IMRS Monthly Overview - April 2012
The IMRS Monthly Overview provides synopses of some of the issues that were received and/or closed by the Issue Management Resolution System staff during the past month. The Monthly Overview is intended to inform the public about the work of IMRS, and highlights the issues that we think would be of most interest to external stakeholders. When the Monthly Overview is posted to IRS.gov, a tweet is posted via Twitter for followers of @IRStaxpros. Sign up to receive notification.
Policy, Practice, Procedures
IMRS Issue 12-0001604 - Roth conversions
Issue: A problem is occurring when taxpayers roll over their traditional IRAs to Roth IRAs. Taxpayers who filed a Form 8606 and elected to report the resulting tax in two years are receiving bills for an additional amount of tax. It appears that the entire amount of the rollover is being taxed in 2011 and the taxpayers are not allowed credit for the amount that they will be reporting in the 2012 tax year.
IMRS Issue 12-0001605 - Form 990 late filing penalty notices
Issue: Practitioners/taxpayers are receiving penalty notices for late filing of Form 990, Return of Organization Exempt from Income Tax. A news release issued in Dec. 2011 (Notice 2012-4) granted an automatic extension for certain exempt organizations. However, in order to avoid receiving a system generated penalty notice for late filing, taxpayers must attach a reasonable cause statement to the Form 990 referencing Notice 2012-4 (an example of the reasonable cause statement is included in the notice). Many practitioners did not understand the notice and the requirement to include the statement with the Form 990. Practitioners would like to see a more streamlined procedure that alleviates the requirement for written response to the notice. Is this something that could be handled by assistor on the PPS or tax exempt organization telephone lines?
Policy, Practice & Procedures
IMRS 11-0001490 - Treatment of unemployment compensation when preparing a net operating loss
Issue: A practitioner prepared a net operating loss carryback using commercial software. The software treated unemployment compensation as non-business income when computing the NOL, but the IRS changed it to business income. The practitioner seeks clarification of the treatment of unemployment compensation.
Response: The 2011 revision of Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, pages 2 & 3, has clarified the treatment of unemployment compensation. It states there that unemployment compensation included in gross income is not to be included in non-business income. The software vendor has been notified and will update their software.
IMRS Issue 11-0001513 - Return calls from IRS assistor
Issue: When a tax practitioner receives a return call from an IRS assistor and the practitioner is not available, procedure dictates the assistor will provide his name and identification number and the fact he is calling from the IRS. The assistor will also state he is calling in response to a call to IRS and provide the time and date of the practitioner’s call. The assistor will not leave any taxpayer identifying information. Many collection notices contain a caller identification number on the letter. Is it possible for the assistor to refer to this caller identification number when leaving their message so that the practitioner can identify the client?
Response: When the Automated Collection System staff returns a call from a practitioner and is unable to speak with the practitioner, the current procedures direct the assister to leave a message for a return call and to include the caller identification number (CRN) referenced in the collection notice issued the taxpayer. We apologize that the CRN was apparently not referenced in this case.
IMRS Issue 12-0001529 – Practitioner Priority Service
Issue: A tax practitioner complained about long wait times and dropped calls when calling the Practitioner Priority Service Hotline.
Response: The IRS devotes resources to each of its product lines and balances its available resources among its many priorities. We are aware of some practitioners experiencing long wait times on the Practitioner Priority Service line, especially on Mondays and Fridays when call volumes are highest. We urge practitioners to try to call on non-peak days and during non-peak hours (generally, the best time to call is early in the morning). PPS hours of operation are 7 a.m. to 7 p.m. local time. Please be aware that an assistor may be required to transfer your call to another employee who is better able to assist with your particular issue. As with the initial call, transferred callers must wait for the next available assistor. We are also aware that some calls were disconnected early in the filing season due to problems, since corrected, experienced by the network carrier.
IMRS 12-0001584 – Erroneous refund of First Time Home Buyer Credit repayments
Issue: Practitioners filed tax returns for clients, correctly showing repayment of the FTHBC. Their clients subsequently received notices reducing the amount of the FTHBC repayments, and they received refunds of that amount of the repayment. The look-up tool on IRS.gov for FTHBC showed each client owed the amount reported on the tax return.
Response: We are aware of a problem that affected certain returns with FTHBC. We implemented a fix on March 4, 2012. However, our research shows that one case was caused by human error. In that particular case, a couple reported their common liability on a Form 5405 for the primary taxpayer. The examiner should have created a second Form 5405 for the other taxpayer and split the payment evenly between the two forms. The second half of the required payment was erroneously refunded because the second form was not created. We apologize for any inconvenience this situation has caused the taxpayers and the practitioner. Thank you for bringing this situation to our attention.
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. You can also access reports for issues closed in prior years on the same page. We invite you to raise your issues/concerns with your local stakeholder liaison.