national tax practice institute level 1 communicating...

NAEA

NATIONAL TAX PRACTICE INSTITUTE™

LEVEL 1 Communicating with IRS

August 7, 2012

LG Brooks, EA

LG Brooks, EA is a senior consultant at The Tax Practice, Inc., a Dallas, Texas, representation firm. He has been in the field of taxation for more than twenty-five years and has been in practice full-time since 1990. Brooks’ areas of practice include tax representation, tax consulting, tax preparation and pre-Tax Court litigation support services. Brooks received a BA from Bishop College in Dallas. A popular speaker, he presents to numerous tax and accounting societies and has addressed attendees at several annual IRS Tax Forums. Brooks is an NTPI Fellow and teaches in NTPI Levels 1, 3 and the Graduate Level in Representation.

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LG Brooks, EA Communicating with the IRS

Table of Contents Introduction ......................................................................................................................................2 The Basics of Communications with the IRS ..................................................................................3 Practitioner Contact Information .....................................................................................................6 Letters From the IRS ........................................................................................................................7 Computer Transaction Codes .........................................................................................................14 IRS Hints ........................................................................................................................................17 Taxpayer Advocate Issues .............................................................................................................18 Computer Definitions.....................................................................................................................19 Various Command Codes ..............................................................................................................22 Transaction Codes ..........................................................................................................................24 FOIA Requests ...............................................................................................................................26

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LG Brooks, EA 2 Communicating with the IRS

Communicating with the IRS

Introduction

Communication is essential to our profession regarding tax matters. Not only are we expected to

communicate with the IRS, but with clients, third parties, professional associates and a host of

other contacts. When we think of communicating with the IRS we should consider the various

divisions, the various levels of employees (IRS agents, officers, tax specialists) whether civil or

criminal, and the level of authority of the IRS personnel, yet we must also maintain the

taxpayer’s confidentiality and privilege. Let’s not forget guarding and asserting the taxpayer’s

rights during any form of communication. Communication may occur with written reports,

verbal discussions, electronic transmissions and numerous other methods. In this profession it’s

important to maintain focus. Based upon the topic of this presentation, if we are to

“communicate with” the IRS, we must first understand their language and their methods of

conveying information. Communicating with the IRS in this modern environment involves not

only the submission and processing of tax returns and responding to notices, but it involves being

prepared for the face-to-face CDP conference or knowing how, when and more importantly why

to respond to a Summons.

Today’s tax practitioner must know more than how to merely communicate with the IRS via

facsimile, conversation and written correspondence; today’s practitioner should understand why

he or she must respond to an IRS request and understand when and why not to respond, and be

able to justify a judgmental or professional decision based upon substantial and relevant

authority.

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THE BASICS OF COMMUNICATING WITH THE IRS

Before you can effectively communicate with the Internal Revenue Service you must obtain the

necessary tools and resources to have a meaningful discussion. Noted below are a few

prerequisites or basics that are essential for communication with the IRS.

I. Transcripts

Prior to making recommendations regarding case decisions for audits, collection

issues, appeal conferences and various other tax matters, it is essential that the

practitioner secure an “account transcript” to properly evaluate and analyze the

taxpayer’s tax situation. Subsequent to review of the account transcript and a

thorough interview of the taxpayer regarding the facts and circumstances, the

practitioner is prepared to communicate with the IRS.

II. Power of Attorney

Form 2848, “Power of Attorney and Declaration of Representative” (POA), is

required to authorize an individual or individuals listed to receive confidential tax

information and to represent a taxpayer before the IRS. Current Disclosure Laws

only allow the IRS to provide information and to discuss confidential information

if a valid POA is on file for the taxpayer. Prior to initiating any type of

meaningful “communications”, secure the appropriate authorization document.

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III. E-Services

Effective March 21, 2005 the Internal Revenue Service announced expanded use

to tax professionals of the suite of e-Services incentive products. The expansion

meets high demand and requests from tax professionals to use these valuable

online tools. To qualify to use this service, a practitioner must have an EFIN.

This can now be acquired, even if you do not actually use it to e-file returns, but

you must have it to access E-Services.

E-Services Products: Disclosure Authorization (DA)

Eligible tax professionals can complete disclosure authorization forms, view and

modify existing forms, all online. Disclosure Authorization allows tax

professionals to electronically submit Form 2848, Power of Attorney and

Declaration of Representative and Form 8821, Tax Information Authorization.

Disclosure Authorization expedites processing and issues a real-time

acknowledgement of accepted submissions. Submission of the appropriate form

through DA allows instantaneous access to the Transcript Delivery System (TDS)

for that client’s records.

Electronic Account Resolution (EAR)

Tax professionals using EAR can quickly resolve clients’ account problems by

electronically sending and receiving inquiries about individual or business

account problems, refunds, installment agreements, missing payment or notices.

Tax professionals must have a Power of Attorney (Form 2848 only) on file before

inquiring into a client’s account. Responses are delivered to a secure electronic

mailbox within three business days. Use the Disclosure Authorization to submit

the Form 2848 to the IRS.

