IMRS Monthly Overview – September 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.
NEW IMRS ISSUES
Policy, Practice, Procedures
IMRS Issue 12-0001704 – IRS Data Retrieval Tool in FAFSA
Issue: Students and/or parents applying for financial assistance are excluded from using the IRS Data Retrieval Tool in the free application for federal student aid to verify tax return information if they have filed a balance due or amended return, filed as married filing separate or have an address change.
IMRS Issue 12-0001706 – Account transcripts for balance due returns
Issue: Many financial institutions now require IRS tax return transcripts to verify income before granting a mortgage to a customer. However, taxpayers who timely file balance due returns are unable to obtain IRS transcripts before late May due to IRS processing delays. This is impacting the ability of some taxpayers to obtain mortgages.
RECENTLY CLOSED ISSUES
Policy, Practice, Procedures
IMRS Issue 12-0001674 – Suggestion to revise Consolidated Annual Wage Reporting notice
Issue: Tax practitioners would like Letter 99C, Letter of Employment Tax Problem (CAWR), revised to show amounts for each of the four 941s in a column format, with a fifth column showing the grand combined totals. Currently, only the combined grand total is shown, making it difficult for employers and practitioners to determine where the discrepancy occurred.
Response: We are working to revise letter CP251, which will replace the 99C Letter. The revised notice will include columns for all four quarters. We are currently on target to implement the revision effective with the new CAWR download in April 2014.
IMRS Issue 10-0001339 – Expenses for older vehicles when applying for an installment agreement
Issue: A tax practitioner suggested that the IRM regarding installment agreements be revised to allow for a $200 a month provision for older vehicles, which is similar to the offer in compromise provision.
Response: The “Collection Financial Standards” page on IRS.gov was redesigned based on tax practitioner feedback to ensure that the information about allowable living expenses meets users’ needs. In addition, Collection Policy provided the following information to address the tax practitioner’s suggestion:
The Bureau of Labor Statistics data used to calculate the allowable standards for transportation operating costs includes expenses for all vehicles, new and old. There are many factors, other than the age of a vehicle, that affect operating costs. Operating costs may vary depending on driving patterns, road conditions, and distance driven. In addition, some vehicles may be more expensive to maintain than others. Since the BLS data includes costs for taxpayers operating older vehicles, there is no valid data on which to base an additional $200 monthly allowance for all older vehicles. However, the IRS may allow for actual expenses if the IRS determines that the facts and circumstances of a taxpayer's situation indicate that using the standards is inadequate to provide for basic living expenses. An additional amount will be allowed in cases where taxpayers substantiate that they need more than the standard allowed for operating costs.
Internal guidance allows employees to afford an additional $200 for OIC cases where it is presumed that a taxpayer's older vehicle will need to be replaced in the near future. This additional $200 expenditure is allowed in OIC cases only and is due to the finality of the decision involved. We determine the taxpayer's future ability to pay based on financial information provided today in OIC cases. Because many OIC payments are made lump sum at the time the OIC is accepted, the amount agreed on today will usually not change if the taxpayer's financial situation changes later (i.e., vehicle repairs or a new vehicle needed.)
Taxpayers who have an existing installment agreement may contact the IRS at any time to have the agreement amended based on changes in their financial status, including unexpected car repairs. The taxpayer may request an amendment to the amount of their installment agreement payment, as long as the payment for the vehicle they have purchased is reasonable, in those cases where the taxpayer has to replace an older vehicle, A recent review of revised agreements found that IRS employees are reducing installment agreement payment amounts if a taxpayer has unexpected car repairs, needs a new car, or encounters other financial difficulties.
The Fresh Start program has given the taxpayer an alternative to the financial statement during the installment agreement process. Most of the installment agreements secured by Collection employees are streamlined agreements, which require only basic financial information and no documentation of expenses. In cases where taxpayers do not meet the criteria for a streamlined agreement, they may still qualify for the "six-year rule." The six-year rule allows for payment of living expenses that exceed the allowable living expense standards as long as the tax owed, including penalty and interest, can be fully paid in six years. Taxpayers are required to provide financial information in these cases, but do not have to provide documentation for reasonable expenses.
IMRS Issue 12-0001665 – Requests for installment agreements not processed timely
Issue: Form 9465 requests for installment agreements on timely filed returns are not being processed, resulting in auto-draft payments not being debited and assessment at a higher rate for failure to pay penalties.
Response: From Jan. 13 through April 20, 2012, the processing of some electronically transmitted Form 9465 requests for installment agreements via direct debit was delayed. The problem was corrected in early June 2012. During the processing delay, impacted taxpayers may have been issued a CP014 notice requesting payment. Taxpayers who received this notice should contact the IRS at the toll free number provided to determine if any account corrections should be made.
Communication and Outreach
IMRS Issue 12-0001641 – Outreach request regarding real estate losses of more than $25,000
Issue: A tax practitioner voiced concern regarding clients who erroneously try to deduct real estate losses that exceed the $25,000 limit. Only real estate professionals can claim losses above this limit, and many of these clients do not qualify. The practitioner recommended that the IRS publish an article in e-News for Tax Professionals regarding the deduction of real estate passive losses over and above the $25,000 limit and the prohibition of anyone other than real estate professionals from claiming this deduction.
Response: The IRS published articles in e-News for Tax Professionals (issue 2012-32) on Aug. 10, 2012 and e-News for Small Businesses (issue 2012-17) on Aug. 22, 2012.
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.