The Internal Revenue Service’s (IRS) Large Business & International Division (LB&I) recently announced six additional compliance campaigns, which brings the total number of campaigns to 59. This move reflects LB&I’s continued efforts towards issue-based examinations and compliance enforcement, in line with “LB&I’s goal … to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.”
A complete list of the 59 LB&I Campaigns can be found here.
The latest campaigns cover:
S Corporations Built-in Gains Tax
C corporations that convert to S corporations may be subject to corporate-level Built-in Gains tax if they have a net unrealized built-in gain and sell assets within five years after the conversion. LB&I is seeking to increase awareness and compliance with the law through issue-based examinations, soft letters, and outreach to practitioners.
Post Offshore Voluntary Disclosure Program Compliance
U.S. persons are subject to tax on worldwide income. Through soft letters and examinations, this campaign addresses former Offshore Voluntary Disclosure Program (OVDP) taxpayers’ failure to remain compliant with their subsequent foreign income and asset reporting requirements.
The IRS is seeking to increase compliance by U.S. citizens and long-term residents who expatriated on or after June 17, 2008 and may not have met their filing requirements or tax obligations. The IRS will address noncompliance through outreach, soft letters, and examination.
High Income Non-filer
U.S. citizens and resident aliens are subject to tax on worldwide income, whether reported on U.S. income documents or their foreign equivalents. The IRS will focus on examinations to bring non-filers into compliance.
U.S. Territories – Erroneous Refundable Credits
The IRS will use outreach and examinations to address refundable credits erroneously claimed by residents of U.S. territories on their individual income tax returns.
Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009
The IRS will focus on issue-based examinations to verify compliance with Internal Revenue Code Section 457A, requiring that any compensation deferred under a nonqualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation.
In addition to these targeted campaigns, the IRS continues to hone their tax return selection process and audit outcome effectiveness. As a result, its agents are more well-versed in sophisticated business structures, enabling them to do a “deep dive” into various issues pre-selected during the audit screening process, as well as identify other issues that emerge during the audit.
Keeping files “audit ready” will not only make the examination process easier, but allow for proactive identification of potential issues. Establishing procedures now will pay for itself in the event of an audit. Aronson LLC’s tax controversy team has the specialized experience to assist in identifying whether your organization may be at risk for an IRS examination, as well as guiding the assembly of “audit ready” files to defend your position on these issues. If this is your situation or if you are having other issues with the IRS, contact Patrick Deane or Larry Rubin at 301.231.6200.