Comments on LMSB's joint audit planning process.

• Position: Large and Mid-Size Business Division

June 25, 2009

In 2003, representatives from Tax Executives Institute and the IRS Large and Mid-Size Business Division developed a procedure to increase the taxpayer's involvement in the audit planning process. From this collaborative effort emerged the Joint Audit Planning Process that captured the concepts identified as being key to efficiently planning and conducting an examination. TEI representatives participated in the production of an LMSB training video on the new process, which was used extensively by the IRS and also distributed to TEI's U.S.-based chapters to use as a basis for chapter programs discussing the new process. LMSB recently approached TEI about updating the process (to include, for example, new procedures such as the Compliance Assurance Process). Preliminary comments were solicited from members of TEI's IRS Administrative Affairs Committee and were submitted to LMSB; they are reprinted below. The Institute will work with LMSB to refine the 2003 process, with a revised document expected to be rolled out to LMSB agents and TEI members later this year.

General Comments

* The Joint Audit Planning Process has made good progress over the last several years, but improvements are needed. Taxpayers often do not know about the process or are not invited to participate in it. With the massive hiring initiative the IRS is embarking on, it is even more critical that Team Managers and Revenue Agents learn about the process.

* Improvement is still needed with regard to joint audit planning. In my area, many agents know about the process but still refuse to involve the taxpayer.

* There should be a way to measure voluntary compliance, which will permit the IRS to allocate resources to abusive taxpayers.

* The joint plan relies on "transparency." When used by both the IRS and taxpayers, progress can be made.

* LMSB should formalize the shared expectations of the IRS and taxpayer teams, such as is reflected in the attached letter some members have received from HMRC.

* Joint training in the process should be held at the TEI chapter or regional level. In addition, the IRS should conduct training for its managers and senior staff in risk analysis, materiality, and the importance of pre-IDR meetings.

* A video should be made demonstrating the elements of the planning process. Prior to starting the current audit cycle, members found the 2003 DVD helpful.

* Perhaps TEI and LMSB could hold a joint webcast on the revised process.

Preliminary Meetings and Discussions

* The joint audit document provides that the audit plan should be given to the taxpayer at the opening conference or before any substantial work is performed. "Substantiality" should be defined and the audit plan should be provided as soon as possible. The planning tool should require that the audit plan be "provided at the Opening Conference or no later than 30 days after it."

* The audit plan should outline when travel to a taxpayer's facilities...