Internal Revenue Manual
IRM 4.47.2 — CAS Technical and Procedural Information
Part 4. Examining Process
Chapter 47. Computer Audit SpecialistSection 2. CAS Technical and Procedural Information 4.47.2 CAS Technical and Procedural Information Manual Transmittal May 06, 2026 Purpose (1) This transmits revised IRM 4.47.2, Computer Audit Specialist, CAS Technical and Procedural Information. Material Changes (1) Changes to this IRM are summarized in the table below: IRM Citation Title Change IRM 4.47.2.1 through IRM 4.47.2.1.7 Program Scope and Objectives through Related Resources Reorganized and updated the internal control subsections in accordance with requirements in IRM 1.11.2 IRM 4.47.2.1 Program Scope and Objectives Added a new paragraphs for primary stakeholders and contact information. IRM 4.47.2.1.1 Background Rearranged and renumbered paragraphs IRM 4.47.2.1.2 Authority Added Rev. Rul. 71-20, Rev. Proc. 98-25 and IRC 6001 to paragraph (1) IRM 4.47.2.1.3 Roles and Responsibilities Added Director, WCPA, to paragraph (1). Paragraph (2) of former IRM 4.47.2.1.4, Program Goals, was moved to paragraph (3). Added paragraph (2), (4), (5) and (6). These changes were made to comply with requirements in IRM 1.11.2 Former IRM 4.47.2.1.4 Program Goals Paragraph (1) was moved to new IRM 4.47.2.1.4 and paragraph (2) was moved to new IRM 4.47.2.1.3 IRM 4.47.2.1.4 Program Management and Review New subsection. Added paragraph (1) from former IRM 4.47.2.1.4, Program Goals Former IRM 4.47.2.1.5 Training All content moved to IRM 4.47.1.2.1, renamed Core Training IRM 4.47.2.1.5 Program Controls New subsection IRM 4.47.2.1.6 Acronyms Changed IMS from Information Management System to Issue Management System IRM 4.47.2.1.7 Related Resources Added Virtual Library reference Former IRM 4.47.2.2 CAS System Security All content moved to IRM 4.47.1.4 IRM 4.47.2.2 Record Retention, Examination and Evaluation Guidelines Content moved from former IRM 4.47.1.2 (with first sentence of paragraph (1) removed) to paragraphs (1) and (2). Moved contents from former IRM 4.47.2.4 except paragraph (4) removed. Former IRM 4.47.2.2.1 Responsibilities All content moved to IRM 4.47.1.1.3, paragraph (6) IRM 4.47.2.2.1 Record Evaluations, Re-evaluations and Examination Objectives All content moved from former IRM 4.47.2.4.1 IRM 4.47.2.2.1.1 Procedures All content moved from former IRM 4.47.2.4.1.1 IRM 4.47.2.2.1.1.1 Record Retention Limitation Agreements All content moved from former IRM 4.47.2.4.1.1.1 IRM 4.47.2.2.1.2 Methods All content moved from former IRM 4.47.2.4.1.2 IRM 4.47.2.2.1.3 ADP Evaluation All content moved from former IRM 4.47.2.4.1.3 IRM 4.47.2.2.1.3.1 Information Useful in an Evaluation Moved from former IRM 4.47.2.4.1.3.1. Added three items to the list on paragraph (3) Former IRM 4.47.2.2.2 Procedures and Requirements All content moved to IRM 4.47.1.4, CAS System Security, paragraph (4). IRM 4.47.2.2.2 Notification Letters and Agreements All content moved from IRM 4.47.2.4.2 Former IRM 4.47.2.2.2.1 Physical Security of Hardware All content moved to IRM 4.47.1.4.1. IRM 4.47.2.2.2.1 Confirmation Letter All content moved from former IRM 4.47.2.4.2.1 Former IRM 4.47.2.2.2.2 Software and Taxpayer Data All content moved to IRM 4.47.1.4.2 IRM 4.47.2.2.2.2 CAS Program Notice All content moved from former IRM 4.47.2.4.2.2 Former IRM 4.47.2.2.2.3 Backup Files All content moved to IRM 4.47.1.4.1.3 IRM 4.47.2.2.2.3 Other All content moved from former IRM 4.47.2.4.2.3 Former IRM 4.47.2.2.2.4 Other Requirements All content moved to IRM 4.47.1.4.4 IRM 4.47.2.2.2.4 Affiliated Corporations All content moved from former IRM 4.47.2.4.2.4 Former IRM 4.47.2.3 Referrals - Requests for CAS Services All content moved to IRM 4.47.1.3 IRM 4.47.2.3 Obtaining Computerized Data All content moved from former IRM 4.47.2.8 IRM 4.47.2.3.1 Rev. Rul. 71-20 and Rev. Proc. 98-25: Scope All content moved from former IRM 4.47.2.8.1 IRM 4.47.2.3.1.1 Summary of Requirements All content moved from former IRM 4.47.2.8.1.1 IRM 4.47.2.3.1.2 Record Retention Agreements Notifications All content moved from former IRM 4.47.2.8.1.2 IRM 4.47.2.3.1.3 Enforcement All content moved from former IRM 4.47.2.8.1.3 Former IRM 4.47.2.4 Record Retention, Examination and Evaluation Guidelines Moved to IRM 4.47.2.2, paragraphs (3) through (5). Removed paragraph (4) of former IRM 4.47.2.4 due to duplicated word in paragraph (2) of new IRM 4.47.2.2 Former IRM 4.47.2.4 through former IRM 4.47.2.4.2.4 Record Retention, Examination and Evaluation Guidelines thru Affiliated Corporations All content moved to IRM 4.47.2.2 through IRM 4.47.2.2.2.4 Former IRM 4.47.2.5 Application and Other Assignment Documentation All content moved to IRM 4.47.1.5 Former IRM 4.47.2.6 CAS Program Monitoring Moved to IRM 4.47.1.1.4, part of paragraph (1) and removed the reference of Policy Statement P-1-20 Former IRM 4.47.2.6.1 Sources of Information All content moved to IRM 4.47.1.1.4.1 Former IRM 4.47.2.7 Computer Audit Specialist Training Removed Former IRM 4.47.2.7.1 Specialized Training Removed Former IRM 4.47.2.8 through IRM 4.47.2.8.1.3 Obtaining Computerized Data through Enforcement Moved to IRM 4.47.2.3 through IRM 4.47.2.3.1.3 Former IRM 4.47.2.9 through IRM 4.47.2.9.3 Procuring Data Processing Resources through Local Service Bureaus and Time-Sharing Services Moved to IRM 4.47.1.7 through IRM 4.47.1.7.3 (2) Editorial changes were made throughout this IRM for plain language, spelling, grammar, punctuation, links, formatting, titles, and citations. Effect on Other DocumentsIRM 4.47.2 dated June 28, 2021 is superseded. AudienceThe intended audience is CAS, CAS managers and statistical sampling coordinators in Large Business & International (LB&I). Effective Date(05-06-2026)Ronald H. Hodge IIAssistant Deputy Commissioner Compliance IntegrationLarge Business and International Division
Program Scope and Objectives
4.47.2.1 (05-06-2026) Program Scope and Objectives Purpose: This IRM provides detailed technical and procedural information for computer audit specialists (CAS) to follow when supporting field examinations. Audience: The intended audience is CAS, CAS managers and statistical sampling coordinators. Policy Owner: LB&I Policy under the Strategy, Policy and Governance office in the Assistant Deputy Commissioner Compliance Integration (ADCCI) organization and Director, Western Compliance Practice Area (WCPA). Program Owner: Director of Field Operations South Central (DFO-SC), WCPA Primary Stakeholders: Large Business and International (LB&I) and all IRS enforcement divisions are the primary stakeholders for this IRM section. Contact Information: To recommend changes or to make any other suggestions to this IRM section, contact the IRM author or see SPDER's IMD Contacts list by referencing guidelines provided in IRM 1.11.6.5 , Providing Feedback About an IRM Section - Outside of Clearance. A request or inquiry can also be made at LB&I Policy Gateway.
Background
4.47.2.1.1 (05-06-2026) Background This information has been prepared to assist Computer Audit Specialists (CASs) and CAS team managers in the performance of their official duties and provide detailed technical and procedural information relating to the CAS Program. The CAS Program is a LB&I organization currently managed by the Director of Field Operations (DFO) South Central within the Western Compliance Practice Area (WCPA). The CAS Program's primary responsibility is to support field examinations involving the use of large electronic data files received from taxpayers and support tax issue development where complex data analysis using advanced programming skills is required. Field employees in the CAS program consist of CASs and statistical sampling coordinators. A CAS is a trained revenue agent who has completed an intensive computer training program concentrating on large computer systems that process voluminous amounts of data. While their primary activity is to support large and medium-sized corporate and partnership examinations focusing on various tax issues, CAS will also work on assigned projects requiring complex data analysis or application development. A statistical sampling coordinator (SSC) is a CAS with advanced training in statistical analysis and methodology. SSCs review taxpayer statistical samples used to generate amounts on a tax return or apply statistical sampling methodology to support tax issues raised during LB&I field examinations. Please refer to IRM 4.47.3, Statistical Sampling Auditing Techniques, for guidelines and procedures a CAS or SSC should follow when considering the use of statistical sampling.
