Tax Hints for Tax Professionals by IRS

VIEWS: 337 PAGES: 31

									2007                                                                     TAXhints
                                                                         Practitioner’s Guide to the Filing Season




Inside this Issue                                                        Welcome to this year’s
FAQs on TETR : What is the
Telephone Excise Tax Refund?                               .....   2
                                                                         Tax Hints—Practitioner’s
Splitting 2006
Federal Income Tax Refunds . . . . . . . . 3
                                                                         Guide to the Filing Season
Frequently Asked Questions                                               As in past years, this electronic publication collects links to vital
about Splitting 2006                                                     information and data from the irs.gov website, and presents
Federal Income Tax Refunds . . . . . . . . 5
                                                                         them all here, in one convenient sourcebook for tax professionals.
Standards of Practice
for Tax Professionals . . . . . . . . . . . . . . . . . 8                The first three Tax Hints items are particularly important—they
Preparers Can Use PTINs to                                               address legislative changes that greatly affect this filing season.
Help Prevent Identity Theft . . . . . . . . . 9                          The lead article covers the telephone excise tax refund (TETR); the
What’s New for 2006—                                                     next two cover the split refund initiative. The Service’s early filing
A Summary of                                                             season experience shows that too few filers are availing themselves
Important Changes . . . . . . . . . . . . . . . . . . . 9
                                                                         of the TETR. Please make sure your clients are taking advantage
Electronic Signatures. . . . . . . . . . . . . . . 10                    of this refund when they file. The split refund options offer more
Important Reminders                                                      flexibility and should encourage filers to put tax refunds into
on Depreciation . . . . . . . . . . . . . . . . . . . . . 11             savings accounts.
ITIN (Individual Taxpayer
Identification Number)                                                   National Public Liaison (NPL) publishes Tax Hints primarily for
Authorized Acceptance Agents . . 12                                      our stakeholders in the tax preparation field. You are the key
New Address For                                                          authors of this publication: you told NPL what information you
Filing Form W-7 . . . . . . . . . . . . . . . . . . . . . . 12           need for filing season reference and how you’d like it presented.
Where to Send                                                            Your input continues to guide and shape this document and is
Authorization Requests . . . . . . . . . . . . 12                        always welcome.
EITC Resources Online 24/7 . . . . . . . 13
                                                                         Tax Hints points of contacts throughout the Service also play a
New Form for
Estate and Gift Tax Program. . . . . . 13                                key role in this publication: they send NPL information and data
                                                                         for inclusion that will make filing season easier and more efficient
Assisting Non-English-speaking
Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14   for the IRS. This material is usually specifically geared to our audi-
                                                                         ence of tax professionals. Please send any comments, or sugges-
IRS e-file Marketing Tool Kit . . . . . . 15
                                                                         tions for additional inclusions, by email to the program manager
Learn All About IRS e-file
                                                                         at gerard.j.ruelle@irs.gov.
in Publication 3452. . . . . . . . . . . . . . . . . . 15
                                                                                                                                                                 2007 TAX HINTS                      2
                                                                                                                                                    Practitioner’s Guide to the Filing Season




Inside this Issue                                                                            FAQs on TETR
continued from page 1

Most Common Reasons for Power of
                                                                                             What is the Telephone Excise Tax Refund?
Attorney (POA) and Tax Information
Authorization (TIA) Rejection . . . . . . . . . . . 15



                                                                                             T
                                                                                                  he telephone excise tax refund (TETR) is        for Federal Telephone Excise Tax Paid, and
Schedule K-1,
                                                                                                 a one-time payment available on the 2006         attach it to Form 1040EZ-T.
Two-Dimensional Barcodes . . . . . . . . . . . . . . 15
                                                                                                 income tax return, designed to refund the
Key IRS Personnel Changes                                                                    previously collected federal excise tax on long      How do businesses and tax-exempt
in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15                                                        organizations request a refund?
                                                                                             distance or bundled service.
Guidelines for Faxed Submissions. . . . . . 16
                                                                                                                                                  Businesses, tax-exempt organizations and sole
                                                                                             Who is eligible for the refund?                      proprietors can request the actual amount of
Use These Simple Solutions                                                                                                                        tax paid using the Form 8913. Businesses and
                                                                                             In general, any individual, business, or tax-
for an Error-Free Tax Return . . . . . . . . . . . . . 17
                                                                                             exempt organization that paid federal excise         sole proprietors attach this form to their regu-
The Information Reporting Program                                                            tax on long distance or bundled service billed       lar income tax returns for 2006. Tax-exempt
Advisory Committee (IRPAC) . . . . . . . . . . . . 17                                        after February 28, 2003 and before August 1,         organizations should attach it to Form 990-T.
New Links Added this Year. . . . . . . . . . . . . . . 17                                    2006 may be eligible to request the refund on           The IRS has developed a formula that most
                                                                                             the 2006 tax return. Taxes paid on local-only        businesses, tax-exempt organizations and
Federal Tax Deposit
                                                                                             service are not eligible for the refund.             eligible sole proprietors can use to calculate
Requirements for Employment . . . . . . . . . 18
                                                                                                                                                  their refund. To use the formula, eligible tax-
Injured Spouse Allocations . . . . . . . . . . . . . . 18                                    How do taxpayers                                     payers need only review their phone bills for
                                                                                             request a refund?
IRS Has Merged Digital Dispatch                                                                                                                   2 months, instead of all 41 months included in
and e-News for Tax Professionals . . . . . . . 19
                                                                                             Individual taxpayers can request a standard          the refund period. In addition, eligible taxpay-
                                                                                             amount from $30 to $60 based on the number           ers need to know their total telephone expens-
Information Returns Processing . . . . . . . . 19                                            of exemptions claimed on their tax returns.          es for the 41-month period and the number
2007 IRS Nationwide Tax Forums                                                               Individual taxpayers who choose the standard         of employees reported on their federal with-
Begin in July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19           amount need only fill out one line on their          holding tax return (Form 941) for the second
                                                                                             tax returns. The standard amount is based on         quarter of 2006. The formula is an alternative
Practitioner Priority Services (PPS) . . . . 20
                                                                                             actual telephone usage data and the amount           to using monthly phone bills to determine the
Tax Talk Today. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20               applicable to a family or other household            amount of refund to request.
U.S. Residency Certification User Fee                                                        reflects the long distance phone tax paid by            In general, businesses and tax-exempt
Implementation: November 1, 2006 . . . 20                                                    similarly-sized families or households.              organizations that were operating at any time
                                                                                                Requesting the standard amount may be the         during the period from March 1, 2003, through
Reducing the Burden
Taxpayers Face . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21                easiest way for taxpayers to get their refunds       July 31, 2006, and continued to incur phone
                                                                                             and avoid gathering 41 months’ worth of old          expenses from April 2006 through September
Taxpayer Advocate Service . . . . . . . . . . . . . . 21                                     phone records. For some taxpayers, requesting        2006, may use the formula. This includes cor-
Low Income Tax Clinics (LITCs) . . . . . . . . . . 21                                        a refund based on the actual amount of tax           porations, S corporations, partnerships, trusts
                                                                                             paid may be more beneficial.                         and estates. (Trusts and estates are treated as
The Internal Revenue Service
Advisory Council (IRSAC) . . . . . . . . . . . . . . . . . 22
                                                                                                These taxpayers should review their phone         businesses in applying the formula.) Nonprofit,
                                                                                             bills since Feb. 28, 2003. Taxpayers who             tax-exempt organizations, including churches
Non-Resident Alien                                                                           choose this option can fill out Form 8913            and charities, can also use the formula. In
Withholding and Reporting . . . . . . . . . . . . . . 22
                                                                                             and attach it to their regular 2006 income           addition, individual owners of rental property
Lockbox Post Office Box Closures . . . . . . 23                                              tax returns (Forms 1040, 1040A, 1040NR or            and self-employed people, including indepen-
                                                                                             1040EZ).                                             dent contractors, sole proprietors and farmers,
Reporting Tax Fraud . . . . . . . . . . . . . . . . . . . . . . . 24
                                                                                                For those who do not otherwise have to file       can use the formula, but only if they report
Top 10 Potential Triggers                                                                    a tax return, the new Form 1040EZ-T can be           gross rental and business income totaling more
for Alternative Minimum Tax . . . . . . . . . . . . 24
                                                                                             used to request this refund. If filers request the   than $25,000 on their 2006 federal income tax
IRS Toll Free Numbers . . . . . . . . . . . . . . . . . . . . . 25                           standard amount, they can simply fill out form       returns.
                                                                                             1040EZ-T using the eligible number of exemp-            For more details on the Telephone Excise
Internal Revenue Service at a Glance . 26
                                                                                             tions. If filers request the actual amount of        Tax Refund, go to irs.gov.
irs.gov Hotlinks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28                tax paid, they must fill out Form 8913, Credit
                                                                                                                           2007 TAX HINTS                       3
                                                                                                               Practitioner’s Guide to the Filing Season




Splitting 2006 Federal Income Tax Refunds
Taxpayers have more                                 Taxpayers cannot direct their refunds into             indicate a contribution year for IRA accounts.
direct deposit options                              accounts of others. However, in the case of            If taxpayers fail to notify their IRA trustees of
for their 2006 refunds                              joint refunds, taxpayers can designate deposits        the intended year for the deposit, their trustees



T
                                                    to joint accounts or accounts of either spouse.        can assume the deposits are for 2007.
      axpayers have more choice and flexibility
                                                    For example: IRS will deposit a joint refund
    for direct deposits of their 2006 federal                                                              IRS is not responsible for the timeliness or
                                                    into an individual retirement arrangement (IRA)
    income tax refunds. Now they can split their                                                           contribution amounts related to IRA direct
                                                    owned by one spouse, providing the financial
refunds among up to three checking or savings                                                              deposits. Since errors on returns or refund
                                                    institution accepts direct deposits for IRAs and
accounts, with up to three different U.S. finan-                                                           offsets could change the amount of refunds
                                                    will accept a joint refund to an account of only
cial institutions. This new option is available                                                            available for deposit, taxpayers who want to
                                                    one spouse.
regardless of whether taxpayers file the follow-                                                           apply their refunds to 2006 IRA contributions
ing original returns on paper or electronically:    These are the same guidelines IRS applies to
                                                                                                           should confirm the amount of the deposit and
Form 1040                                           direct deposits when a taxpayer directs his or
                                                                                                           deposit date and make any necessary correc-
Form 1040A                                          her refund to one account. The only change is
                                                                                                           tions to their 2006 contributions before their
Form 1040EZ                                         taxpayers now have more convenient options
                                                                                                           filing deadlines. If the deposit is not made
Form 1040-PR                                        for receiving their refunds.
                                                                                                           into the account by the due date of the return
Form 1040NR                                         Examples of savings accounts taxpayers can             (without regard to extensions), the deposit is
Form 1040NR-EZ                                      choose to direct their refunds to include, but         not a contribution for 2006. Taxpayers must
Form 1040-SS                                        are not limited to:                                    file amended 2006 returns and reduce any IRA
(Taxpayers filing Form 1040EZ-T, Request for        n   Regular passbook savings accounts;                 deductions and any retirement savings contri-
Refund of Federal Telephone Excise Tax, or          n   Individual retirement arrangements (IRAs);         butions credits they claimed.
Form 8379, Injured Spouse Allocation, cannot        n   Health savings accounts (HSAs);
opt to split their refunds.)
                                                                                                           Accurate account and
                                                    n   Archer MSAs;
                                                                                                           routing numbers imperative
Taxpayers can continue to use the direct            n   Coverdell education savings accounts; and
                                                                                                           Taxpayers should verify routing and account
deposit line on Form 1040 to electronically         n   Individual development accounts (IDAs).
                                                                                                           numbers with their financial institutions.
send their refunds to one checking or savings
                                                    Direct deposit acceptance varies among finan-          Although taxpayers can usually discern the
account, or use IRS’s new Form 8888, Direct
                                                    cial institutions and taxpayers first should           routing number for their checking account
Deposit of Refund, to split their refunds
                                                    verify that their financial institutions will accept   from the face of their checks, routing numbers
among two or three different accounts or
                                                    direct deposits for the types of accounts they         for some savings accounts are not always
financial institutions.
                                                    are designating. For example, a financial insti-       apparent.
This change gives taxpayers more options            tution may accept direct deposits for regular
                                                                                                           IRS assumes no responsibility for taxpayer or
for managing their refunds, teamed with             savings accounts, but not for education savings
                                                                                                           preparer error and taxpayers should ensure
the speed and safety of direct deposit. IRS         accounts.
                                                                                                           their account and routing information is accu-
estimates taxpayers will choose to split their
                                                                                                           rately entered. Errors could result in different
refunds on approximately 3.8 million returns        Note of caution on
                                                                                                           scenarios. For example:
this year.                                          direct deposits to IRAs
                                                                                                           n If taxpayers omit a digit in the account
                                                    Taxpayers wanting to deposit all or part of
Two requirements                                                                                           or routing number of one account and the
                                                    their refunds to their IRA accounts should first
for direct deposits:                                                                                       number does not pass IRS’s validation check,
                                                    ensure their financial institutions will accept
                                                                                                           IRS will mail taxpayers a check for the entire
IRS will electronically deposit refunds to any of   direct deposits to IRA accounts.
                                                                                                           amounts of their refunds;
a taxpayer’s checking or savings accounts with      As with all IRA deposits, the account owner is
U.S. financial institutions, providing:                                                                    n If taxpayers incorrectly enter account or
                                                    responsible for informing their IRA trustee of
                                                                                                           routing numbers and the designated financial
n The taxpayer supplies accurate account and        the year for which the deposit is intended and
                                                                                                           institutions reject and return the deposits to
routing numbers; and                                for ensuring their contributions do not exceed
                                                                                                           IRS, IRS will issue checks for that portion of the
n The financial institutions accept direct          their annual contribution limitations. IRS direct
                                                                                                           refunds; or                  continued on page 4
deposits for the type of accounts designated.       deposits of federal income tax refunds will not
                                                                                                                       2007 TAX HINTS                        4
                                                                                                          Practitioner’s Guide to the Filing Season




continued from page 3
n If taxpayers incorrectly enter account or          of $300 and the taxpayer asks IRS to split the     Taxpayers will receive letters from IRS explain-
routing numbers belonging to others and the          refund among three accounts, depositing $100       ing any adjustments to their returns, refund
designated financial institutions accept the         to each account. Due to an error, the refund       amounts, and direct deposits. Taxpayers can
deposits, taxpayers must work directly with the      is increased by $150. IRS will adjust the direct   get information about refund adjustments also
respective financial institutions to recover their   deposits as follows:                               through Where’s My Refund? on www.irs.gov
funds.                                                                                                  or by calling (800) 829-1954.
                                                                               Actual                       IRS recommends taxpayers use electronic
                                                                  Requested    Direct Deposits
Opportunity for asset building                                                                          filing to avoid math errors and other common
Split refunds offer taxpayers the opportunity         Account 1 $100           $100
                                                                                                        problems that can result in adjustments to
to build assets by sending part of their refunds                                                        their returns and change the expected amount
                                                      Account 2 $100           $100                     of their refunds.
to checking for immediate needs and part
to savings for future needs. A recent study           Account 3 $100           $250 ($100 taxpayer      Adjusting deposits for EITC freezes
                                                                               requested plus
conducted by Harvard Business School and                                       $150 adjustment)         If IRS withholds or freezes the EITC portion of
other interested parties, “Refunds to Assets:                                                           a taxpayer’s refund pending additional infor-
Splitting Refunds and Building Assets,” found                                                           mation to verify eligibility, IRS will deposit the
one in three lower income taxpayers who were         Math error and delinquent                          refund, less the amount withheld, according to
offered a choice opted to direct a portion of        tax adjustments resulting                          the bottom-up approach discussed above.
their refunds into savings accounts. For many,       in reduced refunds                                 If IRS later determines the taxpayer is eligible
it was their first savings experience with a         If IRS must reduce the amount of a taxpayer’s      to receive the credit, the agency will deposit
financial institution.                               refund due to a math error or offset for delin-    the amount withheld into the first account
Regardless of taxpayers’ filing methods—             quent federal taxes and the taxpayer has           designated.
electronic or paper—direct deposit gives them        allocated his or her refund among two or three     Offsets for delinquent state taxes,
faster access to their funds than paper checks.      accounts, IRS will adjust the deposits using a     child support, etc., resulting in
                                                     bottom-up approach and first deduct the differ-    reduced refunds
 Filing    Direct Deposit      Paper Check           ence from the amount designated for the last
 Method    Refund Received     Refund Received
                                                                                                        If a taxpayer owes delinquent state income
                                                     account. If the difference exceeds the amount
                                                                                                        taxes, back child support, or delinquent
 e-file    Within 2 weeks      Within 3 weeks
                                                     designated for the last account, IRS will deduct
                                                                                                        non-tax federal debts such as student loans,
                                                     the remainder from the amount designated to
 paper     Within 5 weeks      Within 6 weeks                                                           etc., the Department of Treasury’s Financial
                                                     the next account, etc.
                                                                                                        Management Service (FMS), which disburses
                                                     Example of a math error/delinquent federal         IRS refunds, may offset the refund for the
Adjusting deposits for
                                                     tax offset adjustment resulting in a reduced       delinquent amount. (These offsets could occur
errors, offsets, etc.
                                                     refund: A taxpayer’s return shows a refund         whether taxpayers opt to receive their refunds
Several factors could change the amount of a         of $300 and the taxpayer asks IRS to split the     via paper checks or direct deposits to one or
taxpayer’s refund. Math errors—one of the top        refund among three accounts with $100 to           several accounts.)
mistakes on returns—can increase or decrease         each account. Due to a math error, the refund         FMS will deduct past-due amounts from the
a taxpayer’s refund and the amount available         is decreased by $150. IRS will adjust the direct   payment that appears first on the payment file
for deposit. Refund offsets for delinquent fed-      deposits as follows:                               received from IRS (the IRS payment file orders
eral or state taxes, child support, student loans,
                                                                                                        accounts from the lowest to the highest rout-
etc., and freezes on the Earned Income Tax
                                                                               Actual                   ing number). If the debt exceeds the payment
Credit (EITC) portion of a refund until IRS can                   Requested    Direct Deposits          designated for the account that appears first
verify the taxpayer’s eligibility can decrease the
                                                      Account 1 $100           $100
                                                                                                        on the payment file, FMS will reduce the pay-
refund amount available for deposit.
                                                                                                        ment designated for the account that appears
Adjustments resulting                                 Account 2 $100           $50 ($100 taxpayer       next, etc.
                                                                               requested minus
in larger refunds                                                                                          Taxpayers will receive letters from FMS
                                                                               $50 adjustment)
If a taxpayer splits his or her refund among                                                            explaining any offset amounts, the agencies
                                                      Account 3 $100           $0 ($100 taxpayer
multiple accounts and the mistake results in a                                                          receiving the payments, the address and tele-
                                                                               requested minus
larger refund than expected, IRS will add the                                  $100 adjustment)         phone number of the agencies, and amounts
difference to the last account designated.                                                              of their refunds or direct deposits offset.
Example of an adjustment for an increased                                                               Taxpayers who dispute the debts should con-
refund: A taxpayer’s return shows a refund                                                              tact the agencies shown on the notice, not IRS,
                                                                                                                                      continued on page 5
                                                                                                                       2007 TAX HINTS                       5
                                                                                                          Practitioner’s Guide to the Filing Season




