Issues Closed in Calendar Year 2012 Sorted by Subject
NOTE: To search for a key word within this document, press CTRL and F simultaneously, and then enter the key word in the pop-up box.
IMRS Issue 12-0001638 – Automated Underreporter CP2000 notices issued for USDA grants properly reported on Form 1040
Issue: Taxpayers who properly reported USDA grants on Form 1040 are receiving Automated Underreporter CP2000 notices for the grant income.
Response: When this issue was identified, we alerted the campus coordinators and they clarified the procedures for the examiners. However, AUR examiners cannot view electronic attachments that reflect a breakdown of the amount(s) reported. If AUR can't determine that the grant income was reported on Schedule F, lines 6a, 6b, 40a, 40b, or line 10 or 44, as outlined in IRM 188.8.131.52.20.1(2)a, an AUR notice is issued.
The ability to view attachments to e-filed returns is currently being tested with Modernized e-File. Unfortunately, full implementation of this technology is still several years out. Although we recognize the burden it creates for taxpayers and IRS compliance functions, taxpayers should continue to provide a timely explanation to AUR to resolve these issues.
IMRS Issue 12-0001604 - Roth conversions Form 8606
Issue: Taxpayers file Form 8606 to report tax when rolling over their traditional IRA to a Roth IRA, and to identify their choice to report the resulting tax in one or two years. However, some taxpayers are receiving CP2000/CP2501 for additional tax due that indicates the Form 8606 was not taken into consideration when computing the tax.
Response: In some cases, software used by return preparers could inadvertently fail to transmit taxpayer information contained on Form 8606, even if the taxpayer initially provided this information. Without this information, the IRS will send a notice requesting tax on the full amount. Generally, the IRS can promptly resolve this issue if taxpayers or their tax preparers respond to the notice with a copy of the Form 8606.
IMRS Issue 11-0001525 – Form 2828 processing delays
Issue: Practitioners are concerned that it may be taking more than 10 days for the Centralized Authorization File to process Form 2848, Power of Attorney and Declaration of Representative. As a result, they would like the IRS to explore the feasibility of the following three suggestions:
1: Consider allowing IRS employees and practitioners to scan Form 2848 and submit directly to the CAF unit.
2: Modify the IRM to reduce the timeframe for processing e-Services disclosure authorizations to at least three to five days. This would serve as an incentive to use this method.
3: Finally, modify the IRM to reduce the overall timeframe to five days since resubmitting the form to the Practitioner Priority Service, Automated Collection System, etc is burdensome and costly to both practitioners and the government.
Response to 1: The IRS CAF Unit is not in a position to receive scanned Forms 2848 from IRS employees or practitioners. The input of the scanned authorization would still be a manual process. All authorizations are processed in order of receipt based on first in and first out. Scanning the authorization will not shorten the processing time. IRS continues to pursue e-Fax, which will be a more efficient option for submitting authorizations to the CAF unit.
Response to 2: When authorizations are submitted through the disclosure authorization application within e-Services, the CAF is updated immediately. Timeframes mentioned in the IRM relate to paper (fax and mail) processing. Changing the timeframes established in the IRM will not decrease the processing time for paper authorizations since it is based on the volume of authorizations received. To expedite processing of an authorization, the practitioner should submit the authorization using the DA application. DA submissions provide real-time (immediate) acknowledgement of accepted applications. Practitioners may contact the IRS when they receive confirmation of the accepted authorization. PPS assistors must verify that the IRS has an authorization on record. Please refer to IRM 184.108.40.206(1), Authentication and Disclosure Guidelines. The PPS assistor must require a faxed authorization before disclosing any account information if the authorization is not recorded. Refer to IRM 220.127.116.11.3, Obtaining Faxed Authorizations.
Response to 3: The CAF unit processes all receipts on a first in/first out basis in the shortest amount of time possible based on existing inventory and available staff. Processing may take up to 10 days during periods of increased inventory. The IRM was updated in 2011 to reflect a reasonable processing timeframe consistent with available resources.
IMRS Issue 11-0001496 – Assessment statute expiration date / collection statute expiration date requests to Practitioner Priority Service
Issue: A tax practitioner with a valid power of attorney on file contacted the PPS requesting the collection statute expiration date for his client's account. The assister refused to provide the information because the IRM states that if the sole purpose of a call is to obtain the ASED or the CSED (and not any other account related information), the ASED/CSED will not be supplied.
Response: We reviewed this issue and recently changed our procedures. Assistors on the PPS telephone line are now able to release ASED/CSED information when a valid POA is on file, regardless of whether the caller requests any other account related information. The official IRM 18.104.22.168.4(17) regarding this issue will be updated by Oct. 1, 2012.
Communication and Outreach
IMRS Issue 12-0001717 - Contact information changes for Centralized Authorization File
Issue: The CAF has changed the fax numbers used for submitting Form 2848 (Power of Attorney and Declaration of Representative) and Form 8821 (Tax Information Authorization). The new numbers are listed below.
- Memphis -- 855–214–7519
- Ogden -- 855–214–7522
The Philadelphia fax number remains the same at 267-941-1017.
