Issues Closed in Calendar Year 2009 Sorted by Subject
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IMRS 10-0001193 & 09-0001180 – Practitioner Priority Service
Issue: Practitioners are complaining about the significant increase in the wait time when calling PPS and that PPS assistors are refusing to talk to someone calling on a cell phone.
Response: We strive to provide optimum service to all our customers and recognize the important role practitioners play in the resolution of customer issues and in the promotion of voluntary compliance. The PPS was established so practitioners could reach our resources more quickly and, under normal circumstances, we deliver that service. Unfortunately, the condition of our economy and the subsequent legislation passed to alleviate the financial burden on taxpayers has created an unplanned demand on both our telephone and correspondence operations. To address this increased demand in both areas, we have periodically realigned our PPS staff to better balance service to all our customers.
We apologize for the recent increase in wait time for PPS, and will work to ensure that it is improved. We have also identified the source of an intermittent technical problem with the vendor equipment associated with PPS menu prompts that resulted in the system failing to recognize Option 1 when it was selected. The vendor upgraded equipment to resolve the technical problem. In addition, specific quality issues, such as discussing taxpayer information with practitioners on cell phones, have been addressed during monthly conference calls with the PPS sites to identify and address training needs.
IMRS 09-0001185 – Processing Form 1040X, Amended U.S. Individual Income Tax Return
Issue: Taxpayer wants to know how Forms 1040X are being processed. They filed a Form 1040X to claim the First Time Homebuyer Credit (FTHBC), but when they called to inquire about their form, the IRS had no record of receipt.
Response: Returns are run through a series of compliance and processing checks and are "logged in" only after processing is completed. Since the law allows taxpayers to claim the 2009 FTHBC on 2008 original or amended returns, there has been a significant increase in the volume of amended returns this processing year. IRS is making every effort to process the claims expeditiously.
IMRS 09-0001168 – Practitioner Priority Service (PPS) Processing of Power of Attorney (POA)
Issue: The PPS would not accept a POA because a portion was typed and a portion was handwritten. The tax professional was told this was a new procedure to reduce chances of identity theft.
Response: When IRS receives a request for a POA that provides typed and handwritten information, the utmost care and security must be provided to protect the taxpayer. Therefore, when the PPS received the POA in question, with both typed and handwritten information, the employee and supervisors decided to err on the side of caution rather than to risk a potential disclosure issue. IRM 184.108.40.206.4 states, “If the Tax Examiner identifies suspicious information, refer to the Manager or Technical Lead to determine if the form should be processed, rejected or referred to TIGTA, CI or OPR.”
IMRS-09-0001151 – Delinquent Return Selection Process
Issue: Practitioners would like to know why they are receiving notices advising that they failed to file corporate tax returns for 2006 and 2007.
Response: We have a new delinquent return selection process for business returns, the Business Master File Case Creation Nonfiler Identification Process (BMF CCNIP). BMF CCNIP provides a better method for identifying nonfilers and creating return delinquencies by using both internal and third party data to identify delinquent modules. Tax Delinquency Investigation Notices, CP 259’s, are issued requesting tax return(s) for all unfiled modules with an open filing requirement to promote full compliance. A business taxpayer may not have received notices previously due to the prior case creation process. The business should reply to the notice using the notice response page.
IMRS 09-0001138 – Recovery Rebate Credit
Issue: Practitioner advises that CP 11 notices are being issued that erroneously disallow the Recovery Rebate Credit.
Response: There are situations where the Recovery Rebate Credit (RRC) was not calculated correctly by the IRS, the taxpayer, or the return preparer. In some cases, due to an IRS software error, the RRC was either not allowed, decreased in error, or the amount allowed was more than the taxpayer should have received, resulting in the issuance of erroneous notices. If the taxpayer did not receive the correct RRC amount, the practitioner or the taxpayer should call the number on the notice to have the liability corrected. If the taxpayer received an overpayment of the RRC, the overpayment must be returned to the issuing IRS Campus in the form of a check or money order with the taxpayer’s name, SSN, and Tax Year 2008 noted on the check. The practitioner/taxpayer should include a note with the payment stating that the money is being returned as the RRC was received in error.
IMRS 09-0001134 & 09-0001133 - CP 161 & CP 162 Notices Issued for Form 1120S and Form 1065
Issue: Practitioners report receipt of both a CP 161 and a CP 162, Notice of Failure to File Penalty Assessment, and are confused as to which notice is correct.
Response: Please accept our apologies for any confusion. The vast majority of these occurred on Forms 1120S. As long as there is no tax liability shown, the CP 162 is correct. (The CP 161 incorrectly shows interest assessed. Interest should not have been assessed when the CP 161 was issued.) In the extremely rare instance where a taxpayer filed a Form 1120S and reported a tax liability that was not paid, the CP 162 will also be incorrect. In this instance, the outstanding tax liability will not be indicated on the notice and the taxpayer/practitioner should call the toll-free number on the notice.
If, as a practitioner, you disagree with the CP 162 or need to request an abatement of penalty based on the issuance of this notice, please contact Customer Service at the number on the notice and reference SERP Alert #090250.
09-0001132 – CP2000 Notices
Issue: Practitioner advises that when CP2000s include unreported qualifying dividends, tax is calculated as ordinary income. Practitioner states that the CP-2000 should advise taxpayers to ensure that the calculations made by the Automated UnderReporter Program are correct.
Response: The IRS corresponds with the taxpayer via CP2000 to confirm the accuracy of the transaction. In the case of unreported dividends, the taxpayer must determine the portion of dividends qualified for the lower tax rate. The CP2000 advises the taxpayer to let us know what portion of the dividend, if any, qualifies.