continued from page 4
since IRS has no information about the validity      Frequently Asked Questions
of the debt. Information about refund offsets
also will be available through Where’s My            about Splitting 2006
Refund?
                                                     Federal Income Tax Refunds
Where’s My Refund?
The most convenient source
for refund information                               Q. What is a split refund?                         Q. Does my refund have to
Whether taxpayers direct deposit their refunds       A.A split refund lets you divide your refund,      exceed a certain amount to
into several accounts, into one account, or opt      in any proportion you want, and direct deposit     split it into different accounts?
to receive paper checks, they can use IRS’s
popular Where’s My Refund? feature to track
                                                     your funds among two or three different            A.Your deposit to each account must be at
                                                     accounts with U.S. financial institutions.         least $1.00.
their refunds.
   Where’s My Refund? will include a mes-            Q. What are the benefits of                        Q. If I want to split my refund
sage confirming the refund was split and             splitting my refund?                               among different accounts, can
the expected deposit date. It will not specify
the amount of the individual deposits or the
                                                     A.Instead of choosing between depositing           those accounts be with different
                                                     your refund into a checking or savings account     financial institutions?
accounts to which the deposits were made but,
if IRS or FMS adjusted the refund amount for
                                                     and later moving part of your refund to            A.Yes, you can split your refund among up
                                                     another account, you can allocate your refund      to three different U.S. financial institutions as
math errors, offsets, etc., it will inform taxpay-
                                                     among up to three different accounts and send      long as they will accept a direct deposit to your
ers about the amount of the adjustment.
                                                     your money where you want it the first time.       account.
Taxpayers can access Where’s My Refund?
                                                       By splitting your refund, you get the conve-
online at irs.gov or by calling (800) 829-1954.
                                                     nience of directing some of your refund to your    Q. Must I file electronically
Inviting stakeholder input                           checking account for immediate needs and           to split my refund?
IRS invites stakeholders and partners to tell
                                                     sending some to savings for future use. Plus,      A.No, you can split your refund whether
                                                     you get the safety and speed of direct deposit,    you file electronically or on paper. However,
us about their experience with 2006 split
                                                     meaning you will have access to your refund        IRS recommends using e-file to avoid simple
refunds— what worked, and what can be
                                                     faster than if you opt to receive a paper check.   mistakes that could change the amount of your
improved. We welcome feedback from stake-
                                                                                                        refund, and therefore the amount available for
holders about their experiences assisting their      Q. How do I split my refund?                       deposit.
customers and clients during the filing season,
and will use this feedback to modify and
                                                     A.Simply complete and attach Form 8888,
improve the process for 2007 refunds.
                                                     Direct Deposit of Refund, to your federal          Q. Can I split my refund
                                                     income tax return to tell IRS how much and to      if I file a 1040-EZ?
  Stakeholders can comment through their
                                                     which of your accounts you want your refund
IRS stakeholder relationship manager in                                                                 A.Yes, you can split your refund on an
                                                     deposited.
National Public Liaison (NPL) or via e-mail to                                                          original return filed on any of the following
                                                                                                        returns: Form 1040, 1040A, 1040EZ, 1040NR,
splitrefundcomments@irs.gov. Although we             Q. Can I still send my refund
will read and consider every experience or                                                              1040NR-EZ, 1040-SS, or 1040-PR. However,
                                                     to just one account?
suggestion, we can not respond to individual                                                            you cannot split your refund if you file Form
e-mail messages.
                                                     A.Yes, you can ask IRS to direct deposit your      1040EZ-T, Request for Refund of Federal
                                                     2006 refund into just one account, or split it     Telephone Excise Tax, or Form 8379, Injured
Speed, safety and choice —                           among two or three different accounts. The         Spouse Allocation.
with direct deposit you can                          choice is yours.
have it all!
                                                        If you want your refund deposited into one      Q. Will splitting my refund cause
                                                     account, use the special direct deposit lines      a delay in depositing my refund?
                                                     on your tax return (Forms 1040, 1040A, etc.).
Split your refund among                                                                                 A.No, splitting your refund will not cause a
                                                     If you want your refund deposited to two or
as many as three accounts.                                                                              delay. Because it uses direct deposit technol-
                                                     three accounts, use Form 8888, Direct Deposit
                                                                                                        ogy, your funds will be in your accounts more
                                                     of Refund.
                                                                                                        quickly than if you opt to receive your refund in
                                                                                                        a paper check.
                                                                                                                                      continued on page 6
                                                                                                                        2007 TAX HINTS                       6
                                                                                                           Practitioner’s Guide to the Filing Season


continued from page 5


                                                                                                         (without regard to extensions) and the deposit
Q. Can I split my refund between a                   Q. What types of accounts are                       amount. If the deposit is not made into your
direct deposit and a paper check?                    eligible to receive my refund via
                                                                                                         account by the due date of the return (without
A.No, you cannot split your refund between           direct deposit?
                                                                                                         regard to extensions), the deposit is a contribu-
a direct deposit and paper check. You can            A.You can direct your refund to any of              tion for 2007, rather than 2006. You must file
either opt for the safety, security and speed of     your checking or savings accounts with a U.S.       an amended 2006 return and reduce any IRA
direct deposit to one, two, or three different       financial institution as long as your financial     deduction and any retirement savings contribu-
accounts or request your refund via a paper          institution accepts direct deposits for that        tions credit you claimed.
check.                                               type of account and you provide valid routing
                                                     and account numbers. Examples of savings            Q. Can I direct part of my refund
Q. Can I split my refund if                          accounts include: passbook savings, individual      to pay a loan?
I have only two accounts?                            development accounts (IDAs), individual retire-     A.No, you can direct your refund to either a
A.Yes, you can electronically direct your            ment arrangements (IRAs), health savings            checking or savings account; you cannot opt
refund to one, two or three separate accounts        accounts (HSAs), Archer MSAs, and Coverdell         for a direct deposit into a loan account.
at your discretion. This change gives you more       education savings accounts.
convenience, flexibility and options in manag-          However, some financial institutions will        Q. If I use a tax professional to
ing your finances.                                   accept direct deposits for some types of            prepare my return, will it cost me
  You can designate a direct deposit to one          accounts, but not others. Contact your finan-       more to split my refund?
account directly on the Form 1040 series             cial institution to ensure they will accept your
                                                                                                         Tax preparation fees could vary. Ask your tax
of forms or you can use Form 8888, Direct            direct deposit and verify your account and
                                                                                                         professional about his or her fees up front.
Deposit of Refund, to split your refund among        routing number.
two or three different accounts.                        IRS also encourages taxpayers and their          Q. Can I direct part of my refund
                                                     preparers to ensure account and routing num-        into my tax professional’s checking
Q. Must I split my refund equally?                   bers are accurately entered on returns so your
                                                                                                         or savings account to pay my tax
A.No, you have the flexibility of dividing and       funds can be deposited as intended.
                                                                                                         preparation fee?
directing your refund any way you want. There
is no requirement to make the deposits equal.        Q. Can I direct part or all of my                   A.No, you can direct your refund to any of
                                                     refund to my prior year individual                  your checking or savings accounts; you cannot
Q. Can I direct IRS to deposit                       retirement account (IRA)?                           direct your refund to someone else’s account
all or part of my refund to any of                   A.You should ensure your financial institu-         (except for your spouse’s account on a joint
my accounts with any financial                                                                           refund).
                                                     tion accepts direct deposits to prior year IRA
institution?                                         accounts.                                           Q. Are there conditions
A.IRS will direct deposit refunds to any of             As with all IRA deposits, the account owner
                                                                                                         that could change the amount
your checking or savings accounts with any           is responsible for informing their IRA trustee of
                                                                                                         of my direct deposits?
U.S. financial institution that accepts electronic   the year for which the deposit is intended and
deposits. However, you should verify that your       for ensuring their contributions do not exceed      A.There are several factors that could change
financial institution accepts direct deposits for    their annual contribution limitations. IRS direct   the amount of your tax refund—resulting in
the type of account you want to direct your          deposits of federal tax refunds will not indicate   either a larger or smaller refund than expected.
deposit to and verify the account and routing        a contribution year for IRA accounts.               Examples that could increase your refund are
numbers.                                                If you fail to notify your IRA trustee of the    math errors and other mistakes. Examples
                                                     intended year for the deposit, your trustee can     that could decrease your refund include math
Q. If I am filing a joint return with                assume the deposit is for 2007.                     errors, mistakes, owing delinquent federal
my spouse, must our refund be                           IRS is not responsible for the timeliness or     taxes, state taxes, child support, student loans,
deposited to a jointly-held account?                 contribution amounts related to an IRA direct       or other delinquent federal obligations or if
                                                                                                         the Earned Income Tax Credit (EITC) portion of
A.You can ask IRS to direct deposit a refund         deposit. Since an error on your return or an
                                                                                                         your refund is withheld pending further review.
on a joint return into your account, your            offset to your refund could change the amount
                                                     of refund available for deposit (for more infor-       For additional information, see “What if a
spouse’s account, or a joint account. However,
                                                     mation, see “Are there conditions that could        mistake on my return increases the amount of
state and financial institution rules can vary
                                                     change the amount of my direct deposits?”)          my refund?,” “What if a mistake on my return
and you should first verify your financial insti-
                                                     you must verify the deposit was actually made       decreases the amount of my refund?,” “ What
tution will accept a joint refund into an indi-
                                                     to the account by the due date of the return        if I owe back taxes to IRS?,” “How will IRS
vidual account.
                                                                                                                                      continued on page 7
                                                                                                                     2007 TAX HINTS                       7
                                                                                                        Practitioner’s Guide to the Filing Season


continued from page 6


handle my split refund deposits if the Earned      Example: Your return shows a refund of $300           You will receive a letter from IRS explaining
Income Tax Credit (EITC) portion of my refund is   and you ask IRS to split your refund among         why a portion of your refund was withheld,
withheld pending further review?,” “Are there      three accounts with $100 to each account. Due      the effect on your direct deposits, and what
other conditions that could reduce the amount      to an error, your refund is decreased by $150.     information you need to provide to verify your
of my refund and change the amount I want          IRS will adjust your direct deposits as follows:   EITC eligibility. If IRS later determines you are
deposited to each account?” and “What will                                                            eligible to receive the credit, the agency will
happen if I owe both back taxes to IRS and back                              Actual                   deposit the amount withheld into the first
child support, state taxes, student loans, etc?”                Requested    Direct Deposits          account you designated on Form 8888.

Q. What if a mistake on my return                   Account 1 $100           $100                     Q. Are there other conditions that
increases the amount of my refund?                  Account 2 $100           $50 ($100 taxpayer       could reduce the amount of my
A.If you split your refund among multiple                                    requested minus
                                                                             $50 adjustment)
                                                                                                      refund and change the amount I
accounts and the mistake results in a larger                                                          want deposited to each account?
refund than you expected, IRS will add the          Account 3 $100           $0 ($100 taxpayer
                                                                             requested minus
                                                                                                      A.If you owe delinquent state income
difference to the last account you designated.                                                        taxes, back child support, or delinquent
                                                                             $100 adjustment)
Example: Your return shows a refund of                                                                non-tax federal debts such as student loans,
$300 and you ask IRS to split the refund                                                              etc., the Department of Treasury’s Financial
among three accounts, depositing $100 to             IRS will apply this same bottom-up rule to       Management Service (FMS), which disburses
each account. Due to an error, your refund is      adjust direct deposits for refund offsets for      IRS refunds, may offset your refund for the
increased by $150. IRS will adjust your direct     unpaid federal taxes or if the Earned Income       delinquent amount.
deposits as follows:                               Tax Credit (EITC) portion of your refund is           FMS will deduct the past-due amounts from
                                                   withheld pending further review.                   the payment that appears first on the payment
                          Actual                     You will receive a letter from IRS explain-      file received from IRS (the IRS payment file
            Requested     Direct Deposits          ing any errors resulting in adjustments to         orders accounts from the lowest to the highest
                                                   your return, your refund amount, and direct        routing number). If the debt exceeds the pay-
 Account 1 $100           $100
                                                   deposits.                                          ment designated for the account that appears
 Account 2 $100           $100                       IRS recommends using electronic filing to        first on the payment file, FMS will reduce
 Account 3 $100           $250 ($100 taxpayer      avoid math errors and other common problems        the payment designated for the account that
                          requested plus           that can result in adjustments to your return      appears next, etc.
                          $150 adjustment)         and change the amount of your refund.                 You will receive a letter from FMS explaining
                                                                                                      any offset amount, the agency receiving the
  You will receive a letter from IRS explain-      Q. What if I owe back taxes to IRS?                payment, the address and telephone number
ing any errors resulting in adjustments to your    A.If you owe delinquent federal taxes, IRS         of the agency, and amount of your refund/
return, refund amount, and direct deposits.        will withhold the balance due from your refund     direct deposit offset. If you dispute the debt,
  IRS recommends using electronic filing to        and adjust your split refund direct deposits       you should contact the agency shown on the
avoid math errors and other common problems        under the bottom-up rule (see “What if a           notice, not IRS, since IRS has no information
that can result in adjustments to your return      mistake on my return decreases the amount          about the validity of the debt.
and change the amount of your refund.              of my refund?”). You will receive a letter from       You can get information about refund offsets
                                                   IRS explaining any adjustments to your refund      through Where’s My Refund? on irs.gov.
Q. What if a mistake on                            amount and direct deposits.
my return decreases the                                                                               Q. What will happen if I owe both
amount of my refund?                               Q. How will IRS handle my split                    back taxes to IRS and back child sup-
A.If the mistake results in a smaller refund,      refund deposits if the Earned                      port, state taxes, student loans, etc?
                                                   Income Tax Credit (EITC) portion
IRS will use a bottom-up rule and deduct the                                                          A.If you owe delinquent federal taxes,
difference from the amount you designated for      of my refund is withheld pending                   IRS will withhold the balance due from your
the last account shown on Form 8888. If the        further review?                                    refund. If your refund exceeds the amount of
difference exceeds the amount designated for       A.IRS will deposit your refund, less the           your delinquent federal taxes, IRS will adjust
the last account, IRS will deduct the remain-      amount withheld according to the bottom-up         your split refund direct deposits under the bot-
der from the amount designated to the next         rule— see “What if a mistake on my return          tom-up rule discussed earlier (see “What if a
account, etc.                                      decreases the amount of my refund?”                                            continued on page 8
                                                                                                                           2007 TAX HINTS                      8
                                                                                                              Practitioner’s Guide to the Filing Season


