Duties of IRS BSA/forms 8300/60501g
Chapter 26. Bank Secrecy Act
Section 11. BSA Examiner Responsibilities for Form 8300/6050I Examinations
4.26.11 BSA Examiner Responsibilities for Form 8300/6050I Examinations
- This section discusses the responsibilities of the BSA examiner. This section applies only to examinations for compliance pursuant to IRC 6050I.
- The BSA examiner is responsible for:
- Identifying trades or businesses that regularly conduct transactions in excess of $10,000 and forwarding the information to the Bank Secrecy Act (BSA) Coordinator;
- Notifying trades or businesses of the reporting requirements;
- Enforcing ( IRC 6050I compliance by conducting Form 8300 examinations; and,
- Making a determination on civil penalties or criminal referrals.
- Any business, other than financial institutions that are required to file Currency Transaction Reports (CTRs) under Title 31, may be subject to the Form 8300 reporting requirement.
- The BSA examiner is required to identify trades or businesses that receive more than $10,000 in cash in one transaction or two or more related transactions.
- All entities identified must be forwarded to the BSA Coordinator.
- Education is an integral part of each Form 8300 compliance activity.
- The BSA examiner is responsible for educating trades or businesses about the preparation of Form 8300 and the reporting requirements of IRC 6050I.
- All requests for educational outreach to industry groups or large audiences and not under examination must be first forwarded through the BSA group manager to the appropriate BSA Stakeholder Liaison Specialist.
Education During a Form 8300 Compliance Examination
- Education is an ongoing process and a critical part of a Form 8300 examination.
- During the examination, the BSA examiner should discuss:
- Filing requirements;
- Anti-Money Laundering compliance program requirements, where applicable.
- Records required to be maintained;
- Civil and criminal penalties; and,
- Prohibited structuring transactions.
- The BSA examiner should provide the trade or business with a copy of the current Form 8300 and Publication 1544.Publication 1544is available in English and Spanish.
- During this time, the following information should be obtained:
- The TIN of the business;
- Name and titles of the officers/employees responsible for filing the Form 8300; and,
- Information on internal controls.
- All information acquired must be documented in the workpapers and kept in the case file.
- The BSA examiner should not use any acknowledgment form that requires a taxpayer’s signature.
- All educational outreach activities must be documented in the workpapers. This information should include:
- The name of the person(s) interviewed and informed of Form 8300 requirements;
- The date the trade or business was informed of the reporting requirements of IRC 6050I; and,
- A statement that the person(s) was informed about any potential civil and criminal penalties which may be asserted.
- What requirements were explained and the title of any publications which were given to the entity.
- The IRS has full responsibility for implementing and enforcing the civil and criminal provisions of IRC 6050I. IRS Compliance is responsible for all civil provisions of IRC 6050I. Criminal Investigation (CI) is responsible for all criminal provisions. These provisions relate to:
- Identifying transactions subject to the reporting requirements;
- Preparing and filing of reports;
- Furnishing statements; and,
- Asserting civil or criminal penalties, as appropriate.
- This section applies only to examinations for compliance of IRC 6050I. An examination for compliance of IRC 6050I cannot be changed to a BSA examination unless a related statute determination can be made. See IRM IRM 4.26.14 for related statute determinations.
- When certain non-financial trades or businesses that are subject to examination by IRS for BSA compliance are also required by the BSA regulations to maintain anti-money laundering compliance programs, the examination will be initiated as a Title 31-BSA examination for compliance with 31 CFR 103.30 (the Title 31 regulation requiring the filing of Forms 8300.) Violations related to AML program issues will be referred to FinCEN. Title 26 penalties related to delinquent Forms 8300 will be assessed by IRS.
- Any potential BSA violations (e.g. bank did not file CTRs on a non-financial trade or business) discovered during an IRC 6050I examination, cannot be disclosed unless a related statute determination can be made. See IRM 4.26.14 for related statute determinations.
- A quality Form 8300 examination begins with a thorough preplan. The following techniques are intended to be used as a guide and should not be considered all-inclusive. Prior to a Form 8300 examination, the BSA examiner should:
- Review the CBRS for cash activity. Currency transactions may be revealed by scanning the CTRs for substantial cash deposits which indicate that the business might be receiving more than $10,000 in cash. Per MOU with FinCEN, SARs can be used in a BSA compliance examination. SARs will be treated as confidential information related to a case and must be protected from unauthorized disclosure. (Reminder: SARs, including any information contained within the SAR) cannot be revealed to or discussed with the entity under examination. Refer to IRM 4.26.4;
- Review prior Form 8300 examination results;
- Check for previous penalties; and,
- Review IDRS to verify that there are no assignments controlled to W&I, SB/SE, LMSB, TE/GE, and CI.
