Archive for IRS Collections
IRS Targets – Don’t Be One.
In 2013, the IRS will focus the significant majority of their enforcement budget and subsequent activity in my opinion on three specific areas:
1. Abusive transactions and under reported income on partnership returns (IRS Form 1065).
2. Officer compensation as well as losses taken in excess of basis in Sub-chapter S Corporations (IRS Form 1120-S).
3. Under reported income via Automated Under Reporter Inventory Strategy Database (AUR-ISD)
In 2012, the IRS started a business information-matching program and a Form 1099-K matching program. The IRS sent new notices in late 2012 questioning businesses on the accuracy of their returns, based on information statements filed under business employer identification numbers (EINs). The IRS also matched Forms 1099-K to business returns and sent inquiries to taxpayers with potential discrepancies, requesting explanations for possible unreported income. I have been informed by reliable sources inside the Service that in 2013, the IRS will expand this effort to address small business under reporting vastly beyond its reaches in 2012.
Denver Colorado IRS Stakeholder Meeting Notes
Bessie Castro-Zepeda, Colorado Department of Revenue
Tax Practitioners only helpline; M-F 8am – 430pm (303) 232-2419
Capital Gain Subtraction: For 2012 returns, the department will make every effort to verify required documentation was included in the filing of the return before contacting the taxpayer for more information. That is why it is important the following supporting documents be submitted with the return.
□ A DR 1316 form, “Colorado Source Capital Gain Affidavit” must be completed and included with the return (electronic or paper). With e-filed returns, attaching the form to the electronic return or submitting it as an E-Filer Attachment in Revenue Online is not sufficient. For electronic returns, the information must be data entered on the DR 1316 portion of the return.
□ A copy of the closing statements for both the purchase and sale of the property, or official documentation from the county detailing purchase date and price and sale date and price
□ Copies of the first two pages of the corresponding federal return, Schedule D and any Schedule D attachments
□ If the capital gain was received via a pass-through entity, documentation that the interest in the underlying business satisfies the required five-year holding period
□ If the capital gain is claimed on a 2009 or prior year return and was due to the sale of stock or ownership interest, documentation verifying it was held for at least five years prior to the sale, that the company was a Colorado company for at least five years prior to the sale, and that the stock was acquired after May 9, 1994.
If form DR 1316 is included, and the capital gain subtraction claimed is $100,000 or less, the department will continue its practice of reviewing the capital gain subtraction claim two to three years after the return is originally filed, when the IRS provides federal return information to Colorado’s Discovery Section.
For more information, see publication FYI Income 15.
Kenneth Cooper, IRS Examination
Western Area has a lot of priority projects and initiatives coming up in the future. The work plan has expanded exponentially, yet the resources are getting smaller. With this type of blueprint, there is a sense of urgency to close cases.
Our return preparer visits have decreased. This year we did less than half of what we did last year. The visits were more educational visits than audits. We have completed the return preparer visits for this filing season.
Our high income non-filer program consists of individuals with an income of more than $200,000. There is a high non-response from these types of high income non-filers.
1099K information reporting is up tremendously.
Goretti Lysek and Tamara Hobson, Automated Collection Site (ACS)
There are currently three new changes to ACS.
Individual cases that can be worked in ACS have increased from $100,000-$250,000.
ACS is no longer asking for substantiation on financials unless the account will not be paid within the statute of limitations.
BMF/trust fund accounts have increased from $10,000 to $25,000 and now if a client can pay within 120 days they can be setup on an installment agreement for $999,999, or less than $1 million.
Question: Is there a change of when liens are filed?
Response: Liens are filed and starting at $10,000 and up. If you’re on a direct debit installment agreement the amount increases to $50,000. And of course a lien can be withdrawn if less than $25,000.
Comment: An ACS letter was received two weeks after the date on the letter. Practitioner will send the information to Debbie, who will forward it to Goretti.
Comment: Financial review on partial pay installment agreement letter not received then it is defaulted before we get the paperwork for the financial information.
Comment: Direct debit installment agreement payments coming out two to three days late creates a default on the installment agreement
Response: There were some issues in late June with direct debit installment agreements going to Collection. About 54% were deemed late and now the program is being analyzed.
Comment: There seems to be a disconnect when we contact ACS and speak to three different people and receive three different answers about an installment agreement.
Stephanie Valencia, Taxpayer Advocate
Nina Olson’s report to Congress was released this week.
The alternative minimum tax patch has been fixed permanently.
Taxpayer Advocate office will not accept any return cases until March. Hardship cases will get looked at individually.
An open house will be held in Denver in March or April with case advocates and managers. Debbie Rodgers will receive the information to forward to all practitioners.
Andrea Ventura, Collection
Collection has a new Area Director Tom Mathews who reports to the Western area on January 14.
Trust fund recovery protests – If we receive new information within 60 days we can revisit the claim. The taxpayer uses Form 1153W to reopen the case.
Collection has new Form 433A and 433B Collection Information Statements. Form 433A has more details about wage earner/self-employed individuals. Section 5 includes monthly income and expenses. We can use the old forms until June 1, 2013.
Some issues with direct debit installment agreements are that the revenue officer did not get an original signature on the direct debit application, and the bank information was incorrect.
