Tax-accrual workpapers.

• Author: Laffie, Lesli S.
• Position: From The IRS

CC-2003-012 sets out procedures for IRS requests for tax-accrual and other financial audit workpapers on (1) the tax reserve for deferred tax liabilities and (2) footnotes disclosing contingent tax liabilities appearing on audited financial statements. It also modifies pre-existing procedures for requests for audit and tax-accrual workpapers not affected by Ann. 2002-63.

For listed transactions, Ann. 2002-63 provides that the Service may request tax-accrual workpapers when examining any return filed after June 30, 2002, that claims a tax benefit from a transaction determined to be a listed transaction at the time of the request, under Regs. Sec. 1.6011-4(b)(2). If the listed transaction was disclosed, the IRS will routinely request the workpapers pertaining only to that transaction. If it was not disclosed, the Service will routinely request all tax-accrual workpapers.

In addition, as a discretionary matter, the IRS will request all tax-accrual workpapers if it determines that (1) tax benefits from multiple investments in listed transactions are claimed on a return (regardless of whether the transactions were disclosed); or (2) if, in connection with the examination of a return claiming tax benefits from a disclosed listed transaction, there are reported financial accounting irregularities. In general, requests will be limited to the tax-accrual workpapers for the years under examination.

For a return filed before July 1, 2002, that claims a tax benefit from a listed transaction, the IRS may request workpapers as to such transaction, if the taxpayer had an obligation to disclose it under Regs. Sec. 1.6011-4 and failed to do so.

In general, the information document request will be limited to the workpapers for the listed transaction for the years under examination. However, the Service...