Tax Audits & Appeals David Robison Tom Wilson
Audit Strategy • Transparency • Educating the audit team • Information sharing between taxing jurisdictions • Benefits of transparency • Impact of Schedule M-3 or other disclosures • the Silicon Valley Compliance Initiative Project • Compliant v. Non-Compliant Taxpayers • How does the IRS make these determinations? • Consequences of being classified as compliant or non-compliant • Transitioning towards compliance
Tax Accrual Workpapers • Revised Policy Announced in 2002 • Since the Arthur Young case, the IRS only requested tax accrual workpapers under unusual circumstances • IRS said in Announcement 2002-63 that it will continue its policy of restraint and will not request accrual workpapers as a standard examination technique • Exceptions: • Listed transactions • Financial irregularities & restatements • The recent litigation involving Textron is an example of the government’s determination to pursue this issue
Penalties • Routine part of examinations; no longer a “bargaining chip” • Penalty issues considered independently • Approved by Director of Field Operations, not agent • New “standard form” IDR regarding tax opinions • “Penalty Proofing”
Issue Resolution • Private Letter Rulings • Tech Advice • Pre-filing Agreements (PFAs) & Advance Pricing Agreements (APAs) • Compliance Assurance Program (CAP) • Limited Issue Focused Examinations (LIFE) • Appeals • Early Referral • Fast Track • Mediation • Coordination with foreign tax authorities *See Handout entitled “Recently Developed IRS Audit and Dispute Resolution Techniques” by Pamela F. Olson and David B. Robison.