Business and Coporate Income Tax

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For anyone who is struggling to understand how tax is filed for large and medium sized businesses, here is a chart from the IRS which helps describe the process for large business and corporate income tax.

Understanding the Large and Mid-Size Business (LMSB) Examination Process

Pre-Audit Planning, Examination Procedures and Issue Resolution Techniques

Your Rights as a Taxpayer

As a taxpayer, you have the right to fair, professional, prompt, and courteous treatment by IRS employees. Click on Notice 609 and Publication 1 to find out more about your rights when dealing with the IRS.

1.
Notice 609 – Privacy Act(pdf)
2.
Publication 1 – Taxpayer Rights(pdf)

What to Expect If Your Tax Return is Selected for Examination

Select one of the items below to find out more about the examination process.

1.
Publication 556(pdf) – The Examination of Returns, Appeal Rights, and Claims for Refund
2.
What is meant by the Start of an Examination
*
What Occurs During an Examination.
3.
Generally Requested Documents
4.
Case Classification
*
IRM 4.46.2.4 – 4.46.2.6.2 of the Team Managers Handbook

Revenue Procedure 94-69 (15-Day Disclosure Provision)

Revenue Procedure 94-69 provides that certain items disclosed within a 15-day time period may not be subject to the accuracy-related penalty. The procedure applies only to Coordinated Industry Cases. To read the full text of the Revenue Procedure, click on Revenue Procedure 94-69.

Facility Considerations

At the beginning of every examination, several practical matters regarding the examination site will be discussed. Click on Facility Considerations to see various factors related to this topic.

Recommendations to Facilitate Open Communication

Open communication between the Examination Team and the Taxpayer is the single most important action in completing an efficient and timely examination. Click on “ Communication Tips” for key suggestions in keeping the communication lines open and the examination progressing efficiently.

*
Form 4564, pdf
*
Form 5701, pdf

Joint Planning Process

The Internal Revenue Service emphasizes improving the examination process. LMSB recognizes that thoroughly involving the Taxpayer in audit planning will have a positive impact on examinations. Joint participation in this process benefits both taxpayers and the Service by increasing examination currency. It also provides certainty of results for both taxpayers (i.e. financial statements) and the Service (i.e. completed examinations) by minimizing open tax years. To improve the examination planning process, LMSB and the Tax Executives Institute (TEI) formed a team to develop a joint, issue driven, audit-planning process that engages all members of the audit team, including specialists, in conjunction with the taxpayer. To obtain additional information, click on Joint Planning Process.

*
Information for Large to Mid-Size Businesses(pdf)

Pre-Audit Planning, LIFE

Several planning steps occur during the preliminary phase of an examination. For example, certain records help to determine the scope of an examination. The Examination Team will consider the number and type of audit specialists needed. For instance, a computer audit specialist (CAS) may begin the process of identifying and obtaining computer records needed during the examination. In addition, the Examination Team will consider the use of LIFE (Limited Issue Focused Examination) rather than a traditional broad-based examination. Finally, the Examination Team will begin work on an audit plan. To find out more about any of the items, just click below.

1.
Automated Records (Rev. Proc. 98-25)
2.
Specialists
3.
LIFE (Limited Issue Focused Examination)
4.
Examination Plan
*
Form 4764, pdf
5.
Optional Examination Plan

Examination of Books and Records

The Examination Team follows standard procedures during an examination. Established procedures for requesting information are in place. In cases with refunds in excess of $2 million dollars, the Joint Committee of Taxation requires additional procedures. The Internal Revenue Manual requires the inspection and, if warranted, the examination of certain items as part of any examination. Procedures are in place to extend the statute of limitations, when necessary, to complete the examination. To find out more about any of these items, just click on one of the following links.

1.
Information Document Requests
*
Form 4564, pdf
*
4.46.4.4 – 4.46.4.4.4
2.
Joint Committee Procedures
*
Internal Revenue Manual 4.36.1 – 4.36.1.3
*
Internal Revenue Manual 4.36.2, Identification of Joint Committee Cases
3.
Concurrent Consideration of Related Returns; Compliance Checks; and Support Examinations of Related Entities in Different Locales
4.
Statute of Limitations (Publication 1035)(pdf)

Coordinated Issues

Certain issues affect a significant number of taxpayers. In order to ensure a uniform application of the law, Coordinated Issue Papers are available for these issues. To find out more, just click on the above link.

Multi-Tiered Classification of Issues

Recently, the Internal Revenue Service established procedures regarding the involvement of LMSB Executives, Senior Leaders, Technical Advisors or Field Advisors in an ongoing examination when Industry aligned cases are not under the line authority of the Industry Director. Internal Revenue Manual (IRM) sections 4.51.1 and 4.51.6 outline theseprocedures. Issues managed under the new procedures are classified as Tier I, Tier IIand Tier III. To obtain additional information, click on the preceding link.

*
Tier I
*
Tier II
*
IRM 4.51.1 – Rules of Engagement
*
IRM 4.51.5 – Industry Focus and Control of LMSB Compliance Issues (Tier I, Tier II and Tier III)(pdf)
*
IRM 4.51.6 – 4.51.6.11 and Exhibit 4.51.6.1

Issue Resolution Techniques

The Examination Team will consider and discuss whether any Early Resolution Tools may apply to your particular situation. Click on Issue Resolution Techniques to access detailed information on the various techniques.

*
Industry Issue Resolution (IIR) Overview
*
Pre-Filing Agreements (PFA)
*
Determination Letters and Letter Rulings
o
Revenue Procedure 2008-1
o
Revenue Procedure 2008-3
o
Revenue Procedure 2008-7
*
Advance Pricing Agreements
*
Technical Advice
o
Revenue Procedure 2008-2
*
Application of Appeals Settlement to CIC Taxpayers (CIC only)
o
Delegation Order 236
*
Settlement Authority for Coordinated Issues
o
Delegation Order 4-25 (Rev. 1)
o
IRM 4.46.5.6 – 4.46.5.6.3 Settlement Authority for Coordinated Issues
*
Accelerated Issue Resolution
o Revenue Procedure 94-67
o See IRM sections 4.46.5.6.8 – 4.46.5.6.9 of IRM 4.46.6
* Early Referral to Appeals
o
Revenue Procedure 99-28
o
Section 4.46.5.6.10 of IRM 4.46.5.6 – Early Referral to Appeals
*
Comprehensive Case Resolution (CCR) Pilot (CIC only)
o
Notice 2001-13
o
Notice 2000-43
*
LMSB Fast Track Process
*
Mediation Procedures for Appeals
o
Revenue Procedure 2002-44 (scroll down to Appeals Mediation)
o
IRM 35.5.5.4 – 35.5.5.8(2), Mediation
*
Arbitration Procedures for Appeals
o
Revenue Procedure 2006-44
o
IRM 35.5.5.1 – 35.5.5.3
o
IRM 8.26.6

Examination Closing Procedures

1.
Notice of Proposed Adjustment
*
Form 5701, pdf
2.
Revenue Agent Report/30-Day Letter
*
Form 4549, pdf
3.
Agreement with Revenue Agent Report, Form 870, pdf
4.
Closing Agreements
*
Form 866, pdf
*
Form 906, pdf
5.
Partial Agreements
6.
Internal Revenue Service’s Response to Protest (Rebuttal)
*
IRM 4.46.7.2.5
7.
Post Examination Critique
*
IRM 4.46.7.4 – 4.46.7.8, Post Examination Critique

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