IMRS 09-0001118 – Verifying Taxpayer Information
Issue: Practitioners are concerned that when they call the Practitioner Priority Service they are sometimes told by customer service representatives that the middle initial of the taxpayer is required prior to receiving assistance even when a valid Form 2848, Power of Attorney and Declaration of Representative, is on file which does not indicate a middle initial.
Response: The customer service representative is required to research the customer account to ensure the practitioner is authorized to receive and discuss the tax account information. Verification of the taxpayer’s middle initial is not a required step in the practitioner verification process. We will remind our representatives that verifying the taxpayer’s middle initial is not required during the third party validation process. We apologize for the inconvenience this may have caused.
IMRS 09-0001115 – Mailing of Blank Form 941, Employer’s Quarterly Federal Tax Return, by IRS Vendor after a Final Return has been Submitted for Processing
Issue: Practitioners ask why their clients receive subsequent quarter Forms 941 after filing a final return.
Response: Once a final Form 941 is processed, it will be coded with an "F" to identify a final Form 941. Generally, this process can take approximately two weeks to post to the Business Master File if there are no processing errors or missing information associated with the return. It is important to note that in order to ensure that all taxpayers receive their subsequent pre-addressed Forms 941 timely, information is usually sent to the vendor six weeks after the prior quarter returns are due. This means that if the final Form 941 return had not completed processing and been identified with the "F" code then a subsequent return may be mailed by the vendor. This scenario is a rare timing issue. The Form 941 instructions advise the taxpayer not to file the return if they have filed a final return during the prior quarter or if they are inactive. If a subsequent return is filed, even if the prior return filed was a final return and the current return shows no liability, it will reactivate the filing requirement for the 941.
IMRS 09-0001112 – CP207/207L/276A (Regarding Form 941, Schedule B) Issued in Error
Issue: Taxpayers and practitioners report receipt of notices CP207, 207L and 276A, dated March 9, 2009, (Cycle 200908), asking them to please submit Form 941 Schedule B, although they submitted the form with their paper filed return.
Response: Due to a systemic error, when processing paper filed Forms 941 Schedule B, we didn’t properly capture the information from the Record of Federal Tax Liability. If you properly submitted Schedule B with your paper filed Form 941, and you or your client received the CP207, 207L or 276A dated 3/9/09, you do not need to resubmit the schedule. We have implemented corrective actions to systemically resolve the accounts. If you encounter problems with customer service, you may reference SERP Alert #090144. We apologize for the inconvenience.
IMRS 09-0001091 – Midwest Disaster Relief
Issue: Practitioners reported that the IRS erroneously adjusted returns using the prior year earned income (as provided in the Heartland Disaster Tax Relief Act of 2008) for purposes of computing the Earned Income Tax Credit (EITC), Education Credits and the Additional Child Tax Credit.
Response: We identified some processing errors on returns, which used the prior year earned income to compute the EITC, Education Credits and Additional Child Tax Credit. For returns filed electronically, we were able to systemically identify and correct the returns. Taxpayers and tax professionals filing paper returns meeting this criteria can contact us using the toll free number at 1-800-829-1040. Tax Professionals can also utilize the Practitioner Priority Service (PPS) to identify the impacted taxpayer and to ask to have the return corrected.
IMRS 09-0001089 – Failure to File Penalties
Issue: Tax professionals requested that the IRS automatically waive the late filing penalty for small partnerships under the exception in Revenue Procedure 84-35. The practitioners stated that the IRS has all the information necessary on the Form 1065 to make a determination as to whether or not the partnership qualifies for the exception and can eliminate unnecessary correspondence between the IRS and the taxpayer.
Response: Although we check all available internal information and related documentation, we may not be able to substantiate a basis to abate the failure to file penalty based on information available at the time. This may be due to timing differences in the filing requirements for the Form 1065 and Form 1040 or other returns. If we cannot fully substantiate the information from internal sources, we communicate with the taxpayer to timely resolve the issue.
IMRS 09-0001068 & 1061 – Automated Collection System (ACS) Managerial Callback Timeframes
Issue: Practitioner stated he does not receive timely callbacks from ACS Campus Managers and reports that, when asked, employees will not furnish their managers’ name and telephone numbers. Practitioner asked for clarification as to the policy for managers responding to customer concerns.
Response: We apologize for any inconvenience that practitioners may be having in attempting to elevate a concern or complaint through an ACS assistor. We continue to stress the importance of making all callbacks timely. The current policy is not to provide the phone number and full name of the manager because there is no guarantee of who may be calling back due to managerial availability. Phone assistors should explain the policy to the taxpayer and representative, while securing their name, phone number and best time to call back. In light of the burden on our stakeholders, we will consider revisiting this policy, while securing feedback from and discussing with our other compliance functions to ensure consistency.
IMRS 09-0001067 - Lost Tax Returns and Payments – CP 80, Reminder, We have not received your return
Issue: Practitioners report that timely filed returns and payments are being separated and the checks are being cashed. The returns are then lost and CP80 notices are being issued with late filing penalties and interest.
Response: It is difficult to determine why a return does not process, yet the check is deposited and applied to the taxpayer’s account. The IRS handles millions of returns and payments per year. When the mail is opened, returns with checks attached stay together; the checks are first posted to the account and then the return is processed. Campuses receive returns from several sources, including individual taxpayers, preparers, lockbox banks, taxpayer assistance sites, revenue officers and revenue agents. They work very hard to carefully control and handle each item received and ensure that returns and checks are posted accurately. When a payment is received without a return, the IRS issues a CP80. The CP80 is a notice that states, “Our records show we applied credits or payments totaling $_____ to the tax period shown above. We have no record of receiving your return for this period and we need your assistance.” It also states that you may have already sent it, but please send another signed copy. It is not a proposed penalty assessment.
