January 15th, 2010 | Published in 5.4 - Audit Commentary | 3 Comments
On April 1, 2007, the IRS’s Large and Mid-Size Business Division (LMSB) issued new Internal Revenue Manual (IRM) section 4.51.6, Issue Management Process Guide. This IRM section provides an overview of the Tier Issue Focus (TIF) Program, and outlines a “triage” process for identifying significant tax compliance issues. At least annually, the IRS evaluates issues received from the field to determine their priority based on their current and/or potential non-compliance risks. The Industry Director then classifies each significant issue into one of three tiers, as follows:
Tier I – High Strategic Importance
Tier II – Significant Compliance Risk
Tier III – Industry Risk.
A good overview of the current TIF issues can be found here.
The R&D Tax Credit is listed as a Tier I – High Risk Transaction, which means it’s of high strategic importance to LMSB and has significant impact on more than one industry. Although Tier I issues are not always treated as mandatory work, examiners are instructed to always consider Tier I issues as part of EVERY examination.
What that means to you is if you are audited for ANY reason, and if you claimed an R&D Tax Credit on that return, the auditor MUST evaluate your R&D Credit and consider opening it up for further examination. If that happens, solid contemporaneous documentation will be critical in defending your claim for the Research and Development Tax Credit.
May 13th, 2010 at 4:51 pm (#)
[...] #1 on R&D Credit Claims was published on April 4, 2007, as a first attempt to address the IRS Tier I issue concerning the R&D Credit. Cheryl P. Claybough, Director of Field Operations East, was named as Issue Owner Executive for [...]
May 17th, 2010 at 6:07 am (#)
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May 19th, 2010 at 8:27 am (#)
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