A compliance assurance process the IRS is using to conduct real-time audits of businesses with assets over $10 million is getting positive feedback, the Treasury Inspector General for Tax Administration has said.
It concluded that the CAP is being administered in accordance with IRS policies and procedures and followed many key best practices in its design and testing phase, but that the agency must develop and implement a plan to thoroughly evaluate its results to ensure that sufficient benefits are being realized in relation to the costs being incurred.
Businesses volunteer to participate in the program, which can reduced the length of the audit process and preempt violations, the IG said. However, CAP audits are consuming substantially more staff hours than those under the traditional audit process, making the hourly revenue rate for the CAP approximately one third of the hourly rate examiners generated from traditional audits, $2,939 versus $8,448, respectively, TIGTA found.
The IRS agreed with recommendations to develop and implement an evaluation plan that verifies that CAP is delivering sufficient benefits in relation to the costs being incurred, as well as to ensure that the CAP is assessed as a potential new user fee source once the IRS-wide user fee guidelines are revised and implemented.