Archive for IRS Levy
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.
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 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. |
Individual Filer Notices
CP 09 – Earned Income Credit You May Be Entitled To From IRS Informs the recipient that, based on information reported on their tax return, they may qualify to take the Earned Income Credit.
CP 32A – We Want to Send You a New Refund Check Explains why we are sending a new refund check, what needs to be done before we can send it, and what we’ll do after the recipient replies to us.
CP 54B – Problem With Name and Identifying NumberInforms the recipient that the name and identifying number used on their tax return don’t match information we received from the Social Security Administration, gives examples of what might cause such a mismatch, and explains the steps the recipient needs to take to resolve it.
CP 54E – Problem With Name and Identifying Number Informs the recipient that the name and identifying number used on their estimated tax payment don’t match information we received from the Social Security Administration, gives examples of what might cause such a mismatch, and explains the steps the recipient needs to take to resolve it.
CP 54G – Problem With Name and Identifying Number Informs the recipient that the name and identifying number used on their tax return don’t match information we received from the Social Security Administration, gives examples of what might cause such a mismatch, and explains the steps the recipient needs to take to resolve it.
CP 54Q – Problem With Name and Identifying Number Reminds the recipient that we’re holding their refund because the name and identifying number used on their tax return don’t match the information given to us by the Social Security Administration, gives examples of what might cause such a mismatch, and explains the steps the recipient needs to take to resolve it.
CP 57 – Notice of Insufficient Funds Informs the recipient that we are charging a penalty for insufficient funds.
CP 60 – Notice of Credit Reversal Informs the recipient that we’ve transferred a credit from their account leaving a balance due.
CP 75 – EIC Portion of Refund Delayed Informs the recipient that we’re delaying the EIC portion of their refund because we may examine parts of their tax return. The notice explains what areas we may examine and what steps we’ll take next.
CP 75A – EIC Portion of Refund Delayed Informs the recipient that we’re delaying the EIC portion of their refund because we may examine the Form 8862, Information to Claim Earned Income Credit After Disallowance, filed with their tax return. The notice explains what steps we’ll take next.
CP 79 – Earned Income Credit Eligibility Requirement Informs the recipient that they may need to complete an additional form to claim the credit if their Earned Income Credit (EIC) was disallowed or reduced by the IRS for any year after 1996.
CP 79A – Earned Income Credit Two Year Ban Informs the recipient that they are banned from claiming the Earned Income Credit (EIC) for two years, and must complete an additional form to claim the EIC in the first year after the ban has been lifted.
CP 88 – Delinquent Return Refund Hold Informs the recipient that we’re holding their refund until they file their delinquent return or provide an acceptable explanation for not filing it.
CP 90 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing Informs the recipient that they still have a balance due on their account and that we intend to levy on certain assets unless they take appropriate action within 30 days.
CP 91 – Final Notice Before Levy on Social Security Benefits Informs the recipient that they still have a balance due on their account and that we intend to levy on their Social Security benefits unless they take appropriate action within 30 days.
CP 2000 – We Are Proposing Changes to Your Tax Return Informs the recipient that we’re proposing changes to their tax return based on different information reported to us by their employers, banks, and other payers. The CP 2000 provides detailed information about the differences, the changes we propose, and what to do if they agree or disagree with the proposal.
Business Filer Notices
CP 101 – Math Error, Balance Due on Form 940 Informs the recipient of one or more changes made to their Form 940 or 940-EZ return during processing. The changes resulted in a balance due on the account.
CP 102 – Math Error, Balance Due on Form 941, 941SS, 943, or 945 Informs the recipient of one or more changes made to their Form 941, 941SS, 943, or 945 return during processing. The changes resulted in a balance due on the account.
CP 108 – Problem With Your Federal Tax Deposit Informs the recipient we couldn’t determine the tax type or tax period for which a federal tax deposit was intended and explains how we applied the payment.
CP 111 – Math Error, Overpayment on Form 940 Informs the recipient of one or more changes made to their Form 940 or 940-EZ tax return during processing. The changes resulted in an overpayment.
