IMRS Monthly Overview - May 2011
RECENTLY CLOSED ISSUES
IMRS Issue 11-0001449 - Dotted-line entries such as qualified charitable distribution
Issue: Taxpayer received a CP2000 notice indicating that the amount reported for their 2008 IRA distribution was $5,000 less than the amount reported by the payer. The payer reported the correct gross amount, but the taxable amount was reduced by a $5,000 contribution that was made from the IRA account directly to a charitable organization. The letters “QCD” were included on the dotted line next to the IRA income line on Form 1040 to notify the IRS that a portion of the distribution was not taxable.
Response: “Dotted line entries” such as “QCD” are not available to Automated Underreporter Program examiners when they review electronically filed returns, , potentially resulting in the issuance of a CP 2000. We are working on a programming change to reformat the dotted line entries, but this solution may be affected by resource constraints. To avoid discrepancies based on missing dotted-line entries on e-filed returns, practitioners can electronically attach a note that explains the dotted line entry, since notes are visible to the AUR examiners.
IMRS Issue 11-0001399 - Form 944/Form 941 filing requirement notifications
Issue: A taxpayer received conflicting correspondence from the IRS regarding his employment tax filing requirements, and was unsure whether he should file the annual Form 944 or quarterly Forms 941.
Response: The IRS considers the impact of timing when issuing notices to employers requiring them to file Forms 941 rather than Form 944. In some situations the IRS allows employers to file a Form 944 for the current year even though they would technically no longer be eligible to do so. If the ineligibility is determined early enough in the current year (generally by the first week of March), the IRS issues a CP 250A notifying employers that they must file Forms 941 for the current year instead of Form 944. If the ineligibility to file Form 944 is not discovered until after the CP 250A notice cut-off date, the IRS will issue a CP 250B informing employers that they must continue to file Form 944 for the current year and that they must file Form 941 for the following year. Employers receiving Notice CP 250B also receive a CP 250C at the close of the current year reminding them that they must file Forms 941 for the following year. The IRS believes that the Form 944 program continues to serve the segment of employers for which it was designed. However, employers not wishing to participate in the Form 944 Program may opt out under Rev. Proc. 2009-51 provisions.
Policy, Practice & Procedures
IMRS Issue 11-0001454 – International Centralized Authorization File address
Issue: The International CAF function would like assistance in informing practitioners of their new address and fax number. The new information for the Philadelphia Campus Accounts Management International CAF team is:
2970 Market Street
Mail Stop 3-E08.123
Philadelphia, PA 19104
Response: This new contact information was publicized in the Apr. 1, 2011, IMRS Hot Issues report and in the Apr. 1, 2011, e-News for Tax Professionals electronic newsletter.
IMRS Issue 11-0001421 – Erroneous rejection of POA for level H (unenrolled) preparer
Issue: A tax practitioner reported that the CAF unit erroneously rejected Form 2848, Power of Attorney, stating that the practitioner was a Level H (unenrolled) return preparer and did not prepare the returns in question when in fact she did prepare the returns.
Response: Level H representation requires that the practitioner had prepared the return in question and that the return be under examination by the IRS. The letter sent to the preparer to inform her of the reason for rejection was incorrect because it stated that she did not prepare the returns and they were not under examination. We apologize for this error and the confusion it caused. The letter should have indicated the correct reason for rejection: while this practitioner prepared both returns, at the time the 2848 was filed neither the 2008 nor the 2009 return was being examined by the IRS.
IMRS Issue 11-0001451 – Audit reconsideration for office audits
Issue: An Exam group manager reported that Publication 3598, What You Should Know About the Audit Reconsideration Process, does not provide clear directions regarding where to send reconsideration requests for taxpayers who have had office audit examinations. The publication appears tailored to campus examinations. The manager also requested clarification of the audit IRM.
Response: Revisions are planned for Publication 3598, What You Should Know About the Audit Reconsideration Process, and IRM 4.13, Audit Reconsideration - Area Office Examination, to clarify procedures for office audit reconsiderations. In the interim, taxpayers should file audit reconsideration requests with the campus where they filed their original tax return.
IMRS 11-0001463 – State energy rebates
Issue: A tax practitioner’s client received a Form 1099 from the state reporting a payment from the state’s home energy rebate program. The practitioner doesn’t think the payments are taxable or that the 1099 should have been issued.
Response: Many energy incentives are referred to as “rebates” even though they do not constitute rebates for federal tax purposes. Generally, only a manufacturer, distributor or installer of equipment can properly make a rebate for the costs of energy conservation equipment. Energy incentive payments from state and local governments that are includible in gross income must be reported using box 6 of Form 1099-G. There is no minimum dollar threshold for this reporting requirement.
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.