Archive for Colorado Department of Revenue
January 17, 2012
John R. Dundon II
Business Expense, Colorado Department of Revenue, Intent To Levy, Intent To Lien, International Tax, IRA, IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, IRS Transcript, Marijuana, Medical Expenses, Offshore account, PTIN, Retirement
Attached is the summary of the IRS Stakeholder Liaison Meeting I attended on January 4th 2012 in Denver, Colorado as produced by Deborah Rodgers of the IRS. Some interesting insights were revisited. The most provocative discussion surrounded the comments made by Matthew Houtsma of District Counsel regarding the taxation of medical marijuana specifically as it pertains to cost of goods sold as well as further defining what constitutes “traffic” under IRC 280(e)
Jack Estoll, Appeals
This is Jack’s last meeting. He will retire on June 1st. Linda Alden, Appeals Team Manager will replace Jack at the PLM meetings. Welcome Linda. Appeals lost 3 processors and 1 analyst to the buyouts in December. Processing will be slowed due to those retirements; Appeals will not fill the retired positions. Examination inventory is decreasing, while Collection inventory is still increasing.
Patience Ellis, Automated Collection Site (ACS)
ACS is business as usual. We are 60 people short compared to a year and a half ago. ACS has instituted some internal process improvements. We have an abbreviated financial information statement. We are using a probe and response guide for offers in compromise, which will ask the right questions to determine if a tp wants to move forward with the offer in compromise process.
Question: How are $100,000 cases handled in ACS?
Response: With the large dollar case unit going away, there are limited things that can bring the balance down. ACS is limited with large dollar cases. Generally they will go to the field.
Question: If taxpayer is compliant and doesn’t want to wait can we writeCincinnati?
Response: You can always write toCincinnatibut process time is 45 to 60 days.
Question: Are you raising the streamline installment agreements from $25,000-$50,000?
Response: Yes, ACS Denver has been part of a pilot that has tested the increase to $50,000. Based upon the positive input and increase in efficiency, the process is projected to rollout in late January in all ACS call sites.Denverwill work Small Business cases and Seattle will work Wage and Investment cases.
Question: Will the filling of Liens change?
Response: The employees will still need to make the lien determination; there is no change to that basic process. A lien can be avoided by entering into a DDIA agreement for $25-$50k and streamline for under $25k.
Comment: 800-829-0115 telephone number gives you an estimated wait time of 15 minutes, in reality the wait time is over one hour.
Response: ACS called the number and the automated system advised at the beginning of call that hold time would be greater than 30 minutes. After being on hold for 55 minutes a representative answered and she said that this number belongs to Accounts Management W&I.
ACS’s automated line 1-800-829-3903 does not give any approximate hold time.
We will elevate this issue.
Shelley Foster, Examination
There are significant losses to resources in our 12 Western states. We are down to 90 employees in 12 states. The work plan has been reduced by 3500 returns. Business master file work has increased from 10% to 18%.
We are striving to reduce the time span between initial contact and holding the interview. Phase 1 of the audit process, with a target of completing the first interview within 45 days of the first contact. There will be a big push on this practice in the future.
We are at 95% closure on all open offshore voluntary disclosure cases within the Western Area. These are cases from the 2009 initiative. The time frame has passed for submitting disclosures for the 2011 initiative. Large Business and International has the lead on the 2011 initiative. Small Business/Self Employed will take some of the disclosure due to the projected number of disclosures. Western has dedicated 23 revenue agents to the 2011 program.
The budget is not affecting case related travel. The fallout for non-case related travel or hiring plans is not known at this time. We lost support staff throughout the Area which is impacting operations.
Question: What about the electronic software issue?
Response: This is still being worked, however, our examiners are advised to only look at information tied to the year(s) under audit which may include the month before and month after the end of the tax year.
Question: What is the number of taxpayers on the new voluntary disclosure program?
Response: Significantly more were received under this program the figures are in excess of 16,000.
Question: What are some of the audit hot topics?
Response: Hi DIF scores; audit selections based on historical audit adjustments, high income taxpayers with over $200,000 with and without Schedule Cs, over $1 million income taxpayers, business flow-through returns, and some Schedule A return projects.
Question: Time for closures?
Response: We want to close a case within reasonable time frames. It’s case-by-case based on the complexity of the return and the issues identified. Availability of records can delay the process. The guidance to managers is to get involved earlier in the process to ensure cases are move forward in a timely manner.
Question: Is it appropriate to move an audit out of state?
Response: A request to move an audit out of state can be denied for various reasons including where the taxpayer, business and records are located.
Comment: I received a proposed adjustment with the initial letter from office audit.
Response: If there is no response to the initial contact letter then we often issue a proposed audit report based on the issues classified. This would not happen unless a discontinuance of communication occurred or there was no response from the taxpayer.
Question: Is there any guidance on medical marijuana dispensary expenses?
Response: Subject is still under review by Counsel. Under federal law it is illegal so some of the expenses may be disallowed.
Comment from Counsel: There is a memo from counsel to local agents that cost of goods sold are allowable. Trafficking expenses are not allowed. Counsel mentioned the CHAMP case (128 T.C. No. 14 (2007)) where the dispensary did documentable care type work with patients. The expenses related to the care giving were allowed. Code section 280E should be followed. This is an evolving area. Agents are coming to Counsel on a case-by-case basis. The National Cannabis Industry Association memo that appeared in Tax Notes in2011 and was partially drafted by local CPA Jim Marty is not accepted by Counsel. Watch for the Harborside Health Center case in California.
