Practitioner ’s Guide to the Filing Season
WELCOME A Message from the Commissioner
TO TAX Dear Tax Professional: more attractive to
I am honored to serve as the Commis- you and easier to
HINTS sioner of the Internal Revenue Service, use. Each year,
I
and in so doing, have the opportunity to more and more
n this edition of TAX
work with the tax professional commu- taxpayers and
HINTS, you will find
nity. Your interest, support and criticism practitioners choose
information about
have been instrumental to the progress IRS e-file because
changes that will help you
we’ve made so far toward modernizing their returns are
and your clients during
the IRS. processed faster
the 2004 filing season. Mark W. Everson
There is much more that we must with fewer errors.
You’ll find information Commissioner,
accomplish. As we move forward, we This means quicker
about the IRS structure, Internal Revenue
must focus on three areas: refunds and less
points of contact, useful
1. We must stay the course of our contact with IRS. As taxpayer demand for
telephone numbers,
reorganization, which continues to IRS e-file continues to grow, you can
explanations of changes
improve customer service. meet the expectations of your clients by
and improvements for the
2. We must continue the information participating as an authorized e-file
2004 filing season and
technology modernization program provider.
hints about making it a
— its success is critical to establish- Also this year, we’re rolling out a
smooth one.
ing a more efficient, effective IRS, series of web-based services for practitio-
We hope this informa-
and ners — e-services. E-services will allow
tion will make your job
3. We must strengthen the integrity of practitioners to perform, on-line, such
easier and that your
our nation’s tax system through tasks as:
experiences with the IRS
enhanced enforcement activities. The • Registering
this filing season will be
IRS must deter those who might be • Filing an e-file application
pleasant and helpful to
inclined to evade their legal tax • Changing addresses
you and your clients.
obligations and appropriately pursue • Submitting disclosure authoriza-
TAX HINTS was produced
those who actually do. You can help tions, and
jointly by the IRS operat-
us by discouraging taxpayers from • Submitting account-related inquir-
ing and functional
participating in schemes designed to ies and requests for tax return
divisions and National
undermine our tax system. information
Public Liaison. Thanks to
Based on a foundation of taxpayer To learn more about e-services as they
all who contributed and
rights, together, service plus enforcement become available, I hope you’ll visit the
special thanks to the W&I
equals compliance. Tax Professionals page of irs.gov, where
Austin Communications
This year we continued to focus on you’ll find a wealth of information to
staff who contributed to
providing you and your clients with the assist you in serving your clients.
the development and
types of services that you’ve come to I look forward to continuing our
production of this docu-
expect from the private sector and that partnership as we work to ensure the
ment. Since it is only
will make it easier to report and pay integrity of our nation’s tax system and
available on our Web site,
taxes. further improve services.
feel free to download and
We’ve been working to upgrade our
reproduce it often. We
electronic filing system to provide greater
cannot provide printed
capabilities — and hopefully make it Mark W. Everson
copies.
Commissioner Internal Revenue
Revised 2/10/04
Practitioner’s Guide to the Filing Season
INSIDE What’s new for 2004?
THIS 2003 tax law changes for individuals
ISSUE
T
here were a number of payment you received in 2003. The
changes to the tax law for 2003 amount of your advance payment is
Commissioner’s message 1 which will affect the 2004 shown on Notice 1319. This notice
filing season. What follows are was mailed to you in 2003. If you do
What’s new for 2004 ......... 2 highlights of these changes, but more not have this notice, you can check
Changes for individuals ... 2 detailed information can be found in the amount of your advance payment
Publication 17, Your Federal Income on the IRS Web site at www.irs.gov
Changes for business ....... 5
Tax and in Publication 553, Highlights or call us at 1.800.829.1040. If you
Military Family Tax Relief of 2003 Tax Changes. received an advance payment but did
Act ....................................... 5 Tax rate changes. The following not have a qualifying child for 2003,
IRS online business tools ... 7 items highlight the changes to the tax you do not have to pay back the
rates. The 2003 tax tables and tax rate amount you received. Do not enter
Fax guidelines..................... 8 schedules are included near the back the amount of your advance payment
Pub 17 ................................. 9 of Publication 17. on your return. If you filed a joint
• The 10% tax rate bracket for return for 2002, but for 2003 you are
Advance Child
most filing statuses is ex- not filing a joint return (or a joint
Tax Credit ........................... 9
panded. return with the same spouse), you
Preparer penalties.............. 10 • The 15% tax rate bracket for are considered to have received one-
IRS Office of Professional married taxpayers filing jointly half of the advance payment.
Responsibility ..................... 11 and qualifying widow(er) is Married filing joint standard
expanded. deduction. The standard deduction
Abusive tax avoidance • The 27%, 30%, 35% and 38.6%
transactions ........................ 12 for married taxpayers filing a joint
tax rates are reduced to 25%, return has increased.
Office of the Privacy 28%, 33% and 35%, respec-
New capital gain rates. For gains
Advocate ............................. 14 tively.
after May 5, 2003, the 10 percent
IRSAC and IRPAC ............ 15 Child tax credits increased. You may
capital gain rate is reduced to 5
be able to take credits of up to $1,000
National Research percent and the 20 percent capital
for each qualifying child, but you
Program .............................. 16 gain rate is reduced to 15 percent. In
must reduce your credits by any
addition, the 8 percent capital gain
Taxpayer rights .................. 17 advance child tax credit payment you
rate for qualified 5-year gain does
received in 2003.
IRS operating divisions ... 18 not apply to gains after that date.
Advance child tax credit payment.
NPL At-a-Glance ............... 21 You must reduce your 2003 child tax Continued on page 3
Electronic information credits by any advance child tax credit
services ................................ 21
On-line EFTPS ................... 23
Electronic payment options
The IRS Mission
for business ........................ 23
Provide America’s taxpayers top quality service by
E-file for business ............. 24
helping them understand and meet their tax
Become an e-file responsibilities and by applying the tax law with
provider .............................. 25
integrity and fairness to all.
e-file tax fraud ................... 26
FTD requirements ............. 27 IRS
Spanish tax assistance ....... 28 Department of the
Treasury
Internal Revenue Service
www.irs.gov/
2004 TAX HINTS 2
Practitioner’s Guide to the Filing Season
2003 tax law changes for individuals
INSIDE Continued from page 2
THIS Dividends taxed at capital gain the income and tax liability limits, the
ISSUE rates. After Dec. 31, 2002, qualified adoption credit and the exclusion from
dividend income is taxed at the new income of benefits under an adoption
Taxpayer Assistance capital gain rates. assistance program for the adoption of
Centers ............................... 28 Standard mileage rates. The standard a child with special needs is $10,160
mileage rate for the cost of operating regardless of the amount of qualified
IRS toll-free numbers ...... 29
your car decreased to 36 cents a mile adoption expenses.
EIN by phone/fax/Web ..... 30 for all business miles driven. The Retirement savings plans. The
ITIN/Adoption standard mileage rate allowed for use following paragraphs highlight changes
TIN/PTIN ........................... 32 of your car for medical reasons that affect individual retirement
decreased to 12 cents a mile. The arrangements (IRAs) and pension
Estate and Gift Tax ............ 34 standard mileage rate allowed for use plans.
Extensions/installment of your car for determining moving
Traditional IRA income limits. If
agreements .......................... 35 expenses decreased to 12 cents a mile.
you have a traditional IRA and are
EITC changes ..................... 36 Lifetime learning credit. The amount covered by a retirement plan at
of qualified tuition and related ex- work, the amount of income you
Tax Talk Today ................... 37
penses you may take into account in can have and not be affected by the
Health Coverage figuring your lifetime learning credit deduction phaseout increases. The
Tax Credit ........................... 38 increased from $5,000 to $10,000. The amounts vary depending on filing
Pension plan limitations .... 39 credit equals 20 percent of these status.
qualified expenses, with the maximum
Taxpayer Advocate Deemed IRAs. A qualified em-
credit being $2,000.
Service ................................. 40 ployer plan (retirement plan) can
Child and dependent care credit. maintain a separate account or
Third party authorization . 45 The following changes apply to the annuity under the plan (a deemed
Unenrolled return child and dependent care credit. IRA) to receive voluntary em-
preparer .............................. 46 • The credit can be as much as ployee contributions. An
35% (previously 30%) of your employee’s account can be treated
Conflict of interest ............ 48
qualified expenses as a traditional IRA or a Roth IRA.
Nationwide Tax Forums ... 49 • The maximum adjusted gross
Limit on elective deferrals. The
Refund checks ................... 49 income amount that qualifies
maximum amount of elective
for the highest rate increased to
Practitioner Priority deferrals under a salary reduction
$15,000 (previously $10,000).
Service ................................. 49 agreement that could be contrib-
• The limit on the amount of
uted to a qualified plan increased
Transcripts and qualifying expenses increased
to $12,000 ($14,000 if you were
photocopies ........................ 50 to $3,000 for one qualifying
age 50 or over). However, for
Offers in compromise ....... 50 individual and $6,000 for two
SIMPLE plans, the amount in-
or more qualifying individuals.
Top errors by preparers .. 51 creased to $8,000 ($9,000 if you
• The amount of income that is
were age 50 or over).
Underreporter Program ... 52 treated as having been earned
by a spouse who is either a full- Self-employed health insurance
Statute of Limitations ....... 53
time student or not able to care deduction. You can deduct 100 percent
Estimated Tax Penalties .. 54 of your self-employed health insurance
for himself or herself increased
Abusive tax shelters ........ 56 to $250 a month if there is one premiums as an adjustment to income.
Refund Hold Program ...... 57 qualifying individual and $500 Health coverage tax credit. This helps
FTDs mailed to wrong a month if there are two or certain displaced workers and certain
address ............................... 58 more qualifying individuals. retirees pay for qualified health insur-
Tax benefits for adoption. Subject to ance.
Lockbox processing ......... 58
Filing addresses ................ 59 Continued on page 4
2004 TAX HINTS 3
Practitioner’s Guide to the Filing Season
2003 tax law changes for individuals Continued from page 3
Certain amounts increased. Some death gratuity paid to survi- • Qualified military benefits
tax items that are indexed for vors of U.S. military mem- include benefits under
inflation increased for 2003. bers for deaths occurring after dependent-care assistance
Earned income credit (EIC). The Sept. 10, 2001, increased programs.
maximum amount of income you from $3,000 to $12,000. • The additional tax on distri-
can earn and still get the earned • Amounts received as a butions from a Coverdell
income credit increased. The qualifying military base education savings account or
amount depends on your filing realignment and closure a qualified tuition plan does
status and number of children. The fringe benefit are now not apply to a distribution
maximum amount of investment excluded from taxable made on account of atten-
income you can have and still be income. dance at a military academy.
eligible for the credit has increased • The rules for filing a return • Reserve component members
to $2,600. that apply to members of the can claim an above-the-line
armed forces in a combat deduction for overnight travel
Standard deduction. The standard
zone are extended to include expenses such as transporta-
deduction for taxpayers who do not
members of the armed forces tion, lodging and meals.
itemize deductions on Schedule A
in a designated contingency • Income tax relief is granted to
(Form 1040) has increased. The
operation. families of astronauts who die
amount depends on your filing
in the line of duty.
status.
Exemption amount. You are
allowed a $3,050 deduction for each Important changes that could affect
exemption to which you are entitled. estimated tax payments for 2004
However, your exemption amount Standard mileage rates. For and not be affected by the
could be phased out if you have high tax years beginning in 2004, the deduction phaseout increases.
income. standard mileage rate for the The amounts vary depending
Limit on itemized deduction. cost of operating your car on filing status.
Some of your itemized deductions increases to: Limit on elective deferrals.
may be limited if your adjusted • 37.5 cents a mile for all The maximum amount of
gross income is more than $139,500 business miles driven, elective deferrals under a
($69,750 if you are married filing • 14 cents a mile for the salary reduction agreement that
separately). use of your car for can be contributed to a quali-
Social Security and Medicare medical reasons, and fied plan increases to $13,000
taxes. The maximum wages subject • 14 cents a mile for the ($16,000 if you are age 50 or
to social security tax (6.2%) in- use of your car for over). However, for SIMPLE
creased to $87,000. All wages are determining moving plans, the amount increases to
subject to Medicare tax (1.45%). expenses. $9,000 ($10,500 if you are age
Retirement savings plans. The 50 or over).
Military Family Tax Relief Act of following paragraphs highlight
2003. This legislation made the Tuition and fees deduction.
changes that affect individual
following changes. Beginning in 2004, the amount
retirement arrangements (IRAs)
• The 5-year period that can of qualified education ex-
and pension plans.
qualify you to exclude the penses you can take into
gain from the sale of your Traditional IRA income account in figuring your tuition
main home can be suspended limits. If you have a traditional and fees deduction varies
by certain members of the IRA and are covered by a depending on your modified
uniformed services or Foreign retirement plan at work, the adjusted gross income.
Service while on official amount of income you can have
extended duty.
• The tax-free treatment of the
2004 TAX HINTS 4
Practitioner’s Guide to the Filing Season
2003 tax law changes for small business
T
he following are some of the ance for property acquired after inflation for 2004 and 2005.
tax changes for small busi- May 5, 2003. Inclusion of off-the-shelf com-
ness for 2003. For more Increased section 179 deduction puter software as eligible section
information on these and other dollar limit. The maximum section 179 property. The types of property
changes, see Publication 553, 179 deduction you can elect for that qualify for the section 179
Highlights of 2003 Tax Changes. property you purchased and placed deduction have been expanded to
Standard mileage rate. The in service beginning in 2003 has include off-the-shelf computer
standard mileage rate for the cost of increased from $24,000 to $100,000. software purchased and placed in
operating your car, van, pickup or This amount will be adjusted for service beginning in 2003.
panel truck in 2003 is 36 cents a
mile for all business miles. Changes for 2004
Self-employment tax. The maxi- The following are some of the Self-employment tax. The
mum net self-employment earnings tax changes for small business for maximum net self-employment
subject to the Social Security part 2004. For more information on earnings subject to the Social
(12.4 percent) of the self-employ- these and other changes, see Security part of the self-employ-
ment tax is $87,000 for 2003. Publication 553, Highlights of ment tax increases to $87,900 for
2003 Tax Changes. 2004.
Self-employed health insurance
deduction. Beginning in 2003, the Standard mileage rate. The Standard mileage rate available
self-employed health insurance standard mileage rate for the cost for small fleets. Beginning in
deduction percentage increases to of operating your car, van, pickup 2004, the business standard mileage
100 percent. or panel truck in 2004 is 37.5 rate may be used for as many as
cents a mile for all business four vehicles that you own or lease
Additional depreciation. You may miles. and use simultaneously.
be able to claim an additional 50
percent special depreciation allow-
Military Family Tax Relief Act
A
new law provides income by the $3,000 they had reported as duty time. A taxpayer is on qualified
exclusions for death benefit taxable. Those who receive such extended duty when at a duty station
payments and certain home gratuities in 2003 and future years that is at least 50 miles from the
sales for qualifying military fami- will not have to report them on their residence sold, or when residing
lies. Both provisions are retroactive, tax returns. under orders in government housing,
so some qualifying taxpayers must Taxpayers may exclude gain on a for more than 90 days or for an
file amended returns to claim these home sale, provided they have indefinite period.
tax breaks. These taxpayers should owned and used the home as a This change applies to home sales
put the words Military Family Tax principal residence for two of the after May 6, 1997. A taxpayer may
Relief Act in red at the top of such five years before the sale. A reduced use this provision for only one
returns to speed processing. maximum exclusion may apply to property at a time and may exclude
The new law doubled the gratuity those who satisfy part of the two- gain on only one home sale in any
paid to survivors of deceased armed year rule. Military personnel often two-year period. Although an
forces members to $12,000, made retain ownership of a home while amended return must usually be
the entire amount tax-free and made away on duty but eventually sell it filed within three years of the
the changes effective for deaths without returning to live in it, original return’s due date, the law
occurring after Sept. 10, 2001. perhaps failing the use test com- gives qualifying taxpayers who sold
Previously, only $3,000 was tax- pletely. a home before 2001 until Nov. 10,
free. Recipients who already paid The new law allows persons on 2004, to file an amended return
tax on benefits received for deaths qualified extended duty in the U.S. claiming the exclusion.
after the effective date may file an armed services or the Foreign A taxpayer may use Form 4506,
amended return on Form 1040X, Service to suspend this five-year test Request for Copy or Transcript of
reducing their adjusted gross income period for up to 10 years of such Continued on page 6
2004 TAX HINTS 5
Practitioner’s Guide to the Filing Season
Military Family Tax Relief Act Continued from page 5
Return, to get an earlier year’s tax overseas. Since he lived in the two years from July 1999 to July
return. This form and Form 1040X house for more than two years 2001, when they lived nearby, the
are available on the IRS Web site or during this test period, he may 16 months she lived in the
by calling 1.800.TAX.FORM exclude the gain on the sale. He townhouse in 1995-96, and the 20
(1.800.829.3676). must file an amended return by months before the February 1991
• Example #1: Lt. Green owned a Nov. 10, 2004, to recover the overseas deployment. During this
house in Georgia and lived there capital gain tax paid on the 1999 test period, Sgt. Brown owned and
from December 1988 until de- return. lived in the townhouse for 26
ployed overseas in January 1991. • Example #3: Col. White owned months, so she may exclude up to
When he returned to the United and lived in her $250,000 of
States in July 1999, he was Ohio house for gain on its sale.
stationed 90 miles from the house. three years before Because her
Preferring not to commute this being stationed husband never
distance, he sold the house four overseas in lived in the
months later, realizing a gain of January 1988. She townhouse, he
$150,000. Because he had not was still overseas does not qualify
used the house as his principal when she sold the for any exclu-
residence during the 5 years house in January sion. The
preceding the sale, he reported 2003. She may Browns have
this capital gain on his 1999 disregard only 10 until Apr. 15,
return. Under the new law, he can of her 15 years 2005, to file an
disregard both the 8½ years he overseas, so her 5- amended return
was overseas and the 4 months year test period claiming a
after his return to the States, since consists entirely of refund of the
he was stationed more than 50 years in which she capital gain tax
miles from old residence. His five- did not live in the paid on the
year test period for ownership and house, leaving her excludable
use now consists of the 5 years not eligible for the amount.
before January 1991, when he home sale exclusion. For information on other tax
went overseas. Since he owned • Example #4: Sgt. Brown owned benefits and issues relevant to
and lived in the house for more and lived in a Virginia townhouse military members and their families,
than two years during this test for 10 months before being go to irs.gov, which includes:
period, he may exclude the gain deployed overseas in February • Questions & Answers on
on the sale. He must file an 1991. She returned in 1995 and combat zone tax provisions,
amended return by Nov. 10, 2004, lived in the townhouse for 16 military pay
to recover the capital gain tax paid months before she was assigned to exclusions, deadline extensions
on the 1999 return. a Texas duty station in late August and miscellaneous provisions
• Example #2: Assume the same 1996. She married, and when the for qualifying taxpayers,
facts as Example #1, except that couple returned to Virginia in July employers.
when Lt. Green returned to the 1999, they bought a nearby house. • A combat zone e-mail address
U.S., his duty station was 40 miles In July 2001, they sold the for members of the armed
from the house. Only the time townhouse. Having lived in the forces or their families world-
overseas may be disregarded, townhouse only one month in the wide to alert the IRS that they
because his duty station after five years preceding its sale, they are serving in a combat zone.
returning to the U.S. was within reported the capital gain on their • A link to Publication 3, Armed
50 miles of the old residence. His 2001 return. Under the new law, Forces’ Tax Guide, which
five-year test period for ownership they may disregard the time spent addresses a wide range of
and use now consists of 4 months overseas and in Texas when issues that may affect members
in 1999 and the 56 months before determining the 5-year test period, of the military.
January 1991, when he went which would then consist of the
2004 TAX HINTS 6
Practitioner’s Guide to the Filing Season
IRS launches first on-line business tools
L
ast fall, the IRS launched the Form W-7P. It reduces
first of a suite of Internet- processing time and input
based business tools that give errors associated with a
tax professionals and financial paper application. Anyone
institutions easier access to client paid to prepare a tax return
information. must sign the return and
Known collectively as e-services, provide either a PTIN or a
the suite of products provides tax Social Security Number. The
professionals with new choices for ability to substitute a PTIN
working electronically with the IRS. for a Social Security Number
The first three products provide a began in 1999 to address
foundation for future services that concerns that clients and
will significantly enhance how the others outside the IRS could
IRS does business with tax profes- use a preparer’s Social
sionals and those who file selected Security Number inappropri-
information returns, such as banks ately.
and other financial institutions. taxpayer burden and improve IRS
Interactive Taxpayer Identifica- employee’s service to taxpayers.
The new e-services begin a series tion Number Matching: Interac-
of steps that will improve how tax These new products and services
tive Taxpayer Identification include:
professionals interact with the IRS. Number Matching, or TIN Match-
Through the use of technology, the • Customer Communications:
ing, is a new pre-filing service Modernized call systems cut by
agency is working to simplify and offered to banks or others that pay
reduce burden on thousands of tax half taxpayers’ call-waiting time
income subject to backup with- and the number of abandoned
professionals and more than 4 holding. Authorized payers can
million firms that send special calls. It also introduced bilingual
match up to 25 taxpayer identifi- voice recognition capabilities,
information returns. Three e- cation number and name combina-
services applications have been which helped double the number
tions against IRS records before of Spanish calls.
introduced: submitting an information return.
Registration: Before using other • Where’s My Refund?: Provides
Results of the match are returned taxpayers with their refund status
e-services products, tax profes- within seconds. This pre-filing
sionals must register on-line to over the Internet. Taxpayers used
check prevents mismatches and the service more than 17.6
create an electronic account. The possible penalties for the payer. In
registration process is a one-time million times in 2003.
the past, only federal agencies • Your 2003 Advance Child Tax
process for tax professionals to could request TIN matching.
select a user name, password and Credit: Gives taxpayers the
Future e-services include an status of their Advance Child Tax
personal identification number. An online application for those who
on-screen acknowledgment Credit checks over the Internet.
want to become authorized e-filers, 15 million taxpayers have used
immediately confirms the registra- an expansion of TIN Matching that
tion process. For security pur- the service so far.
allows bulk matching of thousands • Customer Relationship Man-
poses, a confirmation code is also of taxpayer identification numbers
mailed to the tax professional to agement: Provided nearly 4,000
within 24 hours and special incen- revenue agents with direct laptop
complete the registration process. tive products for e-filers who file access to tax computation
Preparer Tax Identification more than 100 electronic returns. software.
Number Application: The Tax professionals can register for • Internet EIN: Allows small
Preparer Tax Identification e-services immediately through the businesses and others to apply
Number, or PTIN application, lets Tax Professional’s page at for and receive an employer
a paid preparer apply for and www.irs.gov/. identification number online. The
receive a PTIN immediately over E-services joins several IRS IRS has issued more than
the Internet. There is no longer the Business Systems Modernization 380,000 EINs through this online
need to complete and mail a paper products already working to reduce application process.
2004 TAX HINTS 7
Practitioner’s Guide to the Filing Season
Guidelines for faxed submissions
B
ased on requests from determination or a request for a • Requests for Innocent Spouse
practitioners and other ruling, Documentation, forms, Relief (Form 8857)
outside stakeholders, the letters and returns can be re- • Taxpayer Statement About a
IRS has adopted the following ceived via fax in these circum- Refund (Form 3911)
guidance on the acceptance of stances even if a taxpayer • Injured Spouse Claim (Form
faxes by taxpayers and the practi- signature is required, provided 8379)
tioner community. that IRS contact with the tax- • Installment Agreements (Form
General guidelines payer has been made and docu- 433-D)
These general guidelines apply mented. • Collection Information State-
to all divisions and cover opera- • The IRS will not acknowledge ment – Wage Earner (Form 433-
tions related to income tax, faxes received from taxpayers in A)
employment tax, excise tax, estate the course of tax administration • Collection Information State-
tax, gift tax and generation skip- activities by a return fax. Excep- ment – Business (Form 433-B)
ping tax as well as tax exempt and tions can be made in unusual • Early Referral Requests
employee plans determinations. circumstances as determined by • Fast Track Mediation Requests
• Filing of original tax returns via IRS management. • Request for Collection Due
fax will only be allowed as part Specific guidance on use of faxes Process Hearing (Form 12153)
of a return perfection process in tax administration processes • Letter to designate a payment
(e.g., securing a missing (Lists not all inclusive) • Letter to request non-filing of
schedule or missing signature) 1. The following specific docu- lien
initiated by the IRS or in the ments/forms/letters will continue to • Letter to request lien release
post-filing/non-filing activities be accepted by fax in routine • Letter to request lien with-
described in next bullet. Tax operations: drawal
returns can be received via fax • EIN Requests (Form SS-4) • Letter to request non-assertion
as part of return perfection even • Power-of-Attorney (Form 2848) of penalty
if a taxpayer signature is • Taxpayer Authorization (Form • Letter to provide reasonable
required, provided that the IRS 8821) cause statement
contact with the taxpayer has • 1120S Election (Form 2553) • Supporting Statement to Correct
been made and documented. • Return/Transcript Requests Information (Form 941C)
• Submission of documentation, (Form 4506) • Election by a Small Business
forms, letters and returns • Request for Public Inspection or Corporation (Form 2553)
related to post-filing/non-filing Copy of Exempt or Political 3. Consents to assess additional
inquiries and interactions can Organization IRS Form (Form tax (Forms 4549, 870 and others)
be allowed via fax based on 4506-A) of $25,000 or less can be accepted
taxpayer or IRS request unless • Foreign Certification Requests by fax if taxpayer contact has been
there is a specific prohibition. • Appeals Conference Requests made and the case history docu-
This allowance applies to • Responses/documentation ments the date of contact and the
inquiries and interactions needed to resolve filing or post- desire of the taxpayer to submit the
conducted by Field Assistance, filing questions or correspon- consent by fax. Consents to assess
Accounts Management, Com- dence. tax in excess of $25,000 should be
pliance Services, Field Exami- 2. The following specific docu- secured with original signatures
nation, Field Collection, ments/forms/letters can be accepted that are delivered in person or by
Determinations Units, Appeals by fax if contact has been made with mail.
and the Taxpayer Advocate the taxpayer by phone or in-person 4. Taxpayer closing agreements
Service, or related to post- and the taxpayer history file is involving tax amounts of $25,000
submission inquiries and documented with the date of contact or less can be accepted by fax if
interactions conducted by and notation is made that the taxpayer contact has been made
Employee Plans or Exempt taxpayer wishes to send the docu- and the case history documents the
Organizations in connection ment/form/letter by fax: Continued on page 9
with an application for a
2004 TAX HINTS 8
Practitioner’s Guide to the Filing Season
Guidelines for faxed Comprehensive tax guide
submissions
Continued from page 8 available at IRS.gov
date of contact and the desire of the The IRS’ comprehensive tax guide signed into law on Nov. 11. Among
taxpayer to submit the consent by for individuals has been updated for other changes, Publication 17
fax. Closing agreements for tax tax year 2003 and is available at explains the new dividend tax rates
amounts in excess of $25,000 IRS.gov/. IRS Publication 17, Your and provides the new lower income
should be secured with original Federal Income Tax, has been tax rates.
signatures that are delivered in published annually by the IRS for As in prior years, the publication
person or by mail. more than 60 years and has been provides information on how to file
available on the IRS Web site since an individual tax return, what to
5. Employee Plan and Exempt
1996. include as income, how to calculate
Organization determination letter
Publication 17 has been updated capital gains and losses, how IRAs
applications will not be accepted via
with important changes for 2003, and other expenses can affect how
fax.
including tax breaks for men and much income to report, whether to
6. Determination Letter Requests women serving in the military take the standard deduction or
related to income tax, gift tax, estate resulting from the Military Family itemize, and how to figure taxes and
tax, generation-skipping transfer tax, Tax Relief Act of 2003, which was credits.
employment tax and excise tax
matters will not be accepted via fax. Find your 2003 Advance
7. Consents to extend the statute of Child Tax Credit at irs.gov
limitations for assessing tax (Form
T
872, SS-10 and other consent forms) axpayers who received an • The taxpayer’s 2002 filing
will not be accepted via fax in advance payment must status; and
normal operations. reduce their 2003 child tax • The total number of exemp-
credit by the amount of the payment. tions (not dependents)
To help taxpayers who may have claimed on the taxpayer’s
forgotten the amount of their 2002 federal return.
payment or misplaced the notice, Your 2003 Advance Child Tax
Your 2003 Advance Child Tax Credit Credit meets strict IRS security and
DECEDENT on irs.gov will be online through privacy certifications. Safeguards
RETURNS December 2004. include
Using the IRS locking
D
elays in processing Web site, site
returns filed for de- taxpayers can entries
ceased taxpayers can be verify the for 24
reduced or eliminated by writing amount of hours
the decedent’s name, the word their advance after a
deceased and the date of death child tax prede-
in the top left margin of page 1, credit ter-
Form 1040. Also include a payments by entering three personal mined number of unsuccessful
completed Form 1310 if re- identifiers — personal information attempts if the personal identifica-
quired. See Publication 559, Tax shared only between the taxpayer tion information entered does not
Information for Survivors, and IRS: match IRS records. Taxpayers can
Executors and Administrators, • The taxpayer’s Social Secu- avoid unsuccessful attempts by
for additional information. rity Number (SSN) or Indi- entering personal identification
Including all of the required vidual Taxpayer Identification information exactly as shown on
information will eliminate Number (ITIN); their 2002 individual federal income
delays caused by corresponding tax returns.
for missing or incomplete
information.
