax Returns. These returns reflect income which may be subject to Self-Employment Tax. These returns may be ordered for separate screening.
W Alternative Minimum Tax where Form 6251 has been filed. Returns assigned this Audit Code will be inventoried and can be ordered if needed.

Exhibit 4.1.3-2  (05-19-1999)
Corporation Return Audit Codes

Audit Code   Explanation
1 Partnership Issues or Disclosure Statement.
2 International.
3 Miscellaneous.
4 Joint Committee or Form 1120S converted to Form 1120 by Returns Processing.
5 Foreign Ownership
6 Foreign Bank Account.
7 International 1.
8 International 2.
9 Reserved.

Exhibit 4.1.3-3  (05-19-1999)
S Corporation Return Audit Codes

Audit Code   Explanation
1 Partnership Issues or Disclosure Statement.
2 International. Criteria for international transactions are found in the LEM.
3 Miscellaneous.
4 Form 1120 converted to Form 1120S by Returns Processing.
5 Form 8283, Non Cash Charitable Contribution; Form 8586, Low Income Housing Credit or Form 8609, Low Income Housing Credit Allocation Certificate.
6 Foreign Indicator. Refer to the LEM.
7 Reserved.
8 Reserved.
9 First year of Subchapter S filing.

Exhibit 4.1.3-4  (05-19-1999)
AO Individual Inventory and Delivery Report 1040–1

This image is too large to be displayed in the current screen. Please click the link to view the image.
The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC cycle Number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. Post of duty name. Literal is printed only on the report for a POD.
 9. Quarter for file year. Literal is printed only at the end of a quarter.
 10. Run date of the report.
 11. The number of returns in inventory, by DIF Score, through the current cycle.
 12. The total number of returns in inventory by TPI Class.
 13. The total number of returns in inventory by TPI Class, identified as having tax preference issue.
 14. The number of returns delivered, by DIF Score, from inventory through the current cycle.
 15. The total number of returns delivered, by TPI Class, from inventory through the current cycle.

Exhibit 4.1.3-5  (05-19-1999)
AO Individual Inventory and Delivery Analysis 1040–2