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Transcript Delivery System (TDS)

TDS resolves clients’ needs for return and account information quickly in a

secure, online session. It allows eligible tax professionals, with a Power of

Attorney (Form 2848 only) on file, to request and receive account transcripts,

wage and income transcripts, tax return transcripts, and verification of non-filing

letters for individual taxpayers and account transcripts for business taxpayers.

Use Disclosure Authorization to submit the Form 2848 to the IRS.

IRS Outline Refund Feature

Where’s My Refund now allows your clients to safely and easily trace their lost

refund checks and update their mailing address on-line from the convenience of

their own home or office computer. Your clients can securely access their

personal refund information by entering their Social Security number, filing status

and the exact amount of their refund. These “shared secrets”, data known only to

the taxpayer and IRS, verify the person is authorized to access that account.

Simple instructions guide your clients through the steps needed to bring the trace

action. Addresses can be changed or corrected when their refund checks have

been returned to the IRS as undeliverable. When they make the address change

online, it automatically updates the IRS database and advises them of the dates

they should receive their refund checks. Those filing Married Filing Joint must

complete Form 3911, Taxpayer Statement Regarding Refund. The form can be

completed online but must be mailed or faxed to the IRS. Both spouses’

signatures are required. This form is not required for all other filing statuses.

Online EIN - Form SS-4

If you determine that your client needs an EIN, complete the online application.

If you are a third party, you must retain on file a completed copy of the SS-4

signed by the client.

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Practitioner Contact Information Telephone Numbers: Forms and publications (800) 829-3676 Form 1040 Assistance (800) 829-1040 Refund Hotline (800) 829-1954 Tax Fraud Hotline (800) 829-0433 Recorded Tax Topic (Tele-Tax) (800) 829-4477 Tax Exempt/Government Entities (TE/GE) Hotline (877) 829-5500 National Taxpayer Advocate (877) 777-4778 Business and Specialty Tax Line (800) 829-4933 Practitioner Priority Service (866) 860-4259 Paper Request for Copy or Transcript of Tax Forms (800) 829-3676 Treasury Inspector General for Tax Administration (800) 366-4484 Power of Attorney and Third-Party Authorizations: Memphis IRS Center 5333 Getwell Road Stop 8324 Memphis, TN 37501 855-214-7519 FAX 901-546-476 TELE

Ogden IRS Center P.O. Box 9941 Stop 6737 Ogden, UT 84409 855-214-7522 FAX 801-620-4254 TELE

For Foreign Taxpayers Philadelphia IRS Center Philadelphia, PA 19255 215-516-1017 FAX 215-516-5996 TELE

Websites: Internal Revenue Service http://www.irs.gov IRS Spanish-language website http://irs.gov/espanol ITS Forms and Publications http://www.irs.gov/forms.pubs/index.html TIGTA http://www.treas.gov/tigta Online Form 3975 http://www.irs.gov.forms-pubs/fillin.html (Package X order for Tax Professionals) IRS Electronic Services http://www.irs.gov/efile.html Tax Professional’s Corner https://www.irs.gov/prod/bus_info/tax_pro/indes.html Tax Court www.ustaxcourt.gov Revenue Rulings and Procedures www.taxlinks.com U.S. Tax Code On-Line www.fourmilab.ch/ustax/ustax.html Tax Regulations www.irs.gov

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LETTERS FROM THE IRS A letter from the IRS scares most citizens. When, and if the letter is opened, two copies of the

letter and often several publications are found. The letters themselves are often several pages

long. Overwhelmed, the taxpayer too often shoves the letters in a drawer hoping the confusing

missive will self-destruct. As tax professionals, we know that these letters don’t just go away –

they must be dealt with. Hopefully the citizen will approach a well-trained professional in

attempting to handle the problem proposed by the IRS.

We have a problem that was unheard of a few years ago. It wasn’t too long ago that we knew the

IRS we dealt with and automatically knew where to address any correspondence, either to our

local service center or the district office. Not so any more! The National Taxpayer Advocate’s

2003 report identifies “Navigating the IRS” in the top 10 problems when dealing with the IRS.

Originally she had it as the #1 problem but believes that it has improved since IRS has

overhauled their telephone system and prepared an intranet directory available to employees.

Whether or not there has been a significant improvement, knowing where to address our

problems has been acknowledged as a major problem.

We have previously addressed the centralization of work at the various campuses. To help deal

with the changes that occasionally occur, the IRS has also come up with a plethora of toll free

numbers as we noted via the previous page. Knowing where to go is half of the problem or half

of the solution.

IRS NOTICES The majority of the notices sent to taxpayers are sent from the various campuses. We will be

addressing the collection notices in another session. However there are a variety of notices other

than those warning of collection actions. The Taxpayer Bill of Rights and the Restructuring and

Reform Act of 1998 require IRS to send annual statements to taxpayers reminding them that they

owe taxes.

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Annual Statement Notice Codes • CP 71A is sent as an annual reminder notice to those persons whose debt was previously

reported as uncollectible or hardship. (See Computer Paragraph Transaction Codes later in the text.)