Question: The salaries of the employees are being taxed but you are not allowing the deductions. Is this inconsistent?
Response: No it is not inconsistent. Behind the counter employees are deemed trafficking, therefore not deductable.
Question: Is the tour of a medical marijuana dispensary protocol?
Response: Businesses have not pushed back visits from revenue agents. It would be in their best interest to explain how the business is run. It is to get their side of the story out. Since Counsel is providing guidance we should take a look at how the business runs.
Matthew Houtsma, District Counsel
Counsel has experienced a few retirements, which included a manager. There will be a new manager coming in February. Counsel had another victory in an easement case recently. We have several easement cases on the calendar for court in March and May. We handle abusive Roth IRA cases for the whole country.
We started developing products to capture knowledge of retiring attorneys on our website.
There is a push to get summary judgment on collection due process cases. Attorneys are advised to ask the taxpayer early whether or not they object to summary judgment.
Charles Musso, Taxpayer Advocate
Local Taxpayer Advocate, Tom Sherwood is back from his detail.
Our inventory levels are down from 90 cases to about 40 cases per case advocate.
One of the changes to TAS criteria is to send amended returns back to the function.
Comment: Taxpayer Advocate received positive feedback that TAS case advocates were incredibly helpful and moved quickly through the practitioners’ issues.
Diane Sandoval, Collection
Staffing has dropped, but case related travel has not declined. Revenue officers will still be in the field. Collection focus areas include timeliness of actions, to resolve case as quickly as possible, and customer satisfaction- to communicate resolution to the taxpayer. Regarding power of attorney bypassing issue, if there is an unreasonable delay of turning over information or a pattern of no cooperation, bypass procedures will be initiated.
Taxpayers with over $100,000 balance due are encouraged to stay current in their tax matters. Also be prepared when a revenue officer knocks on the door. Resources are strained and we have many cases waiting to be worked. If there is a combative relationship between the practitioner and a revenue officer contact the group manager.
Question: The bypass issue is a more serious issue for the practitioner with the active Office of Professional Responsibility. Has there been any thought given to issuing a summons for the information that the client is not providing to the power of attorney? The practitioner doesn’t want to compromise his position with the client but is there something in the manual that suggests a summons is the next step?
Response: Warning of a bypass procedure is issued by the group manager. The actual bypass document is signed by the territory manager. Practitioner should talk to the group manager if you are issued a bypass warning letter. This is the time to consider revocation of power of attorney. When issuing a bypass letter we asked the revenue officer what they tried to do to get the information. Did they issue a summons?
Comment: Practitioner has received letters with a ghost name on them. When he calls the case has not yet been assigned.
Response: Field collection knocks on the door.
Question: If the taxpayer wants to get something resolved, can they request a revenue officer?
Response: A request for a revenue officer can be made but there are no guarantees.
Lilia Ruiz, Criminal Investigation
Our staffing is fairly steady in our states. We continue to investigate allegations of tax fraud in many areas including employment tax, money laundering, non-filers, abusive schemes, international, questionable returns,ID theft. Joel Churches is no longer the voluntary disclosure contact. Brian Thiel is the new contact. His number is 303-603-4924.
Regarding the medical marijuana issue, the US attorney’s office is proceeding cautiously across state lines. Montana is more aggressive.
Question: Can you pursue both a FBAR and criminal tax audit at the same time? Is Title 31 versus title 26 issues in conflict? Can the revenue agent do both audits or must they be separate? Revenue agent is asking for FBAR information on a civil audit.
Response (from various participants): A regular RA can do a Title 31 FBAR examination under certain circumstances. The foreign account has to be related a Title 26 violation. So, for instance, if the interest from the account was not reported on the return, the failure to report is a Title 26 violation. If everything was properly reported, then the regular RA would not be able to open up the FBAR examination. When processing to open one, a Related Statute Memorandum must be done and approved by the TM. Then, the RA can work both. Each would still be a separate case, separate activity codes, etc.
I think where the confusion lies is due to a technicality. The RA can ask anything they want about the account, but cannot ask about the FBAR form…until the Related Statute Memorandum is approved. Since it’s such a subtle item, it can really feel like an FBAR account. But if you think about it, it’s no different than what they might ask about a domestic account. Who are the signers, account balances, copies of statements, etc. It’s the form itself that throws it under Title 31.
Bessie Castro-Zepeda, Department of Revenue
At the moment we have 3000 work-as compared to 20,000 latest years. All items are under 20 days old. Practitioners are encouraged to use the online system. The phone system has a longer wait time. When you file an amended return, include original forms and backup information or your credits will be disallowed.
Question: Will there be an e-file debit account for payment on return program this year?
Response:
Question: Regarding the amnesty return information program, do you share information with federal government?
Response:
Question: What is taxpayers’ protection if rejected from the voluntary classification settlement?
Response:
Question: Contractors’ agreements? Voluntary? Department of Labor issue?
Response:
Question: Are you pursuing violators of the Colorado use tax?
Response: We only address issue in audits-not as a project.
Kristen Hoiby, Stakeholder Liaison
The revised Form 2848 and instructions issued Oct. 2011 include several changes. One of the most significant changes is for individuals who file joint returns. Each individual taxpayer will be required to submit separate Forms 2848 to the IRS Centralized Authorization File even if they are going to be represented by the same authorized representative(s). The individual(s) identified in the power of attorney will only be authorized to represent one person per Form 2848.
