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Automated Collection System
IMRS 06-0000184 – Contacting ACS
Issue: Tax professionals complain that corresponding with ACS via regular mail is time consuming. They would like to be able to contact ACS employees via phone or e-mail. If they call by phone, they would like to be able to contact the same assistor each time so they do not have to constantly restate the problem.
Response: ACS is designed so that the first available agent takes the call. The agents are assigned to work the queue on varying schedules along with other assigned duties. Therefore, an agent working the telephone banks today may not be on the phone bank again for several days. Also, the agents take calls at different campuses across the country. The current phone system does not have the capability to transfer calls between campuses. Therefore, when a practitioner calls back, the agent who takes the call has no means to know who is working the phone banks and is unable to transfer calls. Each agent enters a history to the taxpayer account so the next person working with the practitioner/taxpayer will know what was done previously.
IMRS 07-0000546 – Automated Collection System (ACS) Checksheet
Issue: Practitioner requests a checksheet be developed for use when resolving cases that have more than $100,000 balance due.
Response: The check sheet has been added to IRS.gov at Tax Pro News Web page.
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Campus Issues
IMRS 07-0000359 – Automated Underreporter Unit (AUR)
Issue: Practitioner complained that they recently waited on hold for the Atlanta AUR for 1 hour.
Response: The AUR program is striving to improve customer access to those who use the toll-free phone system to contact the IRS. AUR recently modernized its system to a centralized telephone environment to provide better customer service. We anticipate that this modification from site specific phone coverage to a centralized telephone environment will allow us to reduce wait time for our customers and provide better service.
IMRS 07-0000360 – Automated Underreporter Unit (AUR)
Issue: Practitioners advise that the Automated Underreporter Unit in Atlanta is not timely processing mail. Practitioners are timely responding to CP2000 notices but they are often getting 90-day letters without consideration of the paperwork previously submitted. Practitioners also report that when they provide Power of Attorney Form 2848 with the response to an AUR notice, it is not posted to the Centralized Authorization File (CAF).
Response: The procedures of the Wage and Investment (W&I) AUR program are to work a response to a CP2000 or CP2501 notice within 30 days of receipt from the Postal Service. Once the IRS receives a response from a taxpayer, the AUR program systemically prevents the issuance of a 90-day letter to the customer. Upon review of the Atlanta Campus, we determined that a delay occurred in controlling cases during the months of May and June 2006. We have since directed additional resources to correct the problem and are in line with W&I policies. The Practitioner Priority Service is able to review notices and case histories online, helping expedite resolution to your customers’ concerns and issues. The second issue of concern was the attachment of a Form 2848, Power of Attorney and Declaration of Representative. When a taxpayer attaches a Power of Attorney form to a response to an AUR Notice, our tax examiners load the information onto the AUR system and then route the form to another area for loading onto the national database for other IRS operations to access. We will investigate some sample cases to determine if there are delays in our interoffice mail or other systems.
IMRS 07-0000370 – Face-to-Face Meetings for Automated Underreporter Cases
Issue: Practitioners would like the IRS to clarify procedures for granting face-to-face meetings in a local office with either a revenue agent or tax compliance officer when there is a disagreement with the Automated Underreporter Unit on issues that result from a CP2000 notice and when there is a written request asking for a meeting. They would also like to know their appeal rights.
Response: When taxpayers make a request for a face-to-face meeting, the AUR operations are instructed to contact the local Appeals office to make the necessary arrangements. The AUR program issues over 4 million notices annually. To limit the volume of referrals to Appeals, the local AUR operations are instructed to make every attempt to resolve outstanding issues prior to transferring cases to Appeals. Taxpayers who would like a face-to-face meeting outside of the Appeals process can visit their local Taxpayer Assistance Center. Information on locations throughout the country can be found at IRS.gov using the search term "Contact My Local Office”. Taxpayers can also contact the Taxpayer Advocate for assistance at (877) 777-4778. A copy of Publication 3498, The Examination Process, accompanies each AUR notice. It provides specific information related to the IRS appeals process.
IMRS 07-0000420 – Copies of Clients Notices
Issue: Practitioners are receiving copies of their client’s notices, specifically CP504, Final Notice – Balance Due, via certified mail. They are having difficulty retrieving the certified mail because the taxpayer’s name is listed first on the notice. They request that copies of taxpayer notices be sent via regular mail unless specifically requested by the taxpayer on Form 2848.
Response: In July 2006 a system change was implemented to stop sending the POA or practitioner copy via Certified Mail. Because the notices are part of the CP504/523 Certified Mail file, the Consolidated Print Sites (CPS) could not process them. This resulted in a serious work stoppage for CPS. As a result, a decision was made to revert to previous programming. Another issue was the receipt, acceptance, and processing of the notices by the US Postal Service. Since the notices are included in the Certified Mail Listing, the Postal Service will not sign for receipt of the entire run if the file is incomplete. As a result, the Postal Service refused to accept the notices and the entire cycle had to be reproduced. The vast majority of taxpayers that receive a CP504/523 do not have a Power of Attorney or practitioner. With an average volume of 9,889,520 CP504/523 and 19,580 related CAF/RAF notices processed annually, it is not cost effective to reprogram an entire system to accommodate this change.
IMRS 07-0000471 – Automated Underreporter (AUR) Program - Jointly Owned Income
Issue: Practitioner is concerned that the IRS Automated Underreporter (AUR) Units are not cross-checking spouses’ returns to determine if jointly owned income (such as interest, dividends, or capital gains proceeds) is split between the returns when married taxpayers file separately.
Response: Married Filing Separately (MFS) return issues are addressed during the AUR matching process. Reducing taxpayer burden is one of the guiding principles of the AUR program. AUR actively attempts to resolve MFS issues prior to initiating taxpayer contact e.g. 300 MFS returns resulted in fewer than 10 CP2000 notices (3 percent occurrence rate). To further address this issue, we will ensure that the MFS procedures are emphasized during the upcoming Continuing Professional Education training sessions which are mandatory for all employees.
IMRS 07-0000448 – Fax Number for Form W-7P, Application for Preparer Tax Identification Number
Issue: Several tax preparation firms have tried unsuccessfully to fax Form W-7P. The number is constantly busy.
Response: Machine is fully functional, just inundated at this time. An additional fax machine has been set up to handle the overflow.
IMRS 07-0000475 – Acknowledgement of Faxes to Automated UnderReporter (AUR)
Issue: Preparers request that Campus AUR acknowledge faxes immediately upon receipt as opposed to the normal 30-day timeframe for all correspondence (fax and mail).
Response: After evaluating this recommendation, we determined that the development and implementation of an automated response system is not economically feasible at this time. The AUR program follows the established IRS policy regarding timeliness of taxpayer correspondence responses. A response is considered timely when initiated within 30 calendar days from the earliest IRS receipt date. When a response cannot be issued timely, an interim response must be provided within 30 calendar days from the earliest IRS receipt date. By electing to pay additional postage, taxpayers submitting written correspondence to the IRS can receive acknowledgement of receipt from the U.S. Postal Service.
IMRS 07-0000496 – Address Change for Form 1040ES
Issue: Stakeholder advises that the mailing address for Form 1040ES payments for Pennsylvania and Kentucky taxpayers will change for the 3rd and 4th quarter payments. Instructions on Form 1040ES and in Publication 3891, Lockbox Address Directory, are not consistent and they have been notified by their software provider that, because the notice was not received regarding the changing of address, it is too late for them to update their product for the new addresses on the payment vouchers.
Response: Software provider updated their product to change the address for the 3rd & 4th quarter payments. It will be shipped to users in early March. Many of the other software vendors and products were researched and all show the correct ES addresses for 2007. Regarding Publication 3891, the correct information will appear on IRS.gov on 7/1/07. Currently the Cincinnati lockbox serves both Philadelphia and Fresno. After June the St. Louis lockbox will serve Pennsylvania and Kentucky taxpayers. Payments sent to Cincinnati after June will not be forwarded to St. Louis. They will be processed in Cincinnati. Unprocessable payments, returns, etc., will be date-stamped with the applicable IRS Received Date Stamp and forwarded to Fresno Service Center. Timely received payments will be considered timely and processed timely regardless of which lockbox bank processing site receives the payment.
IMRS 07-0000571 – Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return
Issue: Practitioner is unable to determine where Form 8453 should be mailed when a state return is attached.
Response: Forms 8453 are directed to the submission processing center that accepted the electronic return transmission (Fed only or Fed/State returns). Beginning with the 2008 filing season, tax practitioners can e-file individual income tax returns only if the returns are signed electronically using either the self-select or the practitioner PIN method. At that time, you will no longer use Form 8453 as a signature document but will use a newly designed version of Form 8453 to transmit supporting documents that are required by the IRS. Guidance for mailing the newly designed Form 8453 for tax year 2007 will be included in the form instructions.
IMRS 07-0000583 – Form 941, Employer’s Quarterly Federal Tax Return
Issue: Payroll managers are being issued “missing Schedule B” notices even though the schedules were mailed with the Form 941.
Response: The IRS scans data from many tax returns. Unfortunately, due to a problem in our scanning process, we did not scan the semiweekly tax liability form or schedule we received with some Forms 941 for the first quarter of 2007. As a result, we sent out CP207 and CP207L requests for the missing tax liability information we needed to verify the timeliness of deposits. We have corrected the scanning process for the second quarter return processing and we apologize for any inconvenience. However, even if you previously supplied the tax liability information for which we issued a CP207 or CP207L, we still need you to provide us with a copy of that information to help expedite the process of validating the timeliness of your deposits. We appreciate your assistance in helping us resolve this matter. If you have any questions, you may call us at (800) 829-0115.
IMRS 07-0000628 and 07-0000603 – Letter 2267B – Delinquent Return Requested
Issue: Local practitioners received several 2267B Letters, Delinquent Return Requested, requesting 1120 Returns for taxpayers with an 1120S filing requirement.
Response: From June 18, 2007 through July 23, 2007, a systemic problem resulted in the failure to generate the "traditional" Return Delinquency notice (CP 515) for a number of delinquent taxpayers. To correct the problem, Letter 2267B was mailed indicating a requirement to file either a Form 1065 or Form 1120. These letters did not, however, differentiate between a "Form 1120" or "Form 1120S" for corporate entities. We apologize for any confusion that may have been caused.
In addition, many practitioners have called IRS stating that these returns were timely filed. Upon review of a large number of these cases, we have determined that an extension of time to file had been received, but the return itself had never been processed. If you have clients that received this letter and you have questions about its validity, please contact the Practitioner Priority Service at (866) 860-4259 for assistance.
IMRS 08-0000667 – Fax Numbers to AUR Units
Issue: Practitioners request the IRS alternate various fax numbers on CP2000 notices to alleviate the difficulty of getting faxes through over-burdened lines.
