The Internal Revenue Service (Irs) announcement new advice Friday, aimed at considerably reducing exam times for the taxpayers of companies while making the audit process more collaborative and more efficient.
The temporary orientation memorandum introduces radical modifications to the way in which the IRS performs tax exams, with the implementation starting in 2025 and extending until 2026.
Why it matters
These modifications could fundamentally modify how companies undergo tax audits, which can save significant companies and resources during examination periods. The reforms target long -standing ineffectiveness which have tormented the corporate tax examination process, certain procedures taking years under current protocols.
For large companies, extended settlement options and rationalized processes could provide greater tax certainty and allow more predictable business planning. The changes also indicate the recognition of the IRS that its traditional examination methods may have been counterproductive both to the effectiveness of tax collection and the compliance of taxpayers.
What to know
The memorandum, entitled “Strengthening of the process of examining large companies and great efficiency, represents a significant change towards what IRS calls for a” culture of collaboration “with taxpayers to solve tax problems faster.
These audit process changes occur in the middle of a Wider series of IRS updates for the 2025 taxation year This affected individual taxpayers, including the increase in children’s tax credits, revised the 1099-K report thresholds and the tax-adjusted tax slices and standard deductions. While these changes have mainly had an impact on individual declarants, the July announcement specifically targets tax exams.
The new guidelines introduce three major changes in procedure that will reshape companies’ tax exams:
Elimination of recognition of the fact process: The IRS will delete its acknowledgment of receipt of the facts (AOF) The process of requesting information document by 2026, citing “a limited value and prolonged deadlines”. Until December 31, 2025, taxpayers can choose to participate in AOF procedures. This transition period allows the feedback of stakeholders before permanent implementation.
Extended resolution of accelerated problems: The memo specifies that the accelerated problem solving (AIR) now applies to large business cases, previously dealt with as part of the coordinated examination program. The air fence agreements allow the problems resolved to apply to all the years of declaration filed in the current audit cycle, which could resolve several years of potential disputes simultaneously.
Improved accelerated settlement journals: The IRS will implement more solid internal revision processes before refusing requests for settlement (FTS) of taxpayer applicants. Additional approvals are now necessary, supporting a broader use of this accelerated resolution process.
What people say
The Internal Returning Service wrote in the ad: “These modifications aim to improve the taxpayer service and the tax administration by rationalizing examination resources, by facilitating resolution in a timely manner and by accelerating tax certainty.”
File – A panel outside the internal income building building was photographed on May 4, 2021 in Washington.
AP photo / Patrick Semansky, file
What happens next
The changes will take place gradually over the next two years, the abolition of the AOF extending until 2025 and the full implementation expected by 2026.