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NAEA

NATIONAL TAX PRACTICE INSTITUTE™

LEVEL 1 Communicating with the IRS & Notices

August 5, 2013

LG Brooks, EA LG Brooks, EA is a senior consultant at The Tax Practice, Inc. in Dallas, Texas, a 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 the NTPI Level 1, Level 3 and the Graduate Level in Representation tracks.

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TABLE OF CONTENTS

Introduction ………………………… 1 The Basics of Communications with the IRS ….. 2 Computer Paragraph Transaction Codes …….. 15 IRS Hints ………………………. 17 Taxpayer Advocate Issues ……………………… 19 Computer Definitions ………………………. 20 Various Command Codes ………………………. 23 Transaction Codes ………………………. 25 Disclosure & FOIA Requests………………………. 27

LG Brooks, EA i Communicating with IRS

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Communicating with the IRS & Notices

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

& Notices we should consider the various divisions, the various levels of employees (IRS

agents, officers, tax specialists) whether civil or criminal, the level of authority of the IRS

personnel. And yet while communicating we must also maintain the taxpayer’s

confidentiality and privilege while doing so. And 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 &

Notices 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.

Course Objectives

Therefore today’s professional 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 the difference of deciding why not to respond, and further more being able to

justify a judgmental or professional decision based upon substantial and relevant

authority.

LG Brooks, EA 1 Communicating with IRS

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THE BASICS OF COMMUNICATING WITH THE IRS & NOTICES

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

obtain the necessary tools and resources to have a meaningful discussion. Therefore

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 then 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 (with respect to representation)

only if a valid POA is on file for the taxpayer. Therefore prior to initiating

any type of meaningful “communications” related to representation of the

taxpayer, the practitioner should secure the appropriate authorization

document.

Practitioner Practice Pointer A separate POA is now required to be executed by each taxpayer/client. All taxpayers, including those with a filing status of married filing joint are subject to the new POA requirements.


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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 e-file any combination of five or more

accepted individual and business tax returns in a calendar year

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.

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.

Practitioner Practice Pointer During June 2013, the IRS announced that it intends to retire the Disclosure Authorization (DA) & Electronic Account Resolution (EAR) components of e-Services as of August 11, 2013 “due largely to low usage”. The IRS has not determined if or when any “electronic alternatives” will be developed relative to the services now available via DA & EAR. However, the IRS stated that it has “increased the number of employees & improved its internal process in response to this change”.


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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 Features:

Where’s My Refund?

This feature 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 numbers, filing statuses and the exact amounts of their refunds.

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.


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Where’s My Amended Return?

Generally, this application will provide you and/or your clients with the

status of amended returns mailed to the IRS Campus or Service Center for

processing. An actual Form 1040X should be filed prior to attempting to

access this service. For example, the taxpayer should not file a “Form

1040” marked “amended”. This is an example of the type “amended that

the IRS has indicated will not be processed and does not qualify for the

“Where’s My Amended Return” application.

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.

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 Offer-in-Compromise (DATC & ETA) (866) 790-7117 Offer-in-Compromise (DATL) (866) 611-6191

Power of Attorney and Third-Party Authorizations: Memphis IRS-(MAMC) P. O. Box 268 STOP 8324 Memphis, TN 38118 855-214-7519 FAX-NEW 901-546-4115 FAX-OLD 901-546-4176 Voice

Ogden IRS-(OAMC) 1973 N. Rulon White Blvd. M/S 6737 Ogden, UT 84404 855-214-7522 FAX-NEW 801-620-4249 FAX 801-620-4254 Voice

Philadelphia IRS-(PAMC) Int’l CAF MS 3-E08.123 2670 Market Street Philadelphia, PA 19104 855-772-3156 FAX-NEW 267-941-1017 FAX 215-516-5996 Voice


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Practitioner Practice Pointer The “Old” fax numbers noted above currently continue to be operational, however the IRS may discontinue their use in the near future. Additionally, the “Old” fax number related to the PAMC will remain operational indefinitely to accommodate submissions from outside the United States.

CAF Acronyms:

MAMC – Memphis Accounts Management Campus OAMC – Ogden Accounts Management Campus PAMC – Philadelphia Accounts Management Campus

Social Media: Various Social Media platforms are available to taxpayers and practitioners as well regarding communicating with the IRS. A few of the “Social Media” platforms are as follows: IRS2GO – Available for Apple & Android applications such as iPhones, iPads,

and various Android devices. YouTube – Taxpayers are capable of watching short, informative videos in

English, American Sign Language, and other languages. Twitter – IRS tweets include various tax-related announcements, news for tax

professionals and hiring initiatives. Facebook – The IRS Return Preparer Facebook page posts useful information for

tax professionals. Tumblr – The IRS Tumblr blog provides current tax information.

Practitioner Practice Pointer Although the above Social Media platforms are available to taxpayers in addition to knowledgeable practitioners, the IRS warns taxpayers that, “privacy & security are paramount” and requests that be careful not to post any confidential information via the social media sites.

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 letters 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.

