Tax Law Center Blog

In a long-awaited change that will bring relief to tax professionals, the Internal Revenue Service (IRS) has confirmed the elimination of the Acknowledgement of the Facts (AOF) Information Document Request (IDR). This procedural shift, detailed in guidance such as LBI-04-0725-0008, marks the end of a process that, for over a decade, has been a consistent source of frustration and inefficiency in the examination phase.

This change is not only an administrative adjustment; it represents a significant streamlining of the audit process that affects how practitioners prepare cases for IRS appeals.

The Decade of the AOF IDR

The AOF IDR was traditionally the final information request issued by an IRS examination team. Its articulated purpose was to have the taxpayer formally review and verify the IRS’s written summary of the facts and issues developed during the audit. The rationale behind this step was seemingly sound: to ensure that the IRS had a complete and mutually agreed-upon factual record before the case proceeded to Fast Track Settlement or IRS Appeals.

However, the reality of the AOF process often failed to align with its stated goal. The tax bar and taxpayers consistently noted that the process was frequently resource-intensive and duplicative. Drafting a compliant response required significant practitioner time to vet the IRS’s narrative, which was often incomplete or skewed, necessitating extensive revisions or outright factual disputes. This process, intended to facilitate settlement, more often became a final point of contention, slowing down the transition to Appeals without adding material value to the factual development of the case.

The Regulatory Shift and Key Dates

The IRS has now formally discontinued the AOF IDR process. Tax professionals should note two critical dates and pieces of information:

• Final Elimination Date: The AOF IDR process is eliminated from audits effective December 31, 2025.
• Current Voluntary Status: Until the end of the year, the AOF IDR is now voluntary. This means taxpayers and their representatives are no longer obligated to dedicate resources to responding to any AOF IDR received between now and the end of the calendar year.

This guidance, such as that issued to Large Business and International (LBI) examiners in LBI-04-0725-0008, signals the IRS’s commitment to adopting a more efficient and less burdensome audit protocol. It is an acknowledgment that the required formalization of facts at the IDR stage was not achieving the desired outcomes.

Implications for Tax Professionals and Case Strategy

The elimination of the mandatory AOF IDR has immediate and strategic implications for tax controversy practitioners:

1. Reduced Audit Burden: The immediate benefit is the elimination of a non-value-add compliance step, freeing up both the taxpayer’s and the practitioner’s resources that were previously dedicated to verifying the IRS’s write-up.
2. Focus on Factual Development: Tax professionals can now place greater emphasis on proactive, contemporaneous factual documentation throughout the initial IDR phase, rather than reacting to the IRS’s summary at the very end. The focus shifts to ensuring the initial IDR responses are as comprehensive and legally sound as possible, as there will be no “final check” mechanism via the AOF IDR.
3. Appeals Preparation: The burden of ensuring a complete and accurate factual record for Appeals now rests squarely with the practitioner during the examination. Counsel must be meticulous in developing the record that will be presented to an Appeals Officer, who will no longer rely on a pre-vetted AOF document. This requires an even more disciplined approach to IDR responses and the assembly of the protest document.

The new procedural landscape helps practitioners who are highly proactive in shaping the factual record from the earliest stages of the audit. While the elimination of the AOF IDR removes a burdensome compliance step, it simultaneously raises the stakes for effective pre-Appeals preparation.

Actionable Insight: Are Your Client’s Cases Ready for the New Era?

The shift away from the AOF IDR process underscores the need for expert guidance in navigating complex IRS examinations. A flawed or incomplete factual record established during an audit can severely undermine a case at the Appeals level or, ultimately, in litigation.

Our firm specializes in guiding tax professionals and their clients through these complex administrative and judicial procedures. We ensure the factual and legal arguments are precisely documented and strategically positioned for the best possible outcome under the new IRS protocols.

Contact us for a confidential consultation to learn more about how we can help your client proactively manage their audit defense and tax controversy issues. We are ready to assist with your most complex tax challenges.