Question: Are there any plans to develop a simpler way to revoke a power of attorney?
Response: This question has been elevated.
Stakeholder Liaison is looking at other ways to deliver information virtually in order to deal with a lower travel budget—if practitioners know of any webinar or other systems that could be used for delivering updates, please let SL know.
There is a concentrated place for frequently asked questions and information on payment card reporting requirements on our website.
The IRS website has been redesigned. The frequently asked questions or many topics are from meetings like our PLM.
The IRS is aware some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so. Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law. This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties.
Beginning Jan. 3, hours of service for most IRS toll-free telephone lines will be 7:00 a.m. to 7:00 p.m. local time. This includes telephone assistance for individuals, businesses, and the Practitioner Priority Service. Hours of service for telephone assistance for exempt organizations, retirement plan administrators and government entities are not changing. As a reminder, the IRS is available online 24 hours a day, 7 days a week, for you and your clients
A six-digit Identity Protection Personal Identification Number or IP PIN is being provided to those victims of tax-related identity theft who have had their identities verified by IRS to avoid delays in processing their federal returns. If your client indicates he or she received IRS Letter 4869CS providing them with an IP PIN, please ask your client for the letter and follow the instructions provided when preparing the return.
Important: If your client received an IP PIN, please enter it on the tax return to avoid processing delays. For electronic returns, the software will indicate where to insert the IP PIN. For paper returns, enter the IP PIN in the six boxes to the right of the spouse’s occupation in the signature section. Tax professionals may send general inquiries to-IPPIN.Questions@irs.gov. IRS Identity Protection Specialized Unit, toll-free 1-800-908-4490.
Question: Where can I get the green card information?
Question: With more practitioners being able to use the services, will it become more user-friendly? And the adjusted gross income precludes some from using e-services.
Certain tax return preparers are required to take and pass a competency test. View a summary of the return preparer requirements
Test Preparation:
Scheduling a Test:
In order to take the test, you must have a PTIN. You can schedule your test directly from your online PTIN account.
Test Logistics:
Question: Do we need to fill out the opt out form for e-file if the obvious reason is that the credit taken is not a form accepted for e-file, such as the adoption credit?
Response: Covered returns that cannot be filed electronically. Some covered returns are not currently capable of being accepted electronically by the IRS. In certain instances, the IRS has instructed taxpayers not to file some covered returns electronically. Additionally, certain covered returns cannot be e-filed if they have attached forms, schedules, or documents that the IRS does not accept electronically and these forms, schedules, or documents cannot be sent to the IRS separately using Form 8453 or Form 8453-F as a transmittal document. In any of these situations, the preparer does not need to complete and submit Form 8948. However, if the forms, schedules, or documents can be sent to the IRS separately using Form 8453 or Form 8453-F as a transmittal document, the rest of the return must be e-filed. For more information, see Form 8453, Form 8453-F, and Notice 2011-26, 2011-17 I.R.B. 720.
The Issue Management Resolution System is a streamlined, structured process that captures, develops and responds to significant national and local issues from tax practitioners and other stakeholders.
Check out this month’s IMRS Hot Issues report.
Thank you for your participation in this meeting.
Next meeting is scheduled for July 18, 2012.
I write in support of this effort on behalf of our elected officials here in Colorado and urge anyone delinquent in their Colorado tax responsibilities to come forward NOW before the Amnesty period ends. Although it seems like a ruse to ‘root you out’ as it were it is for real and I’m here to help shepherd you through the process if needed. Not only is this is an excellent opportunity to achieve compliance, revenue collected through Nov. 15 2011 goes directly to Colorado schools! Here are some facts that my friends at the Colorado Department of Revenue asked me to blog about.
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Tax Amnesty period runs from October 1 – November 15, 2011
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Business and individuals can participate
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Pay owed tax in full plus half accrued interest, and avoid all civil and criminal penalties
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Nearly all state taxes due on or before Dec. 31, 2010 are eligible
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Majority of revenue from amnesty transfers to state education fund
For more information about Jump at the Chance – Colorado Tax Amnesty, including what types of tax are covered under amnesty, visit www.coloradotaxamnesty.com. Interested parties can call the Colorado Department of Revenue’s taxation hotline at 303-205-8288 or toll-free at 1-855-330-3490. All tax returns must be postmarked no later than November 15, 2011.
When filing a Colorado amended return for individual income tax, these tips will help avoid processing delays.
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DO NOT include a copy of the 104 (original) return with the 104X.
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Include all schedules and supporting documentation. Even when there is no change to the 104CR credit schedule or the 104PN part-year/nonresident form, those forms must be completed again (or you must include copies submitted with the original return). Also attach other schedules or credit certifications to the amended return even if copies were attached to original return. Failure to attach these documents will result in delays and errors.
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ALWAYS use the form that matches the year you are amending. For example, if you are amending a 2010 return, use the 2010 104X form. If you use a form for another tax year, the lines from one tax year to another are different. Using an incorrect year form will delay processing and cause errors.
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The 104X form should be the first form seen in any amended packet sent. Place the 104CR, 104PN and other supporting documents behind the 104X.
With Revenue Online, taxpayers Sign Up to get access to their Individual income tax account. They create their own Login and Password. Note: It is important to create a Login ID and Password that can be remembered. Taxpayers will receive an email with an Authorization Code that they must use only the first time they Login to Revenue Online. The Authorization Code is an extra security precaution. After you gain access to your account, you may amend your individual income tax return.
