14^th Annual NYU Tax Controversy Forum
On June 23 And 24, 2022!

Tax Compliance and Enforcement Update Part I

Voluntary compliance and enforcement of the tax law are at the heart of our tax system. Over the past several years, the IRS and DOJ have been challenged to find new and more efficient ways to ensure that all taxpayers pay the correct amount of tax. These panels provide an update on new developments and priorities across various divisions of the IRS and the DOJ.

Finance, technology, and law are constantly evolving, and tax law is no exception. Taxpayers and their advisors are always on the lookout for new opportunities to reduce taxes. This panel will explain how the IRS keeps up with the changing profile of tax avoidance and tax evasion. The panel will also introduce the IRS’ new Emerging Issues Group and describe how it will go about discovering and confronting the latest transactions designed to avoid or evade tax.

The IRS continues to refine its focus on large taxpayers, which tend to have complicated issues and examinations. This panel will discuss a number of initiatives that directly impact the LB&I taxpayer, including an update on the Compliance Assurance Process (“CAP”), which allows eligible taxpayers to undergo a real-time pre-filing audit; the status of Rev. Proc. 94-69, which allows large corporate taxpayers to disclose certain tax issues after the opening of an examination; LB&I’s application of the recent Chief Counsel Advice addressing the documentation requirements for research credit claims; and LB&I’s presence at Appeals conferences. The discussion will also address the IRS’ current partnership initiatives and recent developments in transfer pricing.

Our tax system is based on extremely complex rules and regulations which govern how taxes must be reported and paid. The Administrative Procedure Act generally requires the Treasury Department to follow specific procedures designed to give the public notice and an opportunity to comment before certain kinds of rules and regulations are enacted. Recent court decisions have invalidated IRS notices for failure to follow these procedures and have allowed taxpayers to seek injunctions against the IRS in limited situations. This panel will discuss these decisions and their impact on current audits and litigation as well as the IRS’ authority to enforce existing rules and regulations.

Audits of partnerships and other pass-through entities were previously governed by special procedures under the Tax Equity and Fiscal Responsibility Act (“TEFRA”). For tax years 2018 and forward, however, audits of partnerships and pass-throughs will be governed by the new Centralized Partnership Audit Regime. The new regime will dramatically change the way audits are handled and practitioners must understand the new rules to effectively represent their clients and avoid costly mistakes. This panel will discuss the new regime and the complexities of transitioning from TEFRA. The panel will also suggest ways to prepare for and effectively manage a partnership audit under the new rules.

The IRS automatically assesses penalties for foreign asset information returns that it considers delinquent or incomplete. The mistakes that give rise to these failures are often very minor compared to the amount of the penalties assessed. Under current IRS procedures, the only pre-payment remedy is to rely on the IRS to exercise its discretion to abate the penalties based on reasonable cause. This panel will provide tips for navigating the penalty abatement process to help taxpayers avoid incurring significant penalties for relatively minor foot faults.