Each New Year, many of us look back on the previous year’s activities, and determine what we want to accomplish in the coming year – lose weight, start exercising, read more tax articles, etc. The Internal Revenue Service (IRS) Large Business & International (LB&I) Division memorialized its New Year’s resolutions for 2019 in Publication 5319. So, for taxpayers with more than $10 million in assets, you may want listen up and see what the IRS has in store for 2019!
LB&I’s goals come during a time of significant reduction in workforce and increase in responsibilities. LB&I experienced a significant reduction in workforce between October 2017 and October 2018, reducing its workforce by a net of 344 employees (down from 4,868 to 4,524) spread across several positions. This included 18 individuals in leadership, 218 revenue agents and 25 tax examiners. With the exception of tax law specialists, which remained at 24, every other position saw a reduction in personnel. This reduction in personnel comes at critical point for LB&I, as it undoubtedly spent much of its time and resources last year working on guidance necessary to implement the substantial changes made by the Tax Cuts and Jobs Act enacted in late 2017. It will continue to be responsible for training and compliance related to those changes.
The 2019 goals were accompanied by a message from LB&I Commissioner Douglas W. O’Donnell and LB&I Deputy Commissioner Nikole C. Flax (the Commissioners) to LB&I employees addressing concerns raised across the nation. Those concerns focused on the quality of employee workload and assignments and on carrying out the IRS’s mission. The Commissioners resolved to improve employee satisfaction and overall efficiencies this year. They also committed to assignment improvements and validated each team member’s significance as the “most important asset.”
LB&I’s five major goals for 2019 are: (1) improved compliance activities, (2) implementation of major program priorities, (3) workforce hiring and training, (4) improved operations and (5) internal and external communication. These goals fold into the IRS’s agency-wide five-year strategic plan.
LB&I’s plan for 2019 includes working more efficiently to target noncompliance using improved issue-based campaigns and new data analytics. It also identified areas of significant compliance risks.
- Issue-Based Campaigns: In 2017, LB&I shifted its strategy towards issue-based examinations, and launched several “campaign” issues. It has since identified 50 campaign issues. (We have reported extensively about the IRS’s campaigns). In 2019, LB&I plans to create new campaigns, continue to streamline the process and improve time management and allocation of resources to those campaigns.
- Data Analytics: The IRS has “made significant strides in using data and data analytics” to review taxpayers, identify specific risks and employ tools to classify returns as high, medium or low risk. The IRS is pleased with the early results of this data. It indicated that it would pilot an approach using this data in the beginning of the year.
- Significant Compliance Risk Areas: The IRS will focus on several areas of significant compliance risk and will work on the most effective way to bring taxpayers into compliance on these areas. It named the following two areas: Syndicated Conservation Easements and Micro Captive Insurance.
Practice Point: A strong tax system requires cooperation and transparency between the IRS and taxpayers. LB&I’s goals for 2019 are commendable, both in terms of improving job satisfaction for its employees and working to improve efficiencies for taxpayers. We expect a continued reliance on focused examinations for our large taxpayers in 2019. The campaigns identify the areas and issues that the IRS will be targeting. If you have these issues, it is in your best interest to make sure that you are aware of all of the required documentation and maintain support for positions taken on a return.