IRS to broaden circumstances for requesting audit workpapers. (tax info).
Recently, the IRS announced (Announcement 2002-63) a change in policy which will allow agents more access to these workpapers when an audit client has undertaken a transaction which the Service believes constitutes a tax shelter. For returns filed after June 30, 2002, that include a "listed transaction," the IRS will request the tax accrual workpapers pertaining to that transaction. A listed transaction is one that (1) the IRS has cited in published guidance as a tax avoidance transaction; or (2) is "substantially similar" to a published tax avoidance transaction.
The IRS will generally request the tax accrual workpapers under the following circumstances:
(1) If a listed transaction was properly disclosed to the IRS, the Service will routinely request only those workpapers pertaining to the listed transaction.
(2) If an undisclosed transaction is discovered, the Service will routinely request all tax accrual workpapers.
(3) If a return involves multiple listed transactions, then the Service will, subject to its own discretion, request all tax accrual workpapers.
(4) To the extent a taxpayer has reported "financial accounting irregularities" (restatements, for example), the IRS will, subject to its own discretion, request all tax accrual workpapers--even if the listed transaction was disclosed.
(5) If a return filed prior to July 1, 2002, involved an undisclosed listed transaction, the IRS may request the tax accrual workpapers pertaining to that transaction.
The Supreme Court, in the 1984 United States v. Arthur Young case, upheld the IRS's right to obtain tax accrual workpapers under the Service's summons authority. Although the IRS has traditionally exercised restraint in using this authority, it is relaxing this restraint to address what it sees as a need to curb tax avoidance transactions. The AICPA has already had one meeting with top IRS officials on the new policy, is planning a second, and will closely monitor IRS requests for tax accrual workpapers.
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|Date:||Sep 1, 2002|
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