Additionally, as of October 1, 2012 the CAF Help Lines were no longer operational. If you need assistance regarding a returned authorization, please call toll free at 1-800-829-1040 for individual accounts or 1-800-829-4933 for business accounts.
The CAF unit requested assistance in publicizing this information.
Response: These changes were publicized in e-News for Tax Professionals and the IMRS Hot Issues report and via Twitter to followers of @IRStaxpros.
IMRS Issue 12-0001684 – Processing of Form 1120-H
Issue: Inquiry received from Stakeholder regarding the processing of Form 1120-H. The Form allows the preparer/taxpayer to either apply all, or a portion, of the overpayment to the subsequent year or request the overpayment be refunded. In each case where the CPA completed line 26 of the form requesting the overpayment be applied to the subsequent year, the overpayment was refunded.
Response: We researched the problem you identified and found that a programming problem caused the overpayments on Form 1120-H to be refunded rather than being applied to the subsequent year as requested by the taxpayer. The programming problem was corrected on September 30, 2012 (cycle 201241). Thank you for bringing this issue to our attention. We apologize for any inconvenience.
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.
IMRS Issue 12-0001612 – Veterans disability retirement
Issue: IRS Examination employees found that Veterans Administration (VA) retirement income was frequently reported incorrectly. They requested that the IRS and the VA work together to find a vehicle (an article or fact sheet, for example) to communicate to veterans the proper way to report their retirement income and to avoid unscrupulous preparers.
Response: Representatives from various functions within IRS and the VA discussed this issue. The following articles addressing military disability are now available on www.IRS.gov: Special Tax Considerations for Veterans and FAQs Regarding Filing Amended Returns for Disabled Veterans. The IRS also sent these articles to the VA.
IMRS Issue 12-0001548 – Archiving e-News publications on IRS.gov
Issue: A Stakeholder Liaison employee recommends that e-News publications, (for example e-News for Small Businesses and e-News for Tax Professionals), be archived on IRS.gov for future access by external stakeholders. Currently the e-News publications are emailed to subscribers but are not archived for later viewing.
Response: The concept for the e-newsletters is that people will sign up rather than go onto IRS.gov and read archives. Also, items that may be accurate at the time of issuance could be inaccurate later, links can be outdated, etc. Additionally, since the resources required to maintain archives would be considerable, this recommendation does not make good business sense.
IMRS Issue 12-0001545 - Request for a Spanish webinar on self-employed tax information
Issue: IRS Stakeholder Liaison requests a Spanish language version of the 3/29/2011 webinar: Business Taxes for the Self-Employed: The Basics.
Response: The Spanish version of the Business Taxes for the Self-Employed: The Basics (Impuestos de Negocio para Empleados por Cuenta Propia) was held live on Wednesday, September 26, 2012. It is now archived in English and Spanish on the IRS Video Portal.
The Spanish version of the webinar is now available to view on the IRS Video Portal at: http://www.irsvideos.gov/ImpuestosdeNegocioparaEmpleados/.
The English version of the webinar is available to view on the IRS Video Portal at: http://www.irsvideos.gov/BusinessTaxesSelfEmployedTheBasics/
Some of the topics covered by the webinar included reporting profit or loss from a business or profession, self-employment tax and estimated tax payments, schedule C and C-EZ, deducting Business Expenses, husband and wife businesses, and recordkeeping.
IMRS Issue 11-0001519 – Alerts for new IMRS reports
Issue: A tax practitioner suggested that the IMRS staff implement a procedure to alert practitioners when a new Hot Issues, IMRS Monthly Overview or Industry Issues Quarterly Report has been posted to the IMRS page on IRS.gov.
Response: In response to your suggestion, we now include an article in e-News for Tax Professionals and use Twitter to alert subscribers to newly posted reports. We have also taped a commercial for use in upcoming IRS Webinars and IRS-Live segments to market the IMRS. In addition, we have asked all our liaisons to discuss IMRS at stakeholder events, highlighting IMRS publications and the most current issues resolved.
IMRS Issue 09-0001135 – Agriculture tax deposit requirements/reminders in Spanish
Issue: Stakeholder liaisons in California and the Midwest identified a need for employment tax information in Spanish for the agricultural industry.
Forms, Publications & Products
IMRS Issue 13-0001725 – Draft forms on IRS.gov
Issue: Stakeholders are having difficulty finding draft forms on IRS.gov. It is not intuitive to look under the Payroll Professionals Tax Center. Stakeholders recommend having the link on the Tax Professionals page or under the Forms and Pubs tab.
Response: The IRS specifically excluded the draft tax forms pick list from the search results so that taxpayers will not accidentally land there and think they are downloading current forms. Tax professionals who would like to review draft forms may do so at www.irs.gov/draftforms.
IMRS Issue 12-0001535 – Internal Revenue Code on IRS.gov
Issue: Practitioner organization would like to know why the IRS can’t post current IRC sections on IRS.gov or use a sponsor that would be willing to post current IRC sections. Presently, users are redirected to a third party website.