IMRS 09-0001059 Rebate Recovery Credit
Issue: Practitioners report that they have been told to avoid claiming the rebate recovery credit when they file electronically because it will slow processing and the IRS can automatically calculate the rebate.
Response: To avoid delays in refunds, it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the rebate recovery credit now. Taxpayers can go to the How Much was My Stimulus Payment? tool available on IRS.gov to find out how much they received.
IMRS 09-0001023 Correspondence Examination
Issue: A tax professional reported that he contacted Correspondence Examination to request a one-week extension of time to provide documentation, but was told that extensions of time are never granted. The tax professional would like to confirm that this is correct.
Response: In response to this inquiry, the Internal Revenue Manual was updated to include procedures for the granting of extensions in this situation. The March 10, 2009 revision of IRM 220.127.116.11.6 provides taxpayers up to an additional thirty days to submit documentation when needed, upon request to the Correspondence Unit. The request may be submitted in writing or by phone. However, in the instances where the “Statutory Notice of Deficiency” has already been issued, extensions to submit documentation will not extend the time to petition Tax Court.
09-0001016 – Letter 147C, EIN Previously Assigned
Issue: Practitioner reports the IRS will no longer fax a copy of Letter 147C to authorized representatives, and this is causing a negative impact on his clients.
Response: Updated instructions have been provided to our employees clearly instructing them to fax the 147C letter to taxpayers and/or their authorized representatives when calling the IRS' Business and Specialty Tax Line at 1-800-829-4933. However, if a practitioner calls the Practitioner Priority Service (PPS) Line at 1-866-860-4259, verbal confirmation will be provided. A faxed or written verification will not be provided to the practitioner calling PPS.
09-0000928 – Balance Due Notices
Issue: Preparers advise that balance due notices are being generated when the return is e-filed and a check is mailed shortly afterwards.
Response: Balance due notices issued for electronically filed returns with checks being mailed for the amount owed has been a recurring issue. When an electronically filed return posts and a corresponding payment is not in the system, a notice is automatically generated. Since a payment mailed the same day as the return is e-filed takes additional time to post, notice issuance has increased as the number of returns filed electronically has increased. In the past several years, IRS has taken steps to prevent this from happening during the peak filing season. Beginning in June 2009, all balance due notices will be delayed for two weeks to allow any payments mailed to post. This should greatly reduce the number of erroneous notices. We have recently become aware that some notices may be issued when payments have been made using EFTPS. Again, there is a short lag time as the information is transferred from EFTPS to the IRS and, because of the timing, a notice may be issued. The reprogramming in June 2009 should eliminate this situation as well. Please note that all balance due notices state: If you have already paid your tax in full or arranged for an installment agreement, please disregard this notice. Therefore, if a payment has been sent, no further action is needed unless a second notice is received. These notices may also be avoided by using Electronic Funds Withdrawal for the tax due, interest and penalties.
We apologize for the inconvenience this has caused for taxpayers and their preparers and are hopeful that as of June 2009, systemic changes will greatly reduce the number of these notices.
IMRS 08-0000954 – Economic Stimulus Payment
Issue: Practitioner states that e-filers who elect direct deposit of their stimulus payments, but who have a balance due which is paid by the due date, are receiving paper checks instead.
Response: While some software programs allow for the entry of direct deposit information even with a balance due return, others do not. Taxpayers and tax professionals need to make this determination based on a review of the tax preparation software they use. If the tax software allows the user to enter direct debit (electronic funds withdrawal) as well as direct deposit information, doing so will permit the economic stimulus payment to be directly deposited.
IMRS 08-0000941 - Telephone Numbers on Audit Notices
Issue: Practitioner advises that telephone numbers listed on the correspondence audit notices are frequently not answered at night and, if messages are left, calls are not returned. There is no information regarding supervisors on the notice and therefore no other name or number is available for practitioner to contact.
Response: Correspondence examination sites have been directed to ensure that assistors are available to take phone calls during the hours listed on their notices. If a taxpayer is not available during normal business hours and provides a number and best time to call, the examiner will return the call based on the availability of the taxpayer. Although calls cannot be received by the Campus outside of the stated hours on the letters, examiners may return calls outside of those hours when the taxpayer or representative indicates that is the preferred time. Examiners are encouraged to contact taxpayers by phone when a number is available in order to facilitate the resolution of the case. We apologize that you were unable to speak with one of our employees when you called. If this happens again in the future, please provide your local Stakeholder Liaison with the date, time and number called so we may pursue the issue.
IMRS 08-0000940 – Automated Underreporter Program – Schedule K-1
Issue: Practitioners stated that their clients received CP2000 notices showing a mismatch of information from Schedule K-1, despite properly reporting the income on the tax returns.
Response: We determined that the software used to prepare the returns netted the income and expense figures for each Schedule K-1, making it impossible to match amounts reported on the returns to the information returns. The software company agreed to change their program for 2008 returns so that the amounts would no longer be netted. This should result in a reduction of CP2000s issued for K-1s that have been correctly reported.
IMRS 05-0000006 – Return Processing
Issue: Tax professionals asked us why the IRS can’t make a phone call to the taxpayer instead of sending the return back when information, such as an accompanying schedule or a W-2, is missing.
