Large Business and International Examination Process Effective May 1, 2016
Publication 521, the Large Business and International (“LB&I”) Examination Process, has been posted and will replace
Publication 4837. The LB&I Examination Process (“LEP”) will apply to new cases beginning May 1, 2016, and for cases already in process as of May 1, 2016. The IRS will transition to the LEP process by adopting changes in the execution and resolution phases of an examination.
According to the IRS, the new examination process uses an issues based approach, which will apply from the IRS’s first contact with the taxpayer through the final resolution of issues. The new guidelines provide on organizational approach for conducting professional examinations as the new process is designed to establish the roles and responsibilities of both IRS examiner and taxpayers during an examination.
The LB&I division has jurisdiction over business taxpayers with more than $10 million in assets as well as certain global high wealth individuals and taxpayers with international compliance issues. This publication follows an LB&I reorganization that is intended to change the way the IRS examines large businesses. The publication lists three phases to the LB&I examination process:
Planning Phase
- Communication
- Issue Team Concept
- Examination Plan
Execution Phase
- Issue Development Process
- Written Acknowledgment of the Facts for Unagreed Issues
Resolution Phase
- Issue Resolution
- Exit Strategy
While those stages have been part of the IRS’s quality examination process for some time, LB&I’s goal is to set forth guidelines and responsibilities within these parameters for both the IRS and taxpayers, encouraging a system of cooperation, transparency and responsiveness.
One area of controversy with regard to the new publication is LB&I’s policy of limiting informal claims for a refund to the 30-day period beginning with the opening conference. It appears that due to resource constraints, the IRS stated that refund claims submitted after that 30-day period must be filed as formal claims for a refund using Forms 1120X or 1040X, or Form 843. However, informal claims that pertain to an issue under examination, may be accepted after the 30-day period ends.
If you have any questions or concerns, please reach out to a member of Withum’s International Services Team at [email protected].
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Mark Farber, CPA, Partner 212-751-9100 [email protected] View Experience
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