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LB&I announces three more internationally focused audit campaigns

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Tax Hot Topics newsletterThe IRS Large Business and International (LB&I) division announced three new compliance campaigns on April 16, bringing the total number to 53 since the initiative was rolled out more than two years ago, in January 2017.

Campaigns are designed to drive taxpayer compliance through various “treatment streams,” which can include issue-based examinations, soft letters, taxpayer education, published guidance and other measures taken by the IRS.

The three new campaigns are:

  • Captive Services Provider Campaign: This campaign will focus on ensuring arm’s-length prices are being paid to foreign captive service providers by U.S. parent companies, consistent with Section 482 and the OECD Transfer Pricing Guidelines. The IRS intends to issue soft letters and conduct issue-based examinations to drive compliance.
  • Offshore Private Banking Campaign: This campaign is designed to address tax noncompliance by U.S. persons related to interests in offshore private banks. The IRS stated that it “is in possession of records that identify taxpayers with transactions or accounts” at such banks. With the conclusion of the Offshore Voluntary Disclosure Program (OVDP) in September 2018, willfully noncompliant taxpayers may have fewer options for coming forward to the IRS. This campaign’s treatment stream will be examinations and soft letters.
  • Loose Filed Forms 5471: Form 5471, “Information Return of U.S. Persons With Respect to Certain Foreign Corporations,” must be attached to a timely-filed income tax return (or partnership tax return or exempt organization return, as applicable). The penalty for filing a late or incorrect Form 5471 is $10,000 per form. The goal of this campaign is to improve compliance with the Form 5471, which is sometimes incorrectly filed independent of a tax return.

The IRS has only added to the list of campaigns, which originally began with 13 in January 2017. It is unclear if and when the IRS will remove a campaign from this list. Taxpayers should be aware that some outreach by the IRS may take the form of guidance or potentially a soft letter. A soft letter will likely require some kind of response to the IRS to show that a taxpayer is complying.

Contact:
David Auclair
Managing Principal
Washington National Tax Office 
T +1 202 521 1515

David Sites
Partner
Washington National Tax Office 
T +1 202 861 4104

Shamik Trivedi
Senior Manager
Washington National Tax Office
T +1 202 521 1511

Cory Perry
Senior Manager
Washington National Tax Office 
T +1 202 521 1509

David Zaiken
Managing Director
Washington National Tax Office 
T +1 202 521 1543

Steven Wrappe
Managing Director
Washington National Tax Office 
T +1 202 521 1542
 
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