Route To: j Partners j Managers j Staff j File P.O. Box 115008 Carrollton, TX 75011-5008 Tel (972) 250-7750 (800) 431-9025 Fax (888) 216-1929 tax.thomsonreuters.com LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC s Guide to Dealing with the IRS Twenty-third Edition (June 2015) The following are some of the features of this year s update of PPC s Guide to Dealing with the IRS: Identity Theft. Identity theft continues to be one of the most pervasive and troublesome issues for both the IRS and taxpayers. The Guide expands its coverage of this topic and has also added a new checklist of steps for representing a victim of identity theft. Taxpayer Information for an Audit. An IRS examiner must have all the necessary taxpayer information to perform the specific examination in a thorough, yet efficient manner. The IRS uses various techniques, tools, and documents to gather information necessary for an audit.the Guide has added a section discussing those tools and techniques. Relief for Retirement Plan Reporting Penalties. In June 2014, the IRS began a one-year pilot program designed to bring a significant number of small businesses with retirement plans into compliance with reporting requirements, potentially saving taxpayers penalties of up to $15,000 per return. The Guide discusses this program, which has now been made permanent. Appeals Judicial Approach and Culture (AJAC) Project. The Guide has added a discussion of this project that is designed to clarify the distinction between Compliance and Appeals. One aspect is that Appeals will generally no longer raise new issues in Tax Court docketed cases. Reporting of Foreign Financial Accounts and Assets. Persons with certain levels of foreign financial accounts and assets are required to report these to the Treasury. Nonfilers are subject to substantial civil and potentially criminal fines. The Guide has expanded its coverage of this topic including a streamlined compliance procedure for nonfilers and participation in the Offshore Voluntary Disclosure Program (OVDP). Increased Penalty Amounts and Annual Inflation Adjustment for Penalties. Under new legislation, certain taxpayer and preparer penalties are adjusted for inflation for returns required to be filed after 2014, and the base penalty amounts are increased for returns required to be filed after 2015. The Guide has revised its discussion of these penalties for this new legislation. In addition to these featured items, the 2015 edition of your Guide includes the following update items: CHAPTER 1 Overview of IRS Practice 1. Added comments from the chief of the Criminal Investigation Division and the National Taxpayer Advocate about the effects of budget cuts. 2. Added a note stating that the IRS Oversight Board has temporarily suspended operations. 3. Added a discussion of the voluntary education program for tax return preparers. Section 101 Section 101 Section 102 irsp15sub 1
CHAPTER 2 Tax Overpayments and Interest CHAPTER 3 Statutes of Limitations CHAPTER 4 Audit Procedures and Taxpayer Rights CHAPTER 6 Audits of Business Returns 4. Added discussions of the National Taxpayer Advocate s latest Section 102 reports to Congress, including problems identified, recommendations for administrative changes, recommendations for legislative changes, and an analysis of frequently litigated tax issues. 5. Updated the statistics for Taxpayer Advocate Service (TAS) cases for the current year. 6. Updated the contact information for the taxpayer advocate in each state. Section 104 Appendix 1F 1. Revised and expanded the discussion of identity theft. Section 201 2. Added clarification of the phrase tax paid for purposes of taxes Section 203 paid within the three-year limitations period for calculation of overpayment in a refund claim. 3. Added a discussion of a case indicating the proper look-back period for a refund claim when a notice of deficiency is received prior to filing a delinquent return. 4. Revised and expanded the discussion of designated private delivery services (PDS) for changes to approved list of delivery services and for an IRS notice explaining the determination of date of delivery when a PDS is used. 5. Added a discussion of a case regarding interest netting when a statutory merger occurs. 6. Added a new checklist of steps for representing identity theft victims. Section 203 Section 204 Section 205 Appendix 2J 1. Updated the list of approved Private Delivery Services (PDSs). Section 301 2. Expanded the discussion of approved PDSs. Section 301 3. Expanded the discussion of the mailbox rule as it applies to Section 301 documents other than tax returns. 4. Added a discussion of a court case regarding what constitutes Section 301 gross income in the case of gain from a sale, for purposes of the six-year statute of limitations. 