Response: W&I Business Systems Processing is currently coordinating with the MITS organization to enhance our capabilities to receive and view faxed information. We recognize that an increase in faxed correspondence has resulted in numerous problems for taxpayers and their representatives. The need for a solution has been elevated to the highest levels within the organization. As a result, a Servicewide solution is being pursued for the beginning of Filing Season 2008.
IMRS 08-0000684 – Practitioner Priority Service (PPS)
Issue: Practitioners state they are not receiving timely responses to requests for supervisor return calls. When practitioners request a supervisor call, no one calls back for days/weeks.
Response: We apologize for any delays. Our procedural guidance for PPS employees instructs them to accept requests for a managerial call back. IRM 1.4.20.1.2(H) states “… A call back message for a team manager will be considered a priority work assignment and the call will be returned within 24 hours of the customer’s call.” All Accounts Management employees and managers, including those assigned to PPS, are frequently reminded of the requirements for managerial referrals. We are unable to determine the specific PPS call site that received the request for a manager to call the practitioner back. If any future problems occur, securing and providing the employee badge number will enable us to address the issue directly with the employee and manager involved.
IMRS 06-0000232 – Erroneous CP2000 Notices – State Tax Refund and AMT
Issue: Practitioner advises that clients are erroneously receiving CP2000 notices informing them that they did not include their state tax refund as income when the client was subject to AMT in the prior year.
Response: This issue was elevated to us for Tax Year 2004 Automated Underreporter (AUR) cases. As a result, the proper procedures have been reinforced with tax examiners and, for Tax Year 2005, we were able to systemically eliminate this situation.
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Collection Issues
IMRS 07-0000483 Collection Notices
Issue: Practitioner raised the issue of Collection sending out dunning notices for old amounts that had been subsequently changed by another unit of the IRS and wonders why the IRS computing system cannot scan the affected accounts to make sure all changes to date are captured.
Response: Prior to the issuance of the 5XX/6XX series of balance due notices, a weekly analysis of the taxpayer’s delinquency is done. Based on the analysis results, a notice is systemically created. However, the system will not create or generate a notice if the analyses indicate no notice is due i.e., account full paid, pending transaction(s) or adjustments, etc. While every attempt is made to systemically perfect our notices prior to issuance, there will always be instances where information updates or payments are received after the notice has been generated. Once the notice is created, it is sent to the Consolidated Print Sites (CPS) for printing, stuffing and mailing. Unfortunately, we cannot systemically extract the notices after they are processed by CPS. Annually, over 37,000,000 (CP 5XX/6XX) balance due notices are generated and mailed by the CPS. This figure does not include the other types of balance due, Examination, Automated Underreporter, and Masterfile notices, etc., that are also processed by the sites. Manual extraction is extremely labor intensive and cost prohibitive.
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Communication & Outreach
IMRS 06-0000252 - Deposit Schedules
Issue: Practitioner requests that new business owners applying for an Employer Identification Number are notified of their deposit schedule by FTD alerts or mailing stuffers.
Response: All new businesses are treated as monthly depositors. This information is on page 19 of the current Pub. 15/Circular E (Rev. 01-2007) and on page 1 of Notice 931, under the Monthly Deposit Schedule section. This section references the $100k next-day deposit rule which, if met, would change the requirement to semi-weekly and would fall under the Federal Tax Deposit (FTD) Alert criteria.
FTD Alerts are issued on taxpayers who are classified as semiweekly depositors and who have not made federal tax deposits (FTDs) in the current quarter or who have made them in substantially reduced amounts. FTD Alerts use the previous two quarters as the look-back period for these depositors.
Taxpayers' deposit schedules are determined from the total taxes reported on their Form 941 in a four-quarter look-back period (Treas. Reg. 31.6302-1). The look-back period begins on July 1 and ends on June 30. FTD requirements are discussed in detail in Notice 931.
As for deposit schedule stuffers – we have made a substantial effort to reduce additional stuffers over the past five years to eliminate waste and avoid sending products to those with access to alternative media. Form SS-4 information does not enable us to determine what deposit schedule a taxpayer should be using. When an EIN is assigned, the taxpayer gets one FTD coupon with the CP 575 notice if their filing requirements indicate they will be required to make deposits. They are also automatically enrolled in EFTPS. Publication 15 is sent out in a separate mailing. Form SS-4 instructions discuss FTDs and EFTPS and direct taxpayers to Publication 15. The CP575 notice provides what we believe to be sufficient information by explaining that, as an employer, they will be required to make federal tax deposits.
IMRS 07-0000392 – Tax Gap Information
Issue: Practitioner requested a farm fact sheet be developed that addresses income and expenses specific to family farming operations similar to the fact sheets that are currently being issued.
Response: Communications will develop a fact sheet which addresses farm issues.
IMRS 07-0000414 – Tips for Choosing a Tax Preparer
Issue: Practitioners propose that the IRS conduct a media campaign to educate taxpayers on the requirements of paid preparers as they are finding that many preparers do not follow all of the requirements.
Response: Stakeholder Liaison rolled out the “How to Choose a Preparer” national outreach campaign in English and Spanish in February and moved an article on this topic to the front of the Spanish landing page during the filing season. The IRS and California’s Franchise Tax Board (FTB) jointly developed a brochure entitled “How to Select an Income Tax Preparer” which was released in March 2007, and is available for download through FTB’s Web site.
IMRS 07-0000432 – Business Consequences of Underreporting Income & Overstating Expenses
Issue: Practitioners request the creation and issuance of information on the negative consequences of not reporting all business income and/or overstating business expenses. This information should include audit and prosecution results so practitioners have a tool that includes examples to share with their clients.
Response: The Criminal Investigation Division has developed a very informative webpage on IRS.gov. IRS Criminal Investigations provides much of the information requested by the practitioners. It also includes a link to Criminal Tax Fraud Publications, Facts-Figures-Closed Cases, and New Releases. At this link, practitioners will find several publications effectively describing the negative impact and possible consequences for those considering participation in tax fraud. In addition, many new publications will soon be released in an effort to address and reduce the Tax Gap. These publications will also be available through IRS.gov.
IMRS 07-0000433 – Paying Taxes – Outreach and Education Campaign
Issue: Practitioners would like the IRS to produce additional outreach and educational information which provides a positive message about paying taxes, including the benefits of good recordkeeping and income reporting.
Response: Many new products are currently in development to help educate the general public, small businesses, and the practitioner community about the tax gap. Products include information about the National Research Project results and specific items contributing to the tax gap. Publication 2105, Why Do I Have to Pay Taxes is currently available on IRS.gov. Several different versions of the publication that highlight the societal effect of the tax gap (fewer public services, road deterioration, education cuts, etc.) are currently being reviewed. You can access, order or print several new products and fact sheets on IRS.gov, keyword “Tax Gap”.
IMRS 07-0000450 – Subscription Services for Small Businesses
Issue: Practitioner requests that we do more to publicize e-News for Small Businesses, a new publication now available.
Response: Issued Headliner 187, January 22, 2007.
IMRS 07-0000463 – Products for the Visually Impaired
Issue: Stakeholder would like an index of what is available to the visually impaired on the Digital Talking Books Page and for IRS to communicate tax law updates and other important changes in either CD format, Podcast or other audio means accessible to the visually impaired.
Response: Tax law updates are not available in audio format at this time. Information was provided as to the accessible Section 508 compliant file formats.
IMRS 07-0000503 – Child Tax Credit
Issue: Practitioner suggests the issuance of a Headliner or similar outreach effort regarding the disallowance of the Child Tax Credit for taxpayers who claim dependency exemptions for children living in Mexico or Canada.
Response: Publication 3965, Child Tax Credit, one of the sources that provide information on the child tax credit, was provided to the stakeholder. This publication is designed to educate the public about the child tax credit and is used as an outreach tool by the Wage & Investment Division. “Who is a qualifying child” is detailed in the publication, which addresses the relationship test, residency test, age test, support test and citizen - resident or national test. The publication specifically states that all of these tests must be met to claim someone as a “qualifying child” for the child tax credit.
IMRS 07-0000572 – National Research Project (NRP) Results
Issue: Practitioner suggests that talking points and other communications be developed to address practitioner and taxpayer concerns regarding the recent announcement of the upcoming NRP audits.
Response: The news release can be found at IRS Updates National Research Program for Individuals Web page.
IMRS 07-0000595 – Mutual Family Funds
Issue: Practitioner requests an outreach campaign to brokers and mutual fund companies to remind their clients of the taxability of transfers between family funds.
Response: Information regarding mutual funds (including the taxability of transfers between non-IRA mutual family funds) can be found in Publication 564, Mutual Fund Distributions. In addition, IRS.gov has several FAQs on the subject that can be located by entering “mutual funds” in the search box. When a taxable transfer or sale occurs, investment firms advise the taxpayers of potentially taxable transactions by issuing information returns (various Forms 1099). After review, we determined the existing material is sufficient.
IMRS 07-0000599 – Cafeteria Plans
Issue: Practitioner states the IRS has very limited information available on IRS.gov regarding Cafeteria Plans and requests additional FAQs, presentation materials, and a drop-in article on the subject.
Response: New proposed Section 125 regulations were published in the Federal Register on August 6, 2007. Comments were requested by November 5, 2007. FAQs on IRS.gov have been updated.
IMRS 07-0000601 – Reporting of Income
Issue: Practitioner suggests that we develop TV ad campaigns with a positive message about paying taxes on income related to babysitting, car repair, cosmetology, lawn cutting, construction and other side jobs.
Response: The IRS is looking at a wide range of options for educating and informing the American public about their tax responsibilities, including the possibility of creating public service messages for distribution through the media. Your ideas will help us further develop our communication strategy.
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Electronic Services
IMRS 06-0000054 – Form 1040 – E-filing by Large Corporations
Issue: Representatives of a large regional/national bank would like the IRS to allow large financial institutions to file individual tax returns despite tax issues/disputes they may have with the IRS. They already have the ability to e-file Forms 1041, U.S. Income Tax Return for Estates & Trusts.
Response: All authorized IRS e-file providers must pass a suitability check on the firm as well as on all principals and responsible officials of the firm prior to acceptance to participate in IRS e-file. To safeguard IRS e-file, suitability checks may be completed regularly. If the results of a suitability check indicate a firm or individual does not meet and adhere to IRS e-file requirements, the Authorized IRS e-file provider may be sanctioned. All e-filers must pass the same suitability check. So a firm eligible to e-file Forms 1041 would also be eligible to e-file Forms 1040. If a firm has been denied the right to participate in the e-file program, they can request an administrative review of the decision. Details can be found in Publication 1312, IRS e-file Application and Participation.
