The LB&I Commissioner, Douglas O’Donnell said that from July 15th to September 30th 2020, the IRS is expected to review several hundred tax returns as part of its global high-wealth, GHW Program which looks at high-income individuals and the businesses they control. The cases will focus on high income taxpayer’s pass-through businesses and related tax returns where the individual has controlling interest. Commissioner O’Donnell stated this in a New York University Tax Controversy Forum.
According to information provided by the IRS:
GHW was formed to take a holistic approach in addressing the high wealth taxpayer population; to look at the complete financial picture of high wealth individuals and the enterprises they control. A GHW enterprise case consists of a key case, generally an individual income tax return, and related income tax returns where the individual has a controlling interest and significant compliance risk is deemed to exist. Controlling interest can include significant ownership of or significant influence over an entity or multiple entities within the enterprise. The enterprise case may include interests in partnerships, trusts, subchapter S corporations, C corporations, private foundations, gifts, and the like. GHW personnel work with other personnel from other business operating divisions within the IRS to address noncompliance across the entire enterprise. GHW consists of two functions, Workload Services (WLS) and the field examination groups.
The GHW is responsible for business and financial enterprises controlled by individuals with assets or earnings in the tens of millions of dollars. LB&I Compliance, Planning and Analytics (CP&A) has primary responsibility for overall coordination of the Annual Examination Plan and workload identification.
CP&A provides WLS with an initial listing of the high wealth taxpayer population. CP&A then utilizes computations to determine the examination potential of the enterprises controlled by high wealth individual taxpayers. These computations were developed from available Compliance Data Warehouse data and are used to preliminarily assess the level of compliance risk on filed (or unfiled) returns. The returns with the highest risk indicators are further risk assessed by WLS and potentially resulting in the enterprise being selected for GHW examination.
WLS conducts a detailed risk assessment process consisting of researching taxpayer forms and related data, identifying specific issues, observing trends, and consulting with industry or other tax specialists. Risk assessment includes preparation and review of a yK-1 analysis for each taxpayer to gain an understanding of the taxpayer enterprise (Form 1040 and all related entities). During the risk assessment, large, unusual, or questionable items (LUQs) are noted by WLS for consideration by field agents for all entities in the enterprise that are determined to pose a risk of noncompliance. Related entities considered to be high risk are identified for inclusion in the case building package.
Upon conducting a complete risk assessment, WLS risk assessors determine whether the case will be included in inventory ready for assignment. WLS personnel build enterprise case files for delivery to the field with all related returns to be examined and other tax-relevant materials.
Once an enterprise case is assigned, a virtual case team folder is established on a secure shared drive for additional case-building, examination workpapers, and examination-related materials. GHW enterprise cases may consist of one or more of the following forms.