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What the New IRS Audit Campaigns Mean for Your Organization

The Internal Revenue Service has been shrinking for years, in budget and in workforce. In 2016 alone, the governmental agency said it expected its headcount to shrink by 2,000 to 3,000 people by year’s end. Thus, the IRS has to do more with less, and that means a new tactic for tax audit campaigns in 2017.

The IRS’ Large Business and International division in 2017 will not be hunting and pecking for problems within individual corporations. Instead, it will be focusing on 13 “issues of concern.”

The following is a rundown of how these new audit campaigns could impact your company, and what you can do to prepare for the possibility of being audited.

The “Issues of Concern”: First, here’s a quick look at the 13 issues of concern, also referred to as “campaigns.” In alphabetical order: Basket Transactions, Deferred Variable Annuity Reserves & Life Insurance Reserves IIR, Domestic Production Activities Deduction, Form 1120-F Non-Filer Campaign, Inbound Distributor Campaign, Land Developers – Completed Contract Method (CCM), Multi-Channel Video Program Distributors (MVPD’s) and TV Broadcasters, IRC 48C Energy Credit, Micro-Captive Insurance, OVDP Declines-Withdrawals, Related Party Transactions, Repatriation Campaign, S Corporation Losses Claimed in Excess of Basis, TEFRA Linkage Plan Strategy.

What This Means for You: Per the IRS, “These campaigns were identified through LB&I extensive data analysis, suggestions from IRS compliance employees and feedback from the tax community. 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.” In other words, the IRS didn’t just guess here – these are the areas it believes are the most problematic, so if you fall under any of these umbrellas, you’re more likely to get audited if your operations and figures raise any red flags.

What to Do: For one, be honest. For instance, the IRC 48C Energy Credit Campaign “ensures that only those taxpayers whose advanced energy projects were approved by the Department of Energy, and who have been allocated a credit by the IRS, are claiming the credit.” In other words, being disingenuous about claiming this and other credits is an easy way to get noticed. But more importantly, you must get your financial house in order and audit-ready. That means following a few basic tips, such as employing strict record-keeping standards and not rounding during data entry.

If you find yourself in the IRS’ crosshairs, however, or if you want to discuss or prepare for the eventuality of an audit, get in touch with McManamon & Co. We offer audit services, including risk assessment and reviewing internal controls, and our auditing experts have more than 40 years of experience working with entities including corporations, contractors and service organizations.

Be prepared for what the IRS might have in store for you. Call us at 440.892.8900, or get in touch with us online.

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