Continuing a process that it began in January 2017, IRS Large Business and International division (LB&I) has announced the approval of five additional compliance campaigns.
Background. In January of 2017, IRS announced a new audit strategy for its LB&I division known as “campaigns”; the campaigns essentially shift the divsion’s strategy toward issue-based examinations based on compliance issues that LB&I determines present greater levels of compliance risk and thereby improving return selection. IRS initially selected 13 compliance issues when it rolled out this strategy (see “IRS rolls out Large Business and International campaign audit strategy“).
IRS added to the initial January 2017 list in November, 2017 (see “IRS adds new issues to LB&I’s campaign audit strategy“); March, 2018 (see “IRS adds new issues to LB&I’s campaign audit strategy“); May, 2018 (see “IRS again adds issues to LB&I’s campaign audit strategy“), July 2018 (“IRS adds five new issues to LB&I’s campaign audit strategy“), and September, 2018 (“IRS adds new issues to LB&I’s campaign audit strategy“).
New issues identified. On Oct. 3, 2018, IRS announced that it has identified and selected the following five additional campaigns:
- . . . Individual foreign tax credit—phase II. This campaign addresses taxpayers who have claimed the foreign tax credit but do not meet the requirements. IRS will address noncompliance through a variety of treatment streams, including examination.
- . . . Offshore service providers. The focus of this campaign is to address U.S. taxpayers who engaged offshore service providers that facilitated the creation of foreign entities and tiered structures to conceal the beneficial ownership of foreign financial accounts and assets, generally, for the purpose of tax avoidance or evasion. The treatment stream for this campaign will be issue-based examinations.
- . . . FATCA filing accuracy. This campaign addresses those entities that have FATCA (i.e., the Foreign Account Tax Compliance Act; Code Sec. 1471 through Code Sec. 1474) reporting obligations but do not meet all their compliance responsibilities. IRS will address noncompliance through a variety of treatment streams, including termination of the FATCA status.
- . . . 1120-F delinquent returns campaign. The objective of this campaign is to encourage foreign entities to timely file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, and address the compliance risk for delinquent 1120-F returns. This is accomplished by field examinations of compliance risk delinquent returns and external education outreach programs. (Form 1120-F is generally considered to be timely filed if it is filed no later than 18 months after the due date of the current year’s return, but the filing deadline may be waived in certain situations.)
- . . . Work opportunity tax credit (WOTC). This campaign addresses the consequences of WOTC certification delays and the burden of amended return filings. The campaign’s objective is to collaborate with industry stakeholders, Chief Counsel, and Treasury to develop an LB&I directive for taxpayers experiencing late certifications and to promote consistency in the examinations of WOTC claims.