Response: The IRS provides the public free linked access for the Internal Revenue Code through the site maintained by Cornell University. Through this site, the public may access a current electronic version of the IRC. As of August 9, this site was current for legislation up to May 2012. The Cornell link provided by the IRS also provides access to pending legislation in the current Congressional session, as well as the Thomas legislative research site. Similarly, the IRS links to the Government Printing Office for access to the Treasury regulations (26 C.F.R.), which pick up where the Internal Revenue Code (IRC) leaves off by providing the official interpretation of the IRC by the U.S. Department of the Treasury. As a result, this provides access to very current legislative information.
Even in this electronic age, it takes time to post updates to versions of the Code, whether electronic or in hard copy. The Cornell University link does an effective job of helping the public to remain informed of, and have access to, a very current resource for tax laws and there does not seem to be any value in the Service attempting to duplicate the free Service provided by the Cornell University.
Policy, Practice & Procedures
IMRS Issue 12-0001709 – Request for civil penalty transcripts via e-Services
Issue: Tax practitioners would like the e-Services Transcript Delivery System enhanced to provide users with the ability to obtain civil penalty transcripts.
Response: E-Services is aware of this issue and will address it in the 2014 enhancements
IMRS Issue 12-0001699 – Change of address and notice generation for separated taxpayers.
Issue: Practitioners ask whether filing the Form 8822 will automatically generate notices to both residences in the case of taxpayers filing jointly with separate addresses. If not, practitioners are asking that consideration be given to reprogram the notice system to automatically issue notices to both taxpayers when they are living apart.
Response: Thank you for your inquiry. When a Form 8822, Change of Address, is filed to establish a separate address for the spouse, the IRS Entity function will establish a separate address for the spouse. When notices are issued to the taxpayer, the notice will be sent to both the primary and secondary addresses.
If a joint return is received less than 52 weeks after the establishment of the separate spousal address, any notices will be issued to both the primary and secondary addresses.
If a joint return is received more than 52 weeks after the spouse's address was established, the address for both spouses will be updated based on the address contained on the return.
To maintain the separate spousal address, a Form 8822 will need to be filed every year.
IMRS Issue 12-0001694 – Correspondence Examination concerns
Issue: In response to a brief presentation by Campus Correspondence program employees, Field Examination employees raised concerns about the Campus Correspondence Examination program. They report that there is a lack of communication, responsiveness and cooperation by Campus employees when Field Examination has the same year and/or subsequent year returns under examination.
Response: We take your concerns seriously and we work hard to address them. The concerns identified regarding Campus Correspondence Examination are currently being reviewed as part of a comprehensive project. Upon completion of the review, Correspondence Examination plans to provide feedback and information; this may be done as a webinar, tax topic or frequently asked questions. We appreciate you taking time to identify and elevate these concerns and hope you continue to work with your stakeholder liaison should any future concerns arise.
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 12-0001671 – Redaction of Social Security numbers in notices and letters
Issue: Tax practitioners are requesting the redaction of Social Security numbers from all notices and letters issued by IRS to reduce the chances of identity theft. Automated Collection Service letters are currently redacted but other correspondence is not.
Response: The U.S. government is working to identify ways to authenticate taxpayers without the full use of their Social Security numbers in an effort to protect citizens from identity theft. The Office of Management and Budget issued Memorandum M-07-16 (PDF): Safeguarding Against and Responding to the Breach of Personally Identifiable Information in May of 2007. The memorandum requires all federal agencies to take steps to eliminate or reduce the use of SSNs in order to protect citizens from identity theft.
In response to the requirement, the IRS's Social Security Number Elimination and Reduction Program has made significant strides in eliminating or reducing the use of SSNs within our systems, forms, notices and letters where the collection or use of the SSN is not necessary. We are exploring several phased initiatives.
The first initiative - eliminating or reducing the use of SSNs on outgoing non-payment notices - has been successful. We have redacted the SSN on 46 different non-payment notices and have already mailed over 22 million of these notices to taxpayers to date. We are working diligently to eliminate the use of SSNs on additional notices and correspondence over the next few years.
IMRS Issue 12-0001668 – PPS Assistance with registered domestic partners issues
Issue: Practitioners state PPS assistors need training on registered domestic partners tax related issues. Practitioners call PPS to discuss RDP tax returns and tax related issues and the PPS assistors do not understand these types of tax related issues, etc.
Response: Priority Practitioner Service assistors receive continuing professional education, which includes any updates to registered domestic partners instructions. Additionally, based on this recommendation, the PPS Manual is being updated to enhance RDP procedures. For RDP questions that are not account related, the practitioner should contact a tax law specialist at (800) 829-1040 for additional assistance. Thank you for this recommendation and we apologize for any inconvenience you may have experienced.
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.
IMRS Issue 12-0001635 – Issuance of CP2000 for cancellation of debt income when Form 982 attached to return
Issue: Preparer states AUR is issuing CP2000 for cancellation of debt income where F982 attached to return shows amount excluded from total reported on F1099. Why is AUR challenging amount reported as taxable when F982 is attached?
