In the Compliance Assurance Process (CAP) Program, issues are developed through a collaborative and transparent process between the IRS and the taxpayer. The key steps involved in issue development in the CAP Program are as follows:
- Real-Time Review: The IRS reviews completed business transactions in real-time when the necessary specialists, experts, and records are available. This allows for timely identification and resolution of issues.
- Full Disclosure by Taxpayer: The taxpayer is required to fully disclose and provide all pertinent information related to the transactions. This includes facilitating the participation of knowledgeable employees who can assist in the issue development process.
- Initial Issues List: As part of the CAP Application Process, the taxpayer submits Form 14234-C, Taxpayer Initial Issues List. This form includes known or expected transactions for the upcoming CAP tax year.
- Collaborative Determination: The taxpayer and the CAP team work together to determine which of the preliminary issues will be included as part of the CAP review. This collaborative approach ensures that both parties agree on the relevant issues to be addressed.
- Contemporaneous Disclosures: As the CAP year progresses, the taxpayer makes contemporaneous disclosures of all additional material issues. This ongoing disclosure helps in maintaining transparency and addressing issues as they arise.
- IRS Identification of Issues: In addition to issues disclosed by the taxpayer, the IRS may identify issues for potential consideration based on the review of various sources of information, such as SEC filings. This ensures that all relevant issues are considered during the CAP process.
By following these steps, the CAP Program aims to achieve tax compliance by resolving issues prior to the filing of the tax return, thereby providing tax certainty sooner and reducing the length of the post-filing examination.
Sources:
IRM Part 8. Appeals. Chapter 26. Alternative Dispute Resolution (ADR) Program. Section 1. Fast Track Settlement for Large Business and International (LB&I) Taxpayers
IRM Part 8. Appeals. Chapter 26. Alternative Dispute Resolution (ADR) Program. Section 2. Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers
IRM Part 4. Examining Process. Chapter 46. LB&I Examination Process. Section 5. Resolving the Examination