continued from page 7


mistake on my return decreases the amount of          n  You incorrectly enter an account or routing       refund was split. It will not specify the amount
my refund?”).                                         number that belongs to someone else and your         deposited into each account, but it will tell you
   If you also owe delinquent state income            designated financial institution accepts the         the estimated date of the deposits and, if IRS
taxes, back child support, or delinquent non-tax      deposit, you must work directly with the respec-     adjusted the amount of your refund for math
federal debts such as student loans etc., the         tive financial institution to recover your funds.    errors, etc., will tell you the amount of the
Department of Treasury’s Financial Management         IRS assumes no responsibility for taxpayer error.    adjustment.
Service (FMS) will deduct the past-due amounts        Please verify your account and routing numbers
from the payment that appears first on the pay-       with your financial institution and double-check
                                                                                                           Q. I forgot a deduction on my   origi-
ment file received from IRS (the IRS payment file                                                          nal return and am filing an amended
                                                      the accuracy of the numbers you enter on your
orders accounts from the lowest to the highest        return.
                                                                                                           return for an additional refund. Can I
routing number). If the debt exceeds the pay-                                                              split this additional refund?
ment designated for the account that appears
                                                      Q. How can I ensure my refund                        A.No, you cannot split a refund on an
first on the payment file, FMS will reduce                                                                 amended return. At this time, IRS does not offer
                                                      is deposited as I designate?
the payment designated for the account that                                                                a direct deposit option for refunds on amended
appears next etc.                                     A.First, check with your financial institution       returns. IRS will mail you a check for the amount
   You will receive a letter explaining any adjust-   to ensure they will accept a direct deposit for
                                                                                                           of your additional refund to the address shown
ments IRS made to your refund amount and              the type of account you are designating. Some
                                                                                                           on your amended return.
direct deposits. You will receive a separate letter   financial institutions will accept direct deposits
from FMS explaining any offset amount, the            for some types of accounts, but not others.          Q. I’m requesting an extension
                                                         Second, ensure you have the correct account
agency receiving the payment, the address and                                                              of additional time to file my 2006
telephone number of the agency, and amount            and routing numbers for the account—ask your
                                                                                                           return. Can I still split my refund?
of your refund or direct deposit that was offset.     financial institution if you are unsure—and dou-
                                                      ble-check the accuracy of the numbers you enter      Yes, you can split your refund on any original
If you dispute the debt on the letter you receive
                                                      on your tax return. An incorrect or transposed       return, even if you have an extension of time to
from FMS, you should contact the agency
                                                      number could result in your financial institution    file your 2006 return.
shown on the notice, not IRS, since IRS has no
                                                      rejecting the deposit, or worse, depositing your
information about the validity of the debt.
                                                      refund into someone else’s account.
                                                                                                           Q. I have not filed my 2005 return
   You can get information about your refund                                                               yet. Can I also split my 2005 refund?
offsets available through Where’s My Refund?             Third, double-check your return to ensure you
on irs.gov.                                           have not made math or other errors that could        A.No, refund splitting is not available for tax
                                                      increase or decrease the actual amount of your       years before 2006. You can opt to direct deposit
Q. What will happen if I                              refund. IRS recommends electronic filing for the     your 2005 refund into either your checking or
                                                      most error-free return.                              savings account, but you cannot split this refund
enter an incorrect routing
                                                                                                           among two or three accounts.
or account number?
                                                      Q. What if I entered the
A.Be very careful entering your account and           correct account and routing
routing numbers. IRS will handle account or
                                                      numbers, but IRS made an error
routing number errors on split refunds the same
as for regular direct deposits and mistakes
                                                      in depositing my refund?                                Standards of Practice
can result in several different scenarios. For        A.IRS will correct any agency errors. Contact           for Tax Professionals
example, if:                                          an IRS customer service representative by
                                                      calling (800) 829-1040.                                 The Office of Professional Responsibility
n You omit a digit in the account or routing
                                                                                                              (OPR) has put together a one-stop
number of an account and the number does not          Q. If I split my refund, can I                          resource for tax professionals. You can
pass IRS’s validation check, IRS will send you a      still use Where’s My Refund?                            review vital information all tax pros
paper check for the entire refund;
                                                      to check my refund status?                              need to know at http://www.irs.gov/
n You incorrectly enter an account or routing         A.Yes, you can check the status of a split              taxpros/agents/article/0,,id=123812,00.
number and your designated financial institu-         refund using the Where’s My Refund? feature             html.
tion rejects and returns the deposit to IRS, IRS      available on irs.gov or by calling IRS’s Refund
will issue a paper check for that portion of your     Hotline at (800) 829-1954. Where’s My Refund?
refund; or                                            will include a message confirming that your
                                                                                                            2007 TAX HINTS                       9
                                                                                               Practitioner’s Guide to the Filing Season




                                     What’s New for 2006—
Preparers                            A Summary of Important Changes
Can Use PTINs
to Help Prevent
                                     M
                                                 ost of these changes are discussed       n  Limit on elective deferrals. Generally, the
                                                 in more detail in Publication 17,        maximum amount of elective deferrals under a
Identity Theft                                   Publication 553, Highlights of 2006      salary reduction agreement that could be con-
                                     Tax Changes, and elsewhere in this issue of Tax      tributed to a qualified plan increased to $15,000
                                     Hints. Be sure to review the final paragraph of      ($20,000 if you were age 50 or older). However,



T
        ax professionals can use a   this article for other changes that could result     for SIMPLE plans, the amount is $10,000 ($12,500
      Preparer Tax Identification    from legislative changes still underway as this      if you were age 50 or older).
      Number (PTIN) instead of       revision was posted.                                 n  Designated Roth accounts. A 401(k) or
their Social Security Number                                                              403(b) plan can include a qualified Roth contribu-
(SSN) on returns they prepare
                                     Standard mileage rates
                                                                                          tion program. Under the program, designated
for clients so they do not have      The standard mileage rate for the cost of operat-
                                                                                          Roth contributions are treated as elective defer-
to disclose their SSNs on those      ing your car is 44.5 cents a mile for all business
                                                                                          rals, except that the contributions are included
returns.                             miles driven in 2006. The standard mileage rate
                                                                                          in income. A qualified distribution from a Roth
   Only paid tax return prepar-      allowed for use of your car for medical reasons is
                                                                                          account is not included in income. For more infor-
ers may apply for a PTIN. Using      18 cents a mile for 2006.
                                                                                          mation on contributions, see Publication 525, and
a PTIN meets the requirement            The standard mileage rate allowed for use of
                                                                                          for distributions, see Publication 575.
under IRC Section 6109(a) (4) for    your car for determining moving expenses is 18
                                                                                          n Qualified reservist distributions. If you
preparers to furnish an identify-    cents a mile for 2006. See also Publication 521.
                                                                                          were a qualified reservist called to active duty for
ing number on returns they have
                                     Retirement savings plans                             more than 179 days, the additional 10% tax on
prepared. The PTIN cannot be
                                     The following paragraphs highlight changes that      early distributions does not apply to distributions
used in place of the Employer
                                     affect individual retirement arrangements (IRAs)     to you after September 11, 2001.
Identification Number (EIN) of
the tax preparation firm.            and pension plans.                                   n  Public safety employees. If you were a pub-
   Preparers can get PTINs online    n  Traditional IRA income limits. You may be         lic safety employee who separated from service
at http://www.irs.gov/taxpros/       able to take an IRA deduction if you were covered    after you reached age 50, the additional 10% tax
article/0,,id=109646,00.html,        by a retirement plan, your modified adjusted gross   on early distributions does not apply to distribu-
the IRS e-services page, or visit    income is less than $85,000, and you are married     tions to you from qualified governmental plans
www.irs.gov, click on “Tax           filing jointly or a qualifying widow or widower.     after August 17, 2006. See Publication 575 for
Professionals” then on the                                                                more information.
                                     n IRA contribution. If you are age 50 or older
link for e-services. After reg-      at the end of 2006, the amount you may be able       Certain amounts increased
istering, preparers should fol-      to deduct as an IRA contribution is increased to
                                                                                          Some tax items that are indexed for inflation
low the online instructions to       $5,000.
                                                                                          increased for 2006.
have a PTIN assigned, or go to
                                     n Combat pay. For purposes of taking an
http://www.irs.gov/pub/irs-pdf/                                                           n Earned income tax credit (EITC). The
                                     IRA deduction, earned income includes any non-
fw7p.pdf to get a Form W-7P,                                                              maximum amount of income you can earn and
                                     taxable combat pay received by a member of
Application for Preparer Tax                                                              still get EITC increased. The amount depends on
                                     the U.S. Armed Forces.
Identification Number. More                                                               your filing status and number of children. The
information about Identify Theft
                                     n Qualified charitable distributions. If you         maximum amount of investment income you
can be found at irs.gov, keyword
                                     have reached age 70½ , you can make a qualified      can have and still be eligible for the credit has
“Identity Theft.”
                                     charitable distribution directly from your IRA to    increased to $2,800.
                                     a qualified organization. You do not include the                               continued on page 10
                                     distribution in your income. See Publication 590
                                     for more information.
                                                                                                                 2007 TAX HINTS                 10
                                                                                                    Practitioner’s Guide to the Filing Season




What’s New for 2006
continued from page 9

                                                                                                     Electronic
n Standard deduction. The standard
deduction for taxpayers who do not itemize
                                                 Alternative minimum tax (AMT)
                                                 The AMT exemption amount is increased to
                                                                                                     Signatures

                                                                                                    T
deductions on Schedule A (Form 1040) has         $42,500 ($62,550 if married filing jointly or           he IRS will continue to offer
increased. The amount depends on your filing     qualifying widow or widower; $31,275 if                 two electronic signature
status.                                          married, filing separately).                            (PIN) methods for individual
n Exemption amount. You are allowed a                                                                taxpayers to sign their e-filed
$3,300 deduction for each exemption to which     Energy credits
                                                                                                     tax returns— the Self-Select PIN
you are entitled. However, your exemption        You may be able to claim a new tax credit           method and the Practitioner PIN
amount could be phased out if you have high      for the purchase of qualified energy efficiency
                                                                                                     method. We strongly recommend
income.                                          improvements to your existing home. You may
                                                                                                     using the PIN because it eliminates
  Limit on itemized deductions. Some             be able to claim a tax credit for the purchase
n                                                                                                    the requirement to submit Form
of your itemized deductions may be limited if    of residential solar water heating, photovoltaic
                                                                                                     8453, U.S. Individual Income Tax
your adjusted gross income (AGI) is more than    equipment, or fuel cell property.
                                                                                                     Declaration for an IRS e-file Return.
$150,500 ($75,250 if you are married, filing     Alternative motor vehicles                          As in the past, taxpayers are still
separately).
                                                 You may be able to take a credit if you place       required to use two pieces of infor-
n  Tax benefits for adoption. The adop-          an alternative motor vehicle in service during      mation to verify their identity when
tion credit and the maximum exclusion from       the year. You no longer can take a deduction        using the Self-Select PIN method.
income of benefits under an employer’s           for clean-fuel vehicles.                            However, beginning in Tax Year
adoption assistance program are increased
                                                                                                     2006, taxpayers will have the ability
to $10,960.                                      Phase-outs reduced
                                                                                                     to provide their prior year PIN as
  Hope or lifetime learning credit               n Personal   exemptions. The phase-out of
n                                                                                                    one of the authenticators.
income limits increased. The amount of           the limit on personal exemptions is reduced
                                                 by 1/3.                                             When using the Practitioner PIN
income you can have and still receive a Hope
                                                                                                     method, completion of Form 8879
or lifetime learning credit has increased. The   n Itemized deductions. The phase-out of
                                                                                                     is still a requirement.
Hope credit is increased.                        the limit on itemized deductions is reduced
n Social  Security and Medicare taxes.           by 1/3.                                             We encourage a thorough and
The maximum wages subject to Social Security                                                         attentive review of the ACK file to
                                                 Credit for clean renewable energy                   ensure the PIN was received suc-
tax (6.2%) increased to $94,200. All wages are
                                                 bonds or Gulf tax credit bonds
subject to Medicare tax (1.45%).                                                                     cessfully by IRS. Submission of a
                                                 You may be able to claim a credit if you held       signature document, Form 8453,
Clothing and household items                     any clean renewable energy bond or Gulf tax         is only required when the return
If you donate clothing and household items to    credit bond during the year.                        was not signed using an electronic
a qualified organization, the items must be in                                                       signature method. The Electronic
                                                 Credit for federal
good used condition or better for you to claim   telephone excise tax paid                           Return Originator must mail Form
a charitable contribution deduction.                                                                 8453 to the IRS within 3 business
                                                 If you paid the federal excise tax on your long
                                                                                                     days after receiving acknowledge-
Child under age 18                               distance or bundled telephone service, you
                                                                                                     ment that the IRS has accepted the
You must use Form 8615 to figure the tax of      may be able to claim a credit.
                                                                                                     electronically filed return.
a child under age 18 (increased from age 14)     Split refunds
with investment income of more than $1,700.                                                          More information on electronic
                                                 If you choose direct deposit of your refund,        signatures can be found in various
The election to report a child’s investment
                                                 you may be able to split the refund into two        Hot Links listed in the back of this
income on a parent’s return and the special
                                                 or three accounts. (See article on page 3.)         publication.
rule for when a child must file Form 6251 also
now apply to children under age 18.
                                                                                                                        2007 TAX HINTS                     11
                                                                                                           Practitioner’s Guide to the Filing Season




Important Reminders on Depreciation
From IRS Fact Sheet FS-2006-27, November 2006



I
  RS encourages taxpayers to understand           Certain property can not                             MACRS cannot be used. Preparers and taxpay-
  the rules surrounding depreciation before       be depreciated, including:                           ers should fully understand the information in
  attempting to deduct business-related depre-    n Land                                               Publication 946 to be certain they are using the
ciation expenses. Overstated adjustments,         n Property placed in service and disposed of         correct method.
deductions, exemptions and credits comprise       in the same year
up to $30 billion per year in unpaid taxes,
                                                                                                       IRC Section 179 Deduction
                                                  n Certain types of intangible assets, such as
according to IRS estimates. To educate prepar-    franchises, agreements not to compete, and           Some taxpayers can elect to recover all or part
ers and taxpayers on their filing obligations,    goodwill                                             of the cost of certain qualifying property, up
this fact sheet explains the general rules for       Property used only for personal activities        to a certain dollar limit each year, by claim-
depreciating assets.                              cannot be depreciated. If an asset such as           ing a Section 179 deduction. By taking the
                                                  a home or motor vehicle has both personal            Section 179 deduction a taxpayer chooses to
Depreciation Basics                                                                                    deduct depreciation up front rather than over
                                                  and business use, only the business portion
In general, if property is acquired for use       of its cost may be depreciated. Depreciation         the life of the asset. It is especially important
in a business or another income-producing         rules regarding partial business or investment       to remember that the Section 179 deduction
activity and is expected to last more than        use are discussed in Publication 946, How to         may be taken only on assets acquired for use
one year, taxpayers cannot deduct the entire      Depreciate Property.                                 in trade or business, not on property used for
cost as a business expense in the year it was                                                          other income-producing activities, such as
acquired. They must depreciate the cost over      Computing Depreciation                               rental activities. See Publication 946, How to
the property’s useful life (as defined by the     In order to compute depreciation correctly a         Depreciate Property, for detailed rules appli-
Internal Revenue Code) and deduct part of the     taxpayer must know the following:                    cable to the Section 179 deduction.
cost each year on Form 4562, Depreciation         n When the asset was placed in service for use
and Amortization. (Refer to IRC Section 179
                                                                                                       Disposing of Depreciable Assets
                                                  n a business or income-producing activity
Deduction below for an exception.)                n The basis of the depreciable asset, and
                                                                                                       Depreciation reduces the owner’s basis in the
   Correctly computing depreciation deductions    n The depreciation methods available
                                                                                                       property. When depreciable property is sold or
can be a challenging process which cannot be         Generally property is considered placed in        disposed of, depreciation that was allowed or
covered thoroughly here. You and your clients     service when it is ready and available for a         allowable on that property must be taken into
with depreciable business or income-producing     specific use, regardless of whether or not it        consideration. In other words, even if no depre-
assets should study the resources listed at the   is actually used at the time. For example, a         ciation deduction was taken, the net profit or
end of this article for further information.      house purchased for use as rental property is        loss on the disposition of the property must
                                                  placed in service when it is ready and available     be computed as if depreciation was actually
In order to be depreciated,
                                                  to rent, even if it is not actually rented at that   taken. Taxpayers must also follow recapture
property must:
                                                  time.                                                rules to determine the amount of gain to be
n Be property the taxpayer owns
                                                     The basis is the amount that will be              treated as ordinary income rather than capital
n Be used in the taxpayer’s business or
                                                  recovered (deducted) once the asset is fully         gain. More information on the disposition of
income-producing (investment) activity
                                                  depreciated. It may be the cost of the asset or      assets can be found in Publication 544, Sales
n Have a determinable useful life
                                                  another amount, depending on how and when            and Other Dispositions of Assets.
n Be expected to last more than one year
                                                  it was acquired. Information on determining          Also see:
                                                  basis is available in Publication 946, How to
                                                                                                       n IRS Publication 946, How to Depreciate
                                                  Depreciate Property, and Publication 551,
                                                                                                       Property
                                                  Basis of Assets.
                                                                                                       n IRS Publication 551, Basis of Assets
                                                     Most assets are depreciated according to the
                                                                                                       n IRS Publication 544, Sales and Other
                                                  Modified Accelerated Cost Recovery System
                                                                                                       Dispositions of Assets
                                                  (MACRS). However, there are situations when
                                                                                                                        2007 TAX HINTS                        12
                                                                                                           Practitioner’s Guide to the Filing Season