IMRS 06-0000192 – Rejected Electronically Filed Forms 7004, Application for Automatic 6-Month Extension of Time to File Certain Business Income Tax, Information and Other Returns
Issue: Practitioners advise that they were told that no additional registration was needed to e-file business returns. That policy was changed and an amended Form 8633, Application to Participate in IRS e-file Program, needed to be filed, where the practitioner could elect which forms they intended to e-file.
Response: From the beginning, the IRS position has been that business e-filers would need to update their e-file applications to include the filing of corporate returns. The IRS sent out Quick Alerts (February 16, 2006 and March 8, 2006) informing practitioners that they must update their applications in order to e-file, or their returns and extensions would be rejected. In addition, Publication 4163, Modernized e-file Handbook for Authorized e-file Providers for Form 1120/1120S, on page 14 in red states: Note: TO AVOID REJECTED RETURNS – EROs/Transmitters must have an application on file and it must be current with all the form types that are going to be e-filed. If a return that is not on the e-file application is electronically filed, that return will be rejected (Error Reject 905). Having a current application on file with the IRS will help EROs avoid having any returns rejected.
IMRS 07-0000353 – On-Line Disclosure Authorizations
Issue: CPA states that when a power of attorney form is submitted via e-services and is subsequently rejected, there is no indication as to why. Also, there appear to be differing levels of security for submitting a power of attorney via mail or fax versus submitting a power of attorney using the on-line disclosure authorization process.
Response: Due to budget constraints the Service is unable to make any enhancements to the system at this time; only operational and maintenance items are being performed. We will add your suggestion to our list of issues to consider in the future. IRS has many controls in place designed to ensure the security and protection of tax information. This system was designed to ensure that the person submitting the power of attorney is who they claim to be. On a paper document, the representative must sign and date a jurat that establishes that they are who they claim to be under penalty of perjury. When users are having a problem with the system, they should contact the help desk right when it is happening. The help desk can determine if the problem is an IRS systemic issue. The toll-free phone number is (866) 255-0654.
IMRS 07-0000375 – Centralized Authorization File (CAF)
Issue: Practitioner suggests the IRS establish a CAF tool in e-Services which will allow the user to view all Powers of Attorney they have on file.
Response: We are looking into the feasibility of this suggestion and, if possible, will implement this in 2008. We are also working toward providing a service that would allow the representative to remove all their clients without having a signed and dated 2848, Power of Attorney and Declaration of Representative.
IMRS 07-0000383 – Balance Due Notices
Issue: Preparers advise that balance due notices are being generated when the return is e-filed and a check is mailed shortly afterwards.
Response: Because the electronically filed return posts more quickly than a payment via paper check, this is a difficult systemic issue to resolve. The IRS has several controls in place to prevent this from happening during our peak filing season, but there are related issues that prevent year-round implementation. If tax is the only item owed, the taxpayer or tax professional can avoid this problem by using an electronic funds withdrawal (EFW). However, if penalty and interest are due (for example, on a return filed after the regular due date), the EFW does not permit payment of the penalty and interest, so there will still be a notice issued for those amounts. Beginning in processing year 2008, a scheduled enhancement to EFW will enable taxpayers to make penalty and interest payments.
IMRS 07-0000388 – Electronic Returns Originators (EROs)
Issue: EROs are receiving Letter 2752 incorrectly suspending them from the electronic filing program for non-receipt of Forms 8453. EROs indicate that all forms had previously been submitted.
Response: On October 30, 2006, Suspension Letters 2752 were issued to EROs who were missing required Forms 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return. When a provider submits the required information within 30 days of the date of the suspension letter, the IRS will review the request for reinstatement. A determination will be made and a letter will be issued to the provider informing them of the IRS’ decision.
IMRS 07-0000391 – Master File Tax Return Account Transcripts
Issue: Practitioner requests that transcripts be formatted to include the taxpayer’s tax identification number, name control and tax period on each page of a multi-page transcript.
Response: We agree the suggestion has merit and will pursue a TDS system change.
IMRS 07-0000418 – E-Services Forgotten Passwords
Issue: Practitioners who have forgotten their password for e-Services would like online verification and immediate issuance of a password or PIN.
Response: Due to security procedures and concerns, we cannot provide immediate, online verification and password submission for practitioners who may have forgotten their password or PIN. Since practitioners using e-Services are given access to taxpayer data, it is our responsibility to authenticate their identity. These precautions help prevent unauthorized disclosure or fraudulent activities such as identity theft. If a user has forgotten their password or PIN, they must repeat the Authentication and Confirmation process using the “Forgotten Password or PIN” link. If it has been more than 14 days since the online registration and the practitioner has not received the confirmation code via postal mail, the practitioner should call the e-Services help desk at (866) 255-0654.
IMRS 07-0000452 - Estimated Tax Penalty
Issue: Practitioner advises that when completing a return for electronic submission with an overpayment and an estimated tax penalty, the software will not allow the preparer to send in a payment with the return.
Response: Last year, IRS received a request to allow payment of penalties and interest (P&I) when a taxpayer is paying via electronic funds withdrawal (EFW). Certain types of software (used by taxpayers and tax practitioners) will calculate any P&I due. However, EFT only allows a payment equal to, or not in excess of, the amount owed on the return without penalties and interest. Therefore, taxpayers who want to pay P&I currently cannot do so if using EFW even though the software they or their practitioner is using calculates the P&I. Taxpayers can pay only the tax balance due amount via EFW and pay the P&I amount due by check, money order, credit card, or EFTPS. Or, they may use the same options to send the entire amount due (Bal Due & P&I) and bypass EFW altogether. However, to encourage the use of EFW, IRS will implement a feature which allows P&I payments via EFW in January 2008.
IMRS 07-0000455 – Electronic Submission of Potential Tax Scams
Issue: Tax professionals would like the ability to submit information electronically regarding potential tax scams.
Response: We truly appreciate the public’s assistance in identifying and reporting these items. In an effort to help tax practitioners and taxpayers report fraud, waste, and abuse, the IRS has added a link to the IRS Contact Webpage for reporting suspicious e-mails. At the top right-hand side of the IRS.gov home page, select the “I need to …” option. Click on the arrow in the box and a drop-down menu will appear. Select “Call or contact the IRS.” Scroll down to Suspicious e-Mails, Phishing, and Identity Theft. Tax scams and questionable tax shelters can be reported electronically at the Reporting Abusive Shelters, Fraud & Unscrupulous Tax Preparers page. You can also access the page from IRS.gov by entering the keyword “scam,” then choosing “Tax Scams – How to Recognize and Avoid Them,” then “options.”
IMRS 07-0000464 – Publication 1346, Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns (Tax Year 2006) & Form 8283, Non-Cash Contributions
Issue: Software vendor advised CPA of Publication 1346, which advised of the deletion of the word “various” from Form 8283.
Response: Form 8283 does allow the word “various”. Publication 1346, Nature of change page for record layout #3 is incorrect. A correction will be inserted in the next record layout release.
IMRS 07-0000492 - Changes to E-Services
Issue: To increase user-friendliness, the practitioner suggests the IRS provide a listing of error codes and a CD tutorial on how to navigate the system.
Response: We are currently working on updating the error messages to provide more information. Upon completion, we will look into posting them on the IRS Web site. An online tutorial is available once the customer logs into e-services. It explains how to use all the e-service products. Additionally, online help is available for any page and can be accessed by clicking on the help link at the top of the screen. This explains all the fields on that particular page and what to input. We prefer that customers use the online tutorials versus a CD, since tutorials are updated regularly and the CDs may be out-of-date. Keith Wallace is available to work with practitioners on a one-on-one basis to determine what triggers the error messages. Keith can be reached at the following address: Keith.I.Wallace@irs.gov.
IMRS 07-0000506 – Liability of Electronic Federal Tax Payment System (EFTPS) Batch Provider
Issue: Practitioners state that when registered as an EFTPS batch provider, they become liable for the funds paid by clients if the client’s bank account lacks sufficient funds for payment.
Response: Currently and since inception, EFTPS has no legal authority to penalize third parties, i.e. batch providers. Any penalties due because of untimely or insufficient deposits and/or payments are assessed against the individual taxpayers as are insufficient funds/bad check penalties. The only penalty that can be assessed against the batch provider is suspension from the program. Revenue Procedure 98-32 provides information and guidelines for both batch and bulk providers.
IMRS 07-0000544 – Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return
Issue: Practitioner suggests that, in light of the recent changes concerning Form 8453, the IRS develop a way for Electronic Return Originators (EROs) to validate when Form 8453 is received by the campus.
Response: For processing year 2008, EROs will be mandated to use the PIN therefore eliminating the use of the Form 8453 as a signature document.
IMRS 07-0000545 – Form 1099-MISC, Miscellaneous Income
Issue: The US Department of Agriculture (USDA) reimburses family day care providers for qualifying meals served to children in their care through the Department’s Child and Adult Care Food Program (CACFP). Providers can contact an agency or organization to apply for reimbursement of their food expenses at rates set forth by the USDA. However, the sponsors of these food programs are unsure if they are responsible for obtaining a completed Form W-9, Request for Taxpayer Identification Number and Certification, and subsequently issuing Form 1099-MISC for the reimbursements. These “sponsoring organizations” want to be in compliance with requirements for issuing information returns and would like the IRS to provide clarification.
Response: Answers to questions such as these are based on the facts and circumstances of each taxpayer. Therefore, we suggest you request a Private Letter Ruling (PLR). Revenue Procedure 2007-8 provides the instructions and applicable fees for a PLR. It can be found on IRS.gov at Frequently Asked Tax Questions And Answers Web page. You can also find the information by going to Frequently Asked Questions and entering the keyword “Letter Ruling.”
IMRS 07-0000550 - Form 1040, U.S. Individual Income Tax Return
Issue: Practitioner recommends the name field be expanded beyond 35 characters when e-filing 1040s.
Response: Unfortunately the name line is limited to 35 characters for both e-file and paper returns. If expanded further, it cannot post to the masterfile.
IMRS 07-0000553 – Online EIN Application
Issue: Practitioners advise that the online EIN application times out too quickly and taxpayers believe they are being charged by the Service when submitting the application.
Response: The existing application does time-out approximately 15 minutes after it is accessed. This is to ensure sensitive data is not left on a computer. However, on July 23, 2007, the existing application will be replaced with a redesigned interface similar to the tax preparation software products currently on the market. The application is in a Q&A format and has embedded Help topics and keyword hyperlinks so that separate instructions are not required. The new product clearly states the application will time-out after 20 minutes of inactivity, and provides a pop-up warning when there are 5 minutes remaining. Given that the new application will launch within 60 days, we do not believe it is a sound business decision to make any further changes to the existing application. The IRS does not charge for issuing an EIN. We will add language to EIN-related articles and will revise SS-4 Form and instructions to explain that the IRS online service is free.
