California Business Tax Audit – IRS Tax Audit and Tax Court Avoided By IRS’ Tax Resolution Program

California Tax Attorney:

Internal Revenue Service IRS TAX announced that California businesses and associations have until Aug. 31 to submit tax issues to the Internal Revenue Service to be included in the Fall 2008 review in the Industry Issue Resolution (IIR) Program so that these issues could be resolved outside of IRS Tax Audit or the involvment of the United States Tax Court US TAX COURT. This program really does help address many common tax issues and may help California business owners avoid a full blown IRS tax audit which can be costly and time consuming to taxpayers.

IIR is an IRS IRS TAX program to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues submitted by associations and others representing both small and large business taxpayers, resulted in tax guidance that has affected thousands of taxpayers.

Recent submissions accepted into the IIR by Internal Revenue Service IRS TAX program include:

Integrated Public Utilities – regarding an optional method to be used by integrated utility companies in computing their qualified production activities income under IRC section 199(c). Auto Last In First Out – for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars.

Recent guidance issued by Internal Revenue Service IRS TAX as a result of the IIR program includes:

A safe harbor pooling method, the Vehicle-Pool Method, is available for resellers of cars and light-duty trucks under the last-in, first out (LIFO) inventory method effective for tax years ending on or after December 31, 2007, (Revenue Procedure 2008-23)
Valuation of Parts Inventory by Heavy Equipment Distributors (Revenue Procedure 2006-14)
Clarification regarding circumstances when facsimile signatures may be used to sign employment tax forms. (Revenue Procedure 2005-39)
Explanation of the circumstances under which insurance companies that make incentive payments to health care providers will be permitted to include those payments in unpaid losses. The revenue procedure also provides procedures under which taxpayers may obtain automatic consent of the Commissioner to change their accounting method for those payments. (Revenue Procedure 2004-41)

For each issue selected, an IIR team of Internal Revenue Service IRS TAX and Treasury personnel gather relevant facts from taxpayers or other interested parties affected by the issue. The goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through IRS Tax Audit. IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36.

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