The application period for the Internal Revenue Service (IRS) Compliance Assurance Program (CAP) is now open.
Intended as real-time tax guidance for large corporations and entities, the CAP was launched by the Large Business and International (LB&I) Division of the IRS in 2005. The program has worked its way forward over time, recalibrating its process and application phase. The application season for 2022 is brief—beginning on September 1, 2021 and ending on November 1, 2021.
The draw of the CAP program is the opportunity for a large business to work collaboratively with the IRS to review and resolve complex tax compliance issues in real-time, before tax returns are submitted. Corporations working with the IRS on specific, difficult tax issues can save time and monetary reserves. Rather than submitting a tax return, waiting for response from the IRS, and then working out an amended return and payment, a company may gain a market advantage by partnering with the IRS at the outset to obtain compliance guidance before the return is submitted.
By its existence, CAP provides dedicated personnel to work with large corporate taxpayers on current and potential issues. For a company, the program can identify problem areas, provide compliance answers, and offer resources before a return is filed.
With the advantages, the IRS also notes challenges of the program. The program may not fully resolve issues within timelines set by the IRS. By nature, the CAP process is intended to be collaborative, and companies that enter the process with an adversarial stance may not gain a lot from the program.
Following are criteria to qualify for the CAP:
- A corporation or US taxpayer may not be involved in litigation, involved in an IRS criminal tax investigation, or other tax controversy with any government agency that would limit IRS access to tax records.
- An applicant for the CAP program must have assets of at least $10 million.
- The applying corporation must be publicly traded in the US and submit SEC Forms 8-K, 10-Q, and 10-K.
It is important to note that participants in CAP do not waive any rights by virtue of participation; the same rules apply as do in IRS examinations that occur after a return is filed.
At its best, CAP provides an opportunity to take a deep dive into sticky compliance issues for resolution before a tax return is filed. Talk to your tax attorney to discuss whether the program makes sense for your corporation.
Experience legal guidance with IRS audits and criminal tax investigations
Robert J. Fedor, Esq., LLC offers skilled guidance on questions of business compliance, criminal tax defense, and tax litigation. If you are contacted by an IRS Special Agent or auditor, contact us to set up a free consultation. We work with clients with domestic and offshore concerns. With offices in Chicago and Cleveland, call us at 800-579-0997 or contact us online.