Response: Cancellation of debt (COD) is pursued with the CP 2000 when the Form 982 indicates the taxpayer is excluding the cancellation of debt amount due to Insolvency. The CP 2000 requests verification for the extent of the Insolvency, ". . . a breakdown of your total assets and liabilities immediately before the debt was discharged.” in order to determine whether or not there is a tax consequence.
While the worksheet/calculation is not required to be filed with the Form 982, a calculation must be completed by the taxpayer to determine whether or not they are insolvent. If COD is the reason for selection in the AUR program, the CP 2000 is issued requesting verification of the calculation used to determine the insolvency exclusion treatment indicated on the Form 982. The IRS will request verification of the calculation as a means of verifying the correct tax treatment of the cancelled debt. Checking Form 982, Box 1b does not verify the calculation was completed or completed accurately. Publication 4861 provides a TIP advising the taxpayer that a worksheet is available in the publication for calculation of the insolvency. A suggestion was forwarded to revise F982 to include information regarding the insolvency calculation but this has not been approved at this time.
IMRS Issue 12-0001627 – Incorrect phone number on “Where’s My Refund” page on IRS.gov
Issue: A tax practitioner called to report that the phone number posted on the "Where's My Refund" page on IRS.gov was not functioning.
Response: Thank you for bringing this issue to our attention. An incorrect hotline number was inadvertently displayed on the “Where's My Refund” response for taxpayers receiving reference number 1502. The response has been revised to reflect the correct number of 1-800-829-0582 ext.362.
IMRS Issue 12-0001617 – Resolving potential identity theft cases upon receipt of Letter 4883C
Issue: Tax practitioners are experiencing difficulties communicating with the IRS after receiving Letter 4883C on decedent accounts. They request that the IRS revise their procedures to allow authorized third parties to address the receipt of Letter 4883C when the taxpayer dies after filing the return.
Additional practitioner concerns related to the Letter 4883C process are:
- The long wait times to speak with a representative after receipt of Letter 4883C
- Customer service representatives advising authorized practitioners that, despite having valid 2848s on file, the account cannot be discussed with any party other than the taxpayer
Response: The Taxpayer Protection Program processes returns flagged as potential identity theft cases. When a return is flagged as a potential ID theft case, a Letter 4883C is sent to the address on the return requesting that the taxpayer call. When the taxpayer calls, the customer service representatives go through both basic and high-risk disclosure questions to ascertain the identity of the caller and confirm that the taxpayer filed the return in question. If the identity and return are verified, the return is forwarded for posting.
The high-risk disclosure questions vary by taxpayer and are based on the taxpayer's returns as well as income documents from prior years. As a result, if a third party calls on behalf of a taxpayer, the person may not have all the prior year information needed to answer the high-risk disclosure questions.
However, in keeping with the IRM, even though customer service representatives cannot disclose any information, they can receive information from third parties. Also, if the taxpayer is on the call with the third party, the CSR can proceed as normal. This process helps prevent ID thieves from claiming to be the taxpayer. The CSR must ask questions regarding prior year information, since the return in question may be false, and information return processing documents (e.g., W-2s) are not fully available during the earlier portion of the processing year.
If a person with a Power of Attorney calls, then the CSR can receive and disclose information. However, since POAs may not have all the information needed to respond to the high-risk disclosure questions, they are encouraged (but not required) to have the taxpayer on the phone with them. If the taxpayer is deceased, the caller must verify that they are entitled to the refund of the deceased according to the guidelines in Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer.
A Power of Attorney expires upon the death of the person who granted the power. If the taxpayer is deceased, the POA is invalid. In order for a POA to continue to represent a deceased taxpayer, the deceased taxpayer's representative must execute a new Form 2848.
IMRS Issue 12-0001605 – Form 990 extensions
Issue: Notice 2012-4 granted an automatic extension for filing Form 990 to certain exempt organizations. The notice required organizations to attach a reasonable cause statement to the 990 return, referencing Notice 2012-4, in order to avoid receiving a system-generated penalty notice for late filing. Organizations that failed to attach the reasonable cause statement with the return are being advised to mail in the statement in order to get the penalty abated. A tax practitioner suggested that the IRS adopt a more streamlined procedure, perhaps a phone call to PPS or the Tax Exempt Organization line.
Response: Organizations that receive a late notice and filed their return on or before March 30, can request assistance by calling the number listed on the notice and mentioning Notice 2012-4.
IMRS Issue # 12-0001597 – Invalid return address on IRS notices
Issue: Taxpayer received LTR 4115C, Information Regarding Your Refund, requesting that documentation be sent to the IRS “within 30 days from the date of this letter to the address shown at the top of the first page of this letter." When the practitioner sent back the requested information, the Post Office returned the letter “UNDELIVERABLE AS ADDRESSED, FORWARDING ORDER EXPIRED.” The practitioner then called the PPS and they could not give her a good address. Practitioner requests IRS revise the Letter 4115C to include corrected mailing address, including alternative methods of mailing.
