James W. Rahmlow, The Daily Record Newswire
In IR-2016-85, the IRS announced that it has upgraded authentication processes for its Get Transcript App. In the new process, for the Get Transcript Online feature, taxpayers are required to have an email address, a mobile phone with text capability and specific financial account information.
Providing that a taxpayer can satisfy the requirements of the new Authentication process, taxpayers can use the app to view and download certain tax information. Should a taxpayer need an original copy of their return, they still must submit Form 4506, Request for Copy of Tax Return and pay the applicable fee.
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All future Audit Requests Must Be Initiated by Mail. Telephone is Not Acceptable
Effective immediately “all initial contacts with taxpayers to commence an examination must be made by mail instead of telephone using the appropriate contact letters.” The mandatory change was made by IRS Deputy Commission for Services and Enforcement, John Dalrymple on May 20, 2016.
While the IRS acknowledged that initial contact by telephone has been a long standing policy in certain instances, this is in response to “the continuing threat of phone scams, phishing and identity theft”. Under the new guidelines, the IRS can initiate contact by telephone with the taxpayer only after 14 calendar days have elapsed from the mailing of the letter. It is unclear what the protocol is for criminal cases.
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Applicable Federal Rates (AFR) and Adjusted AFR Rates Issued
In Rev. Rul. 2016-17, the IRS announced its applicable federal rates (AFR) and adjusted applicable federal rates (adjusted AFR) to be used for the month of July, 2016. Below is a summary of those monthly rates.
Short Mid Long
Term Term Term
Applicable
Federal Rate 0.71% 1.42% 2.16%
Adjusted
AFR 0.65% 1.16% 2.06%
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IRS Reduces User Fee
Effective July 1, 2016, the IRS is reducing the user fee for Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code from $400 to $275. This is a welcome change for smaller charities and not-for- profit organizations. When Form 1023-EZ was introduced in 2014 as a way to simplify the application process, some viewed the fees as onerous.
The IRS seems to have acknowledged this potential barrier and reacted accordingly. Qualifying organizations are charities with annual gross receipts not in excess of $50,000 both for the past three years and projected for the next three years. Additionally, the total assets of the organization cannot be valued in excess of $250,000.
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Current Year Amounts Withheld can be applied to Another Year’s Tax Liability
In recent IRS Chief Counsel Advice CCA 201621010, the IRS confirmed that they may use amounts withheld from earnings and other income from the current year to pay a taxpayer’s tax liability from a previous year. It should be noted that the time of payment is of particular relevance when applying the statute of limitations under Code Sec. 6511.
It should also be noted that amounts are not deemed to be credited to the tax liability for another year until the IRS processes the current year’s return, makes a determination of the overpayment and then applies the overpayment to the earlier year.
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Disclosure of Decedent’s Estate tax Return or Income Tax Return
In another Chief Counsel Advice 201621014, the IRS has stated that disclosure of a decedent’s income tax return and estate tax return can be disclosed to heirs at law, next of kin, and beneficiaries of the estate, only if those parties have a material interest that will be affected by the information requested.
The advice obviously deals with disclosure between the IRS and potentially interested parties. It should be noted that materiality is not required under Code Sec. 6103 for disclosure to an administrator, executor or trustee of the estate. Returns include an amendment or supplement to the return or item that is part of the return, including schedules, attachments or lists.
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IRS Enforcement Personnel to be Hired
John Koskinen, commissioner of the IRS has indicated that up to 700 new enforcement personnel with be hired by the IRS in the coming months. He explained that the IRS has available resources to make the hirings, a result of efficiencies and the rate of attrition among agency personnel. Earlier this year, Koskinen reported that the IRS has lost some 5000 enforcement personnel since 2010 due to budgetary pressures.
In his announcement, he stated that “while adding 600-700 new enforcement hires will not replace those who have left, it will help fill key gaps in our enforcement workforce…” The potential hiring represents the first significant hiring in more than five years.
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James W. Rahmlow, a certified public accountant, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com