This image is too large to be displayed in the current screen. Please click the link to view the image.
The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report. Numbered items not specifically described are total figures for the particular item.
 1. Current MCC cycle number.
 2. Computer Services Program/Run/File number.
 3. Area or service center number.
 4. Area or service center name.
 5. Area office number.
 6. Area office name.
 7. Quarter for the file year. Literal printed only at the end of the quarter.
 8. Run Date of the report.
 9. Filings Projected—The projected number of returns, by New Total Positive Income (NTPI) class, to be filed by NTPI class for the area/service center.
 11. Processed Cumulative—The total number of returns posted to the inventory at MCC through the current cycle, by DIF Score and NTPI class.
 13. Percent Processed—Column 11 divided by column 9. This figure, based on the actual number of returns processed, represents the percentage of the projected returns filings that have been processed.
 15. Identification Rate—The number of all returns with a DIF Score greater than or equal to the DIF Cut-Off Scores. The rate is computed by taking the total number of returns for that NTPI class with a DIF score greater than the DIF Cut-Off Score divided by the total number of returns by NTPI class in Column 11. The returns included as above the DIF Cut-Off Score include: Specials. SET, and Correspondence (CORR) returns in addition to regular DIF Inventory, but do not include low potential returns. Please note: It is not possible to manually compute the ID rate with the information presented on the 1040–2.
 17. Inventory Cumulative—The total number of returns posted to the DIF Inventory during the year, by NTPI class.
 19. Specials Cumulative Deliveries—The total number of Specials delivered for classification during the year, by NTPI class.
 21. Correspondence Cumulative Deliveries—The total number of returns delivered from the Correspondence Inventory during the year, by NTPI class.
 23. Regulars Cumulative Deliveries—The total number of returns delivered from the DIF Inventory during the year, by NTPI class.
 25. POD Cumulative Deliveries—The total number of returns delivered from the DIF Inventory during the year via POD Supplemental orders, by NTPI class.
 27. Regular and POD Cumulative Deliveries—Total of Columns 23 and 25.
 29. Percent POD—Column 25 divided by Column 27. The percentage of returns delivered that were ordered via POD Supplemental order during the year, by NTPI class.
 31. Reserved for future use.
 32. Reserved for future use.
 34. Reserved for future use.
 36. Reserved for future use.
 38. Regular Delivered Lowest Score—For Area Office Reports. The lowest scored return delivered via an areawide order during the year, by NTPI Class.
For United States Summary, Area, and Service Center Reports.
This will show the area office code (NN) with the lowest scored return, delivered during the year for the U.S. Summary, Area, or S.C. Report, depending on the report.
 39. POD Delivered Lowest Score—For Area Office Reports.
The lowest scored return delivered via a POD Supplemental order during the year, by NTPI Class.
For United States Summary, Area, and Service Center Reports.
This will consist of two columns:
First Column—Area Office Code (NNN), and
Second Column—Post-of-Duty Code (NN). This will show the AO and POD with the lowest scored return delivered during the year via a POD Supplemental order, by the NTPI class, for the U.S. Summary, Area, or S.C. Report, depending on the report.
 40. Corr Delivered Lowest Score—For Area Office Reports.
The Score of the lowest scored correspondence return delivered during the year, by NTPI Class.
For United States Summary, Area, and Service Center Reports.
This will consist of two columns:
First Column—Area Office Code (NN), and
Second Column—Post-of-Duty Code (NNN). This will show the AO and POD with the lowest scored correspondence return delivered during the year, for the U.S. Summary, Area, or S.C. Report, depending on the report.
 41. Specials Current Deliveries—The number of Specials delivered since the previous report, by NPTI class.
 43. Corres Current Deliveries—The number of Correspondence returns delivered since the previous report, by NPTI class.
 45. Regulars Current Deliveries—The number of returns delivered via a ditrictwide order since the previous report, by NTPI class.
 47. POD Current Deliveries—The number of returns delivered via a POD Supplemental order since the previous report, by NTPI class.
 49. Total Current Deliveries—The sum of Columns 41, 43, 45 and 47. The number of returns delivered since the previous report, by NTPI class.
 52. Prior Year Processed—The number of returns processed since the beginning of the file year, by NTPI class.
 53. Requisition Cumulative Deletions—The number of returns deleted from the inventory, or not added to the inventory, because of a TC 420 and or TC 424 posting to the account, NTPI class.
 55. Subsequent Year Cumulative Deletions—The number of returns deleted from inventory because of a TC 30X posting with an Examining Office Code 1, by Formula.
 57. Other Cumulative Deletions—The number of returns deleted from the inventory because of a TC 914, 916, or 940 posting; or deletions of the return from the inventory because of the delivery of the amended return form the Amended Returns Inventory.
 59. Total Current Deliveries—The number of returns deleted from inventory because of a TC 914, 916, 918 or 940 posting; or deletions of the return from the inventory because of the delivery of the amended return form the Amended Returns Inventory.
 61. Regular Number or Orders—The total number of districtwide orders placed during the year, by NTPI Class.
 62. POD Number of Orders—The total number of POD Supplemental orders placed during the year, by NPTI class.
 63. Exclusion Number of Orders—The total number of orders specifying a POD exclusion during the year, by NTPI class.
 64. Inventory Special Report—The number of returns currently in inventory and available to be ordered, by Audit Code J & W.
 66. Cumulative Special Report—The number of returns delivered during the year, by Audit Code. Does not include Audit Codes J and W in the total.
 68. Current Special Report—The number of returns delivered as a Special or From DIF Inventory since the previous report. Does include Audit Codes J and W.
 70. ID POD Order—The POD number of each POD for which a POD Supplemental order was placed during the year. A maximum of 28 POD’s will be printed. Each POD will only be printed once.
 71. LOW PTNTL—The number of NTPI Class 530 returns excluded from DIF Inventory because of low potential during the year.
 72. 73. and 74. CORR—The total number of correspondence returns delivered from the Correspondence Inventory during the year, by NTPI Classes 531, 532, and 533.
 76. Inventory POD 999—The total number of returns posted to the DIF Inventory with a POD 99 designation of 99 during the year.
 77. Inventory POD 999 Percentage—Column 76 divided by Column 18. The percentage of POD 99 returns total DIF Inventory.

