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Tax Executives Institute Minnesota Chapter
TEI/IRS Liaison Meeting
May 19, 2015
Jessica Samuel, Territory Manager, RFTH
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Introduction
Jessica R. Samuel
Territory Manager
1550 American Blvd East
Bloomington, MN 55425
(651) 726-1525
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Agenda
Professional ExaminationsPrinciples of Sound Tax AdministrationIDR Enforcement ProcessIssue Resolution Tools
Pre-Filing Agreements (PFA) Fast Track Settlement (FTS) Industry Issue Resolution (IIR) Compliance Assurance Program (CAP)
LB&I Exam ProcessCIC 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 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 Notice2.Pre-Summons Letter3.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 Pre-Summons 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 ProcessPre-CAP
Compliance Assurance ProcessCAP
Compliance MaintenanceCM
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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