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i1099ls.pdf
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1219 Inst 1099-LS (PDF)
|
https://www.irs.gov/pub/irs-pdf/i1099ls.pdf
|
[
"Instructions for Form \n1099-LS\n(Rev. December 2019)\nReportable Life Insurance Sale\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code \nunless otherwise noted.\nFuture Developments \nFor the latest information about developments related to \nForm 1099-LS and its instructions, such as legislation \nenacted after they were published, go to IRS.gov/\nForm1099LS.\nReminders\nIn addition to these specific instructions, you should also \nuse the current General Instructions for Certain \nInformation Returns. Those general instructions include \ninformation about the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers.\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the general instructions at IRS.gov/\n1099GeneralInstructions or go to IRS.gov/Form1099LS.\nContinuous-use form and instructions. Form 1099-LS \nand these instructions have been converted from an \nannual revision to continuous use. Both the form and \ninstructions will be updated as needed. For the most \nrecent version, go to IRS.gov/Form1099LS.\nOnline fillable Copies B, C, and D. To ease statement \nfurnishing requirements, Copies B, C, and D have been \nmade fillable online in a PDF format available at IRS.gov/\nForm1099LS. You can complete these copies online for \nfurnishing statements to recipients and for retaining in \nyour own files.\nGeneral Instructions\nThis form is used by the acquirer of any interest in a life \ninsurance contract (also known as a life insurance policy) \nin a reportable policy sale to report the acquisition. In \ngeneral, a reportable policy sale is any direct or indirect \nacquisition of any interest in a life insurance contract if the \nacquirer, at the time of the acquisition, has no substantial \nfamily, business, or financial relationship with the person \ninsured under that contract, apart from the acquirer’s \ninterest in such life insurance contract. See section 101(a)\n(3). Certain exceptions may apply. See Regulations \nsection 1.101-1(c)(2). The acquisition of an interest in a \npartnership, trust, or other entity that holds an interest in a \nlife insurance contract may be an indirect acquisition of \nthat interest in a life insurance contract and may be a \nreportable policy sale. See Regulations section 1.101-1(e)\n(3)(ii).\nWho Must File\nGenerally, file Form 1099-LS if you are the acquirer of any \ninterest in a life insurance contract in a reportable policy \nsale.\nAn acquirer is any person that acquires an interest in a \nlife insurance contract (through a direct acquisition or \nindirect acquisition of the interest) in a reportable policy \nsale.\nYou may not have to file Form 1099-LS if the interest in \na life insurance contract was transferred to you \ngratuitously, if you qualify for an exception in Regulations \nsection 1.6050Y-2(f), or if another acquirer or third party \ninformation reporting contractor reports on your behalf \nunder the unified reporting provisions of Regulations \nsection 1.6050Y-2(b). You may qualify for an exception in \nRegulations section 1.6050Y-2(f) if you are a foreign \nperson, if you report reportable policy sale payments \nmade to a person other than the seller under section 6041 \nor 6041A, or if you acquire a life insurance contract in a \nsection 1035 exchange.\nIf you are the acquirer, enter your name, address, \ntelephone number, and taxpayer identification number \n(TIN). Additionally, enter the name, address, and \ntelephone number of your information contact, if different \nfrom your own. This contact information must provide \ndirect access to a person who can answer questions \nabout this information return.\nReporting\nIf you are the acquirer, you must file a separate Form \n1099-LS for each payment recipient with respect to each \ninterest in a life insurance contract you acquired in a \nreportable policy sale. Enter the name, address, and \ntaxpayer identification number (TIN) of the payment \nrecipient, the name of the issuer of the life insurance \ncontract, the policy number of the life insurance contract, \nthe amount paid to the payment recipient, and the date of \nthe sale. See Regulations section 1.6050Y-2.\nPayment Recipient\nIn general, a reportable policy sale payment recipient \n(payment recipient) is any person that receives a \nreportable policy sale payment in a reportable policy sale. \nA payment recipient may include any seller in the \nreportable policy sale (any person that holds an interest in \na life insurance contract and transfers that interest, or any \npart of that interest, to an acquirer in a reportable policy \nsale), as well as any broker or other intermediary that \nretains a portion of the cash or other consideration \ntransferred in the reportable policy sale. See Regulations \nNov 20, 2019\nCat. No. 71418S\n",
"section 1.6050Y-1(a)(16)(i) for the definition of a \nreportable policy sale payment recipient and section \n1.6050Y-1(a)(18)(i) for the definition of seller. However, a \nperson other than a seller is not a payment recipient if that \nperson received aggregate payments of less than $600 \nwith respect to a reportable policy sale. See Regulations \nsection 1.6050Y-1(a)(16)(ii).\nIssuer\nThe issuer is the person responsible for administering the \nlife insurance contract, including collecting premiums and \npaying death benefits under the contract, on the date a \nForm 1099-LS is required to be furnished under section \n6050Y(a), or their designee. See Regulations section \n1.6050Y-1(a)(8)(i), (ii), and (iv).\nPolicy Number\nThe policy number is the unique identifying number \nassigned to the life insurance contract by the issuer \nnamed on the Form 1099-LS.\nStatements to Payment Recipient and Issuer\nIf you are required to file Form 1099-LS, you must \ngenerally furnish a statement or acceptable substitute to \neach payment recipient and to the issuer, as shown in the \ntable below. The requirement to furnish a statement to the \nissuer applies only with respect to a Form 1099-LS filed \nwith respect to the seller and only if your acquisition of an \ninterest in a life insurance contract in a reportable policy \nsale is a direct acquisition. See Regulations section \n1.6050Y-2(d)(2)(i). Statements furnished to the issuer \nshould be directed to the administrative office that, \npursuant to the life insurance contract, processes \ntransfers of ownership. You may not have to furnish \nstatements to the payment recipient and issuer if another \nacquirer or third party information reporting contractor \nreports on your behalf under the unified reporting \nprovisions of Regulations section 1.6050Y-2(b).\nIF the statement is for the...\nTHEN use...\nPayment recipient\nCopy B\nIssuer\nCopy C\nFor more information about the requirement to furnish a \nstatement to the payment recipient and the issuer, see \npart M in the current General Instructions for Certain \nInformation Returns.\nTruncating recipient’s TIN on payment recipient \nstatements. Pursuant to Regulations section \n301.6109-4, all filers of this form may truncate the \npayment recipient’s TIN (social security number (SSN), \nindividual taxpayer identification number (ITIN), adoption \ntaxpayer identification number (ATIN), or employer \nidentification number (EIN)) on statements furnished to a \npayment recipient (Copy B). Truncation is not allowed on \nany documents the filer files with the IRS. An acquirer’s \nTIN may not be truncated on any form. See part J in the \ncurrent General Instructions for Certain Information \nReturns.\nRescission of Reportable Policy Sale\nIf a reportable policy sale is rescinded and you have filed \na Form 1099-LS with respect to the reportable policy sale, \nyou must file a corrected Form 1099-LS within 15 \ncalendar days of the receipt of notice of the rescission. If a \nreportable policy sale is rescinded and you have furnished \na statement with respect to the reportable policy sale to a \npayment recipient or issuer, you must furnish the recipient \nof that statement with a corrected statement within 15 \ncalendar days of the receipt of notice of the rescission. \nSee Regulations section 1.6050Y-2(e).\nSpecific Instructions\nBox 1. Amount Paid to Payment Recipient\nEnter the total amount paid to the payment recipient in the \nreportable policy sale. The acquirer is not required to \nreport this information to the issuer of the life insurance \ncontract. Reporting the amount paid to the payment \nrecipient is therefore optional on Copy C.\nBox 2. Date of Sale\nEnter the date of the reportable policy sale.\n-2-\nInstructions for Form 1099-LS (Rev. 12-2019)\n"
] |
f1099ls.pdf
|
1219 Form 1099-LS (PDF)
|
https://www.irs.gov/pub/irs-pdf/f1099ls.pdf
|
[
"Attention: \nCopy A of this form is provided for informational purposes only. Copy A appears in red, \nsimilar to the official IRS form. The official printed version of Copy A of this IRS form is \nscannable, but the online version of it, printed from this website, is not. Do not print and file \ncopy A downloaded from this website; a penalty may be imposed for filing with the IRS \ninformation return forms that can’t be scanned. See part O in the current General \nInstructions for Certain Information Returns, available at www.irs.gov/form1099, for more \ninformation about penalties.\nPlease note that Copy B and other copies of this form, which appear in black, may be \ndownloaded and printed and used to satisfy the requirement to provide the information to \nthe recipient.\nTo order official IRS information returns, which include a scannable Copy A for filing with \nthe IRS and all other applicable copies of the form, visit www.IRS.gov/orderforms. Click on \nEmployer and Information Returns, and we’ll mail you the forms you request and their \ninstructions, as well as any publications you may order.\nInformation returns may also be filed electronically using the IRS Filing Information Returns \nElectronically (FIRE) system (visit www.IRS.gov/FIRE) or the IRS Affordable Care Act \nInformation Returns (AIR) program (visit www.IRS.gov/AIR).\nSee IRS Publications 1141, 1167, and 1179 for more information about printing these tax \nforms.\n",