Exhibit 4.1.3-6  (05-19-1999)
Service Center Inventory and Delivery Report 1040–3

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The numbered items below match the numbers shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle Number.
 2. Computer Services Program/Run/File Number for the report.
 3. File Year of returns in report.
 4. Service Center Code.
 5. Service Center Name Abbreviation.
 6. Area Office Code.
 7. Area Office Name.
 8. Run Date of Report.
 9. Self-Employment Tax Inventory by Income Range.
 10. Self-Employment Tax Deliveries by Income Range.
 11. Total Inventory of Self-Employment Tax returns.
 12. Total Deliveries of Self-Employment Tax returns.
 13. Total Deliveries in Current Cycle of Self-Employment Tax Returns.
 14. Total DIF returns processed.
 15. Percent base on returns projected to be processed.
 16. Returns identified for Unallowable Program.
 17. Identification Rate for Unallowable Program.
 18. Returns identified for Tax Preference Program.
 19. Identification Rate for Tax Preference Program.
 20. Returns identified for Self-Employment Tax Program (same as item 11 above).
 21. Identification Rate for Self-Employment Tax Program.
 22. Cumulative Deliveries of Special returns as indicated on report (Total of Items E, F, and G on Special Report should be the same as Item 16 above. Item P on Special Report should be the same as Item 20 above).
 23. Deliveries of Special Returns in Current Cycle.
 24. Total Cumulative Deliveries of Special Returns.
 25. Total Current Deliveries of Special Returns.

Exhibit 4.1.3-7  (05-19-1999)
Amended Returns Inventory and Delivery Report 1040–5

This image is too large to be displayed in the current screen. Please click the link to view the image.
The numbered items below match the numbers shown on the format of the report and provide an explanation for each element of the report.
  1. Current MCC Cycle number.
  2. Data Services Program/Run/File number for the report.
  3. Year in which the amended returns were filed.
  4. Area/Service Center number.
  5. Area Service Center name.
  6. Area Office number.
  7. Area Office name.
  8. Quarter for File Year. Literal prints only at the end of quarter.
  9. Run date.
Items 10 through 20 are amended returns by dollar amounts in inventory according to Issue Code. Items 23 through 33 are amended returns by dollar amount delivered according to Issue Code.
 
10, 23. Adjustments to Income.
11, 24. Filing Status and/or Exemptions.
12, 25. Tax Computation.
13, 26. Credits.
14, 27. Itemized Deductions.
15, 28. Schedule C and/or Schedule F.
16, 29. Schedule D or Supplemental Gains.
17, 30. Schedule E.
18, 31. Other Taxes.
19, 32. Multiples—Any combination of Items 10 through 18, or Items 23 through 31.
20, 33. Other Issues.
  21. Total returns by dollar amount in inventory.
  22. Total returns by Issue Code in inventory.
  34. Total returns by dollar amount delivered.
  35. Total returns by Issue Code delivered.
  36. Total percent delivered.
  37. Total returns delivered in Current Cycle.
  38. Intelligence (TC 91X) Deletes.
  39. TC 420/424 Deletes.

Exhibit 4.1.3-8  (05-19-1999)
AO/SC Individual Inventory and Delivery Report 1040–6

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The numbered items below match the numbers shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle Number.
 2. Computer Services Program/File/Run Number for the report.
 3. File year of the returns in report.
 4. Service center code.
 5. Service center name abbreviation.
 6. Area office code.
 7. Area office name.
 8. Post-of-duty number; literal is printed only if report is for a POD.
 9. Quarter for File Year. Literal is printed only at the end of a quarter.
 10. Run date of the report.
 11. The number of returns in inventory, by DIF score, through the current cycle.
 12. The number of returns in inventory, by TPI Class.
 13. The total number of returns delivered, by DIF score, from Correspondence Inventory for service center use through the current cycle.
 14. The total number of returns delivered, by TPI Class, from Correspondence Inventory for service center use through the current cycle.
 15. Current cycle total deliveries, by TPI Class, for service center use.
 16. The number of returns delivered, by DIF score, from Correspondence Inventory for area use, through the current cycle.
 17. The total number of returns delivered, by TPI Class, from Correspondence Inventory for area use, through the current cycle.
 18. Current cycle total deliveries, by TPI Class, for area use.
 19. The total number of returns delivered, by TPI Class, from Correspondence Inventory for service center use and for area use through the current cycle.
 20. Total number of returns delivered from the Correspondence Inventory for service center use and area office use through the current cycle.
 21. Current cycle total deliveries for the area office use and service center use.