• CP 71C and 171 are issued when the account is unresolved and is awaiting processing

(in the queue). • CP 89 is an annual reminder notice sent to all accounts with installment agreement

activity. This notice is sent annually and required by law (RRA 98 § 3506) • Form 9774 is sent to all accounts with balances due if the account is a non-master file

account no matter what the status. • CP 187 is sent to those business master file accounts with balances due. RESPONDING TO NOTICES When you are ready to respond to a notice sent out from one of the campuses, be sure to clearly

address the issues. Please remember that we are trained, tested and retrained. Service Center

employees are normally the lower grade employees. And while it certainly doesn’t reflect their

potential, their grade does reflect both their level of training and how much discretion they have.

Generally, I try to respond keeping my correspondence at the 6th grade level making points

clearly and concisely. When mailing a letter to the campus, place your letter beneath a copy of

their letter so that the mailroom knows where to ship your reply.

If your client has received one of the collection notices, you should consider responding with the

appropriate form, normally a Collection Information Statement (CIS), identified as Form 433-

A, Form 433-B or Form 433-F.

Practitioner Practice Pointer The Collection Information Statements are signed under penalty of perjury. These forms may be used as evidence against the signor in a criminal case. Therefore, DO NOT SIGN THESE FORMS ON BEHALF OF A CLIENT OR TAXPAYER.

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Generally speaking you may respond to the forms only by addressing the function, which mailed

out the form. A CP 504, Final Demand, can be addressed with Customer Service up until the

time the computer sends it to the collection function. Then you must deal with the Automated

Collection System, ACS. Occasionally, the Service sends out a notice from one site and within

days sends out another notice from a different location. According to the Taxpayer Advocate

Service, it is best to respond to BOTH notices.

REASONABLE CAUSE ASSISTANT IRS has created a program to assist employees with requests for the abatement of penalties based

on reasonable cause. Although it is out of the venue of this course to go into detail on reasonable

cause abatement, a short overview is appropriate. The Reasonable Cause Assistant (RCA) was

created to be used service-wide however, it is not yet used by ACS, field Revenue Officers,

Revenue Agents, or Appeals. It is used by Customer Service and is therefore a tool you need to

use when appropriate. The Service usually assesses a penalty when a taxpayer either files late or

pays late (IRC §6651). Taxpayers have reasonable cause when their conduct justifies the

nonassertion or abatement of a penalty. Each case is judged individually based on the facts and

circumstances at hand. Any reason that establishes a taxpayer exercised ordinary business care

and prudence but was unable to comply with the tax law may be considered for penalty relief.

The following regulations contain examples of circumstances that may be helpful in determining

if a taxpayer has established reasonable cause:

Accuracy-Related Penalty: 1.6664-4 Failure to Pay Penalty: 301.6651-1(c) Failure to File: 301.6651-1(c) Failure to Deposit Penalty: 301.6656-1(b); 301.6656-2(c) Information Returns Penalty: 301.6723-1A(d); 301.6724-1 Preparer/Promoter Penalties: 1.6694-2(d); 301.6707-1T.

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The following Internal Revenue Service Policy Statements contain specific criteria that may

affect the imposition of penalties.

• P-2-4, Penalties and interest not asserted against Federal agencies. • P-2-7, Reasonable cause for late filing of return or failure to deposit or pay tax when

due. • P-2-9, Timely mailed returns bearing foreign postmarks. • P-2-11, Certain unsigned returns will be accepted for processing.

Ordinary business care and prudence includes making provision for business obligations to be

met when reasonably foreseeable events occur. A taxpayer may establish reasonable cause by

providing facts and circumstances showing the taxpayer exercised ordinary business care and

prudence (taking that degree of care that a reasonably prudent person would exercise), but

nevertheless were unable to comply with the law.

RCA provides the reviewer the account history of the taxpayer and then walks them through a

series of questions. At the end, the program advises the reviewer of an answer. IRS stresses that

this is a decision-support tool and not a definitive program for making the reasonable cause

decision. After the decision is made, the program produces the appropriate letter, either advising

the taxpayer of abatement or rejecting the request with the reason and giving appeal rights.

The RCA is designed to automatically grant relief when it is the first time the taxpayer has been

assessed a penalty.

Before you request abatement of penalty based on reasonable cause, it is highly advisable that

you review the client’s account for the prior 3 to 6 years. You want to look at the transcript to

see if the same penalty was previously assessed. If it has, it will materially affect the service’s

response. The Reasonable Cause program will thoroughly analyze the taxpayer’s past account.

It will display for the examiner the penalty history for that particular tax identification number.

The RCA is designed to automatically grant relief when it is the first time the taxpayer has

been assessed a penalty.

Some of the questions the program prompts the examiner to address are:

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1) What happened?

2) When did it happen?

3) Where did it happen?

4) Who is responsible?

5) Why couldn’t the taxpayer comply?

6) How did the taxpayer try to comply? Then, it asks the examiner to select an appropriate category(s) based on the information in the

taxpayer’s statement:

If the user is unable to determine the category, there is a feature of the software that helps them.

It asks the question “Why was the taxpayer unable to comply?” In preparing a request for

penalty abatement, we must address that question clearly.

