An end-of-examination checklist.

• Author: Marshall, S. Starling

The Expert: S. Starling Marshall

Nearing the end of an Internal Revenue Service exam cycle can feel like time to wrap up the process quickly and move on to the next task and then the next cycle. However, considering a few things to do now can result in a faster, more successful resolution of issues not only during this cycle but also during future ones.

Question: What should be on your end-of-exam-cycle checklist?

Answer: When developing a checklist for the end of an IRS exam cycle, take stock of the issues that presented themselves in this cycle and take action. Taking these steps now can have profound benefits.

Taking Stock of Issues

Make a list of issues that presented themselves during this audit cycle. Evaluating the full scope of the issues that arose will help you to address them head-on and identify patterns. At the conclusion of the audit, you are afforded the opportunity to review any adjustments that your exam team proposes. That review is your chance to decide which adjustments you will contest and which you will resolve at exam. Although it is important to review the proposed adjustments, it is also useful to examine the audit holistically. For unagreed issues, identify which issues will recur and which are standalone. How you resolve them now may depend on whether they will recur later. For agreed issues, consider how each is being resolved and how those resolutions affect other items, other years, and your procedures going forward.

Corrective Action: Audit Process

Taking stock of the issues you spent time resolving during the audit will help you identify opportunities to fine-tune internal procedures to make the next cycle more efficient. During an audit, debating new or contested issues may be unavoidable. Examine your list for issues that were resolved but drained significant time and resources. If these items will recur, it is worth exploring how the inefficiencies they cause can be avoided in the future. For example, did the IRS request substantiation for expenses or deductions that was difficult to find or took a long time to organize? How could you change internal policies and procedures to prepare for the next cycle and to avoid this stumbling block later? Considering a corrective action plan even before the current audit cycle is over helps you to tailor your plan to address specific items that slowed the process while things are fresh in everyone's minds. Consult your audit team to ensure that the plan you put in...