IMRS Monthly Overview - April 2011
NEW IMRS ISSUES
IMRS 11-0001450 – Erroneous CP12M notices to taxpayers who claimed a religious exemption from social security and Medicare taxes
Issue: Pennsylvania practitioners received CP12M notices for clients who had filed for an exemption from social security and Medicare taxes on Form 4029. The notices indicated that the taxpayers had received increased refunds due to an adjustment for the Making Work Pay Credit. The taxpayers had no taxable employee compensation and are therefore not eligible for the credit.
IMRS Issue 11-0001452 – Erroneous recalculation of Earned Income Tax Credit for Ministers
Issue: The IRS is recalculating EITC for ministers who receive a housing allowance. When correctly computing the EITC, earned income should be increased by the housing allowance. The IRS has been recalculating the tax, using earned income from page 1 of the Form 1040 instead of using the attached Schedule EIC.
IMRS Issue 11-0001455 – Erroneous self-employment tax adjustment
Issue: A taxpayer had W-2 income over the $106,800 Social Security wage base limit, and correctly completed Form 1040, Schedule SE, including line 8a ("Total social security wages and tips....”), but the IRS did not give the taxpayer credit for Social Security taxes withheld on Form W-2. The taxpayer received IRS math error notice CP12 requesting payment.
IMRS Issue 11-0001457 – Third party authorizations for ITIN inquiries
Issue: An authorized representative had difficulty inquiring about the status of an ITIN application when Form 2848 was not attached to the original Form W-7.
IMRS Issue 11-0001458 - Erroneous adjustments to Making Work Pay and Additional Child Tax credits
Issue: Additional credits are being allowed based on income that is not considered earned income for these purposes. Notations are made on the dotted lines to the left of line 7 of the 1040 in accordance with the instructions to indicate the amounts that are not earned, but these notations are not being recognized.
Policy, Practice & Procedures
IMRS 11-0001451 – Audit reconsideration for office audits
Issue: An examination group manager reported that Publication 3598, What You Should Know About the Audit Reconsideration Process, does not provide clear direction to taxpayers who seek reconsideration of area office examinations. The publication appears tailored to campus examinations. Clarification of the audit IRM was also requested.
IMRS Issue 11-0001456 – Use of CP 2057 - Check Your Records to Confirm the Income You Received notice
Issue: Practitioner believes the use of the CP 2057 instead of the CP 2000 creates undue burden on the taxpayer and the representative since it does not pinpoint the income error and involves an analysis and filing of an amended return to resolve. Responding to a CP 2000 is much easier and more efficient.
IMRS Issue 11-0001460 – Appeals correspondence to multiple representatives
Issue: Practitioner states that when there are two representatives listed on Form 2848 and Box 7a is checked requesting correspondence be sent to both, the Appeals office regularly sends correspondence only to the first one listed.
IMRS Issue 11-0001461 – Conflicting information on the time frame for appeal of denial of reasonable cause request
Issue: A practitioner received Letter 2413(P) from the revenue officer assigned to his client’s case, denying his request for a penalty adjustment due to reasonable cause. The letter states that the taxpayer has 15 days to appeal the decision. However, the Appeals online self-help tool for penalty appeals advises taxpayers that they have 30 days from the date of the rejection letter to initiate an appeal.
RECENTLY CLOSED ISSUES
IMRS Issue # 11-0001427 - Excessive delay in reaching the Practitioner Priority Service call-site and request to include fax numbers on notices to expedite responses
Issue: A tax practitioner complained that responding to certain notices is extremely difficult if the wait time for the PPS is excessive. The practitioner would also like notice CP518 to provide a fax number for response.
Response: Wait times vary based on the time of day and the day of the week. PPS staffing is closely monitored and adjusted as needed to alleviate excessive wait times. PPS opens at 8 am EST, and wait time is generally between two and seven minutes during the morning hours and fluctuates as the day goes on. Monday and Friday call volumes are generally higher than other days of the week.
As we redesign notices, we add fax numbers when the business unit (e.g. Collection for 518 notices) states they can accept (and prefer) faxes. The decision about adding a fax number is decided individually for each redesigned notice. We will be working on the redesign of notices CP515, 516 and 518 in the next year or so, but the actual date will depend on when the information technology programming area can implement the redesigned notices. We will keep the request to include the fax number in mind when redesigning these and other notices and include the fax number where feasible and practicable.