Question: The new collection information statement forms don’t ask for supporting information, why?
Response: Substantiation is still necessary in most cases. A priority of the area Director is to reduce defaults on installment agreements. The Revenue Officer determines what type of supporting documents may be required after making contact with the taxpayer or their representatives.
S Corp Late Filing Penalty Excused IRC 6699 Ensyc Technologies v. Commissioner
Considering the scope of the reasonable cause language to the Code Sec. 6699 penalty for late filing of an S corporation return, the Tax Court determined that the failure to timely file a 2008 2008 1120-S tax return was due to reasonable cause not subject to penalty in Ensyc Technologies v. Comm’r, T.C. Summary 2012-55 (6/14/12). The following are the facts as I understand:
1. Ensyc Technologies, an S corporation operated entirely by its president who works from his home in Idaho with the assistance of subcontractors, had its tax returns prepared by an accountant in Nevada.
2. Ensyc’s annual tax return for 2008 was due March 16, 2009.
3. On March 10, 2009, Ensyc’s accountant sent Ensyc IRS Form 1120S, U.S. Income Tax Return for an S Corporation, to file with the IRS. The accountant also sent copies of Schedules K-1, Shareholder’s Share of Income, Deductions, Credits.
4. Ensyc’s files contained a copy of a Form 1120S bearing the President’s signature dated March 16, 2009.
5. The IRS has record receiving a Form 1120S from Ensyc on September 11, 2009 postmarked September 8, 2009.
6. The 1120-S form itself was dated February 24, 2009.
7. Code Sec. 6699 basically states that an S corporation not timely filing its annual tax return is liable for a per-shareholder penalty for every month the tax return is late up to 12 months. However the penalty is not imposed if the failure to timely file the return is due to reasonable cause.
8. On the theory that the Form 1120S it received on September 11, 2009, was the only Form 1120S Ensyc had filed for tax year 2008, the IRS assessed a $6,408 late-filing penalty.
9. On February 1, 2010, Ensyc requested a collection-review hearing with the Office of Appeals regarding levy action.
10. The IRS Office of Appeals determined that Ensyc did not timely file a Form 1120S nor did it have reasonable cause for failing to timely file the form and sustained the levy.
11. Ensyc took the case to the Tax Court, arguing that it was not liable for the late-filing penalty because it mailed a Form 1120S on March 16, 2009.
12. The Tax Court examined the possible explanations for why the IRS had no record of receiving the Form 1120S and essentially determined that the tax return was not timely mailed.
13. The Tax Court then considered whether there was reasonable cause for not filing the form on time noting that no judicial opinion had yet considered the scope of the reasonable cause exception to the Code Sec. 6699 penalty.
14. The court applied the ordinary-business-care-and-prudence test from IRC 6651 concluding that Ensyc exercised ordinary business care and prudence in its efforts to timely file its Form 1120S for 2008.
15. The Tax Court specifically noted that the President routinely mailed Ensyc’s tax returns on time. Further he mailed the Schedules K-1 to Ensyc’s shareholders and that an Ensyc shareholder filed an annual individual income-tax return on April 15, 2009 reflecting the shareholder’s pass through loss.
16. The court believed the President’s testimony that he thought he had mailed the 2008 Form 1120S on March 16, 2009. As a result, the court found that Ensyc’s failure to timely file a Form 1120S for the 2008 tax year was due to reasonable cause and, thus, Ensyc was not liable for the Code Sec. 6699 penalty.
17. It was also noted that pursuant to INTERNAL REVENUE CODE SECTION 7463(b), this opinion may not be treated as precedent for any other case.
I think the lesson learned here is to file on time and avoid the penalty.
IRS Can Levy More Than 15% of Social Security Benefits According to Bowers V. US
The distinction of how this is possible distills down to understanding the nuanced difference between a ‘Continuous’ and a ‘One Time’ IRS tax levy.
Under Code Sec. 6331(h) once a tax levy is approved, the effect of the levy on specified payments received by a taxpayer is continuous from the date the levy is first made until the levy is released. A continuous levy attaches to up to 15 percent of any specified payment including social security payments.
However as a one-time levy, the 15 percent cap on continuing levies under Code Sec. 6331(h) does not apply to monthly social security benefits allowing the IRS to take more than 50 percent of the taxpayer’s monthly benefit in Bowers v. U.S., 2012 PTC 133 (C.D. Ill. 5/22/12).
In the Bowers case we learn that according to the court, the IRS has discretion to approve continuous levies under either Code Sec. 6331(a) or (h) however it is not required to attach a continuous levy even where the type of property might be eligible for one.
The court stated in this case that social security payments represented a present, vested right to receive benefits in fixed monthly payments for the taxpayer’s life and the amount of the benefits are based upon a formula that included prior wages.
Because the social security benefits were not contingent on the performance of any additional services the tax levy could attach to the entire stream of Social Security payments as a one-time levy under Code Sec. 6331(a) and (b). Thus, the levy was considered a one-time levy.
As a one-time levy, the 15 percent cap on continuing levies under Code Sec. 6331(h) does not necessarily apply.
I think the lesson learned here is that if you are having your social security levied try to have it levied under IRC 6331(h) as a continuous levy subject to the 15% maximum threshold..
