IRS Introduces New Audit Procedures for LB&I

The IRS issued Publication 5125, Large Business & International Examination Process (LEP), which outlines a new examination process that applies beginning May 1, 2016, to all taxpayer examinations undertaken by the IRS Large Business and International (LB&I) division. IRS Publication 5125 replaces IRS Publication 4837, Achieving Quality Examinations Through Effective Planning, Execution and Resolution (QEP). For cases in process as of May 1, the IRS will transition to the LEP by adopting changes in the execution and resolution phases of an examination.

The new examination process uses an issues-based approach, according to the IRS, which will apply from the IRS’s first contact with the taxpayer through the final resolution of issues. The process is designed to establish the roles and responsibilities of both IRS examiners and taxpayers during an examination.

The IRS says that one change is that examiners are expected to work transparently and collaboratively with taxpayers to understand the taxpayer’s business and share issues that have been identified for examination.

The new process also introduces new requirements for examinations of claims for refund.

The IRS says the new process and new publication were the result of significant input from LB&I staff and external stakeholders. The AICPA was among the key stakeholders that provided informal feedback to the IRS.