Farewell to the IRS's AOF Information Document Demand
The Internal Revenue Service (IRS) has introduced significant changes to its Large Business & International (LB&I) Division audit procedures, effective August 1, 2025. These changes, which have far-reaching implications for taxpayers undergoing audits through the end of 2025, aim to streamline audits, promote collaboration between IRS and taxpayers, and reduce staffing burdens on the IRS.
Acknowledgement of Facts (AOF) Process
One of the key changes involves the Acknowledgement of Facts (AOF) process. The AOF Information Document Request (IDR), which was used to confirm mutually agreed facts before issuing a Notice of Proposed Adjustment (NOPA), will be optional from August 1 to December 31, 2025, and completely eliminated in 2026. This means taxpayers can expect audits without the previous step of formal, pre-NOPA fact acknowledgment, potentially reducing procedural delays but also removing a formal mechanism to establish agreed facts early on. During this transition period, use of AOF is voluntary, potentially impacting how efficiently facts are finalized during audits.
Accelerated Issue Resolution (AIR)
The changes also clarify that the Accelerated Issue Resolution (AIR) process can now be applied to Large Corporate Compliance (LCC) cases. AIR allows taxpayers and the IRS to enter closing agreements to extend resolutions of specific audit issues across multiple tax periods or related returns, enabling more efficient resolution of recurring or similar issues occurring in multiple years. This change enhances taxpayers’ ability to resolve issues faster and reduce repetitive audits on the same matters.
Fast Track Settlement (FTS)
The guidance revises the Fast Track Settlement (FTS) program procedures by requiring additional review before the IRS can deny a taxpayer’s request to participate in the Fast Track Settlement process. FTS is designed to facilitate quicker resolution of disputes through alternative dispute resolution channels. This added layer of review enhances taxpayer access to the FTS program, potentially increasing settlement opportunities during LB&I audits and shortening audit durations.
These changes are expected to lead to faster examinations with fewer formal fact-acknowledgment steps, greater opportunities to efficiently resolve issues with AIR, and improved access to alternative dispute resolution via FTS. However, the elimination of AOF also removes a formal checkpoint for fact agreement, potentially leading to debates later in the process.
Taxpayers under audit between now and the end of 2025 should discuss with their tax professionals whether engaging in the AOF process through the end of 2025 is a strategic benefit to their case. It is important to carefully consider the strategic implications of no longer having the AOF phase and plan for potential impacts on case management and dispute resolution.
These updates reflect IRS efforts to increase audit efficiency and taxpayer service focus. However, the efficiency of resolving tax disputes through these programs may be uncertain due to recent budget cuts.
For expert advice on Tax Litigation, Private Wealth & Family Offices, Life Sciences and Healthcare, Litigation, Financial Restructuring and Insolvency, Financial Institutions, and North America, specifically the United States, taxpayers can consult professionals such as Kevin Spencer, Christina Culver, and Kim Marie Boylan.
[1] IRS News Release IR-2025-123, July 23, 2025. [2] IRS Interim Guidance on LB&I Audit Procedures, August 1, 2025. [3] IRS Large Business & International Division, AIR and FTS Program Updates, August 1, 2025. [4] IRS Frequently Asked Questions on LB&I Audit Procedures Changes, August 1, 2025.
- The Acknowledgement of Facts (AOF) process, previously mandatory in the Large Business & International (LB&I) Division audits, will become optional from August 1 to December 31, 2025, and will be eliminated entirely in 2026.
- With the changes, the Accelerated Issue Resolution (AIR) process can now be applied to Large Corporate Compliance (LCC) cases, enabling taxpayers to resolve issues faster and reduce repetitive audits on the same matters.
- The Fast Track Settlement (FTS) program procedures have been revised, requiring additional review before the IRS can deny a taxpayer’s request to participate in the process.
- These changes are expected to lead to faster examinations, greater opportunities to efficiently resolve issues with AIR, and improved access to alternative dispute resolution via FTS.
- However, the elimination of AOF also removes a formal checkpoint for fact agreement, potentially leading to debates later in the process.
- Taxpayers under audit between now and the end of 2025 should discuss with their tax professionals whether engaging in the AOF process through the end of 2025 is a strategic benefit to their case.
- For expert advice on Tax Litigation, Private Wealth & Family Offices, Life Sciences and Healthcare, Litigation, Financial Restructuring and Insolvency, Financial Institutions, and North America, specifically the United States, taxpayers can consult professionals such as Kevin Spencer, Christina Culver, and Kim Marie Boylan at their international office.
