The IRS recently announced a new process to risk-assess Coordinated Industry Cases (CIC), which are cases reserved for taxpayers with large gross receipts, gross assets and operating entities large enough to require systematic auditing. Rather than automatically examining them every cycle under a continuous audit, the IRS will review these taxpayers case by case.
Hopefully, this will free up significant IRS resources, as many of these routine audits have proved unnecessary. Currently, a taxpayer under continuous audit can arrange a pre-filing agreement to ensure a more efficient audit. Under a pre-filing agreement, a taxpayer can request consideration of an issue by an exam team before the tax return is filed and thus, resolve potential disputes and controversy early in the exam process. Obtaining pre-filing agreements is easy for a taxpayer under continuous audit, as they can quickly have matters resolved by audit teams that are familiar with the taxpayer’s returns.
However, under the new process of making risk-based assessments, taxpayers will have to find audit teams that have time to study and understand the Taxpayer’s return history before making a determination regarding a specific issue. A taxpayer may no longer expedite the process with an agreement from an audit team that it has a past relationship with.
The purpose in the shift of strategy results from the IRS’ desire to overhaul the current system. The change is not attributed to known IRS budget problems, but instead to a desire to shift to a more risk-driven analysis. The IRS is intent on paying more attention to the issues presented by a taxpayer’s return, rather than profiling or zeroing in on taxpayers of a certain size.