IMRS 07-0000581 - Form 1040-ES, U.S. Estimated Tax for Individuals
Issue: Practitioners advise that clients who pay estimated taxes electronically are receiving paper 1040-ES vouchers in the mail.
Response: We discovered that there were glitches in the system and we have made adjustments to keep this from happening in the future. In addition, vouchers will no longer be sent each quarter and there will be only one mailing to ES filers. The following identified returns will not receive vouchers.
IMRS 07-0000586 – E-Services Accessibility
Issue: Since many firms hire unenrolled agents as background staff to perform "behind the scenes" tasks on behalf of company clients, their access to E-Services would be highly beneficial for all concerned. How can the employees of these firms be given access to E-Services?
Response: Once a firm has been granted access to the E-Services incentive products, they can delegate access to others in their office. This is a two step process. First they must access their e-file application through the Registered User Portal (RUP) and select the menu item entitled “Delegated User(s).” They then enter the users for whom they wish to delegate the incentive products. Once these steps are completed, they must delegate authorities to that user. The user must then register and confirm their registration in order to use the products.
IMRS 07-0000587 – Transcript Delivery System (TDS)
Issue: Preparers who file Form 8821, Tax Information Authorization, or a modified Form 2848, Power of Attorney and Declaration of Representative, cannot use TDS to request account information and need to use other means, including the Practitioner Hotline, to obtain transcript information. Preparers would like TDS to mirror the PPS.
Response: Guidance from the Office of Professional Responsibility and the instructions on Form 8821 advise that the form should not be used to request a copy or transcript of your tax return. Instead, use Form 4506 or Form 4506-T. Until there is a change in official guidance and Form 8821 is modified, the TDS will not accept Form 8821 as an authority for third party transcript requests. We are working with the Practitioner Priority Service to ensure consistency between OPR guidance and Form 8821 instructions as changes are made.
IMRS 07-0000638 – Automatic Withdrawals for Installment Agreements
Issue: Practitioners would like the ability to set up automatic withdrawals/debits from taxpayer accounts for the life of an Installment Agreement arrangement.
Response: We considered this suggestion and, due to several factors, it cannot currently be pursued. The legal and systemic limitations of EFTPS allow for only one year of scheduled payments. Due to interest rate fluctuations, longer term prediction of the exact date of full payment of the liability is problematic. The IRS is constantly working to improve its electronic payment options and this suggestion will be considered should EFTPS become capable of managing these limitations. Currently, an individual can arrange automatic payments for at least 12 months at a time on EFTPS. If the Installment Agreement extends longer than 365 days, the taxpayer must initiate additional payment instructions on the 366th day. EFTPS ACH debit taxpayers may also elect to warehouse their payments for settlement for up to 120 days for businesses and 365 days for individuals.
IMRS 07-0000653 – Lien Release
Issue: Practitioner requests IRS update e-services to allow those with power of attorney authorization to view liens and lien releases online.
Response: Meetings are being held to discuss options for providing timely access to lien documents in an efficient and secure manner. IRS is aware of the problem and is aggressively trying to meet the needs of the public with enhanced technology and increased system capabilities. However, the barrier to resolving issues and system problems is that proposed projects must compete for available funds and we do not foresee adequate funding for this initiative for the next few years. We are, however, discussing the feasibility of modifying the current system to align with the future redesign of the Automated Lien System.
IMRS 07-0000657 Fiduciaries
Issue: Trust Company requests e-services be redesigned and recommends adding an indicator for a fiduciary under Section 6903. Practitioners feel the change will save valuable time and resources spent unnecessarily verifying these Powers of Attorney.
Response: If the bank is acting in their own interest, i.e., asking questions about their bank, they do not have to file a Form 2848. If the persons calling the IRS are officers of the bank, and are operating in their fiduciary capacity as described in Treas. Reg. 301.6903-1(a) and (b), they do NOT need a Power of Attorney to communicate with the IRS. However, if the bank is acting on behalf of a person for whom the fiduciary is filing, then the bank is required to file Form 56, Notice Concerning Fiduciary Relationship with the IRS. ETA will incorporate the change to recognize bank officers covered under IRC 6903. A Request for Information Services will be submitted to allow adding Form 56 to the e-services platform. However, we do not anticipate that these changes will be implemented until the next generation e-Services roll-out in 2009.
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Forms & Publications
IMRS 06-0000307 - Listed Transactions
Issue: Practitioners would like to see a Notice that contains a complete list to date of transactions identified as “listed transactions.”
Response: The Listed Transactions Webpage on IRS.gov has been redesigned. It incorporates the information from the old page in a very user-friendly format. It is also a living document and can be readily updated to include changes or new information. The new page can be found at the Listed Abusive Tax Shelters and Transactions page.
IMRS 07-0000376 – Form SS-4, Application for Employer Identification Number
Issue: Practitioner suggests that the Service add a check box line to Form SS-4 to identify money services businesses.
Response: Per Counsel, legal restrictions prevent us from using a Title 26, Internal Revenue Code, form (W-4) to collect information on matters related to Title 31, Money and Finance.
IMRS 07-0000393 – Form 8832, Entity Classification Election
Issue: Practitioner indicates that there is no consistency in getting a response when submitting Form 8832 as CP277, We Have Approved Your Form 8832, Entity Classification Election, is not consistently issued. Practitioner feels that the IRS should review the correct procedures for notification and explain why inconsistencies occur.
Response: We believe that this will change with our transitioning the processing of these forms from Philadelphia to Ogden, which is expected to be completed soon. In addition, we are also revising the form and instructions.
IMRS 07-0000398 – Form 1040, Individual Income Tax Return
Issue: Practitioner advises that client had withholding shown on Form 1099-INT and 1099-DIV, Dividends and Distributions. Both the Form 1040 instructions and Publication 17, Your Federal Income Tax For Individuals, instruct the taxpayer to list amounts withheld on Form 1040 but do not require attaching the Form 1099. However, Form 1040 was returned to taxpayer along with Notice 779 requesting the tax return be resubmitted with Form 1099. The instructions should state that 1099 forms with withholding should be attached to the return or, if more information is needed, correspondence should be sent to the taxpayer without returning the entire tax return.
Response: Instructions for Form 1040 and Publication 17 are correct in stating that attaching the Form 1099 is not a requirement; therefore those instructions do not need to be revised. We make every effort to look at the taxpayers’ returns and attachments so forms are not sent back without cause. We are continuing to develop guidance and educate our employees on proper procedures to ensure that our process will continue to improve.
IMRS 0700000417 – Proper Reporting of Payments to Participants in Medical Research Studies
Issue: Practitioners report that some payers to participants in medical research studies report the payments on Form 1099 MISC Miscellaneous Income in Box 7, Non-employee Compensation, rather than Box 3, Other Income. This may result in the recipients incorrectly reporting the income on their returns.
Response: In some cases, fees paid to a participant in a medical research study may be subject to Self Employment Contributions Act (SECA) tax because the participant is engaged in a trade or business of participating in medical research studies. However, in many cases, the payer will not know whether the participant is engaged in the trade or business of participating in medical research studies. Therefore, to avoid creating the presumption that these payments are, in fact, subject to the SECA tax, the payments should be reported in Box 3 of Form 1099 MISC. As always, a taxpayer with amounts reported in Box 3 of a Form 1099-MISC must determine whether such amounts are subject to SECA tax based on his or her own circumstances. We will recommend adding this information to the Form 1099 MISC instructions.
IMRS 07-0000427 – Letter 105C, Claim Disallowed
Issue: Practitioner would like to see the wording changed in Letter 105C which requires him to sign a statement attesting to the authenticity of documents submitted with a formal request. Practitioner feels that if he is basing the protest on the facts and documents presented by his client, he has no way of validating that those statements and documents are true and correct. In addition, the letter only asks for this statement from Enrolled Agents.
Response: We agree with the suggested changes and updates will be made to the disallowance/partial disallowance letters (105C/SP and 106C/SP). The word “personally” will be removed and Attorney and Certified Public Accountant will be added to the signature line along with Enrolled Agents.
IMRS 07-0000430 – Publication 3699, Small Business and Self-Employed Community Web Site Brochure
Issue: Practitioner suggests that we include Publication 3699 in the mailings when new EINs are assigned to businesses in order to direct the small business community to the IRS SB/SE website for information and products.
Response: We have made substantial effort to reduce these mailings over the past five years to eliminate waste and not send products to those who have access to alternative media and do not need the direct mailings. We previously included Publication 3698, TEC Mission Brochure in EIN Notices. However, in 2002, it was decided to remove it as a stuffer for a number of reasons. A few of those reasons are: 1) We were at our limit for any additional stuffers. 2) Practitioners often request multiple EINs and do not generally maintain brochures included with notices. 3) With online EIN and faxing applications, the customer can secure the EIN immediately with no need for paper information. We are currently researching going to a web strategy where a link to more information will be provided when an EIN is obtained on-line.
IMRS 07-0000438 – CP87A, Exam Dupe TIN Notice
Issue: Practitioner would like to see CP87A changed to allow a response that indicates that taxpayer is entitled to the EITC, or the dependent claimed.
Response: Notices that were sent out were incorrect. The entire process was changed this year. We went from letters printed by a private contractor to automated notices issued from master file. Unfortunately the wording in the notices was incorrect. The notices were to advise the taxpayer that if they believe they were entitled to the EITC, or the dependent, no action was necessary. The notices have been corrected.
IMRS 07-0000447 – Rejection of Form 8633, Application to Participate in IRS e-file Program, for Limited Liability Company (LLC) Election Using Same EIN
Issue: Practitioners advise that when completing Form 8633 to update their status from sole proprietor to a single member LLC using their current EIN, they are incorrectly receiving rejection notices. In addition, they have been informed that they must apply for a new EIN and, upon receipt, submit an application to become a new electronic returns originator (ERO).
Response: If the taxpayer converts from a sole proprietor to a single member LLC, and does not have employees, they do not need an EIN just because of the LLC election. There is no process available for changing to an LLC with the online e-file application. Because of the current Third Party Data Store program structure, it cannot be done systemically either. There is nothing in the regulations that states a taxpayer cannot be a sole proprietor and an LLC; therefore, these individuals should remain as sole proprietors, provided they are single member LLCs. They may then contact the e-help number at (866) 255-0654 and tell them they would like the IRS to know that they are a single person LLC retaining sole proprietor status and they are not required to obtain an EIN. The assistor would then make a comment on the application and it would be entered into the records. ETA is looking into the possibility of systemically allowing an LLC to be input with an SSN and also allowing an update from sole proprietor to an LLC, without an EIN but with an SSN.
IMRS 07-0000473 – Form 8913, Credit for Federal Telephone Excise Tax Paid
Issue: Practitioner states that the instructions for calculating interest on Form 8913 are insufficient and that IRS should include a link to the instructions as well as the form.