Response: Beginning later this calendar year, in certain situations where the taxpayer has filed a return that is not processible because it is missing information and/or supporting schedules, the IRS will correspond with taxpayers for the missing information and schedules. According to Submission Processing, there are very limited circumstances where the IRS would send a tax return back to a taxpayer
Communication & Outreach
IMRS 10-0001202 – Appeals Survey
Issue: Practitioner advises he received a phone call from a firm doing a survey of practitioners that had cases in Appeals recently. Practitioner was not aware of a survey and wanted to confirm if the survey was legitimate.
Response: The Appeals Division of the IRS is conducting its annual telephone survey of customers who have been through the Appeals process during the period of October 1, 2008 through September 30, 2009. ICF MACRO, a private, third-party vendor, is taking the survey to determine satisfaction levels with the Appeals process. The survey will be conducted between October and December 2009.
IMRS 09-0001183 – Communication between IRS & Social Security Administration (SSA)
Issue: Practitioner states there needs to be a method of cross-communication between the IRS and SSA as it relates to the reconciliation of documents 941(x) and W2c.
Response: The IRS is currently working closely with SSA on a new SSA-based computer system which, when implemented, should remedy most issues relating to the reconciliation process between the two Federal agencies.
IMRS 09-0001075 – Request for National Phone Forum Transcripts
Issue: Practitioner requests that National Phone Forums be recorded for later listening, or that transcripts be made available solely for educational purposes.
Response: The IRS is pleased to announce that our National Phone Forum process now includes the posting of audio and transcripts of interest to practitioners and small business owners on IRS.gov.
IMRS 09-0000995 – Treasury Regulation 1.6045(e), Forest Products Technical Guidance
Issue: Stakeholder requested outreach to the tax professional community and regional saw mill operators on Treasury Regulation 1.6045(e), which deals with information reporting on the sale or exchange of an interest in timber if the sale or exchange did not include the land.
Response: Internal Revenue Bulletin No. 2009-24, page 1073 discusses information reporting for lump-sum timber sales.
09-0000980 – S Corporations
Issue: A review of incoming questions to the IRS indicated that more detailed information about S Corporations should be made available on IRS.gov.
Response: The IRS.gov S Corporation page has been revised and now has more information. See the expanded information on:
- Compensation and medical insurance issues
- Employees, shareholders and corporate officers
- S Corporation stock and debt basis
09-0001181 – Form 941, Employer’s Quarterly Federal Tax Return
Issue: The Service Center Recognition Image Processing System (SCRIPS) is not always picking up the Schedule B during the processing of paper filed Forms 941.
Response: We put procedures to prevent erroneous notices in place for processing of third quarter 2009 Forms 941. The problem that caused thousands of erroneous CP207 notices to be issued was corrected. Employers who received a CP207 notice in error must still submit a copy of their Schedule B as soon as possible. We apologize for any inconvenience.
IMRS 09-0001164 – Withholding Calendar
Issue: Practitioner states that he is receiving erroneous results when using the Withholding Calendar on IRS.gov.
Response: The American Recovery and Reinvestment Act of 2009 introduced several changes that affect the Withholding Calendar.
- The Making Work Pay Credit: The new withholding tables that employers should have implemented by April 1 have been incorporated into the calculator. Using the calculator will ensure that the reduced withholding will not result in having too little income tax withheld if a taxpayer is an employee with two concurrent jobs, the taxpayer and spouse both work, or if the taxpayer can be claimed as a dependent on someone else’s tax return (since dependents are not eligible for this credit.)
- Pension Income: Non-government pension income is not eligible for the Making Work Pay Credit, and the calculator now accounts for this.
- Unemployment Compensation: The first $2,400 of unemployment compensation an individual receives in 2009 is now tax-free. The Withholding Calculator now accounts for this, so enter the full amount into the calculator.
IMRS 09-0001079 - E-Services Secure Mailbox
Issue: A tax practitioner suggested that revenue officers and revenue agents be able to communicate using the E-Services secured mailbox method.
Response: The capability for revenue officers and revenue agents to interact with practitioners via a secured mailbox is not currently a viable option. The Compliance functions are exploring options and the feasibility of implementing a program to allow this or another alternative electronic communication method.
IMRS 09-0001150 – Estimated Tax Payments
Issue: Practitioner recommends that the IRS establish a link to retrieve estimated tax payments made by taxpayers.
Response: If taxpayers use the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments, they will be able to view and print their payment history if they have an active Taxpayer Identification Number, Personal Identification Number (PIN) and Internet password.
IMRS 09-0001001 – e-Services Transcript Delivery System (TDS)
Issue: A tax professional reported that when using the e-Services Transcript Delivery System, if the taxpayer has not filed a return, the response is unclear. He requests a response that simply says that we have no record of receiving the return.
Response: The request to add a new response was considered, but we are unable to revise our programmed response at this time. We hope to consider the change in future updates to the system.
IMRS 06-0000220 – E-Services
Issue: Tax professionals with a Form 8821, Tax Information Authorization, are not able to use e-Services Transcript Delivery Services.
Response: Transcripts cannot be requested through e-Services with a Form 8821, Tax Information Authorization. Form 4506T, Request for Transcript of Tax Return, is the appropriate form for the taxpayer or representative to use for the sole purpose of securing a transcript. E-Services, created for "limited use" by third parties to carry out their responsibilities for their clients, does not include Form 8821 transcript requests.
In addition, as stated on Form 2848, Power of Attorney and Declaration of Representative, it should not be used by the taxpayer to simply authorize a third party to receive a transcript of their tax information. At this time, there are no plans to allow transcript requests via Form 8821. Practitioners who have access to e-Services and hold a valid authorization may call the PPS and request transcripts be delivered to their Secure Object Repository (SOR).
