New Jersey and Internal Revenue Service see things eye-to-eye.

• Author: Goldie, James
• Position: Chapter News

On Wednesday, March 19, 2008, representatives of the New Jersey Chapter of TEI met eye-to-eye with representatives of the Internal Revenue Service at the IRS's office at Metro Park in Iselin, New Jersey. In preparation for the meeting, chapter leadership sought input from its members on the topics they would like discussed. A list was made and narrowed down to twelve items, which were submitted to the IRS in advance.

Attending for the New Jersey Chapter were President Ron Lerner, Director Glen Strobel, Institute Director Joanne Bonfiglio, and Communications Chair James Goldie. Attending from the IRS's LMSB Division were Carl A. Stewart, Territory Manager, and John G. Mezquita, Supervisory Internal Revenue Agent.

Tax Accrual Workpapers

The IRS will continue its policy of forbearance with regard to requesting tax accrual workpapers. A standard part of any audit, however, is to review the annual and quarterly filings of the company. With regard to issues disclosed in the financial statements, the IRS may issue information requests with regard to these issues. Generally speaking, the IRS will not request workpapers pertaining to discussions of the taxpayer with outside tax advisers.

Quantity and Scope of Examinations

The IRS is conducting more limited scope audits than in the past. These examinations are more "focused" in that they are directed toward areas of greater interest or significance. One objective is to address the issues that need to be addressed. Another is to obtain greater exposure, which is necessary to drive overall compliance.

Timing issues have not taken on added significance. If anything, permanent differences are more in focus.

The CAP Program

The Compliance Assurance Process (CAP) Program, formally inaugurated in Announcement 2005-87, 2005-50 I.R.B., involved 17 taxpayers nationally in 2005. In 2008, it had 70 participants. From that standpoint alone, the program has been successful. The CAP program, however, is "not for everybody." It is information-robust, and requires a free flow of information to the auditors. The goal is to put the cards on the table and resolve the issues before the filing of the return. For it to be successful, it requires the taxpayer be willing to bring transactions to the attention of the auditors, as opposed to allowing auditors to discover transactions on their own.

A relationship is needed before entering the program. It is unlikely that the IRS would accept an applicant into the program if...