IRS expands list of large business audit 'campaigns'.

AuthorTrivedi, Shamik

The IRS Large Business and International division (LB&I) released an updated list of audit "campaigns" in November that expands the government's tax enforcement and administration efforts, especially in the international arena.

The total number of campaigns now stands at 24 separate issues, which includes the original 13 campaigns the IRS made public in January. These campaigns are part of the IRS's strategy to focus limited resources on areas of noncompliance, including a move toward more issue-based examinations of large and midsize businesses. In September 2015, the IRS announced that LB&I would restructure and focus on these issue-based examinations.

LB&I indicated that the restructuring was driven by four "guiding principles" of LB&I, including (1) a flexible, well-trained workforce; (2) the selection of better work; (3) tailored treatments; and (4) an integrated feedback loop. The IRS intends to meet not just the plain-letter meaning of each principle but, as a whole, to focus its efforts in a more concentrated manner on achieving tax administration effectiveness and compliance while dealing with an era of limited budgets and a diminished workforce.

The campaigns are designed to focus on taxpayer noncompliance and areas in which the IRS believes scrutiny is needed and to drive taxpayer behaviors. For example, an LB&I official recently said that one of its original campaigns, which focused on land developers and the completed-contract method of accounting, resulted in numerous filings of Form 3115, Application for Change in Accounting Method (Athanasiou, "LB&I Campaign Lessons and Selection Process Explained," 157 Tax Notes 1053 (Nov. 20, 2017)).

As originally described, the IRS held up the Offshore Voluntary Disclosure Program (OVDP) as an example of what a campaign may resemble. The OVDP addressed what the government believed was a systemic issue affecting tax administration, that of undisclosed foreign financial accounts, and approached the issue through a combination of examinations, tax enforcement efforts, and a compliance mechanism designed to allow account holders to come forward and disclose these accounts, pay a penalty, and avoid criminal prosecution. This approach of employing multiple "treatment streams" forms the basis of campaign enforcement.

The treatment streams the IRS considered range from informative (the issuance of internal and external guidance; so-called soft letters; and other public information) to action-based (such as examinations).

The IRS identifies the...

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