IRS announces a "breakthrough" plan.

• Author: Dougherty, Jim

In its pursuit to obtain audit currency and reduce examinations' cycle time, the IRS recently announced a new initiative, "Breakthrough." The IRS's Large and Mid-Size Business division formed a team of executives, territory and team managers, revenue agents, specialists and technical advisers to identify ways to improve cycle time without compromising compliance standards. The Breakthrough team developed a three-phase approach to accomplish its goals; phase I has already begun and focuses on closing open inventory and examinations that have not been started.

The Breakthrough team evaluated the cycle time on Industry Cases (ICs) and Coordinated Industry Cases (CICs). ICs involve taxpayers with more than $10 million in assets. The CIC program examines the approximately 1,200 largest taxpayers in the country. "Cycle time" is defined as the period from filing the return until closure of the examination process (including Appeals). The current average cycle time for IC and CIC is 37 months and 60 months, respectively; the IRS's goal is to reduce it to 18 months. The new IRS commissioner has strongly emphasized achieving audit currency and reducing cycle time to move the IRS forward.

ICs

Under Breakthrough, agents were required to perform a full risk analysis on all of their ICs (except those under the limited issue focused examination (LIFE) program) by Nov. 14, 2003. Based on this review, they developed strategies to resolve ICs more expeditiously, by limiting the examination's scope to only those issues with a high risk of noncompliance; these cases are expected to close by April 30, 2004. If this deadline cannot be met, the agent must obtain the territory manager's approval. There are some exceptions to the established closure deadlines, including: abusive tax shelters; fraud; competent authority; prefiling agreements in process; cases under the Tax Equity and Fiscal Responsibility Act of 1982; LIFE cases; fast track/early referral; cases with material issues (determined using the LIFE definition of materiality); pending counsel advice; high-priority work (e.g., coordinated issues); and cases in which the taxpayers are uncooperative and noncompliant.

Status 10 cases are also affected by Breakthrough. "Status 10" cases are cases that have been assigned to agents, but for which no work has been performed. Under Breakthrough, Status 10 cases with a filing date before Sept. 1,2002, should have been surveyed and closed out of the group by Nov. 30...