IRS Restrictions on Contacting Taxpayers
I’ve worked with many good people inside the IRS on a wide variety of cases. So please do not get me wrong I’m not bashing ALL IRS employees. However like any big bloated bureaucracy I’ve also worked with some real shit heads inside the IRS who take their orders to advocate on behalf of the US government a little too seriously. When indeed government bureaucrats should be focused on getting maters resolved some use their vested authority to wreak havoc on good people’s lives using what I refer to as procedural maneuvers.
One such example is when IRS Revenue Officers can negatively impact the ability of taxpayers to obtain appropriate and effective representation during collection investigations. According to the Treasury Inspector General for Tax Administration (TIGTA) “IRS employees are required to stop an interview if the taxpayer requests to consult with a representative and may not bypass a representative without supervisory approval.” Evidently this is not happening as provided for by law in that “between October 2010 and September 2011, TIGTA’s Office of Investigations closed 19 direct contact complaints involving IRS employees, of which eight were disciplined or counseled for their actions by IRS management officials.” AKA – a slap on the wrist.
The IRS’s compliance with Internal Revenue Code Sections 7521(b)(2) and (c) is in my opinion woefully inadequate. The audit report I reference goes on to state that “in the sample of 73 cases, TIGTA found that 14 revenue officers deviated from procedures by: 1) contacting the taxpayer directly, instead of the authorized representative, on the initial or subsequent contact in the collection investigation, 2) not sending copies of taxpayer correspondence to the authorized representative, or 3) not allowing enough time for the taxpayer to obtain a representative.” The report in question clearly states “IRS personnel are intentionally disregarding the direct contact provisions of the Internal Revenue Code.”
As such if you are under investigation you need to know your rights. You also need to keep in mind that IRS employees are specifically trained to create the perception that they are ‘helping’ you ‘achieve compliance’ when indeed they are compiling evidence to portray you as a delinquent or even a criminal. Check out the report yourself here ->
http://www.treas.gov/tigta/auditreports/2012reports/201230089fr.html.
IRS Stakeholder Liaison Meeting Summary
The following are the notes from the most recent IRS Stakeholder Liaison Meeting held in Denver Colorado as prepared by IRS Senior Stakeholder Liaison Deborah Rodgers
Michael Shuler, Local Taxpayer Advocate
Nina Olson, the National Taxpayer Advocate’s (NTA) objectives report was released in June, revealed some issues that will be coming out in the annual report in January. Some of Nina’s concerns were around the difficult filing season. The expiring tax provisions cause chaos for the tax professionals and taxpayers, when Congress waits until the end of the year to address these provisions. The AMT tax, sales tax deduction, mortgage insurance premium deduction, and age 70 1/2 IRA charitable contributions are included in this list and are usually retroactive when reinstated.
In 2013 , the Bush tax cuts sunset. These include the long-term capital gains rate cuts, child tax credit and the adoption credit.
Tax fraud and identity theft are growing. Innocent people are caught in the system to prevent fraud ID theft. The ID theft line is understaffed. One in nine calls were getting through during the filing season.
The Advocate’s office is also concerned about IRS disregarding the Taxpayer Assistance Orders (TAOs). The TAO process is provided by statute. A TAO is effective because it can raise issues to higher levels of management. Taxpayer Advocate Service is successful with TAOsevery day, but there are issues with the program raised in the NTA’s Objectives Report, including there not being any consequences if the TAO is disregarded. The Systemic Advocacy Management System also known as SAMS is another very effective way to raise issues. Every one of these will get a high level contact and some result in systemic advocacy projects. Sam’s link is: http://apps.irs.gov/app/samsnet/IssueQualification.jsp
Question: Are you aware of any steps to fix the OVDP program?
Response: No. The OVDP program is closed. The OVDI is the current program. TAS has raised the issue through TAOs and a TAD about IRS not following their own FAQ #35 which appeared to state that reasonable cause and mitigating factors could be considered in the calculation of the closing agreements.
Comment: In cases of inadvertent or inherited funds one size does not fit all.
Response: The IRS says that the participants can always withdraw from the voluntary program. Most people don’t look at withdrawal as a viable option. It should be considered in those types of cases.
Comment: A lot of practitioners are concerned about their advice. Although we cannot offer comment on what advice to provide to your clients, the National Taxpayer Advocate is continuing to advocate for changes to the program that will address the “one size does not fit all” criticism and provide for a more fair process for those who did not shift assets overseas to avoid tax reporting but inadvertently got caught in a non-disclosure.
Bessie Castro-Zepeda, Colorado Department of Revenue
Q: Why does the CDOR send out tax notices disallowing credits and deductions on e-filed returns PRIOR to reviewing the supporting documentation that is mailed in with form DR 1778 “E-filer Attachment Form”?
A: It is the policy of the Taxpayer Service Division, in the event of a review of a credit or deduction claimed on an e-filed return, to wait 30 days for supporting documentation to be received. If the documentation is not received after the 30 day window, the credits/deductions are denied and a letter is sent requesting the backup documentation.
Q: Why is the CDOR disallowing the Colorado Minimum Tax Credit on line 31 of Form 104CR when the credit is simply a calculation based from information reported on the Federal return?