ITIN (Individual Taxpayer Identification Number)                                                           Where to Send
Authorized Acceptance Agents                                                                               Authorization Requests

                                                                                                           P
                                                                                                                 ower of Attorney or Tax Information




A
      n Acceptance Agent (AA) is a person             The category of excepted applicants includes:              Authorization requests should be
                                                                                                               directed wto Memphis or Ogden.
        (an individual or an entity) who, pursu-      a financial institution within the meaning of
         ant to a written agreement with IRS, is      IRC section 265(b)(5) or Treasury Regulations        If your principal business, office or agency or
authorized to assist alien individuals and other      1.165-12(c)(1)(iv); a college or university that     legal residence in the case of an individual, is
foreign persons who are ineligible or unable          qualifies as an educational organization under       located in:
to receive a Social Security Number to get an         Treasury Regulations 1.501(c)(3)-1(d)(3)(i);         Alabama        Kentucky          North Carolina
ITIN. Revenue Procedure 2006-10 describes             casinos; applicants who have passed the suit-        Arkansas       Louisiana         Ohio
the application process for acceptance into the       ability check for Electronic Return Originator       Connecticut    Maine             Pennsylvania
AA Program and the requisite agreement that           (ERO) status and who remain in good standing         Delaware       Maryland          Rhode Island
                                                                                                           District of    Massachusetts     South Carolina
must be executed with IRS.                            with the IRS, along with Federal Agencies as
                                                                                                             Columbia     Michigan          Tennessee
   Any eligible person can apply to become            defined in IRC section 6402(g). The fingerprint
                                                                                                           Florida        Mississippi       Vermont
an Acceptance Agent. An eligible person may           card used for the Acceptance Agent Program           Georgia        New Hampshire     Virginia
be a U.S. or foreign person, at least twenty-         is unique, and should be obtained by calling         Illinois       New Jersey        West Virginia
one years of age (as of the date of the AA            the IRS Andover Campus at (866) 255-0654.            Indiana        New York
Application) and must be involved in the              Individuals can not take their own fingerprints.
                                                                                                           Write, call or fax:
tax profession. Examples of eligible persons          Additional information can be found in the
                                                                                                           Memphis Accounts Management Center,
include tax practitioners, CPAs, colleges and         Instructions for Form 13551.
                                                                                                           CAF Unit
universities, financial institutions, partnerships,      Once the application process has been com-        5333 Getwell Road, Stop 8423
corporations or any other person or categories        pleted, if you have been accepted into the AA        Memphis, TN 38118
of persons who are involved in the tax profes-        Program you will enter into an agreement with        Fax: (901) 546-4115 Phone: (901) 546-4176
sion and who may be authorized under IRS              the IRS outlining the terms and conditions to
regulations or procedures.                            ensure proper administration of the process by       If your principal business, office or agency or
   There is no fee associated with becoming           which the IRS issues ITINs. An agreement stays       legal residence in the case of an individual,
                                                                                                           is located in:
an IRS AA. The application process begins             in effect for four years, after which time it must
with completion of Form 13551 (Application            be renewed. The current processing time is 120       Alaska         Minnesota         Oregon
to Participate in the IRS Acceptance Agent            days from the date the application is received       Arizona        Missouri          South Dakota
Program). Applicants will also be required to         by IRS.                                              California     Montana           Texas
submit to a suitability background check before          Completed applications with required attach-      Colorado       Nebraska          Utah
                                                                                                           Hawaii         Nevada            Washington
being authorized to act as an Acceptance              ments, should be sent to the Internal Revenue
                                                                                                           Idaho          New Mexico        Wisconsin
Agent. A suitability background check includes        Service, Mail Stop 983, Andover, MA 05501.
                                                                                                           Iowa           North Dakota      Wyoming
an IRS review of the applicant’s tax filing his-                                                           Kansas         Oklahoma
tory to determine if the applicant is in full com-        New Address
pliance with filing and payment responsibilities                                                           Write, call or fax:
                                                          For Filing Form W-7                              Ogden Accounts Management Center,
under the Internal Revenue Code (IRC) and its
                                                          Effective January 1, 2007, all Forms             CAF Unit
regulations.                                                                                               1973 North Rulon White Blvd., Stop 6737
                                                          W-7 (Application for IRS Individual
   The applicant or applicant’s representative                                                             Ogden, UT 84404
                                                          Taxpayer Identification Number) will be
who has the authority to sign the Acceptance                                                               Fax: (801) 620-4249 Phone: (801) 620-4254
                                                          processed in the IRS Service Center
Agent Agreement will also be subject to an
                                                          in Austin, Texas. Applications will no
FBI background check, including fingerprint-                                                               International requests will continue to be
                                                          longer be processed in Philadelphia              processed at:
ing. However, there are exceptions to this rule.
                                                          due to a reorganization of Service               Philadelphia Accounts Management Center,
Any individual who is authorized to practice
                                                          Center functions. The new address                CAF Unit
before the IRS under Circular 230 and provides
                                                          for mailing ITIN applications is:                11601 Roosevelt Blvd. DPSW 312
evidence of current professional status will                                                               Philadelphia, PA 19255
not be subject to the requirements of the FBI             Internal Revenue Service
                                                                                                           Fax: (215) 516-1017 Phone: (215) 516-5996
background check. The IRS, however, may                   ITIN Operation
consider the tax filing history of the entity and         P.O. Box 149342                                  We are processing faxed requests in 48 hours
the individual in evaluating their application.           Austin, TX 78714-9342                            and paper requests in five business days.
                                                                                                                     2007 TAX HINTS                 13
                                                                                                        Practitioner’s Guide to the Filing Season




EITC Resources Online 24/7

T
    his year, go online for your Earned Income       irs.gov and information about IRS’s                Proper Payment
   Tax Credit (EITC) needs. Whether you              Taxpayer Advocate Service.
   need to qualify clients, market your EITC
                                                                                                        Voucher for
services or ensure your tax practice complies        Meeting due diligence                              Gift taxes
                                                     requirements
with the EITC due diligence requirements,
you’ll find toolkits, interactive web features
and resources online at your fingertips 24/7
at www.irs.gov/eitc.

Qualifying clients online
                                                     As a tax professional, you must exercise the
                                                     same due diligence in preparing returns claim-
                                                     ing EITC as with any other deductions and
                                                     credits. However, unlike other tax credits, the
                                                     Income Tax Regulations impose four due dili-
                                                                                                        F         orm 8892 (Payment of Gift/
                                                                                                                 GST Tax and/or Application for
                                                                                                               Extension of Time to File Form
                                                                                                         709) should always be used as a pay-
                                                                                                         ment voucher for gift taxes owed. File
Book mark the EITC Assistant as your defini-         gence requirements to ensure EITC accuracy.         this form at the Cincinnati Campus
tive resource to determine client eligibility. The   These include:                                      (Internal Revenue Service Center,
EITC Assistant will guide you through simple            1. Completing Form 8867, Paid Preparer’s         Cincinnati, OH 45999.) Form 8892
steps and questions to determine whether             Earned Income Credit Checklist, or an equiva-       should also be used when requesting
your client qualifies for EITC, even tackling        lent form, based on information either pro-         an extension to file a Gift Tax return.
the tough issues of filing status and qualifying     vided by the taxpayer or reasonably obtained        If the donor is requesting extensions
children in a straightforward manner. The EITC       by you. This Checklist ensures you consider all     to file BOTH Form 1040 and Form
Assistant will then compute the amount of            aspects which may qualify or disqualify a client    709 (gift tax), then Form 4868 should
EITC after the eligibility issues are addressed.     for EITC;                                           continue to be used.
   With the EITC Assistant, you can walk your           2. Completing the EIC worksheet in the
                                                     Form 1040/1040a/1040EZ instructions, or an          The annual exclusion for Gift Taxes
clients through the EITC qualifications on-
                                                     equivalent form. Your records must reflect the      (Form 709) has been increased to
screen, in either English or Spanish, and show
                                                     information and computation method used in          $12,000 per donee, per year for a
them whether or not they qualify. Using the
                                                     your EITC calculation;                              present interest gift in 2006. (This
EITC also can help you avoid two of the most
                                                        3. Retaining these records for 3 years after     replaces the former annual exclusion
common practitioner errors in computing the
                                                     June 30th following the date the return was         of $11,000.)
credit: claiming a child who is not a qualify-
ing child, and filing as “single” or “head of        presented to the taxpayer for signature; and        The Estate Tax exemption equivalent
household” when the taxpayer is actually mar-           4. Having no knowledge as well as no             will increase to $2,000,000 for dece-
ried. The two other most prevalent errors are        reason to know that any information used in         dents dying in 2006 and the maxi-
reporting incorrect income amounts and enter-        determining the taxpayer’s eligibility or com-      mum tax rate for 2006 drops to 46%.
ing incorrect Social Security numbers for either     puting the EITC is incorrect. You cannot ignore
                                                                                                         A State Death Tax Deduction
taxpayers or their qualifying children.              the implication of information furnished to,
                                                                                                         replaces the State Death Tax Credit
                                                     or known by, you and must make reasonable
Specialized tools just for you                       inquiries whether the information appears to
                                                                                                         for decedents dying after 12/31/04
Bookmark the EITC Electronic Toolkit for                                                                 on the estate tax form (Form 706).
                                                     be incorrect, inconsistent or incomplete.
Tax Professionals as your one-stop informa-                                                              Line 13 on the old version of Form
                                                        Tax professionals who fail to follow due
tion resource, including special EITC rules for                                                          706 has been deleted. A new line 3b
                                                     diligence requirements may be assessed a
military, clergy, and people with disabilities.                                                          allows a deduction for state death
                                                     $100 penalty for each failure. For additional
Embedded links make navigating EITC infor-                                                               taxes paid.
                                                     information on these regulations, see Treas.
mation easy, including links to forms, check-        Reg. §1.6695-2.                                     For more information on estate
lists, and the latest news about EITC initiatives.      Alert your small business clients who claim      and gift tax, including Forms and
Criteria for 2006 claims, compliance initiatives,    EITC that they also must follow the due             Publications, go to www.irs.gov and
and qualifying child tie-breaker rules are just a    diligence procedures. Internal Revenue Code         click on Businesses (on the left side
few of the subject categories.                       (IRC) Section 6001 requires, for example,           of the page under information) and
   Under the Tools section, you’ll find free         Schedule C filers (small business owners and        then scroll down to Estate and Gift
educational products to help market your EITC        self-employed individuals) to keep books and        Taxes.
service, including letter templates, newsletter      records to substantiate items on their tax
copy and flyers. The Resources section includes      returns. They must provide this information to
links to the EITC Assistant, IRS publications,       the IRS if requested.
                                                                                                                             2007 TAX HINTS                    14
                                                                                                                Practitioner’s Guide to the Filing Season




Assisting Non-English-speaking Taxpayers

The IRS offers a suite of multilingual products      Spanish tax publications are available on              Publication 4636 is available online in
and services in Spanish and a limited number         the web at https://www.irs.gov/Español. You            Spanish, Chinese, Vietnamese, Korean, and
of products in Chinese (Mandarin), Korean,           can also get Spanish forms and publications            Russian. The Spanish version is titled Opening
French, Vietnamese and Russian. These multi-         by calling toll-free (800) TAX-FORM, or                the Door to the Spanish-speaking Customer,
lingual products come in various formats and         (800) 829-3676.                                        Abriéndole la Puerta al Cliente de Habla
are designed to educate non-English-speaking                                                                Hispana and includes these tax information
taxpayers about their tax responsibilities.                                                                 brochures:
                                                     Toll-free Services
                                                     Recorded tax information. The TeleTax
                                                                                                            n Publication 4346A, Basics of Tax Processing,
irs.gov                                                                                                     Lo Básico en el Procesamiento de
                                                     line at (800) 829-4477 has recorded messages
IRS’s Spanish web page (https://www.irs.gov/                                                                Declaraciones
                                                     in Spanish around the clock, covering more
Español) offers tax information for individuals                                                               Publication 4346B, Why Should I Pay Taxes,
                                                     than 100 tax topics.                                   n
and small businesses. For individual taxpayers,                                                             Por que debo pagar Impuestos
the web page contains many forms, publica-           Check refund status. The Refund Hotline
                                                     provides information in Spanish at (800) 829-
                                                                                                            n Publication 4346C, IRS Toll Free Telephone
tions and brochures that provide detailed tax
                                                     1954. You will need to know your client’s filing       Service, Servicio Telefónico Gratuito del IRS
information. Interactive applications are also
available to assist you and your client deter-       status and the exact whole-dollar amount of            nPublication 4346D, EITC 2005—Don’t Guess.
mine eligibility for the Earned Income               the expected refund.                                   Know., EITC 2005 No Advine. Infórmese
Tax Credit and calculate withholding.                                                                       nPublication 4346E, Understanding Your IRS
                                                     For further assistance you can also talk
                                                     with a Spanish-speaking IRS representative             Notice, Entendiendo su Aviso del IRS
The EITC Assistant (Crédito por Ingreso
del Trabajo (EITC) - ¿Debo Solicitarlo?),            by calling the toll-free customer service line at      nPublication 4346F, Getting Help With Your
helps you and your client accurately determine       (800) 829-1040.                                        Unresolved Tax Problems, Recibiendo Ayuda
eligibility for EITC by answering some basic                                                                Con Problemas de Impuesto No Resueltos
questions.                                           More new Spanish-language                              The Spanish language DVD Novela de
                                                     tax products for this filing                           los Impuestos Federales is a realistic portrayal
The Withholding Calculator (Calculadora
Para La Retención de Impuestos) is avail-
                                                     season                                                 of an immigrant’s journey to understand their
able to help taxpayers ensure that they do not       Publication 4445, Spanish Practitioner Toolkit         tax responsibility. For more information check
have too much or too little income tax with-         is now available online. The toolkit contains          the web at https://www.irs.gov/Español.
held from their pay. It is not a replacement for     brochures that guide you through the tax filing
                                                                                                            Audio CDs in Chinese, Vietnamese, Korean,
Form W-4, but most people will find it more          process. The toolkit also:
                                                                                                            Russian and Spanish explain basic taxpayer
accurate and easier to use than the worksheets       n   Identifies bilingual resources available to you;   rights and responsibilities. For more informa-
that accompany Form W-4. The results of this                                                                tion check the web at https://www.irs.gov/
                                                     n Explains different types of income and how
program can be used to help your client com-                                                                Español.
                                                     to report and pay tax for each type;
plete a new Form W-4.
                                                     n Explains employment statuses and how to
New this filing season: links to Where’s                                                                    Our most popular publications
                                                     report and pay taxes on income earned under
My Refund? (Donde esta Mi Reembolso?)                                                                       are now available in Spanish
                                                     these categories;
application. This interactive application lets you                                                          n Publication 1(SP), Your Rights as a
                                                     n Explains the benefits of participating in the
learn when the IRS processed your client’s tax                                                              Taxpayer, Derechos del Contribuyente, and
                                                     tax process such as establishing residency,
return and when their refund will be sent.
                                                                                                            n Publication579(SP), Cómo Preparar su
                                                     qualifying for tax credits and complying with
For business customers, the web page provides        tax laws; and                                          Declaración de Impuesto Federal, explains
access to the most recent forms, publications                                                               who must file a federal tax return and other
                                                     n Illustrates important information that
and other tax information. This information can                                                             important topics, such as which forms to file,
                                                     Spanish-language clients need to know when
be found on https://www.irs.gov/Español by                                                                  who are dependents, what income is taxable
                                                     selecting a tax preparer.
clicking on the Small Business link (Recursos                                                               and nontaxable, and what some of the more
Para Pequenas Impresas).                                                                                    common credits are.
                                                                                                                           2007 TAX HINTS                        15
                                                                                                              Practitioner’s Guide to the Filing Season




IRS e-file Marketing Tool Kit                            The IRS e-file Marketing Tool Kit
contains IRS e-file promotional products and informational publications designed to
help Authorized IRS e-file Providers get the word out to current and prospective clients                     Key IRS
about the benefits of e-file and e-pay. IRS e-file is a method of filing tax returns that
is proven to increase the satisfaction of tax professionals and taxpayers. Use the ele-                      Personnel
ments in the IRS e-file Marketing Took Kit that work best for you. http://www.irs.gov/                       Changes in 2006
taxpros/providers/article/0,,id=97538,00.html



                                                                                                            D
                                                                                                                    uring the last year IRS has
Learn All About IRS e-file in Publication 3452                                                                         announced several top echelon
Presented in an easy to follow Question and Answer format and geared precisely for                                   leadership changes. If you missed
tax professionals, Publication 3452 is a comprehensive guide to e-file featuring a front                     any of these key personnel announce-
page summary of key dates coming up for the 2006 tax year. The 6-page guide can                              ments, you can review the news releases
be explored online or downloaded for later reference if you prefer. Check it out at:                         containing the announcements on
http://www.irs.gov/pub/irs-utl/p3452taxpronl.pdf.                                                            the News Release Archive page of the
                                                                                                             Newsroom link from www.irs.gov or use
                                                                                                             these links:

