The new initiative, Limited Issue Focused Examination, or LIFE, involves a formal agreement, a Memorandum of Understanding, between the IRS and taxpayer to govern key aspects of the examination. The MOU will contain dollar-limit thresholds, established on a case-by-case basis, below which the IRS will agree not to raise issues and the taxpayer will agree not to file claims.

"LIFE is a two-way street," said LMSB Commissioner Larry Langdon. "Making it work will require taxpayers and the IRS to work cooperatively. Many of the resource benefits of this approach to taxpayers and the IRS will flow from taxpayers meeting the commitments they make at the commencement of a focused examination."

The change is due to the following reasons cited by the IRS: limited resources; the agency's need to expand coverage to other compliance risk areas; the contentious nature of the current process; and overall dissatisfaction with the post-filing process. 

The IRS cited the following benefits to the taxpayer that uses the LIFE process: greater certainty; conservation of resources; increased communication between the IRS and taxpayer; increased involvement in the examination; and reduced time commitment than a traditional examination.

Training of IRS personnel is currently underway. A formal evaluation of the LIFE process is expected in September 2003; input from internal and external stakeholders will be solicited.

For more information, including a PowerPoint presentation on this new program, visit the IRS LIFE page.