Response: The interest factor tables for corporations are available in a PDF document. The tables cover taxpayers with filing dates through August 16, 2007. The link for the tables can be found on the TETR homepage under the “Take Note” section.
IMRS 07-0000487 – Form 1099-INT, Interest Income
Issue: Practitioner would like to see the EIN included on Forms 1099-INT issued by the IRS as some software providers require this information when e-filing.
Response: The EINs and SSNs on information returns are used for matching purposes, i.e., expenses deducted on one return are matched with income reported on another return. Because the IRS is not taking a deduction for the interest paid, the payer EIN is not necessary on the documents in question.
IMRS 07-0000499 – Audit Technique Guides
Issue: Stakeholder suggests that if a specific industry has a Web page on IRS.gov, the Web page should include a link to the appropriate audit technique guides. Also, Publication 3780, Tax Information for Small Construction Businesses, directs the reader to the Construction Industry site for the audit technique guide, yet the guide is not posted there.
Response: Exam is in the process of updating the construction industry guide and expects this to be completed later this year. When completed, there will only be one guide that will include drywall, masonry, concrete, etc. Links and publications will be reviewed to see if revisions are necessary. A link to the audit technique guides can be found on the Small Business Web page under industries/professions.
IMRS 07-0000505 – Form W-2
Issue: Stakeholder believes that there is a significant problem with the easy availability of blank Forms W-2 at the Taxpayer Assistance Centers and IRS Distribution Centers.
Response: We appreciate the practitioner’s suggestion to reduce tax fraud by making it harder for taxpayers to get blank W-2s from the IRS. However, there are many tax forms that taxpayers can use to submit fraudulent claims. Our limited Taxpayer Assistance Center resources make it difficult to monitor the availability of these kinds of forms. The IRS relies on established control systems and practitioner referrals to Criminal Investigation to identify questionable withholdings and refunds.
IMRS 07-0000521 – Form 2553, Election by a Small Business Corporation
Issue: Practitioner advises that after filing Form 2553 for a corporate client, the corporation did not receive a determination of acceptance or nonacceptance of election within two months of the date of filing or within five months if box Q1 was checked. When practitioner called to check the status, the IRS advised that a Power of Attorney (POA) is required before discussing.
Response: There are no provisions for a copy of the acceptance letter to be automatically sent to the practitioner. However, when completing the Form 2553, the practitioner/attorney can request the client sign a properly completed Form 2848, Power of Attorney and Declaration of Representative. The Form 2848 should specifically authorize the representative to receive information about the S-Corporation. After submitting the Forms 2553 and 2848 to the appropriate addresses, the practitioner can follow-up on the S Election through the Practitioner Priority Service. If the election is approved, the Campus can send a letter to the practitioner/attorney advising them of the date the election was approved.
Update: This issue and response was part of the June 2007 Summary. After it was published, the practitioner community responded to their local liaison representatives with several excellent recommendations. One suggestion was to redesign the Form 2553 to include a check box much like the third party designee on Form 1040. Another suggestion was to change the Form 2553 using the same format used for the Third Party Designee section of Form SS-4. The suggestions have all been forwarded for consideration. We will report on the issue as additional information is made available.
IMRS 07-0000552 - Post Card Reminders for Estimated Tax Payments
Issue: Practitioner suggested the IRS begin sending post card reminders for estimated tax payments rather than sending Form 1040ES with vouchers and envelopes.
Response: We are significantly reducing the number of 1040ES packages to be mailed next year. In addition, vouchers will no longer be sent each quarter and there will be only one mailing to ES filers. The following identified returns will not receive vouchers.
These changes will go into effect later this year.
IMRS 07-0000631 – Internal Revenue Manual (IRM)
Issue: Tax professionals believe the external IRM is not updated on a timely basis. They would like the IRS to provide a link to the most current version and provide confirmation stating that it is the most current version. They also suggest the IRS provide a disc with the most current version.
Response: IRS updates the external IRM weekly. New and updated material is normally uploaded one week after the IRM is published on the IRS Publishing Web site. The published IRM is available on IRS.gov (minus information designated official use only (OUO)). A CD-ROM, Doc. 9768, Catalog Number 22933Q, Internal Revenue Manual CD-Rom, is updated quarterly and may be ordered by the public under the Freedom of Information Act (FOIA). If practitioners are concerned as to whether the IRM posted on IRS.gov is the most current, they may submit a request to the FOIA Reading Room. For more information on the IRS’ FOIA Reading Room, see IRM 11.3.7, Freedom of Information Act Reading Room Operations.
IMRS 07-0000640 – Form 8868, Application for Extension of Time to File an Exempt Organization Return
Issue: Practitioners advise that when filing Form 8868 and completing the section for an alternate mailing address, they are not receiving acknowledgement/acceptance of the extension.
Response: The process for sending approval/denial notifications to the filer has changed. We now generate the CP211 from Master File when the extension posts. The notice will only generate to the filer’s address on Master File and to anyone listed on the CAF. Form 8868 is being revised to remove the sections titled Notice to Applicant and Alternate Mailing Address.
IMRS 07-0000659 – Form 13803, Income Verification Express Service Application and Employee Delegation Form
Issue: Stakeholders request that Form 13803 be revised to allow for EINs. The current form only allows hyphenation appropriate for a social security number.
Response: The Adobe Acrobat version of Form 13803 has been revised to allow hyphenation for an EIN as well as a Social Security number.
IMRS 08-0000706 – Publication 4521, e-file in 2008 Brochure
Issue: Publication 4521 contains incorrect information that states that taxpayers can no longer deduct repaid jury duty fees on Form 1040. Form 1040 is the only form on which the fees can be deducted.
Response: The publication should have said that taxpayers can no longer deduct repaid jury duty fees on Form 1040A. Internal alerts were issued and the correct information was added to the Current Hot Issues for December 2007. Forms 1040, 1040A, and the respective instructions are correct as published.
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Identity Theft
IMRS 07-0000416 – Disclosure
Issue: Practitioner advises that the 2006 Package 1099, How to Get Forms 1099, 1096, 5498 and W-2G, mailed earlier this year was sealed by only two round stickers enabling someone to look in through the sides and read the TIN.
Response: As a policy, we make every effort to conceal identifying information. Privacy and identity theft are significant issues that are taken very seriously by the agency. We do so by redesigning products as they are revised. We thank you for bringing this concern to our attention. As we redesign the Package 1099 for 2007, we will determine whether the EIN is needed on the form and will redesign the product to seal all four corners, thus eliminating the potential for someone to peer inside.
IMRS 07-0000472 – Identity Theft
Issue: Practitioner raised the concern that, by having taxpayers include their social security number on their checks or money orders for payments, they may be prey to identity theft and suggests an electronic funds withdrawal option be made available.
Response: Electronic Funds Withdrawal (EFW) is an application offered only to those taxpayers who electronically file their tax return. It would not be feasible to offer this option for paper-filed returns. For instance, a payment record would need to be completed and submitted with the tax return, as well as some form of authorization statement authorizing the Treasury Financial Agent (TFA) to process the electronic payment. Unlike with e-file, there would be no way to check the return and/or payment against various reject conditions, which would greatly increase the number of rejects that would occur when the TFA attempted to process the payments. Timeliness of receipt by the TFA to process EFW requests submitted with a paper return on the date requested by the taxpayer would be an issue. The speed and efficiency by which EFW now works would be greatly impaired for paper-submitted EFW requests mailed in with a return. Besides EFW, other electronic options offered are credit card and EFTPS.
The inclusion of the social security number, tax year and tax period on checks or money orders are essential for the posting of return/payment information to the appropriate taxpayer account. The absence of these items would increase processing costs, due to the time and labor required to research and resolve problems caused by the lack of this information. This information provides the necessary supporting documentation and eliminates the need for IRS to have additional contact with taxpayers. The IRS would otherwise have to make telephone contacts and/or issue correspondence to ensure that these checks and remittances are credited to the appropriate taxpayer accounts.
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Policy & Procedures
IMRS 06-0000159 & 129 – Form 8655, Reporting Agent Authorization
Issue: Practitioner wants to know if checking the box for Form 941, Employer’s Quarterly Federal Tax Return on Form 8655 will also authorize Form 944, Employer’s Annual Federal Tax Return. In addition, Reporting Agents request that the IRS change Revenue Procedure 2003-69 to describe the new Form 8655 so they can work with notices involving CAWR, W-2 and 94X.
Response: These issues are addressed in Revenue Procedure 2007-38.
IMRS 06-0000169, 145 & 143 – Frequency Tapes
Issue: Reporting Agents would like the IRS to include the number of taxpayers on each frequency tape, and notify if client is a Form 943, Employer’s Annual Tax Return for Agricultural Employees or Form 944, Employer’s Annual Federal Tax Return filer.
Response: Tapes now include the number of taxpayers as well as whether the taxpayer files Form 943 or 944.
IMRS 06-0000170 – Employer Identification Number (EIN)
Issue: Practitioner requests information on valid EINs.
Response: Information is now included on IRS.gov and SSA’s Web site.
IMRS 07-0000347 – Currency Transaction Reports (CTRs)
Issue: CPA suggests depositors making deposits on behalf of an organization be given a copy of the CTR for their tax records in case of an audit.
Response: Currency Transaction Reports are generally prepared a few days after the actual transaction, so this suggestion would require mailing a very large number of documents to transactors (about 13,000,000 annually) at great cost to the preparer. This additional burden to banks and other financial institutions outweighs any potential benefit to a filer under examination by the IRS for personal income tax issues. In addition, IRS auditors receive only CTR information regarding the owners of accounts, not the transactors, to prepare for an examination. Auditors also have access to CTR information and can easily resolve any concerns about whether the transactor also owned an account in the event the issue surfaces in an audit. FinCEN, not the IRS, designs the FinCEN 104, Currency Transaction Report, to comply with regulatory requirements. Identification of the Transactor is specifically required by Regulation (31 CFR 103.28). Filers are required to provide all information called for on Form (31 CFR 103.27(3)(d)) and banks are required to ask for the transactor’s SSN. The filer can also ask the bank for a copy of the CTR. The bank is not prohibited from providing this to the filer, but each bank has its own policies and has the option of charging for this service.
IMRS 07-0000367 – Federal Heavy Highway Vehicle Use Tax
Issue: A state transportation department has raised questions which require guidance, pending issuance of regulations. The organization suggests adding these questions and answers to the Frequently Asked Questions (FAQs) section on the existing Federal Heavy Highway Vehicle Use Tax Web page on IRS.gov.
