The following is a summary of the Internal Revenue Service’s most recent Stakeholder Liaison Meeting in Denver, Colorado as prepared by Ann Burton, IRS Senior Stakeholder Liaison. It is jam packed with procedural information and status updates from line managers and group leaders of the various IRS operational functions including Collections, Examinations, Appeals, Tax Court etc. A worthy read for any practitioner navigating the seemingly troubled waters of IRS operations. I found some of the Q+A particularly enlightening. Towards the end there is also information on Colorado updates. Enjoy!
Dena Figueroa & Tammy Hobson, IRS Automated Collections – ACS
To help better protect taxpayer information, beginning January 5, 2014, we will no longer process transcript requests through the Transcript Delivery System (TDS) if an Identity Theft Indicator is on the taxpayer’s account. The tax professional will receive a message letting them know the transcript cannot be processed and the taxpayer will receive a notice alerting him or her of the request for the transcript and instructing them to contact the Identity Protection Specialized Unit.
If an ID theft indicator is on an account that is requesting transcripts, the taxpayer will need to contact the ID theft office to obtain transcripts.
Question: We were recently advised by an Internal Revenue Service representative from the Practitioner Priority Hotline that requests for account transcripts would, in the near future, not be accepted telephonically. A different representative from the Practitioner Priority Hotline did not know about that (assuming it is true), but advised that account transcripts and other related information will soon be unavailable on IRS E-Services. What (if any) of this is true?
Response: IRM 18.104.22.168.4(12) (Transcript Requests) states the practitioner may order online if registered with e-services and having access to TDS (Transcript Delivery System). PPS (Practitioner Priority Service) may order transcripts for the practitioner even if the practitioner is registered for e-services. At this time, there is no information of removing e-services.
Question: At our last meeting, we were advised that all individual cases under $1,000,000 of accrued liability could be worked by ACS. Recently, while working with ACS on a collection case, we were advised that the cutoff is $250,000. What is the current dollar threshold for working an individual tax case with ACS? Is that set to change?
Response: ACS has the authority to resolve individual (i.e., Form 1040, Trust Fund Recovery Penalty) liabilities (i.e., initiating an Installment Agreement (IA), requesting a Currently Not Collectable (CNC)) up to $250.000. An ACS employee may initiate an In-Business Trust Fund (IBTF) IA on a business case involving trust fund liabilities up to $25,000; the IBTF must be on a Form 433D or 2159. The CR may initiate a 60-day extension of time to pay on business cases involving trust fund liabilities up to $999,999. See IRM 22.214.171.124.6. ACS has the authority to work cases (i.e., issuing a levy if appropriate to move the case towards resolution) to $999,999.
Question: Why does the ACS issue Final Notices of Intent to Levy (typically, Letters 1058) to taxpayers on cases that exceed the dollar threshold where the case can actually be worked by them? For example, in a recent matter, we attempted to resolve a case in excess of $1,000,000 with ACS, but were advised that they lacked jurisdiction to work on the case. They further advised that the case would be sent to the queue for assignment to a revenue officer, but they subsequently issued Letter 1058. By doing this, aren’t they working on the very case that they purportedly lacked jurisdiction over? Moreover, by doing this, ACS accelerates the running of the late payment penalty with no immediate recourse at hand.
Response: It is not proper to issue an LT11 (Letter 1058) prior to sending the case to the queue for assignment to an RO per IRM 126.96.36.199.1(4)(b). Most likely the RO issued the LETER 1058C.
Question: Why is there such a disconnect between the phone numbers listed on centralized collection correspondence and the appropriate IRS office which the taxpayer/client needs to be talking to? For example, a client recently received a CP 504 Notice and we called the number on the notice. After being placed on hold for nearly one hour, and then discussing the case with the representative for an additional fifteen minutes, we were advised that we contacted the Taxpayer Information Service number. We were then transferred to the appropriate ACS phone number but were placed on hold for nearly one additional hour. Succinctly, why can’t a direct ACS phone number be placed on collection correspondence?
Response: The CP504 is tax period specific (i.e. Form 1040 for the period ending 12-31-2012) and does not reflect any other issues on the wider case. You may bypass Accounts Management by inputting your client’s TIN when prompted. The automated system should recognize one of your client’s tax periods is with ACS and transfer the call appropriately.
Question: We are noticing more cases where the fraudulent failure to file penalty (I.R.C. § 6651(f)) has been asserted, with facts which, historically, would have warranted only a standard late-filing penalty. Has there been a directive to utilize this penalty provision more frequently, and what factors does the Service look to these days when asserting this penalty?