A: The Colorado Minimum tax credit is being disallowed in cases where Form 104AMT is missing or incomplete. There may have initially been a training issue where the credit was being disallowed incorrectly by an examiner but for the most part, the credit is denied due to missing or incomplete information.
In general, CDOR and, specifically the Income Tax Accounting Section, only denies credits/deductions when there is missing or incomplete documentation. The tax booklet makes it clear what documentation is needed when a credit is claimed. Most of the issues we (Income Tax Accounting Section) run into are missing documentation on amended returns. The taxpayer may have claimed a credit on the original filing and supplied the appropriate documentation, but if the credit is unchanged (or even reduced) on the amended form and there is no supporting documentation we will deny it.
A few tips for filing this year: It is highly encouraged that e-file is used to file returns. Also, we encourage the use of our website, Revenue Online (www.colorado.gov/revenueonline) to file protests and for taxpayers to review their accounts. This is the preferred method to correspond with DOR as the phone system is very difficult to get through on.
The inclusion of forms (104cr, 104pn) and all backup documentation on original AND amended returns needs to be stressed. Even if a credit remains unchanged on an amended filing, it will be denied if the corresponding form is not attached.
To ensure payments are correctly posted to the proper account, ACH debits are recommended – as well as payment through our online portal (this is done through Revenue Online website).
Question: What if it is a carryover from prior year do we still have to resubmit?
Response: We will follow up on this question.
Goretti Lysek and Douglas Wildfong, Automated Collection Site (ACS)
Goretti spoke to the Colorado Society of Enrolled Agents in May about the new provisions of the Fresh Start program. She responded to some questions that came out of that presentation.
Question: When calling into ACS representative asked for Form 2848, then transferred the call and the next assistor asked for the 2848 again, what is happening?
Response: If the taxpayer identification number is input correctly the call will go directly to ACS, otherwise it will be directed to Accounts Management first.
Question: Practitioners were set up on an installment agreement and the installment agreement defaulted, no fault of the taxpayer.
Response: The installment agreement needed substantiation. This installment agreement should have been set up as an IA pending, but some assistors did not set IA pending so levies ensued. We reminded assistors about this problem.
Question: Why do federal tax lien withdrawals for direct debit installment agreements take so long?
Response: We need to get the first three months before withdrawal can take place, but it is taking six months and we will look into that.
If an installment agreement request is beyond ACS authority the case will be taken out of queue and sent to the field.
Question: Is the office that processes 433D’s separate from ACS?
Response: Yes, after it leaves ACS and gets manager approval, Compliance Services Collection Operation (CSCO) takes over. We are analyzing where the delays are and hope to improve the timing.
Michael: If there is a hardship bring it to the Taxpayer Advocate’s attention. The Taxpayer Advocate’s Office can withdraw a lien within 4 to 5 days. Taxpayer Advocate can address the issue separately from the direct debit installment agreement if they can’t wait for six months due to the hardship.
Diane Sandoval, Collection
Question: Are there any appeal rights available to third-party if a revenue officer asserts nominee/alter ego liability against him/her/it? Are there any appeal rights for collection action taken against property held by a purported nominee/alter ego third-party? In this context, if the Service files a tax lien and/or issues a Final Notice of Intent to Levy to a third-party nominee/alter ego, does that party have standing to request a hearing with Appeals? What about the taxpayer? Neither?
Response: The nominee only has CAP appeal rights (using Form 9423); the nominee would not be granted CDP rights. The taxpayer does not have an appeal right in regard to the nominee’s lien. As far as post-appeal rights, they can petition based on the lien to the Federal District Court.
Question: Historically, a revenue officer would grant an in-business taxpayer owing trust-fund tax an installment agreement, if, among other conditions, the individuals who would potentially be liable for the trust-fund recovery penalties would grant an extension to assess these penalties. These assessment extensions are no longer requested and/or accepted, and the revenue officer now insists on making the assessments of the trust-fund recovery penalties before granting the in-business installment agreement. Why did this change and is there any negotiation on this? In some instances, a business might qualify for an installment agreement, but potentially responsible individuals will not consent to the assessment of the trust-fund recovery penalties, thus creating conflict which would not have previously presented itself.
Response: There is not a one-size-fits-all answer for this question; the answer will depend on the type of installment agreement and the individual taxpayer.
If a Partial Payment Installment Agreement is being considered, the Trust Fund Recovery Penalty (TFRP) will usually be assessed because the underlying liability will not be fully paid. The only exception to this requirement is in circumstances in which there is no collection potential from the responsible officers.
Before granting In-Business Installment Agreements the TFRP must be considered, the Assessment Statute Expiration Date (ASED) protected, and an assessment determination made on all in-business trust fund cases. Area management must ensure consideration is given to securing waivers to extend the statutory period for assessment from each responsible individual when the delinquent taxes will not be fully paid prior to the original ASED. In general, the Revenue Officer will not request the assessment of the TFRP if business taxpayers meet the terms of the installment agreements. However, TFRPs must be considered on the potentially responsible persons of the business entity based on the following procedures. If the agreement will not full pay all balances due at least one year prior to the earliest ASED, then the RO will assemble all documentation for completion of the penalty to the point of proposing the assessment, complete interviews of all potentially responsible parties, secure F433-A (Collection Information Statement) from all potentially responsible parties and request signature of F2750 (Waiver Extending Statutory Period for Assessment of the Trust Fund Recovery Penalty). If a potentially responsible officer refuses to extend the ASED, and the TFRP is determined collectible, the RO is to complete and recommend assessment of the TFRP for that responsible person. If potentially responsible persons have the ability to pay from current assets or income, the Revenue Officer should request payments be made to reduce the trust fund portion of the liability. If they have the ability to make a significant payment or payments on the trust fund portion of liabilities, but do not make such payments (or do not make plans for payment from personal assets), the Revenue Officer should consider recommending assessment of the TFRP.
