IMRS Monthly Overview – February 2014
The IMRS Monthly Overview provides synopses of some of the issues received and/or closed by the Issue Management Resolution System staff during the past month. The Monthly Overview informs the public about the work of IMRS and highlights issues that we think would be of most interest to external stakeholders.
RECENTLY CLOSED ISSUES
IMRS Issue 13-0001802 - Paper-filed extensions and e-filed returns
Issue: E-filed returns sometimes post before the paper extension is processed causing the taxpayer to be charged a late filing penalty. Practitioner requests a delay in the issuance of the CP 162, Untimely Filing Penalty – Partnership, until the paper extension is processed.
Response: IRS carefully considered practitioner’s request to delay issuance of CP 162. Paper extensions and electronic returns are both processed within the established timeframes; however, paper forms require more processing time than electronic forms. Practitioners are encouraged to file paper extensions six weeks before the electronic return or to submit the extension electronically.
Policy, Practice, Procedures
IMRS Issue 13-0001852 - Filing Form 8941
Issue: Practitioner states his client received a letter requesting additional information on Form 8941, Credit for Small Employer Health Insurance Premiums. It requests completion of lines 1a and 2, number of individuals employed and number of full-time equivalent employees, respectively. The credit is from a Form 1120S pass-through entity and the Schedule K-1 received includes only the client's share of the credit. The 1120S K-1 instructions for line 13P do not direct the pass-through entity to include the requested information on the taxpayer's Schedule K-1.
Response: The instructions for Form 8941 state: "Taxpayers other than partnerships, S corporations, cooperatives, estates, and trusts, whose only source of this credit is from those pass-through entities, are not required to complete or file this form. Instead, they can report this credit directly on Form 3800."
Occasionally, a Form 8941 is filed when it is not required. When this occurs, the taxpayer may receive correspondence requesting information for lines 1a and 2 of Form 8941. In an effort to prevent correspondence from being issued when the 8941 is received but not required, reviewer procedures have been modified. The instructions now advise reviewers to suppress the correspondence if it can be determined the credit is from a pass-through entity and the Form 8941 was not otherwise required. An automated check is being explored for future years. Taxpayers and preparers are reminded to review when or if the Form 8941 is required before attaching it to a return.
IMRS Issue 14-0001887 – New service allowing ITIN applicants to retain possession of their documents
Issue: Practitioner reported that a client traveled to a Taxpayer Assistance Center 100 miles away to submit Form W-7, Application for IRS Individual Taxpayer Identification Number, for himself and his child. He chose to submit the application in person because he did not want to give up his original identification documents while the application was in process. The child’s identification documents could not be authenticated since the child was not present. Practitioner does not understand why the W-7 with original documents goes to Austin without the child, but the IRS requires the child to go to the walk-in office with the parent. He would like to see a change to this policy.
Response: Effective Jan.1, 2013, the IRS implemented new program changes to strengthen and protect the integrity of the Individual Taxpayer Identification Number (ITIN) application process. The IRS revised the ITIN application process to help ensure ITINs are used for their intended tax administration purposes. Under the new procedures, the IRS only accepts original identification documents or certified copies of these documents from the issuing agency along with a completed Form W-7.
To allow taxpayers to retain possession of their identification documents during the application process, on Jan. 31, 2013, participating Taxpayer Assistance Centers began verifying passports and national ID cards submitted with ITIN applications. To reduce submission of questionable documents, all applicants including children are required to appear in person to have their documents returned to them the same day. Information about this new service is available on IRS.gov as well as in IRS publications and the Form W-7 instructions.
On IRS.gov, taxpayers are advised of the option to apply by visiting some key IRS Taxpayer Assistance Centers in lieu of mailing the application and identification documents. As stated on IRS.gov: "All ITIN applicants, including children, must appear in person at the time the Form W-7… is submitted to have their passport and/or national identification card returned the same day." Other TAC offices will soon be offering in-person document review.
Frequently Asked Questions contain additional information about submitting Forms W-7 at IRS Taxpayer Assistance Centers. As stated: "Primary, secondary, and dependent persons may submit W-7 applications in person (with original documents) at designated IRS Taxpayer Assistance Centers."
On the Form W-7 instructions, under Where to Apply, it states: "In person. You can apply for an ITIN by bringing your completed forms and documentation to any IRS Taxpayer Assistance Center in the United States or IRS office abroad."
We apologize for any inconvenience your client experienced during the ITIN application process. Search ITIN on IRS.gov for more information.
IMRS Issue 13-0001826 – 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 are eligible to receive a return transcript for the most recent year they have filed once the return has been processed. The timeframe in which a return is processed is dependent 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. Returns are processed in less 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 the taxpayer in lieu of a tax return transcript.
See this month’s Special Edition IMRS Overview for more details on this issue.
NOTE: Current and previous reports are also available on this site. The monthly overviews are posted for this year 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.