IMRS Issue 11-0001432 – Incorrect CP-2000 issued for taxable USDA grants
Issue: Farmers received CP-2000 notices indicating they failed to report payments for taxable grants from the USDA. They properly reported the grants on Schedule F and self-employment taxes were paid. Although IRM 126.96.36.199.20.1(1) says the examiner is to compare grant amounts with entries on Form 1040, line 21, IRM 188.8.131.52.20.1(2) states USDA payments can be reported on Schedule F and examiner is to compare grant amounts with Schedule F entries.
Response: Based on our research of the cases involved, there appears to be a training issue that will be addressed. IRM 184.108.40.206.20.1(2)a requires a review of the return; specifically Schedule F lines 6a and 6b, to determine if grant income is reported. The case was worked according to procedure; however, the grant income reported on Schedule F, line 10 could not be validated since the breakdown statement from the electronically filed return was not available.
The content of attachments to e-filed returns is not available to AUR examiners: this is a Servicewide issue that is not unique to the AUR program. We are aware of the burden it creates for taxpayers and IRS compliance functions. With each tax year we see improvement, but information included on attachments to e-filed returns is not yet available universally.
IMRS Issue 11-0001444 – Delay in refunds on returns with repayment of 2008 First Time Homebuyer credit
Issue: Refunds for taxpayers whose 2010 tax returns were e-filed and who are paying back the 2008 First Time Homebuyer Credit have been delayed. When they check "Where's my refund?" the date to receive the refund keeps changing. When they call the IRS, they get differing explanations. Taxpayers want to know what is causing the refund delay.
Response: The IRS has released information on processing issues that are impacting a small percentage of tax returns involving repayment of the First Time Homebuyer credit, primarily involving 2008 home purchases. While we have processed most of these returns normally, the IRS recognizes the hardship caused by delayed refunds, and has assigned additional staff and resources to address the issues promptly. The full information is available on IRS.gov at:
- Update on First Time Homebuyer Credit and Tax Refunds
- Quick Alerts: March 23, 2011
Policy, Practice & Procedures
IMRS Issue 11-0001415 – Proper processing of Form 2848, Power of Attorney, by the CAF
Issue: A tax practitioner is having a problem when submitting Forms 2848 to the Centralized Authorization File that lists multiple representatives. A four-page POA form was submitted showing four representatives, along with a cover letter, but the CAF unit did not recognize and add the information.
Response: We apologize for the unfavorable experience you had with getting the power of attorney for multiple representatives processed through our CAF processing site. We have taken actions to address your issue. The clerical CAF function at all three CAF sites has been reminded to not separate faxed pages that are clearly marked to stay together. The examiners were also alerted to this issue and advised to take steps to locate missing pieces of information before taking any rejection action.
Communication and Outreach
IMRS Issue 11-0001414 – Request for application to verify estimated tax payments
Issue: Practitioners would like an application on IRS.gov where they can check the estimated tax payments that have been made to a taxpayer’s account.
Response: Although the idea has merit, funding issues prevent the IRS from pursuing it at this time.
IMRS Issue 11-0001423 - Link encoding in IRS enewsletters
Issue: Hyperlinks in IRS enewsletter subscriptions now have link encoding, so the links do not work when copied or forwarded via email. Since IRS partner organizations share items with their members, it becomes a problem when hyperlinked material in news items loses functionality.
Response: If both the sender and recipient of the e-mail are using Internet Explorer there should be no problem with the link. However, to avoid any possible problems with other types of users, we recommend that the sender first open the link and allow the web page to load completely, and then copy and paste that link into an email to forward to others.
Forms, Publications & Products
IMRS Issue 11-0001422 – Form 1041 Instructions, request for reasonable cause relief
Issue: A penalty abatement request based on reasonable cause for late filing was disallowed after the taxpayer followed the Instructions on Form 1041 to attach the request to the original return (prior to return processing).
Response: If the penalty is assessed, the taxpayer will receive a notice. At that time, the taxpayer can submit/resubmit their request for relief. The Form 1041 instruction to attach the request for relief from late filing directly to the return will be removed for the 2012 filing season.
IMRS 11-0001445 – Processing revisions of Form 1040X
Issue: When practitioners generate amended returns from their computer software, the returns can have a different format depending on the year involved. Practitioners seek guidance as to which version of Form 1040X, Amended U.S. Individual Income Tax Return, to submit on behalf of their taxpayers.
Response: All revisions of Form 1040X will be accepted.
NOTE: Current and previous reports are also available on this site. The Monthly Overviews are posted for the prior two years through the current month. View reports for issues closed in prior years on the same page.
We invite you to raise your issues/concerns with your local stakeholder liaison.