Exhibit 4.1.3-9  (05-19-1999)
AO Corporate DIF Inventory and Delivery Report 1120–1

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/File Number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. Post of duty name. Literal is printed only on the report for POD.
 9. Quarter for file year. Literal is printed only at the end of a quarter.
 10. Run date of the report.
 11. Total number of returns posted to the inventory at MCC through the current cycle, by FRMLA and DIF score.
 12. Totals by DIF Score of returns posted.
 13. Totals of Columns 11.
 14. Total of all returns posted to the inventory.
 15. Totals of Tax Preference returns included in Totals of Columns 11.
 16. Totals of Tax Preference returns included in Total of Column 12.
 17. Total number of returns delivered for classification, by FRMLA and DIF Score through the current cycle.
 18. Totals, DIF Score, of returns delivered for classification.
 19. Totals of Columns 17.
 20. Total of all returns delivered for classification.
 21. Total of Tax Preference returns included in Totals of Columns 17.
 22. Total of Tax Preference returns included in Totals of Column 18.

Exhibit 4.1.3-10  (05-19-1999)
AO Corporate Inventory and Delivery Analysis Report 1120–2

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report. Numbered items not specifically described are total figures for the particular item.
 1. Current MCC cycle number.
 2. Computer Services Program/Run/File number.
 3. File Year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. MCC Run Date of the report.
 9. Projected Filings—The total number of returns filed last year, by Exam Class.
 11. Processed Cumulative—The total number of returns posted to the inventory at MCC through the current cycle. Includes all returns with Asset Ranges 01 through 05.
 13. Percent Process—Column 11 divided by column 9.
 14. DIF Inventory Cumulative—The total number of returns posted to the DIF Inventory as if no extractions (Deliveries, Specials, Deletions, and/or Extractions) had been made, by Exam Class.
 16. Cumulative DIF Specials Deliveries—Cumulative number of Specials delivered from the DIF Inventory through the current cycle, by Exam Class.
 18. Cumulative Automatic Deliveries—Cumulative number of Automatics processed and delivered through the current cycle, by Exam Class.
 20. Cumulative DIF Regular Deliveries—Cumulative number of Forms 1120 delivered through the current cycle via Regular orders, by Exam Class.
 22. Cumulative DIF POD Supplemental Deliveries—Cumulative number of Forms 1120 delivered through the current cycle via POD Supplemental orders, by Exam Class.
 24. Cumulative Regular and POD Deliveries—Total of Columns 20 and 22.
 26. Percent POD—Column 22 divided by Column 24.
 28. Current Special Deliveries—The number of Specials delivered since the previous report, by Exam Class.
 30. Current Automatic Deliveries—The number of Automatics delivered since the previous report, by Exam Class.
 32. DIF Regular Deliveries—The number of Forms 1120 ordered via Regular orders since the previous report, by Exam Class.
 34. DIF POD Supplemental Deliveries—The number of Forms 1120 ordered via POD Supplemental orders since the previous report, by Exam Class.
 36. Total Current Deliveries—Column 32 plus Column 34.
 38. Deletions—The cumulative number of returns deleted from the inventory, because of a TC 424 or 30X posting to the account, by Exam Class.
 40. Exclusions—The cumulative number of returns excluded form the inventory because of a TC 420, 421, 914, or 940 posting to the account, by Exam Class.
 42, 44, and 48. Current Special Deliveries—The current number of Specials delivered since the previous report, by type of return or Audit Code.
 43, 46, and 50. Cumulative Special Deliveries—The cumulative number of Special returns delivered through the current cycle, by type of return or Audit Code.
 52. Miscellaneous Return Inventory—The total number of Miscellaneous Forms 1120 posted to inventory, by type of return.
 54. Current Miscellaneous Return Deliveries—The number of Miscellaneous Forms 1120 delivered since the previous report, by type of return.
 56. Cumulative Miscellaneous Return Deliveries—The number of Miscellaneous Forms 1120 delivered through the current cycle, by type of return.
 58. Percent Miscellaneous Return Deliveries—Percent of returns delivered form the Miscellaneous Inventory.
 59 and 62. POD 99 Inventory—The number of DIF Scored Forms 1120 and Forms 1120S in the current inventory assigned a POD 99, by exam class.
 61. Percent of POD 999 Inventory—Column 59 divided by Column 14.
 64. Percent of POD 999 Form 1120S—Column 62 divided by the total of Columns 52 and Column 56 (Applicable to Form 1120S returns).
 65. and 69. Current Automatic Deliveries—The number of Automatics delivered since the previous report, by Exam Class or type of Automatic.
 67. and 71.  Cumulative Automatic Deliveries—The cumulative number of Automatics delivered through the current cycle, by Exam Class or type of Automatic.
 73. Form 1120F Inventory—The number of Forms 1120F (Category Q) returns in the current inventory.
 75. Current Form 1120F Deliveries—The number of Forms 1120F delivered since the previous report.
 77. Cumulative Form 1120F Deliveries—The number of Forms 1120F delivered through the current cycle.
 79 Percent Form 1120F Deliveries—Column 77 dividend by the total of Columns 73 and 77.