Response: We are unaware of any directive to assert the Fraudulent Failure to File (FFTF) penalty under IRC 6651(f). IRM 188.8.131.52.7.5(3) lists the factors used to assert the FFTF penalty. These factors are: The taxpayer refuses to, or is unable to, explain the failure to file; the taxpayer’s statement does not agree with the facts of the case; there is a history of failing to file or late filing, but an apparent ability to pay; the taxpayer fails to reveal or tries to conceal assets; the taxpayer pays personal and business expenses in cash when cash payments are not usual, or cashes rather than deposits checks that are business receipts; and the taxpayer is aware of the filing requirement.
Question: Are there any plans for a “Fresh Start Initiative” payment plan hotline to minimize wait times when calling the general collection phone numbers?
Response: There are no plans for a Fresh Start Initiative hotline at this time.
Kenneth Cooper, IRS Examination
Examination is focusing on several things this fiscal year.
Exam continues to place a strong emphasis on identifying and stopping tax schemes and abusive preparers through use our lead development center. Referrals are received from internal and external sources including tax professionals. Exam works closely with W & I and the return preparer’s office to identify questionable preparers. Exam also conducts parallel investigations were criminal investigation and examination conducts separate but contemporaneous investigations. In fiscal year 2012, Department of Justice obtained 54 injunctions. In the first five months of fiscal year 2013, 27 injunctions were obtained.
Another priority is the flow through entities. Tier structuring of flow through entities are challenging to SBSE. Using tier structures may obscure the economic reality or substance of transactions. Over the years, there has been an increase in the use of flow through entities. A partnership strategy is being initiated by SB/SE and LB & I focusing on work load and issue identification, as well as increasing the knowledge and expertise of our workforce in this area.
The offshore voluntary disclosure initiative has slowed down somewhat since the 2009 initiative. All cases from 2009 have closed. Tax year 2009 received 15,000 applications which resulted in 11,000 audits. There are still a few cases left for 2011. 2011 received 18,000 applications which resulted in 12,000 audits. 2011 still has a few cases in the pipeline that should be closed shortly. Tax year 2012 has some open cases but nothing near as high as 2009 and 2011.
The offshore voluntary disclosure program allowed Internal Revenue Service to collect more than $5.5 billion in back taxes interest and penalties from the approximate 38,000 voluntary disclosures made to date.
Question: How is the opt out situation working?
Response: Cases where taxpayers opt out of the ODVI program are sent to the Opt Out Committee located in the Midwest area to be worked. Exam has not been receiving Opt Out cases back from the Opt Out Committee at this time. The opt out program seems to be working well.
The national research programs are still around. There is currently a 1040 study that is a multi-year program. There is a corporate one year study involving 2500 corporate returns with assets under $250,000. These returns have been classified and have been sent to the field and there is an employment tax and fuel tax program.
High Income High Wealth taxpayers are another focus of examination. Rentals, flow through entities and cash transactions are related to these types of taxpayers. 12.5% of taxpayers who earn 1 million or more are being audited. Taxpayers who earn $200,000-$1 million have a 1% chance of being audited, which is pretty high.
Exam continues to make preparer visits in the field. In 2013, there were over 3000 E file, pre-filing season and due diligence visits.
Exam also initiates Preparer Action Cases (PACS) . A preparer action cases is an investigation where clients of questionable preparers are examined to determine whether preparer penalties and/or injunctive actions against the preparer are warranted. PACs are used to treat the most egregiously noncompliant preparers.
Another issue facing exam is the identity theft of taxpayers. Compliance employees provide assistance to identity theft victims, including placing identity theft tracking indicators on the victim’s accounts and coordinating with a specialized unit in the campus to correct their accounts and get them their correct refund.
Michael Rogers, IRS Governmental Liaison
Internal Revenue Service has 6.5 million hits on YouTube. The videos on YouTube assist taxpayers in learning about Internal Revenue Service procedures, policies and practices. Several videos include information on tax law.
The identity theft telephone number is 1-800-908-4490.
Internal Revenue Service worked closely with FEMA to assist in staffing disaster recovery centers during the Colorado Flooding Disaster.
Eric Jaeger, IRS Taxpayer Advocate Service
The delay in the start of the filing season will likely cause concern for taxpayers who have hardships and want to request an expedite refund for tax year 2013. TAS cannot, even in a hardship situation, get a return processed before the start of the filing season (return acceptance period).