                                                                                                             IRS Announces Kathy Petronchak
Most Common Reasons for Power of Attorney (PoA)                                                              Appointed Chief of Staff

and Tax Information Authorization (TIA) Rejection                                                            IR-2006-65, April 17, 2006 — Petronchak
                                                                                                             will assist the Commissioner in overseeing
Form 2848 Power of Attorney                          n If Box 8 is checked, Retention/Revocation of          IRS operations and planning the direction
The most common reasons for a Form 2848              Prior Power(s) of Attorney Forms are submit-            of IRS programs.
Power of Attorney rejection are:                     ted with Box 8 checked, however, no copy of
                                                                                                             Wagner Named Deputy Commissioner
                                                     the power of attorney is attached to identify
n Form  2848 is missing Representative or                                                                    of the IRS Tax Exempt and
                                                     the representative that is being retained. The
Taxpayer signatures or both, or signature                                                                    Government Entities Division
                                                     revocation has the same years, periods and
dates. The requirement for the signature                                                                     IR 2006-100, June 21, 200—The Internal
                                                     tax matters as authorized on CAF.
and date are found on Page 4 of Form 2848                                                                    Revenue Service today announced the
                                                     n   No designation shown.
Instructions.                                                                                                appointment of Christopher Wagner as
                                                     n No jurisdiction shown, applicable for                 Deputy Commissioner of the Tax Exempt
n  Non-specific identification of tax periods (tax
                                                     designations A, B, C or G.                              and Government Entities (TE/GE) Division.
matters) on line 3 is a major reason for rejec-
tion of the Form 2848. Avoid generalizations         n Title of employee of company being
                                                     authorized not indicated.                               IRS Selects Ng as LMSB’s
such as “all years” or “all future periods.”
                                                                                                             Deputy Commissioner, International
Page 2 of the Form 2848 Instructions outlines
                                                     Form 8821 Tax Information Authorization                 IR-2006-99, June 21, 2006—The Internal
several acceptable entries for the tax matters
                                                     The most common reasons for a Form 8821                 Revenue Service selected Frank Y. Ng
field, such as “2000 through 2002” or “2000
                                                     Tax Information Authorization rejection are:            to fill the new position of Deputy
- 2002” or “2000, 2001, 2002.”
                                                     n Missing taxpayer signature, date or both.             Commissioner, Large and Mid-Size
n  If Box 4 is checked, Specific Use Not
                                                     The requirement for the signature and date              Business (International).
Recorded on CAF. We will attempt contact
with the taxpayer to verify specific use intent.     are found on Page 4 of the instructions.                New Top Leadership Team Selected
If we are unable to make phone contact, the          n Non-specific identification of tax periods            IR-2006-174, Nov. 9, 2006—Internal
form will be rejected for clarification.             (tax matters), as in second point above.                Revenue Service Commissioner Mark W.
n Line 6. Receipt of Refund Checks. The              n Incorrect EIN/SSN for taxpayer or business            Everson today announced the appoint-
name of the person authorized to receive             (and IRS is unable to identify and verify it            ment of Kevin Brown and Linda Stiff as
refund checks is listed and the initials of the      through our records).                                   the agency’s two new deputy commis-
taxpayer(s) are not present.                         For more information, visit www.irs.gov/caf.            sioners, effective December 1.


Schedule K-1,                                        If your firm or your client’s firm is creating barcoded Schedules K-1, certification for both the printed
                                                     K-1, as well as the barcode itself is mandatory. The IRS has created procedures for the testing pro-
Two-Dimensional
                                                     cess. Review these procedures at http://www.irs.gov/efile/article/0,,id=129860,00.html
Barcodes                                             Following these procedures as closely as possible will help speed the approval and testing process.
                                                                                                                    2007 TAX HINTS                     16
                                                                                                     Practitioner’s Guide to the Filing Season




Guidelines for Faxed Submissions



B
     ased on requests from practitioners and       Specific guidance on                             n   Letter to designate a payment
     other stakeholders, IRS has adopted the       use of faxes in tax                              n   Letter to request non-filing of lien
     following guidance on the acceptance          administration processes                         n   Letter to request lien release
of faxes by taxpayers and the practitioner         (Lists not all-inclusive)
community.
                                                                                                    n   Letter to request lien withdrawal
                                                   1. The following specific documents, forms or    n   Letter to request non-assertion of penalty
General                                            letters will continue to be accepted by fax in
                                                                                                    n   Letter to provide reasonable cause statement
                                                   routine operations:
These general guidelines apply to all divisions                                                     n Supporting Statement to Correct Information
and cover operations related to income tax,        n   EIN Requests (Form SS-4)
                                                                                                    (Form 941C)
employment tax, excise tax, estate tax, gift       n   Power-of-Attorney (Form 2848)
                                                                                                    n Election by a Small Business Corporation
tax, generation-skipping tax and tax exempt        n   Taxpayer Authorization (Form 8821)
                                                                                                    (Form 2553).
and employee plans determinations.
                                                   n   1120S Election (Form 2553)
                                                                                                    3. Consents to assess additional tax (Forms
n  Filing of original tax returns via fax will     n   Return/Transcript Requests (Form 4506)
                                                                                                    4549, 870 and others) of $25,000 or less can
only be allowed as part of a return perfection
                                                   n Request for Public Inspection or Copy of       be accepted by fax if taxpayer contact has
process (e.g., securing a missing schedule or
                                                   Exempt or Political Organization IRS Form        been made and the case history documents
missing signature) initiated by IRS or in post-
                                                   (Form 4506-A)                                    the date of contact and the desire of the
filing or non-filing activities described in the
                                                   n   Foreign Certification Requests               taxpayer to submit the consent by fax.
next bullet. Tax returns can be received via
                                                       Appeals Conference Requests                  Consents to assess tax in excess of $25,000
fax as part of return perfection even if a tax-    n
                                                                                                    should be secured with original signatures
payer signature is required, provided that the     n Responses or documentation needed to
                                                                                                    that are delivered in person or by mail.
IRS contact with the taxpayer has been made        resolve filing or post-filing questions or
and documented.                                    correspondence.                                  4. Taxpayer closing agreements involving
                                                                                                    tax amounts of $25,000 or less can be accept-
n  Submission of documentation, forms, letters     2. The following specific documents, forms or
                                                                                                    ed by fax if taxpayer contact has been made
and returns related to post-filing or non-filing   letters can be accepted by fax if contact has
                                                                                                    and the case history documents the date of
inquiries and interactions can be allowed via      been made with the taxpayer by phone or in
                                                                                                    contact and the desire of the taxpayer to sub-
fax based on taxpayer or IRS request unless        person and the taxpayer history file is docu-
                                                                                                    mit the consent by fax. Closing agreements
there is a specific prohibition. This allowance    mented with the date of contact and notation
                                                                                                    for tax amounts in excess of $25,000 should
applies to inquiries and interactions conducted    is made that the taxpayer wishes to send the
                                                                                                    be secured with original signatures that are
by Field Assistance, Accounts Management,          document, form or letter by fax:
                                                                                                    delivered in person or by mail.
Compliance Services, Field Examination, Field      n Requests for Innocent Spouse Relief
Collection, Determinations Units, Appeals and                                                       5. Employee Plan and Exempt Organization
                                                   (Form 8857)
the Taxpayer Advocate Service, or related to                                                        determination letter applications will not be
                                                   n Taxpayer Statement About a Refund
post-submission inquiries and interactions                                                          accepted via fax.
                                                   (Form 3911)
conducted by Employee Plans or Exempt
                                                       Injured Spouse Claim (Form 8379)             6. Determination Letter Requests related to
Organizations in connection with an applica-       n
                                                                                                    income tax, gift tax, estate tax, generation-
tion for a determination or a request for a rul-   n   Installment Agreements (Form 433-D)
                                                                                                    skipping transfer tax, employment tax and
ing. Documentation, forms, letters and returns     nCollection Information Statement –              excise tax matters will not be accepted
can be received via fax in these circumstances     Wage Earner (Form 433-A)                         via fax.
even if a taxpayer signature is required, pro-
                                                   n Collection Information Statement –
vided that IRS contact with the taxpayer has                                                        7. Consents to extend the statute of limita-
                                                   Business (Form 433-B)
been made and documented.                                                                           tions for assessing tax (Form 872, SS-10 and
                                                   n   Early Referral Requests                      other consent forms) will not be accepted
n The IRS will not acknowledge faxes received
                                                   n   Fast Track Mediation Requests                via fax in normal operations.
from taxpayers in the course of tax adminis-
tration activities by a return fax. Exceptions     n Request for Collection Due Process Hearing
can be made in unusual circumstances as            (Form 12153)
determined by IRS management.
                                                                                                    2007 TAX HINTS                          17
                                                                                      Practitioner’s Guide to the Filing Season




                                                                                     The Information Reporting
Use These Simple Solutions                                                           Program Advisory
                                                                                     Committee (IRPAC)
for an Error-free Tax Return

                                                                                     T
                                                                                          he IRPAC was created in 1991 to advise
                                                                                          the IRS on information reporting issues of
                                                                                          mutual concern to the private sector and
This checklist is primarily aimed at individual taxpayers preparing their own
                                                                                     the federal government. The members (http://
returns manually. Even so, it contains valuable tips and advice for any preparer.
                                                                                     www.irs.gov/taxpros/article/0,,id=120326,00.
If you take a few minutes to double-check the return, you can help clients
                                                                                     html) have a broad spectrum of experience
ensure that it will sail through the IRS processing center error-free:
                                                                                     with information reporting, representing the
3                                                                                    payroll community, banks, mutual funds, the
q Use the peel-off label. You may line through and make necessary corrections
                                                                                     insurance industry, state tax administration,
right on the label. Be sure to fill in Social Security Numbers in the box provided
                                                                                     colleges and universities and their peers in the
on the return. It is not on the label.
                                                                                     tax professional community. Each year IRPAC
 3
q If you do not have a peel-off label, fill in all requested information clearly,    prepares a report (http://www.irs.gov/taxpros/
including the Social Security Numbers.                                               article/0,,id=120326,00.html) on issues they
                                                                                     have studied, making recommendations to the
3
q Check only one filing status on the tax return and check the appropriate           IRS Commissioner.
exemption boxes. Enter the correct Social Security Number for each of those             The members are selected for a three-year
exemptions. Write legibly. Remember that incorrect, missing or illegible SSNs        term and meet in Washington, DC five times a
will cause a processing delay of your refund if you are due one.                     year. In the Spring the IRS solicits IRPAC nomi-
                                                                                     nations for new members through a notice
3
q Use the worksheet in the instructions for Forms 1040 or 1040A or in IRS            in the Federal Register and information on
Publication 972, Child Tax Credit. Miscalculated child tax credits cause the         the Tax Professionals’ page of irs.gov. More
majority of common errors.                                                           information and copies of the annual reports
                                                                                     can be found at http://www.irs.gov/taxpros/
3
q Use the correct Tax Table column for the filing status. Use a ruler;
                                                                                     article/0,,id=107753,00.html.
double check.

3
q Check and double check all figures on the return. Math errors are common.
                                                                                     New Links Added this Year
3
q Check the accuracy of financial institution routing and account numbers            The Information Reporting Program
entered on the return for a direct deposit of a refund. Incorrect numbers can        Advisory Committee (IRPAC) requested dur-
cause delay or misdirection of the refund.                                           ing their 2006 meetings that the Service
                                                                                     consider development of a practitioner
3
q Sign and date the return. If filing a joint return, both spouses must sign         reference guide to serve as a substitute for
and date the return.                                                                 Package X, which was quite costly to print
                                                                                     and mail, and was discontinued.
3
q Attach all Forms W-2, 1099R and others that reflect taxes withheld to the             At the same time, IRPAC was reviewing
front of the return. If you are filing a Form 9465, Installment Agreement            the findings of a survey taken among 2005
Request, attach that to the front also. Attach all other necessary forms and         Nationwide Tax Forums attendees. The find-
schedules in the order as listed in the attachment sequence order in the upper       ings suggested that those surveyed would
right corner of each form or schedule.                                               value a practitioner reference guide too.
                                                                                        Accordingly, NPL is adding a list of hot-
3
q If you owe tax, enclose a check or money order made payable to the United          links to topic areas on the Tax Pros Tool Kit
States Treasury, along with the Form 1040-V, Payment Voucher, with the return.       website that incorporates what was most
You may choose to pay by credit card by contacting one of the credit card ser-       sought after in the practitioner reference
                                                                                     guide: http://www.irs.gov/taxpros/article/
vice providers. If you file electronically, you may authorize the U.S. Treasury to
                                                                                     0,,id=118004,00.html.
withdraw the payment directly from your bank account.
                                                                                     If you do not find reference materials you are seek-
                                                                                     ing, please notify the Tax Hints editor so they can
3
q For a complete checklist and listing of some of the most common errors, see
                                                                                     be included next year. Please note, Tax Hints can
Tax Topic 303 at irs.gov or call the toll-free TeleTax number, (800) 829-4477.       only link you to documents and information that are
                                                                                     already posted on the www.irs.gov website.
                                                                                                                    2007 TAX HINTS                       18
                                                                                                       Practitioner’s Guide to the Filing Season




Federal Tax Deposit Requirements
for Employment Taxes


D
       o employment tax requirements con-                                                            If the due date for a deposit falls on a federal
                                                     If total taxes
        fuse you? You’re not alone. The rules        reported in the          then                   or state bank holiday or on a Saturday or
      are not one-size-fits-all and can be diffi-    look-back period were:   employer is a:         Sunday, the deposit is considered timely if it
cult to navigate. This summary will help clear                                                       is made by the close of the next banking day.
                                                     $50,000 or less          Monthly Schedule
up some of the mystery.                                                       Depositor              Reminder: If you are a Semi-weekly
  Employers must file Form 941, Employer’s                                                           Depositor, you must attach Form 941,
Quarterly Federal Tax Return, and make               More than $50,000        Semi-weekly
                                                                                                     Schedule B, to your Form 941. Note: No
                                                                              Schedule Depositor.
regular federal tax deposits (FTDs) of employ-                                                       monthly or semi-weekly FTD payments are
ment taxes, which include employees’ with-                                                           required if the total tax liability for the quar-
held federal income tax, Social Security tax,       their business. If, however, a new employer      ter is less than $2,500. Employers may mail
Medicare tax and the employer’s share of            accumulates a tax liability (reduced by any      in payments with their quarterly Form 941.
Social Security and Medicare taxes.                 advance Earned Income Credit (EIC) pay-
  The deposit schedule may be either monthly        ments) of $100,000 or more on any day dur-       If employers have a deposit
or semi-weekly, depending on the amount             ing a deposit period, they must deposit the      requirement, they may choose
owed during a four-quarter look-back period.        tax by the next banking day. FTD payments        one of two deposit methods:
The look-back period for calendar year 2006         are based on when wages are paid, not
                                                                                                     n FTDs can be made the preferred way
covers the four calendar quarters from July 1,      earned, and must be deposited as follows:
                                                                                                     through the Electronic Federal Tax Payment
2004 through June 30, 2005.
                                                                                                     System (EFTPS). You can make tax deposit
                                                    Monthly Schedule Depositors:
Note: Notification of FTD Deposit                                                                    payments through the Internet at www.eftps.
Requirements are issued yearly to filers of         n Deposit each month’s taxes by the 15th day
                                                                                                     gov or call EFTPS Customer Service at (800)
Form 941 and 941SS to advise employers              of the following month (e.g., taxes from pay-
                                                                                                     555-4477.
of which deposit method to use for the              days during August are deposited by Sept. 15).
                                                                                                     n Mail or deliver Form 8109, Federal Tax
upcoming calendar year. It is your respon-
                                                    Semi-weekly Schedule Depositors:                 Deposit Coupon, with their payment to an
sibility to verify the look-back period infor-
                                                                                                     authorized financial institution or Federal
mation with your records to ensure that the         n For wages paid Saturday, Sunday, Monday
                                                                                                     Reserve Bank or branch. Make the check
notice you receive is correct.                      or Tuesday, deposit by Friday of that week.
                                                                                                     or money order payable to the financial
   New employers who have never filed Form          n For wages paid Wednesday, Thursday or          institution.
941 before follow the monthly schedule              Friday, deposit by the following Wednesday.
depositor’s rules for the first calendar year of




                                                      An injured spouse may qualify to receive       an offset has occurred, the Form 8379 can
Injured Spouse                                      his or her portion of the tax overpay-           be filed by itself or with a Form 1040X. If
Allocations                                         ment that was or is about to be applied
                                                    to the outstanding debt. Injured Spouse
                                                                                                     the Form 8379 is filed after the original
                                                                                                     Form 1040 is processed, copies of all W-2



