The Compliance Assurance Process Program (CAP) is available to publicly held corporations with
assets exceeding $10 million. By enrolling in the program, you give the IRS access to your books,
records, and other financial materials. This program assists the taxpayer by identifying and
resolving any potential tax issues prior to the tax return being filed. This helps eliminate any long,
drawn-out audit processes. Overall, the program aids the taxpayer in completing accurate and
timely tax returns.
I think this program could be helpful for certain businesses. Corporations with over $10 million in
assets would likely come into more complex tax situations where they may need help with tax
scenarios. I find it very likely that corporations of this size employs CPA & tax planning teams to
work directly with the executives/CFO. I also think it is reasonable to charge the corporation for
use of this service. Charging an annual service fee could help the IRS with staffing the employees
of this program. Especially considering the IRS has been so far behind on processing returns, they
would probably rather more companies partake in this program and ease the full-audit workload. I
would think the cost of running this program is less than having to complete full audits of
businesses who (if they used this program) would not need one.
Do you think the IRS should open the program to corporations with less than $10 million in assets?
Or to other types of entities?
The Internal Revenue Service (IRS) has introduced a Compliance Assurance Process (CAP), which
assists large taxpaying entities to strengthen their federal tax compliance. The CAP program
enables these taxpayers to utilize real-time tools and techniques for resolution, address issues
prior to filing of tax returns and complying with the federal tax rules and ensuring that accurate tax
returns are in place, which can shorten the IRS audit process (Internal Revenue Service, n.d.). The
program has been highly appreciated by businesses since it serves as a vital opportunity that
enables them to work along with the IRS to achieve tax-related adherence, which eliminates the
possibility of future tax-related complications or discrepancies. The successful completion of the
compliance assurance process can reflect to the IRS that a corporation is taking appropriate and
necessary measures while filing tax returns.
From the perspective of corporate taxpayers, CAP is a useful process that gives them real-time
insight into their accounts and enables them to take prompt action in case any discrepancy has
been observed in the audit process. It basically eliminates their need to uncover old information
which may date back a few years. More importantly, the real-time audit process by the IRS
significantly diminishes the possibility of companies to pay a hefty sum of money relating to
discrepancies in the tax filing process or misstatements in the nooks of accounts. De Widt et al.
(2019) have argued that the CAP process by the IRS helps to strike a better balance between the
interests of corporate taxpayers and the tax authority.
The budget cuts have increased the financial burden for the IRS, as a result of which it has been
reconsidering the CAP process. Instead of eliminating the CAP concept, there is an opportunity for
the Internal Revenue Service to monetize the process so that it will be able to earn revenue from it
and the financial burden can be reduced. For the purpose of monetizing the Compliance Assurance
Process, the IRS can charge a monthly fee to the corporates who intend to make use of the real-
time audit process. The fee amount can be ascertained depending on the resources that the
Internal Revenue Service has to use in order to keep a tab on the books of accounts of taxpaying
business entities. Another way of monetizing the CAP process involves the introduction of an
annual subscription process. Under this process, companies that are willing to avail the real-time
audio capabilities of the IRS will have to pay an annual subscription amount, which will make them
eligible to get their accounts audited by the Internal Revenue Service on a real-time basis. Since
the Compliance Assurance Process gives rise to a win-win situation for corporate taxpayers as well
as the IRS, the program can be monetized so that both parties will be equally responsible for
bearing the financial cost of getting the audit activity done on a real-time basis. Such an approach
can ensure that both IRS and taxpaying corporations will be able to extract benefits and bear the
associated costs of the CAP process.
Reference
Compliance assurance process. Internal Revenue Service. (n.d.).
https://www.irs.gov/businesses/corporations/compliance-assurance-process
De Widt, D., Oats, L., & Mulligan, E. (2019). The US compliance assurance process: a relational
signalling perspective. Journal of Tax Administration, 5(1), 145-161.
