The IRS’s Large Business and International Division has identified 13 “campaigns,” or issues it will target in examinations, in the coming year. While the list targets large businesses, don’t be surprised if the issues trickle down to mid-sized and smaller businesses, too.
The IRS is turning to an issue approach to audits and is focusing on those compliance issues that present the greatest risk, making the most efficient use of examination resources.
The 13 areas the IRS plans to target include:
- losses claimed in excess of basis in S corporations;
- related-party transactions;
- transfer pricing associated with inbound distribution of goods from related parties outside the United States;
- the completed contract method of accounting applied by land developers;
- examinations of the Qualifying Advanced Energy Project Credit (Code Section 48C – e.g., an example is building a factory to manufacture solar panels)
- declines and withdrawals from the offshore voluntary disclosure program;
- repatriation of income from overseas locations;
- foreign companies doing business in the United States that are not filing appropriately;
- deferred variable annuity reserves and life insurance reserves;
- basket transactions that seek to treat ordinary income and short-term capital gain as long-term;
- micro-captive insurance contracts;
- application of the domestic production activities deduction (DPAD) to certain entertainment products; and
- risks associated with larger, more complex pass-through partnerships.
The IRS release provides little detail about how the IRS intends to approach the 13 issues. We would not expect the IRS to completely replace or revamp current IRS examination processes. Wegner CPAs will continue to monitor these and other important IRS issues as they become known.