After reviewing the Compliance Assurance Process article, I think this would be beneficial for the
taxpayer. The reason it is beneficial to the taxpayers because the real-time audit process for
companies involves the continuous monitoring and analysis of financial data to identify potential
issues or red flags. Instead of relying solely on periodic audits, real-time audits use technology and
automated systems to provide ongoing oversight and analysis. Another benefit is enables
organizations to assess their compliance risks and develop strategies to mitigate them effectively.
This also helps organizations update their compliance strengths by providing a structured
framework, which helps to identify duplication, overlaps, and gaps. Compliance Assurance Process
promotes consistency and standardization in compliance-related processes and procedures.
I was interested in reading about the Compliance Assurance Process (CAP). A process that was
developed by the Large Business and International (LB&I) Division to improve federal tax
compliance of large corporate taxpayers (IRS 2023). Large corporate taxpayers are defined as a
publicly held corporation with at least $10 million in assets and the corporation cannot be under
any investigation with the IRS, federal or state agency. While this program was piloted in 2005 it
became permanent in 2021 (IRS 2023).
CAP has a goal of working with corporate taxpayers to be tax compliant and information is correct
before the client files a tax return since the audits are in real time. For large corporations, I can see
how it would be beneficial to have audits done in real time instead of having to go back to the prior
years to find and understand information. For the taxpayer if the company has a large volume of
activity, auditing a certain account or group of accounts from three years ago would be time
consuming and costly. Our firm prepares audit documentation for all types of audits (payroll, sales
tax, property tax and income tax). Typically, income tax audits take the longest to compile
information for the auditor. We have a client who owns a company that operates in 12 states who
recently got an audit letter from the IRS for their 2020 corporate tax return. This company has an
accounting department who is helping prepare documents and I am also helping. I already have
spent over 20 hours saving documents and preparing files for the auditor. If this client was using
CAP, the IRS would not need to be auditing such a large client so many years later and the
reassurance they would need to ensure the return is correct would have been provided in 2020.
I think it would be a shame if the IRS removed this program, I think there are so many benefits of
auditing in real time for larger corporations. I understand there is a process to start CAP but for
large companies even those which have had fraudulent behaviour in their accounting and finance
departments would benefit from having achieved compliance before even filing a tax return.
Perhaps this would also remove the fear of large companies getting audited. Even though our
clients are not large and publicly traded, no one enjoys getting an audit notice. The IRS could
charge a fee that would show it is a valuable program. Perhaps a fee to register of a certain base
amount for each company and then a yearly fee based off some criteria that varies with each
company (for example, fixed assets). I would assume that if the taxpayers are able to write off the
fee as a deductible expense on their corporate tax return, then there might be more incentive.
References:
Internal Revenue Service (IRS). (August 4, 2023). CAP Eligibility and Suitability Criteria.
https://www.irs.gov/businesses/corporations/cap-eligibility-and-suitability-criteria
Internal Revenue Service (IRS). (February 2, 2023). a Compliance Assurance Process.
https://www.irs.gov/businesses/corporations/compliance-assurance-process
Internal Revenue Service (IRS). (August 25, 2023). a Compliance Assurance Process (CAP) –
Frequently Asked Questions. https://www.irs.gov/businesses/corporations/compliance-assurance-
process-cap-frequently-asked-questions-faqs
Compliance assurance process. Internal Revenue Service. (n.d.).
https://www.irs.gov/businesses/corporations/compliance-assurance-process
