The IRS is piloting changes to the Bridge phase of the Compliance Assurance Process (CAP) program, according to an IRS News Release. CAP is a cooperative pre-filing program for large corporate taxpayers. (IR 2023-25, 2/13/2023)
According to the IRS, the CAP process enables the taxpayer and the IRS to:
- Resolve issues before the taxpayer files their tax returns, and
- Shorten the IRS audit process
To participate in the CAP program, taxpayers must meet certain eligibility and suitability criteria and submit a completed application during the application period.
In 2018, the IRS established the CAP Bridge phase. Generally, the Bridge phase of CAP is reserved for taxpayers who are expected to receive a Full Acceptance Letter in their most recent CAP phase and continue to satisfy the CAP eligibility and suitability requirements. During the Bridge phase, the IRS does not accept any disclosures, conduct any reviews or provide any assurances to taxpayers in the CAP program.
See Changes announced to IRS’s Compliance Assurance Process (CAP) program (08/28/2018).
IRS responds to negative feedback.
Since its inception, the IRS has received negative feedback about the Bridge phase. Taxpayers have said that the Bridge phase deprived them of the most important part of participating in CAP – IRS review of their tax compliance.
In response to this feedback, the IRS will pilot a new Bridge phase, called “Bridge Plus.” According to the IRS, to participate in the Bridge Plus phase taxpayers will be required to provide book-to-tax reconciliations, credit utilization and other supporting documentation after their audited financial statement is finalized. An IRS team will then assess the documents to determine if the taxpayer is suitable for the Bridge Plus phase.
After being accepted into the Bridge Plus phase, taxpayers must submit to the IRS an unfiled draft tax return. The IRS will compare the information on the unfiled return with the information the taxpayer provided during the suitability check. If the draft return is consistent, the IRS will tell the taxpayer to file a return. If the filed return is consistent with the taxpayer’s prior submissions, the taxpayer will receive a full acceptance letter.
The IRS will offer the Bridge Plus pilot only to CAP participants that were in the Bridge phase for 2022 and have been recommended to participate in Bridge again in 2023. The IRS will notify CAP taxpayers if they are eligible to participate in the pilot.
For more information about IRS’ examination of taxpayers’ returns, see Checkpoint’s Federal Tax Coordinator ¶T-1090 et seq.
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