IRS ‘HOT’ Issues

This post on IRS ‘HOT’ issues to know is an amalgamation of notes originating from time invested monitoring the pulse of IRS procedural operations.  Self ‘punishment’ as those closest to me espouse, due to childhood scarring from an emotionally distant and psychologically abusive father.

They could be right, but you my dear readers are the benefactors of this knowledge.  At the very least you might have found a temporary cure for insomnia, so read on about the most salient ‘hot issues’ inside the IRS and how to deal with them.

IRS is in fact communicating via email in very specific limited circumstances:

In an effort to implement new ways to communicate with the IRS to minimize in-person contact as a result of our new ‘normal’ where everyone seemingly is deemed by default to be ‘infected’ and contagious. One step to increasing digital interactions is an email option available ONLY for taxpayers/tax pros working with an IRS enforcement employee (Revenue Agent or Revenue Officer) to resolve an examination or collection activity.

The choice to transmit documents electronically is solely up to you as an individual taxpayer. Get a closer look at how the IRS turned the challenging demands of the pandemic into opportunities to meet taxpayers’ needs and to serve their representatives.

Economic Impact Payments (EIP) 1 & 2: 

• For questions regarding non-receipt of EIPs 1 & 2 and prior year Recovery Rebate Credits (RRC) not claimed, start by referencing IR-2022-19.
• It provides updated information on 3^rd round Economic Impact payments and also includes guidance on claiming the 2020 RRC for EIP1 & EIP2. Economic Impact Payments

Advance Child Tax Credit & Third round of Economic Impact Payment letters:

• If you have not received Letters 6419 (Reconciliation Statement – Adv CTC) and 6475 (Your Third Economic Impact Payment), misplaced or thrown them away, the IRS urges you to check their IRS Online Account.
• When properly functioning the Online Account includes the official figures in the IRS systems; using this number will help avoid potential processing and refund delays.
• You may also verify the amount of their payments using the CTC Update Portal available on IRS.gov or by calling 800-908-4184 to obtain the amounts. See FS-2022-5 for more information.

Taxpayer Advocate Update:

NTA Blog: The IRS Hasn’t Processed My Power of Attorney Form. Should I Submit Another?

The Local Tax Advocate (LTA) also suggested utilizing the Systemic Advocacy Management System (SAMS) – Taxpayer Advocate Service (irs.gov) to tackle “big-picture” problems with IRS/tax law.

Notices

Taxpayers are reporting notices are being issued for tax balances that have been paid by EFTPS, Direct Pay, EFW and mail. The IRS has decided to suspend notices in situations where we have credited taxpayers for payments but have no record of the tax return being filed.

Per the IRS Commissioner, in many situations, the tax return may be part of our current paper tax inventory and simply hasn’t been processed. Stopping these letters — which could have otherwise been sent to thousands of taxpayers — will help avoid confusion.  Please also see:

• IRS Statement – Providing meaningful assistance to taxpayers in the current environment.
• IRS continues work to help taxpayers; suspends mailing of additional letters

IRS CP 14 notice is required, by I.R.C. § 6303(a), to be sent to taxpayers when tax is assessed and a balance is due. The CP 14 notice is not suspended. See IR-2022-31 for a complete list of suspended notices.

 Advance Premium Tax Credit

Be warned – The IRS will reject 2021 federal income tax returns for missing IRS Form 8962.  You must attach the completed Form 8962 to reduce or completely eliminate the need for correspondence. If the return is rejected and you do not believe Form 8962 should be included with the return, include your reason as an attachment titled “ACA Explanation” to your electronically transmitted forms – assuming your software allows for this.

Why do you have to do this?  The IRS introduced a business rule which is intended to reduce the need for correspondence. This triggers when IRS records indicate that you, your spouse, if married filing jointly, or a dependent claimed on the tax return, received advance payment of the premium tax credit through the Affordable Care Act Marketplace to help pay monthly insurance premium.

Notices issued asserting that tax forms have not been received

Many taxpayers report receiving CP80 Notices stating tax returns have not been filed when the returns were actually filed and they have verification of filing.  Due to processing delays for 2019 and 2020 tax returns, the issuance of CP80 and CP080 (Unfiled Tax Return – Credit on Account) notices has been suspended.  How to respond to the notice depends on what tax year the notice applies to.

• If you received a notice for your 2019 return and you filed timely, please refile the return.
• If you received a notice for your 2020 return DO NOT refile.

Economic Impact Payment Confusing Letter

IRS ‘original’ FAQ Q G2. Where can I find the amount of my third Economic Impact Payment(s) to help me calculate the 2021 Recovery Rebate Credit? (updated on February 8, 2022) language is confusing and doesn’t make it clear what “total amount” would appear on IRS Letter L6475 for each spouse. The FAQ stated: If you received a joint payment with your spouse, the letter shows the total amount of payments.

However beware – If you file separate 2021 tax returns, each of you must enter half of the amount of the payment shown on Letter 6475.

Because of hard working tax practitioners like yours truly, this issue was elevated up the flag pole inside the IRS and the FAQ has been revised to state: If you and your spouse received joint payments, each of you will receive your own letter showing half of the third payment.

• Again, if you file separate 2021 tax returns, each of you must enter your half of the payment amount shown on Letter 6475 when calculating any 2021 Recovery Rebate Credit you may be eligible for.
• The verbiage used in Understanding Your Letter 6475 is very clear. It states: For married individuals filing a joint return, each spouse will receive their own letter showing half of the total amount.

For more on IRS hot issue contact me today.