Joint taxpayer-IRS quality improvement project on information document requests.

• Author: Ashby, Robert L.

Editor's Note: The following article is adapted from a report prepared by representatives of the Internal Revenue Service and Northern Telecom Inc. (NTI) concerning their joint quality improvement project on information document requests (IDRs). The purpose of the project was "to evaluate the current examination process utilized by the IRS and NTI in order to propose recommendations that would enhance the efficiency, effectiveness, and timelessness of the examination." The project ultimately focused on the IDR system used in the IRS's examination of NTI's tax returns, with a view toward reducing the IDR turnaround time and thereby decreasing the burden of the examination for both NTI and the IRS. The project marked first time that the IRS and a taxpayer participated as equal partners in a QIP project, and this article in being published is the hope that the project may serve as a paradigm for future projects.

Introduction

In approaching this quality improvement project, Northern Telecom Inc. (NTI) and the Internal Revenue Service (IRS) recognized the importance of conducting a quality examination to determine whether the tax liability reported on the federal tax returns being examined is substantially correct. Both parties also recognized and agreed that a quality examination is a joint effort that includes, but is not limited to:

* Joint participation in the planning process.

* Examination of substantive areas that includes a review and analysis of all relevant information and, when warranted, discussion with company personnel having such information and knowledge.

* Reduction of the burden placed upon the company during the course of an examination.

* Utilization of an effective and efficient system for requesting and providing relevant information necessary to conduct a quality examination; i.e., IDR system.

* Maintaining a continuous dialogue and open communications aimed at identifying and resolving any examination problems, concerns, or issues at the earliest time possible and at the lowest appropriate level.

* Minimizing both the actual time applied in conducting the examination and the time over which it takes to conduct the examination.

* Conducting a meaningful post-examination critique.

In addition, NTI and the IRS recognized and agreed that an effective and efficient IDR system is essential to conducting a quality examination in an orderly and timely manner. The scope of the QIP initiative was limited to studying the IDR system...