Schedule UTP: IRS Releases Internal Guidance to LB&I Personnel: Addresses How LB&I Personnel Should Use Schedule UTP as Part of the Tax Return Examination Process

Sullivan & Cromwell LLP - November 8, 2011

On November 1, 2011, the Commissioner of the Large Business and International Division (“LB&I”) of the Internal Revenue Service (the “IRS”) issued internal guidance to all LB&I employees regarding the use of Schedule UTP in LB&I examinations. The highlights of the guidance include:

  • requiring all tax returns that include a Schedule UTP to undergo centralized review prior to being released to the relevant examination team;
  • requiring notification of various IRS supervisors whenever a tax return that includes a Schedule UTP is assigned to an examination team;
  • requiring training for examination teams and other relevant IRS personnel prior to reviewing a Schedule UTP or examining an issue disclosed on a Schedule UTP;
  • providing procedures for determining whether to examine an issue or return based on information provided on a Schedule UTP; and
  • providing procedures for communications with taxpayers relating to Schedule UTP.

Even though these procedures and requirements are internal IRS guidance on which taxpayers are not entitled to rely, knowledge of this guidance can be helpful to taxpayers preparing for an audit or completing a future Schedule UTP. Separate LB&I guidance applies for taxpayers in the Compliance Assurance Process Program (the “CAP Program”).