2004 TAX HINTS 9
Practitioner’s Guide to the Filing Season
Chart of Preparer Penalties (Part I)
The Tax Reform Act of 1976 provided the Service with income tax return preparers. These provisions are designed to
penalty and enjoinment authority to more effectively monitor promote a high standard in the preparation of returns for
income tax return preparation. TEFRA 1982 added IRC compensation and also address the problem of fraudulent,
sections 6700 and 6701 which are not limited solely to unscrupulous or incompetent preparers.
Type of Penalty IRC Section Amount Limitation
2004 TAX HINTS 10
Practitioner’s Guide to the Filing Season
Chart of Preparer Penalties (Part II)
Type of Penalty IRC Section Amount Limitation
Office of Professional Responsibility
T
he Office of Professional the Washington law firm of Caplin & sitting on the IRS Enforcement
Responsibility (OPR) investi- Drysdale, representing and advising Committee, a panel of senior agency
gates allegations of miscon- clients on criminal and civil tax executives who meet regularly to
duct or negligence against tax matters. He began his career as an develop strategies on the top compli-
practitioners who are attorneys, IRS special agent in Brooklyn from ance problems facing the the IRS.
certified public accountants or 1963 to 1968, then spent 10 years in The office will conduct a broader
enrolled agents and enforces the the Justice Department’s Tax review of the IRS’ overall relation-
standards of practice for those who Division, rising to the position of ship with the practitioner community.
represent taxpayers before the IRS, deputy assistant attorney general in For more information about the
as detailed in Circular 230. The 1977. Office of Professional Responsibility,
office also licenses enrolled agents, Combined with other changes visit the Tax Professional’s page at
who are tax professionals meeting involving Circular 230 and abusive irs.gov and download Publication
certain testing or experience require- tax shelters, Namorato’s selection 947, Practice Before the IRS and
ments. represents an important part of the Powers of Attorney,which de-
As part of a broader effort to IRS’ continuing efforts to ensure scribes in detail who can represent
strengthen professional standards, high professional standards and build taxpayers before the IRS and what
Cono Namorato was selected as the faith in the tax system. rules apply to professionals repre-
Director of the Office of Profes- Over the last year, staff of the senting taxpayers. You may e-mail
sional Responsibility. From 1978 to Office of Professional Responsibility the Office of Professional Responsi-
2003, Namorato was a member of was doubled, and the director began bility at OPR@irs.gov/.
2004 TAX HINTS 11
Practitioner’s Guide to the Filing Season
Rules issued to halt abusive tax avoidance
transactions and tighten reins on tax advisers
O
n Dec. 29, 2003, the Trea- supervisory responsibility for a disclose abusive tax avoidance
sury Department and the professional services firm’s tax transactions. The regulations
IRS issued four items of practice. also apply to taxpayers who do
administrative guidance as part of • In an effort to halt the rush to not disclose that they have
their ongoing effort to halt abusive the bottom that pervaded the reported items on their tax
tax avoidance transactions and 1990s and restore the confi- returns that are based on the
maximize effective use of IRS audit dence of the public in tax position that a Treasury regula-
resources. The first of the items is professionals, the proposed tion is invalid. Under the final
aimed at strengthening the tax changes also describe best regulations, for purposes of the
system through heightened stan- practices for tax advisors and imposition of penalties, a
dards for tax advisors. The other call on professional services taxpayer’s failure to disclose an
three are aimed at increasing firms to put in place procedures abusive tax avoidance transac-
transparency and disclosure of for all of the firm’s personnel tion is treated as a strong
information to the IRS. Improved that are consistent with these indication that the taxpayer
disclosure coupled with more best practices. acted in bad faith with respect to
effective use of the information • To ensure clients are well- any additional tax owed as a
disclosed are central to the Treasury advised, the proposed changes consequence of the transaction.
Department and IRS’s strategy for would obligate tax advisors to Similarly, taxpayers who do not
identifying abusive tax avoidance inform clients explicitly about disclose items that are based on
transactions early and addressing what protections, if any, an advice that a Treasury regula-
them promptly. In addition, the opinion provides to the client. tion is invalid will be deemed to
transparency that disclosure brings For example, tax advisors would have acted in bad faith with
serves as a deterrent to abusive tax have to advise clients about respect to any additional tax that
avoidance transactions. issues that the opinion does not is owed as a consequence of
“Taken together, these actions address and warn the client if those items.
represent another significant step to the opinion will not protect the “We are taking the administrative
end the proliferation of abusive tax client against penalties. steps we can under current law to
avoidance transactions that has • The Treasury Department and create downsides for those who
undermined confidence in our tax the IRS are working with choose not to disclose by making it
system,” said Treasury Assistant professional organizations to clear that failing to disclose signifi-
Secretary for Tax Policy Pam Olson. promote best practices among cantly increases the likelihood of
“We are proposing a set of best tax professionals through setting penalties being imposed,” continued
practices that makes clear that tax aspirational standards and self- Assistant Secretary Olson. “Having
professionals should adhere to the regulation. The proposed the IRS hunt for an abusive transac-
highest ethical standards and ensure changes would put in place a tion hidden on a tax return is a waste
that their clients are well-advised of framework for that effort. of IRS resources. If a taxpayer is
the law and any risks they are • The proposed changes replace willing to enter into a transaction,
taking.” changes proposed in January then the taxpayer should be willing
Proposed changes to Circular 230 2001. They reflect a careful to disclose that transaction on its
that set high standards for the tax consideration of the comments return.”
advisors and firms that provide received on the January 2001 • Revised final regulations
opinions supporting tax-motivated proposals and information clarifying that the disclosure
transactions. gathered by the IRS in its audit of confidential transactions on
• The proposed rules set out clear of professional services firms’ a return is limited to transac-
and specific requirements for compliance with the tax shelter tions for which a promoter
tax opinions provided by rules. has imposed confidentiality on
attorneys and accountants and • Final regulations that will a taxpayer to protect the
expectations for those with increase the cost of failing to Continued on page 13
2004 TAX HINTS 12
Practitioner’s Guide to the Filing Season
IRS offers on- Rules issued to halt abusive tax avoidance
transactions Continued from page 12
line Pub 1045
P
promoter’s tax strategies from 31, 2003. Comments on the text
ublication 1045, Tax Profes- disclosure. The revisions are
sionals Guide for 2003 of the proposed new Form 8858
intended to reduce unnecessary are requested from the public by
Federal Tax Products, is now paperwork for taxpayers and
available along with the Form 3975, March 1, 2004.
advisors and to allow the IRS to
Tax Professional Annual Mailing “Lack of information increases
focus its attention on transac-
List Application and Order Blank, the time it takes for the IRS to
tions with potential for abusive
on the IRS Web site at identify and address potential
tax avoidance, not on transac-
www.irs.gov. compliance issues efficiently and
tions for which confidentiality is
Tax professionals who are inter- effectively,” Assistant Secretary
required for non-tax reasons.
ested in a compilation of the most Olson stated. “The proposed new
frequently requested business and “We continue to believe that form will increase transparency for
individual forms and instructions sunshine is the best disinfectant for offshore entities, allowing the IRS
can order Package X electronically abusive transactions,” noted Assis- to better focus its resources and
at www.irs.gov/bus_info/tax_pro/ tant Secretary Olson. “Ensuring that improve compliance. The disclosure
tprax/. Only current participants the rules are focused appropriately will also have a deterrent effect.”
can use this method by entering on the transactions with potential for “The Treasury Department has
their account number shown on the abusive tax avoidance will further adopted measures that do as much
mailing label of a previous Publica- that goal. Burdening taxpayers and as possible to stem abusive tax
tion 1045. New participants in the burying the IRS with useless paper avoidance transactions without
program should use the Form 3975. will not. As a consequence, we have legislative change. We urge Con-
Once fully enrolled, they will be narrowed the disclosure of confiden- gress to pass the legislation the
able to register on-line. The instruc- tial transactions to situations in Treasury Department and the IRS
tions for mailing Form 3975 can be which the promoter imposed confi- proposed in March 2002 to deter
found in Publication 1045. dentiality to keep the promoter’s tax abusive tax avoidance and facilitate
strategy out of view.” the upfront identification of ques-
For ordering products on-line, the • Proposed new Form 8858
addresses are: tionable transactions,” concluded
requiring information report- Assistant Secretary Olson.
• Package X: www.irs.gov/ ing by U.S. persons that own
bus_info/tax_pro/tprax The following related items can
foreign entities that are be accessed from the Treasury
• Publication 1796, IRS Fed- disregarded for U.S. tax
eral Tax Products CD-Rom: Department Web site at http://
purposes. The need for infor- www.treas.gov/:
www.irs.gov/cdorders mation is not limited to the area
• Other tax products: http:// • Circular 230: Regulations Gov-
of abusive tax avoidance erning Practice before the Inter-
bookstore.gpo.gov/irs transactions. Appropriately
To check the status of a Package nal Revenue Service
tailored disclosure and informa- • 6011: Final Regulations Clarify-
X order, call 1.800.829.3676 and tion reporting requirements
ask for the Tax Practitioner Gate. ing the Rules Relating to Confi-
provide the means to better dential Transactions
The printed version of Publication focus the audit resources aimed
1045 is mailed in October. Package • 6662-6664: Final Regulations
at protecting the integrity of our Intended to Promote Disclosure of
X Volume 1 is available in late tax system. Ready access to
December and Volume 2 is available Reportable Transactions
information allows the IRS to • Announcement 2004-4: Informa-
in late January. identify potential compliance tion Reporting With Respect to
issues efficiently and is critical Foreign Disregarded Entities:
to achieving the IRS’s commit- • Form 8858, Information Report-
ment to reducing the time ing With Respect to Foreign
needed to complete an audit. Disregarded Entities
The proposed Form 8858 will • Schedule M to Form 8858
be required for annual account-
ing periods beginning after Dec.
2004 TAX HINTS 13
Practitioner’s Guide to the Filing Season
ELECTRONIC IRS Office of the Privacy Advocate
A
SIGNATURES s the IRS continues to PIA, have resulted in the elimination
modernize its information of Social Security Numbers on IRS
Electronic Signature PIN systems and dramatically mailing labels as well as a reduction
Methods expand its electronic services to in information collected by a number
F
or Tax Year 2004, the taxpayers and practitioners, the role of IRS systems. The office’s efforts
IRS will continue to offer of the IRS Privacy Advocate contin- have also expanded privacy protec-
two electronic signature (PIN) ues to increase in importance. tions to third parties during compli-
methods for individual taxpayers to The commissioner created the ance initiatives.
sign their e-filed tax returns — the Office of the Privacy Advocate in The office reviews IRS privacy
Self-Select PIN method and the 1993 when concerns about the notices which inform visitors to the
Practitioner PIN method. Both privacy of taxpayer information in a IRS Web site (www.irs.gov) and
methods eliminate the requirement rapidly changing electronic environ- the Registered User Portal about the
for Form 8453, U.S. Individual ment first reached the IRS. That types of information that may be
Income Tax Declaration for an IRS electronic environment has dramati- collected. The office has partici-
e-file Return, and Form 8453OL, cally grown and evolved over the pated significantly in all areas of IRS
U.S. Individual Income Tax Decla- last decade and so have the robust modernization and e-file programs,
ration for an IRS e-file Online privacy initiatives of the IRS. such as the free e-filing agreement
Return, by providing a totally The office is responsible for between the IRS and a consortium
paperless e-filed return. developing, promoting and support- of tax practitioners.
The Self-Select PIN method ing privacy programs and awareness Whether taxpayers choose to file
allows taxpayers to electronically throughout the IRS. The Privacy a return electronically or on paper,
sign their e-filed return by creating a Advocate and staff work to make the Office of the Privacy Advocate
five-digit PIN as their signature. The sure all IRS employees are aware of seeks to ensure that:
PIN can be any five numbers except privacy policies and can flag poten- • No personal information will
all zeros. Taxpayers can use the PIN tial privacy issues so that the privacy be collected that is not necessary for
whether they prepare their own rights of taxpayers are protected. tax administration or other legally
taxes using a personal computer or In addition to enforcing a host of authorized purposes;
have their taxes prepared by a tax federal laws that protect the confi- • Information will be used
professional. If filing a joint return, dentiality of taxpayer information only for the purpose for which it was
each taxpayer needs a PIN. The and stringent computer security collected or as specifically autho-
Self-Select PIN method requires the procedures, the IRS goes a step rized by law; and
taxpayer to provide two sources of further to protect your privacy and • Information will be col-
personal information to validate the privacy of your clients. The lected, to the greatest extent practi-
their identity — the prior year Office of the Privacy Advocate cable, directly from the individual to
original Adjusted Gross Income and created the Privacy Impact Assess- whom it relates. Information that is
Date of Birth. ment (PIA), a tool designed to help collected from third parties will be
The Practitioner PIN method is an systems developers and users within verified for accuracy with the
additional electronic signature the IRS to identify and evaluate subject whenever practicable before
option for taxpayers who use an privacy risks in new and substan- final action is taken.
Authorized IRS e-file Provider to e- tially modified IRS information The office continues building
file their tax returns. Taxpayers who systems. The PIA, which was public trust by protecting the privacy
choose this method are also required recognized as a Best Practice by the rights of taxpayers. For questions,
to select any five numbers except all Chief Information Officers Council concerns or comments about IRS
zeros to use as their electronic in 2000, is the model for the privacy privacy practices or the way per-
signature, and each taxpayer needs a assessment enacted by Congress in sonal information is collected,
PIN for a joint return. Taxpayers the Electronic Government Act of maintained and used, please contact
who choose to use the Practitioner 2002 and now required of all federal the office at privacy.advocate@
PIN method must complete Form agencies. It is also increasingly irs.gov or write to: Privacy Advo-
8879, IRS e-file Signature Authori- being adopted by private industry cate (OS:PA), 1111 Constitution
zation. The Date of Birth and the and foreign governments. Avenue, N.W., Washington, DC
Continued on page 15 Privacy initiatives, such as the 20224.
2004 TAX HINTS 14
Practitioner’s Guide to the Filing Season
ELECTRONIC Internal Revenue Service
SIGNATURES
Advisory Council
T
Continued from page14 he Internal Revenue Service effect on federal tax administration.
Adjusted Gross Income are not Advisory Council (IRSAC) The IRSAC conveys the public’s
required for returns filed under the was originally called the perception of Service activities to
Practitioner PIN method. Commissioner’s Advisory Group the IRS. The IRSAC’s objectives
Electronic Funds Withdrawal (CAG) and was established in 1953 continue to evolve. The group
accompanying Form 4868 can be by former Internal Revenue Service
signed using the Practitioner PIN Commissioner T. Coleman
method. A Form 8878, IRS e-file Andrews. The Council was re-
Signature Authorization on Applica- named in 1998 to more accurately
tion for Extension of Time to File reflect its breadth and focus as an
U.S. Individual Income Tax Return, advisory body for the entire agency.
must be completed by all taxpayers The IRSAC is a “national policy/
who use this method. (Note: There issue advisory committee,” estab-
is no signature requirement for lished by the Department of the
Form 4868 filers if there is no Treasury and the Internal Revenue
payment.) Service. Advisory committees of addresses broad tax administration
EROs using the Practitioner PIN this type generally focus on broad topics or organizational issues,
method must retain Form 8879 and policy matters. The IRSAC may rather than narrow technical issues.
Form 8878 for three years from the review existing tax administration Discussions focus on solutions as
return due date or IRS received date, policy or recommend policies well as constructive observations
whichever is later. regarding emerging tax administra- with respect to the tax administra-
PIN Presence Indicator tion issues. tion system. Meetings provide an
The PIN Presence Indicator is The IRSAC’s primary purpose is opportunity for the IRSAC to offer
present on all Acknowledgment File to provide an organized public collective advice on strategic IRS
Key Record (ACK) Files regardless forum for IRS officials and repre- issues.
of whether a PIN was used or not. sentatives of the public to discuss The IRSAC is comprised of
Every transmission will be acknowl- relevant tax administration issues. individuals from diverse back-
edged by the return of an ACK File The group suggests operational grounds who bring a wide breadth
to the transmitter. The ACK File improvements, offers constructive of experience to the Council’s
will contain the following on observations about IRS’ current or activities. Periodically, solicitations
accepted and rejected returns: proposed policies, programs, and for new IRSAC members are
0 = No PIN (Form 8453 or procedures, and advises the IRS on announced on irs.gov on the Tax
8453OL required) particular issues having substantive Professionals’ page.
1 = Practitioner PIN
2 = Self-Select PIN by Information Reporting Program
Practitioner Used
Advisory Committee
T
3 = Self-Select PIN Online
Used he final conference report for administered by the National Public
4 = State Only (PIN, 8453/ the Omnibus Budget Recon Liaison Office under the direction of
8453OL is NOT Required) ciliation Act of 1989 con- the Chief of Communications and
Blank = Return Rejected tained an administrative recommen- Liaison, IRS.
with a PIN dation that the Internal Revenue The primary purpose of the
Service (IRS) establish a federal IRPAC is to provide a public forum
We encourage a thorough and advisory committee to discuss for the IRS and members of the
attentive review of the ACK File to improvement to the information information reporting community in
ensure the PIN method used was reporting program (IRP). As a result, the private sector to discuss relevant
received successfully. the Information Reporting Program information reporting issues.
Advisory Committee (IRPAC) was
established in 1991. The IRPAC is Continued on page 16
2004 TAX HINTS 15
Practitioner’s Guide to the Filing Season
FIND IT ALL IRPAC cont’d. Continued from page 15
AT 1040 The IRPAC advises the IRS on The IRPAC is composed of seven-
teen members who represent various
CENTRAL information reporting issues of mutual
segments of the IRP community, from
concern to the private sector and
I
federal government. The Committee major national professional and trade
f you’re searching for a
works with the Operating Division associations to state tax agencies. The
form or looking for a
Commissioners and other IRS execu- Committee is divided into four sub-
client’s refund, you can
tives to provide information and committees that align with the IRS
now can go to just one place:
recommendations on a range of issues Operating Divisions and industry
1040 Central at IRS.gov/.
regarding IRP administration. The segments.
This new page is designed
IRPAC’s advice is used to assist in the Periodically, solicitations for new
specifically for the individual
execution of IRP objectives while IRPAC members are announced on
taxpayers and for the tax
ensuring fairness to taxpayers. irs.gov on the Tax Professionals’ page.
professionals helping them. It
pulls together much of the step- National Research Program
T
by-step information needed to
prepare and file a return — and he National Research Program • Payment compliance will be
check on refunds. (NRP) is a comprehensive measured using information the
At 1040 Central, you will find: effort by the IRS to measure IRS has available.
• What’s New This Year, payment, filing and reporting compli- • Reporting compliance will be
which highlights the latest ance for different types of taxes and measured by analyzing a sample
tax law changes, tax tips, various sets of taxpayers. The first of tax returns.
news releases and fre- stages will focus on individual income For individual income tax audits, the
quently asked questions; taxes, while future stages will measure no-change rate is going up. This means
• Get Ready to File, which other taxes and other types of taxpay- the IRS is devoting resources to
provides links to information ers. auditing compliant taxpayers, which
about the Earned Income The innovative program will be far increases taxpayer burden and does not
Tax Credit, the 2003 Ad- less intrusive and burdensome on help improve overall compliance. NRP
vance Child Tax Credit and taxpayers than previous compliance data will be used to update the formu-
commonly used forms and studies. And it will help the IRS build las used for selecting returns for audit.
tax instructions; better compliance programs to more (These current formulas are based on
• File Your Return, which effectively catch tax cheating and help data from the late 1980s.)
provides links to IRS e-file ensure everyone pays a fair share. The new NRP data will help reduce
and Free File, the free Administering a tax system that the burden of unnecessary IRS contacts
service provided by IRS serves America’s taxpayers by promot- on compliant taxpayers. An increasing
partners in the tax software ing fairness and operating efficiently number of taxpayers will be unneces-
preparation industry; and effectively is dependent on the sarily audited each year unless formu-
• After You File, which agency’s ability to measure and las for selecting audits can be updated.
includes the interactive distinguish between the many factors Reporting compliance results will be
Where’s My Refund? that that impact compliance with the tax collected to help the IRS identify some
allows taxpayers to track laws. of the problems taxpayers have in
the status of their refund; Without reliable measures, the IRS complying with the tax laws. This will
• More Assistance, which faces major challenges in improving allow the IRS to address noncompli-
helps taxpayers locate its ability to detect noncompliance, ance by redesigning forms, suggesting
additional information improving overall compliance and law changes, improving communica-
sources. developing methods for allocating tions with taxpayers and tax preparers,
resources more effectively. and focusing enforcement on intention-
At 1040 Central, you also NRP will measure the different ally non-compliant taxpayers.
will find easy access to IRS e- types of compliance as follows The IRS will use existing resources
file information. • Filing compliance will be in its audit program to implement NRP,
measured using sample data and the NRP sample will account for
from the Census Bureau.
Continued on page 17
2004 TAX HINTS 16
Practitioner’s Guide to the Filing Season
National Research Program Continued from page 16
only about 1.1 percent of the total without resorting to an case-building will allow
audit-related contacts planned for intrusive audit. examiners to focus more
the year. The IRS will rigorously • Other taxpayers will receive attention on questionable
test the methodology prior to correspondence from NRP items and should improve
implementation and ongoing re- examiners to support items examiner productivity.
views throughout the process will that cannot be otherwise In the most cost-effective and
ensure that the data collected are verified. least burdensome manner possible,
high quality. • Other taxpayers will have NRP intends to provide the IRS with
The NRP process will limit the complicated tax returns with current, reliable data on filing,
burden on taxpayers selected to be significant items that NRP payment and reporting compliance.
in the NRP sample by making examiners can verify only These data will support the IRS’s
maximum use of data the IRS with a face-to-face audit. commitment to apply its limited
already has collected: However, these audits will resources where they are of most
• Through extensive case- generally be no more burden- value in reducing noncompliance
building, well-trained NRP some than ordinary opera- while ensuring fairness, observing
examiners will be able to tional audits, due to the case- taxpayer rights and reducing the
determine that some taxpay- building activities that NRP need to burden honest taxpayers.
ers have plausibly met their examiners will have done in
reporting responsibility advance of the audit. This
Taxpayer rights a priority for the IRS
T
he law requires the IRS to significant hardship.
protect taxpayer rights, and To let taxpayers know about their
in its day-to-day operations, rights, the IRS produces Publication
the IRS and its employees make 1, Your Rights as a Taxpayer. The
taxpayer rights a top priority. This Spanish-language version is Publi-
includes explaining those rights to cation 1SP. These publications,
taxpayers, keeping taxpayer infor- which highlight taxpayer rights and
mation private and confidential and related IRS programs, are available The IRS appeals system is for
being professional and courteous. on the IRS Web site at www.irs.gov people who do not agree with the
Besides what is expected of IRS or by calling 1.800.TAX.FORM results of an examination of their tax
employees, taxpayers have many (1.800.829.3676). Information on returns or other adjustments to their
other rights. They have the right to the Taxpayer Advocate Service is tax liability. In addition to examina-
have someone represent them before also available on the Web site. tions, you can appeal many other
the IRS and to accompany them to things, including:
Appeal rights • Collection actions such as
any meeting with IRS employees. If you are in the middle of a
When there is a disagreement, they liens, levies, seizures, install-
disagreement with the IRS, you are ment agreement terminations
have the right to request that the guaranteed the right to appeal. If
independent IRS Appeals office and rejected offers-in-
you disagree with the IRS about the compromise
review the case. Taxpayers who still amount of your tax liability or about
disagree can put their case before • Penalties and interest
proposed collection actions, you • Employment tax adjustments
the court system. have the right to ask the IRS Ap-
Taxpayers who have been unsuc- and the trust fund recovery
peals Office to review your case. penalty
cessful in resolving issues with the IRS Publication 1, Your Rights as
IRS through normal channels have Appeals conferences are informal
a Taxpayer, explains some of your meetings. The local Appeals Office,
the right to contact the National most important taxpayer rights.
