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IRS Update

Richard G. Furlong, Jr. Senior Stakeholder Liaison 215-861-1551 richard.g.furlong@irs.gov. IRS Update. MACE CPE Seminar October 18, 2012. The Tax Gap. Amount of tax liability faced by taxpayers not paid on time Tax gap estimates for 2006 $450B, gross tax gap

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IRS Update

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  1. Richard G. Furlong, Jr.Senior Stakeholder Liaison 215-861-1551 richard.g.furlong@irs.gov IRS Update MACE CPE Seminar October 18, 2012

  2. The Tax Gap • Amount of tax liability faced by taxpayers not paid on time • Tax gap estimates for 2006 • $450B, gross tax gap • 83.1%, compliance rate • 56%, Net misreporting rate on amounts not subject to information reporting

  3. Reducing the Tax Gap • Reducing opportunities for evasion • Making a commitment to tax gap research • Improve information technology • Improving compliance activities • Enhancing taxpayer service • Reforming & simplifying tax law • Coordinating with partners and stakeholders

  4. Return Preparer Initiative • Launched on June 4, 2009 • Mandatory registration and use of a PTIN • Competency testing • Continued education • Public database • E-News for Tax Professionals

  5. Registered Tax Return Preparer • Beginning in 2014, only RTRPs, EAs, CPAs and attorneys are authorized to prepare individual income tax returns for compensation • RTRP credentials given to preparers having a current PTIN and who pass: • Competency test • Tax compliance check

  6. Right to Practice Before the IRS Circular 230 governs • CPAs, EAs or attorneys granted full rights • Prepare and file tax returns • Represent taxpayer before Appeals, Collection and Counsel • Execute closing agreements, extensions, waivers, claims for refunds • Signing documents on behalf of taxpayer

  7. Right to Practice Before the IRS • RTRPs, granted limited rights • May represent taxpayer before IRS employees during examination if RTRP signed tax return or claim for refund • May not represent taxpayer before Appeals, Collections, or Counsel

  8. Right to Practice Before the IRS • Supervised preparers may not • Sign returns • Identify themselves as RTRPs • Represent taxpayers before the IRS in any capacity

  9. Phases of New Rules for Preparers 4 3 1 2 Phase 1 PTIN Registration Phase 2 Competency Test Phase 3 Continuing Ed Requirements Phase 4 Compliance & Enforcement • Must register annually • Must renew PTIN • PTIN valid calendar year • Since 01/01/11, must use PTIN on return; not SSN. • IRS urging preparers to test now (RTRP or EA) • Schedule using PTIN Account • Topics: tax law and Form 1040 prep • New starting 2012 for RTRPs and RTRP candidates • 15-hours for RTRP candidates annually • CE hours from authorized providers only • Tax Compliance Check for all • Compliance letters and visits • Identifying those not in compliance • 2014: Only certain authorized preparers can do 1040 prep.

  10. Overview of Return Preparer Requirements

  11. Changes to Form 2848, Power of Attorney • Joint returns • Copies of notices and communications • Acts authorized • Representative designations • Future developments

  12. IRS Notices and Letters • AUR/CP 2000 Notice • Identifies discrepancy between income/payment IRS has on file and reported on Form 1040 • Typically gives taxpayer 30 days to provide supporting documentation or agree with proposed adjustment

  13. Collection Letters • CP14, Balance Due, No Math Error • CP501, Reminder Notice, Balance Due • CP503, Reminder Notice, Balance Due • CP504, Urgent Notice, Balance Due

  14. Injured Spouse vs. Innocent Spouse • Injured spouse • Innocent spouse • Files MFJ • Seeks relief from liability

  15. Response to FMS Notice • Financial Management Service administers the Treasury Offset Program • Tax Refund or overpayment may be reduced by FMS to pay: • Past due child support • Delinquent student loans • State income tax obligations • Unemployment compensation debt

  16. Injured Spouse Claims - Filing Non-obligated spouse must File Form 8379, Injured Spouse Allocation to request his/her share of refund • Before offset occurs: Attach F8379 to paper return and write “Injured Spouse” on top left corner • After offset occurs: File stand alone Form 8371 including both spouse’s SSN

  17. Identity Theft • No. 1 consumer complaint reported to FTC for past 12 years • Top priority for IRS • IRS identity theft strategy focus: • Prevention and detection • Protection • Victim assistance

  18. Protecting Taxpayers’ IRS Records If fraudulent use of SSN is suspected: • Notify IRS immediately • Contact IRS Identity Protection Specialized Unit at 800-908-4490 • Complete Form 14039, Identity Theft Affidavit • Take protective actions

  19. Protect Records and Minimize Risk • Taxpayers: • Never provide personal information via phone, mail, or online • Shred or destroy unwanted documents • Update anti-virus software on home PC • Tax Practitioners: • Safeguard clients personal information • Warn clients about e-mail “from IRS” • Advise clients to check credit reports and financial records

  20. IRS is Taking Action • Identity Protection Specialized Unit • Central point for ID theft victims • Individual assistance • Developed filters to stop first-time perpetrators • Use of IP PIN • Nationwide sweeps

  21. Collection Update – Fresh Start • Penalty relief - individual taxpayers • Installment agreements • Streamlined definition expanded • Includes some business taxes • Offers in compromise – streamlined definition expanded

  22. Installment Agreements • Expanded Fresh Start provisions mean more taxpayers can use streamlined installment agreements • IA threshold without financial statement increased to $50,000 • Taxpayers owing up to $50,000 in back taxes, maximum term raised to 72 months

  23. Offers In Compromise – Fresh Start • Expanding the Streamlined OIC process • Adding flexibility • Revising financial analysis procedures • Revising allowable living expenses

  24. Transcript Delivery System • The 2012 re-engineered TDS has increased capacity and improved look and feel • Types of Transcripts • Account • Return • Record of account • Wage and income documents • Verification of non-filing

  25. e-services Secure Mailbox

  26. IRS Practitioner Hotlines • Practitioner Priority Service 866-860-4259 New service for Campus CorrespondenceExamination • E-help Desk – 866-255-0654 Helps with all online issues

  27. Other IRS Hotlines • Tax exempt and government entities 877-829-5500 • Exempt organizations • Retirement plan administrators • Government entities • Employment tax 800-829-4933 • Business returns or accounts

  28. Filing Information Returns Electronically Program • Available to any filer of information returns • Required of businesses filing 250 or more information returns for any calendar year • Requirements for filing with FIRE • Purchase third party software • Apply with IRS – Form 4419 • Establish FIRE account

  29. Audit Technique Guides • Provides guidance to IRS employees and useful to businesses and tax professionals • New ATGs for 2012: • Art galleries • Continuation of employee healthcare coverage • Interest charge domestic international sales corporation return

  30. 1120S Officers’ Compensation • Continued compliance issue • Situations where zero or very small wages paid to, officer yet significant distributable income • Officer performs significant services • Employment taxes reduced or eliminated • New case: Watson

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