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“IRS Settlement Initiatives Can Improve Compliance,” Tax Notes Federal

January 1, 2024

Tom Cullinan's article, “IRS Settlement Initiatives Can Improve Compliance,” in Tax Notes Federal

Tax Notes Federal

In an article published in Tax Notes on January 1, 2024, Shareholder Tom Cullinan discussed how the IRS’s descending resources have generated quite an impact on quality audits on “abusive” transactions, and how voluntary compliance initiatives can benefit both the IRS and taxpayers.

The first three paragraphs of the article are included below with permission from the publication. To read the full article, subscribers may click here.

IRS Commissioner Daniel Werfel said several months ago that he is “very much interested in exploring things like safe harbors” to encourage compliance. According to the commissioner, the IRS’s efforts to “ensure wealthy individuals, large corporations, and complex partnerships pay the taxes they owe” will require “a diverse portfolio of different solutions.” At one end of the spectrum would be enforcement and “along that continuum, there may be opportunities for us to explore agreements, safe harbors, voluntary compliance initiatives.”

More recently, the commissioner said, regarding a planned settlement initiative for taxpayers claiming the employee retention credit, “I’ve been around government a long time and seen a lot of different voluntary compliance programs where you’re trying to set the incentive where people will come in… You have to do it in a way that they see it’s to their benefit.”

Below I examine how the IRS’s declining resources have affected its ability to maintain meaningful audit coverage for what the agency perceives as “abusive” or “tax avoidance” transactions and how voluntary compliance initiatives can provide some redress.3 That is followed by an overview of the IRS’s historical use of voluntary compliance initiatives to fully or partially resolve those types of transactions. Werfel’s interest in those initiatives, if fairly structured, can provide substantial relief and savings for taxpayers and the IRS.

To view the full article, subscribers may click here.