Taxpayer Advocate’s Help Line at which is independent of the IRS
During their contact with taxpayers, office that proposed the disputed
1.877.777.4778. The Taxpayer IRS employees are required to
Advocate can offer special help if an action, can sometimes resolve an
explain and protect these taxpayer appeal by telephone or through
IRS action is causing the taxpayer rights, including the right to appeal. Continued on page 21
2004 TAX HINTS 17
Practitioner’s Guide to the Filing Season
LMSB At-a-Glance
Mission: LMSB Headquarters Office: Financial Services
The Large & Mid-Size Business Robert H. Green Paul DeNard
Operating Division is a world class Director, International Director
organization responsive to the needs Elvin Hedgpeth New York, NY
of customers in a global environ- Deputy Director, International C. Weiss
ment, while applying innovative Kelly Cables Acting Director, Field Operations
approaches to customer service and Director, Performance, Quality & New York, NY
compliance. We will apply the tax Innovation Pat Chaback
law with integrity and fairness Kathy Petronchak Director, Field Operations
through a highly skilled and satisfied Acting Director, Pre-Filing and New York, NY
workforce in an environment of Technical Guidance Heavy Manufacturing and
inclusion, where each employee can Dick Teed Transportation
make a maximum contribution to the Deputy Director, Strategy, John Petrella
mission of the team. Research, and Program Planning Director
Strategic Priorities: Susan Linden Iselin, NJ
• Strategic Initiative # 1: Develop/ Director, Communications & Liaison Doug O’Donnell
enhance methodologies to identify Jim O.Malley Director, Field Operations
the LMSB compliance risks and Director, Management and Finance Iselin, NJ
use productivity improvements to Jim Gaul Jack Schroeder
ensure the most efficient and Division Information Officer Director, Field Operations
balanced use of LMSB reporting Dave Bass Detroit MI
compliance resources in address- Director, Business Systems Planning Communications, Technology and
ing these risks. JoAnne Johnson-Shaw Media
• Strategic Initiative # 2: Build a Director, EEO & Diversity Thomas Wilson
tax administration to deal effec- Cindy Mattson Director
tively with globalization. Division Counsel Oakland, CA
• Strategic Initiative # 3: Develop
Industry Operations: Joann Bank
and institutionalize a comprehen-
Retailers, Food, Pharmaceutical and Director, Field Operations
sive issue management strategy.
Healthcare Oakland, CA
• Strategic Initiative # 4: Recruit,
Robert E. Brazzil Walter Harris
develop and retain a highly skilled
Director Director, Field Operations
and satisfied workforce.
Downers Grove, IL New York, NY
• Strategic Initiative # 5: Combat
Jim Sevier Field Specialists
abusive tax avoidance transac-
Director, Field Operations Keith Jones
tions (ATAT) by providing early-
Downers Grove, IL Director
investing guidance, addressing
Henry Singleton Washington, DC
shelters at the promoter level, and
Director, Field Operations Taxpayer Profile:
increasing the strength of ATAT
Laguna Niguel, CA • Corporations, Subchapter S
issue development.
Management Team: Natural Resources and Construction corporations, and partnerships
Deborah M. Nolan Bobby L. Scott with more than $10 million in
Commissioner Director, Field Operations assets.
Frank Ng Houston, TX • The largest business taxpayers
Acting Deputy Commissioner Paul Cordova interact with the IRS on an
Director, Field Operations ongoing basis.
Mint Building Houston, TX • Most have in-house tax
801 9th St. NW, 4th Floor Mary Tapley divisions. Major issues are tax
Washington, DC 20220 Director, Field Operations law interpretation, accounting
Laguna Niguel, CA and regulatory issues.
2004 TAX HINTS 18
Practitioner’s Guide to the Filing Season
TE/GE At-a-Glance
The Tax Exempt and Government • GE: federal, state and local specialized education programs and
Entities (TE/GE) Division of the governments (FSLG), Indian services, seminars, workshops,
IRS, comprising the Employee tribal governments (ITG) and forms and publications and more:
Plans (EP), Exempt Organizations tax-exempt bonds (TEB) for the • EP: www.irs.gov/ep
(EO) and Government Entities municipal finance community. • EO: www.irs.gov/eo
(GE) divisions, administers the tax For direct technical assistance on • FSLG: www.irs.gov/govts
law provisions that affect the any of these subjects, call TE/GE’s • ITG: www.irs.gov/tribes
specialized customers it serves. Customer Account Services toll-free • TEB: www.irs.gov/bonds
These customers range from small, line at 877.829.5500, Mon.-Fri. 8:00 Leadership Team:
local tax-exempt organizations to a.m. to 6:30 p.m. ET. Evelyn A. Petschek
major universities, pension funds, Note: TE/GE customers are tax- Commissioner
state governments, Indian tribal exempt entities, retirement plan Richard J. Morgante
governments and complex tax- administrators and sponsors, etc. TE/ Deputy Commissioner
exempt bond deals. Examples of GE customers are not the individuals Carol D. Gold
areas where TE/GE provides who contribute to charities or the Director, Employee Plans
customer assistance are: individuals who are participants in Steven T. Miller
• EP: retirement plans such as employer-sponsored retirement Director, Exempt Organizations
401(k), 403(b), 457, SEP, plans. For questions pertaining to Chuck Peterson
SIMPLE and defined benefit individual taxpayers on such issues, Director, Government Entities
pension plans; call 1.800.829.1040.
John Ricketts
• EO: charities, private founda- You can also access the following
Director, Customer Account
tions, other nonprofit organi- Web sites for information on techni-
Services
zations; cal guidance, compliance programs,
W&I At-a-Glance
Mission: • Implementing appropriate Ty Ayers
The Wage and Investment Operating compliance processes. Director, Customer Assistance,
Division (W&I) will educate and • Improving electronic filing Relationships and Education
assist our customers in understand- and communications services. Linda Stiff
ing and satisfying their tax responsi- Director, Compliance
bilities. We will provide this service • Providing the W&I workforce Area Headquarters Offices:
in a high quality, fair and equitable with the necessary tools for • Hartford
manner through partnership between serving taxpayers and admin- • Indianapolis
management, employees and istering the tax code and • St. Louis
stakeholders. enhancing employee skills • Greensboro
Strategic Priorities: through training. • New Orleans
• Meeting demands for assis- Headquarters: Atlanta, Georgia • San Francisco Bay area
tance by providing better and Taxpayer Profile:
more specialized services to Management Team
• Some 94 million filers,
individual taxpayers and Henry O. Lamar
representing 120 million
emphasis on customer Commissioner
customers, including those
segment needs. John Duder who file jointly.
• Resolving accounts earlier Deputy Commissioner • Most pay taxes through
and more accurately through Frank Spiegelberg withholdings and interact with
integrated case processing Senior Operations Advisor the IRS once a year.
and use of linkages within the Ronny Rhodes • More than 75 percent pre-
service. Director, Customer Account pare their own returns and
Services receive refunds.
2004 TAX HINTS 19
Practitioner’s Guide to the Filing Season
SB/SE At-a-Glance
Mission: preparers and more IRS expertise. Ellen Bell
The mission of the Small Business/ SB/SE will also serve estate and Deputy Director, Customer
Self-Employed (SB/SE) Operating gift taxpayers, fiduciary returns and Account Services
Division is to provide SB/SE individuals with international tax Marsha Ramirez
customers top-quality service by returns. SB/SE will focus on its Acting Director, Field Compliance
educating and informing them of mission of providing top quality, Tom Hull
their tax obligations, developing tailored service to this taxpayer Acting Director, Compliance
educational products and services, segment through more qualified
and helping them understand and Joe Brimacombe
and better equipped employees.
comply with applicable laws, and Deputy Director, Compliance Policy
Taxpayer Education and
to protect the public interest by Jim Dumais
Communication (TEC) Organi-
applying the tax law with integrity Director, Business Systems
zation. Provide professional
and fairness to all. Planning
service; implement programs
The Small Business/Self-Employed based on analysis of customer Christina T. Mollett
operating division, headquartered needs; prevent problems with Director, EEO and Diversity
in New Carrollton, Md., is struc- consistent guidance to stakehold- Beth Tucker
tured to best serve taxpayers whose ers and taxpayers and timely and Director, Communications and
needs are more complex than wage effective communication. Liaison
and investment taxpayers.
Customer Account Services Tom Thomas
This division will serve about (CAS). Process returns and assist Division Counsel (SB/SE)
seven million small businesses, taxpayers, including customized
including corporations and partner- John E. Binnion II
services provided by a staff Director, Management & Support
ships with assets of $10 million or focused on issues relevant to SB/
less. While many face the same tax SE taxpayers. Brady R. Bennett
issues as large corporations, they Director, Strategy & Finance
Compliance. Increase overall
often do not have tax professionals Pamela J. Larue
compliance and fairness; and
on staff. Tax compliance issues Director, Strategy, Research and
provide educational guidance and
often stem from a lack of under- Performance Management
outreach through empowered,
standing of tax law requirements,
flexible, and accountable em- Charles P. Pautler, Jr.
inadequate accounting practices
ployees and a tailored approach. Director, Research
and resources and cash flow
Compliance consists of three Area Headquarters Offices:
problems.
organizational units: Compliance Baltimore, Dallas, Jacksonville,
The approximately 33 million self- Policy, Compliance Field and Nashville, Seattle, Boston, Denver,
employed and supplemental income Compliance Services Laguna Niguel, Philadelphia, St.
earners are similar to wage and
Management Team: Paul, Chicago, Detroit, Manhattan,
investment taxpayers, but their tax
Dale Hart San Francisco Bay area, Los
issues are often more complex.
Commissioner Angeles, Washington, International
They have substantially higher
Martha Sullivan area office in Puerto Rico, Field
incomes and file twice the number
Acting Deputy Commissioner Offices throughout the nation.
of forms and schedules, requiring
more time to prepare taxes, a Bobby Hunt
greater reliance on paid tax Director, Taxpayer Education and
Communication
John Crawford
Director, Customer Account
Services
2004 TAX HINTS 20
Practitioner’s Guide to the Filing Season
Right to appeal
Continued from page 17 NPL At-a-Glance
correspondence.
The National Public Liaison Divi- and the Information Reporting
The IRS also offers an option
sion, under the chief, Communica- Program Advisory Committee
called Fast Track Mediation, during
tions and Liaison, works to enhance (described on page 15) and the IRS
which an appeals or settlement
the IRS’ relationships with national Nationwide Tax Forums (described
officer attempts to help the taxpayer
stakeholders and federal partners to on page 49). The office works with
and the IRS reach a mutually
create opportunities to meet stake- external stakeholders to identify
satisfactory solution. Most cases
holder needs and to resolve issues of partnering opportunities; provide a
that are not docketed in court
mutual concern. forum for new ideas and feedback;
qualify for fast track mediation. Fast
Beanna Whitlock, a tax profes- gather information and track issues.
Track Mediation doesn’t eliminate
sional and enrolled agent with more The Office accomplishes its
or replace existing dispute resolu-
than 35 years experience, serves as objectives by coordinating meetings,
tion options, including your oppor-
Director of National Public Liaison, tracking issues and sharing informa-
tunity to request a conference with a
bringing her years of experience tion with external and internal
manager or a hearing before Ap-
representing taxpayers to support stakeholders. It hosts bi-monthly
peals. You may withdraw from the
IRS’ critical partnership with tax meetings between stakeholders and
mediation process at any time.
professionals. IRS program offices; arranges
When attending an informal
National Public Liaison maintains annual individual liaison meetings
meeting or pursuing mediation, you
daily contact with IRS’ national between practitioner organizations
may represent yourself, or you can
stakeholders (practitioner, payroll and the commissioner, chief counsel
be represented by an attorney,
and business organizations). This and other executives; and coordi-
certified public accountant or
ongoing contact helps the IRS nates IRS presence at stakeholder
individual enrolled to practice
expand valuable relationships, meetings to ensure that current and
before the IRS. If you represent
coordinate stakeholder contacts with accurate information is shared.
yourself, you can obtain assistance
the IRS, trouble-shoot issues and To contact National Public
from specially trained customer
communicate key corporate mes- Liaison, call 202.622.3359 or e-mail
service representatives. Find their
sages. National Public Liaison also *public_liaison@ irs.gov.
telephone numbers at www.irs.gov/
manages the IRS Advisory Council
appeals/.
If you and the IRS Appeals officer Electronic information services
A
cannot reach agreement, or if you s digital communication the-blank tax forms, portions of the
prefer not to appeal within the IRS, becomes more and more a Internal Revenue Manual, market
you may take your disagreement to part of our lives, the IRS segment guides and tools for the tax
federal court. But taxpayers can continues to come up with new and professional.
settle most differences without improved ways to use new technol- Publication 1796 can be pur-
expensive and time-consuming court ogy to make life easier for taxpayers chased from the National Technical
trials. and tax preparers. Information Service (NTIS) for $22
Further information on the The Tax Professionals’ page through the IRS Web site at
appeals process is available in IRS (www.irs.gov) is designed to help www.irs.gov or by calling
Publication 5, Your Appeal Rights practitioners find what they need on 1.877.233.6767.
and How to Prepare a Protest If You the IRS Web site. The site has fill in
Don’t Agree, Pub. 556, Examination the blank forms as well as forms to Electronic payment
of Returns, Appeal Rights and download and print. There is also a options for
Claims for Refunds, Pub. 1660, Withholding Calculator to help individuals
Collection Appeal Rights (for Liens, taxpayers determine the number of Individuals can pay taxes elec-
Levies, and Seizures), and Pub. exemptions to take. tronically by authorizing an elec-
3605, Fast Track Mediation. To get tronic funds withdrawal from a
copies of IRS publications, visit 2003 Tax Products checking or savings account or by
www.irs.gov or call toll-free CD-ROM using a credit card. These e-payment
1.800.TAX.FORM Publication 1796, Federal Tax options can be used to:
(1.800.829.3676). Products CD-ROM, contains fill-in- Continued on page 22
2004 TAX HINTS 21
Practitioner’s Guide to the Filing Season
Electronic information services
Continued from page 21
• pay taxes owed on a 2003 estimated tax payment can be made payment services. Anyone may use
income tax return. through electronic funds with- these services to charge taxes to an
• pay projected tax due when drawal. This payment cannot be American Express Card, Discover
requesting an automatic made by phone. Card, MasterCard or Visa account..
extension of time to file. • In 2003, 629,076 taxpayers Fees may vary by service provider.
• pay estimated taxes for Tax paid their taxes through • Official Payments Corpora-
Year 2004. electronic funds withdrawal, tion: 1.800 2PAY.TAX
In addition to the above tax an increase of 48 percent over (1.800.272.9829)
payments, credit cards can be used the prior year. 1.877.754.4413 (Customer
to pay taxes owed on prior tax year Credit Card Service)
www.officialpayments.com/,
2002 returns as well as to make a Payments
payment on an active Installment and
Taxpayers can make credit card
Agreement for past due tax owed for • Link2Gov Corporation:
payments whether they file elec-
tax years 2000 and after. 1.888.PAY.1040
tronically or file a paper return.
The IRS has entered into partner- (1.888.729.1040) 1.888.658
Credit Card payments can be
ships with private industry, includ- 5465 (Customer Service)
submitted via tax software when
ing tax preparation software devel- www.PAY1040.com/.
filing electronically. Credit Card
opers and credit card processors, to payments can also be made over the Electronic Federal
make these electronic payment telephone and Internet. Tax Payment
options available. • In 2003, 559,566 taxpayers System
• More than 1.2 million people paid by credit card, an The Electronic Federal Tax
paid their federal taxes by increase of 78 percent over Payment System (EFTPS) offers
electronic funds withdrawal the prior year. another way for taxpayers to pay
or credit card during 2003, up Federal taxes. EFTPS is a free
The IRS does not set or collect
from 750,000 last year, a 60 service, available year round to
any fees for credit card payments,
percent increase over the individual and business taxpayers.
but the private sector companies the
prior year. Once enrolled, taxpayers can
IRS has authorized to process these
Electronic Funds payments do impose convenience schedule one-time or recurring
Withdrawal fees. The tax payment sent to the U. electronic withdrawal payments
Electronic funds withdrawal is S. Treasury and the convenience fee such as estimated tax payments and
free and the taxpayer decides when are listed separately on the installment agreement payments.
the tax payment is withdrawn from cardholder’s credit card statement. For additional information, visit
the bank account. Electronic funds Some tax software developers www.eftps.gov.
withdrawal is only available to those offer integrated e-file and e-pay The IRS e-file section of the IRS
who e-file, either by computer or by combinations for those who want to Web site — www.irs.gov — has
phone. A taxpayer may e-file early pay a balance due with a credit card. more information about IRS e-file,
and, at the same time, schedule the The software accepts both the the self-select PIN, private sector
withdrawal as late as April 15, 2004. electronic tax return and the credit partnerships and electronic pay-
For returns filed after April 15, the card information. Subsequently, the ments — just click on the IRS e-file
payment is effective on the filing tax return and tax payment data are logo.
date. A 2004 estimated tax payment forwarded to the IRS and the credit
can be made through electronic card data is forwarded to the pay-
funds withdrawal only when filing a ment processor.
2003 tax return via computer, For the 2004 filing season, the
whether or not there is a balance due IRS has authorized two companies
on the return. The estimated tax to accept credit card charges from
payment may be the one due in both electronic and paper filers.
April, June or September. Only one Each offers both phone and Internet
2004 TAX HINTS 22
Practitioner’s Guide to the Filing Season
e-news for EFTPS-OnLine: Pay your
practitioners taxes over the Internet
I
f you’re going to owe taxes when payment history for up to 120 days for
Join the IRS e- you file your federal tax return, individuals.
News for Tax consider paying over the Internet EFTPS also offers a choice of
Professionals through the Electronic Federal Tax convenient electronic payment methods
mailing lists Payment System (EFTPS).
T
he Internal Revenue EFTPS-OnLine is fast, easy,
Service maintains an convenient and secure. The
electronic mail government does not charge
service designed to provide for this service.
localized, targeted and You can enroll in EFTPS-
immediate information for OnLine via an official
tax professionals specifi- government site on the
cally for your geographic Internet, using a user-
area. friendly Web interface. After
To subscribe to local enrollment, you will receive
mailing lists, go to the Tax a confirmation kit by mail
Professional’s page of with instructions for obtain-
irs.gov and click on the ing an Internet password. For in addition to the Internet: by phone,
Subscription Services topic added security, a unique Personal through free EFTPS-PC software, or
and then e-News for Tax Identification Number (PIN) will be through a service offered by your
Professionals. Use the sign- mailed to you. Your private tax informa- financial institution.
up form provided for your tion is protected — the EFTPS site The system is available 24 hours a
state. Additionally, we exceeds private industry best practices. day, 7 days a week and is also available
highly recommend you also With EFTPS-OnLine, you can pay any to business taxpayers. So, individuals
subscribe to the IRS Digital balance due and any estimated tax and businesses can pay their taxes
Dispatch, our national list payments. It also allows individual virtually anytime, from virtually
server. The Digital Dispatch taxpayers to schedule payments up to anywhere.
provides national tax news 365 days in advance. Other features For more information, visit the
and information about new include an instant, printable EFT Ac- EFTPS Web site at www.eftps.gov or
developments on the IRS knowledgment Number as documenta- call toll free 1.800.555.4477 or
Web site. tion of every transaction and access to 1.800.945.8400.
New Electronic Payment Program
CREDIT for business taxpayers
CARD
T
he IRS has launched a new trillion in electronic tax payments
program for new business taxpay- through EFTPS, and this new initiative
PAYMENT
ers designed to boost electronic will help increase growth in those
OPTIONS payment of taxes. This development numbers in tax year 2004. EFTPS
Taxpayers who charge offers some taxpayers new, quicker enables taxpayers and tax professionals
access to an electronic payment system. to make federal tax payments electroni-
payments made with
This initiative uses the Electronic cally online, by phone or with batch
automatic extensions of
Federal Tax Payment System (EFTPS), a provider software for professionals.
time to file or estimated service offered free by two bureaus of EFTPS Express Enrollment for New
tax payments on a credit the U.S. Department of the Treasury, the Businesses will affect all businesses
card should not file IRS and the Financial Management receiving a new Employer Identifica-
paper Forms 4868 or Service (FMS). In fiscal year 2003, tion Number (EIN). Business taxpayers
1040-ES. Treasury collected more than $1.5 Continued on page 24
2004 TAX HINTS 23
Practitioner’s Guide to the Filing Season
New Electronic Payment Program for business taxpayers
Continued from page 23
with a federal tax obligation will be for business taxpayers to make their the system to make their federal tax
automatically pre-enrolled in EFTPS business payments electronically,” payments electronically. In fiscal year
to make all their Federal Tax said IRS Commissioner Mark W. 2003, EFTPS processed more that
Deposits. Everson. 68.5 million transactions totaling
In addition to receiving their EIN, “Paying taxes using EFTPS more than $1.5 trillion. Taxpayers can
taxpayers will also receive a sepa- means 19 times greater accuracy,” make payments 24 hours a day, 7 days
rate mailing containing an EFTPS said Dick Gregg, FMS Commis- a week from home or office; schedule
Personal Identification Number sioner. “Greater accuracy means payments up to 120 days in advance
(PIN) and instructions for activating fewer penalties. I encourage indi- (for businesses) or 365 days in
their enrollment. New business viduals and businesses to enroll advance (for individuals); review the
taxpayers will activate their enroll- today.” last 16 months of tax payment history
ment by calling an 800-number, Taxpayers can enroll in EFTPS by online or by calling Customer Service.
entering their banking information visiting EFTPS-OnLine at In addition, taxpayers receive an
and completing an authorization for www.eftps.gov, or by calling immediate acknowledgement number
EFTPS to transfer funds from their EFTPS Customer Service at for every EFTPS transaction for easy
account to Treasury’s account for 1.800.555.4477 or 1.800.945.8400 record keeping and as proof of the
tax payments per their instructions. to receive an enrollment form by transaction. EFTPS is ideal for all
“There are approximately mail. business taxpayers and for individual
250,000 new EINs issued every EFTPS was introduced in 1996, taxpayers who make Form 1040 ES
year. With EFTPS Express Enroll- and since that time more than 4.4 quarterly estimated payments.
ment, we are making it even easier million taxpayers have enrolled in
e-file for business means less paperwork
I
n the 21st Century, you can run (e.g., Forms 1098, 1099, W2- on the phone, letting them know
your entire business electroni- G), using the Filing Informa- that the TeleFile system has
cally. So why not file your tion Returns Electronically accepted their return.
business taxes the same way? Now (FIRE) system • Delete the Paperwork Through
business taxpayers and tax preparers Some advantages of going all Electronic Signatures: Taxpay-
can file and pay by telephone, by electronic are: ers can create their own Personal
Internet or by PC software. It’s more • Increased Accuracy: IRS Identification Number (PIN) and
economical with less paperwork. It’s computers quickly and automati- file a completely paperless return
more efficient with increased cally check for errors or other using their tax preparation
accuracy. And it’s more effective software or a tax professional.
since you will spend less time There is nothing to mail to the
filing tax returns and more time IRS.
focused on your business. If you are a business taxpayer, ask
You will find that most small your tax preparer about e-
business filing requirements can be filing. If you are a tax profes-
submitted electronically. For ex- missing information, making e- sional, ask your software
ample: file returns more accurate and developer about adjusting your
• Self-Employed Income Tax reducing the chance of getting an programs to take advantage of
Returns (Form 1040, Sched- error letter from the IRS. electronic filing. And to find out
ules C and F) • Quick Electronic Confirma- more, visit www.irs.gov, and click
• Partnership Income Tax tion: Computer e-filers receive on the e-file logo. You will also find
Returns (Form 1065 and most an acknowledgment that the IRS a listing of Approved IRS e-file for
related forms) has received their returns. Callers Business Providers at http://
• Employment Tax Returns using TeleFile receive a confir- www.irs.gov/efile/index.html
(Forms 940/941) mation number while they’re still
• Certain Information Returns
2004 TAX HINTS 24
Practitioner’s Guide to the Filing Season
Become an Authorized IRS e-file Provider
Why IRS e-file? an On-Line Site or by using commer- the changes on your company
• e-file brings you customers — cial tax preparation software. Inter- letterhead to the Andover Campus,
and Tax Professionals who e-file mediate Service providers process signed by a firm official. You may
report using an average of 10 the tax return information and either also call toll-free 1.866.255.0654 to
minutes less per return. forward the information to a trans- make changes.
• Quick — Your customers get mitter or send the information back Step 3: Pass a Suitability Back-
their refunds in half the time. to the EROs or taxpayers. ground Check
• Easy — Just hit “Send.” Transmitters — Once the return When you apply to become an
• Smart — IRS provides an official is prepared, the income tax return ERO, Transmitter, Reporting
acknowledgement that your data is sent to the IRS by a Transmit- Agent or Intermediate Service
client’s return was received. And, ter. Transmitters must have software Provider, the IRS conducts a back-
through integrated e-file and pay and modems that allow them to ground check on all principals of
options, you can help your client connect with IRS computers. EROs your firm and responsible officials
e-file and pay at the same time! may apply to be transmitters and listed on the application to determine
37 million returns were e-filed by transmit return data themselves or their suitability to be an Authorized
tax professionals in 2003! they may contract with accepted IRS e-file Provider. If you apply to be
As taxpayer demand for IRS e-file third-party transmitters who will a Software Developer only, a suitabil-
grows, there are many ways you can transmit the data for them. Transmit- ity check is not required.
meet the expectations of your clients ters, who transmit returns filed from Application forms may be
and participate in this important trend home by taxpayers using tax prepara- submitted year round. Since process-
as an Authorized IRS e-file Provider. tion software, are called On-Line ing the applications and completing
Filers. the suitability background checks can
Getting started
Software Developers — Software take up to 45 days, you should apply
The IRS issues a Handbook for
Developers write the programs to IRS no later than 45 days before the date
Authorized IRS e-file Providers,
specifications that make IRS e-file you intend to begin filing returns
Publication 1345, that contains the
and Federal/State e-file possible. The electronically (business and/or
rules for participating in the IRS e-
IRS and participating states require individual); so that you will be
file program. Please read it before
that all software pass a series of tests accepted in time to begin e-filing for
doing anything else.
each year. Once approved, this your filing season.
