Last week Sharon Porter, Acting Director of International Business Compliance in the IRS LB&I Division, provided practitioners with an update on IRS international audit procedures at the International Fiscal Association meeting. According to Porter, the new strategy for LB&I involves auditing taxpayers based on compliance risk rather than on the size of the taxpayer. Further, to prevent agents from raising the same issues every year, the new IDR process will help focus audit issues.

Single individual examiners handle the returns of multinationals and are aided by IRS experts who help examiners make compliance risk assessments. These risk assessments aid examiners in determining whether the audit is worth pursuing and the issues the Service should focus on. However, a new IRS pilot program creates a centralized group of specialists to assess compliance risk with the LB&I International Strategic Council determining the general areas of focus. One of the goals of the updated audit procedures is to select better cases for litigation at the outset of the exam, rather than the end of an exam.

Lastly, Porter addressed training by international practice networks. In December, the IRS released 50 practice units, which it uses to train LB&I examiners on various International issues. The goal of developing practice units is to create better trained and more informed examiners. The practice units are building blocks of international tax and are not official pronouncements of law. The focus on the new exam procedures and training program are to create a more efficient and focused exam process.

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