Response: The determination to send a 4115C letter is made by an individual employee while working a case. The employee manually enters some data to complete the letter content, including selection of codes to generate the return address. Because the letter is used nationally, there are a variety of different addresses that can be generated. In this instance, the employee made an error while preparing the letter that resulted in selection of the wrong address code. A new letter is not needed since the 4115C letter includes a toll free number to call if there are questions. When calling this number the taxpayer should reference that they received a 4115C letter; this will enable the IRS employee to research on that issue and provide guidance to aid the caller. We are updating IRM guidance to better serve taxpayers who call because their 4115C letter response was returned as Undeliverable. An alert will also be issued to impacted staff to inform them of the guidance update.
IMRS Issue 12-0001596 – Assessment Statute Expiration Date and Collection Statute Expiration Date information for practitioners
Issue: Procedures were recently changed to allow assistors on the PPS telephone line to release ASED/CSED information when a valid POA is on file, regardless of whether the caller requests any other account related information. Practitioners would like the option of obtaining this information in writing when a valid POA is on file.
Response: On May 18, 2012, the procedures in IRM 21.3.10, Practitioner Priority Service, were updated to allow for written confirmation of an ASED/CSED date when a valid power of attorney is on file.
IMRS Issue 12-0001593 – FOIA interim letters
Issue: Tax practitioners suggested that the Freedom of Information Act interim/extension letters be revised to include a field or reference line depicting both the date of the request and the name of the taxpayer (or other identifiable information) to assist in matching the extension with the original request. Listed below is the current and suggested wording.
Current language: “I am responding your Freedom of Information Act request dated August 12, 2011, that we received on August 17, 2011.”
Recommended language as provided by the stakeholder: “I am responding your Freedom of Information Act request dated August 12, 2011 for XYZ client that we received on August 17, 2011.”
Response: Thank you for your suggestion. We do understand the benefit to tax practitioners to easily associate the response letter with their client's case, and hope that by reprogramming the letters with "In Re: <client of FOIA requester>" that the association will be easier. Please note that we considered the language you initially provided, but could not adopt it due to space issues. However, we believe the change we are making will address your concerns.
IMRS 12-0001584 – Erroneous refund of First Time Home Buyer Credit repayments
Issue: Practitioners filed tax returns for clients, correctly showing repayment of the FTHBC. Their clients subsequently received notices reducing the amount of the FTHBC repayments, and they received refunds of that amount of the repayment. The look-up tool on IRS.gov for FTHBC showed each client owed the amount reported on the tax return.
Response: We are aware of a problem that affected certain returns with FTHBC. We implemented a fix on March 4, 2012. However, our research shows that one case was caused by human error. In that particular case, a couple reported their common liability on a Form 5405 for the primary taxpayer. The examiner should have created a second Form 5405 for the other taxpayer and split the payment evenly between the two forms. The second half of the required payment was erroneously refunded because the second form was not created. We apologize for any inconvenience this situation has caused the taxpayers and the practitioner. Thank you for bringing this situation to our attention.
IMRS Issue 12-0001582 - Language in Letter 3402, No Change with Adjustment, is not in conformity with Internal Revenue Manual 22.214.171.124.2
Issue: Letter 3402, No-Change with Adjustments, implies that a taxpayer cannot contest adjustments until changes affect the tax liability of the NOL carryback tax period. This appears to conflict with the Appeals policy noted in IRM 126.96.36.199.2.
Response: Exam Policy is collaborating with representatives from Appeals, LB&I and Counsel to address the inconsistencies between the IRMs for Appeals and Exam. The Letter 3402 will be revised if needed.
IMRS Issue 12-0001564 – Release of tax practitioner information under the Freedom of Information Act
Issue: The IRS releases tax practitioner information to the public from the Preparer Tax Identification Number listing under the Freedom of Information Act but does not identify what specific information on the applications is released. As a result, practitioners' personal information such as their home addresses, home phone numbers and home email addresses is being released to the public. Could the IRS make it easy for practitioners to identify what specific information is subject to release under FOIA when they apply for or renew their PTINs?
Response: The Freedom of Information Act requires the IRS to release its agency records unless the information is protected from public disclosure. As a result, vendors and other persons may obtain a list of individuals with preparer tax identification numbers. PTIN holders are not allowed to opt out of the disclosure of their information.
FOIA requires the IRS to release the name, business name, business website address, business phone number, business mailing address, email address and professional credentials of PTIN holders.
The IRS has created guidance on what information is released under FOIA and how PTIN holders can update their contact information. A new link has been added to IRS.gov, keyword search “Return Preparer Office.” FOIA information may be found on the right side of the main page, under "Get Help.”
The IRS is making changes to the PTIN application to clarify what information may be released under FOIA. The IRS is changing the “Permanent Mailing Address” box on the PTIN application to “Personal Mailing Address” This change clarifies that the information is personal and exempt from public disclosure under FOIA rules.
In addition, the IRS is removing the prohibition on entering a P.O. Box in the “Business Mailing Address” box on the PTIN application. PTIN holders may now enter a P.O. Box as their business mailing address.
Tax practitioners who used a personal mailing address as their business mailing address or used a street address when they would have preferred to provide a P.O. Box as their business mailing address may want to update their contact information. This information is not exempt from disclosure under FOIA rules and will be released even if it is the same as the personal mailing address.