Forms & Publications
10-0001210 – Instructions for Military Pay for Active Duty of 30 Days or Less
Issue: There appears to be an error in the instructions for Forms W-2 and 1099 MISC concerning military pay for active duty of 30 days or less.
Response: The updated instructions have been included on the "Changes to Current Tax Forms, Instructions and Publications" page on IRS.gov.
IMRS 09-0001182 – Form 941X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund
Issue: Filers of Form 941X that include an increase in tax are being incorrectly advised that they need to file Schedule B and are being assessed Federal Tax Deposit (FTD) penalties if they do not do so.
Response: An internal alert was issued 09/10/2009 to affirm that a Schedule B is not needed when a Form 941X is filed and that the increase in tax qualifies as an interest free adjustment.
IMRS 09-0001130 – Publication 3125, The IRS Does Not Approve IRA Investments
Issue: Practitioners would like Publication 3125 updated with current phone numbers for the Federal Trade Commission.
Response: Publication 3125 is being updated to include the new toll-free phone numbers.
IMRS 09-0001122 – Form 1099-G, Certain Government Payments
Issue: State agencies ask if they can truncate SSNs to the last four digits on the payee’s copy of the Form 1099-G for state tax refunds. They feel that doing so would reduce identity theft.
Response: Although we appreciate the privacy concerns raised in this request, the full SSN must be shown on the form. State and local governments making payments of refunds of state or local taxes (or the allowance of credits or offsets with respect to such taxes) of $10 or more to individuals must file an information return pursuant to IRC Section 6050E. This report or statement must be made in accordance with the forms or regulations prescribed by the Secretary and include the amount of the payment, the name of the recipient, and the recipient’s address. (IRC Section 6050E(a)). Treasury regulations further provide that the returns must also include the recipient’s taxpayer identification number (TIN). (Treas. Reg. Section 1.6050E-1(f)). An individual’s TIN is the social security number (SSN) issued to that individual. (IRC Section 6109(d)). An SSN is defined as a nine-digit number taking the form 000-00-0000. (Treas. Reg. Sections 301.6109-1(a)(1) and 301.7701-11). State and local governments must also furnish statements to the recipient of the tax refund, unless it is determined that the individual did not claim itemized deductions in the year giving rise to the refund of credit. (IRC Section 6050E(b)). This statement, which may be a copy of the information return filed with the IRS, must include the same information included on the information return with respect to refunds, credits and offsets. The instructions for Form 1099-G state that the filer must provide the recipient with the same information as is contained on the information return. If the filer furnishes a substitute statement rather than a copy of the form, the Service’s specifications state that the statement must include the same identifying information as is shown on the information return filed with the Service. (Rev. Proc. 2008-36; IRS Publication 1179). Therefore, we conclude that the payee’s entire social security number must be shown on the recipient’s copy, and may not be truncated or masked. The IRS is concerned with issues of identity theft and safeguarding taxpayer’s personal information. In the area of information reporting, the inclusion of the taxpayer’s identifying information is required, and allows the taxpayer an opportunity to verify that the information reported to the IRS is accurate and correct.
IMRS 09-0001096 – New Format for Retrieving Forms and Publications on IRS.gov
Issue: Practitioners complained about the new format for obtaining forms and publication on IRS.gov, specifically that (1) there is no longer a continuous scroll feature; (2) it is difficult to find hyphenated forms; (3) retrieving products is slower; (4) the new format is cluttered with too much detail; and (5) they did not receive previous notification of the change.
Response: The system used for obtaining forms and publications on IRS.gov is used to provide access to several thousand files including new releases, tax products, draft tax products and written determinations. The decision to update the system was made after user research showed significant issues and after receiving numerous complaints. The changes made were site-wide and were not limited to the forms and publications page.
Suggestions to expedite accessibility to particular Forms and Publications:
- Change the "Show per page" from the minimum of 25 per page to the maximum 200 per page to scroll through the lists.
- In the "Find" search box, use a more generic form number (Product Number) rather than a specific form with extensions. For example, searching for 941 will pull up both the 941 and the newer 941X. The same is true for the Form 1040 series. Just entering 1040 as the product number will result in a list of all Forms 1040, 1040A and 1040EZ, along with their related schedules and instructions.
Response time for retrieving files was thoroughly tested and is the same or better than under the previous system. The new system does not display the entire list of files because this would have a negative impact on response time; many of the lists have several thousand entries.
The new system displays the same information listed in the old system, but in a format designed to be easy to scan. Titles are no longer truncated. Prior year products were not impacted by this change.
We appreciate this feedback and will apply these suggestions where appropriate as we continue to make improvements to IRS.gov. We will also endeavor to notify users when changes are coming.
IMRS 09-0001095 – Mailing List for Forms 940, Employer's Annual Federal Unemployment Tax Return and Forms 941, Employer's Quarterly Federal Tax Return
Issue: Practitioner wants to know the procedures to be added back to the 940/941 mailing list and if there is any manual intervention.
Response: Approximately two years ago, a mailing system was established for business returns to systemically determine whether to mail the next tax period’s returns to the taxpayer/practitioner. Millions of returns were being mailed, but were not being filed due to electronic filing and we were receiving complaints from practitioners asking why paper returns were being mailed since they filed electronically.
Last year practitioners and filers were advised to attach a note to the 940 or 941 return if they wanted to remain on the mailing list. The note signaled the IRS examiner to generate the next tax period's package. Once the filer received the tax package, they should continue to receive the mailed package, unless they meet one of the exception conditions mentioned below.
