The IRS has devoted fewer resources to auditing business taxpayers in recent years. While this fact is cold comfort to any company that has endured or is enduring IRS scrutiny, the fact remains that the IRS has not devoted the time or personnel to business audits that it once did.
In response, the IRS has signaled it will take a different approach to business audits. Specifically, the IRS is creating audit campaigns targeting specific types of transactions. Companies that conduct these types of transactions are more likely to be the subject of an IRS audit. While the IRS has not publicly commented on the types of transactions that will be the subject of these campaigns, it is likely that international taxation issues will make up one such campaign. Other campaigns will likely begin in the coming months.
How Will Audit Campaigns Impact Business Taxpayers?
From the business taxpayer's perspective, this approach is likely to have two disadvantages:
- IRS agents may have less discretion: The IRS is training its agents in so-called "boot camps" with the purpose of maintaining conformity as to various tax issues. As a result, IRS examination agents may not have the ability to judge each taxpayer's situation on its individual merits. This could lead to a more contentious, drawn-out audit process.
- Business taxpayers may face multiple campaign-based audits simultaneously: Rather than face the IRS in a single audit, a company may have to defend itself against different campaigns at the same time. This could complicate an already complicated situation.
While this new approach to business audits could create additional challenges for business taxpayers, the approach to audit defense remains the same. Strong records and accurate record-keeping are as essential as ever. As always, the guidance and counsel of knowledgeable, experienced legal counsel is critical. The attorneys of Goldburd McCone LLP provide exceptional representation to businesses across New York City, the United States and internationally in all aspects of tax law, including audit defense.
Source: IRS waging new audit campaigns against business taxpayers, Forbes, July 7, 2016, by Robin Greenhouse, Chelsea Hess and Kevin Spencer