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Guide for Completing Form 8823 - page 30 / 197

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In the event that an owner provides clarification or evidence that the potential violation does not exist, it is not necessary to report the incident to the IRS; i.e., the owner has clarified that they are in compliance.

Workpapers

Content and Purpose

Workpapers are the state agencies’ written records that provide the principal support for their project audits and the filing of Forms 8823. They should include all the information needed to conduct the inspection/review, and document contacts with the owner, the procedures applied, tests performed, information obtained, and the conclusions reached. Workpapers serve the following purposes8:

1. A record of the evidence gathered, procedures completed, tests performed, and analyses conducted;

  • 2.

    Provide support for technical conclusions;

  • 3.

    Basis for internal reviews by state agency management; and

4. Support for IRS audits of the owner’s tax returns.

State agency workpapers may be used by IRS examiners to support conclusions regarding the accuracy of the owner’s tax return. These papers and other documents in files may be reviewed to help establish the scope and depth of an IRS audit, establish a pattern of noncompliance, or provide evidence to support adjustments to the tax return. In some cases, the workpapers may be the only evidence.

While there are no requirements for the form or style of workpapers or documentation, workpapers should include certain “identifying” information to support IRS examinations. Workpapers should include:

  • 1.

    Identity of the owner of the building being reviewed,

  • 2.

    Name (or initials) of person preparing the workpapers, and

3. Date the workpapers were prepared.

Required Recordkeeping and Retention Provisions – State Agencies

For monitoring compliance with low-income housing credit requirements, Treas. Reg. §1.42-5(a)(2)(i)(A) provides that a procedure for monitoring for noncompliance must include the recordkeeping and record retention provisions of Treas. Reg. §1.42-5(b).

Under Treas. Reg. §1.42-5(e)(3)(ii), a state agency must retain the original records of noncompliance or failure to certify for 6 years beyond the state agency’s filing of the respective Form 8823. In all other cases, the state agency must retain the certifications and records for 3 years from the end of the calendar year in which the state agency received the certifications and records.

8

Internal Revenue Manual 4.10.9(3).

3-8

Revised October 2009

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