CP 112 – Math Error, Overpayment on Form 941, 941SS, 943, or 945 Informs the recipient of one or more changes made to their Form 941, 941SS, 943, or 945 tax return during processing. The changes resulted in an overpayment.
CP 138 – Overpayment Applied to Other Federal Taxes Informs the recipient that we applied all or part of their overpayment to other taxes they owe.
CP 145 – Application of Overpayment Reduced Informs the recipient that we weren’t able to fully honor their request to apply a portion of their overpayment to the subsequent tax period, explains why, and shows the amount, if any, we did apply.
CP 160 – Reminder of Balance Due Informs the recipient of a balance that is still due on their account.
CP 161 – Balance Due – Request for Payment or Notice of Unpaid Balance Informs the recipient that there is an unpaid balance due on their account.
CP 165 – Penalty for Dishonored Check (Federal Tax Deposit) Informs the recipient that a check they sent as payment for their federal tax deposit was returned unpaid by their bank.
CP 207 – Proposed FTD Penalty – Request for Correct Information Asks the recipient to send us a completed Record of Federal Tax Liability (ROFTL).
CP 209 – EIN Assigned in Error Informs the recipient that we erroneously assigned them more than one EIN.
CP 235 – Federal Tax Deposit Penalty Waived Due to Change in Deposit Requirements Informs the recipient that we’re waiving their FTD penalty because they meet the criteria for penalty relief.
CP 236 – Reminder of Your Semi-Weekly Deposit Requirements Reminds the recipient that they’re subject to semi-weekly deposits.
CP 238 – You Made One or More Late Federal Tax Deposits But We Didn’t Charge You a Penalty Informs the recipient that they made one or more late federal tax deposits and provides guidance on these deposits and how to make them.
CP 260 – Credit Adjustment Informs the recipient that we removed one or more credits that had been erroneously applied to their account and that the account now has a balance due.
CP 261 – Notice of Acceptance as an S-Corporation Informs the recipient that we’ve approved their election to be treated as an S-Corporation and to explain their obligations.
CP 267 – Account Overpaid – Possibly Misapplied Payments Informs the recipient that they have more credit available on their account than they claimed on their tax return.
CP 268 – Correction and Overpayment Notice Informs the recipient of one or more changes made to their return during processing and of a discrepancy in the total credits claimed on their return and the total credits available on their account.
CP 297 – Notice of Intent to Levy and Notice of Your Right to a Hearing Informs the recipient of our intent to levy and of their right to receive appeals consideration.
CP 297A – Notice of Levy and Notice of Your Right to a Hearing Informs the recipient of our intent to levy and of their right to receive appeals consideration.
CP 298 – Final Notice Before Levy on Social Security Benefits Informs the recipient of our intent to levy on their social security benefits.
IRS Levy Release Overview
The IRS it seems is issuing liens and levies with substantial gusto lately. I’ve grown reasonably skilled at getting these burdens timely released and felt compelled this evening to share some of my experiences in this blog post.
A levy on a bank account attaches only to funds in your account at the time the bank processes the levy, future deposits are not subject to the levy. Usually banks offer a 21-day hold on your account before turning over funds to the US Treasury to provide an opportunity for you to get the levy released. If you may be at risk of a levy you should be duly notified and it is best to be nimble as it were with bank accounts referencing your social security number.
A levy on wages is continuous and impacts every paycheck you receive until it is released. IRC 6334(a)(9) provides for an amount of wages that are protected from levy. With the notice of levy, the IRS will provide your employer with a Statement of Exemption and Filing Status as part of IRS Form 668-W(c)(DO). The amount of exemptions are found in IRS Publication 1494.
Sometimes letting the levy stand with a claim of exemptions provides a better result than incurring the expense of getting a negotiated levy release. This is measured in terms of your time or the $$ needed to hire an Enrolled Agent to negotiate on your behalf.
