The Tax Times: IRS Unveils New Guidance to Streamline Corporate Audits

Tuesday, August 12, 2025

IRS Unveils New Guidance to Streamline Corporate Audits

On July 11, 2025, the IRS released a memo targeting audits of large corporate taxpayers, marking a significant modernization in how the agency approaches complex corporate tax examinations. This update, addressed to employees in the IRS Large Business and International (LB&I) Division, aims to reduce administrative burdens, improve efficiency, and make dispute resolution more accessible for taxpayers.

Phasing Out the “Acknowledgment of Facts” Process

One of the headline changes is the planned elimination of the “acknowledgment of facts” (AOF) information request starting in 2026. The AOF was him him him him him him while the group of him him him him him him him him him him him him him him him him him him him him to establish agreement on important facts between the IRS and taxpayers prior to issuing a notice of proposed adjustment. However, as the agency acknowledges in its new memo, participation from taxpayers in this process has been minimal. Many have found AOF to be cumbersome and of little value, arguing that the factual summaries provided are hard to evaluate without knowing how the IRS intends to apply the law. Bowing to this feedback, the IRS will phase out the AOF, hoping to foster a more streamlined and transparent audit process.

Expanding Accelerated Issue Resolution

The amended guidance also clarifies how the accelerated issue resolution (AIR) process applies, particularly in large corporate cases. The AIR procedure allows issues resolved during one audit cycle to be applied to other tax years for the same taxpayer. By making it clear that this process extends to substantial corporate cases, the IRS hopes to resolve recurring issues more efficiently and reduce redundant disputes in future audits.

Updates to Fast Track Settlement Procedures

Finally, the IRS has updated its fast track settlement program procedures. This program is designed to help taxpayers resolve disputes with the IRS quickly, ideally avoiding litigation. Under the new guidance, if IRS directors wish to deny a taxpayer’s request to participate in the fast track program, they must first notify the division’s deputy commissioner, adding an extra layer of oversight to ensure fairer access to alternative dispute resolution.

What This Means for Corporate Taxpayers

For large businesses, these changes are welcome news, promising shorter audits and improved opportunities to settle tax disputes amicably. Corporate taxpayers should consult with their advisors about how these changes might impact ongoing and future IRS examinations, as the agency seems committed to a more responsive and less adversarial audit environment.

The IRS's latest guidance demonstrates a willingness to adapt based on taxpayer feedback. By eliminating outdated processes and expanding successful programs, the agency is taking meaningful steps toward a more efficient tax system for large businesses.

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