I
   f an individual files a joint tax return         Allocation, Form 8379, must be used to           and W-2G forms for both spouses and any
   with his or her spouse expecting a tax           request the non-debtor spouse’s portion of       Forms 1099 must be attached to the Form
   refund, and all or part of the refund            the joint tax overpayment refunded to him        8379. Form 8379 should be filed as soon as
was, or is expected to be, applied to the           or her. The Form 8379 may be filed with          the taxpayer becomes aware of the govern-
spouse’s past-due Federal tax debt, child           the joint Form 1040 (paper or electronic         ment debt offset.
or spousal support, Federal non-tax debt            submission) or it may be filed separately,          Please refer to the Injured Spouse
or state income tax obligation, the spouse          after an offset has occurred.                    Allocation, Form 8379, for additional infor-
who is not liable for the outstanding debt            Because the IRS will process the allo-         mation. For on-line assistance and informa-
is considered a non-debtor spouse or an             cation request (if filed with the original       tion, visit IRS’s web site at www.irs.gov.
Injured Spouse.                                     return) before an offset occurs, filing Form     Pre-recorded message (Topic 203) covers
                                                    8379 with the original return will improve       Failure to Pay Child Support, Federal non-
                                                    processing time. If Form 8379 is filed after     Tax and State Income Tax Obligations.
                                                                                                                2007 TAX HINTS                 19
                                                                                                   Practitioner’s Guide to the Filing Season




IRS Has Merged
Digital Dispatch                                 2007 IRS
and e-News for                                   Nationwide Tax Forums
Tax Professionals                                Begin in July
The Digital Dispatch and e-News for



                                                 P
Tax Professionals, two e-mail newslet-                 lans are underway for the 2007             summer for three days of learning,
ters from the Internal Revenue Service                 IRS Nationwide Tax Forums                  exchanging ideas and networking.
that covered tax news of interest to                   which will be held in six cities
                                                                                                  As in past years, the 2007 forums
the tax professional community, have             across the nation during July, August
                                                                                                  offer many new and timely seminar
merged as of December 4, 2006. The               and September. The Tax Forums offer
                                                                                                  topics, an enhanced and wireless
new document will continue under the             three full days of seminars with the
                                                                                                  e-IRS Room and a totally automated
name e-News for Tax Professionals.               latest word from the IRS leadership
                                                                                                  Continuing Professional Education
  The goal is to make e-News for Tax             and experts in the fields of tax law,
                                                                                                  (CPE) credit process for enrolled
Professionals as useful and informative          compliance and ethics. Tax profes-
                                                                                                  agents, certified public accountants
as it has always been; it will continue          sionals can earn up to 18 continuing
                                                                                                  and certified financial planners.
to provide the latest tax information            professional education (CPE) credits,
without any decrease in quality, con-            learn about the latest IRS e-Services            Tax professionals can each bring
tent, ease or speed of distribution. It          products and schedule a visit to the             one difficult and long-standing case
remains one of the best ways for tax             Practitioner Case Resolution Room.               to the Practitioner Case Resolution
professionals to stay on top of up-to-           The forums also feature a two-day                Room, which last year resolved 91%
the-minute national and local IRS news           expo with representatives from the               of the 1,415 cases brought in and col-
from all Service operating and func-             IRS, business, finance and tax soft-             lected nearly $40,000 in revenue.
tional divisions.                                ware companies offering their prod-
                                                                                                  Nationwide Tax Forums continue to
  If you already are a subscriber to             ucts, services and expertise.
                                                                                                  offer features that attendees value
either one or both of these newslet-
                                                 Dates and locations for 2007 are                 highly; the quality rating for the 2006
ters, you are not required to take any
                                                 shown in the table below.                        forum season increased to a record
action. Our system will automatically
                                                                                                  99%! For information on conference
merge all subscribers. However, sub-             In 2006, more than 17,000 tax profes-
                                                                                                  room rates and for the latest updates
scribers can choose to unsubscribe by            sionals, IRS staff members, and repre-
                                                                                                  on online registration, seminars top-
following the instructions at the bot-           sentatives from the tax, financial and
                                                                                                  ics, schedules, exhibitor listings and
tom of the e-mail newsletter when                business communities met over the
                                                                                                  more, visit www.taxforuminfo.com.
they receive it.



                                                   Venue                            City                                 Dates
Information
Returns Processing                                 Hilton Atlanta                   Atlanta, GA                          July 17–19

The Information Returns Processing                 Hilton Chicago                   Chicago, IL                          July 31–August 2
website will present the information you need
                                                   Rio All Suites                   Las Vegas, NV                        August 21–23
to know if your client has information report-
ing requirements. Here you will find help-line     Hilton New York                  New York, NY                         August 28 –30
phone numbers and hyperlinked sites to help        Hilton Anaheim                   Anaheim, CA                          September 11–13
meet reporting information returns and how
to file electronically or magnetically.            Disney’s Coronado Springs        Orlando, FL                          September 18–20
http://www.irs.gov/taxpros/content/
0,,id=98185,00.html
                                                                                                          2007 TAX HINTS                        20
                                                                                             Practitioner’s Guide to the Filing Season




Practitioner Priority                                                                      U.S. Residency Certification
                                                                                           User Fee Implementation:
Services (PPS)                                                                             November 1, 2006



                                                                                           I
                                                                                             RS began charging a user fee for processing
What is it?                                    Note: PPS assistors can provide general       Form 8802, Application for U.S. Residency



P
      PS is a nationwide, toll-free,           information on other Compliance issues,       Certification, effective November 1, 2006.
      accounts service designed spe-           such as audits or CP2000 notices.           This fee was announced in Revenue Procedure
      cifically for practitioners that was                                                 2006-35, which was published in IRM 2006-37
introduced in January 2002. PPS should         The type of Assistance                      dated September 11, 2006.
be the “First Point of Contact” for            PPS offers:                                 Approved Form 8802 applications receive certi-
account-related issues. PPS offers consis-     n Account  Problems—                        fication letters (Form 6166) which may be used
tent service to all practitioners nation-      Individual or Business                      as proof of U.S. residency to claim benefits in
wide. Some things to know:                     n Complex
                                                                                           the form of reduced tax rates under an income
                                                          Refunds—Undeliverable,
n Practitioners
              receive priority handling,       destroyed, refund repayment, erro-          tax treaty or with an exemption from a value
ensuring shorter wait times                    neous refunds, and refund offsets
                                                                                           added tax (VAT) imposed by a foreign country.

n Customer  Service Representatives            n Installment
                                                                                           An Office of Management and Budget directive
                                                           Agreements—arrange-
(CSR) are specialized to handle practi-                                                    instructed federal agencies to charge user fees
                                               ments to pay balance due accounts
tioner issues
                                                                                           reflecting the full cost of goods or services that
                                               n Notices
                                                                                           “convey special benefits to recipients beyond
n PPS calls are split by Individual and        n Payment   Tracers                         those accruing to the general public.”
Business inquiries. It is important you
                                                                                           The initial user fee of $35.00 covers a single
select the appropriate option when             Hints for improving
                                                                                           Form 8802 requesting up to 20 certifications
prompted.                                      your PPS experience:                        Form 6166 for a single Taxpayer Identification
n Practitionersseeking service from our        n Don’tgive the PPS toll-free number        Number (TIN) — regardless of the country
Automated Collection System (ACS)              to anyone who is not a practitioner         for which certification is requested or the tax
should select Option 3 and enter the                                                       period to which certification will apply. An
                                               n PPS only handles account related
taxpayer identification number when                                                        additional $5.00 fee covers requests on the
                                               inquiries. Do not ask tax law questions
prompted to ensure your call is handled                                                    same Form 8802 for up to 20 additional Forms
                                               n PPS sites are specialized by Individual
by an authorized assistor.                                                                 6166 certificates issued for the same TIN.
                                               and Business (choose the prompts for
                                                                                           Applicants are advised, therefore, to include all
                                               your type of inquiry)                       requests for Form 6166 certificates on a single
Practitioner Priority Service                  n PPS cannot resolve AUR or EXAM            Form 8802 Application to avoid a new $35.00
                                               issues, they can only give explanations     user fee charge for processing of a second
Toll-Free (866) 860-4259
                                               or instructions. Call the number on the     Form 8802 application.
8:00 a.m. - 8:00 p.m. Local Time
                                               notice received by your client.             The user fee, for example for:
(Alaska and Hawaii follow Pacific Time)
                                               n Have your Power of Attorney (POA)              Number of Form 6166            User Fee
                                               data available to discuss or fax                Requested on Form 8802          Assessed
                                                                                                        1 - 20                   $35.00
                                                                                                       21 - 40                   $40.00

Tax Talk Today                                                                                         41 - 60
                                                                                                       61 - 80
                                                                                                                                 $45.00
                                                                                                                                 $50.00
                                                                                                 (continues in 20 certificate increments
Tax Talk Today is a free monthly web cast sponsored by the IRS about current tax                        for each additional $5.00)
issues and policies. Just go to www.TaxTalkToday.tv to register and attend. You can
                                                                                           For more information, check out the IRS News
even watch archived shows and purchase inexpensive CPE credits. As we posted this
                                                                                           Release IR-2006-139, Revenue Procedure
publication, the full 2007 Tax Talk Today schedule was not available. For the latest
                                                                                           2006-35, and Notice 2006-90, all of which are
information on topics, visit: http://www.taxtalktoday.tv/index.cfm?page=8.71               available on the IRS web site.
                                                                                                                           2007 TAX HINTS                    21
                                                                                                              Practitioner’s Guide to the Filing Season




Reducing the Burden Taxpayers Face
The IRS Office of Taxpayer Burden Reduction         TBR initiatives currently                             Additional information on the Office of Taxpayer
develops proposals designed to reduce the           underway include:                                     Burden Reduction and its projects can be found
time and money taxpayers spend to meet their        n Form  944, Employer’s ANNUAL Federal                on www.irs.gov by searching under keyword
federal tax obligations.                            Tax Return, replacing the quarterly Form 941          “burden reduction.” In addition, Publication
                                                    for many small business filers                        4109, Office of Taxpayer Burden Reduction,
TBR’s primary strategic objective is to maintain                                                          can be ordered by calling (800) 829-3676 or it
                                                    n The redesigned Form 940, Employer’s
a consistent and coordinated approach to bur-                                                             can be downloaded from www.irs.gov.
                                                    Annual Federal Unemployment Tax Return,
den reduction that meets customer needs by                                                                  The IRS encourages the public to submit ideas
                                                    simplifying filing this return for approximately
focusing on the following:                                                                                for reducing taxpayer burden. Form 13285A,
                                                    5.6 million taxpayers.
n Simplifying
                                                                                                          Reducing Tax Burden on America’s Taxpayers,
              forms, publications and notices
                                                    Other TBR initiatives still                           may be used to submit ideas to TBR. This form
n Streamlining  internal policies,                  in development include:                               can be found on www.irs.gov and can be
processes and procedures
                                                    n Capital Gains Tax Reporting                         e-mailed to *sbse.otpbr@irs.gov or mailed to:
n Promoting less burdensome rulings,
                                                    n Simplifying the S-election Process                  Office of Taxpayer Burden Reduction
regulations and laws
                                                    n Redesigning Form 8857, Request                      Internal Revenue Service
n Partnering with internal and external stake-
                                                    for Innocent Spouse Relief                            SE:S:TBR, IR 2023
holders to more efficiently and effectively iden-
                                                    n Correcting Employment Tax Returns                   1111 Constitution Avenue, NW
tify and address burden reduction initiatives.
                                                    n Form 8829, Expenses for Business Use                Washington, D.C. 20224
                                                    of Your Home.




Taxpayer                                            The service is free, confidential, tailored to
                                                    meet your needs, and available for businesses
                                                                                                          listed in the government listings in your local
                                                                                                          telephone directory and in Pub. 1546, The

Advocate Service
                                                    as well as individuals. There is at least one         Taxpayer Advocate Service of the IRS—How
                                                    local taxpayer advocate in each state, the            to Get Help With Unresolved Tax Problems,
                                                    District of Columbia, and Puerto Rico. Because        n Filing Form 911, Application for Taxpayer
The Taxpayer Advocate Service is an indepen-        advocates are part of the IRS, they know the          Assistance Order, with the Taxpayer Advocate
dent organization within IRS whose employees        tax system and how to navigate it. If you qual-       Service, or
assist taxpayers who are experiencing eco-          ify, you will receive personalized service from a     n Asking an IRS employee to complete Form
nomic harm, who are seeking help in resolving       knowledgeable advocate who will:                      911 on your behalf.
tax problems that have not been resolved
                                                    n   Listen to your problem,                           To get a copy of Form 911 or learn more about
through normal channels, or who believe that
                                                    n Help you understand what needs to be done           the Taxpayer Advocate Service, go to www.irs.
an IRS system or procedure is not working as it
                                                    to resolve it, and                                    gov/advocate.
should. You may be eligible for assistance if:
                                                    n Stay with you every step of the way until
n You  are experiencing economic harm or
                                                    your problem is resolved.                                 The Taxpayer Advocate Service is head-
significant cost (including fees for professional
representation),                                    You can contact the Taxpayer                              ed by the National Taxpayer Advocate
                                                                                                              (NTA) who is mandated to report con-
n You have experienced a delay of more than         Advocate Service by:
30 days to resolve your tax issue, or                                                                         cerns and findings to Congress each
                                                    n Calling their toll-free case intake line at
                                                                                                              year. To read the Executive Summary
n You have not received a response or resolution    (877) 777-4778 or TTY/TTD (800) 829-4059,
                                                                                                              or the full report: http://www.irs.gov/
to the problem by the date promised by the IRS.     n Writing or calling your local taxpayer advo-            advocate/article/0,,id=165806,00.html.
                                                    cate, whose address and phone number are



Low Income Tax                                      LITCs are independent organizations that provide low income taxpayers with representation in
                                                    federal tax controversies with the IRS for free or for a nominal charge. The clinics also provide tax
Clinics (LITCs)                                     education and outreach for taxpayers with limited English proficiency or who speak English as a
                                                    second language. Pub. 4134, Low Income Taxpayer Clinic List, provides information on clinics in
                                                    your area. It is available at www.irs.gov or your local IRS office.
                                                                                                               2007 TAX HINTS                 22
                                                                                                  Practitioner’s Guide to the Filing Season




The Internal
Revenue Service
                                                  Non-Resident Alien
Advisory Council                                  Withholding and Reporting
(IRSAC)
                                                  I
                                                    ncreasingly the IRS is coordinating         form a thorough review of their opera-
                                                    efforts across divisions on issues relat-   tions. An analysis of their payments to



T
     he first Advisory Group to the                 ing to international tax administra-        foreign vendors from accounts payable
     Commissioner of Internal Revenue, the        tion. One such effort involves outreach       revealed a number of payments that
     Commissioner’s Advisory Group (CAG)          and enforcement efforts aimed at              were subject to NRA reporting and
was established in 1953 to advise the Service     improving compliance with non-resi-           withholding, but for which neither
on national policy issues. The CAG was            dent alien withholding regulations.           reporting nor withholding was per-
renamed in 1998, becoming the Internal                                                          formed. The most common of these
                                                  These regulations require that a U.S.
Revenue Service Advisory Council (IRSAC) to                                                     types of payments were interest, royal-
                                                  person (i.e. individual, corporation,
more accurately reflect its agency-wide scope                                                   ties, personal services fees, rents and
                                                  partnership, etc.) who makes payments
in advising the entire IRS. The IRSAC was                                                       other fixed or determinable annual or
                                                  of certain types of U.S. sourced income
strategically refocused into subgroups mirror-                                                  periodic payments.
                                                  to non-resident aliens generally must
ing three of the operating divisions, LMSB,       withhold tax at a rate of 30% on such         U.S. withholding agents should be
W&I and SB/SE. (TEGE has its own Advisory         payments, unless there are applicable         aware of these issues and review their
Committee.)                                       tax treaty provisions allowing for a          operations to ensure compliance with
   IRSAC’s objectives have continued to evolve.   reduced rate (see Publication 515).           the NRA withholding and reporting
Responding to one of today’s most critical        Such payments are generally subject           regulations. Practitioners with business
issues, IRSAC has formed a fourth subgroup,       to reporting on Form 1042, Annual             or individual clients who may be sub-
the tax gap analysis subgroup, which will chal-   Withholding Tax Return for U. S. Source       ject to withholding may wish to discuss
lenge tax and economics experts to identify       Income of Foreign Persons and Form            these issues with their clients and help
improved methods to measure voluntary tax         1042-S, Foreign Person’s U.S. Source          them ensure compliance. Where prob-
law compliance.                                   Income Subject to Withholding. The U.S.       lem areas are identified, immediate
   IRSAC members have diverse backgrounds         person making these payments—most             steps should be taken to disclose the
reflecting a wide range of experience in tax      often referred to as a U.S. withholding       problem to the IRS and institute correc-
administration. Members also bring to the         agent—is responsible for the withhold-        tive actions.
Council—and the Service—a unique outside          ing and reporting.
perspective on public perceptions of IRS                                                        For more information about non-
actions and decisions. The group explores         In addition, these regulations require        resident alien reporting and withhold-
broad tax administration topics and organi-       the foreign status of the non-resident        ing requirements, refer to Treasury
zational issues rather than narrow technical      alien, and any applicable treaty claims,      Regulation sections 1.1441-1446 and IRS
issues. Discussions focus on solutions as well    to be documented. Proper documenta-           Publication 515. These and other refer-
as constructive observations on the federal       tion could include Form W-8 or Form           ences can be found on the IRS website
tax system. Each year the IRSAC prepares an       8233, depending on the type of person         www.irs.gov. In addition, note that the
annual report on issues and initiatives they      and income.                                   IRS published an Industry Directive in
have studied, with their recommendations to                                                     November 2003 that gives guidance
                                                  Recently, hundreds of U.S. withholding
the Commissioner. Copies of annual reports                                                      to IRS field agents for audits of forms
                                                  agents voluntarily identified and cor-
can be found at http://www.irs.gov/taxpros/                                                     1042 (Industry Directive for the Audit
                                                  rected their withholding and reporting
article/0,,id=102281,00.html.                                                                   of Forms 1042). This Directive may be
                                                  deficiencies with respect to payments to
   Members are selected for a three-year term                                                   useful as a guide for performing the
                                                  non-resident aliens. A number of these
and meet in Washington, DC several times a                                                      compliance checks mentioned above.
                                                  withholding agents indicated that they
year. This spring the IRS will solicit nomina-                                                  However, it was written in general
                                                  were not aware of their non-resident
tions for new IRSAC members with a notice                                                       terms and should not be relied upon
                                                  alien (NRA) reporting or withholding
in the Federal Register and through the Tax                                                     to identify every instance of non-
                                                  responsibilities at all until they were
Professionals’ page at irs.gov.                                                                 compliance.
                                                  prompted by their tax advisors to per-
                                                                                                2007 TAX HINTS                 23
                                                                                   Practitioner’s Guide to the Filing Season




