The CAP Phase, or Compliance Assurance Process Phase, is a stage within the IRS's Compliance Assurance Process (CAP) Program. During this phase, the IRS and the taxpayer work contemporaneously to achieve compliance and certainty by resolving all or most tax positions prior to the filing of a tax return. The primary goal is to ensure that the taxpayer's filed tax return is accurate and to reduce the need for post-filing examinations.
Key aspects of the CAP Phase include:
- Real-Time Issue Resolution: The IRS and the taxpayer collaborate to resolve tax issues in real-time before the tax return is filed. This proactive approach helps in identifying and addressing potential issues early.
- Transparency and Cooperation: The taxpayer is expected to provide the IRS with pertinent facts and information proactively. This transparency helps in developing material issues and ensures that both parties use their resources efficiently.
- Pre-Filing Review: A successful pre-filing review allows the IRS to achieve an acceptable level of assurance regarding the accuracy of the taxpayer’s filed tax return. This review helps in minimizing discrepancies and potential disputes.
- Post-Filing Representation: Within 30 days of filing the tax return, the taxpayer must provide a Post-Filing Representation. This representation, signed by an officer of the taxpayer with authority to sign the U.S. income tax returns, states that the filed return is consistent with the pre-filing resolution agreements.
The CAP Phase is designed to improve tax compliance and reduce the length and complexity of post-filing examinations by addressing issues before they become disputes.
Sources:
IRM Part 8. Appeals. Chapter 7. Technical and Procedural Guidelines. Section 14. Freedom of Information Act (FOIA) Administrative Appeal Cases
IRM Part 4. Examining Process. Chapter 46. LB&I Examination Process. Section 1. General Information and Definitions