" \nForm 1099-LS\n(Rev. December 2019)\nCat. No. 71383M\nReportable Life \nInsurance Sale\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nFile with Form 1096. \nOMB No. 1545-2281\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nFor calendar year \n20\n1616\nVOID\nCORRECTED\nACQUIRER’S name, street address, city or town, state or province, country, \nZIP or foreign postal code, and telephone no.\nACQUIRER’S TIN\nPAYMENT RECIPIENT’S TIN\nPAYMENT RECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Amount paid to payment \nrecipient\n$\n2 Date of sale\nIssuer’s name\nAcquirer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ACQUIRER)\nForm 1099-LS (Rev. 12-2019)\nwww.irs.gov/Form1099LS\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-LS\n(Rev. December 2019)\nReportable Life \nInsurance Sale\nCopy B\nFor Payment \nRecipient\nDepartment of the Treasury - Internal Revenue Service\nThis is important tax \ninformation and is being \nfurnished to the IRS. If \nyou are required to file a \n return, a negligence \npenalty or other \nsanction may be \nimposed on you if this \nitem is required to be \nreported and the IRS \ndetermines that it has \nnot been reported.\nOMB No. 1545-2281\nFor calendar year \n20\nCORRECTED (if checked)\nACQUIRER’S name, street address, city or town, state or province, country, \nZIP or foreign postal code, and telephone no.\nACQUIRER’S TIN\nPAYMENT RECIPIENT’S TIN\nPAYMENT RECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Amount paid to payment \nrecipient\n$\n2 Date of sale\nIssuer’s name\nAcquirer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ACQUIRER)\nForm 1099-LS (Rev. 12-2019)\n(keep for your records)\nwww.irs.gov/Form1099LS\n",
"Instructions for Payment Recipient\nAn acquirer of a life insurance contract or any interest in a life \ninsurance contract in a reportable policy sale under section \n6050Y must give this form to you for payments made to you in \nthe reportable policy sale.\nPayment recipient’s taxpayer identification number (TIN). \nFor your protection, this form may show only the last four \ndigits of your TIN (social security number (SSN), individual \ntaxpayer identification number (ITIN), adoption taxpayer \nidentification number (ATIN), or employer identification number \n(EIN)). However, the acquirer has reported your complete TIN \nto the IRS.\nPolicy number. Shows the policy number the life insurance \ncompany assigned to the life insurance contract.\nBox 1. Shows the amount paid to you in the reportable policy \nsale under section 6050Y.\nBox 2. Shows the date of sale.\nIssuer’s name. Shows the insurance company that bears the \nrisk with respect to the life insurance contract on the date a \nForm 1099-LS is required to be furnished to that issuer. \nGenerally, this will be the life insurance company responsible \nfor administering the contract, including paying death benefits \nunder the life insurance contract.\nAcquirer’s information contact name, address, and phone \nnumber. Shows the contact information of the acquirer. The \ncontact information provided will give you direct access to a \nperson who can answer questions about this form. If blank, \nthe contact information is the same as the ACQUIRER.\nFuture developments. For the latest developments related to \nForm 1099-LS and its instructions, such as legislation enacted \nafter they were published, go to www.irs.gov/Form1099LS. \n",
" \nForm 1099-LS\n(Rev. December 2019)\nReportable Life \nInsurance Sale\nCopy C\nFor Issuer\nDepartment of the Treasury - Internal Revenue Service\nCopy C is \nprovided to you \nfor information \nonly. Only the \npayment recipient is \nrequired to \nreport this \ninformation on \na tax return.\nOMB No. 1545-2281\nFor calendar year \n20\nCORRECTED (if checked)\nACQUIRER’S name, street address, city or town, state or province, country, \nZIP or foreign postal code, and telephone no.\nACQUIRER’S TIN\nPAYMENT RECIPIENT’S TIN\nPAYMENT RECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Amount paid to payment \nrecipient (optional)\n$\n2 Date of sale\nIssuer’s name\nAcquirer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ACQUIRER)\nForm 1099-LS (Rev. 12-2019)\n(keep for your records)\nwww.irs.gov/Form1099LS\n",
"Instructions for Issuer\nAn acquirer of a life insurance contract or any interest in a \nlife insurance contract in a reportable policy sale under \nsection 6050Y must give this form to you to report the \nacquisition.\nIf you are the issuer, Copy C is provided to you because \nyou have an information reporting obligation under section \n6050Y(b). You must file a Form 1099-SB with respect to \nthe reportable policy sale under section 6050Y. \nPayment recipient’s taxpayer identification number \n(TIN). For the payment recipient’s protection, this form may \nshow only the last four digits of the payment recipient’s \nTIN (social security number (SSN), individual taxpayer \nidentification number (ITIN), adoption taxpayer \nidentification number (ATIN), or employer identification \nnumber (EIN)). However, the acquirer has reported the \npayment recipient’s complete TIN to the IRS.\nPolicy number. Shows the policy number assigned to the \nlife insurance contract acquired from the payment \nrecipient.\nBox 1. This box may show the amount paid to the payment \nrecipient.\nBox 2. Shows the date of sale.\nIssuer’s name. Shows your name as the insurance \ncompany that bears the risk with respect to the life \ninsurance contract on the date a Form 1099-LS is required \nto be furnished to you.\nAcquirer’s information contact name, address, and \nphone number. Shows the contact information of the \nacquirer. If blank, the information is the same as \nACQUIRER.\nFuture developments. For the latest developments related \nto Form 1099-LS and its instructions, such as legislation \nenacted after they were published, go to www.irs.gov/\nForm1099LS. \n",
" \nForm 1099-LS\n(Rev. December 2019)\nReportable Life \nInsurance Sale\nCopy D\nFor Acquirer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-2281\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nFor calendar year \n20\nVOID\nCORRECTED\nACQUIRER’S name, street address, city or town, state or province, country, \nZIP or foreign postal code, and telephone no.\nACQUIRER’S TIN\nPAYMENT RECIPIENT’S TIN\nPAYMENT RECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Amount paid to payment \nrecipient\n$\n2 Date of sale\nIssuer’s name\nAcquirer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ACQUIRER)\nForm 1099-LS (Rev. 12-2019)\nwww.irs.gov/Form1099LS\n",
"Instructions for Acquirer\nTo complete Form 1099-LS, use:\n• The current General Instructions for Certain \nInformation Returns, and\n• The current Instructions for Form 1099-LS.\nTo get or to order these instructions, go to \nwww.irs.gov/Form1099LS.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220. The IRS does not provide a fill-in form option for \nCopy A.\nNeed help? If you have questions about reporting on \nForm 1099-LS, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
f8963.pdf
|
0120 Form 8963 (PDF)
|
https://www.irs.gov/pub/irs-pdf/f8963.pdf
|
[
"Please wait... \n \nIf this message is not eventually replaced by the proper contents of the document, your PDF \nviewer may not be able to display this type of document. \n \nYou can upgrade to the latest version of Adobe Reader for Windows®, Mac, or Linux® by \nvisiting http://www.adobe.com/products/acrobat/readstep2.html. \n \nFor more assistance with Adobe Reader visit http://www.adobe.com/support/products/\nacrreader.html. \n \nWindows is either a registered trademark or a trademark of Microsoft Corporation in the United States and/or other countries. Mac is a trademark \nof Apple Inc., registered in the United States and other countries. Linux is the registered trademark of Linus Torvalds in the U.S. and other \ncountries.\n"
] |
f1099sb.pdf
|
1219 Form 1099-SB (PDF)
|
https://www.irs.gov/pub/irs-pdf/f1099sb.pdf
|
[
" \nForm 1099-SB\n(Rev. December 2019)\nCat. No. 71384X\nSeller’s Investment in \nLife Insurance \nContract\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nFile with Form 1096. \nOMB No. 1545-2281\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\n4343\nFor calendar year \n20\nVOID\nCORRECTED\nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nISSUER’S TIN\nSELLER’S TIN\nSELLER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Investment in contract\n$\n2 Surrender amount\n$\nIssuer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ISSUER)\nForm 1099-SB (Rev. 12-2019)\nwww.irs.gov/Form1099SB\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-SB\n(Rev. December 2019)\nSeller’s Investment in \nLife Insurance \nContract\nCopy B\nFor Seller\nDepartment of the Treasury - Internal Revenue Service\nThis is important tax \ninformation and is being \nfurnished to the IRS. If \nyou are required to file a \n return, a negligence \npenalty or other \nsanction may be \nimposed on you if this \nitem is required to be \nreported and the IRS \ndetermines that it has \nnot been reported.\nOMB No. 1545-2281\nFor calendar year \n20\nCORRECTED (if checked)\nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nISSUER’S TIN\nSELLER’S TIN\nSELLER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Investment in contract\n$\n2 Surrender amount\n$\nIssuer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ISSUER)\nForm 1099-SB (Rev. 12-2019)\n(keep for your records)\nwww.irs.gov/Form1099SB\n",
"Instructions for Seller\nThe issuer of an insurance policy must furnish this form to you \nupon receiving notice of a transfer of your life insurance \ncontract in a reportable policy sale under section 6050Y or the \ntransfer of your life insurance contract to a foreign person \nreportable under section 6050Y.\nSeller’s taxpayer identification number (TIN). For your \nprotection, this form may show only the last four digits of your \nTIN (social security number (SSN), individual taxpayer \nidentification number (ITIN), adoption taxpayer identification \nnumber (ATIN), or employer identification number (EIN)). \nHowever, the issuer has reported your complete TIN to the \nIRS.\nPolicy number. Shows the policy number the life insurance \ncompany assigned to the life insurance contract transferred.\nBox 1. Shows the issuer’s estimate of your investment in the \ncontract (as defined in section 72(e)(6)).\nBox 2. Shows the amount that you would have received upon \nsurrender of the life insurance contract transferred.\nIssuer’s information contact name, address, and phone \nnumber. Shows the contact information of the issuer. The \ncontact information provided will give you direct access to a \nperson who can answer questions about this form. If blank, \nthe contact information is the same as the ISSUER.\nFuture developments. For the latest developments related to \nForm 1099-SB and its instructions, such as legislation enacted \nafter they were published, go to www.irs.gov/Form1099SB. \n",