Step 1: Choose the Authorized IRS software may be sold and used by Once you are accepted into the
e-file Provider options that are best EROs, Reporting Agents, Intermedi- program, there is no need to reapply.
for you ate Service Providers and Transmit- When the IRS receives the applica-
An Authorized IRS e-file Provider ters. Federal/State Software Develop- tion form, we will acknowledge
can be an Electronic Return Origina- ers must register and test with receipt with a letter, assign identifica-
tor, Intermediate Service Provider, participating states’ electronic filing tion numbers, after suitability is
Transmitter, Software Developer or programs. passed, and where applicable, issue a
Reporting Agent. Be sure to include Reporting Agents — A Reporting password for testing based on the
all your choices on the application Agent is an accounting service, provider options you have chosen.
form. franchiser, bank or other person Form 8633, Application to Partici-
Electronic Return Originators authorized to electronically prepare a pate in the IRS e-file Program for
(EROs) originate the electronic Form 940/941 for a taxpayer. Individual and Business Tax Returns,
submission of income tax returns to
Step 2: Submit Form 8633 Frequently Asked Questions and
the IRS. An ERO may originate the
The form asks for basic informa- Answers for Form 8633, as well as a
electronic submission of income tax
tion about your business and the Quick Reference Chart, When to
returns that are either prepared by the
provider options you have chosen. It Complete Form 8633, are available at
ERO firm, or collected from a
is also used to notify IRS of changes irs.gov/. Just click on the e-file logo.
taxpayer.
in your business. It is important that Still have questions? Call the e-
Intermediate Service Providers
you update your application when- Help Desk at 1.866.255.0654 (toll
receive tax return information from
ever changes occur by revising your free) for assistance.
EROs or from taxpayers who file
Form 8633 (paper Form 8633 or e-
electronically from home using
file application online), or by mailing
their personal computers, either on
2004 TAX HINTS 25
Practitioner’s Guide to the Filing Season
Tax Fraud Alert: Fraudulent
e-file returns on the rise
Return preparers and financial institutions should be on alert!
T
he IRS wants to make return preparers and the • Similar returns (e.g. same amount of income,
financial institutions offering refund anticipation deductions or refund.)
loans (RALs) aware of a growing fraud area that Report potentially fraudulent documents to the IRS for
may affect you. There has been a significant increase in evaluation. Documents may be faxed directly to the IRS
the number of fraudsters filing completely false returns Criminal Investigation Fraud Detection Center for your
based on bogus documents. This is being done for the state.
sole purpose of obtaining illegal refunds, mainly in the
State Fraud Detection Fax
form of refund anticipation loans so they can get the
Center Number
money as fast as possible.
In these schemes, the fraudulent tax returns are being CT, MA, ME, Andover 978.691.6902
used as the vehicle for obtaining the loans which are the NH, RI, VT,
proceeds for the perpetrators of these crimes. When the Upstate NY, MI
RAL is paid by the financial institution, the fraudsters GA, NC, SC, Atlanta 678.547.3344
disappear, leaving the return preparer and the financial AL, FL
institution incurring a loan loss if the refund is not TX, NM, AZ Austin 512.460.7436
issued. And the vast majority of these fraudulent refunds
Brooklyn, Brookhaven 631.447.4608
are stopped by the IRS so the loans are never paid.
Manhattan, NJ
This crime is increasing at a disturbing rate. Last
year, one in every 966 e-filed returns was fraudulent. OH, KY, Cincinnati 859.669.3711
While just three years ago, that number was one in WV, IN
4,789. CA Fresno 559.441.5881
The vast majority of fraudulent e-file returns are IL, WI, ND, SD, Kansas City 816.823.8543
being transmitted by practitioners who offer e-file. NE, IA, KS,
During the 2003 filing season, a total of 55,904 fraudu- MO, MN
lent returns were e-filed. Of those, 78 percent came
through practitioners. In addition, there were 212 unique AR, TN, MS, Memphis 901.546.3148
Electronic Filing Identification Numbers (EFIN) that LA, OK
transmitted more than 50 fraudulent returns. CO, MT, WY, Ogden 801.620.6806
As a tax practitioner offering e-file and RALs, please UT, NV, ID, OR,
practice due diligence and be on guard to stop fraudu- WA, AK, HI
lent returns from being filed through your EFIN. PA, VA, Philadelphia 215.516.1445
To prevent fraud, you should look closely at all docu- MD, DE
ments, particularly those authenticating the identity of
the taxpayer, and question suspicious activity. The Visit www.irs.gov regularly for information updates
following may be indications of fraudulent activity: and Tax Fraud Alerts; these can be quickly accessed by
• W-2s that are typed, handwritten, duplicated or using IRS keyword: Fraud.
have noticeable corrections.
• W-2s for a firm in the area that differ from other
W-2s from the same firm.
• Suspicious people accompanying the filer and
observed on prior occasions.
• Multiple refunds directed to the same address or
P.O. Box.
• Employment or earnings that are a basis for
refundable credits are not well documented.
2004 TAX HINTS 26
Practitioner’s Guide to the Filing Season
Ready to apply Federal Tax Deposit requirements
to participate in for employment taxes
D
e-file? o employment tax requirements wages are paid, not earned, and must be
confuse you? You’re not alone. deposited as follows:
• Submit Form 8633, The rules are not one-size-fits- Monthly Schedule Depositors:
Application to Partici- all and can be difficult to navigate. This • Deposit each month’s taxes by
pate in the Electronic summary may help clear up some of the 15th day of the following
Filing Program. the mystery for you. month (e.g., taxes from payday(s)
• Apply early. It takes up Employers are required to file Form during August are deposited by
to 45 days to process 941, Employer’s Quarterly Federal Sept. 15).
applications, which are Tax Return, and to make regular Semi-weekly Schedule Depositors:
accepted year round. federal tax deposits (FTDs) of employ- • For wages paid Saturday, Sunday,
• Forms 8633 are pro- ment taxes, which include employees’ Monday or Tuesday, deposit by
cessed at the Andover withheld federal income tax, Social Friday of that week.
Submission Processing Security tax, Medicare tax and the • For wages paid Wednesday,
Center. For more infor- employer’s share of Social Security and Thursday or Friday, deposit by
mation about e-file, see Medicare taxes. the following Wednesday.
page 25, call The deposit schedule may be either If the due date for a deposit falls on a
1.866.255.0654 or click monthly or semi-weekly, depending on federal or state bank holiday or on a
on the e-file logo on the amount owed during a four-quarter Saturday or Sunday, the deposit is
IRS.gov/. look-back period. The look-back period considered timely if it is made by the
for calendar year 2004 covers the four close of the next banking day.
calendar quarters from July 1, 2002 Reminder: If you are a Semi-weekly
through June 30, 2003. Depositor, you must attach Form 941,
Note: Notification of FTD Deposit Schedule B, to your Form 941.
Requirements are issued yearly to Note: No monthly or semi-weekly FTD
FORM 8453 filers of Form 941 and 941SS to payments are required if the total tax
advise employers of which deposit liability for the quarter is less than
S
ubmission of Form method to use for the upcoming $2,500. Employers may mail in pay-
8453, U. S. Individual calendar year. It is your responsibil- ments with their quarterly Form 941.
Income Tax Declara- ity to verify the lookback period
tion for an IRS e-file Return, If employers have a deposit require-
information with your records to
is required unless the return is ment, they may choose one of two
ensure that the notice you receive is
signed using an electronic deposit methods:
correct.
signature. The Acknowledg- • Make their
If total taxes reported in then employer is a: payment
ment (ACK) File contains
the lookback period were: electronically,
information that indicates if
the electronic signature was $50,000 or less Monthly Schedule Depositor using the safe,
received by the IRS or if More than $50,000 Semi-weekly Schedule Depositor. convenient,
Form 8453 is required. Electronic
New employers, who have never
Three submission process- Federal Tax Payment System
filed Form 941 before, follow the
ing centers will process (EFTPS). To enroll in EFTPS, call
monthly schedule depositor’s rules for
Forms 8453. Andover will 800.945.8400 or 800.555.4477
the first calendar year of their business.
process forms for returns or visit www.eftps.gov/.
If, however, a new employer accumu-
transmitted to Andover and • Mail or deliver Form 8109,
lates a tax liability (reduced by any
Kansas City. Austin will Federal Tax Deposit Coupon,
advance Earned Income Credit (EIC)
process forms for returns with their payment to an autho-
payments) of $100,000 or more on any
transmitted to Austin and rized financial institution or
day during a deposit period, they must
Philadelphia. Memphis will Federal Reserve Bank or branch.
deposit the tax by the next banking day.
process forms for returns Make the check or money order
FTD payments are based on when
transmitted to Memphis. payable to the financial institution.
2004 TAX HINTS 27
Practitioner’s Guide to the Filing Season
www.irs.gov Tax materials and
assistance in Spanish
Visit the (Ayuda en Español)
IRS W e b
I
f you need federal tax information or on the IRS Web site, www.irs.gov,
site to: in Spanish, you can find it in the under Forms and Publications. Some
• Download forms form of recorded tax topics, free tax of the more popular ones are:
and publications. publications and toll-free telephone • Publication 1SP, Derechos del
• Ask tax-related assistance from the IRS. Contribuyente (Your Rights as a
TeleTax is a toll-free automated Taxpayer)
questions. service, in English and Spanish, • Publication 579SP, Como
• Read summaries of providing helpful tax topics and refund Preparar la Declaración de
tax regulations in information. You can find a list of more Impuesto, explains who has to file
plain English. than 150 TeleTax topics in the instruc- a federal tax return and other
• Read news releases tions for Form 1040, 1040A or important topics, such as which
1040EZ. TeleTax can also help you if form to file, who are dependents,
• Send your com-
it’s been at least four weeks since you what income is taxable and
ments directly to filed your return and you want to check nontaxable, and what some of the
the IRS on-line. on the status of your federal refund. more common tax credits are
• Download statistics Having a copy of the tax return handy • Publication 596SP, Crédito por
of income database. will help you respond to the prompts Ingreso del Trabajo, provides
• Learn about elec- on the automated system. TeleTax is details on the Earned Income Tax
available 24 hours a day, 7 days a week Credit.
tronic services. at 1.800.829.4477. You can also talk with a Spanish-
• Use the W-4 calcu- Free Spanish publications are speaking IRS representative by calling
lator to figure available by calling toll free the toll-free customer service line at
withholding allow- 1.800.TAX.FORM (1.800.829. 3676) 1.800.829.1040.
ances.
• Visit the Tax Taxpayer Assistance Centers
Professional’s offer account help, Everyday
page.
• Subscribe to the
Tax Solutions
L
ocal Taxpayer Assistance
Digital Dispatch — Centers (TACs) are practitio-
an e-mail newsletter ners’ source for face-to-face
— or e-news for help with their clients’ tax account
Tax Professionals. issues and Everyday Tax Solutions.
To subscribe, go the While practitioners have many
alternatives for obtaining tax forms
Tax Professional’s
and answers to tax law questions,
page and click on TACs are their only option for in-
Subscription person help with account issues —
Services. inquiries, adjustments, payment ners can call local telephone numbers
plans, liens/levies and problem- for convenient appointments.
solving. Phone numbers, locations and hours
Everyday Tax Solutions ensures of service for IRS TACs are posted at
client issues are resolved at the www.irs.gov. From each page listed
earliest stages, minimizing penalties, under Contents, click on Contact My
interest and aggravation. Practitio- Local Office.
2004 TAX HINTS 28
Practitioner’s Guide to the Filing Season
IRS toll-free numbers
866.860.4259 Practitioner Practitioners’ first point of contact for account-related issues.
Priority Service
800.829.1040 IRS Tax Help Line For filers who need procedural or tax law information or help to file
for Individuals their 1040-type individual returns.
800.829.4933 Business and For Small Businesses, Corporations, Partnerships and Trusts who
Specialty Tax Line need information and/or help related to their Business Returns or
Business (BMF) Accounts. Services cover Employer Identification
Numbers (EINs), 94x returns, 1041, 1065, 1120S, Excise Returns,
Estate and Gift Returns, as well as issues related to federal tax
deposits.
800.829.1954 Refund Hotline For 1040-type Individual and Joint Filers who need to check the
status of their current year refund. Automated Refund Self-Service
Interactive Applications are offered on this line. Note: The Where’s
My Refund? automated self-service feature is also available 24/7 at
www.irs.gov/ to obtain refund status information.
800.829.3676 Forms and For individuals, businesses and tax practitioners who need IRS tax
Publications forms, instructions and related materials and tax publications.
877.777.4778 National Taxpayer For taxpayers whose tax problems have not been resolved through
Advocate’s Help normal channels. The Taxpayer Advocate Service (TAS) provides
Line an independent system to assure that tax problems are promptly and
fairly handled. TAS operates independently of any other IRS office
and reports directly to Congress through the National Taxpayer
Advocate.
800.829.4059 Telephone Device For hearing-impaired taxpayers who need tax law and/or procedural
for the Deaf (TDD) information relating to filing their returns or who need information
or assistance relating to their accounts.
888.912.1227 Taxpayer Advocacy For citizens who want to provide ideas and suggestions on how to
Panel improve IRS services or who want to make recommendations for
improvement of IRS systems and procedures.
800.555.4477, Electronic Federal For taxpayers who want to pay business or individual taxes through
800.945.8400 or Tax Payment System electronic funds transfer. The EFTPS Toll-Free numbers can
800.733.4829(TDD) (EFTPS) Hotline provide callers with EFTPS enrollment forms, instructions and
Tax Exempt – customer assistance.
877.829.5500 Government Entities For taxpayers who need tax information or assistance relating to
(TEGE) Help Line Tax Exempt or Government Entities, Tax Exempt Bonds, Employer/
Tele-Tax System Employee Pension Plans or Indian Tribal Agreements.
800.829.4477 Extension to File For individuals who need to check the status of their current year
refund or who want to listen to recorded tax information. Available
24 hours a day, seven days a week.
888.796.1074 Tele-File System For individual filers who want to submit an Extension to File for a
1040-series return via telephone.
866.699.4083 Form 706 For answers to questions concerning Form 706, United States Estate
Tax Returns.
2004 TAX HINTS 29
Practitioner’s Guide to the Filing Season
IRS toll-free numbers
888.227.7669 AARP Tax-Aide American Association of Retired Persons locations for income tax
Information Line preparation by IRS trained volunteers.
800.829.3903 Automated Collection Business accounts assigned to ACS
System (ACS)
Businesses
800.829.7650 Automated Collection Individual accounts assigned to ACS
System (ACS)
Individuals
800.829.0433 Criminal Report tax fraud.
Investigation
Informant Hotline
800.829.4933 Employer Identifica- EIN application and changes.
tion Number (EIN)
866.699.4096 Form 2290 Heavy Vehicle Use Tax issues related to Form 2290
866.455.7438 Information Return Tax law help for payers of W-2s and 1099s.
Reporting
866.562.5227 Terrorist Act or Information for those affected by a Terrorist Act or a Combat Zone
Combat Zone Special participant or related accounts issues.
Hotline
800.366.4484 Treasury Inspector Report allegations of misconduct or improprieties of IRS
General for Tax employees
Administration
(TIGTA) Hotline
Get an EIN by phone, fax or Internet
Phone Identification Number, to get an It requires neither registration nor
By simply calling the toll-free EIN. Instructions on the form paper. An EIN is issued to you as
number (1.800.829.4933), the IRS’s provide the correct mailing address. soon as all the necessary fields of
Business and Specialty Tax Line, Practitioners can receive an EIN the on-line form are completed,
you can get an employer identifica- on a client’s behalf by completing validated and submitted. The IRS
tion number (EIN). Calls are an- the Third Party Designee section refers to the I-EIN as a provisional
swered Monday–Friday from 7:00 and obtaining the client’s signature EIN, because it may be voided if:
a.m. to 10:00 p.m. local time. on Form SS-4. The instructions • The name and SSN of the
(Pacific Time for Hawaii and include the locations where the form principal officer do not match
Alaska.) should be mailed or faxed. SSA records, or
Internet • The business has already
Fax
The new Internet EIN (I-EIN) been assigned an EIN.
You can also fax requests for an
application opens another avenue to You must keep a copy of your
EIN 24 hours a day, seven days a
apply for and obtain an employer I-EIN application for your records.
week by dialing the fax number at
identification number. I-EIN is You can print a copy by clicking the
the location accepting applications
available for use 24/7 at Print Form button after receiving
from your state. (The numbers are
www.irs.gov (click on Businesses your EIN.
listed below.) Or you can mail Form Continued on page 31
SS-4, Application for Employer and then on Employer ID Numbers).
2004 TAX HINTS 30
Practitioner’s Guide to the Filing Season
Get an EIN by phone, fax or Internet Continued from page 30
Practitioners may request EINs via the
Internet on behalf of their clients. They
must keep a copy of the Form SS-4, signed
by the customer, in their files.
If you need assistance applying for an
EIN on the Internet, call the toll-free
Business and Specialty Tax Line at
1.800.829.4933.
The on-line application process is not
yet available for the following types of
entities: Foreign Addresses (including
Puerto Rico); Limited Liability Company
(LLC) without entity types; REMICs;
State and Local Governments; Federal
Government/Military; and Indian Tribal
Government/Enterprise.
State and federal on-
line business registration Nevada, New Mexico, North Dakota, Oklahoma,
Businesses located in Georgia or Illinois may be able Oregon, Puerto Rico, South Dakota, Tennessee, Texas,
to register with the state and apply for a federal em- Utah, Washing- ton, Wisconsin, Wyoming, write, call or
ployer identification number (EIN) on-line in one fax:
session. If you elect to apply for a federal EIN on-line, Attn: IRS EIN Operation
your information will be transmitted to the IRS for Philadelphia, PA 19255
processing. A provisional federal EIN will be assigned Toll-Free 800.829.4933
to you immediately. You will be notified within two Fax-TIN 215.516.3990
weeks when your federal EIN has been formally as-
If you have no legal residence, principal place of
signed.
business, or principal office or agency in any state
You can download Form SS-4 by accessing http://
(outside the U.S.), write, call or fax:
www.irs.gov/pub/irs-pdf/fss4.pdf/.
Attn: IRS EIN Operation
Where to write, call or fax Philadelphia, PA 19255
If your principal business, office or agency or legal Tele-TIN 215.516.6999
residence, in the case of an individual, is located in: Fax-TIN 215.516.3990
Connecticut, Delaware, District of Columbia, Florida,
Georgia, Maine, Maryland, Massachusetts, New Hamp- Avoid these common problems
shire, New Jersey, New York, North Carolina, Ohio, 1. Taxpayers often fax Form SS-4 and before
Pennsylvania, Rhode Island, South Carolina, Vermont, receiving the EIN faxed or mailed to them, call
Virginia, West Virginia, write, call or fax: the toll-free number or apply over the Internet to
Attn: IRS EIN Operation request an EIN. This can cause duplicate EINs to
Holtsville, NY 00501 be issued.
Toll-Free 800.829.4933 2. Form SS-4 is often not completely filled out. This
Fax-TIN 631.447.8960 causes a delay in providing an EIN.
3. Taxpayers are sometimes uncertain about the type
Illinois, Indiana, Kentucky, Michigan: write, call or fax:
of entity being established. Call the toll-free line
Attn: IRS EIN Operation
for assistance in determining the type of entity.
Cincinnati, OH 45999
4. Callers sometimes are unable to establish that they
Toll-Free 800.829.4933
are authorized to request an EIN for the entity
Fax-TIN 859.669.5760
they represent. An EIN can be released only to
Alabama, Alaska, Arizona, Arkansas, California, duly authorized individuals. If you cannot establish
Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, authorization, the EIN will be mailed to the
Minnesota, Mississippi, Missouri, Montana, Nebraska, taxpayer’s address of record.
2004 TAX HINTS 31
Practitioner’s Guide to the Filing Season
Applying for an Individual Taxpayer
Identification Number (ITIN)
T
he IRS has revised the requirements for Indi- • U.S. driver’s license
vidual Taxpayer Identification Number (ITINs) • Civil birth certificate
applications. These revisions will ensure contin- • Foreign driver’s license
ued availability to individuals with federal tax responsi- • U.S. state identification card
bilities while strengthening tax administration. In most • Foreign voter’s registration card
cases, applicants must demonstrate a tax need for the • U.S. military identification card
numbers by attaching federal tax returns to their appli- • Foreign military identification card
cations. • Visa
Effective immediately, ITIN applicants should follow • U.S. Citizenship and Immigration Services
the new procedures to avoid delays in receiving their (USCIS) photo identification
ITINs. The new guidelines require applicants to: • Medical records (dependents only)
• Apply using the revised Form W-7, dated December • School records (dependents and/or students only)
2003, on-line at www.irs.gov in both English and A list of Acceptance Agents is posted at http://
Spanish versions. Printed versions are available by www.irs.gov/individuals/article/0,,id=96304,00.html/.
calling 1.800.829.3676. IRS Taxpayer Assistance Centers (TACs) provide in-
• Have valid return filing requirements and file person help with ITIN applications on a walk-in or
federal income tax returns with their ITIN applica- appointment basis. TAC locations and hours of service
tions or provide documentation supporting an are posted at http://www.irs.gov/localcontacts/
exception to the return filing requirement. index.html/. Applicants outside the U.S. may contact an
Because they are filing tax returns as attachments to overseas IRS office to find out if that office accepts
their ITIN applications, applicants should not mail Form W-7 applications.
their returns to addresses listed in the Form 1040, Qualifying ITIN applicants will receive letters from
1040A or 1040EZ instructions. Instead, they should the IRS assigning their tax identification numbers,
send their returns, Forms W-7 and other required usually within six weeks, if their applications are
documentation to the address listed in the Form W-7 complete.
instructions: A news release outlining revisions to the ITIN
Internal Revenue Service program is posted on www.irs.gov in the Newsroom,
Philadelphia Service Center and a set of Frequently Asked Questions (FAQ) is at
ITIN Unit, P.O. Box 447 Keyword: ITIN.
Bensalem, PA 19020 Reminder: ITINs are for tax purposes only and are not
Exceptions to the return with application require- valid as personal identification. ITINs do not imply
ment include individuals subject to tax treaty legal status in the U.S. or entitle holders to work in the
benefits or third party reporting or withholding. U.S.
Exceptions are outlined in Form W-7 Instructions.
• Submit original or certified copies of proof of Adoption Identification
identity documents to either IRS Acceptance Agents Numbers
A
or the IRS for validation. doption Identification Numbers (ATINs) are for
An original passport is the only document that taxpayers who are in the process of adopting a
proves both identity and foreign status. Applicants child and who meet the criteria for claiming
who do not have passports must provide a combina- dependent status for the adoptive child but are unable to
tion of current documents that contain expiration apply for a SSN for the child, pending final adoption.
dates, show their names and photographs and ATINs are issued for domestic adoptions only. Taxpay-
support their claim of foreign status. The IRS will ers involved in international adoption must apply for an
accept a combination (two or more) of the following ITIN for the child.
documents, in lieu of a passport: ATINs are temporary numbers issued by the IRS and
• National identification card (must show photo, are valid only for a two-year period, or if the applicant
name, current address, date of birth, and expira-
tion date) Continued on page 33
2004 TAX HINTS 32
Practitioner’s Guide to the Filing Season
Small Business Adoption Identification Numbers
Resource Guide Continued from page 32 an amended
CD-ROM-2003 return to
receives an SSN within that two-year
T
he Small Business period for the adoptive child. If the claim the
Resource Guide on adoption does not become final within EIC for the
CD-ROM is a must for the two-year period, it is necessary to period of
every small-business owner or apply for an extension to validate the pending
any taxpayer about to start a ATIN past the two-year period. Many adoption,
business. This handy, interac- adopting parents often have custody of provided all
tive CD contains all the the child for a period of time pending other EIC
business tax forms, instruc- the adoption and provide sufficient criteria are
tions and publications to financial support during the year to met.
successfully manage a busi- claim the dependency exemption or To apply
ness. The CD also provides child care credit on their returns. for an ATIN,
other helpful information, However, because of privacy issues, use Form W-7A, Application for
such as preparing a business they do not have access to the child’s Taxpayer Identification Number for
plan, finding financing for existing SSN. Additionally, because the Pending U.S. Adoptions, available at
your business and more. The Social Security Administration (SSA) www.irs.gov or by calling the IRS toll-
CD-ROM includes a full-text will issue an SSN only when the free tax forms line at 1.800.829.3676.
and PDF search engine for adoption is final, the parents are unable Applicants are required to provide
easier navigation. To order to provide an SSN when filing the supporting documentation with the
your copy of the Guide return. application. Applicants may file Form
(available mid-March 2004), The Earned Income Credit (EIC) is W-7A at their local IRS office, where
call 1.800.TAX.FORM not allowed without a valid SSN issued field personnel will verify the informa-
(1.800.829.3676) or visit by the SSA; therefore, the EIC cannot tion and pre-screen the Form W-7A for
http://www.irs.gov/busi- be claimed when an ATIN is used for accuracy and completeness. Applicants
nesses/small/index.html and the child. After adoption is final and the may also mail the Form W-7A and
click on Small Business taxpayer has obtained a valid SSN for supporting documentation to the ITIN
Products. the adoptive child, the parents may file Unit at the address shown above.