Although another NTPI session addresses collections notices in detail, for the purpose of

this presentation, a few of the critical collection notices are noted below. However there

are a variety of notices other than those warning of collection actions. The Taxpayer Bill

of Rights 2 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 notices 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. Collection Notice Codes • CP 503 is sent as a reminder notice to those taxpayers who have not responded to a

previous IRS “unpaid balance due” notice. However, the IRS is not statutorily allowed to proceed with enforced collection actions.

• CP 504 is sent as a “pre-final” reminder notice to those taxpayers who have not

responded to the CP503 notice. However, with the issuance of this notice, the IRS is allowed to levy upon “certain” assets.

• CP 90 is issued as the “final” notice of intent to levy. The taxpayer is advised of their

“right” to an appeal. • CP 91 is sent as a “final” notice of intent to levy upon “Social Security” benefits (up

to 15%). The taxpayers are advised of their right to request a CAP Hearing within 30 days of the date of this notice.

• CP 297 is sent as a “final” notice of intent to levy, which is synonymous to the CP90

notice. • CP 298 is sent as a “final” notice of intent to levy, which is synonymous to the CP91

notice. • Notice 746 is provided to taxpayers to inform them of the IRS’s procedures to apply

interest and penalties to delinquent tax balances. Notice 746 also provides taxpayers with crucial information regarding the “Removal of Penalties” (or penalty abatement procedures).


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Responding To Notices Once you are prepared to respond to a notice remitted 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 simple, 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 will be

aware of correct final destination.

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. 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.

E-Mail Communications: Currently, the IRS “does not initiate contact with taxpayers by email to request personal

or financial information”. This includes any type of electronic communication. Such as

text messages and “social media” platforms previously discussed via this presentation.

Practitioner Practice Pointer The IRS suggests that, “all unsolicited email claiming to be from either the IRS or any other IRS-related components, such as the Office of Professional Responsibility or EFTPS, should be reported to [email protected].


mailto:[email protected]

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REASONABLE CAUSE ASSISTANT The 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 or 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 or 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.


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

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?

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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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 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 notices 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 be granted immediately generally with no

lien filed!

PRACTITIONER PRIORITY SERVICE (PPS) 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 employees’ authority are transferred or referred to

the appropriate IRS functions.


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

circumstances, they can:

• Provide transcripts of accounts and returns • Transfer payments • Assist you with locating missing payments • Abatement of penalties • Establish & 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 • Sta-up an account (place a “hold code” on the account)

The PPS also accepts facsimile documents however do not fax any documents or information until you have an Assistor on the line. PPS TELEPHONE PROMPTS When contacting the PPS careful attention should be made regarding the available options via the telephone prompts. Telephone options are changed periodically and may not be the same as your most recent contact. Currently, the telephone prompts are as follows:

1) General Tax Questions 2) Order a Record of Account 3) Individual Accounts - (Which are not currently in Collection or Exam status) 4) Business Accounts - (Which are not currently in Collection or Exam status) 5) ACS-Automated Collection Support (Accounts which are in collection status) 6) Automated Under-reporter Notice Accounts 7) Correspondence Exam Issues (Accts not assigned to an Office or Field Auditor)

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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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.


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


NAEA

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) 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) 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.


NAEA


NAEA

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

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.

PRIVILEGE & COMMUNICATIONS When communicating with the IRS on behalf of a client or taxpayer, the practitioner

should always be aware of and protect the “privileged” information of the taxpayer. All

communications with the IRS on behalf of client are considered “confidential”, however

not all information and communications with the IRS are afforded the status of

“privileged”. A practitioner must “assert” privilege on behalf of a taxpayer when

required to do so. Circular 230 and the Internal Revenue Code (IRC) mandate the

protection of the taxpayer’s privileged information and/or documents. All FAT

practitioners are subject to the provisions of IRC §7525, which require the practitioner to

“protect” and not inappropriately disclose the privileged information of the taxpayer.


NAEA

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.


NAEA

Exam System: has the various forms and questions needed for the examination. 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.


NAEA

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. 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.


NAEA

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. 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 retrieve the information. 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 give 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.


NAEA

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


NAEA

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


NAEA

DISCLOSURE REQUESTS Numerous records and tax case related IRS documents are available to a practitioner

without the formal necessity of filing a “Freedom of Information Act” (FOIA) request as

discussed below. Generally, a FOIA is not required when requesting files and work

papers pertaining to an open or current case. The authorized practitioner is allowed to

request “files & work papers” pursuant to IRC §6103(e), “Disclosure”, and the

respective IRS personnel are required by law to comply with such legal requests.

Additionally, IRM §4.2.5.7, “Requests for File & Workpapers” instruct all IRS personnel

to comply with the provisions of IRC §6103(e), which provide the legal basis of such

requests.

FREEDOM OF INFORMATION ACT 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.

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


NAEA


NAEA

LG Brooks, EA 30 Communicating with the IRS & Notices NTPI 2012 Level I

NAEA


NAEA


NAEA


Documents

Communicating With the IRS & Noticesmedia01.commpartners.com/NAEA/...Communicating_with... · Communicating with the IRS & Notices . August 5, 2013. LG Brooks, EA . LG Brooks, EA