The Compliance Assurance Process was created to help businesses stay compliant with federal tax
laws and keep their compliance up to date annually. No taxpayer likes surprises when it comes to
owing tax because they were unsure of discrepancies and must dig through years of documentation
to keep compliant. This was something that may have been extremely helpful when it started in
2005 and official in 2011. However, I think there are two main reasons why a program like this may
have run out of its usefulness.
The first reason is that the IRS has suffered extreme staff shortages and budget cuts in the last
several years. Especially since Covid-19 began, wait times and efficiency has declined in their
offices. I can't imagine any services they provide will be done with the effort a client deserves. My
biggest concern as a tax preparer would be that a client would sign up for this application and still
be audited regardless of them providing this service. Based on my experiences with clients and
dealing with the IRS, the one hand does not talk to the other in recent years.
The second reason I do not think this service is as necessary anymore is because of digital records.
While it is always frustrating to organize and locate older documents to analyse prior year
information, digital copies and cloud storage make it a lot easier than it used to be. If taxpayers
focus on a better system of storing their documents online through digital means, there should not
be any reason to stress about an Audit requiring to look at prior year information.
The IRS CAP program allows large businesses to work alongside the IRS to file accurate and timely
business tax returns. The IRS provides the business with real-time support to provide tax
compliance before the business files their tax returns. Some of the benefits to the IRS and the
businesses taking part in the program are time, money, a higher tax compliance along with more
accurate tax returns, reduces the need for amended stat tax returns, and helps the IRS identify new
and potential emerging tax issues. Two of the benefits that stand out to me are time and money.
The IRS can save time and money by not having to review tax returns, send letters for clarification,
or conduct audits that have the potential to last years following the audit and appeals process. The
businesses save time and money in the same way, they do not have to have huge legal expenses or
waste employees’ time researching tax compliance for audit issues.
I think either a one-time fee or a reasonable annual fee would still be less expensive than having to
pay tax accountant and or legal representation to fight an IRS ruling 3 years after the original tax
return had been filed.
The Compliance Assurance Process (CAP) started in 2005 as a pilot program and was permanently
put in place in 2011 (IRS 2023). The goal of CAP is to use real-time issues resolution tools and
techniques, correct any mistakes before a tax return is filed and ensure it complies with tax laws,
and ensure complete and correct tax returns to help shorten the audit process. This process applies
to large corporations that meet the specific requirements of CAP. The corporations must file in
accordance with U.S. GAAP.
I believe CAP is beneficial for taxpayers, because it ensures that their tax returns are complete,
correct, and comply with the necessary tax laws, before the tax return is filed. This can give
companies more confidence when it comes to filing their tax returns because they know they are
correct. It also saves them the headache of filing their returns and the IRS rejecting them because
they aren't correct. Then the company would most likely have to file for an extension and pay their
preparer to correct them. It saves time and money.
Some ways the IRS could monetize CAP to show that it is valuable, is track the amount of time and
money saved when companies use CAP and reinvest, expand the requirements for CAP so that
more companies can use it, consistently reevaluate the process and make updates, create a survey
for suggestions on how to improve the process and analyse how useful it is (U.S. GAO, 2013).
References:
IRS. (2023). Compliance Assurance Process.
https://www.irs.gov/businesses/corporations/compliance-assurance-
process#:~:text=The%20Compliance%20Assurance%20Process%20(CAP,comply%20with%20federal%
20tax%20laws
U.S. Government Accountability Office. (2013). CORPORATE TAX COMPLIANCE IRS Should
Determine Whether Its Streamlined Corporate Audit Process Is Meeting Its Goals.
https://www.gao.gov/assets/gao-13-662.pdf