Preparer Tax Identification Number (PTIN)
A
paid tax professional may Tax Professional’s page of
choose to use a PTIN, instead www.irs.gov/.
of his or her SSN, on returns Preparers wishing to apply for a
that are prepared for clients. A new PTIN using the paper method may
PTIN application enables a preparer to download Form W-7P, Application for
REMEMBER: apply for and receive a PTIN on-line or Preparer Tax Identification Number,
look up a forgotten PTIN. An actual from www.irs.gov or call the IRS toll-
Treasury Department PTIN card can be sent to you if re- free tax forms line at 1.800.829.3676.
Circular No. 230 contains quested. Form W7-P will no longer be accepted
the rules governing the Tax professionals who wish to apply via mail or fax by the Philadelphia
practice of attorneys, CPAs, for a PTIN on-line must register on-line Submission Processing Center. It
enrolled agents, enrolled as individuals to create an electronic should now be sent to the Brookhaven
actuaries, appraisers and account. The registration process is a Service Center. Please note the new
other persons representing one-time automated process where the address and telephone numbers below:
taxpayers before the IRS. It user selects a username, password and Fax: 631.687.3850
authorizes the Director of PIN. An on-screen acknowledgment Brookhaven Service Center
Practice to grant or deny confirms that you’ve successfully PTIN Unit Stop 540A
enrollment and to institute completed the initial registration PO Box 9003
disciplinary proceedings. process. You can access the registration Attn: EIN Operation
process by clicking on e-services on the Holtsville, NY 00501
2004 TAX HINTS 33
Practitioner’s Guide to the Filing Season
TIGTA Assembling forms in proper
HOTLINE
order helps processing
I
The IRS expects its f returns are not assembled in ber, where possible. Copies of ap-
employees to conform attachment sequence, they must be proved extensions of time to file
to the highest stan- pulled apart and reassembled. should be attached following the IRS
dards of integrity. If Although we take care to reattach all forms.
you have reason to the pages, important documentation (Ignore the sequence number on
could get lost in the process. Form 2688.) Attach the remittance to
believe that an IRS
Form 9465, Installment Agreement the front of the return on top of Form
employee is engaging Request, and Form 911, Application for W-2.
in misconduct, call Taxpayer Assistance Order to Relieve • Secure the return package with one
1.800.366.4484 Hardship, should be attached to the staple in the top left corner. Use
front of the return. Attach other forms binder clips or large rubber bands
and schedules at the end of the return in for large documents. Do not use
order of the Attachment Sequence tape.
Number that is shown below the year in • Keep the upper right portion of the
the upper right corner of the form or front page blank and free of
schedule. Attachment Sequence Num- staples. The Document Locator
bers are not in the same order as form Number (DLN) is printed in that
CUT DOWN ON numbers. For example, Form 8801 has area. A staple can cause the DLN to
TAX Attachment Sequence No. 74 and Form be printed illegibly and can even
PENALTIES 8814 has Attachment Sequence No. 40. damage the imprinting equipment.
WITH EFTPS IRS forms and schedules without Some practitioners stamp or print a
attachment sequence numbers follow message such as “IRS File Copy”
New research shows real next in numerical order. Attach sepa- in that area in large letters which
benefits to using the rate statements at the end of the return obscure the DLN.
Electronic Federal Tax — not between forms and schedules
• Do not use binders or plastic
Payment System (EFTPS). that are in sequence. If these relate to
covers; these must be removed for
The study shows that non- previous correspondence, refer to the
processing and are discarded.
EFTPS users are 31 times IRS customer service representative by
more likely to be assessed name, ID number and mail stop num-
a penalty than EFTPS
users. With EFTPS, Estate and Gift Tax Program
T
taxpayers can schedule he Estate and Gift Tax Program Asked Questions, go to www.irs.gov
payments in advance to has been centralized for filing and under Contents on the left side of
avoid penalties. purposes at the Cincinnati the page click on Businesses then
Service Center. The addresses are: scroll down that page and click Estate
(for regular mail) and Gift Taxes or click on Forms and
Internal Revenue Service Center Pubs to access Form 950, Introduc-
Cincinnati, OH 45999 tion to Estate and Gift Taxes.
Installment payments under IRC
(private delivery services)
6166 have new requirements. The IRS
REMEMBER: Internal Revenue Service Center
requires either that an estate furnish a
201 W. Rivercenter Boulevard
Using labels saves time surety bond as a prerequisite for
Covington, KY 41011
and increases efficiency. granting the installment payment
Taxpayers can check the status of election or that the executor elects the
None of the information their filed returns by calling special lien provisions of IRC 6324A.
on an IRS preprinted 866.699.4083. (See page 9 of the Form 706 instructions
label affects whether To review information on forms and for more information.)
taxpayers are audited. publications and review Frequently
2004 TAX HINTS 34
Practitioner’s Guide to the Filing Season
Extensions and Installment Agreements
T
axpayers who file extensions by April 15 but are If a client cannot pay the taxes owed at the time of
unable to pay the full amount will not be penal filing of the return, you can file a Form 9465, Install-
ized if they pay 90 percent of the total tax due at ment Agreement Request, with the tax return. This form
the time they request the extension. Regulations require allows the taxpayer to request a monthly payment plan
that the tax liability reported on Form 4868, Application specifying the monthly payments.
for Automatic Extension of Time to File U.S. Indi- There is a processing fee of $43 for entering into an
vidual Income Tax Return, be properly estimated based installment agreement and $24 for restructuring or
on available information. Otherwise, the form may be reinstating an installment agreement. Do not send the
deemed not filed with due diligence. The extension may $43 when you send the Installment Agreement Request.
be disallowed and a late filing penalty assessed if the We will send you a notice for the fee once the agree-
taxpayer does not properly estimate the tax due and ment has been approved. Form 9465 can be transmitted
attach it to the request. Form 4868 is in voucher form electronically by itself or accompanying an electroni-
again this year and can be sent electronically. Balance cally filed return.
due Forms 4868 should be sent to the appropriate Attach Form 9465 to the front of the return so it can
lockbox. (See pages 59-69.) be detached and processed separately. Attach Forms W-
Part II and Part IV of Form 4868 should only be 2, W2- G and 1099R separately so they will not be
completed if the taxpayer and/or the taxpayer’s spouse inadvertently detached from the Form 9465. If you have
plan to file Form 709, United States Gift and Genera- already filed the return, file Form 9465 by itself with the
tion-Skipping Transfer Tax Return, or Form 709-A, IRS service center where you filed your income tax
United States Short Form Gift Tax Return. If either Part return. If you are filing this form in response to a notice,
II or Part IV of Form 4868 is completed, correspon-
send the form to the address on the notice.
dence will be generated to the taxpayer if no Form 709
or 709-A is filed.
2004 TAX HINTS 35
Practitioner’s Guide to the Filing Season
EITC changes balance
education and compliance
N
ew Earned Income Tax Testing new replacements or answers. We will
Credit (EITC) program compliance correspond with all pilot group
changes will result in fairer, initiatives claimants — sending reminders to
more balanced tax administration. A We are testing three new inte- those filing without Form 8836 and
five-point initiative announced last grated approaches to improve EITC acknowledgments to those who do.
summer equitably focuses on compliance without imposing undue The other two pilots ask EITC
education and compliance — burden on claimants. These pilots claimants to provide additional
encouraging eligible taxpayers to involve a limited number of the 20 information after filing their 2003
claim the credit they deserve while million taxpayers claiming EITC, returns.
reducing the high rate of erroneous focusing on potentially high-risk The second pilot will identify
claims, estimated at nearly one-third claims identified from past studies. overstated EITC claims due to
of the 1999 EITC returns. Most EITC claimants are not underreported income. Our Auto-
Claiming the EITC affected. mated Underreporter Program will
review 300,000 claims from taxpay-
they deserve The pilots reflect input from tax
professionals, low-income advocacy ers who previously underreported
Our 2004 public education
groups and the public and will not their incomes, which may change
campaign advises taxpayers —
be further implemented without full the amount of taxpayers’ EITC or
Don’t guess whether you qualify for
analysis, careful evaluation and disqualify them if their true income
EITC. Know! — and directs them to
additional stakeholder input. exceeds the limitation.
our Web site, our toll-free number
The certification pilot involves The third pilot focuses on EITC
and you for more information.
the residency requirement between a taxpayers’ filing status, looking at
You and other tax professionals
child and the taxpayer. We sent the returns of 36,000 claimants
who prepare 68 percent of EITC
Notice 84A and Form 8836, Quali- whose filing status changed from
claims are instrumental in filing
fying Child Residency Statement, to Married Filing Jointly to Single or
accurate returns. Several resources
25,000 taxpayers in early December Head of Household in 2003. We will
posted on both the EITC Individual
asking them to submit proof, when ask these claimants to provide
and Tax Professional pages of
they file their 2003 returns, that the documentation verifying the accu-
www.irs.gov will help you navigate
qualifying children lived with them racy of their filing status.
the credit’s complexities.
for more than one-half of the tax EITC claimants in the certifica-
EITC — An Electronic Toolkit for
year as required. tion and filing status pilots must
Tax Professionals is your one-stop
Please ask your clients whether provide specific documentation
resource to determine clients’ EITC
they received these important before receiving the EITC portion of
eligibility; ensure full compliance
notices. You can e-file these returns, their refunds. They will receive any
with EITC rules and regulations;
but Forms 8836 and supporting refunds attributable to tax withhold-
and file accurate claims. Sample
documentation must be mailed to ing or other refundable credits as
appointment wrap-up cards, letter
IRS, STOP 4300, Annex R2, usual. Pilot group participants will
templates, brochures and posters
Kansas City, MO 64999-0065 or receive their EITC via checks, not
will help you communicate impor-
faxed to 1.913.266.9640. Please direct deposits, after we evaluate the
tant EITC information to your
mail all paper returns with Form documentation and determine their
clients.
8836 to the appropriate Kansas City eligibility — usually within 60 days
You will get additional technical
address listed on the notice — not to of receiving their replies.
support on meeting the due dili-
the taxpayers’ usual filing locations Taxpayers who disagree with our
gence requirements through our
— to avoid processing delays. decisions and cannot reach an
Practitioner Priority Service
Taxpayers who lost their notices agreement with our examiners can
(1.866.860.4259) and other materi-
or have questions can call a special exercise their appeal rights through
als on our Web site using the
number dedicated to the certification our Appeals Division or petition the
keyword: eitc.
pilot — 1.800.294.2723 — for Tax Court.
Continued on page 37
2004 TAX HINTS 36
Practitioner’s Guide to the Filing Season
Earned Income Tax Credit
Continued from page 36
e-filing has more tion to receive their credit. contacted for examinations last year
benefits If your clients need additional time failed to respond, resulting in EITC
A special indicator will help gathering their records, please claim denials, reduced refunds and
Electronic Return Originators contact us at the number listed on requiring claimants to submit
(EROs) identify taxpayers in the the examination inquiry (Letter additional information for future
certification pilot. EROs will L566-BZ). When responding, reply year claims. Your professional
receive a “Y” acknowledgment to the address in our inquiry to avoid counseling can help your clients
indicator within 24 hours of trans- delays. avoid these pitfalls.
mission if an EITC claimant is Encourage clients Tell them our request for addi-
tional information does not imply
required to submit Form 8836. This to respond
early indicator will help you help ineligibility, but we need more
Please advise your EITC clients
your clients file complete returns documentation to verify their
up-front that they may receive IRS
and minimize delays receiving the claims. We want to ensure all
correspondence requesting additional
EITC portion of their refunds. eligible taxpayers receive the EITC
information to substantiate their
they deserve, but only those who are
EITC audits another
compliance tool EITC ON THE eligible.
Also encourage your clients to
EITC audits are more encompass- WEB alert us to address changes. Many
ing than our pilots and may cover Go directly to Earned In- IRS notices and refunds are returned
multiple EITC issues, including
come Tax Credit information to us as undeliverable each year.
filing status, exemptions and Child
Tax Credit. We expect to examine at More information
approximately 260,000 EITC claims www.irs.gov/eitc For additional information about
this year. EITC and our new initiatives, join
Unlike our other examinations, EITC claims as part of these pilots the January 13 broadcast of Tax Talk
which occur after returns are or IRS correspondence examina- Today or check the Web site ar-
processed and refunds are issued, tions. Urge them to respond immedi- chives at www.taxtalktoday.tv/ and
our EITC audits occur at the front- ately or contact you for assistance to visit our Web site frequently for
end, to verify eligibility before minimize delays receiving their updates.
paying the claims. EITC claimants EITC.
must provide the requested informa- More than half of EITC claimants
Tax Talk Today for tax professionals
T
ax Talk Today has steadily and tax teasers. The format allows tion. In addition, NASBA has
gained popularity with tax viewers to ask questions via e-mail, approved credit for viewing the
professionals around the fax or phone. archived broadcast or VHS video-
country who look to this Webcast Continuing professional educa- tape. Viewing the archived broad-
program to provide up-to-date tion (CPE) viewers can earn one cast or VHS video tape qualifies as
information about tax issues. CPE credit by watching each Tax a Non-Interactive Self-Study
Tax Talk Today is a monthly Talk Today program via Live or program.
program about current tax issues Internet-Based-Live Broadcast This program is not approved for
and policies sponsored in part by (based on a 50 minute credit hour) some states requiring QAS (Florida
the IRS. It provides unbiased or Archived/Rerun Broadcast (Non- and Tennessee) for archived viewing
insight and information about interactive self study-based on 100 or viewing VHS videotape. Oregon
current tax and business issues minute credit hour). Credit for the now accepts the archived or VHS
critical to tax professionals. The Live Internet Broadcast is accepted programs for CPE credit.
programs feature a panel discus- by Illinois, New York and all State For more information, visit http:/
sion, questions and answers from Boards that accept NASBA sponsors /www.taxtalktoday.tv/.
viewers, current tax news stories of continuing professional educa-
2004 TAX HINTS 37
Practitioner’s Guide to the Filing Season
A letter to tax professionals from the
Health Coverage Tax Credit Program
Dear Tax Professional,
I want to make sure you know about the Health Coverage Tax Credit
(HCTC). This new federal tax credit may benefit some of your clients,
not only by increasing their refund, but also by giving them access to
health coverage. Workers who have been laid off due to foreign trade or
Get answers to all the individuals receiving pensions from the Pension Benefit Guaranty
Corporation (PBGC) are potentially eligible for the HCTC. While we
most frequently asked
notify individuals who are potentially eligible by mail, we need your
questions about
help to make sure that eligible individuals know about and claim the
Tax Year 2003 at HCTC.
http://www.irs.gov/faqs/
Help eligible individuals save $65 on every $100 they spend on
index.html qualified* health coverage by claiming the new Health Coverage
On the front page of Tax Credit in advance or on their federal tax return.
irs.gov, click on the The HCTC pays 65 percent of qualified health plan premiums for
appropriate page for eligible individuals. These individuals can choose to have the 65
Individuals, Businesses, percent credit applied directly to their health plan premiums as they
Charities, etc., then click become due or they can claim the credit when they file their federal tax
on FAQs under Resources return. You can help them understand their options. Who is eligible?
on the left side of that page. Start by asking if the individuals are now, or were during any part of
the 2003 tax year:
• Receiving benefits under the Trade Adjustment Assistance
(TAA) program through their state workforce agency; or
• Receiving benefits under the (ATAA) Alternative Trade Adjust-
ment Assistance program; or
• Receiving pension payments from the Pension Benefit Guaranty
Corporation (PBGC) and between the ages of 55 and 65.
If the answer to any of these questions is “Yes,” and if the individual is
enrolled in a qualified health plan and not eligible for Medicare, it will
be worthwhile to review HCTC eligibility with the individual to further
determine if they may be able to obtain this valuable tax credit.
Based on a recent survey, 70 percent of HCTC candidates may use a
tax preparer.
The following resources can assist you:
FirstGov.gov is the only official 1. An HCTC eligibility chart to help you quickly determine if the
U.S. Government portal to 47 individual is potentially eligible for the HCTC
million pages of government 2. A drop-in article to include in your client, association or organi-
information, services, and on-line zation newsletters
transactions. The Web site offers a
3. Frequently Asked Questions about the HCTC
powerful search engine that
searches every word of every U.S. Please take the time to go through these resources. This information
government document in a quarter may be found at http://www.irs.gov (IRS Keyword: HCTC).
of a second or less. FirstGov.gov Sincerely,
also features a topical index, links (signed)
to state and local government, Keith V. Taylor
options to contact your govern- Director, Health Coverage Tax Credit Program
ment and other tools to provide Internal Revenue Service
the public with easy, one-stop * Only specific health plans qualify for the Health Coverage Tax
access to government resources. Credit (HCTC).
2004 TAX HINTS 38
Practitioner’s Guide to the Filing Season
Pension plan limitations for 2004
S
ection 415 of the Internal of section 415(b)(1)(A). These from $160,000 to $165,000.
Revenue Code provides for dollar amounts and the adjusted Limitations
dollar limitations on benefits amounts are as follows:
specified by statute
and contributions under qualified The annual compensation limit
The Code, as amended by the
retirement plans. It also requires that under Sections 401(a)(17), 404(l),
Economic Growth and Tax Relief
the commissioner annually adjust 408(k)(3)(C), and 408(k)(6)(D)(ii) is
Act of 2001 (EGTRRA), specifies
these limits for cost-of-living increased from $200,000 to
the applicable dollar amount for a
increases. $205,000.
particular year for certain limita-
Many of the pension plan limita- The dollar limitation under
tions. These applicable dollar
tions changed for 2004. For most of Section 416(i)(1)(A)(i) concerning
amounts are as follows:
the limitations, the increase in the the definition of key employees in a
• The limitation under Section
cost-of-living index met the statu- top-heavy plan remains unchanged
402(g)(1) on the exclusion for
tory thresholds that trigger their at $130,000. The dollar amount
elective deferrals described in
adjustment. Furthermore, several under Section 409(o)(1)(C)(ii) for
Section 402(g)(3) is increased
limitations, set by the Economic determining the maximum account
from $12,000 to $13,000.
Growth and Tax Relief Reconcilia- balance in an employee stock
• The limitation under Section
tion Act of 2001 (EGTRRA), ownership plan subject to a 5-year
408(p)(2)(E) regarding SIMPLE
increased at the beginning of 2004. distribution period is increased from
retirement accounts is increased
For example, under EGTRRA, the $810,000 to $830,000, while the
from $8,000 to $9,000.
limitation under section 402(g)(1) dollar amount used to determine the
• The limitation on deferrals under
on the exclusion for elective defer- lengthening of the 5-year distribu-
Section 457(e)(15) concerning
rals described in section 402(g)(3) is tion period is increased from
deferred compensation plans of
increased from $12,000 to $13,000. $160,000 to $165,000.
state and local governments and
This limitation affects elective The limitation used in the defini-
tax-exempt organizations is
deferrals to section 401(k) plans and tion of highly compensated em-
increased from $12,000 to
to the federal government’s Thrift ployee under Section 414(q)(1)(B)
$13,000.
Savings Plan, among other plans. remains unchanged at $90,000.
• The dollar limitation under Section
Cost-of-living limits The annual compensation limita-
414(v)(2)(B)(i) for catch-up
tion under Section 401(a)(17) for
for 2004 contributions to an applicable
eligible participants in certain
Effective Jan. 1, 2004, the limita- employer plan other than a plan
governmental plans that, under the
tion on the annual benefit under a described in Section 401(k)(11) or
plan as in effect on July 1, 1993,
defined benefit plan under section 408 (p) for individuals aged 50 or
allowed cost-of-living adjustments
415(b)(1)(A) is increased from over is increased from $2,000 to
to the compensation limitation under
$160,000 to $165,000. For partici- $3,000. The dollar limitation under
the plan under Section 401(a)(17) to
pants who separated from service Section 414(v)(2)(B)(ii) for catch-
be taken into account, is increased
before Jan. 1, 2004, the limitation up contributions to an applicable
from $300,000 to $305,000.
for defined benefit plans under employer plan described in Section
The compensation amount under
section 415(b)(1)(B) is computed by 401(k)(11) or 408 (p) for individu-
Section 408(k)(2)(C) regarding
multiplying the participant's com- als aged 50 or over is increased
simplified employee pensions
pensation limitation, as adjusted from $1,000 to $1,500.
(SEPs) remains unchanged at $450.
through 2003, by 1.0220. Administrators of defined benefit
The compensation amounts under
The limitation for defined contri- or defined contribution plans that
Section 1.61-21(f)(5)(i) of the
bution plans under section have received favorable determina-
Income Tax Regulations concerning
415(c)(1)(A) is increased from tion letters should not request new
the definition of “control employee”
$40,000 to $41,000. determination letters solely because
for fringe benefit valuation purposes
The Code provides that various of yearly amendments to adjust
remains unchanged at $80,000. The
other dollar amounts are to be maximum limitations in the plans.
compensation amount under Sec-
adjusted at the same time and in the
tion 1.61-21(f)(5)(iii) is increased
same manner as the dollar limitation
2004 TAX HINTS 39
Practitioner’s Guide to the Filing Season
SECONDARY Taxpayer Advocate Service
SSN
T
he Taxpayer Advocate Service long-term adverse impact;
VALIDATION is an IRS program that provides • Have experienced a delay of more
an independent system to assure
T
than 30 days to resolve the issue; or
he names and Social that tax problems that have not been
Security Numbers • Have not received a response or
resolved through normal channels are
(SSNs) of everyone resolution by the date promised.
promptly and fairly handled. The
claimed on a tax return — program is headed by the national Additionally, you may contact the
primary, secondary and all taxpayer advocate. Each state and taxpayer advocate if all established
dependent SSNs — must service center has at least one local systems or procedures have failed to
exactly match the names on taxpayer advocate, who is independent operate as intended to resolve the
their Social Security cards. of the local IRS office and reports problem or dispute.
The IRS does not accept directly to the national taxpayer Hardship situations and other issues
electronic returns with any advocate. that are referred to the taxpayer
name/number mismatch, The goals of the Taxpayer Advocate advocate are reviewed on the indi-
whether for the taxpayer, the Service are to protect individual vidual merits of each case.
spouse or a dependent. It also taxpayer rights and to reduce taxpayer The Taxpayer Advocate Service is
reduces tax benefits claimed burden. The taxpayer advocate inde- not a substitute for established IRS
on paper returns when there is pendently represents your interests and procedures or the formal Appeals
a name/number mismatch for concerns within the IRS. This is process. The advocate cannot reverse
either spouse listed on a joint accomplished in two ways: legal or technical tax determinations.
return or for any dependent. • Ensuring that taxpayer problems that How do I reach a Taxpayer Advo-
People who change their have not been resolved through cate?
surnames for any reason — normal channels are promptly and • Call the telephone number listed for
such as marriage — should get fairly handled. the office closest to you or the office
updated identification cards, • Identifying issues that increase with which you have been dealing.
unless they intend to use the burden or create problems for (See next page.)
former name for legal pur- taxpayers: bringing those issues to • Call the Taxpayer Advocate’s toll-
poses. Form SS-5, Application the attention of IRS management free telephone number:
for a Social Security Card, is and making legislative proposals 1.877.777.4778
available from the SSA Web where necessary.
site at www.ssa.gov or by • Call the general IRS toll-free
calling 800.772.1213 toll-free. Who may use the Taxpayer Advocate number (1.800.829.1040) and ask
Program? for Taxpayer Advocate assistance.
If you have an ongoing issue with • Write the office nearest you or the
the IRS that has not been resolved one you have been dealing with.
through normal processes, or you have (See next page for addresses.)
suffered, or are about to suffer, a
significant hardship as a result of the • TTY/TTD help is available by
application of the tax laws, contact the calling: 1.800.829.4059.
taxpayer advocate. • Check the Taxpayer Advocate Web
Generally, the taxpayer advocate can site at www.irs.gov/ind_info/
help if, as a result of the application of advocate.html
REMINDER the tax laws, you: • File Form 911, Application for a
• Are suffering, or are about to suffer, Taxpayer Assistance Order,
Refund checks will be a significant hardship; • Send a written request for assistance
returned to the IRS if the • Are facing an immediate threat of (if Form 911 is not available),
address on the check is not adverse action; • Request that an IRS employee
current. Advise your clients
• Will incur significant cost (including complete a Form 911 on your behalf
to file Form 8822, Change of
fees for professional representation); (in person or over the phone).
Address, when they move.
• Will suffer irreparable injury or Continued on page 41
2004 TAX HINTS 40
Practitioner’s Guide to the Filing Season
Taxpayer Advocate Service Continued from page 40
You may fax a Form 911 (or pended while a case is being re- You can expect the advocate to
written request) to your local viewed. provide you with:
taxpayer advocate. Form 911 is The majority of cases are re- • A fresh look at your problem,
available by calling the IRS forms- solved administratively by the • Timely acknowledgment,
only number, 1.800.829.3676 or taxpayer advocate. Even when
• The name and phone number of
from www.irs.gov/. An Application hardship is not a factor, the advocate
the individual assigned to your
for a Taxpayer Assistance Order is often able to help resolve the
case,
requires the advocate to determine if taxpayer’s problem.
significant hardship exists and to • Updates on progress,
What can I expect from the
review the case to determine what Taxpayer Advocate? • Time frames for action,
action should be taken to relieve the The taxpayer advocate will listen • Speedy resolution and
hardship. In certain situations, to your point of view and will work
enforcement action may be sus- • Courteous service.
with you to address your concerns.
Help us solve problems
T
he National Taxpayer Advo- you may be eligible for help where you’ll be asked to briefly
cate is an independent from a TAS Case Advocate. describe the issue and provide a few
organization within the IRS • They always affect multiple details about yourself, such as your
that helps taxpayers solve problems taxpayers. name and e-mail address. However,
with the IRS and recommends • They impact segments of the we want the e-mail address only to
changes that will prevent the taxpayer population locally, communicate with you about the
problems. To this end, the National regionally or nationally. issue (so please notify us if your e-
Taxpayer Advocate invites taxpay- • They relate to IRS systems, mail address or account changes
ers, practitioners, professional policies and procedures. after you’ve submitted an issue).
organizations and all interested • They require study, analysis, Do not submit any taxpayer infor-
Americans to help identify and administrative changes or mation such as your Social Security
recommend solutions to problems legislative remedies. Number.
with the IRS and the tax code. You • They involve protecting
can do this by submitting advocacy What happens next?
taxpayer rights, reducing or
issues to the Taxpayer Advocate Once we’re finished assessing
preventing taxpayer burden,
Service through the Web-based your issue and have no further need
ensuring equitable treatment
SAMS —Systemic Advocacy to contact you, your e-mail address
of taxpayers or providing
Management System — a database is deleted. It will not be stored,
essential services to taxpay-
of issues and information submitted sold, shared or used for any other
ers.
by IRS employees and the public. purpose except as may be required
How can you submit an issue? by law. SAMS will not place
The Taxpayer Advocate Service
Go to www.irs.gov and click on cookies on your Web browser either.
