New IRS Guidelines for Large Business & International Tax Audits

 Posted on September 10, 2025 in Taxation Law

Some of the most complex tax audits will involve large corporations and international businesses. These cases may involve months or years of investigations and document reviews by IRS personnel, as well as complex negotiations between taxpayers and the IRS. In some cases, litigation may be required to address outstanding disputes, alleged violations by taxpayers, or challenges to the constitutionality of tax laws.

Because litigation can be time-consuming and expensive, the IRS often prefers to resolve tax-related issues through settlement negotiations. It offers a number of options to taxpayers who are involved in audits, including Advanced Issue Resolution (AIR) and Fast Track Settlement (FTS). The ways these cases are handled may change as the IRS updates its policies and procedures. Recently, the IRS issued some new guidelines that are meant to encourage collaboration with taxpayers during Large Business & International (LB&I) audits.

As the IRS’s procedures change, taxpayers may not always be aware of their options for resolving tax issues while minimizing their potential losses. An experienced attorney can provide guidance on the best ways to handle tax audits. Legal representation can be crucial in these cases, and it will ensure that a taxpayer’s rights are protected and that they will be able to take advantage of the opportunities that may be available.

Elimination of Acknowledgement of Facts Requests

During tax audits, the IRS may request various documents from taxpayers through an Information Document Request (IDR). An IDR may take the form of an Acknowledgment of Facts (AOF) that is meant to ensure that both parties agree on the facts involved in a case before a Notice of Proposed Adjustment (NOPA) will be issued.

The memo released by the IRS detailing its new guidelines stated that taxpayers are often hesitant to participate in AOF requests because they are unsure about which facts are relevant and how the IRS will apply the law based on these facts. In many cases, AOF requests add more time to the audit process while offering little value. Because of this, the IRS is phasing out the AOF process. After December 31, 2025, the AOF process will be eliminated. In cases that are currently in progress or that will start prior to December 31, 2025, the AOF process will be an option that taxpayers may either elect or decline.

Accelerated Issue Resolution in Large Corporate Compliance Cases

In audits involving Large Corporate Compliance (LCC), the process may be streamlined by applying resolutions from one tax period to other tax periods that involve the same or similar issues. This is known as Accelerated Issue Resolution (AIR). The IRS’s new guidelines noted that there may have been some confusion regarding the availability of AIR due to the use of a legacy term describing the same process, the Coordinated Examination Program (CEP). The guidelines clarify that AIR is an option in LCC cases, and it can be an effective way to resolve issues more quickly and efficiently.

Fast Track Settlement Denials

In certain cases, Fast Track Settlement (FTS) may be an efficient way to resolve outstanding disputes between taxpayers and the IRS. FTS may be appropriate in cases where an audit is nearly finished, all outstanding issues have been raised and are fully developed, all claims have been examined, the taxpayer has stated their position in writing, and there are limited outstanding issues to be resolved. The taxpayer and the IRS may enter into settlement negotiations with the intent of reaching a compromise, but if the FTS process is unsuccessful, the taxpayer may file an appeal.

There are some situations where the IRS may deny a taxpayer’s request for FTS, including when the dispute involves a challenge to the constitutionality of tax laws, when a taxpayer has shown an unwillingness to compromise, or when issues in a case have been designated for litigation. Under the IRS’s new guidelines, FTS denials will require additional reviews and approvals by IRS personnel. This is meant to encourage greater use of the FTS process to resolve tax disputes more quickly and efficiently.

Contact Our San Jose Tax Lawyer

Because of the complexity of tax audits involving large corporations, it is important to work with a lawyer who has a strong understanding of the applicable tax laws and the procedures and guidelines followed by the IRS. At John D. Teter Law Offices, we can provide the legal representation needed to address tax-related issues, resolve disputes with the IRS, and minimize financial losses. Contact our San Jose, CA tax attorney today at 408-866-1810 to arrange a consultation.