fri 130-3-irs practicesand-proceduresupdated
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IRS practices & procedures:a problem solving approach
Today’s presenters
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Panelist
Bob AdamsPartnerIRS Practice and ProcedureWashington National [email protected]
Panelist
Patti BurquestPartnerTax Controversy ServicesWashington National [email protected]
Co‐Moderator
Dean FischbeckSenior Vice PresidentBank of AmericaFederal Tax Audit and Controversy [email protected]
Co‐Moderator
Susanne MullerDirector, Senior Tax [email protected]
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IRS practices & procedures:a problem solving approach
Agenda
Case Study, Due Diligence in Bank Acquisition Items on due diligence list
• Section 382 Limitation on NOL Carryforwards• Tax Accounting Methods• Prior Tax Studies• Tax Workpapers• Prior Tax Exams• Current IRS Exam• Record Retention Policy• Information Reporting• Prior Mergers and Acquisitions• Foreign Activities• Other Matters
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Case Study
Suburban Bank
You are the Tax Director for Suburban Bank– a community bank operating within a large metropolitan area. Suburban began with only two branches in an area where the population is growing rapidly. It has expanded in the area through recent mergers with other community banks and by opening up new branches. Suburban issues credit cards, offers mortgages, and makes commercial and auto loans. It has a large deposit base of checking and savings accounts. Suburban holds an inventory of foreclosed properties and non-performing loans. City Bank will acquire Suburban Bank and you have been informed by Suburban’s president that you must respond quickly to all due diligence inquiries from City Bank.
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Due diligence items listed by City
Section 382 limitation on NOL carryforwards
Capital requirements – Basel III• Deferred tax assets
• What portion of your DTA is attributable to NOL and credit carryforwards?
• What portion of your DTA is attributable to timing differences?
Amount of NOL and Section 382 limitations• Latest loss carryover schedules – federal and state• Amount of NOL permitted by IRS in prior audits• What is the amount of your current NOL for federal and
state purposes?9
Tax accounting methods
Non-performing loans• Has your bank made a bank conformity election?• If not, did you do a loan-by-loan review?• If not, did you get the IRS to agree to another method? Costs associated with OREO property
• What costs have you been including as related to OREO property?
• Have you been historically deducting or capitalizing such costs?
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Prior Tax Studies
Tangible Asset and Repairs Studies (TARS)• Have you had a study done to distinguish your capital
expenditures from supplies, repairs, maintenance, and other deductible business expenses?
• Were you able to use any safe harbor elections? Cost segregation Others
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Prior tax examinations and their resolution, tax workpapers
U.S. income tax• Tax reconciliation workpapers• Tax accrual workpapers• IRM 4.10.20.2 Has the IRS ever requested your tax audit or accrual
workpapers? If so, what was the reason and what was the result of the
audit? State and local taxes Include prior periods of acquired or merged entities
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Current IRS examination status
Agreed issues Issues still under consideration Un-agreed issues Plans for resolving current exam
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Record retention policy
Policy What non-electronic files exist
• Are missing
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Information reporting, procedures and outstanding penalties
Prior history Process to ensure TINs are obtained and accurate At what point is backup withholding begun? Other information matters
• 1099-C• 1099-A• Consumer awards: 1099-INT or –MISC• Rebate, so no form filed
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Prior mergers and acquisitions
See requests above as to entities previously acquired or merged
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Foreign activities - inbound or outbound
What is your account opening process for non-US borrowers oraccount holders?
• Do you obtain W-8s for all non US persons?• Do you have processes in place to do Chapter 3 withholding on
US source income paid to such persons? FBARs
• Do you or any of your officers have signature authority over any foreign financial accounts?
• Do you currently file an FBAR Report of Foreign Bank and Financial accounts?
FATCA reporting compliance procedures
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Other matters
Has this bank ever made an S-corp election? Have any banks with which Community Bank has been
merged ever made S-corp elections?
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Questions
Today’s Presenters
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Panelist
Bob AdamsPartnerIRS Practice and ProcedureWashington National [email protected]
Panelist
Patti BurquestPartnerTax Controversy ServicesWashington National [email protected]
Co‐Moderator
Dean FischbeckSenior Vice PresidentBank of AmericaFederal Tax Audit and Controversy [email protected]
Co‐Moderator
Susanne MullerDirector, Senior Tax [email protected]