Friday, June 8, 2007


It appears that the Internal Revenue Service plans to launch a new National Research Program (NRP) “reporting compliance study” for individual taxpayers. The last study was, I believe, two years ago. The purpose of the NRP study is to assist in developing “updated and more accurate audit selection tools and support efforts to reduce the nation’s tax gap”. The study will examine about 13,000 randomly selected tax year 2006 individual returns.

The NRP is a kinder, gentler version of the old TCMP (Taxpayer Compliance Measurement Program) audits that examined every single entry on a tax return in detail (i.e. if you filed as married you had to produce a copy of your marriage certificate).

The initial group of taxpayers whose returns are selected for audit under this new NRP study will start receiving official letters from "Sam" in October. The majority of individuals will have specific lines of their returns confirmed through in-person audits with an IRS examiner. Some of the individuals whose returns are selected will not be contacted if the IRS can obtain matching and third-party data that confirms the accuracy of their return.

The last time around only one of my approximately 400 clients was chosen for an NRP audit. The choice could not have been more fortuitous – they selected one of, if not the, most organized of the 400. This client is one of two who have their entire financial life recorded on the computer – and detailed back-up for each computer entry. We didn’t even go to the audit - I made copies of all supportive documentation for the items included in the review and sent a big box to the IRS. The result was “no change”.


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