Once a category is determined, the software asks a series of questions and the Assistor needs to

input an answer. For example, if the category is “absence,” the program will want to know when

the absence began and ended. Was the event that caused the absence before or after the due

date? Did the taxpayer also fail to pay the tax (failure to pay penalty assessed)? Was the event

after the first extension? Or the second extension? Who was absent?

As you can see, detailed answers are required. Knowing this should help us as the preparer

know what to put in the request. Based on the information the user is able to enter into the

Assessment Error Absence Bankruptcy

Casualty Death Divorce

Elderly Taxpayer Extension Ignorance

Illness Impairment IRS Error

Lack of Forms Mail Problem Mitigating Circumstances

Other Records Unobtainable Reliance

Relocation Signature Tax Law Changes

Unable to Pay

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computer, the Reasonable Cause Assistor, will reach a determination to either abate or sustain

the penalty. It will then generate the appropriate letter.

Will the IRS give us a copy of the input information? Yes, but only if we make a specific

request for it. You should be able to call the person whose name is on the denial letter and ask

for a print of the Reasonable Cause Assistor program.

Responding to Notices via Telephone On every collection notice and most other notices generated by the service center computers,

there is a toll free number. On the taxpayer’s copy of collection notices CP 503 and CP 504,

there is a “Caller ID.” When you call the toll free number shown on the notice, they may request

the “Caller ID” number. If you have that number, you may be able to quickly resolve the issue

via a voice response automatic call system. If your client is willing to set up an installment

agreement, and the amount you enter is within the authority of the system, the agreement will

generally be granted immediately with no lien filed!

PRACTITIONER PRIORITY SERVICE The Practitioner Priority Service may be accessed by calling the following toll free number: 866-

860-4259. This is the best place to begin your calling when you have a notice unless a revenue

officer generates the notice. If the account is in the Automated Collection System (ACS) you

can call PPS for an expedited referral to ACS. The hours of service are weekdays, 7:30 a.m. until

6:30 p.m. local time

Questions regarding client's individual tax accounts (IMF) are handled by one of three campus

sites: Brookhaven, NY; Memphis, TN; and Philadelphia, PA. Questions regarding client's

business accounts (BMF) are handled by two campus sites: Cincinnati, OH and Ogden, UT.

Calls are routed based on an evaluation of the lowest expected wait time. Issues outside the

scope of the employee’s authority are transferred or referred to the appropriate IRS function.

The PPS Assistor may have the authority to assist you in many ways. In certain circumstances,

they can:

• Provide transcripts of accounts and returns • Move payments

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• Help you find missing payments • Abate penalties • Accept installment agreements • Report an account as uncollectible • Release levies in limited situations • Release liens if the account is not currently assigned to another function and the taxes are

fully paid and upon substantiation of no other balances due. • Make some math error adjustments • Make referrals to other areas with greater authority • STAUP an account (put a hold on it)

The PPS also accepts faxes. However, do not fax until you have an Assistor on the line.

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Computer Paragraph Transaction Codes CP: EXPLANATION: 02 Issued to inform the taxpayer when all or a portion of the ES penalty has been waived. 04 Issued to Inform taxpayer that the portion of ES penalty attributable to wages was waived. 05 Issued to remind taxpayer of requirement for SSN for dependents claimed as exemptions 07 Issued annually from each service center to all taxpayers who received CPs 23, 24 or 25 (ES discrepancy)

for the processing year. Will contain ES payments through November 08 Issued to inform taxpayer that refund is being released but name or TIN is still in error 09 Issued to inform taxpayer of potential EIC. 10 Issued as a first notice to inform a taxpayer that there was an error in computation of his/her individual

income tax return and there is an overpayment of $100 or more Also informs the taxpayer of the amount of credits actually applied to his/her next taxable period, if the taxpayer requested amount and the credited amount differ by $1.00 or more. (Combines CP 12 and CP 45)

11/12 Issued as a first notice to inform a taxpayer that there was an error in computation on his/her individual income tax return and:

11 Balance Due (Over $5.00) 12 Overpayment of $1.00 or more CP 13-Even Balance 14 Issued as a first notice to inform a taxpayer of a balance due when there is no math error 15 Issued to inform the taxpayer that a Civil Penalty has been assessed. 15B Issued for a trust fund recovery penalty module to inform taxpayer of tax periods (up to 25) upon which

Trust Fund Recovery penalty is based. 16 Issued as a first notice to inform the taxpayer that 1) There was an error in computation on his/her Individual Income Tax Return, and, 2) There is an overpayment of $1 or more, and,

3) Part of that overpayment was used to offset another Individual Tax Liability. 17 Issued to inform a taxpayer of a refund caused by the release of an excess estimated tax credit freeze. 18 Issued to advise the taxpayer that a portion of his/her refund is being withheld due to an unallowable item

on the return, 19 Issued to inform a taxpayer that there was one or more unallowable item(s) on his/her return and that there

is a balance due. 20 Issued to inform a taxpayer that there was one or more unallowable item(s) on his/her return and there is an

overpayment of $1.00 or more. (Follow up to CP 18) 21 These are all Examination and data processing (DP) tax adjustment notices resulting in a balance due of

less than $5.00, an overpayment, even settlement condition, and those resulting in a balance due of $5.00 or more when the account was in delinquent account status prior to the adjustment.