Currently for Forms 940 and 941, no manual intervention is required. At the top of each return now is a series of six numbers. The first two numbers are known as the “return code” and tell the scanner during data capture whether the return being filed is from the tax package mailed to the taxpayer or off the internet Web site e.g., irs.gov, or another method. For example, if the first two digits for Form 941 are 95 (irs.gov) or 96 (tax package), or if the first two digits for Form 940 are 85 (irs.gov) or 86 (tax package) the scanner will systemically code the return for the tax package to be sent the next tax period.
Occasionally returns are scanned to determine if one of the filing conditions exists indicating that the next period’s tax package is not needed. This includes final returns, electronic returns, and amended returns.
IMRS 09-0001082 – Package 1096
Issue: Tax professionals state that they receive Package 1096 each year bearing the EIN of the client and never use it. Their software generates the required forms. The tax professional or client must dispose of the Package 1096 with the EIN. They suggest the IRS not send the package automatically.
Response: We understand that tax professionals and taxpayers do not want to waste forms and instructions they do not use. We have made significant efforts to reduce such mailings over the past few years. Several years ago, we began to exclude anyone who filed Forms 1096/1099 electronically from the mailing. This helped to reduce our mailing by about one million packages. The Form 1096 is a scannable document, which facilitates more accurate and efficient processing.
We find most computer generated Forms 1096 are not scannable, which is a detriment to our processing. If tax professionals are already using a computer to prepare Forms 1096/1099, we strongly encourage them to go one step further by filing the information returns electronically with IRS through the FIRE system (Filing Information Returns Electronically). Information on the FIRE system can be found on IRS.gov and in Publication 1220 Part B (PDF) and/or Publication 3609 (PDF).
IMRS 09-0001077 – Economic Stimulus Payment Tool
Issue: Tax professionals report difficulty locating the “stimulus calculator” on IRS.gov and request the IRS place the tool on the front page of IRS.gov.
Response: Thank you for bringing the difficulty in locating the How Much was My Stimulus Payment? tool on IRS.gov to our attention. For the 2009 filing season, we placed a link to the site on the bottom left of the home page. A link was also embedded in the information found under the headline “Avoid Rebate Credit Confusion.”
IMRS 09-0001076 – Publication 936, Home Mortgage Interest Deduction
Issue: Publication 936 contains incorrect information relating to mortgage interest acquisition debt limitations. It appears that the publication reflects legislation that was previously pending, but not passed by Congress.
Response: Counsel issued a memorandum which allows acquisition debt to be considered as home equity debt for purposes of the $100,000 limitation. This interpretation conforms to the information in Publication 936.
IMRS 09-0001056 – Account Transcripts
Issue: A tax professional reported that she was advised by the Practitioner Priority Service (PPS) that they will not send account transcripts and that she must get them through Transcript Delivery Services (TDS). This appears to be in conflict with the information in the Internal Revenue Manual (IRM).
Response: Thank you for your feedback. We apologize for your inability to receive some transcripts requested through the PPS. PPS assistors are authorized to provide sanitized IDRS (Integrated Data Retrieval System) transcripts; however, there is a limit of 10 transcripts per call. We will remind our assistors and clarify the current procedures to ensure quality assistance to practitioners in the future.
IMRS 09-0001022 – Blank Tax Forms for Distribution
Issue: The State of Wisconsin Department of Revenue would like to order blank forms for distribution in their walk-in offices.
Response: We do not provide blank forms to state revenue departments for distribution. Offices that request a large quantity of federal forms, or federal forms that are not stocked at the nearest IRS office, should go to IRS.gov or call 1-800-TAX-FORMS (1-800-829-3676). Publication 4604, Use the Web for IRS Tax Products & Information, provides information on viewing and downloading forms as well as online ordering.
IMRS 09-0001017 – Excise Tax Resources
Issue: Stakeholders complain that it is difficult to locate excise tax information on IRS.gov.
Response: The excise tax landing page is now one of the top search results on IRS.gov using the terms ‘excise tax’ or ‘excise.’ In addition, we published an article in e-News for Tax Professionals and in e-News for Small Businesses highlighting the materials.
IMRS 08-0000891 – Form 1098, Mortgage Interest Statement
Issue: Forms 1098 retrieved through the Transcript Delivery System show the bank/lender as the payer and the borrower as the payee. These should be reversed.
Response: A correction to the system was implemented on 5/10/09.
IMRS 08-0000817 – Payments
Issue: Stakeholders report difficulty finding instructions for sending in paper payments when Form 1041 is filed electronically.
Response: The Tax Professionals’ page on IRS.gov is now updated to include all payment options for electronic filers.
IMRS 08-0000798 – Charitable Contributions
Issue: A tax professional suggested that the IRS require all charitable organizations to place their Federal Employer Identification Number (FEIN) on receipts for charitable donations. He also suggested that the IRS place a search engine on IRS.gov to permit tax professionals to check the qualifying status of the organization by searching the FEIN.
Response: Thank you for your suggestion that we provide the ability to search IRS.gov for organizations eligible to receive charitable contributions by the organization’s employer identification number. We currently provide a search engine (an online version of Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986) that allows anyone to search an on-line database of eligible donees, but it cannot be searched by the FEIN field. We also make available Excel spreadsheets listing tax-exempt organizations by state: these spreadsheets include organizations’ FEINs. Your suggestion to enable tax professionals to search by FEIN would require upgrades to the search engine application and we do not currently have funds available for such upgrades. Requiring organizations to put the FEIN on receipts provided to donors would require an amendment to the regulations
IMRS 07-0000623 – Employer ID Numbers (EINs) for Limited Liability Companies
Issue: Stakeholders request guidance or outreach on changes to EIN procedures for single member LLCs (disregarded entities) with employees.