Authority
4.47.2.1.2 (05-06-2026) Authority By law, the IRS has the authority to conduct examinations under Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, Chapter 78, Discovery of Liability and Enforcement of Title, Subchapter A, Examination and Inspection, which includes, but is not limited to, the following IRC sections: IRC 7602, Examination of books and witnesses IRC 7605, Time and place of examination Rev. Rul. 71-20, Retention of computerized records Rev. Proc. 98-25, Requirements for pertaining records IRC 6001, Notice or regulations requiring records, statements, and special returns For additional information see IRM 4.10, Examination of Returns, and IRM 4.46, LB&I Examination Process.
Roles and Responsibilities
4.47.2.1.3 (05-06-2026) Roles and Responsibilities The Director of WCPA is responsible for the policies and procedures in this IRM section. The DFO-SC has responsibility for the CAS Program and the contents of this IRM. All inquiries, correspondence, reports, etc., pertaining to the CAS Program and any materials in this IRM should be directed to the DFO-SC. The DFO-SC will: Monitor the overall effectiveness of the program. Research technical and innovative aspects of Automatic Data Processing (ADP) examinations. Establish a national inventory of computer assisted audit techniques and issue guidelines for their use. Coordinate the securing of professional ADP technical assistance and advice to field offices. Plan and coordinate the development of computer programs for nationwide use as prototype programs and special purpose programs. Review, recommend, and assist in the development of proposed legislation, regulations, rulings, and procedures to resolve ADP auditing problems. Analyze, evaluate, and make recommendations on both technical and ADP training needs for examiners. Promote overall awareness of appropriate security procedures. Encourage the effective development and use of computer assisted audit techniques in carrying out the IRS's objectives. To support program goals, the DFO-SC will: Explore and identify areas where CAS support may be used to improve the quality and effectiveness of examinations, campaigns and compliance projects. Work with the CAS territory managers to identify, evaluate and procure the tools necessary for CAS to perform their assigned duties effectively and efficiently. Work with the CAS territory managers to provide training recommendations and assist in the development of training for CASs. Coordinate and monitor the completion of the annual Federal Information Security Management Act (FISMA) training that is required for each CAS and CAS manager. CAS territory manager - The CAS territory manager's role is to: Monitor, coordinate, and report on the overall effectiveness of the CAS Program within the territory. Provide inter- and intra-territory coordination for (1) assignments of CASs outside of their team areas; (2) requests between territories for services of examination personnel who have specialized talents needed; and (3) requests between territories for services regarding record retention evaluations for LB&I cases. Consult with and assist personnel in the resolution of ADP auditing problems. Monitor the territory's use of generalized, prototype, and special purpose computer programs in order to eliminate any duplication of effort. Accumulate, analyze, and disseminate information and experiences gained from review and monitoring of groups' activities. Provide coordination within IRS to plan and evaluate computer assisted techniques used in case examinations, and to ensure participation of CASs in the initial planning of each case and the use of CASs as information specialists. Assist in identifying ADP training needs and make recommendations regarding methods and content to the DFO-SC. Monitor, promote, and evaluate appropriate established security procedures. This includes assisting in the identification of security problems and following up to ensure that corrective actions identified during reviews by security functions have been implemented. Ensure that articles are submitted for sharing of programs to the DFO-SC. Identify computer applications and auditing techniques that may be useful on a nationwide basis and submit them to the DFO-SC. Review, discuss, and comment on the effective development and use of computer assisted audit techniques with territory personnel. Ensure that all territories utilize examination time from CASs in planning, performing, and coordinating computer assisted audits to the maximum extent possible. Hold conferences with professional accounting, legal, and tax societies and other interested groups to promote and gain favorable reception for computer assisted audits. Monitor and review all non-case related applications. CAS team manager - The CAS team manager's role is to: Establish procedures to ensure the maximum availability of CASs to examine computerized books and records where feasible and to increase examination efficiency. Identify ADP training needs for examining agents for program consideration. Identify and advise the CAS territory manager of unusual ADP auditing problems encountered during examinations. Make requests to the CAS territory manager for ADP assistance and provide ADP assistance when resources are available. Provide security for taxpayers' ADP records removed from their premises as prescribed in IRM. Use outside professional courses, trade magazines, etc., to provide opportunities for CASs to keep abreast of current ADP developments which affect accounting records processing. Hold conferences with