22 These are all Examination and DP Tax Adjustments resulting in a balance due of $5 or more when the account was not in TDA status prior to the adjustment or when the account is going to delinquent account status in the current cycle

23/24/ Issued to inform a taxpayer that the estimated tax credits claimed on his/her return do not agree with the credits posted to the IMF and there is a difference.

23 Balance due of $1 or more 24 Overpayment of $1 or more 25 Balance due or overpayment of less than $5. 29 Issued to a taxpayer to request information pertaining to the original return filed when an amended return is

received and there is no record of the original on master file 30 Issued to inform the taxpayer that part or all of his/her overpayment has been applied to an ES Penalty. 30A Issued to inform the taxpayer that IRS has recomputed ES Tax Penalty and part or all of prepaid ES penalty

is refunding 31 Issued to inform the taxpayer that his/her refund check was returned as undelivered, and requests the

taxpayer to supply IRS with his/her correct address 33 Error Delay Notice-lssued to inform the taxpayer that there has been a delay in his/her refund No math

error. 34 Issued to acknowledge the receipt of an amended return 36 (Service center only)

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37 (Service center only) 38 (Service center only) 39 Issued to inform the taxpayer that an overpayment from a secondary SSN account has been applied to

his/her balance due. 41 (Service center only) 42 Issued to inform the taxpayer that an overpayment from his/her account has been used to offset a balance

due in a secondary SSN account. 43 (Service center only) 44 (Service center only) 45 Issued to inform a taxpayer of the amount of credits actually applied to his/her next taxable period, if the

taxpayers requested amount and the credited amount differ by $1.00 or more 45S Issued to inform a taxpayer that an additional amount has been credited to their next year's estimated tax 46 (Service center only) 47 Used to notify a taxpayer that an overpayment has been applied to a past due child support obligation or

Federal Agency debt. The name, address and phone number of the agency to contact is also provided 48 Annual notice of obligation issued to the taxpayer advising that an offset will occur 49 Issued to notify a taxpayer that an IMF overpayment has been applied to an unpaid IMF liability or

liabilities 50 Issued to notify a taxpayer of the IRS computation of tax and account balance on a non-computed Form

1040EZ. 50A IRS computation of balance due on non-computed 1040EZ 50B IRS computation of overpayment on non-computed 1040EZ 50C IRS computation of even balance on non-computed 1040EZ 51 Issued to notify a taxpayer of the IRS computation of tax and account balance on a non-computed Form

1040EZ, 1040 and 1040A. 52 Issued to inform a taxpayer that the self-employment earnings claimed on his/her return have been reduced

by $100 or more, or whenever earnings are reduced below $400 regardless of the amount of the reduction. 53 Issued to notify taxpayer that an electronic fund transfer is not honored 54 (Service center only) 55 (Service center only) 56 Issued to remind the taxpayer that their invalid number is still present. 57 Issued to notify the taxpayer that they have defaulted on a direct debit installment agreement due to

insufficient funds. 58 Issued to request information concerning spouse's SSN. This notice is generated whenever the spouse's

SSN is missing and the Filing Status Code is joint, married filing separately and spouse is not required to file or head of household.

59 Issued to request information concerning validity of spouse's SSN. 60 Issued to advise taxpayer of a credit reversal adjustment to the account (IMF). 64 Notice of Tentative Carryback Allowance. 71 Issued to remind the taxpayer of a balance of tax due. Notice is generated for (1) modules in tolerance

status and (2) module in collection status with an unreversed uncollectible (tolerance condition). 71A Issued annually to remind IMF taxpayers of a balance due on a module that has been in Currently Not

Collectible status for at least 65 cycles with closing code indicating the taxpayer is unable to contact or unable to pay with a planned follow-up when a subsequent return is filed with an AGI between $6,000 and $30,000 or closed by ACS by placing in the queue.

71C Issued semi-annually for all delinquent accounts in the queue that have been in status 24in the queue for at least one year. Will reflect service center collection branch return addresses and ACS telephone numbers

71S Issued to all recipients of CP71 who have not full-paid their accounts. The taxpayer will use this notice to request an installment agreement

83 Issued to solicit the taxpayer's agreement to the proposed reassessment of the abated tax due to a math error 86 (Service center only) 87 (Service center only) 88 (Service center only) 93 Notice is generated when a period contains a duplicate filing condition and an / unreversed audit indicator. 95 (Service center only) 96 (Service center only)

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97 (Service center only) 98 (Service center only) 531 Backup Withholding Alert Information Reporting Program Notices: CP No. EXPLANATION 2000 Issued to taxpayer to request verification for unreported income, payments, or credits. 2001 Issued to request missing Payee TIN or correction to invalid Payee TIN on schedule K-1 2005 Computer generated letter to taxpayer acknowledging the receipt of information concerning their

tax liability and closing their account (Underreporter issue). 2006 Computer generated letter to taxpayer acknowledging the receipt of information concerning their tax

liability 2010 Underreporter Withholding Notice 2011 Issued to taxpayer request name and SSN information. 2015 Issued to inform taxpayer of corrections made 2100A Issued to payers who filed less than 51 information returns with missing or incorrect TINs. 2100 Issued to payers who filed more than 50 information returns with missing or incorrect TINs 2501 Initial contact notice to resolve discrepancy between Income, Credits and/or deductions claimed on return

and those reported by payers on information returns 3000 Request for verification of Social Security Number on Form W-4 (Form 6379)

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IRS’S HINTS The 1999 Fresno publication “Tax Hints” included the following tips on preparing for

communication WITH service personnel; and continues to be valid.

