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IRS Audits Tax Procedure

IRS De-Coordinates All Coordinated Issue Papers

The IRS de-coordinated its remaining Coordinated Issue Papers yesterday. This is the final step in the IRS ending its coordinated issue or tiered program.

The IRS’s coordinated issue or tiered program was how the IRS was identifying and working challenging tax issues that presented compliance problems. Coordinated Issue Papers were instructions for IRS auditors on how to handle specific tax issues. The IRS issued these papers for various tax issues that presented challenges for the IRS to audit. The goal was to ensure that IRS auditors were applying the law consistently in these cases across the country.

The coordination of issues and labeling them by tier (or severity) cast a shadow over the tax issues, which lead many IRS agents, practitioners, and taxpayers to view the issues and the taxpayers who had the issues as being problematic or trouble.

The research tax credit is a good example. The IRS issued several coordinated issue papers for the tax credit. The result was that the tax credit–which was enacted into law by Congress–was viewed as a tax credit that only troublesome taxpayers would claim.

The IRS replaced this coordinated issue system with its internal group and network system. This new system is supposed to be akin to the pre-coordinated issue system whereby the IRS made technical guidance employees available to IRS agents for more complicated tax issues. The IRS is expected to start releasing the publications or reports from these groups and networks soon. Hopefully these reports will present a more balanced view of the tax issues.