This year has been marked with substantial changes in the manner in which the Internal Revenue Service (IRS) operates. Shrinking resources and retiring IRS professionals have marred the IRS and its efficiency. The pervasive theme for 2016 was trying to do the job with fewer resources. For example, IRS audits continue to devolve with standardized information document requests (IDRs), international practice unit guides and issue-focused examinations (mostly focused on international tax issues). We say “goodbye” to old friends [au revoir Compliance Assurance Process (CAP) Program] and hello to new rules (e.g., partnership entity audit rules and adjustments). And we have born witness to the slow evisceration of the independence of IRS Office of Appeals.
As we turn the corner to a new year, we expect the IRS’s war on taxpayers to manifest itself in “campaign” after “campaign,” reminiscent of the tiered issue system of days gone by. We expect coordination on a national level to reside with IRS “issue specialists” controlling and dictating audits and appeals, which will increasingly challenge the efficiency of pre-litigation resolution techniques. The end result of these contractions may very likely be an increase in tax litigation as frustration with the administrative process boils over. But the wild card, of course, is what changes will be ushered in by the new administration. Will it be business as usual, or will we see a complete overhaul of the system? Only time will tell, as we wait with bated breath for the ball to drop.