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Click on the ID Number (Social Security Number) in your account, then click on the green All Available tab to see all the tax years you have filed. Currently, only the 2009 and 2010 returns may be viewed and amended online.
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See the “I want to…” links in the upper right corner of the screen to Amend a Return. Returns prior to tax year 2009 must be amended using the Colorado 104X paper return.
For corporations, fiduciaries and partnerships, the same rules apply about using the form that matches the year you are amending and placing the amended return on the top of the packet you submit. DO NOT include the original return in the packet.
For fiduciary and partnership amended returns, use the 105 or 106 form as the amended return.
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Be sure to CLEARLY MARK the Amended Return checkbox at the top of these forms.
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The place to indicate “amended return” is at the top of the 105 and 106 forms and it reads: “Check here if this is an amended return for calendar year 2009 or other tax year.”
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To ensure the 105 and 106 returns will be noticed in our processing pipeline as amended when we receive them, write AMENDED RETURN in red across the top to draw attention to the return.
The Colorado Department of Revenue is offering a tax amnesty period. The program begins October 1st 2011. Tax amnesty is a limited-time opportunity for individuals and businesses with overdue taxes to pay without additional penalties. Those with overdue taxes can pay the full amount owed, plus half the total interest owed. Please note that if a taxpayer receives a delinquency notice on or before Oct. 1, 2011 for a particular tax and filing period, that amount is not eligible for tax amnesty. The tax amnesty period runs from Oct. 1, 2011 through Nov. 15, 2011.
For further information, visit the official Web site www.coloradotaxamnesty.com or call 303-205-8288 in the Denver area; 1-855-330-3490 outside of metro Denver.
The meeting was held July 26th 2011 in the downtown Denver, Colorado, IRS office. The following is a summary of the meeting presentations by presenter as prepared by Deborah Rodgers, IRS Senior Stakeholder Liaison.
Jack Estoll, IRS Appeals
Information Release 2011-78 discusses the revision to the ex parte rules. Internal Revenue Service is accepting comments through August 18 2011. The Reform Act of 1998 said that Appeals was independent within IRS and could not talk about substantial issues with other functions of the Internal Revenue Service. One key change is that Appeals will no longer participate on Issue Management Teams (IMT). Appeals can be briefed by the IMT’s as long as the discussion remains generic rather than case specific.
Hiring in Appeals is limited. One exception to the freeze is the potential of one more GS- 13 in Denver. Denver settlement officers are managed from St. Paul Minnesota by Terri Cismowski.
Inventories are stable but higher than we would like to see.
FastTrack Settlement is being piloted and can actually resolve the case and may be available to all sometime next Fiscal year. Fast Track Mediation on the other hand, is currently available, but the mediator has no option to offer a settlement on the case, the parties must reach an agreement.
Question: Where are the Appeals coordinators located?
Response: Appeals coordinators are part of the compliance function. The Ogden Campus handles all of the penalty cases. If the case is too complex, ask for a face to face and the case will go to the field.
Miles Fuller, IRS District Counsel
Counsel has moved to a new location, 617th St. the Dominion Towers Building.
Colorado SB/SE Counsel is part of Area Five that includes Montana, Wyoming, Arizona, Nevada, and New Mexico.
There is an obvious increase in enforcement with Internal Revenue Service counterparts, especially regarding offshore issues and voluntary disclosures. Case load seems to be remaining constant.
Question: There is a rumor that counsel is trying to get rid of CDP cases as soon as possible. What do you look at it historically; are there criteria that we can discuss?
Response: CDP cases can be resource intensive for Counsel. Like all cases, the way we approach CDP cases is to work them efficiently. In the majority of CDP cases the only issue is whether the IRS should pursue a proposed Lien or Levy. Usually there are no issues about whether the taxpayer opposes tax liability at issue; taxpayers just say they can’t pay the tax. The Tax Court reviews these cases to see if the settlement officer abused his/her discretion. Counsel believes the Court should look at what was provided to settlement officers, without new information added to the case. As such, Counsel believes the cases can be put before the Court with little additional development. Counsel, however, generally tries to confer with a taxpayer at least once before going to Court.
Comment: Most of the settlement officers are fine, but every once in a while I just seem to get one that wants to get the case off their desk.
Response to comment: While we believe the Internal Revenue Service exercises due diligence in all cases, there have been a few situations where Counsel has sent a case back to a settlement officer who might have missed something. If you question the treatment that you’re getting don’t hesitate to contact the manager. If the case is with counsel, let the assigned counsel attorney know about the specific concerns you have.
Question: What is the Internal Revenue Service’s position on medical marijuana dispensaries? Are medical marijuana dispensaries allowed to take their deductions?
Response: Medical marijuana is an evolving issue. Drug trafficking is illegal under federal law. Generally, the issues raised with respect to medical marijuana are governed by I.R.C. § 280E and the relevant case law. Cases involving medical marijuana and dispensaries are very fact specific, making it difficult for the Internal Revenue Service to provide generalized guidance applicable to all cases.
Shelley Foster, IRS Examination
The Examination Area Director expressed her excitement to be included in the meeting this morning and asked the practitioners if they would prefer her level or one of her territory managers to attend these meetings in the future.
There are 950 employees in the Western Area Exam.
