IRS/Practitioner Liaison Meeting
May 14, 2010
Practitioner Liaison Meeting
Anchorage, AK
12:30 p.m. – 3:30 p.m.
Attendees:
Internal Revenue Service
- Kristen Hoiby, NW Area Manager, Stakeholder Liaison
- Mike Cvitkovic, Stakeholder Liaison
- Brenna Spence, W&I Field Assistance (for Kurt Crist)
- Brian Lasselle, LMSB Group Manager
- Coral Quimby, Taxpayer Advocate Service (for Kristia Douts)
- Diane Nesvick, TE/GE Indian Tribal Government Specialist
- Doug Hartford, SB/SE Collection Group Manager
- Kris Ashley, W&I SPEC Tax Consultant
- Lisa Oshiro, SB/SE Division Counsel (by phone)
- Sonia Oen, SB/SE Exam Group Manager
Practitioner Representatives
- Therese Sharp, Chair, ASCPA, Alaska Society of CPAs
- Cindy Coulter, ASCPA
- Cindy Hulquist, ASCPA
- John Rodgers, ASCPA, Alaska TAP Representative
- Karen Ague, ASCPA
- Lisa Rogers, ASCPA
- Robert Rehfeld, ASCPA (by phone)
- Sherry Whah, EA, Alaska Society of Tax Consultants
- Kathy Riley, EA, Alaska Society of Independent Accountants
- Barbara Hompesch, EA, ASIA
- Paula Laurion, EA, ASIA
Meeting Summary
Speaker 1 – Kristen Hoiby, Stakeholder Liaison, Area Manager
Kristen Hoiby discussed several issues with the group. The first of these was the Return Preparer Review. The proposal has several key parts. The first is the registration of all tax practitioners who prepare all (or substantially all) of a Federal Tax Return. Secondly, tax practitioners who are currently considered unenrolled practitioners, meaning that they are not CPAs, Attorneys, or Enrolled Agents, will have both a testing requirement and a continuing education requirement. The last piece is mandatory electronic filing of individual returns which begins next filing season. Practitioners who file 100 or more individual returns, will be required to efile those returns. For the following year, the figure drops to 11 or more returns. The best place to find the latest information on the return preparer program is by checking IRS.gov at http://www.irs.gov/taxpros/article/0,,id=210909,00.html. You’ll find a number of Frequently Asked Questions (FAQs). If you have a question that hasn’t yet been addressed, please send it along to Mike and he will elevate it for you.
Kristen next spoke about the Issue Management Resolution System (IMRS). Kristen thanked the group for the issues they have elevated. Mike represents the NW Area for IMRS and is quite involved in working the issues nationally for Stakeholder Liaison. Please continue to let us know when you identify any systemic problems with any IRS systems or services.
Lastly, Kristen discussed the on-going efforts to improve IRS correspondence. The first round of the redesigned notices came out in January, with a much larger set of revised notices coming in July. IRS is also looking at the inserts that are sent with notices. One of the first ones to be removed is the Form 2290. It was noted that not only do we encourage taxpayers to let the IRS calculate the estimated tax penalty, but most taxpayers that do the calculation either use software or have the assistance of a tax practitioner—including the form was just causing confusion and added cost. If you would like to see examples of the revised notices, please take look at http://www.irs.gov/individuals/article/0,,id=96199,00.html .
Speaker 2 – Mike Cvitkovic, Stakeholder Liaison
Mike next spoke about a variety of upcoming events. The first of these was the IRS Open House to be held at 200 Taxpayer Assistance Centers around the country from 9 am to 2 pm on May 15th. This is part of a continuing series of Saturday events offering additional assistance to taxpayers in difficult circumstances. The next Open House is June the 5th.
Mike next mentioned that May 17th was the deadline for exempt organizations to file Form 990 to protect their exempt status. Alternately, the organization could file for an extension with Form 8868. The COBRA subsidy is ending on May 31st for those who are unemployed. Additionally, the First Time Homebuyer Credit is also wrapping up. To take advantage of the credit, taxpayers must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before June 30, 2010. For more information see http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet=7 .
The Form SS-4 is now specific in the instructions regarding who is considered the “responsible party.” Please see the instructions to the SS-4 at http://www.irs.gov/pub/irs-pdf/iss4.pdf page 3.