5. Revised the discussion of the collections limitation period for certain Foreign Bank Account Reporting (FBAR) requirements. 1. Added a new section describing the IRS s techniques to gather information for an audit. 1. Added a discussion of a court case regarding the election by a partner to treat all partnership items as nonpartnership items for TEFRA audit purposes. 2. Added a discussion of an IRS legal advice regarding whether to notify a partner when no audit adjustments are made to a partnership return. 3. Added a discussion of a program manager technical advice memorandum regarding issuance of Notice of Beginning Administrative Proceedings when no Final Partnership Administrative Adjustment is intended to be issued. Section 302 Section 402 Section 607 Section 607 Section 607 2
CHAPTER 7 Audits of Other Returns CHAPTER 8 Appeals and Alternative Dispute Resolution CHAPTER 9 Assessments and Abatements CHAPTER 10 Collection Procedures, Installment Agreements, and Third-party Collection Issues CHAPTER 11 Liens, Levies, Seizures, and Sale of Taxpayer s Property CHAPTER 12 Innocent Spouse Relief CHAPTER 13 Offers in Compromise 1. Revised and updated the discussion of the pilot program providing Section 704 relief from penalties for failure to comply with retirement plan reporting requirements to reflect the program is now permanent. 2. Revised the discussion of penalties for failure to file information Section 705 returns to reflect that penalty amounts are now adjusted for inflation. 3. Expanded the list of audit objectives for a tax exempt organization. Section 707 4. Revised the discussion of audit examination guidelines for a tax Section 707 exempt organization. 1. Added a discussion of the Appeals Judicial Approach and Culture Section 801 Project (AJAC) to re-design the way Appeals handles cases. 2. Added a discussion of the Virtual Service Delivery (VSD) Section 807 face-to-face teleconference option for appeals conferences. 3. Added a discussion on appealing an offer in compromise. Section 812 1. Added a discussion of IRS report that the Get Transcript online Section 901 application tool was compromised. 2. Expanded the discussion on collection of restitution. Section 901 3. Expanded the discussion on definition of a deficiency for a court Section 903 case involving an erroneous refund issued by the IRS. 1. Added a discussion of waiting period by IRS for payments made by credit and debit cards. 2. Updated the collection case statistics of the Automated Collection System (ACS) based on TIGTA report. 3. Added a discussion regarding the inability of taxpayers in bankruptcy to enter into installment agreements. 4. Expanded the discussion of when the IRS can terminate an installment agreement. 1. Added a discussion of a case illustrating the importance of timing of the IRS filing a lien vs. a security interest previously recorded for the subject property. 2. Added a discussion of Chief Counsel Advice illustrating the collection due process hearing rights when the taxpayer is subject to both a restitution-based assessment and an assessment from a civil examination. 3. Added a discussion of a case regarding the release of a lien on jointly owned property at the death of the liable taxpayer when the co-owner survives. 1. Added a discussion of a case pointing out the importance of filing the correct IRS form requesting innocent spouse relief. 2. Revised the flowchart illustrating qualifications for innocent spouse relief. 1. Added a discussion of treatment of Offer in Compromise (OIC) payment and processing fee submitted and designated as a deposit. 2. Added a discussion of processing an OIC from a victim of fraud by a third-party payroll tax processor. 3. Mentioned a court case regarding no re-instatement of a defaulted OIC. Section 1001 Section 1003 Section 1006 Section 1006 Section 1101 Section 1101 Section 1102 Section 1206 Appendix 12A Section 1303 Section 1303 Section 1304 3
CHAPTER 14 The Trust Fund Recovery Penalty CHAPTER 15 Bankruptcy CHAPTER 16 Representing Nonfilers CHAPTER 17 Taxpayer and Preparer Penalties CHAPTER 18 Criminal Penalties 4. Added a discussion of a nationwide rollout of post-appeals Section 1304 mediation for OIC cases. 5. Added a discussion of a court case providing that both current Section 1304 assets and future income must be taken into account by the IRS when considering accepting an OIC. 1. Expanded the discussion of criminal penalties in trust fund cases to reflect the increased focus by the IRS to enhance their enforcement activities for employment tax cases. 2. Expanded the discussion of the willfulness prong of the trust fund recovery penalty for two cases distinguishing the meaning of willfulness. 3. Added a discussion of Rev. Proc. 2014-64, explaining the criteria of new procedures for initiating mediation requests. 