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IRS's New Enforcement Initiatives Are Aimed At Individuals

by Mike Godfrey, Tax-News.com, Washington

25 July 2019


On July 19, 2019, the United States Internal Revenue Service Large Business and International Division announced six additional compliance campaigns.

According to the IRS, the campaigns were identified through LB&I data analysis and suggestions from IRS employees. The goal of the campaigns is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources. To date, LB&I has announced a total of 59 compliance campaigns.

The campaigns are described by the IRS as follows:

S Corporations Built in Gains Tax

C corporations that convert to S corporations are subjected to the Built-in Gains tax (BIG) if they have a net unrealized built-in gain and sell assets within five years after the conversion. This tax is assessed to the S corporation. LB&I has found that S corporations are not always paying this tax when they sell the C corporation assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. The IRS will tackle this non-compliance in this area with issue-based examinations, soft letters, and outreach to practitioners.

Post OVDP Compliance

US persons are subject to tax on worldwide income. This campaign addresses tax non-compliance related to former Offshore Voluntary Disclosure Program (OVDP) taxpayers' failure to remain compliant with their foreign income and asset reporting requirements. The IRS will address tax non-compliance through soft letters and examinations.

Expatriation

US citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The IRS will address non-compliance through outreach, soft letters, and examination.

High Income Non-filer

US citizens and resident aliens are subject to tax on worldwide income. This is true whether or not taxpayers receive a Form W-2 Wage and Tax Statement, a Form 1099 (Information Return) or its foreign equivalents. This campaign will concentrate on bringing into compliance those taxpayers who have not filed tax returns.

US Territories – Erroneous Refundable Credits

Some bona fide residents of US territories are erroneously claiming refundable tax credits on Form 1040, US Individual Income Tax Return. This campaign will address non-compliance through outreach and traditional examinations.

Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009

This campaign addresses compensation deferred from non-qualified entities attributable to services performed before January 1, 2009. In general, Internal Revenue Code (IRC) Section 457A requires that any compensation deferred under a non-qualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation. The campaign objective is to verify taxpayer compliance with the requirements of IRC Section 457A through issue-based examinations.

TAGS: court | compliance | Offshore | tax | business | law | employees | tax credits | United States | services | Compliance | Tax

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