Pre-Audit Planning, Examination Procedures and Issue Resolution Techniques
Your Rights as a Taxpayer
As a taxpayer, you have the right to fair, professional, prompt, and courteous treatment by IRS employees.
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What to Expect If Your Tax Return is Selected for Examination
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Publication 556 (pdf) - The Examination of Returns, Appeal Rights, and Claims for Refund
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Revenue Procedure 94-69 (15-Day Disclosure Provision)
Revenue Procedure 94-69 provides that certain items disclosed within a 15-day time period may not be subject to the accuracy-related penalty. The procedure applies only to Coordinated Industry Cases.
Facility Considerations
At the beginning of every examination, several practical matters regarding the examination site will be discussed.
Recommendations to Facilitate Open Communication
Open communication between the Examination Team and the Taxpayer is the single most important action in completing an efficient and timely examination. Communication Tips give key suggestions in keeping the communication lines open and the examination progressing efficiently.
Joint Audit Planning Process
The Internal Revenue Service emphasizes improving the examination process. LMSB recognizes that thoroughly involving the Taxpayer in audit planning will have a positive impact on examinations. Joint participation in this process benefits both taxpayers and the Service by increasing examination currency. It also provides certainty of results for both taxpayers (i.e. financial statements) and the Service (i.e. completed examinations) by minimizing open tax years. To improve the examination planning process, LMSB and the Tax Executives Institute (TEI) formed a team to develop a joint, issue driven, audit-planning process that engages all members of the audit team, including specialists, in conjunction with the taxpayer.
Pre-Audit Planning, LIFE
Several planning steps occur during the preliminary phase of an examination. For example, certain records help to determine the scope of an examination. The Examination Team will consider the number and type of audit specialists needed. For instance, a computer audit specialist (CAS) may begin the process of identifying and obtaining computer records needed during the examination. In addition, the Examination Team will consider the use of LIFE (Limited Issue Focused Examination) rather than a traditional broad-based examination. Finally, the Examination Team will begin work on an audit plan.
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LIFE (Limited Issue Focused Examination)
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Examination of Books and Records
The Examination Team follows standard procedures during an examination. Established procedures for requesting information are in place. In cases with refunds in excess of $2 million dollars, the Joint Committee of Taxation requires additional procedures. The Internal Revenue Manual requires the inspection and, if warranted, the examination of certain items as part of any examination. Procedures are in place to extend the statute of limitations, when necessary, to complete the examination.
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Coordinated Issues
Certain issues affect a significant number of taxpayers. In order to ensure a uniform application of the law, Coordinated Issue Papers are available for these issues.
LMSB Issue Tiering Process
Recently, the Internal Revenue Service established procedures regarding the involvement of LMSB Executives, Senior Leaders, Technical Advisors or Field Advisors in an ongoing examination when Industry aligned cases are not under the line authority of the Industry Director. Internal Revenue Manual (IRM) sections 4.51.1 and 4.51.6 outline theseprocedures. Issues managed under the new procedures are classified as Tier I, Tier II and Tier III.
IRS Issue Resolution Techniques
The Examination Team will consider and discuss whether any Early Resolution Tools may apply to your particular situation.
Examination Closing Procedures
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Appeals
The Appeals process is available to taxpayers who do not agree with examination findings.
Compliance Assurance Program (CAP)
The CAP approach leverages corporate governance and financial reporting requirements imposed by the Sarbanes-Oxley Act of 2002. Under CAP, a taxpayer works cooperatively with LMSB Revenue Agents in a pre-filing environment to resolve issues of tax controversy and to determine the proper tax treatment of completed transactions. The above provides additional information for this pilot program.
LMSB Structure
LMSB Counsel Structure:
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