IMRS Issue 12-0001555 – Non-issuance of letters/notices to practitioners with valid POA certifications on file.
Issue: Several tax practitioners stated that they did not receive copies of letters/notices sent to their clients even though a valid power of attorney authorization was on file.
Response: Generally, correspondence to taxpayers and their representatives is systemically issued. Recently, the IRS discovered that a systemic problem resulted in the non-issuance of letters/notices to several tax practitioners with valid authorizations on file. We have corrected the problem.
IMRS Issue 12-0001549 – S-corporation officers will not follow preparer’s advice to take wages
Issue: The owners of an S corporation perform substantial services for the corporation but refuse to take wages. They do take distributions from the corporation. The preparer reminds them in writing, at least once a year, that their procedure is improper and that they should be taking salaries for at least some of the distributions. Is the preparer of the Form 1120-S subject to disciplinary action (doing something wrong) in this instance?
Response: The Office of Professional Responsibility does not issue "advisory opinions" or provide written advice in response to hypothetical scenarios. We suggest that preparers refer to Circular 230 and we strongly encourage them to become thoroughly familiar with it, particularly Section 10.34 (Standards with respect to tax returns and documents, affidavits and other papers) and 10.51 (Incompetence and disreputable conduct).
A practitioner may not sign a tax return that he/she knows lacks a reasonable basis, contains an unrealistic position, is a willful attempt to understate the liability for tax or is a reckless or intentional disregard of IRS rules or regulations. Practitioners should also become familiar with Internal Revenue Code sections 6694(a) and 6694(b).
IMRS Issue 12-0001538 – Form 1040NR and Form W-7 processing by certifying acceptance agent
Issue: A tax practitioner had two separate issues with respect to the services provided at the local Taxpayer Assistance Center office.
1: The tax practitioner was concerned about long wait times at the TAC office and the inability to get bulk copies of 1040NR returns stamped, even when accompanied by payment. TAC employees insisted that the practitioner provide a transmittal list of all returns to stamp. The practitioner is concerned that this will not be sufficient for clients who must provide a stamped filed copy to their home country tax authorities to prove foreign taxes were paid in order to claim the applicable home country tax credit.
2: The tax practitioner stated that the TAC office refused to accept tax returns because photocopies of identity documents were not submitted. The practitioner believes the documents are not required because she submitted the W-7 as a certifying acceptance agent. The ITIN application must be filed with tax returns for taxpayers without tax ID numbers. When a W-7 is completed, it is either submitted to IRS with a passport or other identity documents OR it is submitted to a CAA who reviews the identity documents and signs off on the W-7, which then serves as a certificate of accuracy.
Response to 1: Per IRM 188.8.131.52.2(3), the IRS will forward stamped copies or a transmittal list as soon as possible when the TAC is unable to assist the practitioner while in the office.
Response to 2: Per IRM 184.108.40.206.2, when a CAA attempts to file Forms W-7 with a TAC, the assistor should accept the forms and educate the CAA regarding Revenue Procedure 2006-10. This Revenue Procedure states: "(4) Procedures for submitting TIN application forms: An acceptance agent shall agree to submit promptly the TIN application forms or approved substitute forms (together with the required documentation for ITINs or the supplementary statement, if required, for EINs) to the IRS at the mailing address specified in the agreement.” Although the CAA is not required to attach the documentation, they are required to mail the application to ITIN Operations in Austin, TX within five business days of completion (Section 4.04 of the CAA agreement).
IMRS Issue 12-0001537 – Opt-out of release of information in PTIN application
Issue: A tax practitioner proposed that an opt-out feature be established regarding the release of practitioners’ PTIN information.
In order to maintain privacy, PTIN holders may want to review and/or update their contact information to ensure that their business (not personal) information is listed.
If you receive unwanted email solicitations due to this required disclosure, the Federal Trade Commission, Bureau of Consumer Protection can best advise you whether an email violates the CAN-SPAM Act of 2003 and how to report violations.
IMRS Issue 12-0001536 – PTIN requirement for tax resolution operations
Issue: Tax resolution operations do a lot of advertising on radio, TV and the Internet and promise to help taxpayers to resolve their debts to the IRS for "pennies on the dollar." Employees of these types of businesses should be required to have a PTIN in order to engage in substantive discussions related to these matters.
Response: Individuals who are paid to prepare Forms 656, 433, etc. for others are already required to have a PTIN. These forms are not included in the list of exempt forms found in Notice 2011-6. Additionally, Circular 230 provides the Office of Professional Responsibility direct jurisdiction over individuals and firms providing tax resolution services. Recent amendments to Circular 230, effective Aug. 2, 2011, establish several new rules. Among them is section 10.8 - Return Preparation and Application of Rules to Other Individuals, added specifically for this purpose. Section 10.8(c) states (Terms bolded here for emphasis):
Any individual who for compensation prepares, or assists in the preparation of, all or a substantial portion of a document pertaining to any taxpayer's tax liability for submission to the Internal Revenue Service is subject to the duties and restrictions relating to practice in subpart B, as well as subject to the sanctions for violation of the regulations in subpart C. Unless otherwise a practitioner, however, an individual may not prepare, or assist in the preparation of, all or substantially all of a tax return or claim for refund, or sign tax returns and claims for refund.