- Review IDRS to verify if the entity is an Indian Tribal Government (ITG) of TE/GE. ITG entities can be identified on IDRS by business operating division (BOD) code “TE” and client code “I” . The examiner, through their BSA manager, must notify the applicable ITG field manager prior to initiating any Form 8300 examination on an ITG entity or any other entity if known to be operating on tribal reservations.
- The BSA examiner should complete workpaper #110, Pre-Plan Analysis. IRM 18.104.22.168.2.4 provides guidelines for the development of workpaper content and organization. These guidelines are provided to promote quality and consistency in workpapers and should be used when conducting a Form 8300 examination.
- Sometimes it may be necessary for the examiner to request that Form 8300 related correspondence from the DCC be stopped. To request that correspondence be stopped:
- Complete the request for stopping 8300 correspondence and forward to the contact names below via secure messaging. See Exhibit 4.26.11-1.
- The DCC manager will assign the request to a tax examining technician for processing.
- The DCC tax examining technician assigned to the request will notify the examiner by phone that the request is being worked.
- DCC’s goal is to respond to all requests within 48 hours. A log will be maintained to ensure timely responses.
- The preferred method for submitting requests is through secure messaging. However, if secure messaging is not an option, please fax the request to the attention of the employees listed below at (313) 234-2018.
||Pamela Demand, Manager 8300 Penalty Group
||Denise Saunders, Lead Tax Examining Technician
||Daisy Jones, Lead Tax Examining Technician
- When planning a visit to a Federal District Court, the SB/SE BSA Policy program manager should be notified sixty (60) days prior to a planned visit. This will allow time for coordination with the Administrative Office of Federal Courts’ Audit Branch.
Scope and Depth
- The scope and depth of each Form 8300 examination will depend upon the facts and circumstances of each case. It should be sufficient to assure the BSA examiner that IRC 6050I reporting requirements have been fulfilled. The following techniques are intended to be used as a guide and should not be considered all-inclusive.
- The scope and depth should emphasize a top-down examination process by evaluating the entity’s adequacy and effectiveness of internal controls. The examination should include computer and other systems, controls and procedures in place reasonable to ensure compliance with IRC 6050I .
- As a general rule, the initial scope and depth of a Form 8300 examination will be transactions during the most current 12-month period. By setting the scope at 12 months up front, the entity will have all records available for the examiner to make an appropriate scope determination up front, thus not delaying the examination for additional records to expand the scope.
- Based on the initial interview and review of records for the most current 6 months, if the entity has reportable transactions and the examiner tests the entity’s internal control procedures and insures that the entity is in compliance, then the transactional testing period can be limited to the most current 6-month period, and the examination closed.
- If, after the interview and review of records for the most current 6 months, it appears that the reportable transactions are minimal or deficiencies in internal controls have lead to non-filed Forms 8300 then the transactional testing period should include the full 12 months, but the depth of the transactional testing should be limited.
- The scope and depth of the examination may be different than the most current 12-month period if unusual currency flows, high volume periods, or a period related to certain known events are identified. Examining a period beyond the most current 12-month period, must be discussed with the group manager and the examiner must complete the Risk Analysis worksheet.
- Regardless of the period initially selected, the scope and depth should be expanded if reporting violations or weaknesses in internal control are found. BSA examiners should contact their manager for assistance.
- Only the apparent violations, which have actually been detected during the Form 8300 examination are considered. At no time should the BSA examiner conclude that additional violations have occurred in other periods without actually expanding the scope of the Form 8300 examination.
- If a trade or business has several branches or locations, the BSA examiner should consult with their manager to consider expanding the examination to include the additional locations or branches. Requests to work additional locations or branches must be coordinated through the group manager and BSA Coordinator.
- The interview and records inspected must be solely for the purpose of the Form 8300 examination. The BSA examiner should not determine if the trade or business has filed other returns. This inquiry is beyond the scope of an IRC 6050I examination and may result in an income tax examination.
- Before initiating a Form 8300 examination, the BSA examiner should become familiar with the common industry practices of the trade or business.
- Risk Analysis is the required approach when expanding/contracting the scope and depth of an examination. It is the process used to decide “Is it worthwhile to examine this issue?”
- The BSA examiner should focus on entities which have the highest risk for non-compliance with IRC 6050I reporting requirements, and to spend the least amount of resources on those entities in compliance.