Levies are also immediately released upon the filing of a bankruptcy petition. If the IRS does not release a levy upon filing for bankruptcy call the IRS Centralized Insolvency Unit at 800-973-0424. No further paperwork should be required, but then again it is the IRS. The bankruptcy filing also temporarily precludes the IRS from filing future federal tax liens.
If you owe $25,000 or less to the IRS, you may qualify for a streamlined installment agreement to release a levy which requires little financial disclosure. These agreements can be completed over the phone with an IRS Automated Collection Officer if he or she isn’t a complete idiot. Don’t be surprised though, some of them are so stupid it makes my head spin. Sometimes it is worthy of consideration to pay down the amount owed to $25,000 or under so as to qualify to get the quick levy release and avoid financial disclosures.
A streamlined installment agreement does not require IRS managerial approval; there is no application of the IRS living expense allowances; and, asset disclosure is avoided. The IRS will however require all delinquent returns be filed before releasing the levy unless you are claiming economic hardship.
The filing of an offer in compromise or innocent spouse claim can also result in a levy release without negotiation. The IRS is required by law to suspend collection efforts when either a compromise or an innocent spouse claim is filed.
The Internal Revenue Manual provides for the allowance of all your reported living expenses if an installment agreement can pay off the liability in full within five years according to IRM 5.15.1.10. If more than $25,000 is owed and there is not enough cash flow to repay the taxes in five years, IRM 5.15.1.10 permits allowing the excess living expenses for one year.
In the Tax Court case of Vinatieri v. Commissioner, 133 TC 392 (2009) the Court held that IRC Sec. 6343(a)(1)(D), which provides for release of an IRS levy upon the finding of economic hardship, had no requirement that delinquent tax returns had to be brought into compliance as a condition of release. The court also found that the IRS was unreasonable in deciding to pursue levy action in an economic hardship case, regardless of the compliance issues. If the IRS refuses to recognize Vinatieri, reference the fact that IRS chief counsel acquiesced with the Vinatieri decision as it relates to unfiled returns and economic hardship according to Chief Counsel Notice 2011-005.
If you do not fall into one of the above categories you need to prepare a statement of financial position on either IRS Form 433-A, 433-B, 433-D, or 433-F and be prepared to negotiate a reasonable collection potential. This is for lack of a better phrase a royal pain in the proverbial hinder because it can be woefully time consuming to gather all the necessary substantiating documentation.
It really is best to consult a professional with experience to help shepherd you through this process as it can be frustrating and anxiety prone. Reputable practitioners with experience will tell you up front if the levy can be released and if so exactly what needs to be done to make it happen. Plan on about 10 hours worth or work or less. Most practitioners working in this area bill their services out for about $150/hour.
IRS Stakeholder Liaison Meeting Summary – Denver January 2012
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?
Response: Fact sheet 2011-13.
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:
Test Locations
Candidate Information Bulletin
What to expect on test day video
Frequently Asked Questions
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.
Burden of Proof
The IRS as many of you are painfully aware is often looked upon as accusing first without due process requiring the tax payer to shoulder the burden of proof in regards to his or her innocence relevant to the Internal Revenue Code. In other words there is no such concept as ‘innocent until proven guilty’ when it comes to IRS audits. Systematically the IRS conducts correspondence exams routinely requiring tax payers to defend themselves. That is how the United States Treasury rolls, deal with it. Shifting the burden of proof back onto the IRS is almost always an effective means of navigating through the process in route to a favorable resolution. How does one do that?
Under §6201(d) the taxpayer can shift the burden of proof to the IRS if he or she asserts a reasonable dispute with respect to the income reported on an information return like say for example a 1099-C Cancellation of Debt.
According to §7491(a) (1) the burden of proof is switched from the taxpayer’s responsibility to the IRS if the taxpayer submits
factual evidence contrary to the information return.
Summary, Deficiency and Jeopardy IRS Assessments
Collection of federal taxes starts with an assessment of tax due. The assessment serves two functions.
It is the government’s mechanism for keeping records and recording a liability.
The assessment, authorizing the government to collect, is equivalent to the final judgment that a general creditor must obtain to collect a debt.