professional accounting, legal and tax societies and other interested groups to promote and gain favorable reception for computer assisted audits. Develop procedures that cover basic security responsibilities within the CAS work areas. Promote the use of computer assisted auditing and statistical sampling techniques in all program areas. Participate in the initial planning of each examination. Ensure the CAS does not use any taxpayer machine-sensible records pertaining to a particular tax return until after the person responsible for examining the return has initiated the examination. Ensure the CAS is involved in the initial phases of the examination for the purpose of performing a systems analysis, identification of the audit trail or other application, including the use of statistical sampling techniques as deemed appropriate. Ensure that the CAS is involved throughout the examination for advice and application of innovative computer programs. At or near the conclusion of the examination, the CAS must be available to discuss prior applications, suggest changes or improvements and consider updating any record retention limitation agreement(s). Share with the case manager the activities of the CAS assigned to the examination. Consult with managers to ensure their record retention needs are being met. Participate in post examination critiques when deemed appropriate. Maintain an inventory of generalized, prototype, and special purpose computer applications used or developed in the group. These will be housed on the computer applications section of the CAS SharePoint site. Ensure the AIMS database properly identifies entities having a record retention limitation agreement. Utilize direct examination time of CASs in planning, performing, and coordinating computer assisted audits to the maximum extent possible. Ensure that each use of a CAS represents the most efficient and effective possible employment of examination resources. Ensure that the most cost-effective equipment is used by CASs. Establish, maintain and monitor security procedures as may be required. Establish guidelines for the proper documentation of applications performed on each case. Computer Audit Specialist (CAS) - The CASs role includes: Providing analyses of complex computerized accounting systems; Determining/recommending the most effective method to provide audit data required by examiners; Validating taxpayer created statistical samples; Providing examiners with technical guidance during IRS statistical sample development; Providing computer analyses of large volumes of data; Assisting examiners with the reconciliation of data to book trial balance and tax return line amounts; Designing applications using both standard and custom computer programs; and Searching continually for creative and innovative ways to use computer assisted auditing techniques.
Program Management and Review
4.47.2.1.4 (05-06-2026) Program Management and Review The effectiveness and efficiency of the CAS Program is monitored by management using automated systems, periodic time reports and other sources of information. The information gathered is to be used to evaluate the effectiveness of the CAS Program. It is not used to evaluate individual CAS. All levels of management must ensure adherence to current IRS policy and guidance, such as IRM 1.5.2.11.2, which prohibits the use of Records of Tax Enforcement Results (ROTER) in evaluating employee performance. This information is used to evaluate and monitor the CAS Program objectives. Program Goals: The organizational goal of the CAS Program is to provide efficient access to and analyses of electronic records to support the activities of the LB&I business unit. To accomplish this goal, the CAS Program will: Improve the efficiency and effectiveness of LB&I field examinations by supporting tax issues identified by audit teams. Improve tax compliance by using advanced application and programming skills to identify and develop tax issues during LB&I field examinations. Support LB&I projects by utilizing advanced software application and programming skills to analyze and prepare large and/or complex electronic data files. Support IRS business units by developing custom software applications that can be used by IRS employees to enhance the performance of their jobs. Improve the efficiency and effectiveness of LB&I tax examinations, studies, and projects by optimizing the use of statistical sampling methods when possible.
Program Controls
4.47.2.1.5 (05-06-2026) Program Controls Program controls for the CAS Program include CAS system security which describes the procedures to be followed by security personnel in maintaining systems security for the CASs. Commercially developed system software is utilized, and application software is developed, maintained, and modified by the CASs as required to meet the unique needs of each examination. The most significant ongoing items in these security procedures are the security breach detection procedures and password integrity. The CAS Program uses the Specialist Referral System to manage CAS service requests. The CAS Program encourages referrals on all cases, and from all business units, where the assigned agent believes the examination process would benefit from CAS engagement. With a primary focus on LB&I examination, referrals to CAS are mandatory for tax returns with activity code of 221 and above. Once a referral has been made, and the CAS team manager assigns, transfers or rejects the referrals, the assigned CAS will generally contact the referring revenue agent within 5 business days.