                                                Pittsburgh PO Boxes
Lockbox                                         Form Type      Old Payment Address                   New Payment Address

Post Office Box                                 1040           PO Box 371361                         PO Box 37002

Closures                                        1040-A
                                                1040-EZ
                                                               Pittsburgh, PA 15250-7361             Hartford, CT 06176-0002


Reminder: As a result of the realignment of
                                                1040-ES        PO Box 371999                         PO Box 37001
workload, the Lockbox Post Office Boxes for
                                                               Pittsburgh, PA 15250-7999             Hartford, CT 06176-0001
the following addresses have been closed:
                                                4868           PO Box 371361                         PO Box 37003
Pittsburgh PO Boxes
                                                               Pittsburgh, PA 15250-7361             Hartford, CT 06176-0003
If you have been sending paper check tax
payments to Pittsburgh Post Office boxes,       940            PO Box 371307                         PO Box 105887
those addresses have been closed and must
                                                               Pittsburgh, PA 15250-7307             Atlanta, GA 30348-5887
be changed to the Hartford or Atlanta
addresses listed to the right.                  940-EZ         PO Box 371324                         PO Box 105659
                                                               Pittsburgh, PA 15250-7324             Atlanta, GA 30348-5659
Memphis PO Boxes
If you have been sending paper check tax        941            PO Box 371493                         PO Box 105703
payments to Memphis Post Office boxes,                         Pittsburgh, PA 15250-7493             Atlanta, GA 30348-5703
those addresses have been closed and must
be changed to the Atlanta addresses listed      943            PO Box 371475                         PO Box 105094
to the right.                                                  Pittsburgh, PA 15250-7475             Atlanta, GA 30348-5094

Starting January 2, 2007, all mail              945            PO Box 371441                         PO Box 105092
sent to the old payment addresses will be                      Pittsburgh, PA 15250-7441             Atlanta, GA 30348-5092
returned to sender.
                                                1041-ES        PO Box 371999                         PO Box 105401
                                                               Pittsburgh, PA 15250-7999             Atlanta, GA 30348-5401

                                                2290           PO Box 371488                         PO Box 105421
Other changes...                                               Pittsburgh, PA 15250-7488             Atlanta, GA 30348-5421
Remember: Some Returns
Must Be Sent To New Addresses This Year         CP Notices     PO Box 371410                         PO Box 37004

Some of your clients’ individual tax returns    (521 & 523)    Pittsburgh, PA 15250-7410             Hartford, CT 06176-0004
may have to be sent to a different service
center than last year. In 2007, taxpayers       Memphis PO Boxes
from 5 states, Minnesota, North Dakota,
Arkansas, Kentucky, and New Jersey, whose       Form Type      Old Payment Address                   New Payment Address
individual paper tax returns are mailed to
                                                1040           PO Box 105093                         PO Box 105017
an IRS service center, will file at a differ-
                                                1040-A         Atlanta, GA 30348-5093                Atlanta, GA 30348-5017
ent service center this year. Tables showing
                                                1040-EZ
the correct address and service center are
at www.irs.gov. Taxpayers who receive a tax     1040ES         PO Box 105900                         PO Box 105225
instruction booklet from the IRS in the mail                   Atlanta, GA 30348-5900                Atlanta, GA 30348-5225
and use the labels included with the booklet
can be assured that their tax returns will go   4868           PO Box 105073                         PO Box 105050
to the correct address. Taxpayers who e-file                   Atlanta, GA 30348-5073                Atlanta, GA 30348-5050
are not affected by these changes.
                                                CP Notices     PO Box 105404                         PO Box 105416
                                                (521 & 523)    Atlanta, GA 30348-5404                Atlanta, GA 30348-5416
For a complete list of ALL filing
addresses, click here
                                                                                                        2007 TAX HINTS                 24
                                                                                           Practitioner’s Guide to the Filing Season




Reporting Tax Fraud

A
       s a professional return preparer, especially if you have walk-in traffic,
         you have both the expertise and the opportunity to see how would-be              Top 10 Potential
          fraudsters are attempting to commit refund crimes. This very important
information can be invaluable to the IRS units working on tax refund schemes.             Triggers for
Therefore, the IRS has implemented a way to streamline the reporting of any fraud
allegations you send us.
                                                                                          Alternative
  Some types of fraudulent activity should be referred directly to the IRS Fraud          Minimum Tax
Detection Centers (FDCs), where all refund returns are screened, including:
n   Persons filing questionable/suspicious tax returns
n

n
    Persons claiming refunds using false or altered W-2 forms
    Persons receiving multiple refund checks at one or more locations                     T   he alternative minimum tax (AMT)
                                                                                              is an extra tax some people have
                                                                                          to pay if their regular income tax is
n Persons filing more than one tax return for a single year either by filing at
                                                                                          reduced due to certain deductions and
different IRS campuses or at the same campus using a fictitious Social Security
                                                                                          credits. The AMT works like the regular
Number (SSN) or another person’s SSN
                                                                                          income tax, but with different rules for
n Information about tax return preparers who are preparing returns with false             figuring income and deductions, and
information on their client’s tax forms in order to get larger refunds                    with different tax rates. These rules set
n   Information about people selling dependent Social Security Numbers                    limits on the amount by which deduc-
If you detect these types of fraudulent activities, forward the information directly to   tions and credits can reduce total tax.
the Internal Revenue Service Criminal Investigation Division by e-mail at HQ-ORF@           If you already pay at least the mini-
ci.irs.gov or by faxing information directly to the FDC that reviews refund returns       mum because of your regular income
from your state. (Note: Many of these fax numbers are new since last filing season.)      tax, you do not have to pay the AMT.
                                                                                          However, if your regular tax is less than
                                                                                          the minimum, then you have to make
    States                                   Fraud Detection Center     FAX Number        up the difference by paying the AMT in
                                                                                          addition to your regular tax.
    CT, MA, ME, NH, RI, VT, Upstate NY, MI   Andover                    (978) 691-6902
                                                                                            If you are unsure whether the AMT
    GA, NC, SC, AL, FL                       Atlanta                    (770) 455-2901    applies to you, pay attention to the fol-
                                                                                          lowing 10 items; they often trigger the
    TX, NM, AZ, OK                           Austin                     (512) 460-2724
                                                                                          need to calculate AMT:
    Brooklyn, Manhattan, NJ                  Brookhaven                 (631) 654-6912
                                                                                          1. Personal exemptions
    OH, KY, IN                               Cincinnati                 (859) 669-3711
                                                                                          2. Standard deduction
    CA                                       Fresno                     (559) 441-5881    3. State and local income, sales
    IL, WI, ND, SD, NE, IA, KS, MO, MN       Kansas City                (816) 823-8543    and property taxes
                                                                                          4. Mortgage interest on refinanced or
    AR, TN, MS, LA                           Memphis                    (901) 546-3148
                                                                                          second mortgages and home equity
    CO, MT, WY, UT, NV, ID, OR, WA, AK, HI   Ogden                      (801) 620-6806    loans not used to buy, build or improve
                                                                                          a home
    PA, VA, MD, DE, WV, Puerto Rico and
    other International Returns              Philadelphia               (215) 516-7028    5. Medical expenses
                                                                                          6. Miscellaneous itemized deductions
  If you have knowledge of or suspect other types of tax crimes, please contact the       subject to the 2% floor
IRS Fraud Referral Hotline at (800) 829-0433.                                             7. Exercise of incentive stock options
  The IRS currently has a number of civil and criminal enforcement initiatives under-
                                                                                          8. Long-term capital gains
way to combat refund fraud and other tax crimes. With your specialized knowledge
as a tax professional, you may be able to help us identify a tax fraud scheme early—      9. Tax-exempt interest from private
so that it can be stopped quickly.                                                        activity bonds
  For more information about IRS enforcement activities, visit www.irs.gov.               10. Business tax deductions
                                                                                                                             2007 TAX HINTS                     25
                                                                                                                Practitioner’s Guide to the Filing Season




                                              IRS TOLL FREE NUMBERS
Practitioner Priority Service           (866) 860-4259         Practitioners’ first point of contact for account-related issues.

IRS Tax Help Line for Individuals       (800) 829-1040         For filers who need procedural or tax law information or help to file.

Business and Specialty Tax Line         (800) 829-4933         For Small Businesses, Corporations, Partnerships and Trusts who need information 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.

Refund Hotline                          (800) 829-1954         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.

e-Help Desk                             (866) 255-0654         For questions on e-file, EFTPS and e-services.

Forms and Publications                  (800) 829-3676         For individuals, businesses and tax practitioners who need IRS tax forms, instructions and
                                                               related materials and tax publications.

National Taxpayer Advocate              (877) 777-4778         For taxpayers whose tax problems have not been resolved through normal channels. The
                                                               Taxpayer Advocate Service Help Line (TAS) provides 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.

Telephone Device for the Deaf           (800) 829-4059 (TDD)   For hearing-impaired taxpayers who need tax law or procedural information relating to filing
                                                               their returns or who need information or assistance relating to their accounts.

Taxpayer Advocacy Panel                 (888) 912-1227         For citizens who want to provide ideas and suggestions on how to improve IRS services or who
                                                               want to make recommendations for improvement of IRS systems and procedures.

Electronic Federal Tax Payment System   (800) 555-4477         For taxpayers who want to pay business or individual taxes through electronic funds transfer.
(EFTPS)                                 (800) 733-4829 (TDD)   The EFTPS Toll-Free numbers can provide callers with EFTPS enrollment forms, instructions and
                                        (800) 244-4829 (SP)    customer assistance.

Government Entities (TEGE) Help Line    (877) 829-5500         For taxpayers who need tax information or assistance relating to Tax Exempt or Government
                                                               Entities, Tax Exempt Bonds, Employer/Employee Pension Plans or Indian Tribal Agreements.

Extension to File                       (888) 796-1074         For individual filers who want to submit an extension to File for a 1040-series return
                                                               via telephone.

TeleTax Topics                          (800) 829-4477         Prerecorded messages on various tax topics.

Form 706                                (866) 699-4083         For answers to questions concerning Form 706, United States Estate Tax Returns, and
Form 709                                                       Form 709, United States Gift (and Generation-Skipping Transfer) Tax Returns.

AARP Tax-Aid Information Line           (888) 227-7669         American Association of Retired Persons locations for income tax preparation by IRS
                                                               trained volunteers.

Automated Collection System (ACS)       (800) 829-3903         Business accounts assigned to ACS.
Businesses

Automated Collection System (ACS)       (800) 829-7650         Individual accounts assigned to ACS.
Individuals

Criminal Investigation                  (800) 829-0433         Report tax fraud.
Informant Hotline

Employer Identification Number (EIN)    (800) 829-4933         EIN application and changes.

Form 2290                               (866) 699-4096         Heavy Vehicle Use Tax issues related to Form 2290.

Information Return Reporting            (866) 455-7438         Tax law help for payers of W-2s and 1099s.

Terrorist Act or Combat Zone            (866) 562-5227         Information for those affected by a Terrorist Act or a Combat Zone participant or related
Special Hotline                                                accounts issues.

Treasury Inspector General for Tax      (800) 366-4484         Report allegations of misconduct or improprieties by IRS employees.
Administration (TIGTA) Hotline
                                                                                                      2007 TAX HINTS                 26
                                                                                         Practitioner’s Guide to the Filing Season




Internal Revenue Service At-a-Glance

Wage and Investment (W&I) Division
W&I serve taxpayers                          W&I organizational offices:             Focusing on better service to
with the following profiles:                 n Customer Assistance, Relationships    customers through:
n Approximately 131 million tax returns      and Education (CARE)                    n Media and Publications
n Most pay taxes through withholdings        n Customer Account Services (CAS)       n Stakeholder Partnership Education
n More than 70% of returns prepared          Compliance                              and Communication (SPEC)
by others                                                                            n Field Assistance and Taxpayer

n Most interact with the IRS once a year                                             Assistance Centers
n Most receive refunds
                                                                                     For additional information on W&I,
                                                                                     click on: W&I at a Glance




Small Business/Self-Employed (SB/SE) Division
SB/SE serves taxpayers                       SB/SE Business Units:                   SB/SE/Self-Employed Division serves
with the following profiles:                 n Field Collection                      following types of taxpayers:
                                                                                     n Individuals filing Schedules C, E, F
n Approximately 45 million taxpayers         n Field Examination
n About 33 million full or partially self-   n Campus Compliance Services            or Form 2106.
                                                                                     n All other businesses with assets under
employed                                     n Specialty Taxes

n About 7 million small businesses with      n Fraud/Bank Secrecy Act                $10 million.
assets of less than $10 million              n Taxpayer Burden Reduction

n Have some of the most complex              n Communication, Liaison & Disclosure   For additional information for
issues due to tax law requirements and                                               taxpayers served by SB/SE:
the number of forms and schedules                                                    http://www.irs.gov/taxpros/index.html
required                                                                             http://www.irs.gov/businesses/small/
n Approximately 80 percent use a paid                                                index.html
return preparer




Large & Midsize Business (LMSB) Operating Division
LMSB serves taxpayers                        LMSB is divided into the                For additional information
with the following profiles:                 following industry operations:          on LMSB, click on:
n Corporations, subchapter S corpora-        n Retailers, Food, Pharmaceutical and   http://lmsb.irs.gov/hq/c/downloads/
tions, and partnerships with more than       Healthcare                              Organization/Directories/LMSB%20
$10 million in assets                        n Natural Resources and Construction    Industry%20Mgrs%20by%20ORG%
n The largest business taxpayers             n Financial Services                    202-11-04.doc
interact with the IRS on an ongoing          n Heavy Manufacturing and

basis                                        Transportation
n Most have in-house tax divisions.          n Communications, Technology

Major issues are tax law interpretation,     and Media
accounting and regulatory issues.            n Field Specialists
                                                                                         Operating Divisions continued on page 27
                                                                                                       2007 TAX HINTS                 27
                                                                                          Practitioner’s Guide to the Filing Season




Tax Exempt and Government Entities (TE/GE) Division
TE/GE meets the special needs of:           Examples of areas where TE/GE                Account Services toll-free line at (877)
n Pension Plans                             provides customer assistance are:            829-5500, Monday-Friday, 8:00 a.m. to
n Exempt Organizations                      n EO: charities, private foundations,        6:30 p.m. ET. You can also go to the
n Government Entities.                      other nonprofit organizations                following Websites fo r information
                                            n EP: retirement plans such as 401(k),       on technical guidance, compliance pro-
TE/GE’s three major business units:         403(b), 457, SEP, SIMPLE and defined         grams, specialized education programs
                                            benefit pension plans                        and services, seminars, workshops, forms
n Exempt Organizations (EO)
                                            n GE: federal, state and local               and publications and more:
n Employee Plans (EP)
                                                                                         n EP: www.irs.gov/ep
n Government Entities (GE).                 governments (FSLG), Indian tribal
                                                                                         n EO: www.irs.gov/eo
                                            governments (ITG) and tax-exempt
                                                                                         n FSLG: www.irs.gov/govts
                                            bonds (TEB) for the municipal finance
                                                                                         n ITG: www.irs.gov/tribes
                                            community.
                                                                                         n TEB: www.irs.gov/bonds
                                            For direct technical assistance on any
                                            of these subjects, call TE/GE’s Customer




