Tax Audits & Appeals

David Robison

Tom Wilson

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Audit Strategy

> Transparency- Educating the audit team- Information sharing between taxing jurisdictions- Benefits of transparency- Impact of Schedule M-3 or other disclosures- the Silicon Valley Compliance Initiative Project

> Compliant v. Non-Compliant Taxpayers- How does the IRS make these determinations?- Consequences of being classified as compliant or non-

compliant- Transitioning towards compliance

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Tax Accrual Workpapers> Revised Policy Announced in 2002

- Since the Arthur Young case, the IRS only requested tax accrual workpapers under unusual circumstances

> IRS said in Announcement 2002-63 that it will continue its policy of restraint and will not request accrual workpapers as a standard examination technique

> Exceptions:- Listed transactions- Financial irregularities & restatements

> The recent litigation involving Textron is an example of the government’s determination to pursue this issue

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Penalties

> Routine part of examinations; no longer a “bargaining chip”- Penalty issues considered independently

> Approved by Director of Field Operations, not agent

> New “standard form” IDR regarding tax opinions

> “Penalty Proofing”

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Issue Resolution> Private Letter Rulings> Tech Advice> Pre-filing Agreements (PFAs) & Advance Pricing Agreements

(APAs)> Compliance Assurance Program (CAP)> Limited Issue Focused Examinations (LIFE)> Appeals

- Early Referral- Fast Track- Mediation

> Coordination with foreign tax authorities

*See Handout entitled “Recently Developed IRS Audit and Dispute Resolution Techniques” by Pamela F. Olson and David B. Robison.