There are several challenges that Examination is facing. We’re still waiting for legal guidance on the medical marijuana cases. The conservation easement cases are coming to an end. IRS is facing a $606 million dollar budget cut; while 94% of our business operation budget is salary. Nationwide exam may be able to hire 50 new revenue agents in 2012 which means Western Area may get about 15% of those hires. With the 5% projected budget cut, travel and training are limited. Most of the travel budget will go to the field examiners for working cases.
The proposed Examination work plan is a roll over or will remain flat, not decreasing but moving to different categories. For example, high wealth taxpayers over $200,000, Schedule C business returns, flow-through entities, Individuals with under $200,000 may decrease.
The Director is a co-sponsor of a Taxpayer Satisfaction Team. The team will look at the audit timeline, understanding the process, timely actions, open cycle days, honest communication, scheduling tools, and the use of technology. The team will also look at the possibility of team audits to avoid undo delays by Examination.
Offshore voluntary disclosures are 75% complete for 2009 initiative. The 90 day extension for 2011 taxpayers ends in November. The 2011 cases will mostly be handled by the Austin campus. Exam is not incorporating the 2011 cases into the 2012 plan at this time. If an individual opts out or is removed from the current program then the case will go under examination, and if applicable will go to Criminal Investigation.
Question: Can you expand on the conservation easement issue coming to an end?
Response: We are waiting on the valuations of the properties which are handled in TE/GE and, cannot close the cases until the valuations have been secured.
The Director has been to the field on at least 10 occasions, to put a finger on the pulse and better understand what actions may not add value to the audit process. This also allows for expanded employee engagement, which provides opportunity to share thoughts and ideas as she strives to improve employee relations for an improved work environment.
Comment: I am impressed with the quality of the newer and older agents. The large audit process is more transparent. I think it helps expedite the audit.
Goretti Lysek, IRS Automated Collection Service
We’ve lost quite a few employees, but can’t replace any due to hiring freeze. We are doing a lot of training.
There is currently a collection process study that will streamline the collection process overall. You will see some changes in fiscal year 2012.
Question: One of your employees called my office and asked me to call them. They left a message with a case reference number. I was not able to cross-reference the case with the number; is there any way to provide more information to the power of attorney such as a name?
Response: That is part of the collection process study. We are looking at the disclosure issue.
Question: Any chance of priority service on the ACS line?
Response: Yes if you use telephone number 1-866 – 860 – 4259, option 3, you will get a practitioner priority service ACS assistor.
Question: There is a problem with the phone numbers on notices. The taxpayer may have a large dollar balance due (and should therefore be speaking to the Large Dollar Unit, but the telephone number does not coincide with the notice amount. We are forced to be transferred and hold another 40 minutes.
Response: This is also part of the collection process study.
Charles Musso, Taxpayer Advocate Service
TAS is very busy. With the economy and hardship situations taxpayers are using TAS more than ever. We have had attrition but we are not hiring new employees at this time.
Our First Time Home Buyer cases are diminishing but now the Adoption Credit cases are picking up. Adoption Credit cases are being looked at very closely by the Internal Revenue Service. We are conducting Congressional visits across the state. We handle all of the Colorado Congressional cases in house. All other cases are part of the work load balancing process and can be handled by any Taxpayer Advocate across the nation.
Comment: Recently we’ve gone to TAS with small things such as application of payments when we’ve designated payments with a letter, and the payments were misapplied and defaults agreement; usually this hasn’t been the case.
Another scenario is the levying of funds not belonging to the client where ACS has told the client to pay their liability in full but the business is now gone. TAS finally refunded the funds because we were able to document that the money did not belong to the taxpayer, but it was a very difficult process.
TAS: TAS can certainly assist in these situations however; we request that you attempt to rectify the situation through normal channels first. Often these issues can be quickly resolved by the originating function.
ACS: When you have a case like that you should talk to the ACS manager.
Michael Rogers, IRS Governmental Liaison
Governmental Liaison is now under the Office of Privacy, Governmental Liaison, and Disclosure (PGLD).
We work with state agencies such as the Department of Labor and the Department of Revenue. We are working with the state and several local municipalities in the exchange of data information. These partnerships have produced positive results. We receive a lot of questions regarding the tanning tax. We visit the congressional offices with TAS. We attended the national disaster conference with congressional leaders.
We are currently meeting with the Attorney General’s office to see who is first in line for collection. For example IRS was first in line to get the money but the State took it and we’re now trying to establish better communications between the two agencies.
Question: Why can’t the State and IRS work as one on these cases?
Response: For some reason we can’t work that out although we’ve talked about it.
Question: What is the exchange of tapes you referenced?
Response: It is the exchange of data between the municipalities and IRS. Some agencies won’t issue licenses or sales permits, if taxes are owed. The data exchange even helps with the location of taxpayers.
Sean Sowards, IRS Criminal Investigation
Criminal Investigation area includes Colorado, Wyoming, Idaho, and Montana. There are enough funds to hire to attrition levels. They are fully staffed in Denver and no anticipation of attrition.
International is a big focus for criminal investigation. The UBS cases are busy this year also. On the subject of medical marijuana it is a criminal offense under federal law. The Department of Justice position is that it is illegal drug trafficking and financial transactions with proceeds of marijuana sales could violate federal money laundering laws. There is not an official position within Internal Revenue Service regarding culpability of practitioners providing financial services to medical marijuana industry clients at this time so as practitioners you should proceed with caution.
Question: Is there a mandate to start investigating these types of cases?
Response: No comment.
Question: Are there other experiences out there that you could talk about?
