IMRS Monthly Overview - July 2011
NEW IMRS ISSUES
Policy, Practice, Procedures
IMRS Issue 11-0001495 – Manager contact information requests in compliance cases
Issue: Tax professionals report encountering resistance from IRS examiners and revenue officers when they are asked to provide their supervisor’s contact information. They suggest including the supervisor’s contact information on the initial IRS correspondence to simplify matters and reduce adversarial encounters between practitioners and IRS compliance personnel.
IMRS Issue 11-0001498 – Clarification of Letter 4731 received by practitioner
Issue: A former tax preparer did not renew her PTIN because she left the tax preparation business in October 2010 and did not prepare any tax returns for the 2010 tax calendar year (2011 filing season). She received a Letter 4731 from the IRS that stated it appeared returns were prepared with a PTIN assigned to her but not renewed. The preparer called the PTIN hotline number referenced on the letter she received and was told to disregard the letter if she did not prepare any returns. The practitioner is very concerned and would like to know why she received a letter indicating returns were filed with her PTIN.
RECENTLY CLOSED ISSUES
IMRS Issue 11-0001456 – Practitioner prefers CP2000 to CP2057
Issue: A tax practitioner stated that the CP2057 is more burdensome to the taxpayer/practitioner than the CP2000. The CP2057 requires the taxpayer to file a form 1040X if the proposed income adjustment is correct where the CP2000 does not. Is the CP2057 pilot project due to be terminated soon?
Response: The IRS continuously strives to develop initiatives to increase voluntary compliance while minimizing the impact to both customer burden and IRS resources. The CP2057 is part of a “soft notice” initiative designed to serve as an educational tool, encourage self-correction and improve voluntary compliance.
The soft notice asks taxpayers to voluntarily correct an apparent misreporting by either filing an amended return or not repeating the action in the following year. The CP2057 provides information that may or may not lead to the need for an amended return. If receipt of CP2057 makes taxpayers aware that the information on a filed tax return is incorrect, it is incumbent upon them to file an amended return. Recent IRS tests using soft notices have proven successful in leveraging limited resources to address noncompliance. Based on the results of this test, we expect the project to be expanded.
IMRS Issue 11-0001455 – Erroneous self-employment tax adjustment
Issue: Several taxpayers stated that they had W-2 income over the $106,800 Social Security wage base limit and correctly completed the Schedule SE on Form 1040, including line 8a ("Total Social Security wages and tips....”), but the IRS did not give them credit for Social Security taxes withheld on Form W-2. The taxpayers received IRS math error notice CP12 requesting payment.
Response: Although the printed Schedule SE entries were properly completed, we found that taxpayers reporting this problem all used the same software. The IRS contacted the software provider, and they determined that the wage amount on Schedule SE was not transmitted to the IRS on electronically filed returns. This resulted in the issuance of math error notices. The provider subsequently updated the software, notified users of the problem and is working with the IRS to resolve the impacted taxpayers’ accounts. An alert was posted to notify IRS phone assistors of this problem.
Policy, Practice & Procedures
IMRS Issue 09-0001144 – Release of source codes during examination
Issue: A tax practitioner requested the source codes during an audit. He was instructed to make a Freedom of Information Act request.
Response: In most circumstances, source codes can be released to a requester during the course of an examination. However, we cannot disclose source codes if their release would seriously impair or impede tax administration or would identify, or tend to identify, a confidential informant.
Source codes can be requested directly from the examiner, but the decision to redact source codes under the circumstances described above must be made by the examiner’s manager. Managers have been delegated the authority to withhold this information based on IRC 6103(e)(7) impairment considerations. While the manager's decision cannot formally be appealed, it can be elevated to the territory manager. If a requester disagrees with management's decision, a FOIA request might be appropriate because that venue provides appeal rights for any denials of information based on applicable FOIA exemptions.
IMRS Issue 11-0001465 – Collection action in Trust Fund Recovery Penalty cases
Issue: When the Trust Fund Recovery penalty is assessed against an individual for unpaid corporate payroll taxes, the IRS should make it easier for the corporation to enter into an installment agreement to address both the corporate and individual liabilities. The IRS representative handling the corporate case should be able to suspend collection on the individual while the corporation is resolving the matter. In addition, when IRS enters into an installment agreement with the corporation, there should be an automatic hold on collection against the individual unless the company defaults.
Response: The IRS has procedures in place and is able to withhold collection of the assessed Trust Fund Recovery penalty while the business is paying through an installment agreement. The IRS may withhold the assertion or collection of the TFRP while the business is attempting to resolve the liability through another method, such as an installment agreement. The specific facts and circumstances surrounding both the business and individual officers in each case would determine the actions taken by the IRS.
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.