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HOW TO REACH THE ADVOCATE? There are three ways to bring the taxpayer advocate into a case:

1. File a Form 911.

2. Send by mail or fax a written request for assistance.

3. Get the IRS person you are working with to complete a Form 911 on behalf of your client. This may be a person you are working with on the phone or in person.

4. Call the Taxpayer Advocate Help Line at 877-777-4778.

What is the difference in either writing a letter or completing a 911? Internal Revenue Code

§7811 and Regulation §301.7811-1 require that the running of statute of limitations on collection

be suspended when the taxpayer requests a Taxpayer Assistance Order. Although you may

request a TAO in a letter, the most common means is with a Form 911. With a normal letter that

just requests help, the statute is not suspended.

How long is the statute of limitations suspended? It is suspended for the period beginning on the

date the Taxpayer Advocate Service receives an application for a taxpayer assistance order and

ending on the date on which the Advocate makes a determination with respect to the application,

and for any additional period specified by the Ombudsman in an order issued pursuant to a

taxpayer's application. For the purpose of computing the period suspended, all calendar days

except the date of receipt of the application shall be included.

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Computer Definitions Masterfile: As the name suggests, this system is the IRS main computer system used to store account data. The information stored includes all types of returns, the official addresses of the taxpayer for the last six or so years, and specific return information such as wages, AGI, withholding, payments, offsets, and all transaction codes relating to that tax period including the secret codes that are not available to the taxpayer. Non-Masterfile: These accounts are more or less manual. The information may be viewed on the computer but the real account is maintained on a card. An actual copy of the card may be requested. It is rarely done and I think we would have to go through Freedom of Information to get it. A manually prepared transcript maybe requested. IDRS: (Integrated Data Retrieval System) This is the computer system that is based at the service center level. It generally has only the accounts that are assigned to either the service center or a district office. It does not keep fully paid accounts on the system for long. ALS: This is the lien system. As soon as IDRS shows an account as fully satisfied, it notifies the lien system. When every account on a lien is satisfied, the lien system generates a release of lien. ACS: (Automated Collection System also called the Automated Call Site). This is the first unit that can actually take collection action, limited to levies and liens. The ACS system was first used in the early 80's. The assistor now can see both IDRS and ACS on a split screen. With a push of a button, a levy or lien can be requested. Although requested at the Call Site, the forms are generated at the Service Center. There are history annotations although they are abbreviated to the point of being in a foreign tongue. The history goes to archive when the case is closed either by an installment agreement, full payment, uncollectible or sent to the field. The field revenue officer usually gets a copy so that she can see what action ACS took. The major actions such as payments and case closings are entered onto IDRS. ICS: (Integrated Collection System) is the revenue officer’s computerized system. The cases being worked by the RO are downloaded onto their laptop. The system shows the amounts due for the years assigned to him. It has various screens that require certain information. This information has been required for years but with a paper case, an RO could accidentally skip something. With ICS the system requires the actions before the RO can move on to another action or close a case. The system also downloads levy information from IDRS, has case history and allows for managerial approval and review by notifying the manager electronically. Some of the information previously available only through IDRS, such as payoff information, is now part of the ICS program. Certain forms and letters are automatically generated by giving the laptop computer a command then the printout is made at a centralized clerical station. The laptops are docked with the main ICS computer while in the office but at an alternative worksite or in the field the computer has specific cases on the hard drive. This system allows for intra-office mail but does not have access to the internet. Exam System: has the various forms and questions needed for the examination.

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Transaction Codes: Almost every action taken on an account is signified by a particular code. Transaction codes (TC) are three digit numbers that include specific programmed responses. For instance a TC 520 is a litigation code. When it is accompanied by a closing code (CC) 88 the computer is told that the taxpayer has filed bankruptcy and certain actions cannot be taken. In the case of a TC 520 with a CC 88, the computer automatically generates a freeze code. Unless all 520's are reversed, refunds will not automatically be issued. See below. Different transaction codes do different things. There is an ADP Book, Document 6209 that gives the codes, closing codes, locator numbers, etc. This book is available under the Freedom of Information Act for a cost of about $77. Of course, some materials are covered or blocked out but the majority of the information is available. This information is also available through CFS, the company that brings you TaxTools. It is part of their Audit and Collection Software. They can be contacted at 800-343-1157 or on the web at www.taxtools.com. Closing Codes and Action Codes: These are supplemental codes that work in conjunction with Transaction Codes. Designated Payment Code: Payments that come in to IRS are generally posted as a Payment with Return, Estimated Tax Payment or Subsequent Payment. To further define the Subsequent Payment there is a two digit Designated Payment Code (DCP), which gives additional information such as if the payment was from a bankruptcy, a seizure, a levy, etc. Disposal Codes: When an open examination is closed, a transaction code indicates the closure but a disposal code indicates how the exam was closed. Transcripts of Accounts: There are two types of transcripts. There is the MFTRX, the literal version, of the masterfile account, which is generally provided to taxpayers upon request. The information is limited and codes are defined. Note: There is a variation within IRS regarding what constitutes a transcript. When I order a transcript, I define it as the transcript with the entire history of the account, a MFTRX. Otherwise you may receive a transcript of what was entered on to tax return. CP Notices: When IDRS generates a letter it is called a computer paragraph or CP. The most well known one is a CP 2000, which is the letter indicating that IRP information does not match the information reported on the tax return. Command Codes: The command codes (CC) are the computer words that tell the computer what information to pull up. Sometimes the document compiled is called by the command code used to request it. MFTRA, which is synonymous for transcript of account, is actually the command code used to request the transcript. Unpostable: When a transaction is input to IDRS, the next cycle (week) it is downloaded to the masterfile. If the masterfile rejects the code then it is unpostable. A technician must manually review unpostables to identify the problem.

