IMRS Industry Issues Quarterly Report June 2014
IMRS Issue 13-0001826 & 14-0001909 – Transcripts requested for financial purposes
Issue: Confusion exists around the availability and type of transcripts the IRS issues for mortgage lenders, student loans, etc.
Response: Taxpayers can receive return transcripts for the most recent year they’ve filed once the return has been processed. The time frame in which a return is processed depends on many factors including when a taxpayer files the return, whether the return is filed on paper or electronically, and whether the return shows a balance due. For example, tax returns with balances due, whether filing electronically or on paper, are not processed until the last cycle of the filing season (April 15), and traditional transcripts using the Transcript Delivery System are unavailable until the returns are posted. Returns are processed in fewer than 21 days for more than nine out of 10 taxpayers.
Effective Jan. 10, 2014, Title 12 of the Code of Federal Regulations [12 CFR § 1026.43(c)(4)] allows mortgage companies and other lenders requiring proof of income to use earning statements and other financial records from taxpayers in lieu of tax return transcripts.
See the February Special Edition IMRS Overview on IRS.gov for more details on this issue.
IMRS Issue 13-0001854
Issue: Stakeholder Liaison requested a presentation on the basics of depreciation for business partners who instruct and counsel small business owners.
Response: IRS presented a depreciation webinar May 28 and posted it to the IRS video portal at IRSvideos.gov (search: depreciation).
IMRS 13-0001831 – USDA Conservation Reserve Program payments incorrectly reported
Issue: Practitioners are incorrectly reporting USDA Conservation Reserve Program (CRP) payments. Some report CRP payments correctly on Schedule F of Form 1040, making the payments subject to self-employment tax. Others report CRP payments on Form 4835, Farm Rental Income and Expenses, and circumvent SE tax. By using Form 4835 to report CRP payments, an underpayment of SE tax results.
Response: CRP “annual rental payments” are not rental income for federal tax purposes. Although the payments are called “annual rental payments” for purposes of the CRP, these payments are not rental payments for federal tax purposes. Generally, a rental payment is an amount paid for the use or occupancy of property. Courts have held that the government does not use or occupy the land covered by a CRP contract. Morehouse v. Commissioner, 140 T.C. No. 16 (2013), appeal docketed, No. 13-3110 (8th Cir. Sept. 23, 2013). Search Agriculture Tax Center on IRS.gov for more information.