| ||Participation in the Service’s Pre-Filing Agreement Program: A Guide to Developing a Quality PFA Request|
David R. Stubblefield *
*Manager—Specialized Tax Applications, for the Dallas, TX firm of Jackson & Rhodes, P.C.; graduate of The University of Texas at Austin. Prior to joining the firm, he was with the Internal Revenue Service for 38 years, specializing in domestic and international federal taxation at various positions and levels of management in the Examination function. He was a key member of the IRS Modernization Team that designed and piloted the PFA Program within the Large and Mid-Size Business Division.
With the issuance of Revenue Procedure 2001-22, the Service has expanded its issue-resolution process and offered the Pre-Filing Agreement Program (PFA) on a permanent basis to Large and Mid-Size Business (LMSB) taxpayers, a category that includes corporations, subchapter S corporations and partnerships with assets in excess of $10 million, based on the entity’s latest-filed tax return. A Pre-Filing Agreement (PFA) will allow an eligible taxpayer to request a Service audit of a specific issue or issues relating to a tax return before the return is timely filed. The objective of a PFA is to bring about an earlier and faster resolution to tax issues involving factual circumstances and well-settled principles of law between the Service and taxpayers with the hope of minimizing or eliminating any controversy during a post-filing Service audit. The program can provide a multitude of benefits and cost-saving advantages, including: greater efficiency in the use of personnel and salary dollars and professional tax representatives; shorter and less costly Service audits; greater compliance with tax returns; and quicker resolution of the taxpayer’s tax liability exposure.
The key document required for acceptance into the PFA Program is a formal LMSB Pre-Filing Agreement Request. A taxpayer’s application does not ensure acceptance into the program, as each request will be subject to a very in-depth screening process by the Service. Therefore, the quality and completeness of a taxpayer’s PFA request, nature of the completed transaction involved, availability of resources and records, use of settled tax law, and ability to meet a very compressed time frame prior to the filing of the next year’s tax return are crucial factors in being accepted into the program. This article describes the attributes that go into the development of a quality PFA request. The guidelines in this article will be invaluable to the taxpayer and the taxpayer’s tax representative in preparing a PFA request and enhance the acceptance of the PFA into the program.The Service has set up user fees for PFA requests determined by the asset size of the company. The fees are as follows: $10,000, over $250 million in assets;$5,000, $50 million to $250 million in assets; $1,000, over $10 million, but less than $50 million in assets.