Acronyms
4.47.2.1.6 (05-06-2026) Acronyms Table of Acronyms Acronym Definition ADP Automatic Data Processing CAS Computer Audit Specialist DFO-SC Director of Field Operations South Central FISMA Federal Information Security Management Act IBMIS Issue Based Management Information System IMS Issue Management System LB&I Large Business & International SQL Structured Query Language SSC Statistical Sampling Coordinator WCPA Western Compliance Practice Area
Related Resources
4.47.2.1.7 (05-06-2026) Related Resources Information regarding the CAS Program, including its authority, roles and responsibilities, goals and scope of activity is described in IRM 4.47.1, Computer Audit Specialist Program (CAS). Technical and procedural information utilized by SSC to accomplish program goals are described in IRM 4.47.3, Statistical Sampling Auditing Techniques. More information about the CAS Program may be found in the Virtual Library: Computer Audit Specialist Knowledge Base.
Record Retention, Examination and Evaluation Guidelines
4.47.2.2 (05-06-2026) Record Retention, Examination and Evaluation Guidelines Initial record evaluations will only be conducted when requested by the taxpayer. Re-evaluations may be initiated by the CAS territory managers at times other than during an examination if deemed appropriate. The CAS will not ask for future years' returns and return information. The CAS will only request and review information pertinent to record retention evaluations or reevaluations. Such reviews do not constitute the commencement of an examination. Recommendations resulting from record evaluations are made to permit a taxpayer to limit the volume of records otherwise required to be retained yet ensure that adequate information will be available for future examinations. Record retention limitation agreements will be prepared incorporating record retention recommendations. Letters or notifications may be issued to taxpayers based on analyses and conclusions about their computerized accounting systems and record retention practices. The CAS will ensure that if a taxpayer has a record retention agreement it is properly reflected in the AIMS database. If a taxpayer record retention agreement exists, the CAS will advise the CAS manager to determine if further action is required. The volume and complexity of accounting records being produced by automated data processing systems has made necessary the use of specialized auditing techniques to deal with computer output. Rev. Rul. 71-20 and Rev. Proc. 98-25 set forth the conditions under which machine-sensible records are to be considered books and records under IRC 6001 of the Code and retained by taxpayers for IRS use. To promote cooperation, provisions are made for the establishment of record retention agreements between taxpayers and the IRS. It is expected that taxpayers will identify and retain machine-sensible records as required by law, even if a record evaluation has never been conducted. In some examinations, use of computer assisted techniques may not be the best audit approach. Some of the reasons are: The volume of transactions is not large enough to warrant computerized sampling and analysis. The potential time savings do not justify performing an application. The taxpayer can produce or reproduce the books and records in a form easily audited by examiners.
Record Evaluations, Re-evaluations and Examination Objectives
4.47.2.2.1 (05-06-2026) Record Evaluations, Re-evaluations and Examination Objectives The CAS may be able to pinpoint records where analyses and samples can be obtained which are presently available only through a detailed search of subdivided records. Through the use of computer retrieval programs, it may be possible to: Prepare databases to allow the examiners to more efficiently analyze account data. Produce applications dealing with unique industry issues. Produce trial balance with accounts grouped according to lines on the tax return. Produce summaries, comparatives and stratifications of accounts, groups of accounts and other accounting data. Perform mathematical computations needed for investment credit, depreciation, depletion and inventory verification and adjustment. Identify fragmented invoices by consolidating detailed transaction records resorted in invoice number sequence.