If taxpayers are currently ”Repeaters,” the TFRP will normally be assessed.
If accounts qualify for In-Business Trust Fund Express agreements, the Revenue Officer must ensure that the ASED is protected.
Question: Closely related to #5, it seems that many (but not all) revenue officers will resolve a business account with trust-fund tax issues and assess the trust-fund recovery penalties where appropriate, but then close out the file without resolving the individual collection cases. This creates the needless hassle of having to resolve the individual trust-fund recovery penalty cases with the Automated Collection System, even though the revenue officer is generally in the best position to resolve the individual cases. Is this new policy, or does this approach differ depending upon the area or manager? In one circumstance, a revenue officer properly assessed the trust-fund recovery penalty, but refused to work the individual collection case and closed it. When this individual case was eventually assigned to the Automated Collection System, they indicated that it was at too high of a dollar threshold to resolve and sent it back to the field……to the same revenue officer. Is this an isolated incident?
Response: It is my expectation in the Denver Territory that related IMF and BMF cases should be worked simultaneously by the same Revenue Officer, as appropriate. However, if there are no additional assessments on the IMF case and the RO has to wait on the TFRP to be assessed, there would be no case for the RO to hold open or to work until the TFRP assessment has been completed and posts to the account.
Lois Deitrich, Examination
Identity theft is a very hot topic being seen daily in exam, as well as our walk-ins across the country. SB/SE Exam proactively required every employee to take a briefing on identity theft by 12-31-2011. Unraveling returns erroneously filed is difficult; the first return received by the Service posts (since the Service doesn’t know it is not the “real” return) and when the legitimate taxpayer files their return; that is often the first indication the Service (and the taxpayer) has that their identity has been stolen.
Following link is to identity theft information. http://www.irs.gov/privacy/article/0,,id=186436,00.html
Phishing schemes are still alive and well- phishing@irs.gov is the link to send your suspicious e-mails to. We close them down as quickly as possible. IRS cannot e-mail you back but we are working on it a way to get a secure “portal” to legitimately answer POAs and taxpayers who email the Service.
We have frequently asked questions for the Offshore Voluntary Disclosure Program (OVDP) program on www.irs.gov . This program is heavily governed by technical experts. Examiners will discuss the options for taxpayers to ”opt-out” or remove themselves from the program when their participation in the program is not feasible. In some instances, the penalty on the account exceeds 300% of the account. Examiners look at what is most sensible and work very hard to work with POAs and taxpayers to achieve a good result for both the taxpayer and the Government.
Examination is not sure how we are going to respond to health care. There are a lot of high level people working on it.
Taxpayers who denounce citizenship because of taxes are usually approached as offering a frivolous argument. For more information on frivolous arguments, http://www.irs.gov/taxpros/article/0,,id=159853,00.html
Gary Easley and Linda Alden, Appeals
Gary Easley replaced Jack Estoll as the Appeals Lead Team Manager. Appeals hired Appeals Officer Melodie Farris who is an attorney.
Appeals focus at the Nationwide Tax Forums is the topic of fast-track mediation.
Question: How long is it taking to complete a non-docketed case in Appeals?
Response: Inventory has dropped somewhat, hopefully will be less than a year to work out an agreement.
A fast-track appeal is a way to get resolution to a case more quickly. If it doesn’t work the taxpayer still has appeal rights hearing within 120 days. This process can help move the parties from their hard and fast positions.
Question: Are only certain people allowed to work such cases?
Response: Yes mediation training is required.
Question: Can small (non-Large Business and International) tax cases be heard?
Response: Yes, we have five trained mediators in Denver. And if necessary, we can bring in other trained mediators if we need to.
Question: What type of cases can go through this program?
Response: See Publication 4167 and associated Revenue Procedures for details.
Lilia Ruiz, Criminal Investigation
Criminal Investigation investigates ID theft issues. We have one employee assigned to ID theft issues, his name is George Warnock at 303-603-4931. Criminal Investigation looks to see if these ID theft issues are tied to other schemes. We continue to investigate unscrupulous tax preparers.
Question: Non foreign voluntary disclosures where do these go?
Response: The Domestic Voluntary Disclosure (DVD) will need to be made to the Philadelphia Lead Development Center. Attached is a template that POAs and taxpayers can use to disclose information relative to their domestic disclosure.
It was decided that centralization of this process is essential to processing these types of disclosures. Once the Criminal Investigation Philadelphia Lead Development Center reviews the information they will direct the POA or taxpayer on where to send all other applicable documents.
The website addressing voluntary disclosures has not been updated to reflect this process and it still lists our local agent as a contact. However, the attached procedures should be followed.