The modification of the TAS Case Acceptance criteria that began about a year and a half ago has been extended for the next year. Specifically, TAS will not accept non-hardship cases involving: original return processing; unpostable/rejected tax returns; injured spouse claims; and amended returns (even if the case would otherwise meet TAS criteria). The reasoning behind this decision is to enable TAS to effectively assist those taxpayers who are experiencing an economic hardship. Economic hardship criteria includes the following:
1. The taxpayer is experiencing economic harm or is about to suffer economic harm. This usually involves a privation of necessary living expenses such as housing, food, medical care, transportation, etc.
2. The taxpayer is facing an immediate threat of adverse action. This includes a threat of enforcement action such as the filing of a levy or lien.
3. The taxpayer will incur significant costs if relief is not granted (including fees for professional representation). The term “significant” is meant to be relative to the individual circumstances of the taxpayer.
4. The taxpayer will suffer irreparable injury or long term adverse impact if relief is not granted. This can include a loss of livelihood, ability to conduct business or other lasting effects caused by an IRS action.
In reference to other meeting comments and concerns about the ongoing difficulties encountered due to identity theft, it was noted that recent case receipts in TAS for identity theft issues are down nearly 40% in comparison to a year ago. This may be attributable to the IRS doing a better job of working these cases, since TAS would normally become involved only when the IRS is unable to resolve the issue, or when a taxpayer is encountering an economic hardship.
The initial contact, once a TAS case is established, is three business days for economic hardship cases and five business days for systemic hardship cases.
Stephen Boyd, IRS Criminal Investigation
Criminal Investigation’s priorities are high impact cases and our mission is to investigate these cases, people in jail, publicize the outcome as a deterrent. Identity theft cases have tripled and are still on the rise. Criminals have determined that ITIN’s have been easy to obtain, and are using fraudulent ITINS for tax. Some practitioners go through a certification training program that allows them to certify documents for taxpayers to obtain an ITIN number.
There are special agents throughout the world, working with foreign banks that are cooperating with the United States.
As one of our priorities Criminal investigation has an on-going effort to combat sovereign citizens.
We are working with the State to assist with compliance within the marijuana industry in compliance. Compliance includes not selling to minors, trafficking across State lines and following the regulations for grow houses.
Cathy Schum, IRS Collection
Implemented January 1, installment agreement and offer in compromise fees have increased. Installment agreement fees have increased to $120 and offer in compromise fees have increased to $186. The fee to reinstate a defaulted installment agreement has increased to $50. The user fee for a direct debit installment agreement remains unchanged at $52. Health and Human services reduction is at $43.
All revenue officers have an E- fax number, which makes faxing documents more efficient.
Disaster relief for the 11 counties affected by the flooding has ended.
When collection receives cases identified as an identity theft case, the revenue officer will work the case according to specific guidelines in the IRM. A taxpayer that self identifies, are instructed to contact the identity theft unit.
Marijuana cases are handled on case-by-case basis. It is a difficult situation due to banking issues.
Matthew Houstma, Area Counsel
Counsel had two recent retirements, attorney Randy Preheim and paralegal Robert Boyer both retired within the last month.
Counsel had a December calendar, and currently have a January calendar with 2 to 3 trials per calendar.
Counsel has some medical marijuana cases that may be docketed this fall. The issues revolve around 280E issues, business expenses.
1099K-credit card reporting notices are going out to taxpayers, allowing them to explain the differences in what the credit card company reported and what was claimed on the return. If the initial notice is ignored, then that stat notice will be sent out to the taxpayer.
There are still some easement cases out there to be resolved.
Counsel will stop accepting bankruptcy cases, due to staffing shortage.
Counsel is interested in feedback from any pro se petitioners who received the letter Counsel is sending with their Answer explaining the Appeals and Tax Court process. Please send Debbie your feedback to pass along to Matthew.
Matthew will pass along the feedback on the new notices being sent to taxpayers that seem to bury the intent of the notice.
Highlights of recent tax legislation
2013 Colorado Tax Updates
Refund Deadline for Overpaid Sales and Use Tax – FYI Sales 1, Paragraph 3
Wildfire Mitigation – FYI Income 65
Income Tax Deductions for Medical Marijuana Businesses – Look for changes on the 2014 tax return.
Elimination of Sales and Use Tax Exemption for Cigarettes — Retailers will continue to charge state sales tax of 2.9 percent on all retail sales of cigarettes.
Compensation for Persons Wrongly Incarcerated
Innovative MV Income Tax Credit
Extends Colorado Job Growth Incentive Income Tax Credit – FYI Income 66
Authority of License Plate Auction Group
Income Tax Refund Deposit to College Invest (see 104 form, Refund area)