Procedures
4.47.2.2.1.1 (05-06-2026) Procedures CASs will conduct evaluations of taxpayer's computerized accounting systems. Initial evaluations will only be conducted when requested by the taxpayer. Reevaluations may be initiated by the CAS territory manager at times other than during an examination, if deemed appropriate. Taxpayers whose records are processed by ADP service bureaus or time-sharing services are responsible for record retention the same as any other taxpayer. In most cases, the record evaluation will show that audit efficiency can be increased using machine-sensible records. Discussions should be held with taxpayers or their representatives to gain cooperation in the use of computer assisted audit techniques and taxpayer computer facilities. After the discussions are concluded, the taxpayer must be furnished with either a confirmation letter or a notice, depending on whether the taxpayer agrees to comply, setting forth the specific record retention requirements resulting from the evaluation. The group manager, team manager and/or territory manager with responsibility for the case must concur with the provisions incorporated in the agreement or notification. All specialty team managers involved should also review and approve the list of records identified for retention. All concurrences are to be in writing. When an evaluation of a taxpayer's records results in the need for changes to arrangements or record requirements previously agreed to, or set forth in a notification to the taxpayer, a new notification or agreement reflecting the changes or requirements will be issued. Internal controls affecting record retention are as follows: The CAS should evaluate and document the system of internal controls used by the taxpayer to ensure that the records needed will actually be retained. The taxpayer's internal controls should be capable of ensuring that records are retained in spite of changes that may occur in tax department or data processing department personnel, to the computerized accounting system, or to the computer files management system. Such a system will typically provide a regular report to the company official responsible for the record retention limitation agreement identifying the records actually retained and the periods covered. Serious deficiencies detected in the taxpayer's system of internal controls must be discussed with the taxpayer. If the taxpayer fails to take corrective action within a reasonable period of time, consideration should be given to issuing a notification letter. The CAS will identify the audit trail and perform reconciliation between the tax return and the items being examined. At a minimum, the CAS will reconcile the tax return to the trial balance(s) at the tax return line level, not at a net/book income level. This procedure can be waived with consideration of examination team support needs and only with written approval of the CAS manager. In situations where the taxpayer uses a tax preparation software package and/or has electronic data that contains the audit trail between the tax return and the trial balance, the CAS should request this electronic data for use in reconciling each tax return line item to the corresponding trial balance accounts. In situations where the revenue agent or team coordinator performs the reconciliation, the CAS should request copies of the reconciliation work papers and include them in the CAS case file. When the audit team requests detailed transactional information, the CAS should reconcile the details to the corresponding trial balance or other summary documentation unique to the requested detailed information.
Record Retention Limitation Agreements
4.47.2.2.1.1.1 (05-06-2026) Record Retention Limitation Agreements The CAS should discuss the requirements in Rev. Proc. 98-25 with all taxpayers. Requirements of Rev. Proc. 98-25 include, in part. Document the format or layout of records and make available to the Service any field definitions (including the meaning of all "codes" used to represent information) and file descriptions (e.g., data set name). Periodically check the records. Notify the CAS territory manager if any records identified for retention are lost or destroyed. Retain all records for new systems added or subsidiaries acquired after the record evaluation was conducted. Retain evidence that the retained records reconcile to the books and to the tax return. Document the controls used to prevent the unauthorized addition, alteration, or deletion of retained records.
Methods
4.47.2.2.1.2 (05-06-2026) Methods Evaluators should review examination historical files and consult with the examining agent, other team members, or specialists (engineering & valuation, financial products, cross border activities, tax law, economists, employment and excise), and the group or case manager to determine what records were used. The CAS should also review audit trails and record formats, and hold discussions with responsible officials, including representatives from the taxpayer's data processing department. Taxpayers should be asked to identify files which they deem appropriate not to retain. Certain printed reports produced by a taxpayer are often critical to an examination and continually used by examiners. Since the taxpayer may change company policy and no longer produce a key report in the same format or media, consideration should be given to retaining machine-sensible records, which would permit the re-creation of such reports.
ADP Evaluation
4.47.2.2.1.3 (05-06-2026) ADP Evaluation The following is a brief outline of some basic information useful in the evaluation of a taxpayer's ADP system.
Information Useful in an Evaluation
4.47.2.2.1.3.1 (05-06-2026) Information Useful in an Evaluation Names and telephone numbers of the: Tax Manager ADP Manager Authorized signature on legal documents Others as necessary Organization Chart, Chart of Accounts, and Account Number to Tax Return Line Number Mapping. A list of all records processed within the ADP system and volume, such as: General ledger Accounts receivable Accounts payable Fixed assets Job costing systems Payroll Voucher register Depletion Depreciation Amortization schedules Cryptocurrency accounting records Financial products trading transactions Oil & gas reserves Insurance reserves The name(s) given to the computer application(s) or file(s) containing the details of the daily transactions, including such items as: Operating system Accounting software Data location Record layouts Obtain systems flowcharts, catalogue of reports and sample of output. Evaluate current retention policies. Review audit trails with emphasis placed on individual detail items to General Ledger and return. Determine if generalized retrieval programs are available. Review extent of retention agreement if already existing. Use of taxpayer's computer facilities and extent of taxpayer's assistance during application. Future changes planned for system.
