On February 7, 2017 we posted IRS Has 13 New Compliance Campaigns for LB&I Taxpayers where we discussed our previous posted on October 9, 2015 LB&I Agents Lose Autonomy To Centralized Office That Will Be Using Data to Identify Compliance Risks For Audit! that discussed the fact that Tax practitioners will face new questions from examination teams as the IRS selects compliance risks based on data.
This is in conformity with the Large Business and International Division's (LB&I) move from individual audits of multinationals to broader considerations involving risk assessment, which was included in January 2017 announcement regarding the new audit strategy for its LB&I division known as "campaigns," essentially, shifting its strategy toward issue-based examinations based on compliance issues that LB&I determines present greater levels of compliance risk and thereby improving return selection. IRS initially selected 13 compliance issues when it rolled out this strategy.
On May 21, 2018 the IRS Announced the Identification of 6 Large Business and International Compliance Campaigns
These six additional campaigns were identified through LB&I data analysis and suggestions from IRS employees. LB&I's goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.
The six campaigns selected for this rollout are:
- 1. Interest Capitalization for Self-Constructed Assets
When a taxpayer engages in certain production activities they are required to capitalize interest expense under Internal Revenue Code (IRC) Section 263A. Interest capitalization applies to interest a taxpayer pays or incurs during the production period when producing property that meets the definition of designated property. Designated property under IRC Section 263A(f) is defined as (a) any real property, or (b) tangible personal property that has: (i) a long useful life (depreciable class life of 20 years or more), or (ii) an estimated production period exceeding two years, or (iii) an estimated production period exceeding one year and an estimated cost exceeding $1,000,000.
The goal of this campaign is to ensure taxpayer compliance by verifying that interest is properly capitalized for designated property and the computation to capitalize that interest is accurate. The treatment stream for this campaign is issue-based examinations, education soft letters, and educating taxpayers and practitioners to encourage voluntary compliance
- 2. F3520/3520-A Non-Compliance/Assessed Penalties
This campaign will take a multifaceted approach to improving compliance with respect to the timely and accurate filing of information returns reporting ownership of and transactions with foreign trusts. The Service will address noncompliance through a variety of treatment streams including, but not limited to, examinations and penalties assessed by the campus when the forms are received late or are incomplete.
- 3. Forms 1042/1042-S Compliance
- Taxpayers who make payments of certain U.S.-source income to foreign persons must comply with the related withholding, deposit, and reporting requirements. This campaign addresses Withholding Agents who make such payments but do not meet all their compliance duties. The Internal Revenue Service will address noncompliance and errors through a variety of treatment streams, including examination.
- 4. Nonresident Alien Tax Treaty Exemptions
This campaign is intended to increase compliance in nonresident alien (NRA) individual tax treaty exemption claims related to both effectively connected income and Fixed, Determinable, Annual Periodical income. Some NRA taxpayers may either misunderstand or misinterpret applicable treaty articles, provide incorrect or incomplete forms to the withholding agents or rely on incorrect information returns provided by U.S. payors to improperly claim treaty benefits and exempt U.S. source income from taxation. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
- 5. Nonresident Alien Schedule A and Other Deductions
This campaign is intended to increase compliance in the proper deduction of eligible expenses by nonresident alien (NRA) individuals on Form 1040NR Schedule A. NRA taxpayers may either misunderstand or misinterpret the rules for allowable deductions under the previous and new Internal Revenue Code provisions, do not meet all the qualifications for claiming the deduction and/or do not maintain proper records to substantiate the expenses claimed. The campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
- 6. NRA Tax Credits
- This campaign is intended to increase compliance in nonresident alien individual (NRA) tax credits. NRAs who either have no qualifying earned income, do not provide substantiation/proper documentation, or do not have qualifying dependents may erroneously claim certain dependent related tax credits. In addition, some NRA taxpayers may also claim education credits (which are only available to U.S. persons) by improperly filing Form 1040 tax returns. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
International Tax Audit by IRS LB&I ?
Contact the Tax Lawyers at
Marini & Associates, P.A.
Marini & Associates, P.A.
for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243).
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243).
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