Question: Is there a resurgence of frivolous positions?
Response: No more than normal– just one of the things we investigate.
Question: Will you pursue criminally?
Response: Not necessarily depends on the facts and circumstances. We prefer to go after the promoter.
Question: Any other hot topics?
Response: False 1099s, tax evasion schemes.
Nancy Carver, Counsel
Nancy Carver is the new Area Counsel Associate for the district. She left private practice in New York and has been with the Internal Revenue Service for 12 years, spending most of her time in Washington DC.
Area Counsel does advisory work for other functions. We preview statutory notices, and indirect methods of proof. Tax Court cases include international issues, conservation easement cases, abusive Roth IRAs, identity theft, hobby losses, first-time home buyers, unreported income, cancellation of debt, innocent spouse, and collection due process.
Question: Is there anyone working medical marijuana issues?
Response: One person in the group is working those types of cases.
Tax Court attorneys don’t have settlement authority. They must go through Nancy Carver or Bob Varra. If more than $1 million it is elevated.
If an attorney gives advice on an Exam case, the same attorney cannot handle the case in Appeals.
Michael Rogers, Governmental Liaison
Governmental Liaison (GL) has scaled down to two areas East and West.
GL is engaged in several data exchange programs with State of Colorado. The state income tax levy program netted IRS 18 million in its first year of state refunds.
Our partnership with the Department of Motor Vehicles includes background checks for car dealers. IRS will perform compliance checks for Department of Motor Vehicles.
Colorado Department of Labor will be participating in the Treasury Offset Program (TOPs). This will allow them to intercept federal income tax refunds to offset any debt a person may have with the Dept. of Labor.
We are currently in dialogue with the city of Denver to institute licensing compliance checks annually.
Our congressional office visits are centered on the issue of identity theft.
Charles Musso, Supervisory Taxpayer Advocate
Chuck accepted a job with the Safeguards division. Chuck also mentioned that he interviewed for the Local Taxpayer Advocate position.
Chuck mentioned that the State issued a public announcement declaring the Colorado Wildfire areas disasters.
Kristen Hoiby, Stakeholder Liaison Field
Stakeholder Liaison is still in the business of responding to education requests from practitioner organizations. We are exploring new and innovative ways to educate the practitioner community. We are in the process of obtaining our own webinar system and we also partner with other agencies in using their webinar systems.
One of our major focus areas is the registered tax return preparer’s and enrolled agent CE program.
There are several webcasts that are available to view on IRS.gov. They include ethics and authorizations and can be found at http://www.irsvideos.gov/Professional/UpcomingWebinars
With all the discussion today, Kristen mentioned a useful chart on IRS.gov which is a comparison of FATCA vs FBAR requirements.
She also encouraged practitioners to sign up for the electronic FATCA information list.
There are many questions surrounding the RTRP test and why so many individuals have not yet taken the test. We encourage practitioners to take the test as soon as possible.
IRS Document 6209 – 8A Master File Codes
The first thing that I always do when investigating a tax dispute is pull the transcripts from the IRS for review. They can be really hard to read if you don’t understand the Transaction Codes referenced. Transaction Codes are defined in IRS Document 6209 – Section 8A. This is a valuable resource in understanding how your account has evolved with the IRS.
Understanding IRS Notices and Letters
Look on the IRS notice or letter you received in the upper right hand corner for an alpha numeric sequence. The corresponding IRS explanations below to their Notices and letters are sub categorized as follows:
1. Redesigned Notices
2. Other Notices
3. Individual Filer
4. Business Filer
Redesigned Notices
Notice Number | Description | Topic |
|---|---|---|
CP01H | You received a CP 01H notice because we were unable to process your tax return. The IRS has locked your account because the Social Security Administration informed us that the Social Security number (SSN) of the primary or secondary taxpayer on the return belongs to someone who was deceased prior to the current tax year (before January 1, 2010 for a 2010 tax return). | |
CP02H | You owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma. | Balance Due |
CP03C | You received a tax credit (called the First-Time Homebuyer Credit) for a house you purchased. You may need to file a form to report a change in ownership to the house you purchased. | |
CP04 | Our records show that you or your spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. As a result, you may be eligible for tax deferment. | |
CP08 | You may qualify for the Additional Child Tax Credit and be entitled to some additional money. | Additional Child Tax Credit |
CP10 | We made a change(s) to your return because we believe there’s a miscalculation. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. | Change To Your Estimated Tax Credit Amount |
CP10A | We made a change(s) to your return because we believe there’s a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. | Change To Your Estimated Tax Credit Amount |
CP11 | We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes. | Balance Due |
CP11A | We made changes to your return because we believe there’s a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes. | Balance Due |
CP11M | We made changes to your return involving the Making Work Pay and Government Retiree Credit. You owe money on your taxes as a result of these changes. | Balance Due |
CP12 | We made changes to correct a miscalculation on your return. | |
CP12A | We made changes to correct the Earned Income Credit (EIC) claimed on your tax return. | |
CP12E | We made changes to correct a miscalculation on your return. | |
CP12M | We made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return. | |
CP12R | We made changes to the computation of the Rebate Recovery Credit on your return. | |
