IRS Updates Pre-Filing Agreement to Encourage Early Tax Resolution

Why wait for an audit to blow up your tax position when you can settle it months before the return even hits Submit? Hotter than the wings on Hot Ones, the IRS’s revamped Pre-Filing Agreement (PFA) program is giving large businesses and international taxpayers a powerful way to lock in tax certainty, months before a return ever hits the wire. If you’re managing high-dollar positions and global complexities, this IRS reboot isn’t just red tape in a fancy folder. It’s a shift in tone, tactics, and tax strategy that puts proactive compliance front and center. And yes—it comes with a price tag ($181,500), but for companies playing in the deep end of the pool, that’s pocket change compared to the cost of uncertainty, restatements, or years of audit disputes.

Big Moves, Less Guesswork

The IRS is clearly stepping up its plan. On June 17, 2025, via IR-2025-69, a full overhaul of the Pre-Filing Agreement program, and this time, it's legit, user-friendly. The redesign isn't just cosmetic; it’s strategic:

• Freshly built PFA landing page: Think stats, process clarity, and fast links to dispute-prevention tools.
• Step-by-step application guidance: No more decoding IRS speak—now you know what happens and when.
• "Likely suitable issues" guide: No more second-guessing if your position qualifies.
• Updated timeline recommendations: Nail the window, or risk being too late to benefit.

This isn’t a one-off update. It’s part of a broader push by the IRS to foster early engagement with complex taxpayers, before controversy even begins brewing.

The Real Deal Behind PFAs

Let’s be real, this program is built for the tax big leagues. If you fall under the Large Business and International (LB&I) division and have some thorny positions to resolve, PFAs offer a peace treaty… with paperwork. From 2019 to 2024, PFAs were accepted 67% of the time, and nearly 60% of them focused on just two hot-button issues:

• Research Credit claims
• Worthless stock deductions under IRC §165(g)(3)

Other hitters include sale/leaseback transactions, passthrough elections, and debt-equity classification. If you’re litigating the same issue for a prior year? Sorry, you’re out. PFAs are about resolving the next issue, not dragging baggage from the past.

Timing Matters More Than Ever

If you’re even thinking about a PFA, don’t snooze on the calendar. The IRS wants these requests in:

• Within 60 days of a transaction closing, or
• Within 30 days of the tax year ending, whichever comes first.

Why the rush? Because it gives the IRS up to 9 months to work through your request before you hit “file” on your return. And documentation? You'd better bring receipts. No backup = no love from the IRS. Want a lower-stakes entry point? Schedule a pre-submission conference. It’s like pitching your idea in the Shark Tank before bringing the full deck. Saves time, money, and ego.

Why This Isn’t Just About Audits

PFAs aren’t just a tax department checkbox; they're a business risk mitigation tool:

• Stronger Financial Reporting: Resolve tax positions early and clean up that balance sheet.
• Reputation Boost: Show stakeholders you’re not just compliant—you’re cooperative.
• Global Leverage: A settled U.S. position can reduce foreign tax friction for multinationals.
• Strategic Certainty: M&A deals, IPOs, and capital raises all look better when your tax risk is nailed down.

Bottom line: PFAs can help move a company from reactive to strategic in handling tax.

It’s Getting Smart

Don’t confuse modernization with leniency. The IRS is acting more like a forward-thinking regulator: engaging early, clarifying gray zones, and asking for transparency before the chaos kicks in. And for industries like tech, biotech, and finance, where the business often outpaces regulation, PFAs can also serve as a channel to educate the IRS on emerging models before enforcement gets messy. This new PFA chapter is a call to action: Don’t wait for an audit letter to shape your tax destiny. Instead, show up early, show up early, show your work, and build your defense before it’s even needed. That’s not just good compliance—it’s smart business.