(TAS) Office of Systemic Advocacy
Taxpayer Advocacy under Resources The SAMS database is cleared out
is responsible for managing SAMS.
on the left side of the page. Scroll as required by established Federal
We review all submissions and
down the Taxpayer Advocacy page Record Retention standards. (The
develop some as advocacy projects,
and click on What is Systemic Privacy Statement at the bottom of
with the goal of improving IRS
Advocacy. At the bottom of that each irs.gov page describes how the
services and sometimes amending
page click on the link SAMS — IRS handles information from Web
tax laws.
Systemic Advocacy Management site visitors). After reviewing each
What are systemic issues? System. You’ll be asked a few submission, we decide whether it
• They do not apply to just one questions to determine whether your merits development as an advocacy
taxpayer. However, if you submission qualifies as an advocacy project, and if so, we assign it to be
personally have an unre- issue. If so, you’ll be directed to our resolved.
solved federal tax problem, SAMS Issue Submission page,
2004 TAX HINTS 41
Practitioner’s Guide to the Filing Season
Taxpayer Advocate Service Directory
Do you want assistance from a taxpayer advocate? This handling when you can’t get a problem solved through
assistance is not a substitute for established IRS proce- normal channels. Call toll free 1.877.777.4778 or call
dures, formal Appeals processes, etc., but the taxpayer the taxpayer advocate office nearest you listed below.
advocate can give your tax matter proper and prompt
National Taxpayer New York/New England Brookhaven Local Offices by State and
Advocate 290 Broadway 14th floor 1040 Waverly Ave., Location
1111 Constitution Ave. NW New York, NY 10007 Stop 102 Alabama
Rm. 3031, TA Phone: 212-298-2015 Holtsville, NY 11742 801 Tom Martin Drive, Rm.
Washington DC 20224 Fax: 212-298-2016 Phone: 631-654-6686 151-PR
Phone: 202-622-4300 Oakland Fax: 631-447-4879 Birmingham, AL 35211
Fax: 202-622-6113 1301 Clay St. Suite 1030-N Cincinnati Phone: 205-912-5631
Deputy National Tax- Oakland, CA 94612 201 Rivercenter Blvd., Fax: 205-912-5156
payer Advocate Phone: 510-637-2070 Stop 11-G Alaska
1111 Constitution Ave. NW Fax: 510-637-3189 Covington, KY 41011 949 E 36th Ave.,
Rm. 3031, TA Richmond Phone: 859-669-5316 Stop A-405
Washington DC 20224 400 N. 8th St. Rm. 328 Fax: 859-669-5405 Anchorage, AK 99508
Phone: 202-622-4300 Richmond, VA 23240 Fresno Phone: 907-271-6877
Fax: 202-622-6113 Phone: 804-916-3510 5045 East Butler Ave., Fax: 907-271-6157
Executive Director, Fax: 804-916-3641 Stop 13941 Arizona
Systemic Advocacy Seattle Fresno, CA 93888 210 E. Earll Dr.,
1111 Constitution Ave. NW 915 2nd Ave. Stop W-404 Phone: 559-442-6400 Stop 1005 PHX
Rm. 3219, TA:EDSA Seattle, WA 98174 Fax: 559-442-6507 Phoenix, AZ 85012-2623
Washington DC 20224 Phone: 206-220-4356 Kansas City Phone: 602-207-8240
Phone: 202-622-7175 Fax: 206-220-4930 2306 East Bannister Rd., Fax: 602-207-8250
Fax: 202-622-3125 Stop 1005 ROE Arkansas
Small Business/Self
Area Offices Employed Campuses Kansas City, MO 64131 700 West Capitol St.,
Atlanta/International 312 Elm St., Suite 2250 Phone: 816-926-2493 Stop 1005 LIT
401 W. Peachtree St. Cincinnati, OH 45202 Fax: 913-696-6390 Little Rock, AR 72201
Stop 101-R Rm. 1970 Phone: 859-669-5556 Memphis Phone: 501-324-6269
Atlanta, GA 30308 Fax: 869-669-5808 5333 Getwell Road, Fax: 501-324-5183
Phone: 404-338-8710 Stop 13-M California
Service Centers/
Fax: 404-338-8709 Memphis, TN 38118 (Laguna Niguel)
Campuses
Dallas Andover Phone: 901-395-1900 24000 Avila Road,
4050 Alpha Road 310 Lowell St., Stop 120 Fax: 901-395-1925 Stop 2000
Mail Stop 1005, Rm. 1240 Andover, MA 01812 Ogden Laguna Niguel, CA 92677
Dallas, TX 75244-4203 Phone: 978-474-5549 1973 N. Rulon White Phone: 949-389-4804
Phone: 972-308-7019 Fax: 978-247-9034 Blvd., Stop 1005 Fax: 949-389-5038
Fax: 972-308-7166 Ogden, UT 84404 California
Atlanta
Milwaukee 4800 Buford Hwy, Stp 29-A Phone: 801-620-7168 (Los Angeles)
310 W. Wisconsin Ave. Chamblee, GA 30341 Fax: 801-620-3096 300 N. Los Angeles St.,
Suite 1210 East Tower, Phone: 770-936-4500 Philadelphia Stop 6710 LA
Stop 1009 MIL Fax: 770-234-4443 11601 Roosevelt Blvd., Los Angeles, CA 90012
Milwaukee, WI 53203 Stop SW-820 Phone: 213-576-3140
Austin
Phone: 414-297-1646 Philadelphia, PA 19154 Fax: 213-576-3141
3651 S. Interregional Hwy,
Fax: 414-297-3485 Phone: 215-516-2499
Stop 1005 AUSC
Austin, TX 78741 Fax: 215-516-2677
Phone: 512-460-8300
Fax: 512-460-8267
2004 TAX HINTS 42
Practitioner’s Guide to the Filing Season
Taxpayer Advocate Service Directory
California (Oakland) Florida (Jacksonville) Iowa Minnesota
1301 Clay St., Suite 1540-S 841 Prudential Drive, 210 Walnut St. 316 North Robert St.
Oakland, CA 94612 Suite 100 Stop 1005 DSM, Rm. 483 Stop 1005 STP, Rm. 383
Phone: 510-637-2703 Jacksonville, FL 32207 Des Moines, IA 50309 St. Paul, MN 55101
Fax: 510-637-2715 Phone: 904-665-1000 Phone: 515-284-4780 Phone: 651-312-7999
California (Sacramento) Fax: 904-665-1817 Fax: 515-284-6645 Fax: 651-312-7872
4330 Watt Ave., Georgia Kansas Mississippi
Stop SA5043 401 W. Peachtree St., NW 271 West 3rd St. North 100 West Capitol St.,
Sacremento, Summit Bldg., Rm. 510, Stop 1005-WIC, Suite 2000 Stop JK31
CA 95821 Stop 202-D Wichita, KS 67202 Jackson, MS 39269
Phone: 916-974-5007 Atlanta, GA 30308 Phone: 316-352-7506 Phone: 601-292-4800
Fax: 916-974-5902 Phone: 404-338-8099 Fax: 316-352-7212 Fax: 601-292-4821
California (San Jose) Fax: 404-338-8096 Kentucky Missouri
55 S. Market St., Hawaii 600 Dr. Martin Luther King 1222 Spruce St.
Stop 0004 300 Ala Moana Blvd., Jr. Place, Rm. 622 Stop 1005 STL,
San Jose, CA 95113 #50089 Louisville, KY 40202 Rm. 10.314
Phone: 408-817-6850 Stop H-405 / Rm. 1-214 Phone: 502-582-6030 St Louis, MO 63103
Fax: 408-817-6851 Honolulu, HI 96850 Fax: 502-582-6463 Phone: 314-612-4610
Colorado Phone: 808-539–2870 Louisiana Fax: 314-612-4628
600 17th St., Fax: 808-539-2859 600 South Maestri Place, Montana
Stop 1005 DEN Idaho Stop 2 10 West 15th St.,
Denver, CO 80202-2490 550 W. Fort St., Box 041 New Orleans, LA 70130 Suite 2319
Phone: 303-446-1012 Boise, ID 83724 Phone: 504-558-3001 Helena, MT 59626
Fax: 303-446-1011 Phone: 208-334-1324 Fax: 504-558-3348 Phone: 406-441-1022
Connecticut Fax: 208-334-1977 Maine Fax: 406-441-1045
135 High St., Stop 219 Illinois (Chicago) 68 Sewall St., Rm. 313 Nebraska
Hartford, CT 06103 230 S. Dearborn St. Augusta, ME 04330 1313 Farnam St.
Phone: 860-756-4555 Rm. 2855, Stop-1005 CHI Phone: 207-622-8528 Stop 1005 OMA, Rm. 208
Fax: 860-756-4559 Chicago, IL 60604 Fax: 207-622-8458 Omaha, NE 68102
Delaware Phone: 312-566-3800 Maryland Phone: 402-221-4181
409 Silverside Road Fax: 312-566-3803 31 Hopkins Plaza, Rm. 940 Fax: 402-221-3051
Wilmington, DE 19809 Illinois (Springfield) Baltimore, MD 21201 Nevada
Phone: 302-791-4502 320 W. Washington St., Phone: 410-962-2082 4750 W. Oakey Blvd.,
Fax: 302-791-5945 Rm. 611 Fax: 410-962-9340 Stop 1005 LVG
District of Columbia Stop 1005 SPD Massachusetts Las Vegas, NV 89102
(Maryland) Springfield, IL 62701 25 New Sudbury St., Phone: 702-455-1241
31 Hopkins Plaza, Rm. 940 Phone: 217-527-6382 Rm. 725 Fax: 702-455-1216
Baltimore, MD 21201 Fax: 217-527-6373 Boston, MA 02203 New Hampshire
Phone: 410-962-2082 Indiana Phone: 617-316-2690 Thomas J. McIntyre
Fax: 410-962-9340 575 N. Pennsylvania St. Fax: 617-316-2700 Federal Bldg.
Florida (Ft. Lauderdale) Rm. 581 - Stop TA770 Michigan 80 Daniel St., Rm. 403
7850 SW 6th Court, Indianapolis, IN 46204 McNamara Federal Bldg. Portsmouth, NH 03801
Rm. 265 Phone: 317-226-6332 477 Michigan Ave. Phone: 603-433-0571
Plantation, FL 33324 Fax: 317-226-6222 Rm. 1745 - Stop 7 Fax: 603-430-7809
Phone: 954-423-7677 Detroit, MI 48226
Fax: 954-423-7680 Phone: 313-628-3670
Fax: 313-628-3669
2004 TAX HINTS 43
Practitioner’s Guide to the Filing Season
Taxpayer Advocate Service Directory
New Jersey Ohio (Cincinnati) South Dakota Washington
955 South Springfield Ave., 550 Main St., Rm. 3530 115 4th Ave, Southeast 915 2nd Ave., Stop W-405
1st Floor Cincinnati, OH 45202 Stop 1005 ABE, Rm. 114 Seattle, WA 98174
Springfield, NJ 07081 Phone: 513-263-3260 Aberdeen, SD 57401 Phone: 206-220-6037
Phone: 973-921-4043 Fax: 513-263-3257 Phone: 605-226-7248 Fax: 206-220-4900
Fax: 973-921-4355 Ohio (Cleveland) Fax: 605-226-7246 West Virginia
New Mexico 1240 E. 9th St., Rm. 423 Tennessee 425 Julianna St., Rm. 3012
5338 Montgomery Cleveland, OH 44199 801 Broadway, Stop 22 Parkersburg, WV 26101
Blvd., NE Phone: 216-522-7134 Nashville, TN 37202 Phone: 304-420-6616
Stop 1005 ALB Fax: 216-522-2947 Phone: 615-250-5000 Fax: 304-420-6682
Albuquerque, NM 87109 Oklahoma Fax: 615-250-5001 Wisconsin
Phone: 505-837-5505 55 North Robinson Texas (Austin) 310 W. Wisconsin Ave.
Fax: 505-837-5519 Stop 1005 OKC, Rm. 138 300 E. 8th St. Suite 1298 West Tower,
New York (Albany) Oklahoma City, OK 73102 Stop 1005-AUS, Rm. 136 Stop 1005 MIL
Leo O’Brien Federal Bldg. Phone: 405-297-4055 Austin, TX 78701 Milwaukee, WI 53203
1 Clinton Square, Rm. 354 Fax: 405-297-4056 Phone: 512-499-5875 Phone: 414-297-3046
Albany, NY 12207 Oregon Fax: 512-499-5687 Fax: 414-297-3362
Phone: 518-427-5413 1220 S.W. 3rd Ave., Texas (Dallas) Wyoming
Fax: 518-427-5494 Stop O-405 1114 Commerce St. 5353 Yellowstone Road
New York (Brooklyn) Portland, OR 97204 MC 1005DAL, Rm. 1004 Cheyenne, WY 82009
10 Metro Tech Center Phone: 503-326-2333 Dallas, TX 75242 Phone: 307-633-0800
625 Fulton St. Fax: 503-326-5453 Phone: 214-413-6500 Fax: 307-633-0918
Brooklyn, NY 11201 Pennsylvania Fax: 214-413-6594 International-Puerto Rico
Phone: 718-488-2080 (Philadelphia) Texas (Houston) San Particio Office Bldg
Fax: 718-488-3100 600 Arch St., Rm. 7426 1919 Smith St. 7 Tabonuco St., Rm. 200
New York (Buffalo) Philadelphia, PA 19106 Stop 1005 HOU, Rm. 1650 Guaynabo, PR 00966
201 Como Park Blvd Phone: 215-861-1304 Houston, TX 77002 Phone:
Buffalo, NY 14227-1416 Fax: 215-861-1613 Phone: 713-209-3660 787-622-8930 (Spanish),
Phone: 716-686-4850 Pennsylvania Fax: 713-209-3708 787-622-8940 (English)
Fax: 716-686-4851 (Pittsburgh) Utah Fax: 787-622-8933
New York (Manhattan) 1000 Liberty Ave., 50 South 200 East, Stop
290 Broadway - 7th Floor Rm. 1602 1005 SLC
Manhattan, NY 10007 Pittsburgh, PA 15222 Salt Lake City, UT 84111
Phone: 212-436-1011 Phone: 412-395-5987 Phone: 801-799-6958
Fax: 212-436-1900 Fax: 412-395-4769 Fax: 801-799-6957
North Carolina Rhode Island Vermont
320 Federal Place, Rm. 125 380 Westminster St. Courthouse Plaza
Greensboro, NC 27401 Providence, RI 02903 199 Main St.
Phone: 336-378-2180 Phone: 401-525-4200 Burlington, VT 05401-8309
Fax: 336-378-2495 Fax: 401-525-4247 Phone: 802-860-2089
North Dakota South Carolina Fax: 802-860-2006
657 Second Ave, North 1835 Assembly St., Rm. Virginia
Stop 1005 FAR, Rm. 244 466, MDP-03 400 N. 8th St., Rm. 916
Fargo, ND 58102 Columbia, SC 29201 Richmond, VA 23240
Phone: 701-239-5141 Phone: 803-253-3029 Phone: 804-916-3501
Fax: 701-239-5323 Fax: 803-253-3910 Fax: 804-916-3535
2004 TAX HINTS 44
Practitioner’s Guide to the Filing Season
Changes to third party authorizations
Oral consents • There are no limitations on the account information, both orally
T
he Taxpayer Bill of Rights II type of specified account and in writing, on account
(TBOR II) and revised 26 information that may be dis- issues arising from the tax
CFR 301.6103(c) - 1(c) closed. return upon which the authoriza-
authorize the IRS to disclose tax All OTIAs are recorded on the tion was granted.
information pursuant to a taxpayer’s Centralized Authorization File • Disclosure in written form (e.g.
oral request or consent when, and (CAF), which provides nationwide transcripts, content of notices)
only when, assistance is needed to notice of an authorization. will be provided upon the
resolve a federal tax matter. designee’s request.
Third party
In response to TBOR II and the • The authorization will no longer
designee or be confined to return processing,
revised regulation, the IRS intro-
duced two disclosure authorization
checkbox refund and payment issues.
products to allow taxpayers’ desig- authorization • The authorization will expire one
nees to discuss with the IRS specific The Third Party Designee or year from the due date of the tax
notice issues or to discuss specified Checkbox authorization was de- return, without extensions.
tax matters. signed to acknowledge our diverse • The authorization will be re-
The first product, an Oral Disclo- taxpayer base (IRS Policy Statement corded directly onto the
sure Consent (ODC), authorized the P-6-41) and to respond to TBOR II. taxpayer’s Master File account
IRS to orally disclose information to Originally, the taxpayer granted the and not on the CAF.
the designee and only on specific IRS the authority to disclose oral
information to a designee on issues Terminating the
notice issues.
limited to return processing, refunds authorization
• The taxpayer phones
and payments related to that return. As with all authorizations, the
800.829.1040. After identity
From its introduction through taxpayer may revoke an OTIA or
verification, the name of the
2003, this product has expanded Checkbox authorization at any time.
designee is provided and is
from allowing only return preparers The designee may withdraw from
recorded directly onto the tax
as designees to any third party, the authorization at any time.
account.
including “friends and family” and Once all tax account issues
• The authorization expires when
legal, accounting and tax prepara- specified in the authorization have
the specific notice issue is
tion firms. The authorization first been resolved, both parties should
resolved.
appeared on forms in the 1040 series consider whether the authorization
The second product, the Oral Tax should remain in force.
(except 1040X and Tele-File). By
Information Authorization (OTIA), A statement of revocation by the
2003, it was also included on forms
is the oral equivalent of a Form taxpayer or a statement of with-
in the 94X series and Forms 720,
8821, Tax Information Authoriza- drawal by the third party must be
1041, 1120, 2290 and CT-1.
tion. An OTIA allows the IRS to made in writing and must contain
Expiration of the original
exchange oral and written informa- the following elements:
Checkbox authorization was keyed
tion with the designee on tax matters • clear intent.
to certain steps in account process-
specified in the authorization. • identification of the taxpayer —
ing. While designed to protect
• The taxpayer phones taxpayer privacy, the expiration taxpayer name, Social Security
800.829.1040 and advises the criteria occasionally disrupted the Number or employer identifica-
assistor he wishes to grant an problem resolution process. tion number.
OTIA. Following identity • identification of the other party
verification of the taxpayer, the Effective Jan. 1, to the authorization you wish to
call is transferred to a CAF Unit 2004: revoke.
where an assistor directly • The Third Party Designee • identification of the tax matters
records the authorization authorization will be expanded — tax form number(s) and tax
information onto the CAF. to serve as the equivalent of a period(s).
• The taxpayer may authorize the Form 8821, Tax Information
IRS to automatically provide the Authorization.
designee with copies of notices. • The IRS will be able to disclose Continued on page 46
2004 TAX HINTS 45
Practitioner’s Guide to the Filing Season
DIRECT Changes to third party authorizations
Continued from page 45
DEPOSIT OF • dated signature of the party with the word “Revoke” or “Withdraw”
REFUNDS terminating the authorization. written at the top of the form with a
E
nter all the required This statement of revocation can be current dated signature is acceptable.
information to insure mailed or faxed to any Centralized Once received, the necessary actions
the refund is credited Authorization File (CAF) Unit. (See will be taken to remove the authoriza-
to the correct bank account. If addresses and phone numbers below). tion from IRS records and parties to the
an incorrect bank account A copy of the original authorization action will be notify
number and/or Routing Where to send authorization requests
P
Transit Number (RTN) is
ower of Attorney or Tax Infor- Alaska, Arizona, California, Colorado,
entered by the taxpayer,
mation Authorization requests Hawaii, Idaho, Iowa, Kansas, Minne-
preparer or electronic return
should be directed to Memphis sota, Missouri, Montana, Nebraska,
originator, the IRS does not
or Ogden. If your principal business, Nevada, New Mexico, North Dakota,
have the authority to recover
office or agency or legal residence in Oklahoma, Oregon, South Dakota,
the refund from the account
the case of an individual, is located in: Texas, Utah, Washington, Wisconsin or
holder that receives the
Alabama, Arkansas, Connecticut, Wyoming, write, call or fax:
refund in error. Taxpayers
Delaware, District Of Columbia, Ogden Accounts Management
must contact their financial
Florida, Georgia, Illinois, Indiana, Center, CAF Unit
institution to resolve the
Kentucky, Louisiana, Maine, Mary- 1973 North Rulon White Blvd.
erroneous deposit.
land, Massachusetts, Michigan, Miss- Stop 6737
Taxpayers will receive a issippi, New Hampshire, New Jersey, Ogden, UT 84404
paper refund check and a New York, North Carolina, Ohio, Fax: 801.620.4249
notice if: Pennsylvania, Rhode Island, South Phone: 801.620.4254
• Required information is Carolina, Tennessee, Vermont, Virginia International requests will continue to
missing or incomplete. or West Virginia, write, call or fax : be processed at:
• RTN does not match the Memphis Accounts Management Philadelphia Accounts Management
master list of valid RTNs. Center, CAF Unit Center, CAF Unit
5333 Getwell Road, Stop 8423 11601 Roosevelt Blvd. DPSW 312
• RTN is for a foreign bank. Memphis, TN 38118 Philadelphia, PA 19255
• Power of Attorney is on Fax: 901.546.4115 Fax: 215.516.1017
file and third party is Phone: 901.546.4176 Phone: 215.516.5996
authorized to receive If your principal business, office or We are processing faxed requests in
refund. agency or legal residence in the case 48 hours and paper requests in five
• Return is a decedent of an individual, is located in: business days.
return.
• Return is for a prior year. Unenrolled Return Preparer
R
• $10,000 or more in with- evenue Procedure 81-38 In order to qualify to engage in
holding and zero tax is prescribes the standards of practice, the unenrolled return preparer
owed. conduct, scope of authority and is limited to contacts with IRS cus-
the circumstances under which an tomer service representatives (CSRs)
• Math error of more than individual preparer of tax returns may and examination officers with respect
$50. engage in limited practice without to a federal tax liability arising from a
• More than two direct enrollment before the IRS, pursuant to tax return he prepared. He is granted
deposits are requested for Section 10.7(a)(7) of Treasury Depart- representational authority by the
the same account. ment Circular No. 230. taxpayer via Form 2848, Power of
“Practice” or representation includes Attorney and Declaration of Represen-
advocating facts or law, acting on tative, designation level “H”.
behalf of, and/or negotiating or signing Continued on page 48
on behalf of a taxpayer.
2004 TAX HINTS 46
Third Party Authorizations
47
Practitioner’s Guide to the Filing Season
Representing Unenrolled return
a client preparer continued from page 46
when there Limits on Practice
Acts specifically prohibited are:
is a conflict • Executing claims for refund
of interest • Receiving IRS checks for
E
taxes, penalties or interest
xcept as explained in the (refunds),
next paragraph, you • Executing consents to extend
may not represent a client in any statutory period of
your practice before the IRS if the assessment or collection of
representation involves a conflict of tax,
interest. A conflict of interest exists • Executing waivers of restric-
if: tion on assessment or collec-
• The representation of one client tion of a deficiency in tax.
will be directly adverse to • Executing closing agreements
another client; or with respect to a tax liability
• There is a significant risk that information required by Form 8821:
or specific matter,
the representation of one or • Taxpayer name and Social
• Executing and negotiating
more clients will be materially Security or employer identifi-
payment agreements
limited by your responsibilities cation number
• Representation before IRS
to another client, a former client • Name, address and CAF
Appeals and Collection
or a third person or by a per- Number (if available) of
including the Automated
sonal interest of your own. Appointee
Collection System (ACS)
However, you may represent a client • Type of tax(es) and tax
Unit.
if: period(s)
• You reasonably believe that you Tax Information This authorization is known as an
will be able to provide compe- Authorization Oral Tax Information Authorization
tent and diligent representation When an unenrolled return (OTIA) and is only available for the
to each affected client; preparer does not meet the criteria purpose of resolving federal tax
• The representation is not for engaging in limited practice, he matters.
prohibited by law; and may be designated by the taxpayer If the unenrolled return preparer
• Each affected client gives to receive account information and is a registered and authorized user of
informed consent, confirmed in transcripts and copies of notices on the IRS e-services product, Disclo-
writing. a tax information authorization sure Authorization (DA), Forms
(TIA). 2848 or 8821, may be transmitted to
You must keep copies of the
The authorization can be submit- the IRS through the Internet on
written consents for at least 36
ted using Form 8821, Tax Informa- behalf of the taxpayer. DA will be
months from the date of the conclu-
tion Authorization. (The mailing available in Spring 2004.
sion of the representation of the
addresses and fax numbers are on Form 2848 should be used to
affected clients, and you must
page 44.) The taxpayer may also designate an unenrolled return
provide the written consents to any
orally grant the authorization by preparer only when the designee is
IRS officer or employee on request.
calling 1.800.829.1040. Once the entitled to engage in limited practice
See section 10.29 of the regulations
caller’s identity is verified, the call (prepared the tax return at issue and
governing practice before IRS
is transferred to a Centralized is engaged in discussions with a
(Circular 230) for more information.
Authorization File (CAF) Unit CSR or Exam employee). Other-
You can access Circular 230 under
where an assistor will record the wise, Form 8821 should be used to
Basic Tools for Tax Practitioners on
authorization directly into IRS authorize the unenrolled return
the Tax Professionals’ page of
records. The taxpayer should be preparer to inspect and receive
irs.gov/.
prepared to provide the same information from the IRS.