Response: Headliner 252, Disregarded Entities for Purposes of Employment Taxes was issued November 2008.
Policy & Procedures
IMRS 10-0001197 & 09-0001178 – Release of ERO Information through Freedom of Information Act (FOIA) Request
Issue: Practitioners state that they received e-mails and flyers advising them that the IRS gave a marketing firm their contact information. They would like to know if electronic return originator (ERO) information was shared through a Freedom of Information Act (FOIA) request. In addition, practitioners received a letter offering for sale by zip code the number of returns transmitted by each Electronic Filing Identification Number (EFIN).
Response: We don’t give records to marketing firms but are required to respond to FOIA requests from any source if the information requested is considered a public record. The Freedom of Information Act, 5 U.S.C. Section 552 provides public access to agency records unless protected from disclosure. The FOIA applies to records created by Federal agencies and does not cover records held by Congress, the courts, or state and local government agencies. The ERO name, address and number of tax returns electronically filed are considered public records and can be secured through a FOIA request. EFINS are not public information and cannot be secured through a FOIA request.
IMRS 09-0001177 – Form 8275, Disclosure Statements
Issue: Tax Professional has seen a marked increase in audits and wonders if his frequent use of Form 8275 has contributed to this increase.
Response: Attaching Form 8275 (Disclosure Statement) to a tax return has no impact on the Discriminant Function (DIF) score that a return is given upon filing. The DIF score rates the potential for change, based on past IRS experience with similar returns. Updates to the DIF formula come from the data derived from the examination of returns selected for the National Research Program (NRP).
IMRS 09-0001141 – Request to revise IRM as it pertains to Form 8821, Tax Information Authorization
Issue: Practitioner is concerned that Automated Collection System (ACS) employees are not releasing tax information to employees of his firm unless a list of names is attached to Form 8821, Tax Information Authorization. As a result, he asked that the Internal Revenue Manual (IRM) be reviewed and revised accordingly.
Response: IRM 18.104.22.168.1, Form 8821 Overview, and IRM 22.214.171.124.2, Essential Elements for Form 8821, were revised on October 26, 2009, to indicate that more than one individual person or business entity can be designated on a Form 8821. If more than one individual/business entity is designated, a list may be attached to the Form 8821, naming the additional appointee(s). A special note was added to specify that if a business entity is named as the appointee, this will include all employees of the named business entity and a list is not required.
IMRS 09-0001123 – Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation
Issue: Given that the IRS requires that private foundations file Form 990-PF and that the return information is made available to the public, what information should not be included?
Response: The law requires the IRS to make available to the public the information returns of tax-exempt organizations including Form 990-PF. The law also requires organizations to make copies of these returns available to the public. Because the organizations and the IRS are required to make Form 990-PF publicly available, we are very careful about the information we ask organizations to provide on their annual returns. For private foundations, Part XV of the Form 990-PF requests the names and addresses of grant recipients, a statement as to whether the recipient has any relationship to the foundation manager, the purpose of the grant, and the amount of the grant. We have never required private foundations to provide the social security numbers of their grant or scholarship recipients on the Form 990-PF for any tax year. We are very sensitive to the potential problems that such disclosures could cause. To try to prevent such events, we issued a reminder in our electronic newsletter, EO Update, which reaches over 75,000 subscribers, not to include any personal identifying information, such as social security numbers not required by the IRS on these forms. We will continue to raise awareness of those who file these returns and do what we can to identify such disclosures of personal information.
IMRS 09-0001103 - Expedited Processing of 501(c)(3) Applications
Issue: A stakeholder contacted the IRS to ask if there is a method for expediting the 501(c)(3) application process. The stakeholder organization had lost the opportunity to apply for over a million dollars in grant money, and was in danger of losing another opportunity to apply for other grants due to the rapidly approaching application deadline.
Response: In general, applications are processed in the order received by the IRS. Sometimes, however, the IRS will work a case outside the regular order. For expedited processing to be granted, there must be a compelling reason to process the case ahead of others. Compelling reasons include the following: (1) A pending grant, where failure to secure the grant will have an adverse impact on the organization's ability to continue operating, (2) a newly created organization providing disaster relief to victims of emergencies, and (3) IRS errors have caused undue delays in issuing a determination letter. More information may be found on IRS.gov, search “Expediting Application Processing.”
IMRS 09-0001101 – Extending Time & Authority of Third Party Designee
Issue: Practitioners continue to raise the issue of extending the time and authority of the third party designee box on Form 1040. They believe that as the preparer of returns the tax practitioner is the best person to resolve processing and CP 2000 issues.
Response: The IRS will not extend third party designations from 12 to 24 months. The original intent of the 12-month period was that it would be used during the initial processing for the return. After a year, most outstanding matters would involve audit or collection activities rather than processing issues, and we do not want to erroneously allow designees to practice before the IRS based on these authorizations. A taxpayer response page is included when CP 2000 notices are sent. That page has an area to authorize a third party to discuss and give information to the IRS pertaining to the proposed changes.
IMRS 09-0001100 – Power of Attorney (POA)
Issue: Practitioner advises that revenue agents are not checking for a POA and are contacting their clients when there is a current, valid power of attorney on file with the CAF unit.