" \nForm 1099-SB\n(Rev. December 2019)\nSeller’s Investment in \nLife Insurance \nContract\nCopy C\nFor Issuer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-2281\nFor Privacy Act and \nPaperwork Reduction \nAct Notice, see the \ncurrent General \nInstructions for Certain \nInformation Returns.\nFor calendar year \n20\nCORRECTED (if checked)\nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nISSUER’S TIN\nSELLER’S TIN\nSELLER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nPolicy number\n1 Investment in contract\n$\n2 Surrender amount\n$\nIssuer’s information contact name, street address, city or \ntown, state or province, country, ZIP or foreign postal code, \nand telephone no. (if different from ISSUER)\nForm 1099-SB (Rev. 12-2019)\n(keep for your records)\nwww.irs.gov/Form1099SB\n",
"Instructions for Issuer\nTo complete Form 1099-SB, use:\n• The current General Instructions for Certain \nInformation Returns, and\n• The current Instructions for Form 1099-SB.\nTo get or to order these instructions, go to \nwww.irs.gov/Form1099SB.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220. \nNeed help? If you have questions about reporting on \nForm 1099-SB, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
p1660.pdf
|
0120 Publ 1660 (PDF)
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https://www.irs.gov/pub/irs-pdf/p1660.pdf
|
[
"Collection Appeal Rights\nBy law, you have the right to a CDP hearing when you receive \na Notice advising you of this right and you timely postmark a \nrequest for a hearing to the address indicated on the Notice. \nYou are limited to one hearing under section 6320 (Notice and \nopportunity for hearing upon filing of notice of lien) and 6330 \n(Notice and opportunity for hearing before levy) for each tax \nassessment within a tax period.\nYou may contest the CDP determination in the United States \nTax Court.\nLien Notice: The IRS is required to notify you the first time a \nNotice of Federal Tax Lien is filed for each tax and period. The \nIRS must notify you within 5 business days after the lien filing. \nThis notice may be mailed, given to you, or left at your home \nor office. You then have 30 days, after that 5-day period, to \nrequest a hearing with Appeals. The lien notice you receive will \nindicate the date this 30-day period expires.\nLevy Notice: For each tax and period, the IRS is required to \nnotify you the first time it collects or intends to collect a tax \nliability by taking your property or rights to property.\nThe IRS does this by issuing you a pre-levy or post-levy notice. \nThe notice is mailed, given to you, or left at your home or office. \nDuring the 30-day period from the date of the notice, you may \nrequest a hearing with Appeals. There are four exceptions to \nissuing this notice before levy:\n1.\t When collection of the tax is in jeopardy. \n2.\t When the IRS levies your state tax refund.\n3.\t When the criteria for a Disqualified Employment Tax \nLevy is met.\n4.\t When the IRS serves a federal contractor levy.\nYou may request a hearing after the levy action in these \ninstances.\nIf your request for a CDP hearing is not timely, you may request \nan equivalent hearing. To receive an equivalent hearing, your \nrequest must be postmarked on or before the end of the one-\nyear period after the date of the levy notice or on or before the \nend of the one-year period plus 5 business days after the filing \ndate of the Notice of Federal Tax Lien.\nYou may appeal many IRS collection actions to the IRS Independent Office of Appeals (Appeals). Appeals is separate from and \nindependent of the IRS Collection office that initiated the collection action. Appeals ensures and protects its independence by \nadhering to a strict policy of prohibiting certain ex parte communications with the IRS Collection office or other IRS offices, such as \ndiscussions regarding the strengths or weaknesses of your case. Revenue Procedure 2012-18 has more information about Appeals’ \nindependence and ex parte communication and is available at www.IRS.gov.\nThe two main procedures are Collection Due Process and Collection Appeals Program. Other procedures are described on page \nfour of this publication and at www.IRS.gov.\nCollection Due Process (CDP) is available if you receive one of the following notices:\n•\t Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320\n•\t Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing\n•\t Notice of Jeopardy Levy and Right of Appeal\n•\t Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing \n•\t Post Levy Collection Due Process (CDP) Notice\nCollection Appeals Program (CAP) is available for the following actions:\n•\t Before or after the IRS files a Notice of Federal Tax Lien \n•\t Before or after the IRS levies or seizes your property \n•\t Termination, or proposed termination, of an installment agreement \n•\t Rejection of an installment agreement \n•\t Modification, or proposed modification, of an installment agreement\nCAP generally results in a quicker Appeals decision and is available for a broader range of collection actions. However, you cannot \ngo to court if you disagree with the CAP decision. CAP procedures are described on pages three and four of this publication.\nYou may represent yourself at CDP, CAP and other Appeals proceedings. Or, you may be represented by an attorney, certified public \naccountant, or a person enrolled to practice before the IRS. Also, you may be represented by a member of your immediate family, \nor in the case of a business, by regular full-time employees, general partners or bona fide officers.\nA Low Income Taxpayer Clinic (LITC) may represent you if you qualify. LITCs are independent from the IRS and most provide \nrepresentation before the IRS or in court on audits, tax collection disputes, and other issues for free or for a small fee. Some clinics \ncan provide multilingual information about taxpayer rights and responsibilities. Publication 4134, Low Income Taxpayer Clinic List, \nprovides information on clinics in your area and is available at your local IRS office, by calling 1-800-829-3676, or from www.IRS.gov.\nIf you want your representative to contact us or appear without you and to receive and inspect confidential material, you must file \na properly completed Form 2848 (no earlier than 10/2011 revision), Power of Attorney and Declaration of Representative. You may \nalso authorize an individual to receive or inspect confidential material but not represent you before the IRS, by filing a Form 8821, \nTax Information Authorization. These forms are available at your local IRS office, by calling 1-800-829-3676, or from www.IRS.gov.\nHEARING AVAILABLE UNDER COLLECTION DUE PROCESS (CDP) For Lien and Levy Notices\nPublication 1660 (Rev. 1-2020) Catalog Number 14376Z Department of the Treasury Internal Revenue Service www.irs.gov\n",
"How do you request a CDP or equivalent hearing with the \nIRS Independent Office of Appeals?\nComplete Form 12153, Request for a Collection Due Process \nor Equivalent Hearing, or other written request with the same \ninformation and send it to the address shown on your lien or \nlevy notice. To request an equivalent hearing, you must check \nthe Equivalent Hearing box on line 7 of Form 12153, or if you \ndon’t use Form 12153 write that you want an equivalent hearing \nif the CDP hearing request is late. If you received both a lien \nand a levy notice, you may appeal both actions by checking the \nboxes on line 6 of Form 12153 or if you don’t use Form 12153, \nyou may appeal both actions in one written request. You must \nidentify your alternatives to, or your reasons for disagreeing \nwith, the lien filing or the levy action. Alternatives or reasons for \ndisagreeing may include:\n•\t Collection alternatives such as installment agreement or \noffer in compromise.\n•\t Subordination or discharge of lien. \n•\t Withdrawal of Notice of Federal Tax Lien. \n•\t Appropriate spousal defenses.\n•\t The existence or amount of the tax, but only if you did \nnot receive a notice of deficiency or did not otherwise \nhave an opportunity to dispute the tax liability.\n•\t Collection of the tax liability is causing or will cause an \neconomic or other hardship.\nNote: You may not raise an issue that was raised and \nconsidered at a prior administrative or judicial hearing, if \nyou, or your representative, participated meaningfully in the \nprior hearing or proceeding. Also, you may not challenge the \nexistence or amount of an assessment made based on court \nordered restitution.\nForm 12153 is available at your local IRS Office, by calling \n1-800-829-3676, or from www.IRS.gov. Include a copy of your \nlien and/or levy notice. List all taxes and tax periods included on \nthe notice you received for which you are requesting a hearing. \nYou are entitled to only one hearing relating to a lien notice and \none hearing relating to a levy notice, for each taxable period. \nIn general, the IRS will deny a hearing request that only raises \nissues identified by the IRS as frivolous or that are made solely \nto delay or impede collection. For a nonexclusive listing of \nissues identified by the IRS as frivolous, see “The Truth About \nFrivolous Tax Arguments” on www.IRS.gov.\nTo preserve your right to go to court, you must request a CDP \nhearing within the time period provided by law. Your request for \na CDP hearing must be sent to the address on the lien or levy \nnotice and postmarked on or before the date shown in the lien \nnotice or on or before the 30th day after the date of the levy \nnotice.