IRS postpones TCMP audits.

The Internal Revenue Service has postponed for 60 days the taxpayer compliance measurement program (TCMP) audits. Originally scheduled to begin October 1, 1995, they are expected to start on December 1.

The TCMP is a line-by-line verification of over 150,000 tax returns. The program will provide Congress with data to formulate tax policy and create statistical models. It also will provide the basis for the computer program that scores all tax returns to make selections for the IRS's regular audit programs.

A spokesperson in the IRS national office in Washington, D.C., told the Journal that the delay would give the IRS time to analyze the implications of any budget constraints imposed by Congress. "By postponing the audits for 60 days we can review and determine what is feasible with the compliance program given the uncertainty of the appropriations budget for 1996," he said. President Clinton's budget proposed $405 million for the first year of TCMP audits, but House Republicans cut the 1996 budget for compliance audits to $266 million, while the Senate voted for no financing.

The IRS said it would re-evaluate all compliance programs within the TCMP and assess resources that may be needed to deliver critical activities or programs in other parts of the IRS, such as taxpayer services. "Much of the preparation is complete," said the spokesperson. "The returns already have been identified and selected for audit based on market segmentation."

The House Ways and Means Oversight Subcommittee held hearings on the TCMP in July 1995. Several witnesses expressed concern about the potential burden the program would put on taxpayers selected for audit. The American Institute of CPAs, in a letter submitted to subcommittee members in July, said that although the audits imposed substantial added burdens on those taxpayers selected, "the accumulation of statistically valid baseline data would help countless other taxpayers avoid an unnecessary audit."

FYI 

* The Internal Revenue Service has revised the list of countries whose taxes are noncreditable. Under Internal Revenue Code section 901(j), no foreign tax credit is available for taxes paid to countries with which the United States does nor maintain diplomatic relations, for example. Angola, Afghanistan, Cambodia and Vietnam were dropped from the list; Sudan was added.

* The IRS, in a private latter ruling, approved the use of a non-qualified 401(k) wraparound plan that could enable highly compensated employees to defer the maximum permissible amounts to a qualified 401(k) plan and reduce employer's administrative burdens.

* In a technical advice memorandum, the IRS ruled that state and local government agencies that provide a cafeteria plan for their employees were not exempt from the form 5500 filing requirement under the state and local government plan exemption. These agencies should file an annual information return for the plan on form 5500.