Response: We added this information to the existing Frequently Asked Questions regarding Federal Heavy Highway Vehicle Use Tax posted to IRS.gov, key word: “highway.” Please note: FAQs are labeled as “FAQs for Indian Tribal Governments regarding Highway Use Tax.” However, the FAQs may be useful for others filing Form 2290, Heavy Highway Vehicle Use Tax Return.
IMRS 07-0000374 – Retirement Funds
Issue: Practitioners would like to know if using retirement funds to start a business violates Internal Revenue Code Section 4975 and what limitations, if any, are imposed for this type of activity.
Status: The IRS and the Department of Labor (DOL) are aware of the explosion of activity involving IRAs and Business Start-up promotions. The demand for plain language guidance (“soft guidance”) is increasing each year as plan sponsors/employers and plan participants/employees seek information about the operation of their retirement plans. While the IRS is able to assert that a particular self-directed IRA will lose its tax-exempt status to the beginning of the taxable year in which a prohibited transaction took place, as a result of Reorganization Plan No. 4 of 1978, 1979-1 C.B. 480, the final interpretive authority as to whether a given transaction is a prohibited transaction rests with the DOL. Thus, any determination as to whether a prohibited transaction has taken place is under the jurisdiction of DOL. DOL has issued the following advisory opinions that should give the individuals some idea of how DOL treats use of an IRA to invest in a business: DOL Advisory Opinion 2000-10A (July 27, 2000), and DOL Advisory Opinion 2006-10A (January 6, 2006).
IMRS 07-0000387 – Enrolled Agent Exam
Issue: Practitioner would like to know the passing score for persons taking the Enrolled Agent exam and the procedures to refute questions that were marked incorrect.
Response: Information about the scoring and results of the Enrolled Agent Examination will be posted to the Thomson Prometric Web site in late March 2007. Please visit Thomson Prometric Web site to review this information.
IMRS 07-0000390 – Penalty and Interest Calculator
Issue: Practitioners request a penalty and interest calculator be placed on IRS.gov - similar to the calculator on the New York State Department of Taxation and Finance’s Web site.
Response: Due to the nature and complexity of interest computations, a calculation tool for federal returns that is similar to what is provided on the NY Web site could only provide an estimated computation and could not take into consideration the various tax law provisions that may be applicable. Therefore, at this time there is no plan to provide an interest calculation application on IRS.gov.
IMRS 07-0000405 – Split Refunds
Issue: There is a potential problem for taxpayers who make prior year (2006) IRA contributions using money from their 2006 refund via Form 8888. A change to the IRA deposit amount could potentially impact the 2006 tax computation. IRA contributions should be listed first on Form 8888, Direct Deposit of Refund since, if IRS makes any changes to the refund deposit amounts, they begin with the last account listed on Form 8888. Potential problems arise when Financial Management Services (FMS) makes changes to the refund deposit amounts, since they begin with the first listed account – which would impact the IRA deposit. This problem could be avoided if IRS transmitted the direct deposit information to FMS in reverse order of how the Form 8888 is designed. That would ensure that, if FMS makes a change, they will do so in the same priority order as the IRS.
Response: We understand how this could present problems if changes were made to the refund amount. This issue was discussed at length during the planning of the Split Refund option and can be an issue anytime the amount of the refund to be remitted differs from the amount on the return. Every possible solution was explored. The planning group found no possible way to ensure that the amount the taxpayer indicates as an IRA will be actually deposited into his/her IRA account. Therefore it continues to be the taxpayer’s responsibility to ensure the amount they want deposited into their IRA for any year, prior or current, is done through the direct deposit of the refund or any other type of deposit. For more information on how direct deposits may be adjusted, see page 2 of Form 8888, Direct Deposit of Refund to More Than One Account, under the “Changes in Refund Due to Math Errors or Refund Offsets” section.
IMRS 07-0000409 – Enrolled Agents
Issue: Some clients of enrolled agents received incorrect notices advising their enrolled agent was ineligible to practice before the IRS.
Response: The Service researched the enrollment records and determined that there were a few who were erroneously reported as ineligible. Corrected information was sent to taxpayers and letters of apology were sent to the Enrolled Agents. However, most cases involved Enrolled Agents who did not renew on time for whom the change of status was correct.
IMRS 07-0000439 – Individual Taxpayer Identification Numbers (ITINs)
Issue: Certifying Acceptance Agents are having difficulty obtaining ITINs.
Response: As in all new systems, we are working to eliminate the bugs in the real-time system. Organizations that have been approved as acceptance agents are given the ITIN operation telephone number for checking the status of applications. Generally, when we conduct research on processing problems, we find that (1) the agent failed to provide the required documents to support the application, and/or (2) they did not complete the W-7 correctly. For assistance, please contact the ITIN program office via e-mail at itinprogramoffice@irs.gov or you may call (404) 338-8963.
IMRS 07-0000442 – Standard W-2, Wage & Tax Statement
Issue: Practitioners would like the IRS to mandate a standard W-2.
Response: There are no enforcement mechanisms to require compliance with standard W-2s. We provide specifications to be followed and guidelines in Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3 and Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and W-2G (and 1042-S).
IMRS 07-0000451 – Large Cases
Issue: Practitioner suggests that the IRS provide the contact phone number for large/high dollar cases on taxpayers’ notices. In addition, upon entering the ACS system, they would like the ability to indicate the dollar amount of the case to ensure they are directed to the appropriate area. They report that each time they contact ACS on a taxpayer’s case, they need to explain the taxpayer’s situation to a different person.
Response: High dollar accounts are already segregated and handled in a specific environment. When a taxpayer or practitioner calls into any of the toll-free numbers, they are asked to give the SSN or Case Number. If the account is $100,000 or greater and in Status 22 (the return filed and assessed and a taxpayer delinquency account notice issued), the call will be directly routed to a specific site designated for these accounts. In ACS we document the case history to avoid the taxpayer having to repeat their situation to the person who answers the call. In a small environment such as the 100k team, there should be some familiarity with an account if the taxpayer has called several times for assistance.
IMRS 07-0000453 – Form 8655, Reporting Agent Authorization
Issue: Reporting agent reports that, despite having a Form 8655, Reporting Agent Authorization, when calling the IRS regarding an account, IRS assistors will not discuss the account with him.
Response: This most commonly occurs when the reporting agent calls and identifies themselves as a representative, rather than a reporting agent. The phone assistor sometimes checks the Centralized Authorization File (CAF) rather than the Reporting Agent File (RAF). The assistor cannot see record of the authorization which permits them to discuss the account. We have reminded our staff to check the Reporting Agent File and that they are permitted to talk with the reporting agent who has a Form 8655 on file.
IMRS 07-0000470 – Split Refunds, Payment for Tax Preparation Services
Issue: Practitioners request the option of designating a portion of their client’s refund to pay for tax preparation services.
Response: At this time, split refunds are only available between two and three accounts with financial institutions and are not available for taxpayers to direct part of their refund into their tax professional’s checking or savings account to pay for tax preparation fees. The IRS invites stakeholders and partners to tell us about their experience with the 2006 split-dollar refund option - what worked well and what can be improved? We welcome feedback from stakeholders about their experiences assisting their customers and clients during the filing season and will use this feedback to modify and improve the process for 2007 refunds. Stakeholders can comment through their IRS stakeholder relationship manager or via e-mail to a dedicated mailbox. Although the IRS will read and consider every suggestion or comment, the IRS does not have the capability to respond to individual e-mail messages.
IMRS 07-0000479 – Continuing Education Credits
Issue: AICPA will not grant continuing education credits for the IRS’ presentations on Circular 230.
Response: Currently there is no agreement between the AICPA and IRS that qualifies our Circular 230 presentations as Ethics training for CPE credit. Each State Board of Accountancy is the qualifying body that makes the determination as to what qualifies for CPE credit for their members. It is not IRS’ practice to present our materials directly to the states for approval. The organization, stakeholder/partner (such as Practitioner Organization, partnering school system, etc.) or participant is responsible for obtaining CPE approval.
IMRS 07-0000484 – Taxability of Proceeds from Livestock Sales at County Fairs
Issue: Educational assistance is requested regarding the taxability of proceeds from livestock sales at county fairs and the requirements for issuing Form 1099, U.S. Information Return.
Response: Information for the 4-H Fact Sheet was provided to the USDA. Publication 225, Farmer’s Tax Guide provides information for 4-H projects and prize monies from the projects. Information regarding 1099s can be found in the general instructions for Form 1099 on IRS.gov and instruction for Form 1099-MISC.
IMRS 07-0000486 – Missing Forms 8453, U.S. Individual Income Tax Declaration for Electronic Filing
Issue: Practitioner advised that he was suspended after providing missing Forms 8453.
Response: Publication 1345, rev. 11-04 (page 26) states, “[a]s a composite tax return is not considered filed until the Forms 8453 are received by the IRS, EROs who are lax, negligent or untimely in mailing Forms 8453 to the IRS may be sanctioned.” The standard used for Form 8453 suspensions is currently being reviewed by management for changes related to tax year 2007 and possibly for tax year 2006.
IMRS 07-0000490 & 489 – Certifying Acceptance Agent (CAA)
Issue: A CAA is concerned about the lack of training provided to CAAs on the ITIN application process, procedures, and requirements, and is having difficulty getting assistance from the ITIN Unit.
Response: The Service recruits CAAs from seasoned tax practitioners who are knowledgeable about tax law as it relates to resident and non-resident aliens. Upon completion and approval of Form 13551, Application to Participate in the IRS Acceptance Agent Program, the IRS provides Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN), and Publication 4520, Acceptance Agents Guide for Individual Taxpayer Identification Number (ITIN), as well as additional instructions. The ITIN office also sends out a newsletter that contains updates on requirements, conferences, problems, etc. as well as sends email alerts when there are problems. A yearly conference is held in various locations and an email is sent to all Certifying Acceptance Agents notifying them of the details. However, it is not a requirement to attend. We also participate in the Nationwide Tax Forums and phone forums. If a Certifying Acceptance Agent feels they need additional training or information, or if they have questions, they can send an e-mail request to: ITINProgramOffice@irs.gov.
IMRS 07-0000495 – Failure to Deposit Penalty (FTD) Waiver for Farmers
Issue: Industry stakeholder requests a blanket FTD penalty waiver for farmers filing returns due 03/01/07 as he believes that changes to the tax law and unavailability of forms has prevented farmers from filing their returns timely.
Response: This particular instance does not appear to constitute a need for a special waiver. IRS Publication 505, Tax Withholding and Estimated Tax, provides instructions for requesting a waiver of the Failure to Deposit penalty in unusual circumstances. While we understand the frustration associated with receiving late information returns, this issue is not limited to farmers.
IMRS 07-0000498 – Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
Issue: Practitioners would like to use private delivery services for overnight mailing of Form 4868 when making payments. However, they must have the campus street addresses to do so.