The above applies to preparers of described documents, regardless of professional designation, to include those affiliated with tax resolution firms. Individuals compensated to prepare such documents are subject to the duties and restrictions described in subpart B of Circular 230 and subject to sanction under subpart C. Imposition of a monetary penalty is one sanction available. The final sentence of the section reinforces the difference between documents and tax returns. You MUST be a practitioner to prepare/sign tax returns.
Tax resolution firms need to thoroughly familiarize themselves with Circular 230. Sections 10.36, Procedures to Ensure Compliance, 10.34(b) Standards for Documents and Other Papers and 10.34(d)Relying on Information Furnished by Clients are particularly important.
PTIN requirements and recent revisions to Circular 230 represent major developments to better address deceptive practices and/or misconduct in the tax resolution arena.
IMRS Issue 12-0001531 – Prohibited practitioner advertising
Issue: Practitioner advertising is prohibited on Forms W-2 and other information returns (reference Rev Proc 2011-62 and Publication 1141), but are there restrictions on including practitioner advertising with Forms W-2 and other information returns?
Response: No additional enclosures, such as advertising, promotional material, or a quarterly or annual report, are permitted. Even a sentence or two on the year-end statement describing new services offered by the payer is not permitted. Logos, slogans and advertising may be used on any permissible enclosure such as a check or account statement, other than information returns and payee copies. See the general instructions of the information return for a list of permissible enclosures.
As indicated in Sections 1.3.1 and 5.1.3, of this revenue procedure, Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, 1042-S, and 8935 are subject to annual review and possible change. If you have comments about the restrictions on including logos, slogans, and advertising on information returns and payee copies, send or email your comments to: Internal Revenue Service, Attn: Substitute Forms Program, SE:W:CAR:MP:T:M:S, 1111 Constitution Avenue, NW, Room 6526, Washington, DC 20224 or firstname.lastname@example.org.
IMRS Issue 12-0001529 – Practitioner Priority Service
Issue: A tax practitioner complained about long wait times and dropped calls when calling the Practitioner Priority Service Hotline.
Response: The IRS devotes resources to each of its product lines and balances its available resources among its many priorities. We are aware of some practitioners experiencing long wait times on the Practitioner Priority Service line, especially on Mondays and Fridays when call volumes are highest. We urge practitioners to try to call on non-peak days and during non-peak hours (generally, the best time to call is early in the morning). PPS hours of operation are 7 a.m. to 7 p.m. local time. Please be aware that an assistor may be required to transfer your call to another employee who is better able to assist with your particular issue. As with the initial call, transferred callers must wait for the next available assistor. We are also aware that some calls were disconnected early in the filing season due to problems, since corrected, experienced by the network carrier.
IMRS Issue 11-0001527 - Posting date for failure to pay penalty abatement
Issue: When the IRS abates the failure to pay penalty, the date posted to the IRS computer system for the abatement is often the date the abatement was processed instead of the date the penalty was originally assessed. The result is that it appears the IRS collects interest on abated penalties from the date of assessment to the abatement posting date.
Response: Even though the posting date on the account transcript shows the date the abatement was processed, the computer uses the original assessment date when computing interest. Interest on penalty abatements is computed using a first in first out ordering system, so interest on abated failure to paypenalties is abated from the penalty assessment date. Therefore, there is not a systemic interest problem with failure to pay penalty abatements.
IMRS Issue 11-0001513 - Return calls from IRS assistor
Issue: When a tax practitioner receives a return call from an IRS assistor and the practitioner is not available, procedure dictates the assistor will provide his name and identification number and the fact he is calling from the IRS. The assistor will also state he is calling in response to a call to IRS and provide the time and date of the practitioner’s call. The assistor will not leave any taxpayer identifying information. Many collection notices contain a caller identification number on the letter. Is it possible for the assistor to refer to this caller identification number when leaving their message so that the practitioner can identify the client?
Response: When the Automated Collection System staff returns a call from a practitioner and is unable to speak with the practitioner, the current procedures direct the assister to leave a message for a return call and to include the caller identification number (CRN) referenced in the collection notice issued the taxpayer. We apologize that the CRN was apparently not referenced in this case.
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 Oct. 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.
Response: Tax practitioners should call the PTIN information line (Primary Toll-Free: 877-613-PTIN (7846), TTY: 877-613-3686, toll number for international callers: +1 915-342-5655) to report suspected misuse of a PTIN and provide any information available regarding the person or entity they believe may be using it. The former tax preparer in the scenario above should call back and have the assistors on the PTIN Information line take a referral. Generally, preparers will not have any liability for returns filed under their PTIN by someone else. At some point, but not for the 2012 filing season, there will be a way for preparers to get a count of the number of returns prepared under their PTIN. They can use this information to determine if there are too many, and therefore potentially fraudulent usage of their PTIN.
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.
