IRS Appeals

247 Pages·2012·0.87 MB·English

Welcome
May 8, 2012
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Audit Management Strategies
and Best Practices
Robin Greenhouse, Partner, Washington D.C.
Mary Kay Martire, Partner, Chicago
Greg Palmer, Partner, Chicago
Kevin Spencer, Partner, Washington D.C.
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Overview
▪ Introduction
▪ Schedule UTP

▪ Compliance Assurance Programs

▪ Best Practices to Prepare for the Audit

▪ Examination Information Gathering

▪ Administrative Summonses

▪ Best Practices to Resolve Issues During the Audit

▪ Managing the Statute of Limitations

▪ Joint Audits with Treaty Partners

▪ Best Practices for Closing the Audit

3
Introduction
▪ Schedule UTP has changed the “Playing Field”
▪ Will the scope of audits be defined by UTP’s?

▪ Tier Issues and Issue Management Teams are being

replaced by Issue Practice Groups

▪ What is the impact of these changes to Exam’s
independence?

▪ Resources are being shifted from CIC taxpayers to
midsize taxpayers – what does this mean for CIC

taxpayers?

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Uncharted Territory
▪ Schedule UTP is uncharted territory
– IRS and the tax community will be learning together how to deal

with issues on Schedule UTP

▪ Corporations learning what issues must be listed, working with financial
audit firms to determine issues for which tax reserves are required

▪ IRS is training revenue agents on auditing Schedule UTP and not
getting bogged down on every issue

▪ Corporate tax departments and tax advisors will need to be proactive in
order to prevent Schedule UTP audits from getting out of control

5
The Uncertainties Of Schedule UTP
▪ IRS is hunting for information and is skeptical of self-
assessment system

▪ What to expect:
– Specific penalties?

– Signed under penalties of perjury?

– Litigation, à la Textron and its progeny

– More confusion, duplication and expense trying to comply

– States get on the bandwagon

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Taxpayers Subject To Schedule UTP
Reporting Requirements
▪ ALL Taxpayers that:
– File Form 1120 series (1120, 1120L, 1120PC, 1120F) income

tax returns

– Prepare audited financial statements (or are included on the
financial statements of a related entity)

▪ Related per IRC §§ 267(b), 318(a) or 707(b)
– Determine reserves for uncertain federal income tax positions

under FIN 48 or other accounting standards

– Have $10 million or more in assets
▪ Five-year phase in: $100m 2010/2011; $50m 2012/2013; and $10m

2014 and beyond

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Corporate Taxpayers Only
▪ Does NOT apply to:
– Partnerships

– Pass-through entities

▪ OR

– Tax exempt entities

▪ For now!

8
Schedule UTP Reporting Triggers
▪ Corporate taxpayer must file Schedule UTP if:
– Taxpayer has taken “tax position” on U.S. federal income tax

return for current or prior year AND, EITHER:

▪ The taxpayer (or related party) recorded a reserve for U.S. income tax
position in audited financials

▪ OR
▪ The taxpayer did not record a reserve because it expects to litigate the

position and prevail

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Positions Expected To Litigate
▪ Corporation or a related party determines probability of
settling with IRS is less than 50%

▪ AND

▪ Under accounting standards, no reserve is recorded,
because the taxpayer intends to litigate and has

determined it is more likely than not it will prevail on
merits in litigation
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