1. Added information on where the Notice of Federal Tax Lien needs to be filed. 2. Expanded the discussion of discharging taxes relating to delinquent returns for cases filing for a Writ of Certiorari with the Supreme Court. 3. Revised the discussion on designation of tax payments in a 7 Bankruptcy for recent case law. 4. Expanded the discussion of practical considerations for payments of nondischargeable taxes. 1. Expanded the discussion of reporting for foreign financial accounts and assets, including streamlined compliance procedures for nonfilers and participation in the offshore voluntary disclosure program. 2. Expanded the discussion of situations that may qualify as reasonable cause to justify penalty abatement for delinquent filings. 3. Expanded the discussion on when married taxpayers should consider filing delinquent returns separately instead of jointly. 1. Updated the tables for the most recent IRS statistics for penalties assessed and abated, including a separate table for civil fraud penalties. 2. Revised the discussion of rescission of Section 6707A penalty for new final regulations replacing part of Rev. Proc. 2007-21. 3. Added law change alerts for various penalties that are adjusted annually for inflation after 2014. 4. Added a discussion of a Chief Counsel Advice regarding assessment of the preparer penalty for willful or reckless conduct on amended returns that are signed but not filed, and filed but not signed. 5. Revised the table of taxpayer and return preparer penalties for penalty amounts that are adjusted annually for inflation after 2014. Section 1401 Section 1402 Section 1404 Section 1504 Section 1505 Section 1505 Section 1505 Section 1601 Section 1601 Section 1606 Introduction and section 1705 Section 1702 Sections 1703, 1706, and 1707 Sections 1706 and 1707 Appendix 17A 1. Added a discussion of new cybercrimes unit created by the IRS to Section 1801 focus on large-scale cybercrime-related cases. 2. Expanded the discussion of the offshore voluntary disclosure Section 1801 initiative. 3. Expanded discussion of the whistleblower program. Section 1802 4. Added a discussion of the IRS using parallel investigations during certain criminal investigations. Sections 1802 and 1803 4
CHAPTER 19 Rules of Practice CHAPTER 20 Access to Information CHAPTER 21 Managing an IRS Engagement CHAPTER 22 Client Profiles 1. Addressed changes in IRS Publication 947, Practice before the Section 1901 IRS and Power of Attorney, which was revised in April 2015. 2. Updated the list of who can practice before the IRS to include Section 1901 unenrolled tax return preparers, and explained the restrictions on their practice rights. 3. Addressed the September 3, 2014, delegation of authority by Section 1901 Commissioner John Koskinen to OPR to exercise responsibility for all matters related to conduct, discipline, and fitness to practice before the IRS under Circular 230. 4. Explained ways that practitioners can lose their eligibility to Sections 1901 practice before the IRS, as well as the actions that the IRS Office and 1903 of Professional Responsibility will take depending on the reason for the loss of eligibility. 5. Explained the contents of and rules for taking the Annual Filing Section 1902 Season Federal Tax Refresher comprehensive test. 6. Noted the flexible attitude that OPR takes when it determines that Section 1905 a Circular 230 violation has occurred; generally speaking, it looks for alternative options to disciplining practitioner that will get them back on track. 1. Added information on the proper use of Form 8821. Section 2001 2. Clarified who can sign a POA for a partnership, based upon Section 2001 guidance provided by the IRS. 3. Added a caution about information not recorded by the IRS in the CAF. Section 2001 4. Reminded submitters of the importance of paying fees for Section 2002 information requested under the FOIA. 5. Explained the impact of budget cuts on responses from the Section 2002 Income Verification Express Service. 6. Provided information on a taxpayer s ability to question a Section 2006 summons from the IRS. 7. Added a properly completed Form 8821. Appendix 20H 1. Emphasized the importance of a properly complete power of Section 2101 attorney (Form 2848). 2. Clarified when the IRS may change the location of an examination Section 2102 or collection meeting. 3. Enhanced the discussion of steps to take if a taxpayer is contacted Section 2103 over the telephone by an individual claiming to be an IRS employee. 1. Added additional immediate action for practitioners representing Section 2209 victims of identity theft. 2. Revised the appendixes for new IRS revised forms. Appendixes 22D and 22E 5
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