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Penalty Codes: There are so many penalties that separate codes for each type of penalty is not practical. IRS has transaction codes for many of the commonly used penalties such as failure to file and failure to pay. However for the majority, TC 240 has a three-digit definer code to explain which penalty was assessed. Pending Transactions: Any TC that is input to IDRS but is not yet transmitted to the masterfile is a pending transaction. Reference Numbers: Some transaction codes require a Reference number to further define. One example of this is the reference number that defines the preparer penalty.

NAEA


Various Command Codes: MFTRA - This is the complete transcript of account as shown on the Masterfile. The information is written in code and numbers. This is generally only available upon specific request and often a Freedom of Information Request is necessary. MFTRA searches can be made for amounts, dates and spouse’s social security numbers. The amount searches are specifically used to find payments or levy proceeds. There are various types of MFTRA that can be requested: MFTRAX - transcript for outside use (practitioners and taxpayers) offering limited information. MFTRAE - Entity information off of the masterfile MFTRAC – Gives complete information of all accounts under one TIN, which is on the masterfile computer. This information should be rarely and carefully requested because in some cases, the amount of papers could be voluminous. TXMOD: This transcript shows what is on the service center IDRS computers. It generally differs from what is on the Masterfile. Along with showing account information, this also shows an encoded history of the various statuses that the account has passed through. This information is generally available only through a FOIA request. It has a wealth of information. PINEX: This is a notice that explains penalty and interest calculations to the taxpayer. INTST: This command code computes penalties and interest through a specific date for accounts that is already assessed and on the campus computers. It is generally for internal use only. INTSTD: Provides a detailed computation of penalty and interest to a specific date. This computation is literal and can be given to the taxpayer. The majority of IRS employees are not aware of the INTSTD because it was used primarily by experienced caseworkers. RTVUE: Provides access to the line items transcribed from tax returns as well as their accompanying schedules and/or forms as the returns are processed at the service center. The processing year includes all returns processed during the year. Delinquent returns will be displayed in the year processed. RTVUE provides access to the following:

• Line items transcribed from IMF returns (Forms 1040, 1040A, 1040EZ, 1040NA, 1040SS and 1040PR);

• Edited or verified fields; and, • The accompanying schedules and forms filed in the current processing year including

late-filed returns, and the two prior years.

NOTE: The information on RTVUE is transcribed or generated on the original returns as they are processed at the submission processing sites. It does not change, nor will it reflect any subsequent adjustments or amended/duplicate returns.

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RTFTP provides a sanitized taxpayer version of RTVUE that includes no IRS edited or generated data. IRP: IRP stands for Information Reporting Program. It contains all of the 1099, 1098 and W-2 information reported on the taxpayer by year. The computer currently keeps about 2 - 3 years on active and the remaining 3 to 4 years is archived and must be requested. The request can take as much as 6 weeks to process. SUPOL provides access to a national database of potential delinquent inquiry (non filer) cases. The database contains the Information Return (IRP) document(s) associated with the potential TDI (non-filers). The initial year on the database starts with TY90 information. Additional years of information are added in May of each year. A total of 6 years will be available when the entire database is built. URINQ - Unidentified Remittance Inquiry is input when a payment is received and IRS cannot identify the taxpayer usually because a social security number is not on the check. URINQ can be requested under the date the check was received or by the amount. SUMRY - A SUMRY request shows every account on IDRS and the status. When you call Practitioner’s Hotline and are told that an account is in collection but it is really ACS, the assistor is looking at the collection status codes. This code is only shown on SUMRY and TXMOD. It also shows the filing requirements for each type of return. For example, if a final 941 was filed but the 940 was not marked FINAL the account may show no filing requirement (closed) for the 941 but the computer will still be looking for the 940 because the filing requirement is open. STAUP - This is a hold on an account keeping it from going to the next status or notice level. ENMOD - This CC gives entity information. It will show when addresses were changed. If that information is added to the notice information on the TXMOD, you can ascertain where a notice was sent. This is useful if you are proving to what address a notice was mailed. TXMOD shows that date the notice was mailed while the ENMOD shows what address IRS had for the taxpayer on that specific date. Other information is also available on ENMOD. Generally a FOIA request would be required to get this information. LEVYS - indicates the levy sources on the computer. You will never see this but it is nice to know that IRS has an easy source of levies.

