LMSB-TEI Joint Audit Planning Process: October 2003.

• Position: Recent Activities

Introduction (1)

Over the past year, representatives of the IRS Large and Mid-Size Business Division (LMSB) and Tax Executives Institute have worked together to develop a Joint Audit Planning Process to the mutual benefit of taxpayers and the government. The result of this joint effort is a Planning and Monitoring Tool that outlines the specific joint and individual responsibilities of the participants in the examination process. The process has been rolled out within LMSB and continues to be introduced to local TEI Chapters.

Reactions to the process within LMSB have been favorable. For example, one Team Coordinator has observed:

In the past, the audit planning process was, more likely than not, a unilateral process that may not have always produced the most efficient audit plan and examination. Now under the Joint Audit Planning Process, audit planning will be a bi-lateral process with the taxpayer that should result in more efficient examinations. As in any bi-lateral process, however, the key to success will be getting the right people involved who will maintain accountability throughout the examination. An International Territory Manager elaborated:

The full implementation of the Joint Audit Planning Process is a requirement as LMSB and our taxpayers seek to conduct more efficient and timely examinations. The key word is "joint," in that both parties not only must fully endorse this initiative but must ensure it is a reality in practice. My team manager and I recently concluded a meeting with a large CIC taxpayer and discussed every line item, one by one, included in the Joint Audit Planning and Monitoring Tool. Although a number of the practices were implemented in past cycles, the document served as a reminder for those practices previously utilized as well as new ones that should be implemented. Those present in our meeting were energized to take audit efficiency to another level in our new cycle. We will continue to use the Monitoring Tool throughout the process to ensure all best practices are fully considered and implemented when appropriate. We all agreed that openness and trust among us is vital as we seek to meet our closing goals. In my judgment, aggressive case closing goals will not and cannot be met if taxpayers and LMSB do not fully implement the Joint Audit Planning Process. We will ensure LMSB meets our end of the bargain and am confident that our taxpayer will as well. Following completion of the project, a training video of TEI and LMSB representatives discussing the process was produced and distributed both throughout LMSB and to all TEI chapters. After viewing the video, a Team Coordinator--who worked with a taxpayer to use the concepts of Joint Audit Planning in identifying and developing potential issues--reported the following comment by a Vice President of Tax:

If an issue has five facts that define a transaction, we believe it is in our best interest to provide those facts to the IRS in a timely manner so that we can agree to them. Then, any disagreement surrounding the issue would focus on the application of the tax law. The more current the years under examination and the shorter the exam cycle, the more cost effective it is for our company. Changes in company personnel and difficulty in locating records for older years put the company at an extreme disadvantage. The Vice President of Tax concluded that working with the LMSB Audit Team to improve the IDR process through Joint Audit Planning would help limit the number of requests and reduce the time needed to perfect an issue. Both...