Exhibit 4.1.3-11  (05-19-1999)
AO 1120S DIF and 1120F Inventory and Delivery Report 1120–3

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. Post of duty name. Literal is printed only on the report for a POD.
 9. Run date of the report.
 10. Total number of returns posted to the inventory at MCC through the current cycle, by FRMLA and DIF score.
 11. Totals by DIF Score of returns posted.
 12. Totals of Columns 11.
 13. Total of all returns posted to the inventory.
 14. Totals of Tax Preference returns included in Totals of Columns 10.
 15. Total of Tax Preference returns included in Total of Column 11.
 16. Total number of returns delivered for classification, by FRMLA and DIF Score through the current cycle.
 17. Totals, by DIF Score, of returns delivered for classification.
 18. Totals of Columns 16.
 19. Total of all returns delivered for classification.
 20. Total of Tax Preference returns included in Totals of Columns 16.
 21. Total of Tax Preference returns included in Total of Column 17.
 22. Total number of returns posted to the inventory at MCC through the current cycle, by FRMLA.
 23. Totals number of returns posted.
 24. Total number of returns delivered for classification, by FRMLA, through the current cycle.

Exhibit 4.1.3-12  (05-19-1999)
AO Partnership Inventory and Delivery Report 1065–1

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. Post of duty name. Literal is printed only on the report for a POD.
 9. Run date of the report.
 10. Total number of returns posted to the inventory at MCC through the current cycle, by Audit Class and DIF score.
 11. Totals by DIF Score of returns posted.
 12. Totals of Columns 10.
 13. Totals of Columns 11.
 14. Totals Deletes—The total number of returns deleted from inventory or not added to inventory, because of a TC 424, or 30X posting to the account, by Audit Class.
 15. Total of all Deletes.
 16. Total number of returns delivered for classification through the current cycle, by Audit Class.
 17. Totals, by DIF Score, of returns delivered from the inventory since the previous report, by Audit Class and DIF Score.
 18. Totals of Columns 16.
 19. Totals of Columns 17.
 20. Total number of returns delivered from the inventory since the previous report, by Audit Class and DIF Score.
 21. Total of all returns delivered from the inventory since the previous report.

Exhibit 4.1.3-13  (05-19-1999)
AO Partnership Inventory and Delivery Analysis Report 1065–2

