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Government Questions the Benefits of IRS Audit Campaigns

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:

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.




Understanding LB&I “Campaigns”

On March 3, 2017, KPMG and the Internal Revenue Service (IRS) held a joint webcast presentation regarding the Large Business & International’s (LB&I) new “Campaign” examination process.  The IRS speakers for the presentation were Tina Meaux (Assistant Deputy Commissioner Compliance Integration) and Kathy Robbins, Director (Enterprise Activities Practice Area). On February 1, 2017, we blogged about this new IRS program.

The IRS explained that Campaigns are a fundamental change in the way the IRS will conduct examinations in the future, and are the result of the IRS’s ever-shrinking resources.  The Campaigns reflect the LB&I Division’s need to focus on risks, drive compliance objectives, and efficiently and effectively respond with a variety of work streams.

The general principles that guide the Campaign program are:

  • Flexible and well-trained work force.  Because of funding cuts, the IRS has not been able to hire examiners in recent years.  In connection with the Campaigns, the IRS will implement additional training, including “just-in-time” training, to help the IRS react to a dynamic examination environment.
  • Better selection of work.  The IRS is using data analytics and internal and external feedback to assist in shaping Campaigns.
  • Tailored treatment.  The IRS is developing an integrated process to identify compliance risks, and identify the work streams needed to address those risks.
  • Integrate feedback loop.  This is the cornerstone of the Campaign program.  The IRS admitted that it cannot implement an effective and efficient process without feedback from both internal and external stakeholders.  To be successful the feedback needs to be “just-in-time,” not merely post-audit.

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