A view from the trenches: a former IRS executive reflects on trends in tax administration.

• Position: Robert Brazzil - Interview

Following a 35-year career with the Internal Revenue Service, Robert Brazzil retired as an Industry Director of the Large and Mid-Size Business Division and joined the tax services practice of Deloitte Tax LLP As the director of the Retail, Food, Pharmaceuticals, and Healthcare Industry, Mr. Brazzil was responsible for audits and compliance with respect to companies assigned to that industry as well as certain LMSB-wide initiatives. Previously, he was IRS District Director in two districts.

Shortly after he left the IRS, The Tax Executive sat down with Mr. Brazzil to ask his views on a number of tax administration issues. Excerpts from that interview follow. (Disclaimer: The views expressed in this interview do not constitute tax, legal, or other advice from Deloitte Tax LLP.)

Q: What do you see as the IRS's focus for the next couple years?

A: The IRS is placing a strong focus on its renewed commitment to ensuring taxpayer compliance through a combination of increased customer service and enforcement activities as reflected by the new guiding principle, Service Plus Enforcement Equals Compliance. Areas of emphasis will include case closures, application of planned time in the tax shelter program, resolution strategies, cycle time improvements, and promoter audits.

The IRS will continue to address "abusive" tax shelters and other tax avoidance transactions, possibly by offering additional settlements similar to the "Son of Boss" initiative, which ended earlier this summer. Announced statistics show that a significant number of taxpayers known to the IRS have filed elections under the settlement. The IRS is moving toward increasing audit activity to identify new tax shelters, seek legislation to curb abuses, identify tax shelter promoters and investors, and establish a process for reporting such transactions. Taxpayers may also see changes in penalties and the statute of limitations with regard to tax shelters. The IRS will also be scrutinizing charitable organizations to determine whether they are being used to avoid tax.

The IRS will focus on strengthening its role in corporate governance and its relationship with the Securities and Exchange Commission (SEC) to deal more effectively with corporate ethical breaches and other issues prompting earnings restatements and other compliance concerns. The IRS is also reviewing the professional standards for practitioners and will introduce new guidance in Circular 230 in the near future.

Globally, the IRS is focusing on cross-border transactions and the use of foreign entities to avoid paying taxes. They will work toward establishing cooperative agreements and stronger alliances between countries.

In the Coordinated Industry Case, or large case, community, the IRS will push toward more efficient compliance activity in both scope and depth through more contemporaneous interaction. There will be greater attention paid to listed transactions to determine the propriety of settlement offers and to develop strategies for additional legislation.

Finally, the IRS is focusing on payment compliance and collection. The agency is trying to bridge the gap between what is owed and what is collected. It is evaluating the use of private agencies to assist with collection efforts.

Q: How has the character of large corporate audits changed?

A: Since the restructuring of IRS and the creation of the Large and Mid-Size Business Division, there has been an evolution in the approach taken to conduct large corporate audits. Most noteworthy is the shift from resource-driven plans to an issue-focused approach. The use of risk assessments based partially on industry-specific knowledge has reduced audit scopes and facilitated much more efficient audits. There is much more focus on cycle time and...