- The BSA examiner should emphasize evaluating the entity’s system of internal controls (including internal monitoring), and its employee training to determine if they are adequate for reasonably ensuring compliance with IRC 6050I.
- If internal controls and internal monitoring is adequate, the transaction testing period could be limited.
- It is not intended that the BSA examiner examine every transaction for the most current 12-month period.
- The BSA examiner should compare the potential benefits to be derived from expanding the scope and depth of an examination to the resources required to perform the examination, and the potential outcome generated from expanding/contracting the scope. The objective of risk analysis is to focus the examination on issues of merit.
- The examiner should consider whether identifying additional violations would promote compliance or change the conclusion of the examination.
- The BSA examiner should consider such factors as the seriousness of the violations identified and any internal control weaknessess that may result in increased risk with respect to money laundering activities when considering changes to the scope and depth of the examination.
- The BSA examiner will analyze risk at various stages throughout the Form 8300 examination.
- IRM 22.214.171.124.1.1 Scope and Depth describes the following that assist in performing risk analysis during an examination:
- Utiliizing a top-down exam process;
- Considering the appropriate scope; and
- Documenting changes to the scope of an examination.
- The BSA examiner should use the Risk Analysis Workpaper (#120) to document expanding/contracting the scope and depth of the examination.
- The initial contact may be made by telephone, letter or cold call visit. Cold call visits require management approval.
- Whether you select the letter or the telephone call, the BSA examiner will need to:
- Use the Initial 8300 Entity Contact Check Sheet during the initial telephone conversation with the entity;
- Prepare an initial IDR and IRC 6050I Appointment Letter 2277; and
- Send the appointment letter with the IDR to the entity.
- The BSA examiner should complete workpaper #130 Initial 8300 Entity Contact Check Sheet. IRM 126.96.36.199.2.5 provides guidelines for the development of workpaper content and organization. These guidelines are provided to promote quality and consistency in workpapers and should be used when conducting an 8300 examination.
- The most current IRC 6050I Appointment Letter 2277 should be given to the business prior to an 8300 examination. The letter can be accessed at http://publish.no.irs.gov/catlg.htm.
- The BSA examiner should furnish Form 4564, Information Document Request (IDR), to the trade or business at the time the appointment is scheduled. See Exhibit 4.26.11-2. for a sample IDR. The IDR should be expanded or contracted, as each Form 8300 examination warrants.
- The appointment letter is usually mailed.
- An Examining Officer Activity Record is used to record all contacts with the trade or business and any other case activity. It is extremely important to document what was discussed, noting the names of the specific persons contacted and the date(s) of those discussions.
Initial Appointment Meeting
- The BSA examiner should utilize workpaper #135, Initial Appointment Agenda for the initial meeting. Refer to IRM 188.8.131.52.2.6.1 for guidelines on the development of workpaper content and organization.
- The BSA examiner should explain that the purpose for the visit is for a Form 8300 examination only, and is NOT an income tax examination.
- Advise the entity that the IRS might use the information from records for any tax matter permitted by the IRC.
- The 8300 examination should be conducted at the place of business.
- The BSA examiner should assess the internal controls of the entity. This should be documented on the Policies, Procedures and Internal Controls Lead Sheet – #140.
- Use of the Policies, Procedures and Internal Controls Lead Sheet is mandatory and requires that a conclusion be documented.
- The BSA examiner should work with the Entity/POA to establish a Mutual Commitment Date (MCD) and determine the number of expected field visits. Record the MCD on the Form 4318. The MCD should be reasonable and attainable.
- The BSA examiner should consider the following factors when determining an MCD:
- Number of anticipated additional visits;
- Days needed between visits to get information properly prepared; and
- Availability of records.
- Notify the manager if there is a need to change the MCD by more than 30 days.
- The BSA examiner should interview the owner and/or manager to obtain information on the operation of the business and to identify the employee(s) responsible for filing Form 8300.
- During the interview, the BSA examiner should ascertain and/or verify:
- The TIN of the business;
- The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;
- The owner/officer’s knowledge of Form 8300 and IRC 6050I and its regulations and that of the employee(s) designated by the business as responsible for identifying reportable transactions and filing Forms 8300;
- The internal controls of the business with regard to cash transactions;
- The person(s) who handles cash receipts, prepares bank deposit slips, and makes the bank deposits;
- The number and types of bank accounts;
- The types of records maintained on transactions required to be reported on Form 8300;
- Whether or not the business has filed any Form 8300;
- Procedures used by the business to ensure that the information contained in the Form 8300 is complete and correct. (For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document?);
- Procedures used by the business to notify transactors;
- The entity’s membership in trade associations; and,
- Related entities.