Qualified Joint Ventures are situations where husband and wife both participate in a business and elect the Qualified Joint Venture status in order to ensure both spouses receive Social Security Benefits. http://www.irs.gov/businesses/small/article/0,,id=221082,00.html Many taxpayers are unaware of this entity status.
The Nationwide Tax Forums are coming up soon. The two West Coast Forums are back to back this year with the Las Vegas Forum scheduled on August 24-26 and the San Diego the following week August 31- September 2nd. http://www.irs.gov/taxpros/article/0,,id=173843,00.html Don’t forget, the courses will also be offered on-line for credit later in the year.
The Automated Freedom of Information Act (AFOIA) program is continuing to roll out. Alaska requests should be sent to IRS, Disclosure Scanning Operation, 2385 Chamblee Tucker Road, Stop 93A, Chamblee GA 30341.
A National Phone Forum will be held on the Centralized Authorization File (CAF). Many of you have had questions or concerns about Powers of Attorney, so watch for this session coming up on June 16. http://www.irs.gov/businesses/small/article/0,,id=158856,00.html
Under the Worker, Homeownership, and Business Assistance Act of 2009 (WHOBA), the First-time Homebuyer Credit was expanded both in the amount of the credit and also in the inclusion of long-time homeowners. Other items in this act were the extension of the FUTA surtax (.02%) under §3301, the extension and amendment of the 5 year NOL carryback period, and the increase of the penalty for failure to file partnership or S-Corporation returns from $89 to $195. As noted, this act also included the mandatory e-file provisions previously mentioned.
The recently signed HIRE Act (Hiring Incentives to Restore Employment) has two key provisions for employers. The first is an incentive to hire new employees by in effect exempting the employer from the 6.2% Social Security tax withholding for the employer, and in addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. Much more information is forthcoming and is being posted to IRS.gov as it becomes available. Please check http://www.irs.gov/businesses/small/article/0,,id=220745,00.html for the latest information and if you have a question that has not yet been addressed, please forward it to Mike to elevate. Already the Forms 941, W-2, and W-3 have been revised, and a new Form W-11 created to serve as an affidavit to be signed by the employee.
Issues & Status
Issue #1: Corrected Forms 1099
Practitioner raised an issue regarding the number of corrected Forms 1099 arriving after February 15 and what deadlines reporting companies and brokerage firms have. Mike noted that the Energy Improvement and Extension Act of 2008 extended, from January 31 to February 15, the deadline for brokerage firms to provide certain Forms 1099 to taxpayers. There is no deadline for reporting companies to report to brokerage firms, but, according to industry sources, the practice is for reporting companies to provide information to brokerage firms by mid-January. The corrected 1099s arise when reporting companies reclassify previously reported distributions after the brokerage firms have issued the original 1099s.
Issue #2: Employer Reporting under Affordable Care Act (ACA)
Practitioner asked a question regarding employer reporting requirements under ACA. Mike stated that discussions are under way to add an additional box or checkmark to the Form W-2 to indicate an employee’s health coverage, but no preliminary drafts are available.
Issue #3: Are ROs or RAs required to show ID or ask a practitioner for it?
Practitioner elevated a concern about the protocol for visits with practitioners. In the past, the practitioner would know most of the ROs, RAs, and TCOs and vice-versa. With the hiring of many new employees, that is no longer the case. Sonia Oen noted that every auditor will have identification with them, but that they are not required to show it unless asked. They are not in the practice of checking the identification of the practitioner, as they are generally at the practitioner’s place of business and they have validated the Power of Attorney prior to the appointment. Practitioners should be notified if the auditor intends to bring along another employee—say a coach or manager. Doug Hartford noted that ROs generally do not call first, but usually do show ID, though not required. A follow-up question was asked about whether the RO would communicate with the taxpayer if there was a POA – Doug explained that they might if it was a limited POA—at least to view the business, but would ask the POA. Doug noted that in January and February of 2010 there had been a problem with the CIS system used by the ROs—it mistakenly dropped a lot of valid POAs. It was corrected, but that might explain some instances where the TP was contacted directly. In the Anchorage office because the ROs know the practitioner community so well, they were able to avoid some of that problem. Another follow-up question was whether a taxpayer who had a case with Taxpayer Advocate would the POA still need to deal with other IRS personnel (ROs, RAs). Coral noted that if the TP was having a problem making contact, TAS would act as go-between with Exam or Collection, but would try to stop other contacts such as ones from ACS.