Response: Return preparer fraud is an issue. We’re looking to see how the PTIN program will impact the community. We imagine some practitioners will go underground and we will want to hear about non-signing practitioners. We are fully engaged in investigating Ponzi schemes and investment fraud.
Bessie Castro-Zepeda, Colorado Department of Revenue
The Department of Revenue’s online website became available April 25. You can access payment history, make address changes, and input power of attorney requests. There was a usability study with tax professionals and many provided suggestions for improvement. We are planning a new study on August 2 which you can find on taxcolorado.com.
Department of Revenue’s tax amnesty program starts October 1 through November 15.
The Department of Revenue is now auditing returns for medical marijuana sales and income tax.
The new computer system is not complete and more changes will take effect in the next year
Question: Why is the Department of Revenue not allowing direct debit or ES payments when filing a state tax return?
Response: This feature will be available August 29th with Revenue Online.
Question: What is your inventory status? Last time I heard it was 25,000.
Response: All returns have been processed. Our backlog, as of 07/26, is 28,000 which means those returns are awaiting review by a tax examiner.
Question: What are the conditions for amnesty?
Response: The Colorado Department of Revenue will allow certain taxpayers to pay the full amount of overdue taxes, including one-half of any interest due, without being subject to any other civil or criminal penalties. The Colorado tax amnesty program will run from Oct. 1 through Nov. 15, 2011 and applies to taxes that were due on or before Dec. 31, 2010. The amnesty DOES NOT include 2010 Colorado income tax, which was due April 18, 2011.
Question: Does DOR offer classes to tax practitioners specifically.
Response: We do not do a lot of CPA classes anymore, but are willing to do them on specific topics if needed. Also, we offer online classes at www.taxcolorado.com for preparers needing CPE credit.
Kristen Hoiby, IRS Stakeholder Liaison
Since Collection was unable to attend the meeting today, Stakeholder Liaison talked about the Fresh Start program. The biggest change is to allow in-business taxpayers installment agreements up to $25,000. The new guidelines also allow taxpayers to pay down the balance to meet the criteria, while previously this was not an option.
Beginning July 5, 2011, Internal Revenue Service will only be accepting the March 2011 revision of Forms 656 Offering Compromise.
Information Release 2011-80 talks about the Two-Year Limit no longer applies to many Innocent spouse requests. Include link
Nearly 6,000 Colorado organizations recently were announced to have lost their exempt status. Some of these organizations may have become extinct, but others may just have failed to file either the Form 990 or the electronic postcard to verify their existence. The list of organizations for Colorado is available on IRS.gov. The website also provides information on how an organization can be reinstated. If a parent or umbrella organization loses its exempt status, it applies to all of the subordinate organizations, even if the subordinates met the filing requirement.
The Return Preparer Program continues to be a subject of much interest in the practitioner community, especially regarding the testing criteria. A number of the practitioners noted that there were already “return prep” courses available. It was noted that nothing could be done to stop that, but since detailed information regarding the test is not yet available, one wonders what these courses are going to cover.
Next meeting will be January 5, 2012. Save the date!
General
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Be mindful of your new tax account number. The Colorado Department of Revenue has moved sales tax into its new tax accounting system. The improved system allows the department to process and distribute taxes more efficiently and assist businesses better than the current system. As part of this change, tax account numbers went to eight digits.
This number is known as the “Colorado Account Number.” For account numbers obtained prior to October 2010, a zero (0) is at the front of the original seven digits. For example, if your account number was L12-34567-0000, your new number is 01234567. Businesses should use the new number format as soon as possible to increase the accuracy of their tax records.
New businesses to receive eight-digit tax account number. Beginning in October 2010, businesses applying for sales and withholding tax accounts with the Colorado Department of Revenue will automatically receive an eight-digit account number.
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Use Online Sales Tax Filing. Single location filers may use this service as long as they have filed at least one paper return with the department in the past. Multiple location filersmay file online as long as they have tested their electronic file (in XML format) with the department and received department approval to use the file. Many taxpayers are taking advantage of this new option to help minimize calculation errors and make filing easier. Visit the Online Sales Tax Filing Web site for instructions.
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Filing returns with incorrect filing dates. For example, when filing a return for the first quarter (January through March) of 2009, the dates on the return for this period should be 0109-0309. The format is MMYY-MMYY. If using the pre-printed coupon return booklet received from the department, be sure to use the form with the correct dates when filing for that period. Do not make copies of any of the forms in the booklet with pre-printed periods/dates and use those forms to file taxes for another period. A return with June dates should not be used to report taxes for September.
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File returns on time. Multiple location filers who file Colorado Retail Sales Tax (DR 0100)returns need to make sure all the returns are mailed/post marked by the 20th of the month, even if a payment was made before that date. For example, if paying by Electronic Funds Transfer (EFT) on the 15th of the month, the return is still due or must be postmarked by the 20th of the month
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Taxpayers with questions should use the Taxation Web site. Often, taxpayers can find answers to their questions by looking at the sales/use tax FYI publications. In addition, the Web site, www.TaxColorado.com has a list of all sales tax forms needed to remit taxes and details about various record retention requirements.
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FEIN and SSN Numbers. The new accounting system is going to actively verify Federal Employer Identification Numbers (FEIN) and Social Security Numbers (SSN) used on business accounts. The system will verify the numbers through the Internal Revenue Service. If your account does not have a valid FEIN/SSN number, you will receive a notice from us to correct this number as soon as possible. Often times, this number may have been transposed on the original CR 0100 application. New business applications should have their FEIN or SSN ready when applying for a license.
