Tax Resolution Hot Sheet™ #4: Appeals – Digital Signatures, Digital Case Files

In this issue:

  • Reissuance of digital signature guidance for Appeals
  • Extension of electronic case file pilot for Examination Appeals
  • Make just one more cold call

Extension of Digital Signature Guidance
Today, we have a pair of Appeals-related guidance extensions to discuss. First up is memo AP-08-0521-0015. In response to the pandemic last year, Appeals basically had no other choice than to create a procedural deviation to allow for digital signatures on many documents. More specifically, this change related to digital images of signatures, which are usually verboten.

In other words, Appeals was able to temporarily accept signatures that were drawn on computer — e.g., there was never a wet ink signature to start with. It’s also important to note that these are NOT true “digital signatures”, which have some sort of authentication protocol attached to them. This is literally just drawing a signature with your mouse, or taking a photo of a signature with your phone and cropping it, and then copy/pasting it into the IRS form, with no security provisions.

In other departments, such as the CAF Unit, we’ve already seen relatively quick (by government standards) creation of true digital signature options. It’s my hope that the Service will expand those technologies to all departments sooner rather than later, making life easier for everybody.

Also in this procedural deviation is the ability for Appeals personnel to receive taxpayer documents via email and to send taxpayers documents via SecureZip. We can only hope that this is going well, and that in the future we can do the same with Collections and Examination. Then we’d really be living the dream, eh?

These temporary provisions were set to expire, but have been extended through Dec. 31, 2021.

Electronic Case Files in Field Examination Appeals
IRS field units still use paper files for the vast majority of the work they do. When a taxpayer is getting put through the ringer on either the Collection or Exam side, there’s a massive amount of paper created. Running an audit from an iPad? Pfft, maybe by 2050, if we’re lucky. 🙂

But, at least there are some steps in the right direction. Within SB/SE, there has been a pilot program running for a little while (pre-COVID) that allows for digital case files for certain types of field examination. These are mostly individual income tax examinations that are being run under this program. Payroll tax, excise tax, gift … Continue reading

Tax Resolution Hot Sheet™ #3: Filing Compliance for IAs; Examinations Beget Examinations; Follow Up Marketing

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 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

Tax Resolution Hot Sheet™ #2: FY20 Data Book; Interest Calculations on BK SFRs; Priorities

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