Notification Letters and Agreements
4.47.2.2.2 (05-06-2026) Notification Letters and Agreements Letters should be tailored to the needs of the situation. Letters should be used that are appropriate for the situation. Letters that can serve as templates will be shared within the program. Templates can be obtained from the CAS team manager. During each examination, the CAS should assess the adequacy of the taxpayer records with Revenue Procedure Rev. Proc. 98-25. In situations where the files are not in compliance, feedback should be provided to the taxpayer addressing the specific problems encountered. The feedback should be addressed to a corporate officer or someone who has authority over the accounting, tax and data processing departments. It should be signed by a CAS manager and should be discussed with the case manager prior to issuance. At a minimum, the feedback should include: A listing of the files used. A listing of the specific areas of non-compliance. A request for a written response from the taxpayer addressing the steps that will be taken to ensure the problems are corrected for future returns. The primary focus of the feedback is to provide an opportunity for the taxpayer and the audit team to address and overcome areas of non-compliance. The feedback document does not replace a Notice of Inadequate Records, which is appropriate in continued or egregious occurrences of non-compliance.
Confirmation Letter
4.47.2.2.2.1 (05-06-2026) Confirmation Letter When discussions with the taxpayer result in an agreement to retain machine-sensible records, and cooperate in the use of computer-assisted techniques, or to use alternative procedures acceptable to the IRS, a confirming letter will be issued to the taxpayer by the CAS territory manager setting forth what has been agreed to. This letter will be issued over the signature of the CAS territory manager.
CAS Program Notice
4.47.2.2.2.2 (05-06-2026) CAS Program Notice When a taxpayer, after the records have been evaluated by the IRS, is orally advised of record retention requirements but does not agree to comply or enter into an agreement, the CAS territory manager must issue a letter notifying the taxpayer that retention of the records specified therein is required. This letter is applicable only to those taxpayers whose records are acceptable under the guidelines in Rev. Proc. 98-25. Others will be handled under normal inadequate records procedures. This notice will also be issued in cases where the taxpayer's willingness to comply with the terms of a signed record retention limitation agreement is seriously questioned. This may be evidenced by the taxpayer's failure to implement adequate internal controls to ensure that records identified in the agreement will actually be retained.
Other
4.47.2.2.2.3 (05-06-2026) Other When it is determined that the accounting records processed by computer are not sufficiently voluminous or complex to warrant their retention in machine-sensible form, a letter will be issued to the taxpayer to confirm that a record evaluation has been made and that their present record retention practices will be adequate. This letter should be signed by the CAS team manager. When a taxpayer agrees to comply with the requirements of Rev. Proc. 98-25 and the taxpayer has adequate internal controls, a letter will be issued to the taxpayer to confirm that a record evaluation has been made and that their present record retention practices will be adequate. This letter should be signed by the CAS team manager.
Affiliated Corporations
4.47.2.2.2.4 (05-06-2026) Affiliated Corporations Consolidated Returns—One notice or confirmation letter to the common parent will serve as a notice to all members of the group. It may, of course, provide different retention requirements for different group members, as audit needs dictate. Large Corporate Compliance (LCC). The LCC group to which the case is assigned will be responsible for the evaluation and determination of record retention requirements for all LCC components. A notice or confirmation letter to any member of a LCC will be issued upon the advice and direction of the CAS team manager. However, that LCC group may request an evaluation by a support CAS group. Requests for support evaluations should be coordinated through the CAS team manager and may require submission of a referral within SRS. A copy of the notice or letter will be made a part of the case historical file.
Obtaining Computerized Data
4.47.2.3 (05-06-2026) Obtaining Computerized Data The volume and complexity of accounting records being produced by automated data processing systems has made necessary the use of specialized auditing techniques to deal with computer output. Rev. Rul. 71-20 and Rev. Proc. 98-25 set forth the conditions under which machine-sensible records are to be considered books and records under section 6001 of the Code and retained by taxpayers for IRS inspection. All machine-sensible records retained by a taxpayer, whether retained under the provisions of a record retention limitation agreement or for other reasons, may be used for computer assisted auditing techniques so long as the data is relevant or material to the determination of tax liability. (See U.S. v. Davey, 543 F.2d 996 (2d Cir. 1976)).
Rev. Rul. 71–20 and Rev. Proc. 98–25: Scope
4.47.2.3.1 (05-06-2026) Rev. Rul. 71–20 and Rev. Proc. 98–25: Scope Taxpayers with assets of $10 million or more must comply with the record retention requirements of Rev. Rul. 71-20 or Rev. Proc. 98-25. For this purpose, a controlled group of corporations will be considered to be one corporation and the assets of all members of the group will be aggregated. Taxpayers not subject to the record retention requirements of Rev. Rul. 71-20 or Rev. Proc. 98-25 may voluntarily retain machine-sensible records for IRS use.