\nBefore you formally appeal a lien or levy notice by sending \nus Form 12153, you may be able to work out a solution with \nthe Collection office that sent the notice. To do so, call the \ntelephone number on the lien or levy notice and explain to the \nIRS employee listed on the notice or other representative why \nyou disagree with the action.\nIf a telephone number is not shown on the notice, you can call \n1-800-829-1040. This contact, however, does NOT extend the \n30-day period to make a written request for a CDP hearing.\nWhat will happen when you request a CDP or equivalent \nhearing with the IRS Independent Office of Appeals?\nAfter you request a hearing, you may still discuss your concerns \nwith the Collection office that sent the lien or levy notice. If you \nare able to resolve the issues with that office, you may withdraw \nyour request for a hearing. If you are unable to, or do not choose \nto, resolve the issues with the Collection office, your case will \nbe forwarded immediately to Appeals.\nAppeals will contact you to schedule a conference. Your \nconference may be held by telephone, correspondence, or, if \nyou qualify, in a face-to-face conference at the Appeals office \nclosest to your home, school or place of business. To qualify for \na face-to-face conference, you must not raise any issues that \nare deemed as frivolous or made with a desire solely to delay or \nimpede collection. If you are proposing a collection alternative, it \nmay be necessary for you to submit financial information or tax \nreturns. Generally, the IRS Independent Office of Appeals will \nask the Collection Function to review, verify and provide their \nopinion on any new information you submit. We will share their \ncomments with you and give you the opportunity to respond. \nIf you request a face-to-face hearing, the Appeals Officer will \nnotify you by letter if you need to take steps to qualify for a face-\nto-face conference.\nUnless one of the exceptions in section 6330(f) applies, \nfor Jeopardy situations, State Income Tax levies, Federal \nContractor levies or Disqualified Employment Tax levies, levy \naction is not permitted for the subject tax and periods during the \n30 days after the levy notice and during the timely requested \nCDP hearing process. Normally, there will be no levy action \nduring the period you have to request a hearing from a lien \nnotice and during the related CDP hearing process.\nIf your request for a CDP hearing is timely, the 10-year period \nthe IRS has to collect your taxes will be suspended until the \ndate Appeals’ determination becomes final or you withdraw \nyour request for a hearing in writing.\nAt the conclusion of the CDP hearing, Appeals will issue a \ndetermination letter unless you have withdrawn your hearing \nrequest. If you don’t agree with Appeals’ determination, you \nmay request judicial review of the determination by petitioning \nthe United States Tax Court within the time period provided for \nin the Appeals’ determination letter. You may not be able to \nraise issues in the Tax Court if you do not raise them during the \nAppeals hearing, and the Tax Court may limit the evidence you \ncan present to the evidence you submitted to Appeals during \nthe hearing. You should, therefore, raise all issues and present \nall evidence during the Appeals hearing, in order to preserve \nyour rights to raise issues and have evidence considered in \nsubsequent court proceedings.\nAppeals will retain jurisdiction over its determination. You may \nreturn to Appeals if you believe that the Collection function \ndid not carry out Appeals’ determination as it was stated or if \nthere is a change in your circumstances that affects Appeals’ \ndetermination. However, you must first try to work with Collection \nto resolve the problem.\nIf your request for a CDP hearing is not timely and you request \nan equivalent hearing, the law does not prohibit levy and the \ncollection statute is not suspended. Furthermore, you cannot \ngo to court if you disagree with Appeals’ decision.\n",
"HEARING AVAILABLE UNDER COLLECTION APPEALS PROGRAM (CAP)\nFor Liens, Levies, Seizures and Installment Agreements\nThe CAP procedure is available under more circumstances \nthan Collection Due Process (CDP). Unlike CDP, you may not \nchallenge in CAP the existence or amount of your tax liability. \nYou also cannot proceed to court if you don’t agree with Appeals’ \ndecision in your CAP case. Collection actions you may appeal \nunder CAP are:\nNotice of Federal Tax Lien. You may appeal the proposed \nfiling of a Notice of Federal Tax Lien (NFTL) or the actual filing \nof an NFTL at the first and each subsequent filing of the NFTL. \nYou may also appeal denied requests to withdraw a NFTL, and \ndenied discharges, subordinations, and non-attachments of a \nlien.\nThird parties may file a CAP appeal regarding the filing of a \nnotice of lien against alter ego or nominee property. There are \nno CDP rights available for persons determined to be nominees \nor alter egos. Persons assessed as transferees under Internal \nRevenue Code (IRC) Section 6901, however, are entitled to \nCDP rights. \nNotice of Levy. You may appeal before or after the IRS places \na levy on your wages, bank account or other property. Once \nthe levy proceeds have been sent to the IRS, you may also \nappeal the denial by the IRS of your request to have levied \nproperty returned to you. Please note that a request to return \nlevy proceeds must be made within 9 months from the date of \nsuch levy if it was made on or before March 22, 2017. If the levy \nwas made on or after March 23, 2017, your request must be \nmade within 2 years from the date of such levy. See IRC Section \n6343(d). You may also have additional CDP appeal rights. See \nthe preceding information regarding Hearing Available under \nCollection Due Process.\nSeizure of Property. You may appeal before or after the IRS \nmakes a seizure but before the property is sold.\nRejection, Modification or Termination of Installment \nAgreement. You may appeal when the IRS rejects your request \nfor an installment agreement. You may also appeal when \nthe IRS proposes to terminate or terminates your installment \nagreement.\nIn addition, you may also appeal when the IRS proposes to \nmodify or modifies your installment agreement.\nWrongful Levy. If you are not liable for tax and the IRS has \nlevied or seized property that you believe belongs to you or in \nwhich you have an interest superior to the IRS, you may appeal \nthe denial by the IRS of your request to release the levy or \nseizure, or return the property or its value. Please note that a \nrequest to the IRS to return wrongfully levied property must be \nin writing, filed within 9 months of the levy or seizure if it was \nmade on or before March 22, 2017, and must satisfy certain \nrequirements. If the levy or seizure was made on or after March \n23, 2017, your request must be made within 2 years from the \ndate of the levy or seizure. See Publication 4528, Making an \nAdministrative Wrongful Levy Claim Under Internal Revenue \nCode (IRC) Section 6343(b).\nHow do you appeal a lien or levy action if your only \ncollection contact has been a notice or telephone call?\n1.\t Call the IRS at the telephone number shown on your \nnotice or identified by the IRS employee in a prior \ntelephone contact. Be prepared to explain which action(s) \nyou disagree with and why you disagree. You must also \noffer a solution to your tax problem.\n2.\t If you can’t reach an agreement with the employee, tell the \nemployee that you want to appeal his or her decision. The \nemployee must honor your request and will refer you to a \nmanager. The manager will either speak with you then or \nwill return your call within 24 hours.\n3.\t Explain to the manager which action(s) you disagree with \nand why. The manager will make a decision on the case. \nIf you don’t agree with the manager’s decision, your case \nwill be forwarded to Appeals for review. You do not have to \nsubmit the appeal request in writing.\nHow do you appeal a lien, levy or seizure action if you have \nbeen contacted by a Revenue Officer?\n1.\t If you disagree with the decision of the Revenue Officer, \nyou must first request a conference with the Collection \nmanager.\n2.\t If you do not resolve your disagreement with the \nCollection manager, you may submit a written request for \nAppeals consideration, preferably by completing Form \n9423, Collection Appeal Request. This form is available \nat your local IRS office, by calling 1-800-829-3676, or \nfrom www.IRS.gov. Check the action(s) you disagree \nwith and explain why you disagree. You must also offer a \nsolution to resolve your tax problem.\n3.\t Submit the Form 9423 to that Collection office.\n4.\t If you request an appeal after the IRS makes a seizure, \nyou must appeal to the Collection manager within 10 \nbusiness days after the Notice of Seizure is given to you \nor left at your home or business.\n5.\t You should let the Revenue Officer or manager know \nwithin 2 business days after your conference with the \nCollection manager if you want to appeal under CAP or \nthe IRS will resume collection action. Your Form 9423 \nmust be postmarked within 3 business days after the \ndate of your conference with the Collection manager in \norder to prevent the resumption of collection action.\n6.\t If you request a conference and are not contacted by \na manager or his/her designee within two (2) business \ndays of making the request, you can contact Collection \nagain or submit Form 9423. If you submit Form 9423, \nnote the date of your request for a conference in Block 15 \nand indicate that you were not contacted by a manager. \nThe Form 9423 should be received or postmarked within \nfour (4) business days of your request for a conference \nas collection action may resume.\nHow do you appeal the denial by the IRS of your request to \nrelease or return levied or seized property, if you believed the \nproperty was wrongfully levied or seized?\n1.\t If you do not agree with the denial of the request to \nrelease or return wrongfully levied/seized property or \nits value, you must first request a conference with the \nmanager of the Advisory Group denying your request.\n2.\t Call the telephone number on the letter denying your \nrequest and explain that you want a conference with the \nAdvisory Group manager.\n3.\t If you do not resolve your disagreement with the Advisory \nGroup manager, you must submit a written request \nfor Appeals consideration, preferably on Form 9423, \nCollection Appeal Request. \n",
