Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers


April 14, 2005


FROM: Deborah M. Nolan /s/ Deborah M. Nolan Commissioner, Large and Mid-Size Business Division

SUBJECT: Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers

The purpose of this memorandum is to reinforce guidance for examiners regarding the policy and procedures for requesting tax accrual workpapers, audit workpapers, or tax reconciliation workpapers. The new IRM Section 4.10.20 is a crucial tool in our efforts to curb abusive tax avoidance transactions and ensure that taxpapers comply with the law. All requests for audit workpapers or tax accrual workpapers must follow the procedures outlined in the IRM.

I want to emphasize that the IRM makes clear that a request for tax accrual workpapers is mandatory when a taxpayer claims the benefit of a listed transaction for a return filed on or after July 1, 2002, and for some returns filed before that date. Revenue agents will issue an Information Document Request (IDR) for tax accrual workpapers as soon as it is determined that the taxpayer is involved in a listed transaction. Industry Tax Shelter Analysts can identify cases subject to mandatory IDR requests through the ERCS and OTSA databases. Industries should monitor adherence to the IRM provisions to ensure consistent application.

Local counsel will be involved in drafting the IDR and addressing any legal issues, such as whether a transaction is a listed transaction, whether the transaction has been properly disclosed by the taxpayer, or whether a privilege claim has merit. A support cadre of PFTG Technical Advisors has been established to assist examiners with questions and issues related to securing and evaluating tax accrual workpapers. The names and contact information for these Technical Advisors are available on the OTSA website. When an administrative summons is needed to obtain tax accrual workpapers that have not been produced, local counsel will be involved in drafting the summons and the Director of Field Operations (DFO) must pre-review the summons. Counsel's review of the summons will be coordinated through the appropriate Division Counsel and the Associate Chief Counsel (Procedure & Administration). IRM 4.10.20 modifies and supersedes all previous memoranda from my office concerning the policy and procedures for requesting audit workpapers, tax accrual workpapers, or tax reconciliation workpapers.

Questions related to this memorandum or requests for tax accrual workpapers can be directed to (deleted name, phone number and email; for internal use only) In addition, a cadre of specialists has been established to provide guidance on this topic. The cadre members, as well as other relevant information, can be found at the following website: (link to internal intranet site deleted) .

cc: Chief Counsel
LMSB Division Counsel
Commissioner, Small Business/Self-Employed Division