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Use the correct county and city jurisdiction codes for your businesss location(s). If you are not using a form printed by the Department of Revenue such as the sales tax coupon booklet or preprinted forms that are mailed to you, be sure to check the publication“Jurisdiction Codes for Sales Tax Filing” (DR 0800) for your six-digit (NN-NNNN format) code.
Calculation Errors
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Incorrect tax rates and mathematical errors. When filling out a blank, generic sales tax return that has no pre-printed sales tax rates, list the rate correctly and multiply as follows: If the sales tax rate = .25 percent, this percent should be calculated as .0025 on the return. If the total net taxable sales collected for a jurisdiction is $500.00, the calculation would be $500.00 x .0025 = $1.25. All tax amounts should be reported on the return using standard rounding rules where cents below 50 cents get rounded to “0” and 50 cents and higher get rounded up to the next dollar. For example, a $1.25 should round down to $1.00. Calculate the tax by using either a percentage key on a calculator or by using the decimal method, do not mix these calculation methods. Finally, always double check math calculations
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Do not submit a return with negative numbers. Credits for one jurisdictional tax cannot be offset against another jurisdictional tax. Credits cannot be moved from one column to another. After calculating a return, if any column falls below zero, the credit can be carried forward to a future return and applied to the same jurisdiction/column. A credit can only be subtracted within the same column up to the amount of what is reported for that jurisdiction for the current period. If the credit cannot be recaptured within three future tax periods, the Claim for Refund (DR 0137) should be filed for the full amount of the credit. The smallest amount of tax reported in any column is zero. Negative numbers should never be used anywhere on the return.
Incorrect Use of Columns on the DR 0100
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Do not list taxes in columns on the sales tax return that are NOT designated for that tax. The sales tax return has a column designated for each jurisdiction (County, City, Special Districts, State, etc.). Therefore, be sure to correctly list each tax in the appropriate column.
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Fill out the sales tax return completely.
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Do not leave columns/lines blank. Use NA if a column on the DR 0100 return does not apply to a business location. Put NA or Not Applicable on the TAX RATE line for that column. The TAX RATE line is right under line 4 of the DR 0100. DO NOT write 0.00 or leave it blank. Zeros or leaving it blank will cause an error in our accounting system. If a “0” is listed on any line or column, the department will assume that the business is still responsible for remitting that jurisdiction’s tax but that the amount due for that period is “0.”
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Use “0” if there is no tax to report but the tax DOES apply to the location.
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Every line on a tax return needs to be filled out correctly in order to be processed timely. When filing a DR 0100 (paper copy of a return) complete each line and each applicable column. Do not leave a column blank or incomplete, even if filing a “zero” return with no tax due.
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Do not change pre-printed sales tax forms you receive by mail. Do not enter new sales tax jurisdictions that have not been set up on an existing account. Additional locations must be set up before filing the return.
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Do not create customized or independent forms to remit taxes for additional jurisdictions. For example, if the current sales tax return states that taxes will be remitted for Boulder County in the county column, do not cross out Boulder County and replace it with Jefferson County.
To add a physical location, the Department of Revenue (DOR) must receive notification of the new branch/location by submitting the Sales Tax / Wage Withholding Account Application (CR 0100)) to the DOR. Send the form with the appropriate fees to: 1375 Sherman Street, Denver, CO, 80261. For a branch with NO physical location in Colorado, send an email request to add the branch/location to:multilocations@spike.dor.state.co.us Refer to publication FYI Sales 58 for more information.
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If all sales for a specific jurisdiction are out of the taxing area, post the amount on line 3A in the applicable column and then follow through the 0.00 on line 14 to complete column.
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Total amount remitted on line 15 of the return does not balance with the subtotal columns on line 14 of the return. For example, if the total for all columns of the sales tax return is $500.00, then the remittance should also be $500.00.
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Line 10 of the Retail Sales Tax Return (DR 0100) is used for tax on goods removed from inventory for personal or business use. Line 10 should not be used to file consumer use tax.
Instead, businesses should report consumer use tax on the Consumer Use Tax Return (DR 0252) and the RTA Consumer Use Tax Return (DR 0251) for the RTA branches. If you file paper return(s) you will need to send a check in payment of the tax or pay by Electronic Funds Transfer (EFT). If paying consumer use tax by Electronic Funds Transfer (EFT), you must have the consumer use tax EFT code (code 045) added to your EFT account. For more information on EFT, please review the document Electronic Funds Transfer (EFT) Program for Tax Payments (DR 5782), then complete the Authorization for Electronic Funds Transfer (DR 5785). Individuals reporting use tax can file and pay online using the Revenue Online Consumer Use Tax Return. For more information on use tax, please see the Consumer Use Tax Web page and FYI General 10.
Failure to Correctly Report Local Taxes
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Multiple jurisdictional filers cannot combine the county tax collected for all branches on one form. For example, if there are five branches/locations in Summit County, each branch/location must report the tax on a separate branch return. All taxes collected for any jurisdiction can’t be combined and reported on one of the Summit County branch/location forms, while leaving the tax amounts off the other branch returns. The same rule applies to all of the local taxes collected for companies with multiple locations in any jurisdiction.
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Do not write “Various” on any tax rate line and combine all the jurisdictional taxes together in one column. Returns will not be processed correctly and there will be delays in processing. Each jurisdiction has one tax rate and taxes collected for that jurisdiction must be reported in its own column. For example, the state sales tax return has one column designated for city tax and only one sales tax rate applies to that city.