Appeals Division
The Appeals Division has been resolving     Link to Online Videos of the Appeals         Publication 4165, An Introduction to
tax disputes for over three-quarters of     Process http://www.irs.gov/individuals/      Collection Due Process Hearings
a century and our mission has remained      article/0,,id=137945,00.html                 Publication 4167, Appeals—Introduction
the same for the last 80 years. Our goal                                                 to Alternative Dispute Resolution
is to increase confidence in the overall    Below is a list of publications and
                                                                                         Publication 4227, Overview of the
fairness of the tax system by providing     forms relating to the Appeals process
                                                                                         Appeals Process Brochure
an efficient and independent adminis-       which may be found on the Appeals
trative appeal process for all taxpayers.   Publications and Forms, About Your
                                                                                         Forms
Our commitments to taxpayers are:           Appeal Rights web site located on irs.gov
                                            at the following link: http://www.irs.gov/   Form 656, Offer in Compromise
n To explain their appeal rights and
                                            individuals/article/0,,id=160745,00.html     Form 843, Claim for Refund and
the Appeals process.
                                                                                         Request for Abatement
n To listen to their concerns.
                                            Publications                                 Form 2751, Proposed Assessment
n To be courteous and professional.

n To be responsive (and allow taxpay-       Publication 1, Your Rights As a Taxpayer     of Trust Fund Recovery Penalty
ers reasonable time to respond to any       Publication 5, Your Appeal Rights            Form 8836, Qualifying Children
requests for information).                  and How to Prepare a Protest If You          Residency Statement
n To be fair and impartial.                 Don’t Agree                                  Form 9423, Collection Appeal Request
                                            Publication 594, What You Should             Form 12203, Request for Appeals
Want to Learn More About                    Know About The IRS Collection Process        Review
Appeals and Its Processes?
                                            Publication 1660, Collection                 Form 12153, Request for a
Appeals has developed and posted on         Appeal Rights                                Collection Due Process Hearing
their irs.gov website a few short videos
                                            Publication 3498 & 3498A,                    Form 12509, Statement
that will explain the Appeals process.
                                            The Examination Process                      of Disagreement
                                                                                                                    2007 TAX HINTS                     28
                                                                                                      Practitioner’s Guide to the Filing Season




                                                   IRS.gov HotLinks
                             SB/SE E-Submissions/e-Interactions & More
                       An alphabetical listing of Hyperlinks for www.irs.gov
                                       Tip: Save this file to your Desktop for quick reference


940/941 e-file                                     Compliance & Enforcement News                     e-file Partners for Financial Institutions/
                                                                                                        Employers
990/990-EZ/990-PF/1120-POL e-file                  Consumer Alerts & Tax Scams
                                                                                                     e-file Partners for Taxpayers
1040 Central                                       Contact My Local Office - state-by-State IRS
                                                     Office Locations, Hours etc.                    e-file for Tax Professionals - Landing page
1041 e-file
                                                   Corporations, Tax Information for                 e-file Providers, Individual Locator
1065 e-file
                                                   CP-2000 Prevent Delays in the Processing          e-file New Requirements for large Corps &
1120/1120S/7004 e-file
                                                                                                        Exempt Organizations
                                                   Credit Card Payments - Individuals
1120 POL e-file
                                                                                                     e-file Resources - Help Desk & State e-file
                                                   Criminal Enforcement
2006 Tax Law Changes for Individuals                                                                    Coordinators
                                                   Criminal Investigation Division - CID
2007 Nationwide Tax Forums - NWTFs                                                                   e-file Resources for EROs, etc
                                                   Direct Transmitters - What’s New in EMS for
Abusive Offshore Tax Avoidance Schemes                                                               e-file Revenue Procedure 2005-60 new
                                                     2006
Abusive Tax Shelters                                                                                 e-file for Software Developers & Transmitters
                                                   Discontinuance of Non-Encrypted e-file
Advertising/Promotion Publications - ERO’s -         Transmission Options                            e-file Technical Publications
  Marketing Toolkit, Refund Cycle Chart
                                                   Disaster Assistance Self-Study                    EFTPS - Express Enrollment for Businesses Pub
Amended Returns                                                                                        4276
                                                   Disaster Relief - Pub. 3833
Appeals Process - link to streaming video                                                            EFTPS on irs.gov
                                                   Draft Tax Forms
Appeals - Resolving Tax Disputes                                                                     EFTPS.GOV
                                                   EA Exam
Application to Participate in the e-file Program                                                     EFTPS Marketing Materials Practitioner Order
                                                   EA Information
  (paper version)                                                                                      Form - FMS
                                                   e-file Application & Participation - Pub 3112
Approved IRS e-file for Business Providers                                                           e-Help Desk - Toll-Free Number
                                                   e-file Checklist for Individuals
Armed Forces - Tax Information                                                                       EIN - Apply Online
                                                   e-file Demographics for Electronic Return
Around the Nation                                                                                    EIN, Online Application FAQs
                                                      Originators
Authorized IRS e-file Provider Locator Service                                                       EITC Assistant
                                                   e-file Demographics
  for Tax Professionals
                                                                                                     EITC Information/Resources
                                                   e-file FAQs for Tax Professionals - Publication
Become an Authorized IRS e-file Provider
                                                      3452 TY 2006                                   EITC - Do You Qualify?
Burden Reduction - About the Office of
                                                   e-file for Business & Self-Employed Taxpayers     Electronic Federal Tax Payment System
  Taxpayer Burden Reduction
                                                   e-file for Business Program Overview              Electronic Funds Withdrawal - EFW
Business e-file options
                                                   e-file for Business Partners                      Electronic Payment Options Individual &
Calendar, Tax for 2007 Pub. 509
                                                                                                       Business
                                                   e-file for Business Providers
Centralized Authorization File (CAF)
                                                                                                     Electronic Payment Options Brochure Pub
                                                   e-file for Large & Mid-Size Corporations
Charities & Other Non-Profits                                                                          3611
                                                   e-file Library
CID - Criminal Enforcement                                                                           Electronic Reading Room
                                                   e-file Made Easy - A Tax Professional’s One
Circular 230 (Rev. 6/2005)                                                                           Electronic Signature Methods - PIN
                                                      Stop e-file/e-pay Shop
COEs - Centers of Excellence Industries/                                                             Employment Tax e-file System
                                                   e-file Market Research Data
  Professions
                                                                                                     Employment Taxes - e-file and e-pay Options
                                                   e-file Provider News & Alerts
Combat Zone Provisions - FAQs
                                                   e-file Partners for Individuals
                                                                                                                                continued on page 29
                                                                                                                   2007 TAX HINTS                       29
                                                                                                      Practitioner’s Guide to the Filing Season


continued from page 28

IRS.gov HotLinks

Employment Taxes for Small Businesses              Form 8633 - Application to become an              IRS e-file For Tax Professionals
                                                     Authorized IRS e-file Provider
Employment Tax Enforcement Program                                                                   IRS Guidance - A Brief Primer
                                                   Form 8633 FAQs
Employment Tax Schemes                                                                               IRS Office Locations, Hours, Addresses
                                                   Form 8878, IRS e-file Signature Authorization
Encryption - New Transmitter Requirements                                                            IRSAC & IRPAC General Information
                                                     for Application for Extension of Time to File
e-News for Tax Professionals - Sign Up                                                               IRS Resources
                                                   Form 8878 - Spanish version 2006
Enrolled Agent Information (Office of                                                                IRS - The Basics
                                                   Form 8879, IRS e-file Signature Authorization
  Professional Responsibility - OPR)
                                                                                                     ITINs - Reminders for Tax Professionals
                                                   Fraud Alerts - CID
ERO Locator Service
                                                                                                     Latest News - The IRS Newsroom
                                                   Fraud, Reporting
Errors - Top Errors by Paid Preparers on Paper
                                                                                                     Laws, Regulations, Research and Court Rulings
  Returns                                          Free File Home Page
                                                                                                     Locator Service - Individual e-file Providers
e-services                                         Free File FAQs & Help Center
                                                                                                     Logo, IRS e-file
e-services Products                                Free Online Filing - Free File Home page
                                                                                                     Low Income Tax Clinics -LITC 2007
e-services Registration page (link to online       Frequently Asked Tax Questions & Answers
  tutorials found in red bar)                                                                        Mandates (State)
                                                   Frivolous Tax Arguments, The Truth About
ETAAC Annual Report to Congress 2006                                                                 Marketing Toolkit
                                                   Government Entities - Tax Information for
Extensions - Bs & Individual                                                                         Market Research Data for IRS e-file
                                                   Government Printing Office
Fact Sheets - Newsroom                                                                               MeF Internet Filing
                                                   HCTC: Individuals - Overview for Health
FAX Guidelines, New IRS                              Coverage Tax Credit                             Military Tax Information
Federal Register                                   Hot Topics                                        Modernization - New IRS
Federal/State e-file                               Hurricane Relief                                  Modernized e-file MeF (1120, 990)
Fed/State e-file Coordinators                      Identity Theft - Federal Trade Commission         Money Laundering
Fed/State Employment Tax e-file Schemas            Identity Theft - SSA Web Page                     Nationwide Tax Forums, IRS Summer 2007
  (FSET)
                                                   Individuals, Tax Information for                  News & Alerts for e-file Providers
FedStats.gov
                                                   Industries/Professions                            News Releases
Filing Information Returns Electronically (FIRE)
                                                   Information Returns - e-file with FIRE            Newsroom - Latest News
Filing Season Supplement, Pub 1345A for TY
                                                   Information Returns Processing                    Nonfiler Enforcement Program
   2005
                                                   Innocent Spouse Tax Information FAQs              Notices - Understanding Your IRS Notice
Financial Management Service (FMS) U.S. Dept
  of the Treasury                                  Installment Agreements                            Offer in Compromise - OIC
FIRE                                               Internal Revenue Bulletins- IRBs                  Office of Professional Responsibility Enrolled
                                                                                                       Agent Program
FIRE.net http://fire.irs.gov                       International Businesses, Tax Information for
                                                                                                     Office of Professional Responsibility, Latest
Forms & Pubs                                       International Taxpayer
                                                                                                       News from
Forms 940 & 941 e-file Programs                    Internet Filing MeF
                                                                                                     Offshore Tax Avoidance Schemes
Form 990/990EZ/990PF & 1120POL e-file              IRBs
                                                                                                     Online Application EIN Form SS-4
Form 1041 e-file Program                           IRM - Internal Revenue Manual
                                                                                                     Online EIN FAQs
Form 1065 e-file Program                           IRPAC & IRSAC General Information
                                                                                                     Partial Payment Installment Agreements
Form 1120/1120S e-file                             IRS e-file & e-pay for Business & Self-Employed
                                                                                                     Partners - e-file for Business Partners
                                                     Taxpayers
Form 1120POL e-file
                                                                                                     Payment Options for Individuals & Businesses
                                                   IRS e-file for Business Partners
Form 8453, U.S. Individual Income Tax
                                                                                                     Payroll Service Providers
  Declaration for an IRS e-file Return             IRS e-file for Business Providers
                                                                                                                                 continued on page 30
                                                                                                                   2007 TAX HINTS                30
                                                                                                   Practitioner’s Guide to the Filing Season


continued from page 29

IRS.gov HotLinks

PINs - Self -Select & Practitioner               Schedule K-1, Two-Dimensional Bar Code           Taxpayer Advocate Service
                                                   Specifications & Certification Profess
Practitioner Priority Service                                                                     Taxpayer Burden Reduction
                                                 Schemes - Tax Scams & Consumer Alerts
Preparer - Top Errors by Paid Preparers on                                                        Taxpayer Rights
  Paper Returns                                  Schemes - Abusive Offshore Tax Avoidance
                                                                                                  Tax Professionals, Basic Tools for
                                                   Schemes - Talking Points
Prior Year Forms & Pubs
                                                                                                  Tax Professionals, e-file for
                                                 SEE - Special Enrollment Exam 2006
Projections - Statistics
                                                                                                  Tax Professionals - Resources for
                                                 Self-Select PIN
Providers, e-file for Business
                                                                                                  Tax Professionals, Standards of Practice
                                                 Small Business Self-Employed One-Stop
Publication 17 TY 2006 Tax Guide for
                                                   Resource                                       Tax Professionals, Tax Information for
  Individuals
                                                                                                    Tax Regulations
                                                 Small Business Self-Employed Online
Publication 334 - 2006 Tax Guide for Small
                                                   Classroom                                      Tax Scams - How to Recognize & Avoid Them
  Businesses
                                                 Small Business Products Online Ordering          Tax Statistics
Publication 1220 (FIRE)
                                                 Small Business Resource Guide Update             TaxTalk Today.tv
Publication 1345
                                                 Small Business Tax Workshop Student              Tax Tips 2007
Publication 1345A, Filing Season Supplement
                                                   Workbook
                                                                                                  Tax Treaties, International Taxpayer
Publication 1436 - e-file Test Package TY 2006
                                                 Software Developers & Transmitters XML
                                                                                                  TCE - Tax Counseling for the Elderly
Publication 3112 - e-file Application &            Schemas (e-file for Business)
  Participation                                                                                   Technical Publications - IRS e-file
                                                 SOI (Statistics of Income) Products & Services
Publication 3452, e-file FAQs for Tax                                                             Test Package - e-file, Pub. 1436 (TY 2006)
                                                 Special Enrollment Examination (SEE)
  Professionals TY 2006                                                                             PATS
                                                 SS-4 Online EIN Application
Q&A for Tax Professionals Pub 3452 2006                                                           TIGTA - Treasury Inspector General for Tax
                                                 SSA/IRS Reporter Employer Newsletter               Administration
QuickAlerts Library
                                                 SSA Employer Web site - File W-2s                Toll-Free Number e-Help Desk
QuickAlerts Messaging System for EROs,
                                                   Electronically
  Software Developers/Transmitters                                                                Topics For Tax Professionals
                                                 SSA Website
QuickAlerts - Welcome Page                                                                        Undelivered Refunds
                                                 Standards of Practice for Tax Professionals
Reading Room                                                                                      Understanding Taxes
                                                 State Links
Refund Cycle Chart - 2007                                                                         U.S. Census Bureau - State Data Center
                                                 State Mandate Info - FTA
Reporting Agents (RAF)                                                                            VITA
                                                 Statistics, Tax
Resource Information - IRS                                                                        What’s Hot in Tax Forms, Pubs, and Other Tax
                                                 Stats - FEDStats.gov                              Products
Retirees/Sr. Citizens
                                                 Students, Tax Information for                    What’s Hot - News
Return Preparer Enforcement Program
                                                 Subscription Services for Tax Professionals      Where to File Addresses
Revenue Procedure 2005-60 Individual &
  Business e-file                                Talking Tax Forms                                Where’s My Refund?
SB/SE Online Classroom                           TAP - Taxpayer Advocacy Panel                    Withholding Calculator
SB/SE Page, Your One-Stop Business Resource      TAS - Taxpayer Advocate Service                  Worldwide Tax Administration Assistance
SB/SE Partners Page                              Tax Fraud Alerts                                 XML Schemas - e-file for Business
Scams/Consumer Alerts                            Tax Fraud Program
Schedule K-1 Tips for Accurate Filing            Tax Information for Businesses
                                                                                                                                      2007 TAX HINTS                   31
                                                                                                                           Practitioner’s Guide to the Filing Season




2007 TAXhintsPractitioner’s Guide to the Filing Season

                                                         Communications and Liaison,
                                                         National Public Liaison
 Tax Hints—Practitioner’s Guide
 to the Filing Season is only                            National Public Liaison Division, (NPL) under the Chief, Communications
 available for download from                             and Liaison, works to enhance the IRS’s relationships with national stake-
 our Website. We cannot provide                          holders and federal partners to create opportunities to meet stakeholder
 printed copies.                                         needs and to resolve issues of mutual concern.

                                                         NPL manages:
 TAX HINTS STAFF
                                                         n   The IRS Advisory Council (IRSAC)
 Program Manager                                         n   The Information Reporting Program Advisory Committee (IRPAC)
 Jerry Ruelle                                            n   The IRS Nationwide Tax Forums
 Phone: (202) 622-6051                                   n   Tax Hints
 gerard.j.ruelle@irs.gov
                                                         n   Stakeholder Relationships

 National Public Liaison
                                                         n   Issue Tracking
 CL:NPL Room 7563 IR                                     To contact National Public Liaison, call (202) 622-3359, email npublic-liaison@
 1111 Constitution Avenue NW                             irs.gov or click on the Tax Professionals Page for further information: http://
 Washington. DC 20224                                    www.irs.gov/taxpros/index.html



                                                         Visit the Tax Professionals Page at www.irs.gov
                                                         Did you know that the drafts of most major tax forms can be seen on the
                                                         Tax Professionals Page months before they are officially released?
                                                         Did you know that you will also find information that will help you work with
                                                         the IRS more effectively, like how to be an Authorized IRS e-file Provider?
                                                         A wealth of information is waiting for you, so:
                                                         Don’t delay, visit today!
                                                         http://www.irs.gov/taxpros/index.html




                                                                 The IRS Mission
                                      Provide America’s taxpayers top quality service by helping them
                                   understand and meet their tax responsibilities and by applying the tax
                                                  law with integrity and fairness to all.


                                                               Department of the Treasury   Publication 4437 (Rev.02-07)
                                                               Internal Revenue Service     Catalog Number 39500F

                                                                          www.irs.gov

								
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