Sie sind auf Seite 1von 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 
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 
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 
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 
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 
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 
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 
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 
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
3Use the peel-off label. You may line through and make necessary corrections payroll community, banks, mutual funds, the
q
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
q3If 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 Check only one filing status on the tax return and check the appropriate
q 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
3Use the worksheet in the instructions for Forms 1040 or 1040A or in IRS
q 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/
3Use the correct Tax Table column for the filing status. Use a ruler;
q
article/0,,id=107753,00.html.
double check.

3Check and double check all figures on the return. Math errors are common.
q
New Links Added this Year
3Check the accuracy of financial institution routing and account numbers
q 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
3Sign and date the return. If filing a joint return, both spouses must sign
q 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.
3Attach all Forms W-2, 1099R and others that reflect taxes withheld to the
q 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-
3If you owe tax, enclose a check or money order made payable to the United
q 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
3For a complete checklist and listing of some of the most common errors, see
q
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