CP13 | We made changes to your return because we believe there’s a miscalculation. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero. | |
CP13A | We made changes to your return because we found an error involving your Earned Income Credit. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero. | |
CP13M | We made changes to your return involving the Making Work Pay credit or the Government Retiree Credit. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero. | |
CP13R | We made changes to your return involving the Recovery Rebate Credit. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero. | |
CP14 | We sent you this notice because you owe money on unpaid taxes. | |
CP14I | You owe taxes and penalties because you didn’t take out the minimum amount you had to from your traditional individual retirement arrangement (IRA). Or, you put into a tax-sheltered account more than you can legally. | |
CP16 | We sent you this notice to tell you about changes we made to your return that affect your refund. We made these changes because we believe there was a miscalculation. Our records show you owe other tax debts and we applied all or part of your refund to them. | |
CP21A | We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). | Balance Due |
CP21B | We made the change(s) you requested to your tax return for the tax year specified on the notice. You should receive your refund within 2-3 weeks of your notice. | Refund |
CP21C | We made the change(s) you requested to your tax return for the tax year specified on the notice. You’re not due a refund nor do you owe any additional amount. Your account balance for this tax form and tax year is zero. | Even Balance |
CP21E | As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. | Balance Due |
CP21I | We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. | Balance Due |
CP22A | We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). | Balance Due |
CP22E | As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. | Balance Due |
CP22I | We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. | Balance Due |
CP23 | We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a balance due because of these changes. | |
CP24 | We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes. | |
CP24E | We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes. | |
CP25 | We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero. | |
CP31 | Your refund check was returned to us, so you need to update your address. | Refund |
CP39 | We used a refund from your spouse or former spouse to pay your past due tax debt. You may still owe money. | |
CP42 | The amount of your refund has changed because we used it to pay your spouse’s past due tax debt. | |
CP45 | We were unable to apply your overpayment to your estimated tax as you requested. | Overpayment |
CP49 | We sent you this notice to tell you we used all or part of your refund to pay a tax debt. | Overpayment |
CP53 | We can’t provide your refund through direct deposit, so we’re sending you a refund check by mail. | Direct Deposits |
CP59 | We sent you this notice because we have no record that you filed your prior personal tax return or returns. | |
CP71 | You received this notice to remind you of the amount you owe in tax, penalty and interest. | |
CP71A | You received this notice to remind you of the amount you owe in tax, penalty and interest. | |
CP71C | You received this notice to remind you of the amount you owe in tax, penalty and interest. | |
CP71D | You received this notice to remind you of the amount you owe in tax, penalty and interest. | |
CP90C | We levied you for unpaid taxes. You have the right to a Collection Due Process hearing. | |
CP120 | You need to send us documentation of your tax-exempt status. | Tax Exemptions |
CP120A | Your organization’s tax-exempt status has been revoked for failure to file a Form 990 series return for three consecutive years. In addition, you are no longer eligible to sponsor a tax-sheltered annuity plan (Internal Revenue Code section 403(b) retirement plan). | |
CP130 | Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax. | Filing Requirements |
CP152 | We have received your return. | Confirmation of Return Receipt |
CP153 | We can’t provide you with your refund through a direct deposit, so we’re sending you a refund check/credit payment by mail. | Refund |
CP166 | We were unable to process your monthly payment because there were insufficient funds in your bank account. | Payment Process |
CP178 | Your tax return filing requirements may have changed: You may no longer owe excise tax. | Filing Requirements |
CP231 | Your refund or credit payment was returned to us and we need you to update your current address. | Address Update Needed |
CP259 | We’ve sent you this notice because our records indicate you didn’t file the required business tax return identified in the notice. | |
CP259A | We sent you this notice because our records indicate you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax. | |
CP259B | We sent you this notice because our records indicate you didn’t file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. | |
CP259C | We sent you this notice because our records indicate you are presumed to be a private foundation and you didn’t file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. | |
CP259D | We sent you this notice because our records indicate you did not file a required Form 990-T, Exempt Organization Business Income Tax Return. | |
CP259E | We sent you this notice because our records indicate you did not file a required Form 990-N, e-Postcard. | |
CP259F | We’re sending you this notice because our records indicate you did not file a required Form 5227, Split-Interest Trust information Return. | |
CP259G | We sent you this notice because our records indicate you did not file a required Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. | |
CP259H | We sent you this notice because our records indicate you are a tax-exempt political organization and you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax. | |
CP276A | We didn’t receive a correctly completed tax liability schedule. We normally charge a Federal Tax Deposit (FTD) penalty when this happens. We decided not to do so this time. | FTD Penalty |
CP276B | We didn’t receive the correct amount of tax deposits. We normally charge a Federal Tax Deposit penalty when this happens. We decided not to do so this time. | FTD Penalty |