2004 TAX HINTS 48
Practitioner’s Guide to the Filing Season
2004 TAX Facts about refund checks
A
refund check will be returned to has been cashed. If the original check
FORUMS the IRS if the address on the has not been cashed, a replacement
E
check is not the most current. The check will be issued. If the check has
ach summer, the IRS refund will not be been cashed, a photo-
hosts 3-day tax reissued until IRS is copy of the check will
forums in prominent notified of the new be mailed to the tax-
locations across the nation. address. Complete and payer with a claim Form
These forums provide up- return Form 8822, 1133. The completed
to-date tax-related informa- Change of Address, to form should be returned
tion to help equip the tax notify the IRS. If a to FMS at the address
professional community to refund check is lost or provided. The investiga-
better serve taxpayers. Last stolen, a completed tion of lost or stolen
year, 17,000 tax profession- Form 3911, Taxpayer refund checks that have
als attended the forums. Statement Regarding been cashed is a time-
The forums feature basic Refund, or a detailed consuming process.
and advanced seminars on a letter must be sent to the Taxpayers can expect a
variety of IRS programs, IRS. delay of three months to
practices and policies. Reminders: a year before another
Practitioners can earn • Allow for the normal check is issued.
valuable continuing profes- processing time before you inquire • Refund checks that are not cashed
sional education credits for about refunds: within one year of the issuance date
attending seminars on Paper – 6 weeks are automatically cancelled.
compliance initiatives, e-file/TeleFile – 3 weeks • Refund checks will not be split
income tax law changes, 1040X – 8–12 weeks because of a family dispute, even
electronic filing and Business Returns – 6 weeks though a divorce decree or other civil
more. In addition to receiv- • If a check was issued for a joint return, action may so direct.
ing updates directly from both signatures must be present on the • Overpayments will offset federal tax
IRS executives, practitio- Form 3911. debts and nontax debts such as child
ners can exchange ideas • The IRS and Financial Management support before the refund is issued.
with colleagues and meet Service (FMS) determine if the check
with vendors to learn how
the latest technology can Practitioner Priority Service — your first
help with their business, as point of contact
O
well as bring their toughest
ur Practitioner Priority Service is Questions regarding client's indi-
unresolved case or question
a professional support line vidual tax accounts (IMF) are handled
to IRS representatives for
(1.866.860.4259) staffed by IRS by one of three campus
on-site resolution. And they
customer service representatives specially sites: Brookhaven, N.Y.; Memphis,
can hear how our new e-
trained to handle practitioners’ accounts Tenn. and Philadelphia, Penn. Ques-
services products can help
questions. tions regarding client’s business
them when they enroll to
Practitioner Priority Service is a toll- accounts (BMF) are handled by two
become an Electronic
free, accounts-related service for all tax campus sites: Cincinnati, Ohio, and
Return Originator (ERO).
practitioners nationwide. It is the Ogden, Utah. Calls are routed based on
As soon as locations and
practitioner’s first point of contact for an evaluation of the lowest expected
seminar topics for the 2004
assistance regarding taxpayers’ account- wait time. Issues outside the scope of
tax forums are finalized,
related issues. The hours of service are the employees’ authority are transferred
details will be posted on the
weekdays, 7:30 a.m. until 5:30 p.m. local or referred to the appropriate IRS
Tax Professionals page of
time (with the exception of Alaska and functions.
irs.gov. It’s always impor-
Hawaii, which are Pacific Time).
tant to register early – hotel
space fills up quickly.
2004 TAX HINTS 49
Practitioner’s Guide to the Filing Season
Transcripts and photocopies of returns
What is a transcript? taxpayer address. The transcript should arrive in
A
Tax return transcript is a printout of most lines the mail to the taxpayer address of record within
from the original return. It is often used instead 10 to 15 days.
of a photocopy of a return. It is commonly used Too busy to call?
to amend a return, answer a notice from the IRS, meet Mail us a Form 4506-T, Request for Transcript of Tax
information requirements for college grants, loans, Return. The form is available at www.irs.gov or by
federally funded mortgages or social service agencies calling 1.800.829.3676. The taxpayer signature is
and to obtain alien clearance. A tax account transcript required. Mail the form to the address indicated in the
also shows adjustments made to the account after the instructions. The transcript should arrive in the mail
return was filed. within 10-15 days of IRS receipt of the request.
Getting transcripts is fast, easy Need a photocopy instead?
and free. Complete Form 4506, Request for Copy of Tax
• Dial 1.800.829.1040. Return, attach the $39 fee per return, and mail to the
• If you reach a customer service representative address indicated in the instructions. Allow 60 days
(CSR), tell the CSR you wish to order a transcript from date of IRS receipt to receive a photocopy.
of a tax return or account. Allow at least 6 weeks after the original return is filed
• If you reach an automated voice message, you before requesting a copy or other information. Informa-
will hear a list of menu options. Listen for the tion may not be available for returns filed more than 6
option which says “... for questions about your years ago. If you are seeking information about or
personal tax records ...” Press the number for that copies of Forms W-2 and 1099, for any year, contact the
option. employer first. Call the IRS at 1.800.829.1040 after Feb.
• Continue listening and enter the taxpayer’s Social 14 if you need help in obtaining current filing season
Security Number (SSN) when asked. (If the forms. Previously filed Form W-2 information is
taxpayer filed a joint return, enter the first SSN available by July of the year following the year of
entered on the return.) Continue providing earnings.
requested information including the tax year and
Application fee for Offers in Compromise
B
eginning Nov. 1, 2003, the IRS began charging between a taxpayer and the IRS that resolves the
a $150 application fee for the processing of taxpayer’s tax liability. Under certain circumstances, the
offers in compromise. The IRS expects that IRS has the authority to settle federal tax liabilities by
this fee will help offset the cost of providing this accepting less than full payment. To submit an OIC, a
service as well as reduce frivolous claims. taxpayer must use the May 2001 version of the Form
The law authorizes federal agencies to charge fees 656 Offer in Compromise package.
to defray the costs of providing certain services. All taxpayers who file an OIC will have to pay the
Guidelines encourage such fees for benefits beyond application fee with their submission unless the offer is
those provided to the general public. The IRS antici- based solely on doubt as to liability or the taxpayer’s
pates the fee also will reduce the number of offers that total monthly income falls at or below income levels
are filed inappropriately — for example, solely to based on the Department of Health and Human Services
delay collection — enabling the agency to redirect poverty guidelines. Taxpayers who claim the poverty
resources to the processing of acceptable offers. guideline exception must certify their eligibility using
“The application fee will provide funding to recover Form 656-A, Offer in Compromise Application Fee
some of the costs associated with the offer in compro- Instructions and Certification.
mise program and reduce the number of inappropriate More information on the OIC application fee is
filings,” said Dale Hart, Commissioner, Small Busi- available at www.irs.gov or by calling the IRS taxpayer
ness/Self-Employed Division. assistance line at 1.800.829.1040.
An offer in compromise (OIC) is an agreement
2004 TAX HINTS 50
Practitioner’s Guide to the Filing Season
TOP ERRORS BY PAID TOP ERRORS BY PAID
PREPARERS ON 2003 PREPARERS ON 2003
BUSINESS RETURNS 1040s (paper)
I
n 2003, the IRS sent hundreds of thousands of Note: Rate Reduction Credit errors are for tax
error notices for name/Employer Identification year 2001 returns that are now being corrected
Number (EIN) mismatches on Forms 940, 941, in the Error Resolution System.
1065, 1120 and 7004. These notices cost taxpayers 1. Taxpayer Identification Numbers or
and return preparers time and money to identify names for dependents didn’t match IRS
and send corrected information to the IRS. Of the or SSA records. We didn’t allow the
errors, 80 percent resulted from the use of a DBA exemptions.
(Trade Name) on the top name line instead of the 2. Rate Reduction Credit was not claimed.
legal name submitted on Form SS-4, Application We computed it.
for Employer Identification Number. The IRS
3. Taxpayer Identification Numbers or
matches the legal name to the EIN, and when they
names for dependents didn’t match
don’t match, a notice is sent. When the IRS can’t
IRS or SSA records. All or part of Child
resolve the problem based on the return informa-
Tax Credit not allowed.
tion, then taxpayers and return preparers have to
get involved. 4. Earned Income Credit was figured or
What’s the easiest way to avoid this and similar entered incorrectly.
errors? When returns are filed electronically, 5. Spouse’s SSN was either missing or
simple checks are made by the system to insure didn’t match SSA records. Spouse’s
such errors are not present. Return preparers are personal exemption wasn’t allowed.
notified immediately of mismatches, and correc- 6. Child/children’s age exceeded the limit.
tions can be made while the paperwork is readily Child Tax Credit was reduced or re-
available. moved.
Below are additional significant filing errors.
These can also be corrected through e-filing. 7. SSN for child(ren) who qualify taxpayer
Forms 941 for Earned Income Credit didn’t match
1. Liability section (Schedule B) was not SSA records. Earned Income Credit was
completed when necessary or it didn’t match changed.
the total tax on the return. 8. Additional Child Tax Credit was figured
2. Social Security and Medicare taxes were not incorrectly on Form 8812.
correct based on the amount of wages 9. Taxable amount of Social Security
reported. benefits for page 1 was figured incor-
3. Errors in computing balance due or overpay- rectly.
ment amount.
10. Based on information reported, we
Forms 1065
refigured the tax using the filing status
1. Number of Schedule K-1s attached not
for a single person.
accurately reported on line I.
2. Business code number on line C incorrect or
not present.
Forms 1120
1. Math errors in computing balance due or
overpayment.
2. Math errors in computing income and/or
deduction totals.
3. Total assets not present when required
(line D).
4. Errors in tax computation.
2004 TAX HINTS 51
Practitioner’s Guide to the Filing Season
Underreporter Program
analyzes unreported income
T
he Automated Underreporter the discrepancy is explained or response is not received from the
Program (AUR) reviews supporting documentation is submit- taxpayer, a 90-day Statutory Notice
individual returns with ted, the case is closed with no of Deficiency is issued. Before
potential underreported income and/ change to the tax liability, and the generating statutory notices, the
or overclaimed deductions. The taxpayer is informed that all issues account is reviewed for any changes
returns for a specific tax year are are resolved. If the taxpayer fails to including payments. If full payment
identified and computer matched respond or submits insufficient is found, the case can be closed at
with documents from the Informa- information, a CP-2000 notice is that time. If there is no indication of
tion Returns Program (IRP), i.e., issued. a response, an updated address or
Forms W-2, W-2P, 1099, 1098, The CP-2000 is a proposal to full payment, the Statutory Notice
5498, etc. For example, a W-2 for of Deficiency is mailed. A tax-
wages is compared to the wages payer who disagrees with the
reported on the return, and a 1099- notice has 90 days to petition the
INT for interest is compared to the U.S. Tax Court. Whether or not
interest reported on the return. the taxpayer petitions the court, the
When amounts reported on the taxpayer has appeal rights during
return do not match the amounts on all phases of the Underreporter
IRP documents, a potential process. Any information the
Underreporter case is created on an taxpayer submits to resolve the
automated database. The case within disagreement is considered. If
the database shows all income that there is no response, or the
the taxpayer reported to the IRS for certified statutory notice is un-
the tax year in question, all the claimed or refused at the post
taxpayer data from the IRP file and change the income, deductions, tax office, the tax, interest and penalties
a history of account transactions credits or payments reported on the are assessed by default after the 90-
which is updated weekly. During the return. It is not a demand for pay- day deadline is past. A balance due
initial review, a tax examiner ment. The taxpayer is asked to notice is then sent to the taxpayer
performs an in-depth analysis of the respond within 30 days from the and the case goes to collection.
case. The examiner determines if all date of the notice. Even after a case is in collection
income in question can be identified Many cases are closed agreed status, the taxpayer can still disagree
on the tax return. If it can be found, with a signed consent statement and/ with the assessment and send
the case is closed, and the taxpayer or full payment. If the taxpayer correcting statements, letters from
is never contacted. If the income agrees to some of the proposed banks, etc., for consideration to
cannot be located or readily identi- changes and satisfactorily explains have the tax, penalties or interest
fied on the return, a CP-2501 or CP- the remaining issue(s), a second CP reduced or abated. This process is
2000, depending on the issues 2000 reflecting the amounts the also worked in the Underreporter
involved, is sent to the taxpayer. taxpayer has agreed to is issued. area.
If, in the course of the review, the When the taxpayer responds within The IRS doesn’t recommend that
examiner finds a discrepancy that the requested time and provides taxpayers file an amended return as
would result in a refund, a notice sufficient documentation that the a response to the CP 2000 or the
would be issued to verify the refund income is not taxable or that the statutory notice as submission of a
is appropriate. deduction was appropriately Form 1040X could delay process-
The CP-2501 notice asks the claimed, the case is closed with no ing. However, if the taxpayer does
taxpayer to explain where on the change to the tax liability. respond with a Form 1040X, it will
return the income is reported. This If the CP 2000 notice comes back be considered when the case is
inquiry notice has no figures or undelivered, and the IRS cannot processed and the AUR examiner
proposed balance due amounts. If locate an updated address or a will take all necessary actions.
2004 TAX HINTS 52
Practitioner’s Guide to the Filing Season
Statute of Limitations
T
he Internal Revenue Code original return was filed or two tax credit, etc.) within three years of
states that the IRS can years from the time the tax was the Return Due Date (RDD), plus
assess tax, make overpay- paid, whichever of such periods extensions, including the time of
ment, and collect unpaid taxes expires the later, or if no return was extension granted by a Presidential
within a specific period, known as filed by the taxpayer, within two Declared Disaster.
the Statute of Limitations. When the years from the time the tax was If the original return was filed
Statute of Limitations expires for a paid, whichever is later. timely and the claim is being filed
tax return, the IRS can no longer To be timely, a claim for refund/ more than three years after the
allow the taxpayer’s claim for credit must be filed within three original, the amount of refund/credit
overpayment or assess additional tax years of the original return. If your is limited to the amount of the tax
for that return. paid within the two
Ordinarily, as a rule, the years immediately
Assessment Statute Expira- preceding the filing of
tion Date (ASED) is three the claim. If no return
years from the tax period was filed, the claim is
due date, or three years allowable when filed
from the received date of within two years from
the original return, which- the date the tax was
ever is later. As in the case paid.
of the assessment period, a The RRA ’98,
return filed before the due Section 3202, allows
date is considered as having for the suspension of
been filed on the due date the statute on filing
for the purpose of the overpayment claims
limitation period on refunds during periods of
and credits. However, if a disability. Section
return is filed delinquently 3202 suspends the
or within the period of an extension original return was filed by April 15, running of the statute of limitations
of time to file, then the actual filing 2000, you have until April 15, 2003, on refunds during the time the
date is the governing date. The to file a claim. While the claim may taxpayer is medically, physically, or
Statute will not expire until the be timely for the decrease in tax, the emotionally unable to handle their
taxpayer files a return and three refund/credit may be limited. financial affairs. The disability must
years have elapsed. Tax Forms 941, Prepaid credits may not be refunded be medically determinable and must
943 and 945 are exceptions. The or offset unless claimed within three continually last for not less than 12
ASEDs for these tax returns are years of the due date or extended months or result in the death of the
three years from April 15 of the year due date of the return. taxpayer. It does not suspend the
following their due date, or from the If the original return was filed late statute of limitations for taxpayers
received date, whichever is later. and the claim is being filed within that have a spouse or other guardian
Refund Statute Expiration Date three years of the original, the to act for them during the periods of
(RSED). This is generally the amount of refund/credit may be disability. Section 3202 does not
period of time you have to file a limited to the amount of tax paid apply to any claim for refund or
claim for refund or credit. It also within the three years immediately credit that is barred as of the date of
sets limits on the amount you are preceding the filing of the claim, enactment, July 22, 1998.
allowed as a credit or refund before plus any extensions of time for The Collection Statute Expiration
and after the period of limitation on filing. The IRS must receive an Date (CSED) is 10 years from the
filing a claim. original delinquent return, claiming date of assessment of tax. If no
The period of limitation for a refund/credit of prepaid credits return is filed for a tax period, the
filing claims. Generally it will (federal tax withheld, timely esti- CSED cannot be computed and will
expire if a claim is not filed within mated tax payments, earned income not expire.
three years from the time the
2004 TAX HINTS 53
Practitioner’s Guide to the Filing Season
Estimated Tax Penalties
Individuals, Estates if you file your 2003 tax return by filed for that year showed a tax
and Trusts Jan. 31 and pay the entire balance liability greater than zero.
I
f you expect to owe tax of due with your return. For due dates 2. 100 percent of the tax shown
$1,000 or more for the tax year, for fiscal year taxpayers and addi- for the current year (the current
you must prepay the tax by tional information about estimated year tax may be determined on
having tax withheld or by making taxes and your 2003 tax liability, see the basis of actual income or
estimated tax payments. We charge Form 1040-ES, Estimated Tax for annualized income).
a penalty when the total tax you pay Individuals, or Form 1041-ES, Note: The fact that your prior year’s
during the year doesn’t meet the Estimated Tax for Estates and tax was zero does not exempt you
requirements of the law. Generally, Trusts. from this penalty. In this case, you
to meet the requirements of the law Form 2210, Underpayment of should annualize your income.
(and avoid the penalty), you must Estimated Income Tax by Individu- Large Corporation— For
make estimated tax payments if you als, Estates and Trusts, is used to purposes of payment of estimated
expect to owe at least $1,000 after determine if an individual or fidu- tax, a large corporation is one with
subtracting your withholding and ciary is subject to the penalty for at least $1 million of taxable income
credits) and you expect your with- underpayment of estimated tax and, in any of the last three years. A large
holding and credits to be less than if so, the amount of the penalty. You corporation is prohibited from using
the smaller of: do not need to file Form 2210 in their prior year’s tax liability
• 90 percent of the tax shown on most cases. The IRS will figure any (method (1) above), except in
your current year’s tax return, penalty you owe and send you a bill. determining the first installment of
or File Form 2210 only if one or more their tax year. Any reduction in a
• The tax shown on your preced- of the boxes in Part I of Form 2210 large corporation’s first installment,
ing year tax return (110 percent apply to you. If you are not required as a result of using the prior year’s
of that amount if you are not a to file Form 2210, you may use it to tax, must be recaptured in the
farmer or fisherman and the figure your penalty if you wish to do corporation’s second installment. In
adjusted gross income shown so. Enter the penalty on your return applying the $1 million test, taxable
on that return is more than but do not file Form 2210. For more income is computed without regard
$150,000 or, if married filing information on when the estimated to net operating loss carryovers or
separately, more than $75,000). tax penalty may be reduced or capital loss carrybacks.
(Note: This item does not apply removed, see the instructions for Form 2220, Underpayment of
if you did not file a preceding Form 2210. Estimated Tax by Corporations, is
year tax return or that return Corporations used to determine if the corporation
did not cover 12 months.) A corporation with tax of $500 or is subject to the penalty for under-
Exception: You do not have to more that fails to pay a correct payment of estimated tax and, if so,
make estimated tax payments if you installment of estimated tax in full the amount of the penalty. Gener-
had no tax liability for the full 12 by the due date may be subjected to ally, a corporation does not have to
months of the preceding tax year. an estimated tax penalty. The file this form because the IRS will
Also, an individual must be an U.S. penalty rate applies to the period of figure the amount of the penalty and
citizen or resident alien for the underpayment for any installment. bill the corporation. A corporation
entire tax year. Compute the penalty at the rate of should complete and attach this
interest published quarterly by the form to their return if:
Due dates and • The annualized income install-
additional IRS. For tax years beginning after
Dec. 31, 1993, the estimated tax ment method and/or the
information adjusted seasonal installment
payment required in installments is
For 2003, estimated tax payments method is used, or
the lessor of:
for calendar year taxpayers are due • The corporation is a large
1. 100 percent of the tax shown
April 15, June 16 and Sept. 15, 2003 corporation, computing their
on the return for the preceding
and Jan. 15, 2004. You do not have first installment based on their
year, if that year was a 12-
to make the Jan. 15, 2004, payment prior year’s tax. The corpora-
month tax year, and a return
Continued on page 55
2004 TAX HINTS 54
Practitioner’s Guide to the Filing Season
Estimated tax penalties Continued from page 54
tion should attach their annual- able cause, but interest cannot be your position in any contested
ized income worksheet to Form removed for reasonable cause. factual issues and
2220. Note: The tax must be paid before • Any documentation supporting
Note: For underpayments paid after the request can be considered. why you filed/paid your taxes
March 31, 2004: You will need to Reasonable cause determinations late.
use the penalty interest rate for each are based on the facts and circum- • If available, include a state-
calendar quarter, which the IRS will stances of each case. Generally, if ment outlining the law or other
determine during the first month in the taxpayer exercised ordinary authority on which you relied.
the preceding quarter. These rates business care and prudence and was The statement of facts should be
are published quarterly in an IRS still unable to file the return on time, detailed and complete, including
news release and in a revenue ruling the delay is considered due to specific dates, names, amounts,
in the Internal Revenue Bulletin. To reasonable cause. A failure to pay locations, etc. It must be declared
obtain this information on the also may be due to reasonable cause true under penalties of perjury. You
Internet, access the IRS Web site at if the taxpayer exercised ordinary may do this by adding the following
www.irs.gov. You can also call business care and prudence, yet signed declaration to the protest:
1.800.829.1040 to get interest rate could not pay the tax liability in a “Under penalties of perjury, I
information. timely manner. declare that the facts presented in
Abatement
If the IRS determines that failure my written protest, which are set out
to file was due to reasonable cause in the accompanying statement of
of penalties and not willful neglect, this penalty facts, schedules, and other state-
S
will not be assessed. The taxpayer ments are, to the best of my knowl-
ection 6651 of the Internal
would still be responsible for the tax edge and belief, true, correct and
Revenue Code authorizes the
owed plus interest due. complete.”
abatement of penalties for
Note: Late payment penalty and If an authorized representative
failure to file tax returns and/or
interest will be charged on any tax sends the protest, the following
failure to pay tax, if that failure is
paid after the original return due declaration may be substituted:
due to reasonable cause and not
date. Even if you are granted an “That he or she prepared the protest
willful neglect. Individuals request-
extension to file, you still must pay and accompanying documents, and
ing reasonable cause consideration
all of your tax by the original return whether he or she knows personally
for a penalty normally must submit a
due date. You may be granted an that the protest and accompanying
written supporting statement. The
extension to file but not to pay. documents are true and correct.”
statement should be filed with the
Extensions to pay are only granted Attach Form 2848, Power of
director of the service center where
to United States Estate Tax Returns Attorney and Declaration of Repre-
the tax return was required to be
(Form 706). sentative, or similar written authori-
filed. The declaration must be made
under penalties of perjury and must Penalty appeals zation to your written statement.
fully explain the facts related to the procedures Send your request to:
reasonable cause. Abatement If an abatement of a penalty has Internal Revenue Service Center
requests for certain penalties may be been denied, and you want to Penalty Appeals Coordinator
made by telephone to a toll-free receive further consideration by an The coordinator will review your
number shown on the penalty Appeals officer, a brief written additional information to determine
notice. However, in the interest of statement of the disputed issue must whether the penalty should be
fairness, the IRS accepts unsigned be submitted to the service center reduced. If the request for appeal
and oral requests (if the penalty is Appeals coordinator. Provide the cannot be resolved immediately
$500 or less) with the appropriate following information: with the additional information, the
documentation by the employee • The name and SSN or EIN of coordinator will forward the written
handling the case when no reason the taxpayer. statement to the Appeals Office
exists to question the legitimacy of • A statement that you want to servicing your district.
the request. You may request appeal the findings to Appeals.
abatement of penalties for reason- • A statement of facts supporting
2004 TAX HINTS 55
Practitioner’s Guide to the Filing Season
INSTALLMENT Combating abusive tax shelters
A
AGREEMENT s part of a comprehensive compliance with the registration
REDUCES strategy to ensure all taxpayers and list maintenance require-
PENALTIES pay their fair share, the ments, by requesting information
Treasury Department and the IRS and investor lists.
Taxpayers who don’t pay continue to move aggressively to • Of these summonses, 114
their taxes when they are combat abusive tax avoidance transac- involving 11 promoters have
due may be subject to a tions. been referred to the Department
failure-to-pay penalty of This multi-pronged strategy includes of Justice for enforcement.
.50 percent of their requiring prompt disclosure of poten- • The Justice Department has filed
unpaid taxes for each tially abusive transactions by taxpayers summons enforcement actions
month or part of a month and promoters, providing more timely against six promoters.
the tax is not paid. If they analyses of these transactions and • Since the beginning of 2002,
file their return on time publishing legal guidance as early as LMSB has obtained court
and enter into an install- possible. It also involves auditing approval to serve John Doe
ment agreement with the taxpayers and promoters to ensure that summonses on 5 promoters.
IRS, this penalty will be they have complied with their obliga- • With respect to promoters of
reduced to .25 percent. tions under the tax rules. other abusive transactions
Note: If the installment In particular, the IRS conducts (including scams and schemes),
agreement defaults or is promoter examinations to determine the IRS Small Business/Self-
terminated, the normal whether a promoter has complied with Employed Division (SB/SE)
failure to pay penalty regulations requiring identification of currently has 659 promoter cases
charges will resume. potentially abusive tax avoidance under investigation in the field
transactions by registering such and is following up on an
transactions and maintaining and additional 406 promoter leads.
providing investor lists to the IRS upon The SB/SE Lead Development
request and to determine whether the Center is receiving an average of
promoter may be liable for penalties 105 promoter leads per month.
for failure to comply with the registra- • SB/SE has referred 93 promoter
tion and list maintenance requirements. cases to the Justice Department.
Some promoters have cooperated by To date, the courts have ruled
giving the IRS the information to against 46 of these promoters —
which it is entitled; however, others including 31 permanent injunc-
have not. tions — and 37 others are
Among the key steps taken as of mid- awaiting action by Justice or the
November 2003: courts.
