The Internal Revenue Service (IRS) announced new guidance on Friday aimed at dramatically reducing examination times for corporate taxpayers while making the audit process more collaborative and efficient.
The Interim Guidance Memorandum introduces sweeping changes to how the IRS conducts business tax examinations, with implementation beginning in 2025 and extending through 2026.
Why It Matters
These changes could fundamentally alter how corporations experience tax audits, potentially saving businesses significant time and resources during examination periods. The reforms target long-standing inefficiencies that have plagued the corporate tax examination process, with some procedures taking years to complete under current protocols.
For large corporations, the expanded settlement options and streamlined processes could provide greater tax certainty and allow for more predictable business planning. The changes also signal the IRS’s recognition that its traditional examination methods may have been counterproductive to both tax collection efficiency and taxpayer compliance.
What To Know
The memorandum, titled “Reinforcing the Customer Focused, High Efficiency Large Business & International Examination Process,” represents a significant shift toward what the IRS calls a “culture of collaboration” with taxpayers to resolve tax issues more quickly.
These audit process changes come amid a broader series of IRS updates for the 2025 tax year that have affected individual taxpayers, including increased child tax credits, revised 1099-K reporting thresholds, and inflation-adjusted tax brackets and standard deductions. While those changes primarily impacted individual filers, the July announcement specifically targets business tax examinations.
The new guidance introduces three major procedural changes that will reshape corporate tax examinations:
Elimination of Acknowledgement of Facts Process: The IRS will phase out its Acknowledgement of Facts (AOF) Information Document Request process by 2026, citing “limited value and extended timelines.” Until December 31, 2025, taxpayers can choose whether to participate in AOF procedures. This transition period allows for stakeholder feedback before permanent implementation.
Expanded Accelerated Issue Resolution: The memo clarifies that Accelerated Issue Resolution (AIR) now applies to Large Corporate Cases, previously handled under the Coordinated Examination Program. AIR closing agreements allow resolved issues to apply across all filed return years within the current audit cycle, potentially resolving multiple years of potential disputes simultaneously.
Enhanced Fast Track Settlement Reviews: The IRS will implement stronger internal review processes before denying taxpayer requests for Fast Track Settlement (FTS). Additional approvals are now required, supporting broader use of this expedited resolution process.
What People Are Saying
The Internal Revenue Service wrote in the announcement: “These changes are intended to enhance taxpayer service and tax administration by streamlining examination resources, facilitating timely issue resolution, and expediting tax certainty.”
What Happens Next
The changes will roll out gradually over the next two years, with the AOF phase-out extending through 2025 and full implementation expected by 2026.
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