- Ask open-ended questions throughout the interview. Don’t ask questions that require only “Yes” or “No” answers.
- Additional questions should be asked to establish knowledge of the Form 8300 filing requirements. See IRM 184.108.40.206.5.3.
- The interview should be documented on the Initial Interview Questions and Notes- Form 8300 workpaper. IRM 220.127.116.11.2.6.2 provides guidelines for the development of workpapers content and organization.
Group Manager Concurrence Meeting
- The Group Manager Concurrence Meeting (GMCM) must occur within 30 calendar days after completion of the Initial Appointment Meeting.
- The BSA examiner should schedule the concurrence meeting as soon as the date of the Initial Appointment is set.
- GS-13 BSA examiners are encouraged to utilize a GMCM in order to provide updates on cases and obtain guidance from managers.
- GS-12 BSA examiners and below are required to use the GMCM.
- The BSA examiner should be prepared to discuss:
- The Initial Appointment Meeting and MCD;
- Plan for completing the case; and
- The GMCM should be documented on the Group Manager Concurrence Meeting Check Sheet.
Inspection of Books and Records
- The BSA examiner should examine the appropriate documents and accounting records to determine any:
- Transaction(s) involving the receipt of reportable cash in excess of $10,000;
- Consecutive or related reportable transaction in excess of $10,000; and,
- Whether Form(s) 8300 were filed on such transaction(s).
- The BSA examiner should be alert to identify transactions that may appear to have been made in an attempt to avoid the reporting requirements of IRC 6050I, such as:
- A single transaction structured as multiple transactions of less than $10,000.
- Transactions in excess of $10,000 where cash and non-cash payments appear to be combined to avoid the filing requirements. For example, the purchase of a diamond necklace worth $11,500, paid with $9,900 cash and a $1,600 check.
- A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.
- CBRS records should be compared to:
- Bank account numbers indicating the possible existence of other accounts, and
- Retained Forms 8300 to reconcile contents and determine whether they were timely filed.
- Refer to IRM 4.26.12 for in-depth examination techniques on several specific types of trades or businesses.
- Structured transactions are reportable transactions, which are broken down into smaller amounts to avoid the reporting requirements of IRC 6050I. IRC 6050I(f) prohibits structuring transactions to evade the reporting requirements for the filing of the Form 8300. No person shall:
- Cause or attempt to cause a trade or business to fail to file a return required under IRC 6050I;
- Cause or attempt to cause a trade or business to file a return required under IRC 6050I that contains a material omission or misstatement of fact; or
- Structure or assist in structuring, or attempt to structure or attempt to assist in structuring, any transaction with one or more trades or businesses.
- Refer to IRM 4.26.13 for an in-depth discussion on structuring.
Third Party Records
- If the business refuses to provide records or states that the records have been lost, stolen or destroyed, or if the records appear to be false, it may be necessary to contact third parties who have knowledge of the records and the transactions.
- Issuance of an inadequate records letter as per IRC § 6001 is NOT applicable to Form 8300 examinations.
- To determine whether a written statement was furnished, the BSA examiner may need to contact the customer.
- Third party notification as required by IRC § 7602(c)(1) is applicable to Form 8300 examinations.
Computer Audit Specialist
- Use of a Computer Audit Specialist (CAS) must be considered on Form 8300 examinations if:
- A large number of transactions need review;
- A large volume of records need review; or,
- The trade or business maintains a computerized recordkeeping system.
- If the subject of the examination is an attorney, see IRM 4.26.12.
- The BSA examiner should prepare Form 4564, Information Document Request (IDR), listing the specific documents needed to perform an 8300 examination. If the entity fails or refuses to comply, a summons ( Form 2039) should be issued. See your manager for assistance when issuing summonses.
- If the subject of the examination is an attorney, see IRM 4.26.12.
- Follow the flow chart below to analyze results.Figure 4.26.11-1
Delinquent Form 8300 Procedures
- During a Form 8300 examination, the BSA examiner may find that a business failed to file Form 8300. If the BSA examiner is considering whether the violation was due to intentional disregard or is considering referring the case to CI, delinquent Form 8300 returns should not be requested before consulting with the manager and determining that no criminal referral is warranted.
- The BSA examiner must determine if failure to file Form(s) 8300 was due to reasonable cause. Penalties imposed by IRC § 6721 and IRC § 6722 will not be applied if reasonable cause exists.