"4.\t This form is available at your local IRS office, by calling \n1-800-829-3676, or from www.IRS.gov. Check the \naction you disagree with and explain why you disagree.\n5.\t Submit the completed Form 9423 to the Advisory Group \noffice that denied your request to release or return of \nwrongfully levied/seized property or its value.\nHow do you appeal the rejection of a proposed installment \nagreement?\n1. Call the telephone number shown on the letter rejecting your \nproposed installment agreement and explain that you want to \nappeal the rejection. Your appeal need not be in writing unless \nthe rejection letter was sent by a Revenue Officer, in which \ncase your request for an appeal must be in writing, preferably \nusing Form 9423, Collection Appeal Request. While a \nconference is recommended, you need not have a conference \nwith a Collection manager before appealing the rejection of a \nproposed installment agreement.\n2. Your request for an appeal of the rejection of a proposed \ninstallment agreement must be made on or before the 30th \nday after the date of the rejection letter (the mailing of a written \nrequest, including a Form 9423, must be postmarked on or \nbefore such day).\nHow do you appeal the termination of an installment \nagreement?\n1. Call the telephone number shown on the notice that indicates \nthat the IRS intends to terminate your installment agreement. \nIf you are unable to resolve the matter, then explain that you \nwant to appeal the termination. Your appeal need not be in \nwriting unless the notice of intent to terminate your installment \nagreement was sent by a Revenue Officer, in which case \nyour request for an appeal must be in writing, preferably using \nForm 9423, Collection Appeal Request. While a conference \nis recommended, you need not have a conference with a \nCollection manager before appealing the termination of an \ninstallment agreement.\n2. You will have 30 days from the date of the notice of intent \nto terminate in which to request an appeal. Unless you appeal \nwithin 30 days after the date of the notice, or cure the default, \nthe installment agreement will terminate. After the termination \nof your installment agreement, your right to appeal will continue \nfor an additional 30 days. Your written request, if mailed, must \nbe postmarked within the appeal period. Please note that if you \nappeal prior to the termination of your installment agreement, \nyou may not appeal the decision again once the termination \ntakes effect.\nHow do you appeal a proposed modification or modification \nof an installment agreement?\nThe IRS may propose to modify the terms of your installment \nagreement based on your financial information. If the IRS does \nnot hear from you after proposing to modify your installment \nagreement, it may proceed to modify your installment \nagreement. If you are informed that your agreement is being \nmodified or has been modified, you may request an Appeals \nhearing under CAP procedures. If you wish to file an appeal \nconcerning a proposed modification or modification of your \ninstallment agreement, please follow the directions under the \nsection entitled, “How do you appeal the termination of an \ninstallment agreement?”\nWhat will happen when you appeal your case?\nLien, Levy and Seizure: Normally, the IRS will not take \nany action to collect the tax for the tax periods Appeals is \nconsidering, unless the IRS believes the collection of the \ntax is at risk or you are a business meeting the criteria for a \nDisqualified Employment Tax Levy.\nInstallment Agreements: IMPORTANT - The IRS can’t \nlevy until 30 days after the rejection or termination of your \nagreement. If you appeal within the 30-day period, the IRS will \nbe prohibited from levying until your appeal is completed unless \nthe IRS believes the collection of the tax is in jeopardy.\nOnce Appeals makes a decision regarding your case, that \ndecision is binding on both you and the IRS. You cannot \nobtain judicial review of Appeals’ decision following a CAP \nhearing. However, there may be other opportunities to obtain \nadministrative or judicial review of the issue raised in the CAP \nhearing. For example, a third party may contest a wrongful levy \nby filing an action in district court. See Publication 4528, Making \nan Administrative Wrongful Levy Claim Under Internal Revenue \nCode (IRC) Section 6343(b).\nNote: Providing false information, failure to provide all pertinent \ninformation or fraud will void Appeals’ decision.\nAPPEAL OF OTHER COLLECTION ACTIONS\nYou may also appeal other collection actions: \n•\t Rejected Offer in Compromise\n•\t Proposed Trust Fund Recovery Penalty\n•\t Denied Trust Fund Recovery Penalty Claim\n•\t Denied request to abate penalties (i.e., late payment, \nlate filing, or deposit penalties)\nTo dispute a penalty in Appeals, follow the protest requirements \nin Publication 5, Your Appeal Rights and How To Prepare \nA Protest If You Don’t Agree. Also, the correspondence you \nreceive on these types of cases will explain where you should \nsend your protest.\nHelp if you are experiencing economic harm...\nThe Taxpayer Advocate Service (TAS) helps taxpayers \nwhose problems with the IRS are causing financial \ndifficulties; who have tried but haven’t been able to \nresolve their problems with the IRS; and those who \nbelieve an IRS system or procedure is not working as it \nshould. If you believe you are eligible for TAS assistance, \nyou can reach TAS by calling the TAS toll-free number at \n1-877-777-4778 or TTY/TDD 1-800-829-4059. For more \ninformation, go to www.irs.gov/advocate.\nTAS cannot extend the time you have to request a CDP, \nequivalent or CAP hearing. The timeframes for requesting \nthese hearings are explained in this publication.\n"
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n1392.pdf
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0120 Notc 1392 (PDF)
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https://www.irs.gov/pub/irs-pdf/n1392.pdf
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"Notice 1392\n(Rev. January 2020)\nDepartment of the Treasury\nInternal Revenue Service\nSupplemental Form W-4 Instructions \nfor Nonresident Aliens\n \nNonresident aliens must follow special instructions when \ncompleting Form W-4, Employee's Withholding Certificate, for \ncompensation paid to such individuals as employees \nperforming dependent personal services in the United States. \nCompensation for dependent personal services includes \namounts paid as wages, salaries, fees, bonuses, \ncommissions, compensatory scholarships, fellowship income, \nand similar designations for amounts paid to an employee.\nGetting tax forms and publications. Go to IRS.gov/Forms-\nInstructions to view, download, or print all of the forms and \npublications you may need. You can also download and view \npopular tax publications and instructions on mobile devices as \nan eBook at no charge. Or, you can go to IRS.gov/OrderForms \nto place an order and have forms mailed to you within 10 \nbusiness days. Also, you can call 800-829-3676 to place your \norder.\nAre you a nonresident alien? If so, these \nspecial instructions apply to you. Resident \naliens should follow the instructions on \nForm W-4.\nIf you are an alien individual (that is, an individual who is not \na U.S. citizen), specific rules apply to determine if you are a \nresident alien or a nonresident alien for federal income tax \npurposes. Generally, you are a resident alien if you meet either \nthe “green card test,” or the “substantial presence test,” for the \ncalendar year. Any alien individual not meeting either test is \ngenerally a nonresident alien. Additionally, a dual-resident \nalien who applies the so-called “tie-breaker” rules contained \nwithin the Resident (or Residence or Fiscal Residence) article \nof an applicable U.S. income tax treaty in favor of the other \nContracting State is treated as a nonresident alien. See Pub. \n519, U.S. Tax Guide for Aliens, for more information on the \ngreen card test, the substantial presence test, and the \nfirst-year choice.\nWhat compensation is subject to \nwithholding and requires a Form W-4?\nCompensation paid to a nonresident alien for performing \npersonal services as an employee in the United States is \nsubject to graduated withholding. Compensation for personal \nservices also includes amounts paid as a scholarship or \nfellowship grant to the extent it represents payment for past, \npresent, or future services performed as an employee in the \nUnited States. Nonresident aliens must complete Form W-4 \nusing the modified instructions provided later, so that \nemployers can withhold the correct amount of federal income \ntax from compensation paid for personal services performed in \nthe United States. This Notice modifies the instructions to \nForm W-4 to take into account the restriction on a nonresident \nalien's filing status, the restriction on claiming the standard \ndeduction, and the restriction on claiming tax credits and \ndeductions for certain Nonresident aliens.\nAre there any exceptions to this \nwithholding?\nYes. Nonresident aliens may be exempt from wage \nwithholding on the following amounts.\n• Compensation paid to employees of foreign employers if \nsuch pay is not more than $3,000 and the employee is \ntemporarily present in the United States for not more than \na total of 90 days during the tax year.\n• Compensation paid to regular crew members of a foreign \nvessel.\n• Compensation paid to residents of Canada or Mexico \nengaged in transportation-related employment.\n• Certain compensation paid to residents of American \nSamoa, Puerto Rico, or the U.S. Virgin Islands.\n• Compensation paid to foreign agricultural workers \ntemporarily admitted into the United States on H-2A visas.\nSee Pub. 519 to see if you qualify for one of these \nexemptions.\nNonresident aliens may be exempt from wage withholding \non part or all of their compensation for dependent personal \nservices under an income tax treaty. If you are claiming a tax \ntreaty withholding exemption, do not complete Form W-4. \nInstead, complete Form 8233, Exemption from Withholding on \nCompensation for Independent (and Certain Dependent) \nPersonal Services of a Nonresident Alien Individual, and give it \nto each withholding agent from whom amounts will be \nreceived.\nEven if you submit Form 8233, the withholding agent may \nhave to withhold tax from your income because the factors on \nwhich the treaty exemption is based may not be determinable \nuntil after the close of the tax year. In this case, you must file \nForm 1040-NR, U.S. Nonresident Alien Income Tax Return (or \nForm 1040-NR-EZ, U.S. Income Tax Return for Certain \nNonresident Aliens With No Dependents, if you qualify), to \nrecover any overwithheld tax and to provide the IRS with proof \nthat you are entitled to the treaty exemption. See Form 8233 \nand the Instructions for Form 8233, Pub. 901, U.S. Tax \nTreaties, and Pub. 519 for more information on treaty benefits.\nIRS.gov\nCatalog No. 54303E\n",
