This article applies to those who have been the subject of an IRS examination or audit. The Large Business & International Division (LB&I) announced that it’s extending the suspension of information document request (IDR) enforcement procedures through September 30, 2021.
Abstract: In a recent memo, the Large Business & International division of the IRS announced that it’s extending the suspension of information document request enforcement procedures through September 30, 2021. This article examines the details of this important development.
IRS Extends Document Request Enforcement Suspension
In a recent memo, the Large Business & International division (LB&I) of the IRS announced that it’s extending the suspension of information document request (IDR) enforcement procedures through September 30, 2021. The division also announced that other exam activities will continue under normal procedures (with some exceptions) through the same date. Here are some additional details on this important development.
Background on the Suspension
In March 2020, the LB&I stated that IDR enforcement procedures would be suspended through July 15, 2020. Note that an IDR is issued on IRS Form 4564, “Department of the Treasury/Internal Revenue Service Information Document Request.” It’s a form that the IRS uses during a tax audit to request information from a taxpayer.
In April 2020, the LB&I clarified its compliance priorities for the period ending July 15, 2020. Generally, the division said, it wouldn’t begin new return examinations before July 15, 2020. However, LB&I managers had the discretion to open an examination into a previous year, subsequent year and related returns associated with an existing examination.
In a December 2020 memo, the LB&I said it was generally extending the suspension of IDR enforcement procedures through June 30, 2021. However, for listed transactions (tax avoidance transactions identified by the IRS as listed transactions under applicable regulations), the December 2020 memo stated that examiners should follow existing organization-wide summons procedures.
Two Notable Exceptions
The December 2020 memo also clarified that LB&I exam activities would generally continue under normal procedures (with some exceptions) through June 30, 2021 “and thereafter,” with two notable exceptions:
- Appointments. Whether in person or virtual, an appointment could be scheduled depending on the taxpayer’s facts and circumstances. Although in-person contact was allowed, the IRS would continue to support performing its work virtually to accommodate its employees or taxpayers who may have concerns with in-person contact, which may require the need for extensions. Virtual appointments would continue to be conducted by WebEx or teleconference.
- The hold on new Discriminate Analysis Score (DAS) cases. The IRS uses this computer model to score examination potential for corporate returns with total assets of $10 million or more. The hold on these cases would continue. IRS managers, however, would have discretion in approving previous, subsequent and related returns associated with an existing DAS examination.
Most Recent Extension
The IRS has now extended the guidance in the December 2020 memo through September 30, 2021. As noted above, the December 2020 memo stated that the LB&I exam activities would continue under normal procedures (with some exceptions) through June 30, 2021 “and thereafter.” However, the new memo says that the LB&I exam activities will continue under normal procedures (with some exceptions) through September 30, 2021. That is, it deletes the “and thereafter” language.
In addition, the latest memo extends the approval period to deviate from IDR enforcement procedures and applies to the IDR enforcement process for taxpayers who are unable, because of the COVID-19 pandemic, to respond timely to an IDR.
Notwithstanding this deviation, managers retain the discretion to continue with the IDR enforcement process when, in their judgment, the interests of tax administration warrant — for example cases with short statutes of limitations or fraud development.
If you’ve been the subject of an IRS examination or audit, take note of this relief regarding IDR enforcement procedures. Your CPA can answer further questions.
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