Fact Sheet: Pre-Filing Agreement (PFA) Program - January 2018


Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

The PFA program is a beneficial way to reach agreement on a contentious issue through a cooperative effort before the return is filed.

  • Revenue Procedure 2016-30PDF provides the program guidelines.
  • Taxpayers estimate they save 48% by using this process instead of the traditional audit; the Service estimates savings of 30%.
  • On a scale of 1 to 5, taxpayers report an overall level of satisfaction with the program of 4.7 and 4.6 on the likelihood of recommending the process to others.

There is a user fee for participation in the program.

  • The user fee is $174,000.
  • OMB requires a user fee on special benefits beyond those received by the general public.
  • The fee is paid only if the issue is accepted.

Any taxpayer under LB&I’s jurisdiction may apply for a PFA; eligible issues are factual and governed by well settled law.

  • PFAs can cover the current and up to four future tax years, but the transaction must be complete.
  • They may also be used to determine the appropriate methodology for determining tax consequences affecting future tax years.
  • PFAs are available on International issues.
  • The most common issues are worthless stock/bad debts, research credit, cost segregation studies, and disposition or acquisition of a subsidiary. Recently we have received several on deduction of settlement costs, fines, and penalties.

Following are recent statistics on the PFA program:

  • Since the program’s inception in 2001 through September 2018, we have received 534 applications, accepted 362, and closed 281 with an agreement.
  • The total time to complete a PFA was 664 days in fiscal year 2018.

A brief summary of the PFA process is below:

  • The taxpayer can file a request with the Case Manager or PFA Program Manager.
  • The request should include all items listed in Rev. Proc. 2016-30PDF.
  • The application is evaluated by Counsel, the Audit team, and Subject Matter Experts.
  • The Practice Area Director makes the decision to accept or not; there is no appeal to the Practice Area Director’s decision.

For more information:

  • Visit the PFA page on IRS.gov under information for Large Business and International Division.