"Am I required to file a U.S. tax return even \nif I am a nonresident alien?\nYes. Nonresident aliens who perform personal services in \nthe United States are considered to be engaged in a trade or \nbusiness in the United States and generally are required to file \nForm 1040-NR (or Form 1040-NR-EZ). Also, you will need to \nfile Form 1040-NR (or Form 1040-NR-EZ) to claim a refund of \nany overwithheld taxes. See the Instructions for Form \n1040-NR, or the Instructions for Form 1040-NR-EZ, for more \ninformation.\nNonresident aliens who are bona fide residents of U.S. \npossessions should consult Pub. 570, for information on \nwhether compensation is subject to wage withholding in the \nUnited States.\nWill my withholding amounts be different \nfrom withholding for my U.S. coworkers?\nYes. Nonresident aliens cannot claim the standard \ndeduction. The benefits of the standard deduction are included \nin the existing wage withholding tables published in Pub. 15-T, \nFederal Income Tax Withholding Methods.\nBecause nonresident aliens may not claim the standard \ndeduction, employers are instructed to withhold an additional \namount from a nonresident alien's wages. For the specific \namounts to be added to wages before application of the wage \ntables, see Pub. 15-T.\nNote. A special rule applies to nonresident alien students \nfrom India and business apprentices from India who are \neligible for the benefits of Article 21(2) of the United \nStates-India income tax treaty. Employers are not required to \nwithhold an additional amount for the standard deduction from \nthe wages of these individuals, as they may be entitled to claim \nthe standard deduction. See Pub. 15-T and Pub. 519 for more \ninformation.\nWhat are the special Form W-4 \ninstructions?\nNonresident aliens should pay particular attention to the \nfollowing lines when completing Form W-4.\nStep 1(b): Personal Information. You are required to enter a \nsocial security number (SSN) on Step 1(b) of Form W-4. If you \ndo not have an SSN, contact the Social Security \nAdministration (SSA) to find out if you are eligible for one.\nYou can visit any SSA office or call the SSA at \n800-772-1213. For the deaf or hard-of-hearing, call \n800-325-0778 (TTY/TTD number).\nFor more information, go to www.ssa.gov/ssnumber.\nNote. You cannot enter an individual taxpayer identification \nnumber (ITIN) in Step 1(b) of Form W-4.\nStep 1(c): Personal Information. Check the Single or \nMarried filing separately box regardless of your actual marital \nstatus.\nStep 2: Multiple Jobs or Spouse Works. Do not complete \nthis section unless you have more than one job at the same \ntime. Do not account for your spouse's job because \nnonresident aliens may not file jointly.\nIf you have more than one job, you may complete Step 2(b) \nor Step 2(c).\nIf you chose Step 2(b), complete the Step 2(b) Multiple \nJobs Worksheet for only one job and write “nonresident alien” \nor “NRA” below Step 4(c) for only one job.\nIf you have only two jobs, you may choose Step 2(c), check \nthe box on both Forms W-4, and write “NRA” or “nonresident \nalien” below Step 4(c) for the Form W-4 for the highest paying \njob. Do not write “nonresident alien” or “NRA” below Step 4(c) \nfor the other job.\nNonresident aliens should not use the Tax Withholding \nEstimator.\nMultiple withholding agents. If you are completing Form \nW-4 for more than one withholding agent (for example, you \nhave more than one employer), complete Steps 3-4(b) on only \none Form W-4. Withholding will be most accurate if you do this \non the Form W-4 for the highest paying job.\nStep 3: Claim Dependents. Only certain nonresident aliens \nshould use Step 3. Nonresident aliens from Canada, Mexico, \nSouth Korea, or India may be able to claim the child tax credit \nor the credit for other dependents. See Pub. 519 and Pub. 972 \nfor more information.\nNonresident aliens are generally not entitled to education \ncredits. See Pub. 519 for more information.\nAdd the total credits that you may claim and enter the total \nin Step 3.\nStep 4. Optional\nStep 4(a). If you want tax withheld for other income this year \nthat won't have withholding and the income is taxable in the \nUnited States, enter the amount of other income here. Do not \ninclude any income from any jobs or self-employment. See \nPub. 519 for more information.\nStep 4(b). Nonresident alien itemized deductions and \nadjustments to income may be limited. See Pub. 519 for more \ninformation. If you expect to claim itemized deductions and/or \nadjustments to income (such as the student loan interest \ndeduction), add your itemized deductions and adjustments to \nincome and enter the amount in Step 4(b).\nStep 4(c). Write “nonresident alien” or “NRA” in the space \nbelow Step 4(c). If you would like to have an additional amount \nwithheld, enter the amount in Step 4(c).\nExempt from withholding. Do not claim that you are exempt \nfrom withholding in the space below Step 4(c) of Form W-4 \n(even if you meet both of the conditions to claim exemption \nfrom withholding listed in the instructions to the Form W-4).\nIRS.gov\nCatalog No. 54303E\n"
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n940sp.pdf
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1219 Notc 940 (SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/n940sp.pdf
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[
"Aviso 940SP\n(Rev. diciembre de 2019)\nDepartment of the Treasury\nInternal Revenue Service\n¿Por qué tengo que entregarle un Formulario W-4(SP) a mi \nempleador?\nEste aviso ha sido preparado con el propósito de informarle por qué tiene que completar y entregar a su empleador o patrono un \nFormulario W-4(SP), Certificado de Retenciones del Empleado (o el Formulario W-4, en inglés), cada vez que comienza a trabajar en \nun nuevo empleo, cuando su situación personal o financiera cambia o cuando desea calcular su retención con mayor precisión. Si \ndesea obtener información más reciente sobre el Aviso 940SP, como legislación tributaria promulgada después de que este se ha \nenviado a imprenta, acceda a IRS.gov/FormW4SP.\nPago del impuesto. El impuesto federal sobre el ingreso se paga a medida que se devenga o se reciba el ingreso. Esto significa \nque tiene que pagar este impuesto cada vez que su empleador o patrono le pague lo que ha ganado.\nRetención del impuesto sobre los ingresos. Por lo general, durante todo el año, su empleador o patrono retendrá de sus ingresos \nel impuesto que tiene que pagar y se lo enviará al Servicio de Impuestos Internos (IRS, por sus siglas en inglés). De esta manera, \ncuando termine el año, habrá pagado todo, o casi todo, su impuesto sobre sus ingresos. Si no lo hace así, es posible que esté sujeto \na multas. Por lo tanto, le conviene que se le retenga el impuesto a lo largo del año para evitar tener que hacer un pago grande al \npresentar su declaración de impuestos. Sin embargo, tampoco es conveniente que se le retenga una cantidad excesiva de impuestos \nporque, aunque reciba un reembolso grande al final del año, esta no es una buena manera de ahorrar. Es más, perderá dinero \nporque, por lo general, el IRS no paga intereses sobre retenciones en exceso.\nIngresos sujetos a impuestos. Todos los ingresos de sueldos, salarios, propinas y otras compensaciones que reciba por trabajar \n(por ejemplo, ingresos del trabajo por cuenta propia) están sujetos al pago del impuesto. Sin embargo, la ley le permite restar de sus \ningresos algunas cantidades antes de calcular el impuesto. Estas cantidades incluyen ciertos ajustes que puede hacerle a su ingreso, \nasí como la deducción estándar (o las deducciones detalladas, si estas son mayores que la cantidad de la deducción estándar). Al \nrestar de su ingreso estas cantidades, obtendrá la cantidad sobre la cual tendrá que pagar el impuesto. Puede encontrar información \ndetallada acerca de estos y otros temas relacionados con el impuesto federal sobre el ingreso en la Publicación 17(SP), El Impuesto \nFederal sobre los Ingresos (Para Personas Físicas); acceda a IRS.gov/Pub17SP.\nIngresos que no provienen de sueldos ni salarios. Si tiene ingresos que no provienen de sueldos ni salarios, como ingresos por \ndividendos o ganancias de capital, o sus ingresos están sujetos a impuestos adicionales, como el impuesto adicional del Medicare, \nconsidere hacer pagos del impuesto estimado utilizando el Formulario 1040-ES, Estimated Tax for Individuals (Impuesto estimado \npara personas físicas), en inglés. De lo contrario, podría adeudar impuestos adicionales. Si recibió ingresos por concepto de pensión \no anualidad, vea la Publicación 505, Tax Withholding and Estimated Tax (Retención del impuesto e impuesto estimado), en inglés, \npara saber si tiene que ajustar su retención en el Formulario W-4(SP) o en el Formulario W-4P, Withholding Certificate for Pension or \nAnnuity Payments (Certificado de retención para pagos de pensiones o anualidades), en inglés.