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IRS Audit Risk Survey for Hedge Funds Interim Results

sum2logoThe IRS has developed a methodology to determine an audit risk profile for hedge funds, private equity firms, CTA’s RIAs and corporations using offshore structures.

Sum2 has commissioned a survey to determine financial services industry awareness and readiness for IRS audit risk factors.  The survey seeks to determine industry awareness of IRS Industry Focus Issue (IFI) risk exposures for hedge funds, private equity firms, RIAs, CTAs and corporations using offshore structures.

The survey is open to fund management executives, corporate treasury, tax managers and industry service providers. CPAs, tax attorneys, compliance professions, administrators, custodians and prime brokers are also welcomed to participate in the study.

The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IFI audit risk.

Sum2 will share weekly interim results of the surveys findings.  The survey will run for four weeks.  This is the first weekly report.

Survey Highlights

  • 62% of survey respondents are from North America
  • 18% are from Great Brittan
  • 16% are from other EU countries
  • 4% are from Asia
  • 50% of respondents who viewed survey begin survey
  • 20% of respondents indicate an awareness of IFI
  • 9% of respondents indicated that they initiated actions to address IFI
  • 7% of respondents indicated that they have received action alerts from industry service providers concerning IFI
  • 2% of respondents indicated that they plan to communicate impact of IFI to fund investors

We invite you to participate in a survey to determine industry awareness of IRS Industry Focus Issue risk for hedge funds, private equity firms, RIAs, CTAs and offshore corporate structures.

The survey can be accessed here:  IRS Audit Risk Survey for Hedge Funds

More information and alerts can be found here:  Credit Redi

The survey is open to fund management executives and industry service providers to the industry. CPAs, tax attorneys, compliance professions, administrators, custodians, consultants and prime brokers are welcome to take the study.

The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IRS Industry Focus Issue risk.  The goal of the survey is to help Sum2 better respond to the critical needs of fund managers and the alternative investment management industry by improving our just released IRS Audit Risk Program (IARP).

This survey asks ten questions.  The questions concern your awareness of IFI and how it pertains to your fund or fund management practice. The survey seeks to determine overall industry risk awareness, potential exposure to IFI risk factors and any mitigation initiatives you plan to address IFI risk factors. It should take no more then 5 minutes to complete the questionnaire.

Your participation in this study is completely voluntary. There are no foreseeable risks associated with this project. However, if you feel uncomfortable answering any questions, you can withdraw from the survey at any point. It is very important for us to learn your opinions.

Your survey responses will be strictly confidential and data from this research will be reported only in the aggregate. Your information will be coded and will remain confidential.

If you have questions at any time about the survey or the procedures, you may contact Sum2 at 973.287.7535 or e-mail us at customer.service@sum2.com

Thank you for your participation.

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March 16, 2009 Posted by | IARP, IRS, risk management, Tax | , , , , , , , | Leave a comment

Hedge Fund Audit Risk and Foreign Nationals

irs-logo-no-text1Sum2 is conducting a study to determine fund management industry awareness and preparedness to address recent IRS initiatives concerning the use of Industry Focus Issues (IFI) to guide agency field engagements.

The survey can be accessed here:

IRS Audit Risk Survey for Hedge Funds

Sum2 asked industry participants to take part in the survey that were not domiciled in the US. Though the IRS is not the national tax authority for fund managers located outside of the US the audit guidelines that the agency is developing has a high focus on foreign nationals investing in funds with a US nexus. This has implications for any individuals, institutions and subscribers to fund of funds regardless of their nationality. The IRS has developed three tiers of IFI that relate to the investment management industry and four (4 ) of the fourteen (14) First Tier IFI concerns foreign nationals participation in US domiciled partnerships. The IFI risk profiling that will guide agency field agents examination of investment partnerships and other fund structures will impact all partners in a investment fund corporation.

The duration of the survey will be four weeks. Sum2 will be releasing interim weekly results of the survey. The first interim update will be released later today. So far respondents of the survey have indicated an extremely low level of awareness about the IFI and its potential impact on fund partnerships.

One of the goals of the survey was to create visibility for our new IRS Audit Risk Program (IARP) product. In future releases of the product, we plan to incorporate other tax domiciles.

We encourage all global participants to review the survey to determine how it may impact their fund management business.

We also welcome any comments or insights from industry participants about how IFI may impact their investment fund partnerships company’s and how Sum2’s IARP can be improved to help investment partnerships more effectively mitigate and manage audit tax risk.

In particular we welcome insights and intelligence on EU market application and best practices guidelines industry participants employ to monitor and manage tax audit threats. As with all risk management products, there is a lot of interest in the IARP product in the United States.

We are looking forward to the release of subsequent additions of the IARP that speak to managing audit tax risk in other domiciles and tax jurisdictions.

We welcome your insights into initiatives or trends that impact the global fund management industry.

Thank you for your response.

March 16, 2009 Posted by | hedge funds, IARP, IRS, NP, off shore, private equity, regulatory, Tax | , , , , | Leave a comment