Issue #4: Accuracy penalties under §6662A/Reasonable Cause Assistant (RCA)
Practitioner expressed a concern regarding how the Accuracy Penalties are applied. The code section is composed of two penalties—one is for negligence or intentional disregard; the other for substantial understatement. Generally, one or the other would be assessed on the same issue, but not both. There is no dollar threshold on when the negligence penalty may be applied. Substantial understatement does have a threshold – when the understatement of tax exceeds the greater of 10% of the tax required to be shown or $5,000. Sonia noted that the agent would look at what authority was being cited for the positions on the return. Practitioners should look to the reason given for the error—were there no books and records? Was it just a math error? Reasonable cause can be used to remove the penalty. The discussion then went to whether more requests for penalty abatements are being denied. The question was whether the criteria had changed. The intention is to be consistent, fair, and apply penalties evenly across the board. Employees using oral statement to discuss penalty abatement must use the Reasonable Cause Assistant which prompts them to ask certain questions in order to make the determination. If the request for abatement is denied, the taxpayer will receive the 854C Letter to advise them of their appeal rights. It was noted that the experience level of the assistor in conveying the questions to the practitioner and the POA and their level of experience in communicating back will make a big difference. Coral noted that the RCA is a very rigid program which is not set up to take all the issues. Brenna noted that the RCA also looks at the taxpayer’s history—it does make a difference if this is a first time issue.
Issue #5: Accepting Payments at the Taxpayer Assistance Centers (TACs)
A practitioner had asked about the policy of receiving payments at the TACs. Brenna Spence explained that, for internal control purposes, only certain employees are allowed to receive cash payments. Cash payers will be routed to those designated TAC employees and you may have to wait for them to be available. Brenna noted that the TAC can only receive cash payments in the exact amount of the balance due – no change is made. Brenna next addressed bulk payments at the end of filing season. Each check submitted must have an accompanying voucher so TAC employees must print a voucher if none is submitted. The checks and vouchers must be verified for accuracy of date, payee, amount, signature, and notations. Then the TAC assistor must record each check on a daily report. In the last two days of this filing season, the Anchorage TAC accepted 100 payments which took a lot of time to process. If a 3rd party is making the payment, they must have all of the information available.
Issue # 6 E-Filing Form 6252 with attachments
The issue was raised about the inability to efile returns with more that 10 attached forms 6252. Mike noted that this has been elevated as a system enhancement and should be accommodated under Modernized e-File as it rolls out over 3 years.
Issue #7 Estate Tax
Practitioner requested guidance on working estate issues involving 2010 decedents. Per the IRS Estate and Gift Tax staff, until Congress addresses legislation on this tax, no guidance can be provided.
Issue #8 E-filing Form 1041 –no voucher available
The issue resurfaced about the lack of payment vouchers for Form 1041 when the return is electronically filed. The only guidance available is to be certain to annotate the check with all of the key information—TIN, tax period, and taxpayer’s name and address.
Issue #9 Denied Education Credits
Terese noted that she had 3 clients where the education credits were denied, even though the children did not claim themselves. Mike will follow up with her to determine whether this is a systemic issue, as just prior to the meeting, Mike has seen a similar issue raised by another area.
Issue #10 Long Term Homebuyer Credit
The issue was raised about the situation where the taxpayer does not have a settlement statement or certificate of occupancy because the area where they live does not issue them. Coral advised that a Building Summary from the local borough and bills from the local utilities to show ownership and occupancy have been acceptable documentation.
Roundtable & Comments
Coral noted that many Permanent Fund Dividends were not showing up (2006, 2007, 2008). If practitioners encounter this, they should contact TAS.
Brenna noted that the Anchorage TAC would be open for the May 15th Open House that Mike had previously mentioned. The hours are 9-2 Alaska Time.
Sonia mentioned that she has hired 6 new agents. They are off to training, but set up about 80 audits in the time they were available.
Brian had no updates.
Doug noted that he had hired 2 new people in Collection.
Diane noted that ITG is working with 229 tribal entities.
Kris noted that SPEC had no staffing changes, but reminded the practitioners that people in the military may qualify for an additional year for the Homebuyer Credit. If taxpayers claimed the 2008 credit and did not stay in the home the required time, the repayments would begin in 2010.
Next Scheduled Meeting
The next meeting will be scheduled for early November 2010.
