The Internal Revenue Service (IRS) Large Business and International (LB&I) Division continues to churn out new audit “campaigns.” For our prior coverage, please click here. The most recent set of campaigns were announced on April 16, 2019, bringing the grand total to 53 campaigns since the program’s initial release on January 13, 2017. The IRS explains that the goal of the campaigns is to “improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.”

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The Internal Revenue Service (IRS) Large Business and International (LB&I) Division recently released several directives (LB&I Directives) geared toward transfer pricing. LB&I acknowledges that significant LB&I resources are devoted to transfer pricing issues, and such issues make up a substantial portion of the LB&I inventory. It appears that these directives are aimed at ensuring that LB&I resources are utilized in the most efficient and effective manner on transfer pricing issues. A link to each LB&I Directive and a short summary is provided below.

Interim Instructions on Issuance of Mandatory Transfer Pricing Information Document Request (IDR) in LB&I Examinations

This LB&I Directive advises LB&I examiners that it is no longer necessary to issue the mandatory transfer pricing information document request (IDR) to taxpayers that have filed Form 5471, Information Return of U.S. Person with Respect To Certain Foreign Corporations, or Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, or engaged in cross-border transactions. An update to Part 4.60.8 of the Internal Revenue Manual will be made in the future to further explain this change.
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As most taxpayers know, under Internal Revenue Code (Code) Section 6501(a), the Internal Revenue Service (IRS) generally has three years after a tax return is filed to assess any additional tax. However, Code Section 6501 provides several exceptions to this rule, including but not limited to the following.

  • False or fraudulent returns with the intent to evade tax (unlimited assessment period)
  • Willful attempt to defeat or evade tax (unlimited assessment period)
  • Failure to file a return (unlimited assessment period)
  • Extension by agreement (open-ended or for a specific period)
  • Adjustments for certain income and estate tax credits (separately provided in specific statutes)
  • Termination of private foundation status (unlimited assessment period)
  • Valuation of gifts of property (unlimited assessment period)
  • Listed transactions (assessment period remains open for one year after certain information is furnished)
  • Substantial omission of items (six-year assessment period)
  • Failure to include certain information on a personal holding company return (six-year assessment period)

If the IRS issues a notice of deficiency and the taxpayer files a petition in the Tax Court, the statute of limitations on assessment is extended until after the Tax Court’s decision becomes final. See Code Section 6503(a); see also Roberson and Spencer, “11th Circuit Allows Invalid Notice to Suspend Assessment Period,” 136 Tax Notes 709 (August 6, 2012).
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