- “Delinquent Return Secured by Examination” must be written in red on top of the secured Form(s) 8300. The examiner should forward the original delinquent Forms 8300 directly to the DCC. Copies identified as “Copies” should be kept in the case file.
- The examiner should solicit a written explanation from the taxpayer for the failure(s). The examiner should document verbal explanations for the failures if unable to obtain written explanations.
- Determination of intent or willfulness with respect to potential criminal violations of the reporting requirements should be made on a case-by-case basis and discussed with the manager.
- Willfulness must be proved by establishing knowledge and intent.
- The BSA examiner should follow the guidelines set forth in the “Fraud Awareness Lead Sheet” (#405) with respect to any person involved in a transaction that had sufficient knowledge of the Form 8300 filing requirement but who willfully failed to file, filed a form with false information, or attempted to cause a Form(s) 8300 not to be filed.
- The “Fraud Awareness Lead Sheet” fulfills the BSA examiner’s requirement to make a comment on fraud in every case. This is a mandatory lead sheet.
Knowledge and Intent
- Statements made during Form 8300 interviews can demonstrate the taxpayer’s knowledge. The degree of knowledge may be determined by asking the following questions:
- Were you aware that a Form 8300 was required in this transaction?
- Why was Form 8300 not filed?
- Did you know the consequence of the failure to file a Form 8300?
- Are you a member of any trade organization? If so, has that organization published any information regarding the filing requirements of Form 8300?
- A key point in demonstrating knowledge and intent is the date of the first filed Form 8300. Subsequent failure(s) to file Form 8300 may indicate willfulness on the part of the trade or business.
- Knowledge can also be shown through interviews of salespersons and employees in the accounting department, regarding procedures and training on Form 8300 reporting requirements.
- Intent must be considered. Some indicators may be:
- Not taking the advice of their accountant;
- Withholding records;
- Numerous non-filings;
- Filings with names other than that of the business;
- Few filed Forms 8300, but many filed CTR0s;
- Failure to deposit all cash received;
- Use of several bank accounts;
- Use of several entities to make deposits;
- False, misleading or inconsistent statements;
- Alteration, falsification or destruction of records;
- Advising customers on how to structure transactions to avoid Form 8300 filing requirements;
- Issuing more than one receipt for a transaction;
- Recording receipts over a period of several days;
- Deposit slips which show two or more cash deposits, although records show one large cash receipt; and,
- Consistently making cash deposits around $9,000 (potential structuring to avoid Form 8300 requirements).
Penalties Asserted on IRC Section 6050I Violations
- Form 8300 civil penalties can be applied under IRC § 6721 and IRC § 6722. These penalties may apply to negligent or intentional conduct, but will not apply in the case of reasonable cause. To determine reasonable cause, see IRC § 6724, Treasury Regulations 301.6724-1 and the Penalty Handbook at IRM 18.104.22.168.1.
- IRC § 6721 applies to a person who fails to file Form 8300, or files a return and fails to include all of the required information or provides incorrect information on the return. (Refer to IRM 20.1on Penalties).
- IRC § 6722 applies to a person who fails to furnish correct payee statements.
- Supervisory approval is required prior to assessment of penalties. The supervisor must document the discussion. (5) The BSA examiner should complete Penalty Approval Form— Form 8300 (#400). This is a check list to determine whether a penalty needs to be assessed. This is a mandatory workpaper.
- IRS Policy Statement P-2-4 precludes the assertion of penalties against another Federal agency. Office of Chief Counsel advises that this would include the judiciary branch, to include Federal court clerks. No such prohibition exists for state offices or officials.
- Refer to IRM 4.26.10 for additional information on penalties and statute of limitations.
- IRM 20.1.7, Information Return Penalties (which is part of the Penalty Handbook), has additional guidance on asserting penalties for violation of the Form 8300 filing requirement and the requirement to provide payee statements.
Waiver of Penalties
- A waiver of a penalty for failure to comply with the requirements of IRC 6050I is granted if the trade or business can show that the failure to comply was due to reasonable cause. Although this burden is on the trade or business, the BSA examiner should always document any special factors or occurrences, which may have affected the trade or business’ level of compliance.
- The BSA examiner must always document oral requests for waivers of penalties due to reasonable cause.
- Further guidance on appealing penalties can be found in IRM 20.1 on Penalties.
- Pre-assessment appeal should be offered to taxpayers when proposing the intentional disregard penalty per IRC § 6721(e) . See the Penalty Handbook at IRM 20.1.