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Do not subtract a credit from a previous period and carry it forward to a future period and deduct that credit from all jurisdictions listed or columns on the current period tax return. For example, if a credit is carried forward for city taxes, only take the credit in the city column; do not take the credit from the county, state, or special district columns, too. Example: Tax overpaid by $50.00 needs to be converted into net taxable sales credit. $50 divided by tax rate will result in net taxable sales credit to be posted on Line 3C for the applicable liability.
Multiple Location/Jurisdiction Filers Errors
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Multiple Location/Jurisdiction Filers (formerly known as Spreadsheet Filers) who currently use spreadsheets to file their sales tax will NOT be able to use their current spreadsheet filing methods for the September 2010 filing period returns due October 20 and any periods after. The Department of Revenue has developed a new computer system to manage Colorado sales, use and wage withholding taxes. As part of this change, Spreadsheet Filing will cease for all filers including current approved filers. They must either file electronically OR file a paper return for each location beginning October 1, 2010. For more information, please see the Multiple Location/Jurisdiction Filers Web page.
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Keep contact information current with the Department of Revenue. Please be sure to notify us if there is a change in personnel, mailing addresses, phone numbers and most importantly, email address. We send communication and acknowledgements through email often. Please be sure we have the most up-to-date contact information. Send your contact information to spreadsheetfilers@spike.dor.state.co.us
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Verify “Branch Numbers” early. It’s recommended that you verify all of your branch numbers before you submit your return electronically. You can confirm the branch numbers online. Search by account number. The verification system will show all open locations for your account number and the current, applicable tax rates for each location.
Payment Errors
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Taxpayers may continue to make a single payment to remit the tax for all locations. Use the Colorado Online Tax Payment service to make one payment by echeck or credit card. Another alternative is Electronic Funds Transfer (EFT). Advance registration is required prior to using EFT but is not required for the echeck/credit card payment method.
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Taxpayer’s Electronic Funds Transfer (EFT) payment does not match the total amount filed on either the XML return or on the DR 0100 return. Double check for mathematical and transposition errors. Both the amount on the return and the amount of the EFT must match.
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Taxpayers who make a tax payment using Electronic Funds Transfer (EFT) need to file a return. Single location taxpayers can file a DR 0100 online at Online Sales Tax Filing or a paper return. Paper returns can be filed by mail, private carrier, or in person at any walk-in service center. Filing a return late, not filing a return, incomplete returns, and non-payment or incomplete payment of the tax due will all result in an assessment of penalties and interest
June 17, 2011
John R. Dundon II
Abusive Tax Shelter, Colorado Department of Revenue, Estimated Taxes, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Private Letter Ruling, Tax Abuse, Tax Problems & Requests, Tax Relief, Tax Whistle Blower
I am opposed to all tax strategy patents. They are bad public policy and harmful to taxpayers and their advisers. No one should have a monopoly on part of the tax code and no taxpayer should be subject to paying royalties or lawsuits for using a legal way to comply with the tax code.
The tax code is already complicated enough. We do not need more of these kinds of bad patents issued, carving up the tax code and making life more difficult for everyday taxpayers.
Congressman Polis’ (Colorado) proposed amendment coming up for a vote in the House of Representatives next week would allow up to 160+ additional tax strategy patents to be issued. This could potentially more than double the number of these bad patents from the approximately 140 that are already out there.
A pending application is no promise that a patent will ultimately be issued by the PTO so Congress is not doing anything unfair to the patent applicants. There was no guarantee when they filed their applications that they would ultimately receive a patent. And, these kinds of patents are simply not in the public interest.
A patent applicant may argue that he or she divulged certain proprietary information or business secrets when he or she applied for the patent and therefore is entitled to continue the process. But all patent applicants send in their application with the understanding that they may not ultimately receive a patent.
The Colorado state Vendor’s Fee also known as the sales tax Service Fee has been restored at 2.22%. The fee may be claimed on timely filed and paid Colorado sales tax returns submitted on or after July 1, 2011 beginning with sales tax returns for June 2011 and 2nd quarter 2011 due on July 20, 2011.
The service fee may be kept by the licensee ONLY if the tax return is filed and paid on time.
SO BE SURE TO FILE ON TIME!!!
This applies to state sales tax, state retailers use tax, and Regional Transportation District (RTD), Scientific and Cultural District (CD), Football District (FD), Baseball District (BD) sales tax. The service fee rates for state-collected cities, counties and other special districts are not changed. Service rates for state-collected local jurisdictions are listed in the publication Colorado Sales/Use Tax Rates (DR 1002). The service/vendor’s fee does not change the Colorado state sales/use tax rate which is 2.9 percent.
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Businesses with only one location will receive new DR 0100 coupon books in early July. If the new the booklet does not arrive in time to prepare and file the return, change the state and district column vendor fee rates on the existing coupon to 2.22% (.0222).
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Multiple location retailers, seasonal filers, and annual filers will receive pre-printed forms that will have the 2.22% rate.
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XML format or Excel spreadsheet filers need to verify that their rate for state, RTD/CD/FD/BD has been changed to reflect the service fee change for the June 2011 or 2nd quarter 2011 returns due on July 20, 2011.
The Colorado Department of Revenue is in the process of updating relevant forms, documents and Web pages. They are doing an EXCELLENT job considering the resource constraints they are under. For the latest information, please see the State Sales Tax Service Fee Web page.