Summary of Requirements
4.47.2.3.1.1 (05-06-2026) Summary of Requirements Taxpayers subject to the mandatory record retention requirements must retain all machine-sensible records generated by all automated data processing systems unless the CAS territory manager has consented to limit the retention to certain specific records. The limitation on machine-sensible records to be retained pursuant to a retention limitation agreement does not apply to subsidiary companies acquired, or to accounting and tax systems added, subsequent to the completion of the record evaluation or reevaluation upon which the agreement is based. All machine-sensible records produced by these companies or systems must be retained until such time as a reevaluation is conducted by the CAS territory manager. Unless otherwise specifically agreed to by the CAS territory manager, taxpayers are required to: Periodically test records retained for Internal Revenue Service use. Maintain system documentation relating to retained records. Retain the capability to process the records at the time of an examination. Provide evidence that the retained records reconcile to the books and the tax return. If a new incompatible computer system is installed, either convert the records or have an arrangement with a third party to adequately process all records on a compatible system. Notify the CAS territory manager if files identified for retention are lost or destroyed.
Record Retention Agreements Notifications
4.47.2.3.1.2 (05-06-2026) Record Retention Agreements Notifications The CAS territory manager may consent to limit the retention of records by entering into a record retention limitation agreement with a taxpayer. These agreements usually require the taxpayer to notify the CAS territory manager if changes are made to its ADP accounting systems or record formats that will affect the ability of the taxpayer to comply with the terms of the agreement. The intent of the notification provision is to permit a taxpayer to make changes to an ADP system without influencing the agreement, provided the content of the files specified in the agreement has not changed. Changes which add or rearrange fields within a data record will not be considered to have changed the substance of an agreement if all fields that were in the records covered by the agreement are retained. Under these circumstances, the files created by the revised system may be retained in lieu of those specified in the agreement. Notification is not required. A taxpayer who is unable to comply with the provisions of a record retention limitation agreement because of system changes has, in substance, created a new system. All records created by the replacement system must be retained until such time as a reevaluation is conducted by the CAS territory manager.
Enforcement
4.47.2.3.1.3 (05-06-2026) Enforcement As the information specialist to the audit team, the CAS is responsible for obtaining accurate and complete computerized records that meet the requirements of Rev. Proc. 98-25. Failure to comply with the provisions of Rev. Rul. 71-20 or Rev. Proc. 98-25 may result in the issuance of a Notice of Inadequate Records or the assertion of civil and/or criminal penalties. Refer to Rev. Proc. 98-25 and Rev. Rul. 81-205 for additional information. If records are lost, destroyed, damaged, incomplete or materially inaccurate, the following steps should be followed by the CAS to the extent necessary to correct the noncompliance. Secure a letter from the taxpayer fully explaining the events leading to the situation, and any effort taken to recreate the file within a reasonable amount of time. This letter must be signed by a responsible officer of the company. Issue a letter signed by the CAS territory manager stating the situation and putting the taxpayer on notice that any further problems can result in civil or criminal penalties. Recommend to the case team manager the issuance of a Notice of Inadequate Records when the facts and taxpayer actions support such an issuance. Recommend appropriate civil or criminal penalties provided by IRC 7203 if considered to be applicable. Form 2797, Referral Report for Potential Fraud Cases, must be submitted through channels to the Criminal Investigation Division. This recommendation will be made through the CAS team manager, case team manager, and case territory manager. The application of penalties is the responsibility of the case team manager. Careful consideration should be given to the issuance of a Notice of Inadequate Records pursuant to Section 12 of Rev. Proc. 98-25 when the required records are either incomplete or non-existent. The taxpayer should be offered the opportunity to explain the reason for the missing records and to reconstruct the records. If the taxpayer provides the necessary records or delivers an alternative that is acceptable to the audit team, the events and actions should be documented in a memorandum to be included in the historical file. If the taxpayer is unable or refuses to provide the needed information, serious consideration should be given by the CAS and CAS team manager to recommending the issuance of the Notice of Inadequate Records. It is the responsibility of the case manager to issue a Notice of Inadequate Records; however, it is the responsibility of the CAS and CAS team manager to make recommendations. If there is a disagreement between the team managers, the appropriate territory managers or other management officials should be involved to resolve the disagreement.
Source: official text