Response: Instructions for Form 4868 have been revised to include information regarding using private delivery services. If you are not making a payment, you can use certain private delivery services designated by the IRS. These private delivery services already have the correct street addresses for the IRS. If you are making a payment, you must use the U.S. Postal Service, not private delivery service.
IMRS 07-0000502 – Licensed Public Accountant
Issue: A public accountant in Alabama reports difficulties in getting IRS employees to recognize him to practice before the IRS. Have IRS personnel been informed that Alabama public accountants are recognized as authorized representatives before the IRS just like the Alabama CPAs?
Background: In October 2004, the Chief Counsel determined that Pennsylvania law accorded Pennsylvania public accountants (licensed before a change in the law governing the practice of accountancy in that state) the same practice privileges as Pennsylvania certified public accountants, provided they met the same ethical and continuing professional education requirements as Pennsylvania CPAs. OPR is in the process of reviewing this issue on a state-by-state basis. A determining factor involves whether the state had a prior program or designation of public accountant which subsequently transitioned into the CPA process and designation. In some states, public accountants were "grandfathered in," meaning they did not have to take the CPA exam. In contrast, some states maintain a two-tier approach, whereby they still have "public accountants" and "certified public accountants."
Response: At this time, IRS recognizes public accountants from the following states as authorized representatives: AL, AK, CA, CO, CT, HI, MT, NH, NJ, NY, ND, OH, PA, RI, SD, TN, VT, WV.
We have shared this information with the Collection and Examination organizations for distribution to their employees.
IMRS 07-0000504 – Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return – Difficulty in Getting State Payments Certified
Issue: West Virginia practitioner files unemployment tax returns for an Ohio business using his West Virginia address and frequently has problems getting the state payments certified.
Response: The IRS 940 Certification and Disclosure staff and the Ohio Department of Job and Family Services (ODJFS) agreed to new procedures for transmission of 940-Bs. The 940 Certification staff in the Cincinnati campus will begin faxing forms directly to ODJFS’ DCC unit. The forms will no longer be transmitted through the campus Disclosure Office. Faxes to ODJFS will include the name of an authorized IRS employee. An updated list of authorized employees will be provided to ODJFS on a predetermined schedule.
IMRS 07-0000511 – Enrolled Agent Status
Issue: Practitioners would like a way to identify enrolled agent status online through IRS.gov.
Response: The Office of Professional Responsibility (OPR) is currently working to make this service available.
IMRS 07-0000519 – Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return
Issue: Practitioner advised that not all attachments to an electronically filed return are being reviewed by the AUR unit, particularly those attached to Form 8453.
Response: Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return, serves as a document transmittal or coversheet for an electronically filed (ELF) return and does not require any supporting documentation beyond what is needed to address extenuating circumstances, e.g. Form 8332, Release of Claim for Exemption or copies of divorce agreements to support dependents claimed on the tax return, etc. IRS tax forms and schedules are not maintained with Form 8453. Beginning in TY 2005, Form 8879 could be used in lieu of Form 8453. Taxpayers use a PIN to electronically sign the Form 8879 rather than submit a signed Form 8879; again no paper attachments are filed. Taxpayers will only be required to submit Form 8453 if their Form 8879 is rejected. When an AUR case involves an ELF return, the AUR tax return database (TRDB) window displays a “Taxpayer Note” button. If the button is marked “Yes” any additional information submitted by the taxpayer with the ELF return may be viewed by the AUR tax examiner. Instances where it appears that the AUR tax examiner has not viewed all available ELF information can be attributed to human error as opposed to AUR system limitations or lack of instruction. Employee error trends are identified and addressed throughout the year via the Quality Review and Continuing Professional Education (CPE) processes.
IMRS 07-0000529 – Circular 230 – Definition of Attorney
Issue: Practitioner suggests that the definition of attorney in Circular 230 be revised to include persons who are not attorneys but have passed a test to practice before the U.S. Tax Court.
Response: The rules governing this issue are spelled out clearly in Treasury Department Circular 230. Circular 230 established the rules for those who practice before the IRS including a definition as to “who may practice.” According to Circular 230, passing the Tax Court examination does not provide one with the credential or ability to practice before the IRS. There are limited circumstances where this person may qualify to engage in limited practice, such as in the case of an unenrolled return preparer. He/She could represent a taxpayer before Exam on a return he or she prepared. However, to have full practice authority, they would have to be licensed in a particular state by the State Bar or Board of Accountancy or pass the Special Enrollment Examination and be enrolled as an enrolled agent. There is no provision to allow the person to practice as an enrolled agent due to their passing the Tax Court exam.
IMRS 07-0000547 – Practitioner Priority Service (PPS) Requests for Submission of Returns
Issue: Changes in the Bankruptcy Act have resulted in an increased number of taxpayers trying to get current with filing requirements in order to file for bankruptcy. When tax professionals contact the PPS to request transcripts and other information needed to prepare the returns, the PPS assistors give the tax professional a 30-day deadline to produce the delinquent returns. Practitioners request the 30-day time frame be extended to 90-120 days to enable them to gather documents and prepare an accurate return.
Response: A change to allow up to 120 days (4 months) is not warranted. Timely filed returns are due 105 days or 3 ½ months after the end of the tax period. In the event the deadline cannot be met, the representative or taxpayer can call the IRS to request additional time or allow the case to progress to the next notice status.
IMRS 07-0000549 – 90-day Letters
Issue: Practitioners would like guidance on the measures they should take when 90-day letters are issued “prematurely.”
Response: There are instances when the taxpayer’s response to the CP2000 arrives after the Statutory Notice of Deficiency has been issued or when it is too late to stop the Statutory Notice of Deficiency from being issued. This typically occurs when the taxpayer:
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Does not use the envelope provided with the CP2000. The return envelopes contain a bar code that allows the response to be routed to the appropriate AUR campus more efficiently.
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Does not attach their response to the CP2000 as instructed on the CP2000 Response Page. Inclusion of the CP2000 response page allows IRS mail personnel to easily identify AUR related correspondence.
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Files an amended tax return and mails the Form 1040X to the address of the IRS campus where the original tax return was filed instead of to the return address included with the AUR notice.
Following the mailing instructions provided with the CP2000 prevents misrouting and/or delayed responses to the AUR Operation.
When a CP2000 response is received after the Statutory Notice has been issued, the AUR Operation regards the response as if it were a response to the notice. Responses to a Statutory Notice are considered high priority and worked in an expeditious manner to ensure any subsequent actions occur within the 90-day period that the taxpayer has to petition the U.S. Tax Court.
In the event the taxpayer receives a Statutory Notice and it appears that his/her response to the CP2000 was not considered, we recommend that the taxpayer take the following actions:
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Upon receipt of the Statutory Notice, immediately contact the AUR Operation, using the toll-free number provided on the CP2000 Notice. The AUR assistor will be able to determine whether the response to the CP2000 was received and the current status of the case.
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If AUR has no record of receiving the response, the AUR assistor can advise the taxpayer of the best course of action based on the specific issues involved and whether oral testimony can be considered.
Once a Statutory Notice is issued it is important that the taxpayer monitor the progress of the case. If it appears that the 90-day period for petitioning the U.S. Tax Court is in danger of expiring and the AUR issues remain unresolved (or the taxpayer disagrees with the resolution), the taxpayer should be advised to file a petition with the Tax Court using the instructions provided on the Statutory Notice of Deficiency. In general, after the petition has been filed, docketed cases are reviewed by the IRS Appeals Office to determine if a resolution can be reached without a trial before the U.S. Tax Court. The fee for filing a petition with the Tax Court is $60. The Tax Court can waive the filing fee in certain situations.
The decision to rescind a Statutory Notice is discretionary on the part of the IRS and is made on a case-by-case basis. See Rev. Proc. 98-54, 1998-2 C.B. 529, for situations in which the IRS will agree to rescind a Statutory Notice. The majority of Statutory Notices issued by the AUR Operations can be resolved without the need to rescind the Statutory Notice of Deficiency.
IMRS 07-0000551 – Practitioner Priority Service (PPS) Voice Prompts
Issue: Practitioners would like to bypass the welcome message for PPS. They also would like to know why a caller is required to enter a TIN while waiting to speak to a representative since the representative cannot “see” the TIN and must ask for it again.
Response: The Telephone Excise Tax Refund (TETR) welcome message was uninterruptible so customers were required to listen to the entire message before continuing to process through the menu. Based on feedback and complaints from PPS sites, the IRS removed the TETR message from the PPS line. The new message that markets e-services was also uninterruptible; however, it has been removed. If a caller selects menu options #1 (Individual) or #2 (Business), we do not require a taxpayer identification number because our assistors have access to both customer databases, and the call is routed based on the option selected. If a caller selects menu option #3 (Automated Collection System (ACS)), the system requests a taxpayer identification number which is used to determine which ACS function that has jurisdiction over the account. If we are not successful, or the caller does not enter valid information, the call is routed to an assistor who will transfer the call to the correct ACS function. While this adds time and customer burden, security requirements make it impossible to transfer the taxpayer identification number from one location to another, so the caller must provide the TIN twice. We do not publish our menu/prompt sequence on IRS.gov since we are required to change the menu frequently (often with little notice). At this time, the menu options available are: #1 Individual Accounts, #2 Business Accounts, #3 Automated Collection System (ACS) and #4 Record of Account.
IMRS 07-0000558 – Tax on Consulting Fees for Resident Alien
Issue: Practitioner would like guidance on whether a resident alien and business owner who does consulting for an international organization is exempt from U.S. tax.
Response: The client would not be subject to U.S. tax on the consulting fees because the international organization he consults for is chartered. An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act. If an employee of an international organization in the United States is not a U.S. citizen (or is a U.S. citizen but is also a citizen of the Philippines), the salary from that organization is exempt from U.S. tax. The client should obtain a Staff Appointment Letter from the organization which would outline the details of taxation.
IMRS 07-0000563 – Earned Income Tax Credit (EITC)
Issue: Practitioner states “if a taxpayer’s EITC is denied and it is determined that the error is due to reckless or intentional disregard of the EITC rules, then the taxpayer cannot claim the EITC for the next two years. If the error is due to fraud, then the taxpayer cannot claim the EITC for the next 10 years.” Practitioner would like to know if a taxpayer complied with a directive from the New York City Department of Finance to sign an amended return to claim the EITC, and the taxpayer does not qualify for EITC refund claims, would the taxpayer be penalized?
Response: Whether an EIC claim is fraudulent or due to reckless or intentional disregard of rules and regulations is determined on the basis of the specific facts and circumstances of each case. A disallowance period for claiming the EIC is imposed on any individual who makes a fraudulent or reckless EIC claim. The credit is denied for a period of two taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s EIC claim was due to reckless or intentional disregard of rules and regulations. The credit is denied for a period of ten taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s EIC claim was due to fraud. Thus, for the two year ban, there must be a determination of reckless or intentional disregard of rules and regulations and for the ten year ban there must be a determination of fraud. For further information, see Publication 596, Earned Income Credit (EIC).
