Tax Executives Institute
Minnesota Chapter
TEI/IRS Liaison Meeting
May 19, 2015
Jessica Samuel, Territory Manager, RFTH
Introduction
Jessica R. Samuel
Territory Manager
Jessicia.R.Samuel@irs.gov
1550 American Blvd East
Bloomington, MN 55425
(651) 726-1525
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Agenda
Professional Examinations
Principles of Sound Tax Administration
IDR Enforcement Process
Issue Resolution Tools
 Pre-Filing Agreements (PFA)
 Fast Track Settlement (FTS)
 Industry Issue Resolution (IIR)
 Compliance Assurance Program (CAP)
LB&I Exam Process
CIC Centralized Classification Process
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Professional Examinations
 Principles of Sound Tax Administration
 Accountability
 Professionalism
 Discipline
 Transparency
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Professional Examinations
Transparency Throughout Entire Audit Process
 IRS must ensure that the taxpayers know throughout
audit
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the issues the examiner is considering,
why the examiner is raising the issue,
the legal argument the examiner is relying upon, and
the examiner’s views of the taxpayer’s legal arguments.
 Taxpayers must fully participate in all stages of
examination
 Planning Phase
 Timely presentation of all relevant facts and arguments with
respect to each issue during the examination.
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Professional Examinations
IDR Enforcement Process
Make IDR Process Efficient and Transparent
LB&I examiners and specialists trained
Meaningful engagement between IRS and
Taxpayer
Mandatory Process – No exceptions
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Professional Examinations
Requirements for Issuing IDRs
IRS and taxpayer to discuss a draft of the IDR
and its contents prior to issuance
IDRs are to be issue focused, clear and
concise
Issue IDRs with clear, agreed-upon
timeframes for response
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Professional Examinations
IDR Enforcement Process
 Applies to IDRs issued in compliance with
requirements for issuing IDRs
 Mandatory process involves three graduated
steps:
1. Delinquency Notice
2. Pre-Summons Letter
3. Summons
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Professional Examinations
IDR Enforcement Process
 Delinquency Notice (Letter 5077)
 Discussed with the taxpayer (Tax Manager) and
signed by team manager
 Pre Summons Letter (Letter 5078)
 Discuss lack of complete response to Notice with the
exam team (specialist, team and territory management,
counsel, DFO)
 Territory Manager must sign and discuss PreSummons Letter with the taxpayer (Tax Director)
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Professional Examinations
IDR Enforcement Process
 Summons
 Discuss lack of complete response to Letter
with taxpayer (VP of Tax)
 Includes Team Manager, Specialist Manager,
Territory Managers, DFOs and IRS Counsel
 Summons prepared and issuance coordinated
with IRS Counsel
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Issue Resolution Tools
Pre-Filing Agreements (PFA)
Fast Track Settlement (FTS)
Industry Issue Resolution (IIR)
Compliance Assurance Program (CAP)
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Pre-Filing Agreements (PFA)
 Beneficial way to reach agreement on a issue
in a cooperative environment before the
return is filed.
 Revenue Procedure 2009-14 provides the
program guidelines.
 User fee — $50,000 (Due only if the issue is
accepted).
 Taxpayers overall satisfaction is 4.7 out of 5.
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Fast Track Settlement (FTS)
 Key points about FTS include the following:
 The FTS program is jointly administered by the LB&I
Division and the Office of Appeals.
 LB&I agents and taxpayers work together to resolve
outstanding issues while in LB&I’s jurisdiction.
 The FTS process should be completed in 120 days.
 Not appropriate for all cases, agents strongly
encouraged to consider Fast Track on ‘unagreed’
issues
 The taxpayer retains all standard appeal rights
regarding any unresolved issues remaining at the
time of termination
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Fast Track Settlement (FTS)
Appropriate resolution tool when:
 Issue cannot be resolved at exam level
 Factual and Legal Issues
 Taxpayer and IRS agree to utilize the program
 Hazards of Litigation exist
Since program inception through March 2014
 Accepted 984 cases
 Resolution rate over 80%
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IIR Program – Rev Proc 2003-36
The program goals are to:
 Address frequently disputed or burdensome business
tax issues that affect a significant number of taxpayers.
 Provide clear guidance to reduce the time and
resources associated with resolving issues during tax
examinations.
The IIR process includes:
 Issue Submission and Selection
 Planning, Analysis and Development
 Resolution and Guidance
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IIR Submission
Taxpayers, associations, and others can submit
an issue anytime
No required format, but should include
 Issue statement and description of why the issue is
appropriate for the program
 Explanation of the need for guidance and estimated
number of taxpayers impacted
 Name and phone number of a contact person
 May include a recommendation as to how the issue
could be resolved.
 Refer to Rev. Proc. 2003-36 for IIR application process
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Issues Appropriate for IIR
Issue should have two or more of the following
attributes:
 Uncertain tax treatment of common factual situation,
 Uncertainty results in frequent, repetitive exam of the
same issue,
 Uncertainty results in taxpayer burden,
 Significant and impacts a large number of taxpayers, or
 Extensive factual development, understanding of
industry practices and views would assist the Service in
determining the proper tax treatment.
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Issues Not Appropriate for IIR
 Generally, issues not appropriate for the IIR program
include:
 Issues unique to one or a small number of taxpayers.
 Issues primarily under the jurisdiction of the Operating
Divisions of the Service other than the LB&I and SB/SE
Divisions.
 Issues that involve transactions that lack a bona fide
business purpose, or transactions with a significant
purpose of improperly reducing or avoiding federal
taxes.
 Issues involving transfer pricing or international tax
treaties.
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CAP Overview
Collaborative program
Pre-file identification and resolution of issues
Efficient use of resources
Tax and financial reporting certainty
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CAP Program Eligibility
Company assets > 10 million
Publicly-held entity
Privately-held with audited financial
statements
No investigation/litigation that limits access
to current corporate tax records.
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CAP Program Background
2005: 17 taxpayers
 CAP Pilot began
2011: 140 taxpayers
 CAP Program Permanent
 Compliance Maintenance and Pre-CAP added
2014: 185 taxpayers
2015: 194 taxpayers
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Phases of the CAP Program
Pre-Compliance Assurance Process
Pre-CAP
Compliance Assurance Process
CAP
Compliance Maintenance
CM
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LB&I Examination Process
Update current Quality Examination Process
Leverage LB&I best practices
IDR Process
Claims process for issues not included in the
exam plan
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CIC Centralized Classification Process
Manage exam resources more effectively
Work Cases with higher compliance impact
Central Classification Team - Pilot
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Questions
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