The IRS Large Business and International (LB&I) Division set a May 1 effective date for certain changes in the examination process for large taxpayers. This change in process shifts the IRS’s focus to an issue-based approach.
Publication 5125, “Large Business and International Examination Process,”
was released by the IRS on Feb. 26 and provides “an organizational approach for conducting professional examinations from the first contact with the taxpayer through the final stages of issue resolution.”
This publication follows an LB&I reorganization that is intended to change the way the IRS examines large businesses. The LB&I division has jurisdiction over business taxpayers with more than $10 million in assets, as well as certain global high wealth individuals and taxpayers with international compliance issues.
The examination process outlined in the publication focuses on three stages familiar to most large taxpayers: planning, execution and resolution. While those stages have been part of the IRS’s quality examination process for some time, LB&I’s goal is to set forth guidelines and responsibilities within these parameters for both the IRS and taxpayers, encouraging a system of cooperation, transparency and responsiveness.
One area of controversy with regard to the new publication is LB&I’s policy of limiting informal claims for a refund to the 30-day period beginning with the opening conference. Citing resource challenges, the IRS says that refund claims submitted after that 30-day period must be filed as formal claims for a refund, using Forms 1120X or 1040X or Form 843. Informal claims relating to an issue under examination, however, may be accepted after the 30-day period ends.
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