Response - Collection policy: Every taxpayer has the right to speak to an IRS employee’s supervisor upon request. Typically, such requests are relayed to the supervisor from the employee, and the supervisor is required to contact the taxpayer within a reasonable period of time. Including supervisory contact information on initial letters and correspondence would not be in the best interests of taxpayers or the IRS. Taxpayers should deal with the employees assigned to their cases since they are familiar with the details of the case and in the best position to resolve tax issues. Providing two contact names and phone numbers could be confusing and possibly result in further unnecessary delays. If you have specific examples of taxpayers and/or representatives requesting to speak to a supervisor and not getting a return call, we would ask that you supply those examples so we can determine whether it is an isolated incident or a more widespread problem.
Response - Examination policy: The examiner's manager has an important role in the examination process as the audit moves past the initial contact phase. At the time of the initial interview, the examiner should provide the taxpayer and/or representative with their manager's name and telephone number. In addition, the examiner should provide their manager's name and telephone number at any time upon request. If the taxpayer or practitioner is unable to obtain manager contact information, they should contact the Stakeholder Liaison for their geographic area (refer to Stakeholder Liaison Contacts) . The SL will provide them with the manager's name and telephone number. If the manager does not respond to contact from the taxpayer or practitioner, the taxpayer may also ask the SL for contact information for the next level manager.
IMRS 11-0001490 - Treatment of unemployment compensation when preparing a net operating loss
Issue: A practitioner prepared a net operating loss carryback using commercial software. The software treated unemployment compensation as non-business income when computing the NOL, but the IRS changed it to business income. The practitioner seeks clarification of the treatment of unemployment compensation.
Response: The 2011 revision of Publication 536, Net Operating Losses for Individuals, Estates, and Trusts, pages 2 & 3, has clarified the treatment of unemployment compensation. It states there that unemployment compensation included in gross income is not to be included in non-business income. The software vendor has been notified and will update their software.
IMRS Issue 11-0001457 – Refusal of ITIN Unit to provide information to third party when F-2848, Power of Attorney and Declaration of Representative, was not attached to W-7
Issue: Tax practitioners with a valid power of attorney on file said that the ITIN Unit refuses to speak to them if the F-2848 was not attached to the original W-7. The Internal Revenue Manual does not address this specific situation.
Response: This suggestion was elevated and reviewed. We updated IRM 3.21.263.7(1) to refer assistors to the disclosure guidelines in IRM 220.127.116.11. This section advises assistors that when they respond to a third party (anyone other than the taxpayer) who indicates he/she has a third-party authorization on file, they should complete the appropriate search. For Powers of Attorney and Tax Information Authorizations, assistors should research the Centralized Authorization File before providing any tax account information.
We also updated IRM 3.21.263.7(2) to remind assistors to review the remarks screens because that is where POA information received after initial processing is loaded.
IMRS Issue 10-0001373 – Tolerance for streamlined installment agreements
Issue: Practitioners would like to see the streamlined installment tolerance increased from $25,000 to $50,000 to facilitate agreements.
Response: Thank you for your suggestion. The IRS continues to evaluate our processes and programs. As a result of our internal reviews and research, the IRS issued Interim Guidance SBSE 05-0112-013 (PDF), Streamlined Installment Agreements, dated Jan. 20, 2012, which increased the dollar threshold from $25,000 to $50,000 aggregate unpaid balance of assessment for individuals and out of business – sole proprietor streamlined installment agreements.
IMRS Issue 10-0001349 - Form 8655, Reporting Agent Authorization
Issue: Reporting Agents are not authorized to work with IRS to resolve issues related to new information Forms 3921, Exercise of an Incentive Stock Option under Section 422(b) and 3922, Transfer of Stock Acquired through an Employee Stock Purchase Plan under Section 423(c).
Response: A suggestion received from the reporting agent community has been incorporated into Form 8655, Reporting Agent Authorization, revised January 2012. Authorization to receive information related to the new information returns, Forms 3922 and 3921, has been added to the 8655. This will allow reporting agents to work with IRS to resolve any issues related to these new forms.
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 08-0000921 - Disclosure by payroll firms regarding employer responsibility for employment taxes
Issue: A national payroll organization recommended that payroll firms be required to inform their clients that employers remain liable for payment of their payroll taxes. The organization recommended that payroll firms inform their existing clients at least quarterly and their new clients prior to or at the time of contracting for services. They also recommended that payroll firms provide information on how employers can verify the federal and state tax payments made on their behalf.
Response: A requirement to disclose this information is now included in Revenue Procedure 2012-32.
IMRS Issue 06-0000202 – Form 8027 treatment of gift card redemptions
Issue: How should the redemption of gift cards by restaurants handled when preparing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips?
Response: Amounts redeemed with a gift card should be treated like cash. The amount redeemed is reported as a gross receipt to the extent the gift card is used to purchase food and beverages. If the patron may use the gift card for tipping as well, then the tip amount should be treated as a cash tip paid to the service provider. If the patron uses a credit card for tipping when redeeming the gift card for food and beverages, then the tip amount is reported as a charge receipt with a charged tip on Form 8027.