This image is too large to be displayed in the current screen. Please click the link to view the image.
The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. MCC Run Date of the Report.
 9. Projected Filings—The total number of returns filed last year, by Exam Class.
 10. Total of Column 9.
 11. Processed Cumulative—Total number of returns posted at MCC through the current cycle, by Audit Class.
 12. Total of Column 11.
 13. Percent Processed—Column 11 divided by Column 9.
 14. Item 12 divided by item 10.
 15. DIF Inventory Cumulative—The total number of returns in the DIF Inventory as if no deliveries or extractions had been made. Does not include counts for Specials or Automatics.
 16. Total of Column 15.
 17. Cumulative Specials—Cumulative number of Specials delivered through the current cycle, by Audit Class.
 18. Total of Column 17.
 19. Cumulative Automatics—Cumulative number of Automatics delivered through the current cycle, by Audit Class.
 20. Total of Column 19.
 21. Cumulative DIF Regular—Cumulative number of Forms 1065 ordered via regular orders.
 22. Total of Column 21.
 23. Cumulative DIF POD—Cumulative number of Forms 1065 ordered via POD Supplemental orders by Activity Code.
 24. Total of Column 23.
 25. Cumulative Regular and POD—Total of Columns 21 and 23.
 26. Total of Columns 22 and 24.
 27. Current Specials—The number of Specials delivered since the previous report, by Audit Class.
 28. Total of Column 27.
 29. Current Automatics—The number of Automatics delivered since the previous report, by Audit Class.
 30. Total of Column 29.
 31. Current Regular—The number of Forms 1065 ordered via regular orders since the previous report, by Audit Class.
 32. Total of Column 31.
 33. Current POD—The current delivery number of returns listed in Column 23.
 34. Total of Column 33.
 35. Total of Columns 27, 29, 31, and 33.
 36. Total of Columns 28, 30, 32, and 34.
 37. Deletions—The cumulative number of returns deleted from the inventory or not added to the inventory, because of a TC 424 or 30X posting to the account, by Audit Class.
 38. Total of Column 37.
 39. Exclusions—The cumulative number of returns excluded from the inventory because of a TC 420, 421, or 914 posting to the account, by Audit Class.
 40. Total of Columns 39.
 41. Special Current—The current number of Specials delivered since the previous report, by type of Special.
 42. Total of Columns 41.
 43. Special Cumulative—The cumulative number of Specials returns delivered through the current cycle, by type of Special.
 44. Total of Columns 43.
 45. POD 999 Inventory—The cumulative inventory numbers for Forms 1065 DIF Scored returns in POD 999.
 46. Total of Columns 45.
 47. Columns 45 divided by Column 15.
 48. Columns 46 divided by Column 16.
 49. Automatics Current—The total number of Automatics delivered since the previous report, by type of Automatics.
 50. Total of Column 49.
 51. Automatic Cumulative—The cumulative number of Automatics delivered through the current cycle, by type of Automatic.
 52. Total of Column 51.

Exhibit 4.1.3-14  (05-19-1999)
Fiduciary Inventory and Delivery Report 1041

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Service center number.
 5. Service center name.
 6. Area office number.
 7. Area office name.
 8. Run date of the report.
 9. Inventory Report Total—The number of returns in the inventory at the end of the monthly cycle.
 10. Cumulative Returns Processed Total—The number of all 1041 returns posted to the inventory. (This total includes returns for which a TC424 has posted before TC150.).
 11. Current Delivery Report Total—The number of returns delivered through the current cycle.
 12. Cumulative Delivery Report Total—The total number of all returns delivered during the year.
 13. Delivered Current Cycle—The number of Automatic returns delivered for classification through the current cycle (excluding International returns).
 14. Cumulative Delivered Total—The total number of all Automatic returns delivered for classification (excluding International returns).
 15. 500th or More Total Income—The total number of Automatic returns in inventory having the criteria of $500,000 or more of total income.
 16. Prompt Audit Requested—The cumulative number of Automatic returns in inventory having Prompt Audit Requests.
 17. Multiple Conditions—The cumulative number of Automatic returns in inventory having Multiple Conditions.
 18. International Current—The total number of Automatic returns having International issues delivered through the current cycle.
 19. International Cumulative— The cumulative number of Automatic returns having International issues delivered.

Exhibit 4.1.3-15  (05-19-1999)
AO Real Estate Mortgage Investment Conduit and Delivery Report 1066–1

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The numbered items below match the number shown on the format of the report and provide an explanation for each element of the report.
 1. Current MCC Cycle number.
 2. Computer Services Program/Run/File number.
 3. File year of returns in the report.
 4. Area or service center number.
 5. Area or service center name.
 6. Area office number.
 7. Area office name.
 8. Post of duty name. Literal is printed only on the report for a POD.
 9. Run date of the report.
 10. Total number of returns posted on the inventory at MCC through the current cycle, by Total Assets.
 11. Totals of Columns 10.
 12. Total number of returns delivered for classification through the current cycle, by Total Assets.
 13. Cumulative Deliveries—Total of Column 12.
 14. Current Deliveries—Total of all returns delivered from the inventory since the previous report.
 
 

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