Compliance Assurance Process by the IRS is a program that is provided to big companies that have
assets of 10 million or more. If the company is accepted there is no fee for this process. This
program helps large corporations improve their federal tax compliance. The corporation can use
real-time issue tools and techniques to resolve issues before the tax returns are filed. In order to
apply, the company must be a US publicly traded corporation with legal requirements to prepare
and submit. These forms are Form 10K, 10Q, and the 8K that are submitted to the SEC. These
companies must be willing to submit quarterly reports to the IRS that are in accordance with the
US GAAP to be accepted.
The IRS has implemented this process since 2011, this process provides companies with an
opportunity to be constantly audited in real-time and make sure they are being compliant with the
laws and regulations instead of waiting between 2-3 years to be audited. Companies seem to like
this process as it relieves a company of stress from going back and remembering items that have
happened in prior years. They have a piece of mind that their tax year was completed correctly.
The IRS is rethinking this process because of budget cuts, It would be a shame to lose this process
that provides the taxpayer with the ability to stay compliant, receive help, and better identify
financial reporting issues and give peace of mind. From the IRS perspective, this process is helpful
and has shown that is a valuable program. I do believe that companies would pay for this service.
If it is coming down to budget cuts the process is highly popular it can generally be funds to pay
for itself. Charging the participant taxpayer, a fee to cover the basic needs of to audit would be a
way to fix the IRS budget issues. Another way can be balancing out the cost of the audits by using
the tax collections. For 2023 the IRS budget provided was 12.3 billion and for 2024, it is set at 14.1
billion. Under the Inflation Reduction Act of 2022, “The IRS revealed portions of its strategic
operation plan is to spend the 80 billion it was allocated over 10 years.” (Waggoner, Martha, 2023).
This is on top of their annual budget. 4.3 billion will be for improved taxpayer services, hopefully, a
portion will go towards the CAP process.
The Compliance Assurance Process (CAP) initiated by the IRS in 2011 has indeed introduced a
significant shift in how companies are audited. Typically, companies were audited with a time lag,
often two or three years after the tax year in question. On the other hand, the CAP allows for real-
time audits, providing several potential benefits to taxpayers and the IRS.
Benefits of the CAP for Taxpayers:
Under the CAP, companies are audited concurrently with preparing and filing their tax returns. This
reduces the uncertainty and stress associated with traditional audits that may occur years after the
tax year. Any discrepancies or issues identified during the real-time audit can be addressed
promptly, minimizing the risk of costly disputes and penalties. Companies are incentivized to
maintain accurate and transparent records throughout the year, leading to improved tax
compliance.
Potential Monetization Strategies for the IRS:
-The IRS could charge participating companies a fee for the privilege of undergoing real-time audits
through the CAP. These fees could be based on the company's size, revenue, or other relevant
factors. This approach would help offset the costs of administering the program.
-The IRS could establish performance metrics tied to the CAP's success, such as reduced audit
timeframes, increased tax compliance, or lower dispute rates.
-The IRS could then use these metrics to negotiate reduced penalties or interest charges for
compliant companies. The IRS could offer specialized training and consulting services to companies
in the CAP to help them improve their tax compliance processes. Companies may be willing to pay
for such services to reduce their audit risk.
The Compliance Assurance Process has the potential to benefit taxpayers by reducing stress,
improving compliance, and resolving issues promptly. To monetize this program effectively and
demonstrate the value the program can generate through the proper channels of implementation,
the IRS should consider a combination of user fees, performance-based incentives, training
services, data analysis, partnerships, and technology-driven solutions. This approach can help the
IRS maintain a valuable program while addressing budget constraints and ensuring fair taxation
practices.
References.
Compliance assurance process. Internal Revenue Service. (n.d.-a).
https://www.irs.gov/businesses/corporations/compliance-assurance-process
IRS Opens Application Period for 2023 compliance assurance process (CAP) program. KPMG. (n.d.).
https://kpmg.com/us/en/home/insights/2022/09/tnf-application-period-2023-cap-program.html
IRS announces New Pilot Phase for Compliance Assurance Process Program. Internal Revenue
Service. (n.d.-b). https://www.irs.gov/newsroom/irs-announces-new-pilot-phase-for-compliance-
assurance-process-program
IRS.gov. (2018). Compliance Assurance Process. Retrieved from irs.gov:
https://www.irs.gov/businesses/corporations/compliance-assurance-process
Journal of Accountancy, Waggnor, Martha, April 7th, 2023," IRS unveils $80billion spending plan"
IRS unveils $80 billion spending plan - Journal of Accountancy