Response: The policy is that examiners must check appropriate internal records to determine if a valid power of attorney is on file for the year(s) under examination. We're revising the Internal Revenue Manual to further clarify that the initial contact should be made with the taxpayer’s representative, if a valid Form 2848 is on file for the year(s) and type of tax under examination. The estimated publishing date for this IRM change is January 2010.
IMRS 09-0001089, 09-0001085 & 09-0001084 – American Recovery and Reorganization Act (ARRA)
Issue: ARRA generated a substantial number of inquiries from stakeholders.
Response: Three collector issues were established on the Issue Management Resolution System to act as a central repository for questions on the provisions of ARRA. Industry stakeholders elevated questions by contacting their local stakeholder liaisons. As questions were answered, the responses were provided to the stakeholders who raised the issues and were also considered for inclusion on the Q & A pages of IRS.gov. Many of the Q & As on IRS.gov are a direct result of the questions our industry stakeholders brought us. See IRS.gov for Q & A’s on the Making Work Pay Credit, First-Time Homebuyer Credit, the 5-year Net Operating Loss Carryback Election for Small Businesses, and the COBRA credit.
IMRS 09-0001065 – Penalty Relief for Estimated Tax Payments – Farmers and Fishermen
Issue: Practitioners requested relief from penalties for failure to make estimated tax payments for farmers who cannot timely file and pay their taxes by March 2, 2009, due to the extended deadline for broker issued information returns.
Response: Unfortunately, the legislation that extended the deadline for broker issued information returns did not change the provisions of Internal Revenue Code Section 6654(i), Special rules for farmers and fishermen. Therefore, legally, there was no additional time allotted for farmers or fishermen to file their tax returns. While we can agree with and are sorry for the frustration of receiving late information returns, all taxpayers, not just one segment of the filing population, are in a similar situation. To address unusual circumstances that prevented payment of the estimated tax payment by January 15th or the filing of the tax return with payment of taxes by March 2, 2009, see IRS Publication 505, Tax Withholding and Estimated Tax, which provides instructions for requesting a waiver of the Failure to Pay Estimated Income Tax Penalty.
IMRS 09-0001063 – Rescinding Statutory Notices of Deficiency
Issue: Tax professional complains that when taxpayers provide substantiation to the IRS that results in a revised audit report, the IRS does not rescind the Statutory Notice of Deficiency. Tax practitioners would like the IRS to rescind the Notice of Deficiency in these circumstances and get that rescission to the taxpayer prior to the date the taxpayer must file a tax court petition (the IRS has Form 8626 to do this). Because there is an outstanding Statutory Notice of Deficiency, the revised report is not legally binding on the IRS: the practitioner says that taxpayers and/or their representative are placed in the position of having to file a petition to protect their rights. This means that a taxpayer may have to pay the attorney fees and court fees involved in petitioning the tax court, an unnecessary burden and cost.
Response: There is no letter that is the equivalent to the statutory notice of deficiency that binds the IRS to a revised report computation. The IRS can issue a supplemental report during the 90-Day Statutory Notice of Deficiency period in response to information provided by the taxpayer. The Letter 555, Notification of Findings Based upon Taxpayer’s Recent Data, accompanies the supplemental report. There is no need for the IRS to rescind a Statutory Notice of Deficiency when a taxpayer signs the supplemental report. The supplemental report will serve as the documentation to support the taxpayer’s position if there is any future controversy. Likewise, the taxpayer does not have to petition the tax court, or pay attorney and/or court fees in this situation. If the IRS either partially accepts or fully disallows the taxpayer’s documentation and the taxpayer does not agree, the taxpayer must petition the tax court and pay the applicable fees.
IMRS 09-0001015 - Property Taxes
Issue: Maine Revenue Services would like to know if the additional standard deduction for property taxes, as provided for in the Emergency Economic Stabilization Act of 2008, would have to be included back in income if a taxpayer subsequently receives a property tax rebate under a state rent or property tax rebate program.
Response: Yes, recovery of a tax benefit item must be included in income in the year of recovery.
IMRS 08-0000906 – Collection Transportation Standards
Issue: Practitioners would like to see transparency as it pertains to Collection Transportation Standards. They feel the IRS has failed to provide a clear statement of their assumption of the number of commuting miles driven by each taxpayer in setting the operating expense allowances.
Response: The Allowable Living Expense (ALE) standards are used to reduce subjectivity in determining what a taxpayer may claim as basic living expenses necessary to avoid hardship, when the taxpayer must delay full payment of delinquent taxes. Use of the standards is very important in maintaining public confidence that IRS administers the tax law in a way that is fair to both individuals who are delinquent in paying their taxes, and fair to the vast majority of compliant taxpayers who pay on time. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for taxpayers in similar geographic areas.
Vehicle Operating standards are based on actual consumer expenditure data obtained from the United States Bureau of Labor Statistics which are adjusted with Consumer Price Indexes to allow for projected increases throughout the year. (These CPI are used to adjust all ALE standards.) Vehicle operating standards are not based on average commuting distances. Fuel costs, which are part of vehicle operating costs, have a separate fuel price adjustment which is based on Energy Information Administration data which allows for projected fuel price increases. Although recent analysis of EIA data shows that fuel prices have increased, actual consumption has decreased, resulting in only a slight increase in overall expenditures.
While one set of standards cannot fit every individual circumstance, IRS employees are empowered to deviate from the ALE structure when warranted to address those taxpayers who document necessary living expenses in excess of current allowances.
The collection financial standards, available via IRS.gov, provide the following explanation: “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, we may allow for actual expenses. However, taxpayers must provide documentation that supports a determination that using national and local expense standards leaves them an inadequate means of providing for basic living expenses.”