• The IRS Large and Mid-Size In addition to these efforts to ensure
Business Division (LMSB) is that promoters comply with the law, the
investigating 118 promoters IRS and Treasury have taken the
(some of which are related) following actions to fight abusive tax
including law firms, investment transactions:
banks and accounting firms. • The IRS and Treasury have
Sixty-nine of these promoters identified 25 abusive transac-
have provided some information tions as listed transactions
on investors to the IRS. through formal guidance. Shortly
• Since the beginning of 2002, after Notice 2003-76 updated
LMSB has issued 315 adminis- this listing with 24 items, Notice
trative summonses in 37 promot- 2003-77 added another. The
ers cases (some of which are participants in these listed
related) to examine promoters’ transactions include foreign and
Continued on page 57
2004 TAX HINTS 56
Practitioner’s Guide to the Filing Season
PAYMENT Combating abusive tax shelters
Continued from page 56
TIPS domestic business entities, headed by IRS executives from
individual taxpayers and tax- the LMSB, SB/SE and/or Tax
Help your clients exempt organizations. Exempt/Government Entities
ensure that their pay- • The IRS is auditing taxpayers Divisions as appropriate and
ments are properly to determine whether they include representatives from
credited by stressing invested in abusive transac- Chief Counsel, technical advi-
the importance of tions, using information derived sors and field specialists. The
writing the following from promoter audits, a disclo- Chief Counsel has also created a
information on their sure initiative (described new senior executive position
check or money order: below), public information and within the Office of Chief
• SSN or EIN. other sources. Counsel to focus on potentially
• LMSB conducted a disclosure abusive tax avoidance transac-
• Tax period covered initiative from December 2001 tions.
by the payment. to April 2002 that resulted in • In October 2002, the IRS
• Current mailing 1,689 disclosures from 1,206 launched additional settlement
address. taxpayers. Taxpayers disclosed initiatives involving three types
• Correct name of the transactions in which they of abusive transactions, to offer
tax account. claimed deductions or losses an equitable alternative to
amounting to billions of protracted enforcement and
• Type of tax form dollars. Agents continue to litigation. The last of these
associated with the investigate the leads generated settlement initiatives ended in
payment. by information provided by the March 2003.
• Make the check or taxpayers who came forward. • The president’s 2004 budget
money out to United • IRS teams have been assembled proposes an additional $100
States Treasury — to implement a comprehensive million to support this effort to
not the IRS. strategy to deal with question- pursue high-income individuals
able transactions. Teams are and businesses.
It is even more impor-
tant to provide identi- Refund Hold Program
T
fying information if
he IRS now has an automated sent the refund hold letter — not to a
you use a money order. program freezing refunds local office. There is no need to send
when a taxpayer has one or another current year return; doing so
more unresolved tax delinquency may only complicate the process. The
investigations for the past five tax earliest the taxpayer could expect a
years. current year refund is one full month
The IRS sends letters to taxpayers after the delinquent return is pro-
requesting they file the delinquent cessed. However, if the delinquent
return or explain why no return return shows a balance due, the held
should be filed. If we don’t receive a refund will be applied. Practitioners
response, we may prepare a substitute should provide the taxpayer’s daytime
for return on the missing periods. phone number and the best hours to
These cases involve refunds due to call. If there is a problem with the
taxpayers who file only when they return, it can be resolved more
expect a refund. quickly by calling the phone number
To avoid delays, delinquent returns listed on the notice rather than by
should be mailed to the office that correspondence.
2004 TAX HINTS 57
Practitioner’s Guide to the Filing Season
Federal Tax Deposits erroneously mailed to
the Federal Reserve Bank of St. Louis
B
eginning Jan. 1, 2004, their review, or they can enroll in
Federal Tax Deposits EFTPS-Online at www.ettps.gov/
(FTDs) sent to the wrong EFTPS is a free service offered by
address will be returned, which may the Department of Treasury. For
trigger penalties and interest. more information, call EFTPS
During the 2003 filing season, all Customer Service at
taxpayers still mailing their pay- 1.800.555.4477 or
ments to the Federal Reserve Bank 1.800.945.8400.
(FRB) of St. Louis were sent letters 2. Deposit federal tax payments at
advising that FTDs must now be one of the more than 10,000
mailed to a new address. In order to financial institutions nationwide
avoid a payment being returned and designated as a Treasury Tax and
a possible missed or late payment, Loan (TT&L) depositary. If using
taxpayers must begin sending their this option, credit for tax payment
payments to: is received immediately. Taxpay-
Financial Agent ers should contact their financial
Federal Tax Deposit Processing institution to determine if it is a
P.O. Box 970030 TT&L depositary.
St. Louis, MO 63197
To hear more information on the
To assist with this transition, the Federal Tax Deposit Program,
FRB has provided labels with the please call our toll-free number at
new mailing address. Taxpayers 1.866.692.6929.
should affix these labels over any
pre-addressed envelopes or on a
blank envelope. LOCKBOX PROCESSING
There are other options available
T
to taxpayers, which may eliminate ax practitioners should two-label envelope. Other taxpayers
the possibility of any checks being mail all types of forms will receive the usual address
returned. They may: with a remittance to the envelope. Regardless of the package
• Enroll in the Electronic Federal lockbox. There are procedures in received by your clients, mail your
Tax Payment System (EFTPS) Package X for preparation and Form 1040-V remittance returns to
giving taxpayers the ability to pay mailing of the 1040-V with lockbox the lockbox address. If your clients
all federal business taxes 24 hours mailing instructions and addresses. receive a preprinted Form 1040-V
a day, 7 days a week from the These procedures not only provide package, encourage them to use the
convenience of their home or for expanding lockbox volumes but preprinted Form 1040-V with their
office using a phone, free PC also provide consistent procedures remittance returns. The preprinted
software or online through the for tax preparers. voucher can be read through high-
Internet. With EFTPS, payments Installment agreement payments speed computer scanning equip-
can be scheduled up to 120 days and fees should also be mailed to ment, eliminating the need for data
in advance of the due date, so the the appropriate lockbox address. entry, thus ensuring fast and accu-
payment is made automatically on Not all individual tax packages rate posting of the payment informa-
the date indicated. No more forms contain lockbox mailing instruc- tion.
to mail or trips to make to the tions. Forms 4868, Extension Requests,
bank. EFTPS brochures and Individual tax packages are with remittances are processed at
enrollment forms have been limited in scope regarding which the lockbox. (See the list of lockbox
provided to these taxpayers for taxpayers will receive the lockbox addresses on the following pages.)
2004 TAX HINTS 58
Practitioner’s Guide to the Filing Season
Where to File 2003 Taxes
Beginning in January 2004, practitioners should mail returns and payments to the following
addresses.
Forms 1040 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Alabama, Florida, Georgia, Mississippi, Atlanta, GA P.O. Box 105093
North Carolina, Rhode Island, South 39901-0002 Atlanta, GA 30348-5093
Carolina, West Virginia
Maine, Massachusetts, New Andover, MA P.O. Box 37002
Hampshire, New York, Vermont 05501-0002 Hartford, CT 06176-0002
Connecticut, District of Columbia, Philadelphia, PA P.O. Box 80101
Maryland, New Jersey, Pennsylvania 19255-0002 Cincinnati, OH 45280-0001
Arkansas, Colorado, Kentucky, Austin, TX P.O. Box 660308
Louisiana, New Mexico, Oklahoma, 73301-0002 Dallas, TX 75266-0308
Tennessee, Texas
Alaska, California, Hawaii, Fresno, CA P.O. Box 7704
Idaho, Montana, Nevada, Oregon, 93888-0002 San Francisco, CA 94120-7704
Washington, Wyoming
Delaware, Illinois, Indiana, Iowa, Kansas City, MO P.O. Box 970011
Kansas, Michigan, Minnesota, Missouri, 64999-0002 St. Louis, MO 63197-0011
Nebraska, North Dakota, South Dakota,
Wisconsin
Ohio, Virginia Memphis, TN P.O. Box 105017
37501-0002 Atlanta, GA 30348-5017
Arizona, Utah Fresno, CA P. O. Box 1214
93888-0002 Charlotte, NC 28201-1214
All APO and FPO addresses, American Philadelphia, PA P.O. Box 80111
Samoa, nonpermanent residents of Guam 19255-0215 Cincinnati, OH 45280-0011
or the Virgin Islands*, Puerto Rico (or if
excluding foreign income under Internal
Revenue Code section 933), dual status aliens,
a foreign country: U.S. citizens and those
filing Form 2555, 2555-EZ, or 4563
* Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box
23607, GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue,
9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 59
Practitioner’s Guide to the Filing Season
Forms 1040A (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Alabama, Florida, Georgia, Mississippi, Atlanta, GA P.O. Box 105093
North Carolina, Rhode Island, South 39901-0015 Atlanta, GA 30348-5093
Carolina, West Virginia
Maine, Massachusetts, New Andover, MA P.O. Box 37002
Hampshire, New York, Vermont 05501-0015 Hartford, CT 06176-0002
Connecticut, District of Columbia, Philadelphia, PA P.O. Box 80101
Maryland, New Jersey, Pennsylvania 19255-0015 Cincinnati, OH 45280-0001
Arkansas, Colorado, Kentucky, Austin, TX P.O. Box 660308
Louisiana, New Mexico, Oklahoma, 73301-0015 Dallas, TX 75266-0308
Tennessee, Texas
Alaska, California, Hawaii, Fresno, CA P.O. Box 7704
Idaho, Montana, Nevada, Oregon, 93888-0015 San Francisco, CA 94120-7704
Washington, Wyoming
Delaware, Illinois, Indiana, Iowa, Kansas City, MO P.O. Box 970011
Kansas, Michigan, Minnesota, Missouri, 64999-0015 St. Louis, MO 63197-0011
Nebraska, North Dakota, South Dakota,
Wisconsin
Ohio, Virginia Memphis, TN P.O. Box 105017
37501-0015 Atlanta, GA 30348-5017
Arizona, Utah Fresno, CA P. O. Box 1214
93888-0015 Charlotte, NC 28201-1214
All APO and FPO addresses, American Philadelphia, PA P.O. Box 80111
Samoa, nonpermanent residents of Guam 19255-0215 Cincinnati, OH 45280-0011
or the Virgin Islands*, Puerto Rico (or if
excluding foreign income under Internal
Revenue Service code section 933), dual
status alien, a foreign country: U.S.citizens
and those filing Form 2555, 2555-EZ, or 4563
* Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box
23607, GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue,
9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 60
Practitioner’s Guide to the Filing Season
Forms 1040EZ (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Alabama, Florida, Georgia, Mississippi, Atlanta, GA P.O. Box 105093
North Carolina, Rhode Island, South 39901-0014 Atlanta, GA 30348-5093
Carolina, West Virginia
Maine, Massachusetts, New Andover, MA P.O. Box 37002
Hampshire, New York, Vermont 05501-0014 Hartford, CT 06176-0002
Connecticut, District of Columbia, Philadelphia, PA P.O. Box 80101
Maryland, New Jersey, Pennsylvania 19255-0014 Cincinnati, OH 45280-0001
Arkansas, Colorado, Kentucky, Austin, TX P.O. Box 660308
Louisiana, New Mexico, Oklahoma, 73301-0014 Dallas, TX 75266-0308
Tennessee, Texas
Alaska, California, Hawaii, Fresno, CA P.O. Box 7704
Idaho, Montana, Nevada, Oregon, 93888-0014 San Francisco, CA 94120-7704
Washington, Wyoming
Delaware, Illinois, Indiana, Iowa, Kansas City, MO P.O. Box 970011
Kansas, Michigan, Minnesota, Missouri, 64999-0014 St. Louis, MO 63197-0011
Nebraska, North Dakota, South Dakota,
Wisconsin
Ohio, Virginia Memphis, TN P.O. Box 105017
37501-0014 Atlanta, GA 30348-5017
Arizona, Utah Fresno, CA P. O. Box 1214
93888-0014 Charlotte, NC 28201-1214
All APO and FPO addresses, American Philadelphia, PA P.O. Box 80111
Samoa, nonpermanent residents of Guam 19255-0215 Cincinnati, OH 45280-0011
or the Virgin Islands*, Puerto Rico (or if
excluding foreign income under Internal
Revenue Code section 933), dual status aliens,
a foreign country: U.S. citizens and those filing
Form 2555, 2555-EZ, or 4563
* Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box
23607, GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue,
9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see below.
Use of private delivery services
You can use private delivery services designated by FedEx International Priority and FedEx International
the IRS to meet the “timely mailing as timely filing/ First.
paying” rule for tax returns and payments. The most • United Parcel Service (UPS): UPS Next Day Air,
recent list of designated private delivery services was UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd
published by the IRS in September 2002. The list Day Air A.M., UPS Worldwide Express Plus and UPS
includes only the following: Worldwide Express.
• Airborne Express (Airborne): Overnight Air The private delivery service can tell you how to get
Express Service, Next Afternoon Service and written proof of the mailing date. If you need an IRS
Second Day Service. office address for private delivery and are unable to get
• DHL Worldwide Express (DHL): DHL Same Day one from the delivery service, call 800.829.1040 for the
Service and DHL USA Overnight. appropriate address. Private delivery services cannot
• Federal Express (FedEx): FedEx Priority Over- deliver items to P.O. boxes. You must use the U.S. Postal
night, FedEx Standard Overnight, FedEx 2-Day, Service to mail any item to an IRS P.O. box address.
2004 TAX HINTS 61
Practitioner’s Guide to the Filing Season
Forms 1040-ES (Practitioners)
Client lives in . . . (Note: the first line of the address should be Internal Revenue Service)
Alabama, Florida, Georgia, Mississippi, P.O. Box 105900
North Carolina, Rhode Island, South Atlanta, GA 30348-5900
Carolina, West Virginia
Maine, Massachusetts, New P.O. Box 37001
Hampshire, New York, Vermont Hartford, CT 06176-0001
Connecticut, District of Columbia, P.O. Box 80102
Maryland, New Jersey, Pennsylvania Cincinnati, OH 45280-0002
Arkansas, Colorado, Kentucky, P.O. Box 660406
Louisiana, New Mexico, Oklahoma, Dallas, TX 75266-0406
Tennessee, Texas
Alaska, California, Hawaii, P.O. Box 510000
Idaho, Montana, Nevada, Oregon, San Francisco, CA 94151-5100
Washington, Wyoming
Delaware, Illinois, Indiana, Iowa, P.O. Box 970006
Kansas, Michigan, Minnesota, Missouri, St. Louis, MO 63197-0006
Nebraska, North Dakota, South Dakota,
Wisconsin
Ohio, Virginia P.O. Box 105225
Atlanta, GA 30348-5225
Arizona, Utah P. O. Box 1219
Charlotte, NC 28201-1219
All APO and FPO addresses, American P.O. Box 80102
Samoa, nonpermanent residents of Guam Cincinnati, OH 45280-0002
or the Virgin Islands*, the Commonwealth
of the Northern Mariana Islands, Puerto Rico
(or if excluding foreign income under Internal
Revenue Code section 933), dual status alien,
a foreign country: U.S. citizens and those
filing Form 2555, 2555-EZ, or 4563
* Permanent residents of Guam should use: Department of Revenue and Taxation, Government of Guam, P.O. Box
23607, GMF, GU 96921; permanent residents of the Virgin Islands should use: V.I. Bureau of Internal Revenue,
9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 62
Practitioner’s Guide to the Filing Season
Forms 4868 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Alabama, Florida, Georgia, Mississippi, Atlanta, GA P.O. Box 105073
North Carolina, ,Rhode Island, South 39901 Atlanta, GA 30348-5073
Carolina, West Virginia
Maine, Massachusetts, New Andover, MA P.O. Box 37003
Hampshire, New York, Vermont 05501 Hartford, CT 06176-0003
Connecticut, District of Columbia, Philadelphia, PA P.O. Box 80109
Maryland, New Jersey, Pennsylvania 19255 Cincinnati, OH 45280-0009
Arkansas, Colorado, Kentucky, Austin, TX P.O. Box 660575
Louisiana, New Mexico, Oklahoma, 73301 Dallas, TX 75266-0575
Tennessee, Texas
Alaska, California, Hawaii, Fresno, CA P.O. Box 7122
Idaho, Montana, Nevada, Oregon, 93888 San Francisco, CA 94120-7122
Washington, Wyoming
Delaware, Illinois, Indiana, Iowa, Kansas City, MO P.O. Box 970028
Kansas, Michigan, Minnesota, Missouri, 64999 St. Louis, MO 63197-0028
Nebraska, North Dakota, South Dakota,
Wisconsin
Ohio, Virginia Memphis, TN P.O. Box 105050
37501 Atlanta, GA 30348-5050
Arizona, Utah Fresno, CA P. O. Box 1236
93888 Charlotte, NC 28201-1236
All APO and FPO addresses, American Philadelphia, PA P.O. Box 80109
Samoa, nonpermanent residents of Guam 19255-0215 Cincinnati, OH 45280-0009
or the Virgin Islands*, Puerto Rico (or if
excluding foreign income under Internal
Revenue Code section 933), dual status aliens,
a foreign country: U.S. citizens and those filing
Form 2555, 2555-EZ, or 4563
* Permanent residents of Guam should use: Department of Revenue and Taxation,
Government of Guam, P.O. Box 23607,
GMF, GU 96921
* Permanent residents of the Virgin Islands V.I. Bureau of Internal Revenue,
should use: 9601 Estate Thomas, Charlotte Amalie,
St. Thomas, VI 00802
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 63
Practitioner’s Guide to the Filing Season
Form 940 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, Cincinnati, OH P.O. Box 105887
District of Columbia, 45999-0046 Atlanta, GA 30348-5887
Illinois, Indiana,
Kentucky, Maine,
Maryland, Massachusetts,
Michigan, New Hampshire,
New Jersey, New York,
North Carolina, Ohio,
Pennsylvania, Rhode Island,
South Carolina, Vermont,
Virginia, West Virginia,
Wisconsin
Alabama, Alaska, Ogden, UT P.O. Box 660095
Arizona, Arkansas, 84201-0046 Dallas, TX 75266-0095
California, Colorado
Florida, Georgia,
Hawaii, Idaho, Iowa
Kansas, Louisiana,
Minnesota, Mississippi
Missouri, Montana,
Nebraska, Nevada,
New Mexico, North Dakota,
Oklahoma, Oregon,
South Dakota, Tennessee,
Texas, Utah, Washington,
Wyoming
Puerto Rico, Philadelphia, PA P.O. Box 80105
U. S. Virgin Islands 19255-0046 Cincinnati, OH 45280-0005
Exception: If you are filing Form 940
for an exempt organization or government entity
(federal, state, local, or Indian tribal), use the following addresses,
regardless of location:
Return without payment: Return with payment:
Internal Revenue Service Internal Revenue Service
Ogden, UT 84201-0046 P.O. Box 660095
Dallas, 75266-0095
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 64
Practitioner’s Guide to the Filing Season
Form 940EZ (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, Cincinnati, OH P.O. Box 105659
District of Columbia, 45999-0047 Atlanta, GA 30348-5659
Illinois, Indiana, Kentucky
Maine, Maryland, Massachusetts,
Michigan, New Hampshire, New Jersey,
New York, North Carolina, Ohio,
Pennsylvania, Rhode Island,
South Carolina, Vermont,
Virginia, West Virginia, Wisconsin
Alabama, Alaska, Ogden, UT P.O. Box 660351
Arizona, Arkansas, 84201-0047 Dallas, TX 75266-0351
California, Colorado, Florida,
Georgia, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota, Mississippi,
Missouri, Montana, Nebraska, Nevada,
New Mexico, North Dakota, Oklahoma,
Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming
Puerto Rico, Philadelphia, PA P.O. Box 80105
U. S. Virgin Islands 19255-0047 Cincinnati, OH 45280-0005
Exception: If you are filing Form 940-EZ for an exempt organization or government entity (federal, state, local, or
Indian tribal), use the following addresses, regardless of location:
Return without payment: Return with payment:
Internal Revenue Service Internal Revenue Service
Ogden, UT 84201-0047 P.O. Box 660351
Dallas, 75266-0351
Form 2290 (Practitioners)
Client lives in . . .
All States including Cincinnati, OH P. O. Box 105421
Canada and Mexico 45999-0031 Atlanta, GA 30348-5421
Form 706 (Practitioners)
filer other than nonresident U.S. citizen Cincinnati, OH 45999
nonresident U.S. citizen Philadelphia, PA 19255, USA
filer other than nonresident U.S. citizen 201 W. Rivercenter Blvd.
(private delivery service) Covington, KY 41011
Form 709 (Practitioners)
Cincinnati, OH 45999
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 65
Practitioner’s Guide to the Filing Season
Form 941 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, Cincinnati, OH P.O. Box 105703
District of Columbia, Illinois, 45999-0005 Atlanta, GA 30348-5703
Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio, Pennsylvania,
Rhode Island, South Carolina, Vermont, Virginia,
West Virginia, Wisconsin
Alabama, Alaska, Arizona, Ogden, UT P.O. Box 660264
Arkansas, California, Colorado 84201-0005 Dallas, TX 75266-0264
Florida, Georgia, Hawaii, Idaho, Iowa
Kansas, Louisiana, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Oklahoma,
Oregon, South Dakota, Tennessee, Texas,
Utah, Washington, Wyoming
No legal residence or Philadelphia, PA P. O. Box 80106
principal place of business in any state 19255-0005 Cincinnati, OH 45280-0006
If you are filing Form 941 Ogden, UT 84201-0005 P.O. Box 660264
for an exempt organization or government Dallas, TX 75266-0264
entity (federal, state, local or Indian tribal),
regardless of location.
Form 943 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, Cincinnati, OH P.O. Box 105094
District of Columbia, Illinois, 45999-0008 Atlanta, GA 30348-5094
Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin
Alabama, Alaska, Arizona, Arkansas, Ogden, UT P.O. Box 660587
California, Colorado, Florida, Georgia, 84201-0008 Dallas, TX 75266-0587
Hawaii, Idaho, Iowa, Kansas, Louisiana,
Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming
No legal residence or principal place Philadelphia, PA P. O. Box 80107
of business in any state 19255-8526 Cincinnati, OH 45280-0007
Exception: If you are filing Form 943 for
an exempt organization or government entity Ogden, UT 84201-0008 P.O. Box 660587
(federal, state, local or Indian tribal), Dallas, TX 75266-0587
regardless of location:
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 66
Practitioner’s Guide to the Filing Season
Form 945 (Practitioners)
Client lives in . . . No payment enclosed With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, Cincinnati, OH P. O. Box 105092
District of Columbia, Illinois, 45999-0042 Atlanta, GA 30348-5092
Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island,
South Carolina, Vermont,
Virginia, West Virginia, Wisconsin
Alabama, Alaska, Ogden, UT P.O. Box 660443
Arizona, Arkansas, California, 84201-0042 Dallas, TX 75266-0443
Colorado, Florida, Georgia, Hawaii, Idaho,
Iowa, Kansas, Louisiana, Minnesota,
Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming
No legal residence or Philadelphia, PA P.O. Box 80108
principal place or business in any state 19255-0042 Cincinnati, OH 45280-0008
Exception: If you are filing Form 943 for
an exempt organization or government entity Ogden, UT 84201-0042 P.O. Box 660443
(federal, state, local or Indian tribal), Dallas, TX 75266-0443
Form 1041-ES (Practitioners)
Client lives in . . . With payment enclosed
(Note: the first line of the address should be Internal Revenue Service)
All States including P. O .Box 105401
Canada and Mexico Atlanta, GA 30348-5401
Form 1041 (Practitioners)
Client lives in . . . (Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, District of Cincinnati, OH 45999-0048
Columbia, Illinois, Indiana, Kentucky,
Maine, Maryland, Massachusetts,
Michigan, New Hampshire, New Jersey,
New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin
Alabama, Alaska, Arizona, Arkansas, Ogden, UT 84201-0048
California, Colorado, Florida, Georgia,
Hawaii, Idaho, Iowa, Kansas, Louisiana,
Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming
A foreign country or a U.S. possession Philadelphia, PA 19255-0048
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 67
Practitioner’s Guide to the Filing Season
Form 1065 (Practitioners)
If the partnership’s principal business,
office or agency is located in . . . (Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, District of Columbia,
Illinois, Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin,
and total assets at the end of the year
(Form 10645, Line 1, Item F) are: Less than $10 million: Cincinnati, OH 45999-0011
$10 million or more: Ogden, UT 84201-0011
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota, Mississippi,
Missouri, Montana, Nebraska, Nevada,
New Mexico, North Dakota, Oklahoma, Oregon,
South Dakota, Tennessee, Texas, Utah, Washington,
Wyoming, and total assets at the end of the year
(Form 10645, Line 1, Item F) are: Any amount: Ogden, UT 84201-0011
A foreign country or U.S. possession
and total assets at the end of the year
(Form 10645, Line 1, Item F) are: Any amount: Philadelphia, PA 19255-0048
Form 1120 (Practitioners)
If the corporation’s principal business,
office or agency is located in . . . (Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, District of Columbia,
Illinois, Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin,
and the total assets at the end of the
tax year are: Less than $10 million: Cincinnati, OH 45999-0112
$10 million or more: Ogden, UT 84201-0012
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Mexico, North
Dakota, Oklahoma, Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming,
and the total assets at the end of the
tax year are: Any amount: Ogden, UT 84201-0012
A foreign country or U.S. possession (or the corporation
is claiming the possessions corporation tax credit under
sections 30A and 9936), and the total assets at the end
of the tax year are: Any amount: Philadelphia, PA 19255-0012
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 68
Practitioner’s Guide to the Filing Season
Form 1120A (Practitioners)
If the corporation’s principal business,
office or agency is located in . . . (Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, District of Columbia,
Illinois, Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin,
and the total assets at the end of the
tax year are: Less than $10 million: Cincinnati, OH 45999-0112
$10 million or more: Ogden, UT 84201-0012
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Hawaii, Idaho, Iowa,
Kansas, Louisiana, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Mexico, North
Dakota, Oklahoma, Oregon, South Dakota, Tennessee,
Texas, Utah, Washington, Wyoming, and the total assets
at the end of the tax year are: Any amount: Ogden, UT 84201-0012
Form 1120S (Practitioners)
If the corporation’s principal business,
office or agency is located in . . . (Note: the first line of the address should be Internal Revenue Service)
Connecticut, Delaware, District of Columbia,
Illinois, Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, New Hampshire,
New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina,
Vermont, Virginia, West Virginia, Wisconsin,
and the total assets at the end of the
tax year are: Less than $10 million: Cincinnati, OH 45999-0112
$10 million or more: Ogden, UT 84201-0013
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas,
Louisiana, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Tennessee, Texas,
Utah, Washington, Wyoming, and the total
assets at the end of the tax year are: Any amount: Ogden, UT 84201-0013
A foreign country or U.S. possession (or the corporation
is claiming the possessions corporation tax credit under
sections 30A and 9936), and the total assets at the end
of the tax year are: Any amount: Philadelphia, PA 19255-0013
Note: If you use a private delivery service (Airborne, DHL, FedEx or UPS), see page 61.
2004 TAX HINTS 69
Practitioner’s Guide to the Filing Season
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2004 TAX HINTS 70