Closing The Examination
- Once the 8300 examination is completed the BSA examiner should set up a closing conference with the owner(s) and/or officer(s) of the business to discuss any Form 8300 violations found and procedures to be taken to correct the problem.
- No closing letter is issued to the trade or business upon completion of a Form 8300 examination.
Processing The Administrative Case File
- The BSA examiner should prepare the case for closing once the Form 8300 examination and the closing conference are completed. Follow the procedures below.
- Once completed the case should be forwarded to the group manager for review.
- The case must close from ERCS and the case file forwarded as directed by the Workload Selection Unit.
- This section provides guidelines for the development of workpaper content and workpaper organization. These guidelines are provided to promote quality and consistency in BSA examiner workpapers.
- Workpapers must be thorough enough to fully disclose the depth, scope, and time period covered and techniques used in the Form 8300 examination. The workpapers should be neat, concise, well organized, and provide an adequate audit trail.
- A summary memorandum should be prepared for the case file detailing the results of the Form 8300 examination.. The summary memorandum should briefly summarize the facts and circumstances with respect to violations identified and the steps the trade or business has agreed to take to correct the violations.
- The proper use of computerized workpapers can improve the quality and efficiency of conducting an examination.
- The BSA examiner should use the computer to prepare workpapers using the Form 8300 Master Template in a way that will most efficiently and effectively document the examination process.
- The Form 8300 Master Template is located on the BSA website at http://sbse.web.irs.gov/FR/BSA/default.htm .
- Standard tools are used to document the BSA examiner’s decisions. Tools include lead sheets, check sheets, workpapers, letters, and IDRs and the Quick Reference Guides to Tools.
- Tools have these features in common:
- Each tool has it own reference number based on its category.
- The tools are placed in the case file based on the reference number.
- The tools numbering system is:
||Administrative and Planning
||Form 8300 Issues
||Form 8300 Penalties
- A workpaper reference number is required when comments or calculations are made on a separate lead sheet or workpaper.
- Each Lead Sheet is self-contained; it includes all facts, law, conclusions, and entity position for that issue.
- Form 4318is now an index for all case documents.
- The Input Sheet is the first place to go (after creating the entity folder) to prepare a case for examination. Using the Input Sheet means that the examiner does not need to fill in the entity’s information on each of the tools that the examiner uses. The entity’s information is automatically entered onto tools in the folder.
Workpaper #105 “Administrative Plan to Close Lead Sheet”
- The BSA examiner should use workpaper # 105, “Administrative Plan to Close Lead Sheet” as a guide for the exam planning phase.
- The “Administrative Plan To Close Lead Sheet” consists of the following steps:
- Securing Power of Attorney
- Initial Contact
- Examination Process
- Case Closing
- Additional Items
- The “Administrative Plan to Close Lead Sheet” :
- Keeps the examiner focused on a plan to close;
- Keeps the examiner organized;
- Lets the examiner know what the next steps are;
- Lists all the steps that need to be completed;
- Makes sure the examiner has completed the steps in each section before proceeding to the next one; and,
- Ensures that the examiner is prepared to go to the next step.
Workpaper #110, “Pre-Plan Analysis”
- The first section on the “Administrative Plan to Close Lead Sheet” is Preplan.
- This is where the BSA examiner will:
- Create the Form 4318 Exam Workpaper Index
- Create Activity Record Form 9984
- Use Pre-Plan Analysis Lead Sheet
- Workpaper #110,”Pre-Plan Analysis” , can be found in the Primary Case Folder.
- In conducting the exam pre-plan, the BSA examiner will:
- Review case built materials;
- Review and analyze CBRS;
- Protect SARs filed on the entity under examination;
- Review the historical case file;
- Prepare initial interview notes tailored for the financial institution and services provided; and
- Develop the examination plan.
Form 4318 Exam Workpaper Index Form 8300
- The first step under Pre-plan is to create the Form 4318, Exam Workpaper Index.
- The primary purpose of a Form 4318 is to serve as a Table of Contents for all documentation connected with the case file.
- Form 4318 can be found in the Primary Case Folder.
Form 9984 Activity Record
- Form 9984 is used to record all contact with the financial institution and any other case activity. The BSA examiner must document what was discussed with specific personnel and the date(s) of those discussions.
- The BSA examiner should complete the items in the header that are not pre-filled from the Input Sheet:
- Date assigned/opened
- Taxpayer’s Business Name and Address
- Taxpayer’s Phone Number – Residence and Business
- Representative has POA/TP’s Authorization (if applicable)
Develop the Exam Plan
- The last bulleted item on the “Pre-Plan Analysis Lead Sheet” is “Develop the Exam Plan” .
