IRS Ends 'Tiered' Issue Management

Author:Grant Thornton's Washington National Tax Office
Profession:Grant Thornton LLP

The IRS Large Business and International Division (LB&I) has announced (LB&I-04-0812-010) that it will no longer use its "tiered issue process" to manage audit issues. Instead, LB&I is creating a knowledge management network with issue practice groups (IPGs) for domestic issues and international practice networks (IPNs) for international issues.

The tiered issue process was established in 2006 to promote greater consistency and accountability in the resolution of "high-risk" compliance issues. Under the process, many issues were assigned to one of three tiers and managed by issue management teams. These teams were responsible for developing resolution strategies and tools, and each tier carried specific requirements for coordinating audit issues. Examiners were required to address any Tier I issues on a return, though having a Tier I issue did not mean a taxpayer's return would automatically be selected for audit.

Effective with LB&I's announcement, all Tier I, II and III issues are no longer tiered and should be risk-assessed and examined in the same manner as any other issue in an audit. All prior industry director directives issued under the tiered issue process are withdrawn.


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