\n¿Cuánto retendrá mi empleador o patrono de mi sueldo o salario? Usted es responsable de informarle a su empleador o \npatrono la cantidad del impuesto que le tiene que retener. Cuando obtiene un empleo, una de las primeras cosas que le piden es que \ncomplete un Formulario W-4(SP) (o el Formulario W-4, en inglés). Si después necesita cambiar la información que indicó en el \nformulario, complete un nuevo formulario y entrégueselo a su empleador o patrono. El formulario y las hojas de trabajo incluidas le \nayudarán a aumentar o reducir la cantidad del impuesto que le retendrán de su sueldo o salario. Si no le entrega un Formulario \nW-4(SP) debidamente completado a su empleador o patrono, es posible que se le retenga una cantidad excesiva de impuestos, ya \nque la retención se hará como si usted fuera soltero sin reclamar ninguna deducción.\nLa cantidad del impuesto que le retendrán en su empleo durante el año no será exactamente la misma que calculará en la \ndeclaración que presentará al final del año, porque, por lo general, en su empleo le habrán retenido una cantidad mayor o menor de la \nque adeuda. Por lo tanto, si al preparar la declaración se da cuenta que aún adeuda impuesto, pague la cantidad adeudada al \npresentar su declaración y, si pagó de más, el IRS le reembolsará la cantidad que pagó en exceso después de que presente la \ndeclaración.\n¿Cómo completar el Formulario W-4(SP)? El Formulario W-4(SP) que usted obtiene en el lugar donde trabaja contiene \ninstrucciones, hojas de trabajo para calcular las deducciones y tablas de impuestos. El Formulario W-4(SP) incluye hojas de trabajo \ndetalladas para ayudarle a calcular la cantidad correcta de deducciones y ajustes a la retención. Puede usar el estimador de \nretención de impuestos en el sitio web IRS.gov/W4AppSP para ayudarle a completar el Formulario W-4(SP). Acceda al sitio web \nIRS.gov/FormsPubs, disponible en inglés, para descargar Formularios W-4(SP). De otro modo, puede visitar la página IRS.gov/\nOrderForms, en inglés, para pedir formularios del año actual y de años anteriores. Recibirá su pedido dentro de 10 días laborables. \nSe pueden utilizar Formularios W-4(SP) sustitutos creados por el empleador si este provee las tablas, instrucciones y las hojas de \nIRS.gov\nNúmero de Catálogo 12920R\n",
"trabajo incluidas en el Formulario W-4(SP) que está vigente al momento. Los empleadores no pueden aceptar Formularios W-4(SP) \nque son creados por el empleado; los empleados que entreguen tal formulario, serán tratados como que no entregaron el Formulario \nW-4(SP). También calcule el crédito tributario por hijos y el crédito por otros dependientes que planea reclamar si le corresponden. \nPara más detalles sobre estos créditos, vea la Publicación 972, Child Tax Credit and Credit for Other Dependents (Crédito tributario \npor hijos y el crédito por otros dependientes), en inglés. También puede incluir otros créditos tributarios, como los créditos tributarios \npor estudios y el crédito por impuestos extranjeros si le corresponden.\nSi planea detallar sus deducciones o hacer ajustes a su ingreso, complete la Hoja de Trabajo para Deducciones para tomar las \ndeducciones que le corresponden. Si es soltero y tiene más de un empleo, o si es casado y su cónyuge trabaja, complete la Hoja de \nTrabajo para Múltiples Empleos, así evitará que se le retenga menos impuesto del que tiene que pagar en el año. Vea Más de un \nempleador o patrono, más adelante.\nDespués de que haya completado las hojas de trabajo que le correspondan, estará listo para completar el Formulario W-4(SP). En \neste formulario incluirá su nombre, número de Seguro Social, dirección, estado civil para efectos de la declaración, cantidad del \nimpuesto adicional a retener cuando en la unidad familiar existen múltiples empleos (si le aplica), estimado de deducciones por \nreclamación de dependientes (si le aplica), deducciones que va a tomar (según lo que anotó en las hojas de trabajo \ncorrespondientes) y cualquier cantidad adicional que desea que se le retenga de sus salarios. Si solicita que no se le retenga \nimpuesto, tema explicado a continuación, anote la información requerida en la línea correspondiente.\nTambién puede usar el estimador de retención de impuestos en IRS.gov/W4AppSP. Considere usar el estimador de retención de \nimpuestos si tiene una situación tributaria más complicada, como por ejemplo, si trabaja solo parte del año, si tiene un cónyuge que \ntrabaja, si tiene más de un empleo, si tiene una cantidad de ingresos no derivados del trabajo aparte de su empleo o si prefiere \ndeterminar su retención con mayor precisión. Si usa el estimador, no necesita completar ninguna de las hojas de trabajo del \nFormulario W-4(SP) para determinar si necesita aumentar o reducir su retención.\nSolicitud para que no se le retenga impuesto. Si reúne los requisitos, también puede utilizar el Formulario W-4(SP) para pedirle a \nsu empleador o patrono que no le retenga de su salario impuestos federales sobre el ingreso. Esto se puede pedir si (1) el año \npasado usted no tenía obligación tributaria federal y (2) este año espera no tener obligación tributaria federal. Sin embargo, si el \nempleado puede ser reclamado como dependiente en la declaración de impuestos de los padres o de otra persona, serán aplicables \notras limitaciones adicionales. Además, los salarios, propinas, etc., que reciba están sujetos tanto al impuesto del Seguro Social \ncomo al del Medicare. Si cumple con los dos requisitos indicados al principio de este párrafo y desea que no se le retenga impuesto \nsobre el ingreso, complete un Formulario W-4(SP) para cada año en que esté exento de la retención del impuesto. Para determinar \ncuándo tiene que completar este formulario, vea el Formulario W-4(SP). Si no lo hace así, le retendrán impuesto como si fuera una \npersona soltera que no toma deducciones. Vea las instrucciones del Formulario W-4(SP). Un Formulario W-4(SP) en el cual reclama \nuna exención de la retención es válido únicamente por 1 año calendario. Vea la Publicación 505, en inglés.\nRevise su retención del impuesto. Después de completar y entregar a su empleador o patrono un Formulario W-4(SP), necesitará \nasegurarse de que la cantidad del impuesto que se le retenga sea correcta. Para hacerlo, tiene que comparar la cantidad total del \nimpuesto que se le retendrá en su empleo durante el año con la cantidad total del impuesto que estima que tiene que pagar ese año. \nSi, después de comparar las dos cantidades, se da cuenta que le están reteniendo impuesto de menos, o de más, tiene que \ncompletar y firmar un nuevo Formulario W-4(SP) indicando la cantidad adicional del impuesto que desea que se le retenga o, si \ndesea que se le retenga menos impuesto, la cantidad adicional de deducciones que desea tomar. Vea la Publicación 505, en inglés, \npara entender cómo comparar la cantidad que se le retiene con su cantidad total de impuestos estimados para ese año.\nMás de un empleador o patrono. Si trabaja para más de un empleador o patrono, o si está casado y su cónyuge también trabaja, a \nusted y a su cónyuge le pedirán en cada empleo que completen un Formulario W-4(SP). Calcule el total de deducciones que tiene \nderecho a tomar en todos los trabajos utilizando las hojas de trabajo de un solo Formulario W-4(SP) y divida el número de \ndeducciones que va a tomar entre los diferentes empleos. La cantidad de impuestos que le van a retener durante el año usualmente \nserá más precisa cuando toma todas las deducciones en el Formulario W-4(SP) del empleo que recibe el salario más alto y no toma \ndeducciones en los otros Formularios W-4(SP) que entrega en los demás empleos. Vea la Publicación 505, en inglés, para más \ndetalles.\nExtranjero no residente. Si es extranjero no residente, vea el Aviso 1392, Supplemental Form W-4 Instructions for Nonresident \nAliens (Instrucciones complementarias del Formulario W-4 para extranjeros no residentes), en inglés, antes de completar este \nformulario. Para más información acerca de los procedimientos para la retención de impuestos sobre los ingresos de los salarios de \nempleados extranjeros no residentes, vea el Aviso 2005-76, el cual está en la página 947 del I.R.B. 2005-46, disponible en \nIRS.gov/irb/2005-46_IRB y el artículo titulado Aliens Employed in the U.S. (Extranjeros empleados en los Estados Unidos), ambos en \ninglés.\nImportante\nHay dos puntos muy importantes relacionados con los impuestos que tiene que tener en cuenta. Estos son el impuesto estimado y el \npago del crédito por ingreso del trabajo.\nIRS.gov\nNúmero de Catálogo 12920R\n",
"El primer punto es determinar si tiene o no que hacer un pago del impuesto estimado. El impuesto estimado es el método \nmediante el cual se paga impuesto sobre los ingresos que no están sujetos a retención en el empleo. Entre estos se encuentran el \ningreso del trabajo por cuenta propia, la compensación recibida por desempleo, así como ingresos de intereses, dividendos, \npensiones, alquileres, ganancias de capital por la venta de bienes, premios y recompensas. Si recibe una cantidad de estos u otros \ningresos similares, tiene que determinar si está sujeta al pago del impuesto estimado utilizando el Formulario 1040-ES, en inglés. Por \nejemplo, si recibió compensación por desempleo, es posible que tenga que hacer pagos trimestrales del impuesto estimado. Sin \nembargo, puede optar por que se le retenga impuesto sobre los ingresos. Para más información, vea el Formulario W-4V, Voluntary \nWithholding Request (Solicitud para la retención voluntaria), en inglés. De lo contrario, es posible que al final del año tenga que pagar \nmás impuesto. Puede obtener el Formulario 1040-ES y sus instrucciones en el sitio web IRS.gov/Form1040ES, en inglés.\nEl segundo punto es determinar si reúne los requisitos para reclamar el crédito por ingreso del trabajo. Quizás reúna los requisitos \npara recibir este crédito si tanto el total de ingreso que reciba por trabajar durante el año como el total de su ingreso bruto ajustado es \nmenos de cierta cantidad y, además, tiene un hijo viviendo con usted y cumple con otros requisitos. Puede recibir este crédito cuando \npresente su declaración de impuestos. La Publicación 596(SP), Crédito por Ingreso del Trabajo, contiene toda la información que \nnecesita para determinar si tiene derecho a recibir este crédito.\nAcontecimientos futuros. Si desea informarse sobre los acontecimientos relacionados con el Formulario W-4(SP), como \nlegislación tributaria promulgada después de que este ha sido publicado, visite IRS.gov/FormW4SP.\nIRS.gov\nNúmero de Catálogo 12920R\n"
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f6478.pdf