- In developing the exam plan, the BSA examiner will:
- Prepare and complete, to the extent possible, the mandatory lead sheets; and
- Create other lead sheets as necessary. Examination steps must be tailored for the industry and the depth of the issue. Examination steps can be adjusted after the initial appointment.
Mandatory Lead Sheets
- The first bullet under “Develop the Exam Plan” is for the BSA examiner to prepare and complete to the extent possible the mandatory lead sheets.
- Each of the mandatory tools is indicated on the 4318.
- Mandatory tools can be found in the Primary Case Folder.
- The BSA examiner should refer to the “Quick Reference Guide to Tools” to determine which tools are mandatory.
- The fourth step under “Develop the Exam Plan” is creating lead sheets for identified issues to examine. “Form 8300 Review Lead Sheet” has been created and can be located in the Primary Case Folder. When applicable, lead sheets for the review of anti-money laundering compliance programs are also located in the Primary case Folder. Reviews of anti-money laundering compliance programs are done during BSA examinations, not during Form 8300 examinations that are conducted under the authority of Title 26 (that is, not during examinations to check for compliance with IRC Section 6050I).
- The BSA examiner should tailor the examination steps to the entity under examination. Adjustment(s) to the examination plan can be made after the initial appointment.
Workpaper #130 “Initial 8300 Entity Contact Check Sheet”
- The third item on the “Administrative Plan to Close Lead Sheet” is to utilize the “Initial 8300 Entity Contact Check Sheet” .
- The BSA examiner should use the “Initial 8300 Entity Contact Check Sheet” when:
- Talking to a person on the phone for the first time;
- Preparing and mailing IRC 6050l Appointment Letter 2277; or
- Performing a cold-call visit.
- Workpaper #130, “Initial 8300 Entity Contact Check Sheet ” can be found in the Primary Case Folder.
- IRC 6050l Appointment Letter 2277 can be found in the Letters and Agreements Folder.
Initial 8300 IDR (Form 4564)
- The fifth section on the “Initial 8300 Entity Contact Check Sheet” is “Scheduling Initial Appointment” . Under this item, the examiner is required to prepare and mail IRC 6050l Appointment Letter 2277, and the initial IDR.
- The BSA examiner should prepare the initial IDR using the information recorded on the “Initial Entity Contact Check Sheet” during the telephone conversation with the entity.
- Form 4564 (IDR) can be found in the “Information Documents Requests Folder” .
- IDRs are numbered in the upper right hand corner (Request Number).
- The BSA examiner should save the completed IDR to the Primary Case Folder.
- The fourth step under the “Administrative Plan to Close Lead Sheet” is the “Examination Process” .
- This “Examination Process” includes:
- Completing and updating the”Risk Analysis Workpaper” ;
- Using the “Initial Appointment Agenda” ; and
- Completing the “Initial Interview Questions and Notes” workpaper.
Workpaper #135 “Initial Appointment Agenda”
- The fourth action on the “Administrative Plan to Close Lead Sheet” is “Conduct the Initial Appointment Meeting ” . The first step is to conduct the interview utilizing the ” Initial Appointment Agenda” .
- The BSA examiner should use the “Initial Appointment Agenda ” as a guide for the meeting.
- Workpaper #135, “Initial Appointment Agenda” , can be found in the Primary Case Folder.
Workpaper #205 “Initial Interview Questions and Notes “
- The fifth step under “Develop the Exam Plan” is preparation of interview questions.
- When preparing the interview questions, the BSA examiner should tailor questions to the entity and issues.
- The BSA examiner should keep a list of questions for the entity that occur when preparing the exam plan.
- Record questions on Workpaper #205 “Initial Interview Questions and Notes” .
- The title of the lead sheet “Initial Interview Questions and Notes” has a hyperlink to an internet site that has guidance available for a particular type of entity.
- Workpaper #205, “Initial Interview Questions and Notes ” , can be found in the Primary Case Folder.
- In order to create a well organized, professional appearing case file, the workpapers in the case file should be arranged in the numbering sequence shown on “Form 4318 Exam Workpaper Index-Form 8300″ (top to bottom).
