IMRS Industry Issues Quarterly Report - June 2013
The Issue Management Resolution System (IMRS) was designed to capture, develop and respond to stakeholder issues. IMRS also identifies nationwide trends in the reporting, filing and paying requirements that may indicate a need to change IRS processes or procedures.
This report provides synopses of some of the issues raised by or of interest to our industry stakeholders. Stakeholders should forward significant issues regarding IRS policies, practices and issues to their Stakeholder Liaison (SL) Local Contacts.
IMRS Issue 12-0001719 – CP2000 notices for self-employment tax
Issue: Taxpayers complained that they are receiving erroneous CP2000 notices for self-employment tax imposed on whatever amount is shown on line 21 of Form 1040
Response: During examinations, the Small Business and Self-Employed business unit found that income subject to self-employment tax was reported incorrectly on Line 21 (other income) of Form 1040 and no self-employment tax was paid. SB/SE recommended that the Automated Underreporter program pursue self-employment tax issues.
AUR issues a notice proposing self-employment tax when it can’t determine whether income on Line 21 is subject to self-employment tax. When taxpayers receive a notice proposing self-employment tax and the proposal is incorrect, they should respond by explaining why self-employment tax is not applicable.
AUR tax examiners are required to review entries on the dotted part of Line 21 on both electronic and paper tax returns. The ability to view these entries on electronic returns became available beginning with tax year 2011. Taxpayers should ensure that they include an explanation of the type of income on the dotted line because tax examiners are still unable to view written attachments at this time due to system compatibility issues. AUR is aware of this barrier and working on a final resolution.
IMRS Issue 12-0001708 – Spanish products
Issue: An IRS stakeholder liaison requested that the Spanish products page on IRS.gov indicate which products are available online only. The liaison also requested that Publications 4591, Small Business Federal Tax Responsibilities, and 1518, IRS Tax Calendar for Small Businesses and Self-Employed, be added to the Small Business Publications in Spanish page.
Response: The request has been completed. Please visit http://www.irs.gov/Spanish/Publicaciones to identify which publications are available online only. Publications 4591 and 1518 were added to the Small Business Publications in Spanish Web page:
IMRS Issue 13-0001747 - Tax treatment of federally issued loans on casualty loss deduction in disaster situations
Issue: If a taxpayer receives a loan from the Small Business Administration for the full amount of losses incurred as a result of a federally declared disaster, does this preclude the claiming of a casualty loss deduction?
Response: A low-interest disaster loan from the SBA must be repaid and therefore does not reduce the casualty loss amount. However, amounts of the loan, if any, which are cancelled or forgiven are included in gross income in the year of cancellation. Additionally, insurance or other reimbursements received that are not required to be repaid will reduce the casualty loss. Additional information on this issue, as well as other aspects of federal disaster relief efforts, may be found on the IRS website. See Frequently Asked Questions under the category of SBA loans.
IMRS Issue 13-0001759 – Estimated tax penalty relief for tax year 2012
Issue: Generally, taxpayers can opt not to make their fourth quarter estimated tax payment on Jan. 15 and avoid the estimated tax penalty, if they file their returns and pay the tax by Jan. 31. Taxpayers are asking whether the IRS is considering any automatic relief for assessing the estimated tax penalty for taxpayers who did not make their fourth quarter estimated tax payment by Jan.15 and intended to file and pay by Jan. 31, but may not have done so because of the delayed start to the filing season and release of some forms.
Response: A request for penalty waiver should be completed by checking Box A in Part II on Form 2210 and attaching an explanation with a list of forms that were not available for making the deposit or filing the return. These requests will be considered on a case-by-case basis.
IMRS Local Issue 1813 – Entering both an EIN and SSN on Forms 2848 and 8821
Issue: The instructions for Forms 2848, Power of Attorney and Declaration of Representative, and 8821, Tax Information Authorization, indicate that users can enter both an SSN and EIN on one form for sole proprietors. The online fillable Forms 2848 and 8821 on IRS.gov only allow the input of one nine-digit number.
Response: The IRS updated the online fillable Forms 2848 and 8821 on IRS.gov so both an SSN and an EIN may be input for a sole proprietorship.
IMRS Issue 12-0001608 – Outreach request for oil and gas industry
Issue: An oil and gas boom in parts of the United States has resulted in new payments for leasing land, royalty payments and rental income for many taxpayers. A stakeholder liaison requested outreach information pertaining to these industries and addressing potential income for taxpayers.
Response: IRS.gov and various IRS publications contain helpful information for tax issues related to this area. Stakeholder liaisons have been provided with resources to quickly point their stakeholders to information on estimated tax payments, business expenses, taxable income, room rentals, etc. Additionally, the IRS issued a fact sheet, Tips on Reporting Natural Resource Income (FS-2013-6), which posted to IRS.gov April 11.