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TRANSACTION CODES There are more than 400 ADP Transaction Codes. Some codes are used for dedicated Master File (MF) applications, while others are used in several MF applications. The following list identifies some frequently used transaction codes:

011-EIN, SSN CHANGE

150-RETURN FILED/TAX ASSESSED

166-DELINQUENT RETURN PENALTY

170-ESTIMATED TAX PENALTY

171-ABATE ES TAX PENALTY

180-DEPOSIT (FTD) PENALTY

181-ABATE PENALTY (FTD)

196-GENERATED ASSESSED INTEREST

270-FAILURE TO PAY TAX PENALTY

280-BAD CHECK PENALTY

290-ADDITIONAL TAX ASSESSED

291-ABATEMENT OF PRIOR TAX

300-EXAMINATION TAX ASSESSMENT

301-ABATE PRIOR TAX ASSESSMENT

320-FRAUD PENALTY

321-ABATE FRAUD PENALTY

336-INTEREST ASSESSMENT

350-NEGLIGENCE PENALTY

430-ESTIMATED TAX DECLARATION

460-EXTENSION OF TIME FOR FILING

480-OFFER-in-COMPROMISE PENDING

481-OFFER-in-COMPROMISE REJECTED

482-OFFER-in-COMPROMISE WITHDRAWN

494-NOTICE OF DEFICIENCY

500-MILITARY DEFERMENT

530-UNCOLLECTIBLE ACCOUNT

550-COLLECTION STATUTE EXTENSION

610-REMITTANCE WITH RETURN

611-BAD CHECK WITH RETURN

620-INITIAL INSTALLMENT PAYMENT

640-ADVANCE PAYMENT OF

DETERMINED DEFICIENCY

650-FEDERAL TAX DEPOSIT (FTD)

660-ESTIMATED TAX PAYMENT

661-ES OR FTD BAD CHECK

670-SUBSEQUENT PAYMENT

671-BAD CHECK-SUBSEQUENT PAYMENT

700-CREDIT APPLIED

706-OVERPAYMENT APPLIED FROM

ANOTHER TAX MODULE

710-CREDIT ELECT OVERPAYMENT APPLIED

736-INTEREST OVERPAYMENT

740-UNDELIVERED REFUND CHECK

DEPOSITED

764-EARNED INCOME CREDIT

766-REFUNDABLE CREDIT ALLOWANCE

770-INTEREST DUE TAXPAYER

800-CREDIT FOR WITHHELD TAXES

806-CREDIT FOR WITHHELD TAXES AND

EXCESS FICA

807-WITHHOLDING CREDITS REVERSED

820-CREDIT TRANSFERRED

826-CREDIT TRANSFERRED OUT

830-OVERPAYMENT TRANSFERRED

840-REFUND PRIOR TO SETTLEMENT

841-CANCELLED REFUND DEPOSITED

842-REFUND DELETION

846-OVERPAYMENT REFUND

914-ACTIVE CRIMINAL INVESTIGATION

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13 A delinquent return was received after a substitute for return (SFR) was processed

31 & 33 These codes tell what happened in a bankruptcy

35 The taxpayer’s computer generated final demand for payment (CP 504) was bypassed and either ACS or a revenue officer issued a manual demand (LT 11 or Form 1058)

43 The taxpayer has proposed payment of the account via an installment agreement

51 Indicates that the taxpayer is a federal employee/retiree

63 An installment agreement was approved

69 A Collection Due Process (CDP) notice was issued to the taxpayer

69 & 66 The CDP notice was not mailed but handed to the taxpayer

69 & 67 The CDP notice was left at the taxpayer’s last known address

71 Innocent spouse claim

72 A return was inspected as part of a package audit and accepted as filed.

163 Defaulted installment agreement

FREEDOM OF INFORMATION REQUESTS The Freedom of Information Act (FOIA), 5 U.S.C. § 552, provides public access to

agency records unless protected from disclosure by one of the FOIA’s nine exemptions or

three exclusions. The FOIA applies to records created by Federal agencies and does not

cover records held by Congress, the courts, or state and local government agencies. Each

state has its own public access laws, which should be consulted for access to state and

local records. The Internal Revenue Service complies with the FOIA by:

• Maintaining publicly available materials on the Internet in the IRS Electronic Reading Room at irs.gov under the heading of “FOIA”,

• Staffing the IRS Public Reading Room at 1111 Constitution Avenue, NW, Washington, DC 20224 call (202) 622-5164), and

• Responding to written requests for agency records not available in the Reading Room.

Practice Tip: There is a Document 6209 also called the ADP Book, which provides a key to reading the IRS transcripts. One method of obtaining this reference book is through a Freedom of Information Request or from a commercial vendor.

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Many IRS records are available for sale from the Government Printing Office, or are available through established agency procedures. Routine requests are most efficiently processed through those procedures.

NAEA


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