IMRS 07-0000573 - Mailing or Faxing Transcripts
Issue: Practitioner is concerned about the change in policy for mailing and faxing tax account information. Effective April 27, 2007, Practitioner Priority Service will no longer mail or fax income information or transcripts to taxpayers if requested to do so by a practitioner who does not have a power of attorney on file.
Response: A review of the Practitioner Priority Service (PPS) IRM has been completed in coordination with the Office of Disclosure regarding the mailing or faxing of income information or transcripts to taxpayers as a result of practitioner contact when no POA is on file. A revision will be added to IRM 21.3.10 to advise assistors with the following procedure "Advise the Practitioner that we cannot respond directly to them for the information in which he/she has requested, however, a response will be sent to the taxpayer at the taxpayer’s address of record. The practitioner would then need to obtain the requested information, on the taxpayer's behalf, directly from the taxpayer.” Additionally, a review of Headliner #186 has been completed and an update has been elevated to revise question #5 "What should a practitioner have when calling PPS?"
IMRS 07-0000577 - De Minimis Notices with No Balance Due
Issue: Practitioner would like to know if the IRS can stop sending notices that advise of adjustments to accounts when a de minimis balance due is waived.
Response: The purpose of IRS notices, beyond the statutory requirement, is to advise the taxpayer of actions directly affecting the processing and settlement of their tax return/tax account. In this case, the IRS does have a statutory requirement to advise taxpayers when a penalty is assessed against their return. Subsequent notices are not issued for small balances due. While the notices can be viewed as being insignificant, the IRS issues original return settlement notices as part of an effort to educate taxpayers.
IMRS 07-0000580 – Sharing Change of Address Information
Issue: Practitioner suggests that the Social Security Administration (SSA) and the IRS exchange change-of-address information for recipients of Social Security benefits in an effort to end misrouted levies of SSA benefits.
Response: As noted in Tax Topic 157 on IRS.gov, the U.S. Postal Service provides the IRS with change of address updates weekly. Tax forms will be mailed to the last address clearly and concisely provided by the taxpayer or the change of address information furnished by the Postal Service. The IRS makes every effort to ensure notices as well as tax forms are sent to the most accurate and current address available.
IMRS 07-0000584 – Private Debt Collection Letters
Issue: Practitioner objects to the wording in a letter received on behalf of his client from an authorized private debt collection firm. The letter is addressed to the POA and reads “Dear ….” (Name of POA) and then states “You are responsible to pay this debt.”
Response: All letters used for private debt collection have been revised. The letters will be sent to the POA on file but will be addressed to the taxpayer and not the POA.
IMRS 07-0000613 – Form 2210, Underpayment of Estimated Tax
Issue: Tax professional states he prepares over 200 commercial fishermen 1040 tax returns annually. All returns include: the SIC Code for commercial fishing on Schedule C; the gross proceeds from fishing on Page 2 of Schedule E; and Form 2210F. For several years, five to ten of these fishermen have erroneously received notices stating they owe penalties for failure to make estimated payments, and every year the penalties are abated. Why are these notices being issued?
Response: We determined that there was a programming problem which caused penalties to be calculated incorrectly. This has been corrected. If you continue to experience problems, please provide specific examples we can research.
IMRS 07-0000617 – Practitioner Priority Service (PPS)
Issue: Practitioner is experiencing long wait times when calling the PPS phone number.
Response: Wage & Investment checked phone statistics and the average wait time for all PPS lines for the 2007 calendar year is around four minutes. We are unable to provide any more information without knowing the exact date and time of the call.
IMRS 07-0000624 – Foreign Investment in Real Property Tax Act (FIRPTA)
Issue: Practitioner advises that requests for early refunds on amounts withheld due to FIRPTA take too long to receive and are difficult for IRS assistors to track through IDRS.
Response: Taxpayers may call the International Line (215) 516-2000 to check on the status of their early refund.
IMRS 07-0000629 – Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return
Issue: Practitioners state they are receiving erroneous notices regarding missing Forms 8453 when the practitioner PIN method was used and the tax returns were accepted by IRS.
Response: A review of the samples provided indicates the warning letters 2750 were not issued in error. The returns did not include a practitioner/taxpayer PIN signature when the e-file return was accepted by the IRS. Practitioners who received letter 2750 and who initially intended to use a taxpayer PIN, should submit a completed Form 8453 without the taxpayer signature if also attaching a Form 8879, IRS e-file Signature Authorization, signed by the taxpayer. We are unable to process a Form 8879 that is not attached to a Form 8453.
IMRS 07-0000633 - Deferring School Employees' Salaries
Issue: School teachers and other employees are given an annualization election - that is, they are allowed to choose between being paid only during the school year and being paid over a 12-month period - and, if they choose the 12-month period, they are deferring part of their income from one year to the next. For instance, a teacher who chooses to get paid over a 12-month period, running from August of one year through July of the next year, rather than over the August to May school year, falls under this law. Many tax attorneys believe IRC 409A will apply to the income over the twelve month period.
Response: In an effort to clarify the effect of IRC 409A, News Release IR 2007-142 was published August 7, 2007 on IRS.gov. In addition, the article provided a link to Section 409 FAQs.
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Power of Attorney
IMRS 06-0000241 – Form 2848, Power of Attorney and Declaration of Representative
Issue: Campuses are asking for a new Form 2848 with the taxpayer signature when a practitioner changes firms (mailing address and phone number) but retains the same clientele.
Response: Form 2848 instructions will be revised to indicate that representatives can send written and signed notification to the IRS to change their address. It is not necessary for the representative to obtain the signature of the clients or send a new Form 2848.
IMRS 06-0000309 – Acceptance Criteria for Power of Attorney
Issue: Practitioner advises that he submitted a power of attorney in 2005. When he attempted to contact the Service again on the same issue in 2006 he was advised that no power of attorney was on file. When he faxed the same power of attorney, he was told it was invalid, they cannot assist him, and that his issue relates to how he listed the periods on the power of attorney.
Response: Assuming we have no information to suggest the taxpayer intended otherwise, from a disclosure (Form 8821, Tax Information Authorization, or equivalent) standpoint the listing of years covers all quarters within the year assuming the correct tax form/type of tax is indicated. From the Form 2848, Power of Attorney, instructions, it does appear that the form should include a listing of beginning and ending quarters which can involve a range of years. Counsel has advised that the representative may state the quarters, for example 200612, 200703, etc. The representative can also say “all quarters in 2007” and be given authority for all 4 quarters. They advise that the use of the years to include all quarters within the year is acceptable. The representative can list the quarter separately or enter a year for all quarters. For example, they can state “authority for 2007 for 941”. This means they have the authority for all 4 quarters in 2007. The representative has to be specific as to the type of tax.
IMRS 07-0000467 – Form 2848, Power of Attorney and Declaration of Representative
Issue: Practitioners want to know if a valid Form 2848 can be scanned and sent via email to the Service.
Response: While there are no legal barriers to accepting scanned Forms 2848 at this time, the IRS does not currently have an acceptance portal available for them on the Centralized Authorization File (CAF). The IRS is assessing a variety of technologies used to receive and deliver electronic images of documents, such as Forms 2848 and 8821, to employees responsible for processing those requests. The technology must be capable of accepting either scanned or faxed images for delivery to centralized repositories for electronic distribution to these employees. While work has begun to secure the necessary software and programming to implement this technology, the IRS also has to ensure these technologies meet rigorous security and privacy requirements. However, the IRS anticipates using technology as it develops to make these operations more efficient and provide better service to our customers.
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Other
IMRS 05-0000064 – IRS Restructuring Causing Taxpayer Burden
Issue: Taxpayers and their representatives are having problems locating an address for sending non-return related forms.
Response: Developed and launched Web site “ Where to Send Non-Return Forms (Applications and Payments)" on IRS.gov. Site includes information on topics such as offer in compromise, liens, installment agreements, innocent and injured spouse, application for ITIN, and other information. This site can be found by going to IRS.gov and entering “Where to File” in the search field.
IMRS 07-0000434 – Resource Tools
Issue: Tax practitioners and business organizations request the creation of written best practices resource tools that would incorporate Circular 230 best practices along with the processes/procedures used by successful practitioners of business tax returns.
Response: The Services does have a Circular 230 section on best practices for use by practitioners, business-related or otherwise. In addition, we have hundreds of publications and instructions as well as instructions on IRS.gov such as an Online Classroom, Online Tax Products and “ Basic Tools for Tax Professionals” (with additional links). This information, while not labeled as “best practices” per se, could be shared with SL customers to promote a best practice work process. If there is a need for a concentrated best practices list for business practitioners, their own professional organizations should collaborate to produce this.
IMRS 07-0000478 – Complaints against IRS Employees
Issue: Practitioner advised that when they have a complaint against an IRS employee and they search IRS.gov, that Publication 1, Your Rights as a Taxpayer, should be the number one search result for employee complaints.
Response: We agree that a Web page needs to be easily accessible to taxpayers who have complaints concerning the treatment they received from IRS employees. Publication 1 appears to be the most appropriate page. We made an adjustment to the IRS.gov search engine so that “complaint against IRS employees” will display Publication 1 as one of the top two results for this query. From that screen, you can select the link to go directly to Publication 1.
IMRS 07-0000491 Taxpayer Surveys
Issue: CPA suggests that taxpayer surveys and notices be provided in both English and Spanish or that the IRS provide a checkbox on returns for taxpayers to indicate whether they would like correspondence issued in another language.
Response: The IRS has conducted an extensive assessment of the language needs of taxpayers who have difficulty understanding and speaking English. Historically, assessment of the Spanish speaking population, which included gathering feedback from taxpayers, practitioners, volunteers, and grantees, has shown that they would prefer to receive correspondence in their native language. The IRS has responded to this preference by developing over 240 written products in Spanish. Recent assessments have indicated that the majority of Spanish speaking taxpayers seek the assistance of tax professionals to prepare their tax return. In light of this finding, the IRS has developed a number of bilingual documents (English and Spanish) to assist the tax professional with interpreting the document, as well as provide the taxpayer with native language information. These documents include notices and customer satisfaction surveys. With the increasing numbers of taxpayers with limited English proficiency, the IRS recognizes the importance of being able to identify the language preference of non-English speaking taxpayers and those who assist them. The agency is considering the impact of providing a check box on the 1040 tax returns, and is assessing other means for identifying language preference. The IRS is committed to providing quality service to all taxpayers and continues to work towards providing non-English speaking taxpayers with the tools and support they need to meet their tax responsibilities.
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