Publication 5125
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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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IRS Updates LB&I Examination Process Guide

Effective May 1, 2016, the Internal Revenue Service (IRS) will begin applying previously announced changes to the Large Business & International (LB&I) Division’s examination process.  Publication 5125 begins by setting forth expectations for the LB&I exam team and the taxpayer or its representatives.  It then addresses IRS expectations regarding refund claims.  Finally, the publication discusses the three stages of the LB&I examination process—planning, execution and resolution—and how the IRS and taxpayers should conduct themselves during each stage.

The IRS had previously released draft publication 5125 in November 2014, which concerned some taxpayers, particularly with respect to the statement that informal refund claims would only be accepted within 30 days of the opening conference.  Final Publication 5125 retains the 30-day period for making informal refund claims, but provides that LB&I will not require a formal claim after the 30-day period if an issue has been identified for examination (unless IRS published guidance specifically requires a formal claim).  Exceptions may also be granted by LB&I senior management.

Publication 5125 also made changes to the examination process based on the recent shift to an issue-based audit approach.  The case manager will have overall responsibility for the case, which may be beneficial to taxpayers involved in recent audits where domestic and international personnel appeared to share responsibility for the conduct of the audit.  Factual and issue development are also heavily stressed, with an emphasis on the information document request (IDR) process and a focused and useful examination plan.  The publication also states that IRS team members are expected to seek the taxpayer’s acknowledgment of the facts and to resolve any disputes prior to the issuance of Form 5701, Notice of Proposed Adjustment.

Taxpayers should review Publication 5125 to familiarize themselves with the current audit process and to ensure that IRS team members are following the guidance.  To the extent an IRS team member is not following the guidance, taxpayers should not hesitate to discuss the matter with the team manager.




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