- The number sequence is:
||Administrative and Planning
||Form 8300 Issues
||Form 8300 Penalties
- Inside left side of case file:
- Computer CD or Disk, if applicable
- Enclose the following forms (if applicable):
- Case Control Document (CCD) or Case Closing Document;
- Competitor’s List for Workload Selection Unit (WSU);
- Original 5346s, if applicable;
- Form 8278,Computation and Assessment of Miscellaneous Penalties, for no change or no violation cases;
- Copy of Form 13639 , Fraudulent Intent Referral Memorandum (FIRM);
- Copy of Form 2797 , Referral Report of Potential Criminal Fraud Case;
- “To Be Opened by Addressee Only” Envelope with SARs not filed by the financial institution under examination enclosed. Document 6441 (a cover sheet for documents requiring protection) must be attached to the outside of the envelope; and
- Form 4318 package.
- SARs will be treated as confidential information related to a case and must be protected from unauthorized disclosure. The SARs should be secured in “To be Opened by Addressee Only” envelope and Document 6441(a cover sheet for documents requiring protection) is to be used as a cover sheet to alert others to the sensitive nature of the information. (Reminder: SARs cannot be revealed to or discussed with the entity under examination. Refer to IRM 4.26.4 .)
- The Form 4318 package should include copies of the penalty case file documents.
Administrative File Using Automated Workpapers
- The BSA examiner should verify that the completed tools have been saved into the primary case folder:
- Form 4318
- Mandatory workpapers
- Lead sheets
- Information Document Requests
- Each tool should be numbered and named according to the issue worked on.
- The BSA examiner should copy the primary case folder (after decrypting) to a CD or disk to be included in the administrative file.
- The entity folder should be deleted from the computer once saved to a disk or CD.
- Attach the case control document to the administrative file folder.
- Enclose referral forms.
Penalty Case File
- The penalty case file should include the following:
- Examination Closing Instructions should be attached to the penalty case file and annotated in the Other section as follows: “Assess Civil Penalty as indicated on Computation and Assessment of Miscellaneous Penalties, Form 8278″ ;
- “Computation and Assessment of Miscellaneous Penalties” ( Form 8278);
- “Computation of Penalty for Failure to File Information Returns or Furnish Statements” ( Form 3645);
- Copy of Workpaper #300, “Form 8300 Review Lead Sheet” . This form delineates the violations and its use eliminates the need to prepare Forms 886-A.
- Copies of Delinquent Form(s) 8300;
- Copies of documents to support violations;
- Copy of “Payment Posting Voucher – Examination” ( Form 3244A) if payment received; (Copy should also be attached to the original Form 8278) and,
- Managerial approval form for penalty assessments.
- A separate Form 8278, Form 3645, and Form 3244A (if payment is received) must be used for each year in which a penalty is assessed, but they may be used to assess or post penalties under more than one code section. (See IRM 20.)
- In any penalty case, the BSA examiner should provide a full explanation for obtaining an administrative appeal. Use of written explanations of the appeal process is also encouraged.
Form 5346 Information Reports
- The BSA examiner should be aware of questionable and unusual transactions during a Form 8300 examination. Transactions may or may not have been reported on a Form 8300. An Examination Information Report ( Form 5346) should be completed, when warranted.
- The BSA examiner should attach any relevant documents to the Form 5346.
- Project Code 432 should be noted on Form 5346 for all leads generated from Form 8300 examinations.
Power of Attorney
- Form 2848, Power of Attorney and Declaration of Representative (POA), is appropriate for Form 8300 examinations. Work with the representative who has a valid POA, as you would with respect to any other Title 26 matter.
- Time spent on Form 8300 examinations should be charged to activity code 509.
- Safety of the BSA examiner should be a concern in completing Form 8300 examinations. There are several options available to the BSA examiner if there is a safety concern:
- Notify the BSA group manager and CI.
- Ask the business to bring all records to the IRS office.
- Follow IRS safety procedures.
- The BSA examiner should contact the group manager with any technical questions pertaining to Form 8300 or for procedural assistance.
BSA Program Web Site
- Information obtained during a Title 26 examination cannot generally be disclosed for nontax purposes. See IRC 6103. However, in the course of a Form 8300 examination, information may be identified which indicates that a potential civil or criminal violation of Title 31 has occurred. When a related statute determination has been made, the information evidencing the violation may be referred in writing to Criminal Investigation or the Financial Crimes Enforcement Network (FinCEN), as appropriate. Refer to IRM 4.26.14 for an in-depth discussion.
- The BSA examiner must involve the group manager in any related statute determination.
Exhibit 4.26.11-1 (11-24-2006)
Request to stop 8300 Correspondence from the Detroit Computing Center
Exhibit 4.26.11-2 (01-01-2003)
Letter 4564, Sample Information Document Request