Where is the IRS Headed?

They are searching.  In the month of August all 500+ managers in the Large Business and International (LB&I) division (assets more than $10 M) are meeting in one of 17 locations for four days to discuss the Future Focus of the IRS.  This is not an answer to “what will the IRS be doing specifically”, but a solicitation of manager’s ideas with oversight from the national office.   Having worked for the IRS for 28 years I suspect that the National Office has a well thought out plan crafted within the boundaries of the beltway.  However, before implementing the plan, the National Office wants to bounce this off of their managers, create buy in and tweak it as necessary.  What will they be discussing?   Inquiring minds want to know.  What has the IRS shared previously?

The IRS has announced nine campaigns.  Four are geographic in nature and five are technical in nature.  I shared these on my blog on September 22, 2015.  On the technical side the five areas in question are:

1.       pass through entities;

2.       enterprise activities, including financial institutions and products, corporate issues, credits, and penalties;

3.       cross-border activities;

4.       withholding and international and individual compliance; and

5.       treaty and transfer pricing compliance.

The IRS has its “Dirty Dozen List of Tax Scams”.  Relating to LB&I these include:

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Dirty Dozen Tax Scams

IRS Wraps Up the "Dirty Dozen" List of Tax Scams for 2016 
IR-2016-29, Feb. 19, 2016 — The IRS today wrapped up its annual "Dirty Dozen" list of tax scams with identity theft topping this year's list but with phone scams and phishing schemes also deserving special mention.

Frivolous Tax Arguments Completes the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season 
IR-2016-27, Feb. 17, 2016 – The IRS today finished its 2016 “Dirty Dozen” tax scams list by warning taxpayers against using frivolous tax arguments to avoid paying their taxes.

Abusive Tax Shelters Again on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season 
IR-2016-25, Feb. 16, 2016 — The IRS today said using abusive tax shelters and structures to avoid paying taxes continues to be a problem and remains on its annual list of tax scams known as the “Dirty Dozen” for the 2016 filing season.

Falsifying Income to Claim Tax Credits is on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season 
IR-2016-23, Feb. 12, 2016 — The IRS today warned taxpayers to avoid schemes to erroneously claim tax credits on their returns, which is on the annual list of tax scams known as the “Dirty Dozen” again for the 2016 filing season.

Excessive Claims for Business Credits is on IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season 
IR-2016-22, Feb. 11, 2016 — The IRS today warned that taxpayers should watch for improper claims for business credits, which is on the “Dirty Dozen” list of tax scams for the 2016 filing season.

Falsely Padding Deductions on Returns is on the IRS Annual “Dirty Dozen” List of Tax Scams to Avoid 
IR-2016-21, Feb 10, 2016 -- The Internal Revenue Service today warned taxpayers to avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe and possibly receive larger refunds.

Inflated Refund Claims Again Made the IRS Dirty Dozen List of Tax Scams for the 2016 Filing Season
IR-2016-18, Feb. 8, 2016 -- The Internal Revenue Service today warned taxpayers to be on the lookout for unscrupulous tax return preparers pushing inflated tax refund claims. This scam remains on the annual list of tax scams known as the “Dirty Dozen” for the 2016 filing season.

Hiding Money or Income Offshore Resides on the “Dirty Dozen” List of Tax Scams for the 2016 Filing Season 
IR-2016-17, Feb. 5, 2016 --The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

 

Of course phishing and identity theft are key components, as well as fake charities and return preparer fraud, but these are less likely of an issue in LB&I so I did not include these types of activities here.

Areas firms may want to particularly pay attention to include research credit (a lot of promoters entering the field of this recently made permanent credit and some major firms entering this at an explosive rate – beware of something sounding too good to be true – especially smaller entities), financial products not meeting all of the requirements necessary (§831(b), §419, §79,) and others. 

The IRS is asking the taxpayers that have been cooperating with the IRS that are now in the IRS Compliance Assurance Program (CAP) what they think the IRS should do.  These are taxpayers that cooperate very well with the IRS.
 

The IRS has an advisory group known as the IRS Advisory Committee (IRSAC) made up of private sector representatives that provides information to the IRS in an advisory capacity.  They too have weighed into this process.   This is their latest report released February 16, 2016.

It’s too early to tell what the IRS will do, but clearly there is a lot in the works for 2017 with some major changes coming.   The IRS has not brought their managers together like this in over five years.  Stay tuned.

About the author

Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at mg@mikegreg.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]