On September 28, 2019, the Treasury Inspector General for Tax Administration (TIGTA) issued a report titled Initial Compliance Results Warrant a More Data-Driven Approach to Campaign Issue Selection.
As the name of the report describes, the TIGTA analyzed whether the Internal Revenue Service (IRS) audit campaigns were effective and efficiently administered. We have written at length regarding the IRS’s “campaign” methodology:
- More IRS “Campaigns?! IRS Announces Six More Examination Campaigns
- IRS Announces More LB&I Campaigns!
- The LB&I Campaigns Keep Coming!
- LB&I Announces Five New Campaigns
- LB&I Announces Six New Campaigns
- Are LB&I’s Campaigns Stuck in the Trenches?
- IRS Continues to Barrage Taxpayers with New Campaigns
- LB&I’s Final Campaigns Webinar: Section 48C Energy Credits and Completed Contract Method for Land Developers
- The View from Here: LB&I’s Cross-Border Activities Campaigns Webinar
- Understanding LB&I “Campaigns”
- Run for Cover—IRS Unveils Initial “Campaigns” for LB&I Audits
- Some Questions Posed by Declining Audit Rates and Audit Campaigns
- IRS Wages ‘Campaigns’ against Taxpayers
The report questions how the IRS selected the campaigns it has unleashed on taxpayers. Upon inspection, it appears that the IRS did not have a systematic approach to choosing which issue would become a campaign. Instead, the approach was seemingly ad hoc, and was open to employee suggestions instead of empirical analysis. The TGITA suggests that going forward the IRS use a more data-driven selection process for its campaigns. The idea would be to analyze where the IRS could get the biggest bang for its resource bucks in terms of dollars as well as compliance goals. Accordingly, the TGITA recommends the IRS adopt a formal process for selecting and prioritizing issues for campaigns, and the IRS use actionable metrics, based in part on compliance results, to select the most productive inventory.
Practice Point: We have heard in the past that some campaigns were based on issues that revenue agents and other field personnel identified, but it was never clear whether the IRS was applying a systematic approach. We expect now that the IRS will be more mindful with its approach, focusing on issues with substantial dollars associated with them, and also where the IRS wants to ensure taxpayer compliance with the Internal Revenue Code.