CP297C | We levied you for unpaid taxes. You have the right to a Collection Due Process hearing. | |
CP501 | You have a balance due (money you owe the IRS) on one of your tax accounts. | |
CP503 | We have not heard from you and you still have an unpaid balance on one of your tax accounts. | |
CP504 | You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe. | |
CP504B | You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) certain property or rights to property and apply it to pay the amount you owe. | |
CP521 | This notice is to remind you that you have an installment agreement payment due. Please send your payment immediately. | |
CP523 | This notice informs you of our intent to terminate your installment agreement and seize (levy) your assets. You have defaulted on your agreement. | |
CP565 | We gave you an Individual Taxpayer Identification Number (ITIN). | |
CP565 (SP) | Nosotros le asignamos un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés). | |
CP566 | We need more information to process your application for an Individual Taxpayer Identification Number (ITIN). You may have sent us an incomplete form. You may have sent us the wrong documents. | |
CP566 (SP) | Necesitamos más información para poder tramitar su solicitud para un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés). Usted quizá nos envió un formulario incompleto. O, quizá nos envió los documentos incorrectos. | |
CP567 | We rejected your application for an Individual Taxpayer Identification Number (ITIN). You may not be eligible for an ITIN. Your documents may be invalid. We may not have received a reply when we asked for more information. | |
CP567 (SP) | Hemos rechazado su solicitud para un Número de Identificación Personal de Contribuyente (ITIN, por sus siglas en inglés). Es posible que no reúna los requisitos para un ITIN o que sus documentos no sean válidos. O es posible que no hayamos recibido una contestación de su parte cuando solicitamos más información. | |
CP601 | Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas. | |
CP603 | No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas. | |
CP604 | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda. | |
CP604B | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda. | |
CP621 | Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente. | |
CP623 | Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo. | |
CP711 | Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones. | |
CP712 | Hemos realizado cambios para corregir un error de cálculo en su planilla. | |
CP713 | Hemos realizado cambios para corregir un error de cálculo en su planilla. No se le debe un reembolso y no adeuda una cantidad de dinero adicional a causa de estos cambios. El saldo de su cuenta es cero. | |
CP714 | Le enviamos este aviso porque usted adeuda contribuciones pendientes de pago. | |
CP721 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. | |
CP722 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. | |
CP749 | Le enviamos este aviso para informarle que hemos utilizado todo o parte de su reintegro para pagar una deuda contributiva. | |
CP759 | Le enviamos este aviso porque no tenemos registro que indique que usted radicó su planilla o planillas de contribuciones personales para uno o varios años anteriores. | |
CP771 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. | |
CP772 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. | |
CP773 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. | |
CP774 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. | |
CP959 | Usted no radicó su planilla de contribución de negocios identificada en este aviso. | |
CP2005 | We accepted the information you sent us. We’re not going to change your tax return. We’ve closed our review of it. | |
CP2006 | We received your information. We’ll look at it and let you know what we’re going to do. | |
CP2057 | You need to file an amended return. We’ve received information not reported on your tax return. | |
CP2501 | You need to contact us. We’ve received information not reported on your tax return. |
Other Notices and Letters
Notice or Letter Number | Title |
|---|---|
CP 57 | Notice of Insufficient Funds |
CP 88 | Delinquent Return Refund Hold |
CP 90/CP 297 | Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing |
CP 297A | Notice of Levy and Notice of Your Right to a Hearing |
CP 91/CP 298 | Final Notice Before Levy on Social Security Benefits |
CP 161 | Request for Payment or Notice of Unpaid Balance, Balance Due |
CP 2000 | Notice of Proposed Adjustment for Underpayment/Overpayment |
Letter 0484C | Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer |
Letter 0549C | Balance Due on Account is Paid |
Letter 668D(LP 68) | We released the taxpayer’s levy. |
Letter 0681C | Proposal to Pay Accepted |
Letter 0757C | Installment Privilege Terminated |
Letter 1058 (LT 11) | Final Notice prior to levy; your right to a hearing |
Letter 1615 (LT 18) | Mail us your overdue tax returns. |
Letter 1731 (LP 64) | Please help us locate a taxpayer. |
Letter 1737 (LT 27) | Please complete and site Form 433F, Collection Information Statement. |
Letter 1961C | Installment Agreement for Direct Debit 433-G |
Letter 1962C | Installment Agreement Reply to Taxpayer |
Letter 2050 (LT 16) | Please call us about your overdue taxes or tax return. |
Letter 2257C | Balance Due Total to Taxpayer |
Letter 2271C | Installment Agreement for Direct Debit Revisions |
Letter 2272C | Installment Agreement Cannot be Considered |
Letter 2273C | Installment Agreement Accepted: Terms Explained |
Letter 2318C | Installment Agreement: Payroll Deduction (F2159) Incomplete |
Letter 2357C | Abatement of Penalties and Interest |
Letter 2603C | Installment Agreement Accepted – Notice of Federal Tax Lien Will be Filed |
Letter 2604C | Pre-assessed Installment Agreement |
Letter 2761C | Request for Combat Zone Service Dates |
Letter 2789C | Taxpayer Response to Reminder of Balance Due |
Letter 2840C | CC IAPND Installment Agreement Confirmation |
Letter 3030C | Balance Due Explained:Tax/Interest Not Paid |
Letter 3127C | Revision to Installment Agreement |
Letter 3217C | Installment Agreement Accepted: Terms Explained |
Letter 3228 (LT 39) | Reminder notice. |
Letter 4903 (LT 26) | We have no record of receiving your tax returns. |
Letter LP 47 | Address Information Request |
Letter LP 59 | Please contact us about the taxpayer levy. |
