Category: Tax Resolution Hot Sheet

In this issue:

• Procedural update on filing compliance for Installment Agreements
• Employment tax exams initiated from income tax audits
• Are you sending Thank You notes?

Filing Compliance for Campus Installment Agreements
An update has been made to IRM 5.19.1.4.4.1 effective July 1, 2021 to allow Campus Collection to grant payment plans to taxpayers whose account records show filing delinquency for 2019 and 2020. Since the IRS is still woefully behind on processing paper filed returns for 2019, not to mention 2020, their have been issues with taxpayers that have filed to get an IA established to resolve prior tax periods.

This IRM change addresses this issue, and finally gives you an option to help clients that are stuck in this situation. As you should already be aware, the IRS employee handling a Collection case is required to do a compliance check to make sure the taxpayer has filed all required returns before they authorize an Installment Agreement for that taxpayer. If their 2019 or 2020 return is sitting in a mail tub somewhere, not yet opened, then the taxpayer has met their filing obligation and should be able to get their IA.

This IRM update is in effect through the end of the current fiscal year (Sep. 30, 2021). Telephone assistors can set up the IA even if the return does not show up on IRS computer systems — but again, only for 2019 and 2020 returns. In addition, if you have a client that filed a 2020 return that has not been processed, ask the IRS employee to include the 2020 liability in the payment plan right now as you set it up. You’ll need a copy of the client’s 2020 return in hand, to read off the balance due, but it can help reduce penalties and interest a little bit and definitely saves a lot of time.

This procedural deviation applies to both IMF and BMF liabilities; AKA, both individual and business tax debts.

To learn more about Installment Agreement procedures, including the purpose of demonstrating that your client is current and compliant and how that benefits your client, see our 2-hour CPE class, CTR-132: Individual Installment Agreements, available exclusively to Academy members.

Examination Begets Examination
IRS Policy Statements are an under-explored portion of the already under-explored Internal Revenue Manual (IRM). Studying the IRM is, in my experience, the key to being a better taxpayer representative, and I’ve recently become fascinated with … Continue reading

In this issue:

• Fiscal Year 2020 Data Finally Released… Data Time!
• IRM Update on Interest Calculations on Manually Prepared Returns in BK Cases
• Are you doing the right work?

Fiscal Year 2020 Data Book
Last week, the IRS finally released the FY20 Data Book. This is my most favorite IRS statistical release of the year, as it includes all the juicy Collections activity details for the year.

As was expected, the shutdown of Collection activity from April 1, 2020 through September 30, 2020 resulted in significant changes to Collection and Examination activities at the Service. The number I was most looking forward to seeing was the change in NFTL filings. All last year, I was guesstimating that we’d see around 250,000 NFTL filings for fiscal year. I wasn’t actually that far off, but the Service beat my prediction with 291,000 NFTs filed.

Other interesting tidbits:

• Case inventory dropped like a rock, as expected, with only 8.4 million Collection cases in inventory by the end of the fiscal year. This is getting balanced out by the massive increase in enforcement action going on right now, though, so don’t assume that tax resolution is dead — far from it!
• Levy action dropped by almost half compared to 2019.
• Delinquent return investigations increased by over 26% — this clearly shows the importance of this activity to the Service (in case you didn’t know it already).
• OIC acceptance dropped to 31%, with only 0.19% of all Collections cases being resolved via OIC. Not 19%… 0.19%. This is something I continuously stress to tax pros.

From the Exam side, Dan shares:

• Examinations were cut almost in half compared to three years ago.
• 80% of audits are still being conducted by correspondence.
• 90% of all Examinations are against individuals — despite more than half of Collection cases being against businesses. Quite the imbalance in The Force.

Interest Calculations on Manual Returns
IRS released an update to internal procedures on June 14, 2021 under IRM 5.9.13 pertaining to Service preparation of tax returns while a taxpayer is in bankruptcy.

Letter 1714 is a notice sent to the taxpayer that requests unfiled returns. This IRM procedure dictates the procedures for IRS employees to follow when following up on this request for returns and return information. This can include updating taxpayer records with explanations about why filing wasn’t required, reaching out to the taxpayer or their bankruptcy attorney by phone in an … Continue reading