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0120 Form 6478 (PDF)
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https://www.irs.gov/pub/irs-pdf/f6478.pdf
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[
"Form 6478\n(Rev. January 2020)\nDepartment of the Treasury \nInternal Revenue Service\nBiofuel Producer Credit \n▶ Attach to your tax return.\n▶ Go to www.irs.gov/Form6478 for instructions and the latest information.\nOMB No. 1545-0231\nAttachment \nSequence No. 83\nName(s) shown on return\nIdentifying number\nType of Fuel\n(a) \nNumber of Gallons \nSold or Used\n(b) \nRate\n(c) \nColumn (a) x Column (b)\n1 \nQualified second generation biofuel production (see instructions \nfor election)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n$1.01\n2 \nEnter the amount from column (c) on line 1. Include this amount in your income for the tax year, \nand enter your IRS registration number (see instructions) .\n.\n.\n2\n3 \nBiofuel producer credit from partnerships, S corporations, cooperatives, estates, and trusts \n(see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4 \n \nAdd lines 2 and 3. Cooperatives, estates, and trusts, go to line 5. Partnerships and S corporations, \nstop here and report this amount on Schedule K. All others, stop here and report this amount on\nthe appropriate line of Form 3800 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5 \nAmount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see \ninstructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6 \nCooperatives, estates, and trusts, subtract line 5 from line 4. Report this amount on the\nappropriate line of Form 3800 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\nFor Paperwork Reduction Act Notice, see separate instructions.\nCat. No. 13605J\nForm 6478 (Rev. 1-2020)\n"
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i6198.pdf
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0120 Inst 6198 (PDF)
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https://www.irs.gov/pub/irs-pdf/i6198.pdf
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[
"Instructions for Form 6198\n(Rev. January 2020)\nAt-Risk Limitations\nFor use with Form 6198 (Rev. November 2009) or later revision\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue \nCode unless otherwise noted.\nGeneral Instructions\nPurpose of Form\nUse Form 6198 to figure:\n• The profit (loss) from an at-risk \nactivity for the current year\n(Part I),\n• The amount at risk for the current \nyear (Part II or Part III), and\n• The deductible loss for the current \nyear (Part IV).\nThe at-risk rules of section 465 limit \nthe amount of the loss you can deduct \nto the amount at risk.\nFor more details, see Pub. 925, \nPassive Activity and At-Risk Rules.\nWho Must File\nForm 6198 is filed by individuals \n(including filers of Schedules C, E, and \nF (Form 1040 or 1040-SR)), estates, \ntrusts, and certain closely held C \ncorporations described in section 465(a)\n(1)(B), as modified by section 465(a)(3).\nFile Form 6198 if during the tax year \nyou, a partnership in which you were a \npartner, or an S corporation in which \nyou were a shareholder had any \namounts not at risk (see Amounts Not at \nRisk, later) invested in an at-risk activity \n(defined below) that incurred a loss.\nYou must file Form 6198 if you are \nengaged in an activity included in (6) \nunder At-Risk Activities (see At-Risk \nActivities below) and you have \nborrowed amounts described in (3) \nunder Amounts Not at Risk (see \nAmounts Not at Risk, later).\nAt-Risk Activities\nThe at-risk limitation rules apply to \nlosses from the following activities \ncarried on as a trade or business or for \nthe production of income.\n1. Holding, producing, or distributing \nmotion picture films or videotapes.\n2. Farming, as defined in\nsection 464(e)(1).\n3. Leasing any section 1245 \nproperty, as defined in\nsection 1245(a)(3).\nCertain equipment leasing \nactivities by closely held C \ncorporations are not subject to \nthe at-risk rules. See sections 465(c)(4), \n(5), and (6).\n4. Exploring for or exploiting oil and \ngas resources.\n5. Exploring for or exploiting \ngeothermal deposits, as defined in \nsection 613(e)(2).\n6. Any other activity that is not \nincluded in (1) through (5) above.\nException. Holding real property \nplaced in service before 1987 and \nholding an interest acquired before \n1987 in a partnership, an S corporation, \nor other pass-through entity already \nengaged in an activity of holding real \nproperty before 1987 are not affected by \nthe at-risk rules. This exception does \nnot apply to holding mineral property.\nA special exception to the \nat-risk rules applies to a \nqualifying business of a \nqualified C corporation. See Pub. 925 \nfor details.\nAmounts Not at Risk\nYou are not considered at risk for any of \nthe following.\n1. Nonrecourse loans used to \nfinance the activity, to acquire property \nused in the activity, or to acquire your \ninterest in the activity (unless the \nnonrecourse loan is secured by your \nown property that is not used in the \nactivity). However, you are considered \nat risk for qualified nonrecourse \nfinancing secured by real property used \nin the activity of holding real property \n(other than mineral property). See \nQualified Nonrecourse Financing, later.\n2. Cash, property, or borrowed \namounts used in the activity that are \nprotected against loss by a guarantee, \nstop-loss agreement, or other similar \narrangement (excluding casualty \ninsurance and insurance against tort \nliability).\nCAUTION\n!\nCAUTION\n!\n3. Amounts borrowed for use in the \nactivity from a person who has an \ninterest in the activity other than as a \ncreditor or who is related under section \n465(b)(3)(C) to a person (except you) \nhaving such an interest. However, this \ndoes not apply to (a) amounts borrowed \nby a corporation from a person whose \nonly interest in the activity is as a \nshareholder of the corporation, or (b) \namounts borrowed after May 3, 2004, \nand secured by real property used in the \nactivity of holding real property (other \nthan mineral property) that, if \nnonrecourse, would be qualified \nnonrecourse financing. See Pub. 925 for \ndefinitions.\n4. Any cash or property contributed \nto the activity or to your interest in the \nactivity that is:\na. Financed through nonrecourse \nindebtedness or protected against loss \nthrough a guarantee, stop-loss \nagreement, or other similar \narrangement; or\nb. Borrowed from a person who has \nan interest in the activity other than as a \ncreditor or who is related under section \n465(b)(3)(C) to a person (except you) \nhaving such an interest. However, this \ndoes not apply to (i) amounts borrowed \nby a corporation from a person whose \nonly interest in the activity is as a \nshareholder of the corporation, or (ii) \namounts borrowed after May 3, 2004, \nand secured by real property used in the \nactivity of holding real property (other \nthan mineral property) that, if \nnonrecourse, would be qualified \nnonrecourse financing. See Pub. 925 for \ndefinitions.\nYou do not have to file Form 6198 if \nyou are engaged in an activity included \nin (6) under At-Risk Activities, earlier, \nand you only have amounts borrowed \nbefore May 4, 2004, that are described \nin (3) above.\nQualified Nonrecourse \nFinancing\nQualified nonrecourse financing is \nfinancing for which no one is personally \nliable for repayment and is:\n• Borrowed by you in connection with \nholding real property;\nDec 10, 2019\nCat. No. 50013J\n",
"• Secured by real property used in the \nactivity;\n• Not convertible debt; and\n• Loaned or guaranteed by any federal, \nstate, or local government, or borrowed \nby you from a qualified person (defined \nbelow).\nSee Regulations section 1.465-27 for \ndetails, including rules for partnership \nliabilities and disregarded entities. This \nsection is effective for any financing \nincurred on or after August 4, 1998, but \ntaxpayers can apply the section \nretroactively.\nA qualified person is a person who \nactively and regularly engages in the \nbusiness of lending money (for \nexample, a bank or savings and loan \nassociation).\nA qualified person is not:\n• A person related to you unless the \nperson would be a qualified person but \nfor the relationship and the nonrecourse \nfinancing is commercially reasonable \nand on the same terms as loans to \nunrelated persons,\n• The seller of the property (or a person \nrelated to the seller), or\n• A person who receives a fee as a \nresult of your investment in the property \n(or a person related to that person).\nAggregation or Separation \nof Activities\nFile one form if your activities are listed \nunder the aggregation rules. File a \nseparate form for each activity if your \nactivities are listed under the separation \nrules.\nAggregation rules. All section 1245 \nproperties that are leased or held for \nlease and placed in service in any tax \nyear of a partnership or an S corporation \nare treated as one activity. A partner in a \npartnership or an S corporation \nshareholder can aggregate and treat as \na single activity all of the properties of \nthat partnership or S corporation that \nare included within each of categories \n(1), (2), (4), and (5) under At-Risk \nActivities, earlier.\nActivities described in (6) under \nAt-Risk Activities , earlier, that constitute \na trade or business are treated as one \nactivity if (a) the taxpayer actively \nparticipates in the management of that \ntrade or business, or (b) the business is \ncarried on by a partnership or an S \ncorporation and 65% or more of the \nlosses for the tax year are allocable to \npersons who actively participate in the \nmanagement of the trade or business. \nSimilar rules apply to activities \ndescribed in (1) through (5) under \nAt-Risk Activities, earlier.\nSeparation rules. Your activity with \nrespect to each film, videotape, section \n1245 property that is leased or held for \nlease, farm, holding of real property, oil \nand gas property (as defined in section \n614), or geothermal property (as \ndefined in section 614) that is not \naggregated with other activities under \nthe above rules is treated as a separate \nactivity.\nEach investment that is not a part of \na trade or business is treated as a \nseparate activity.\nSpecific Instructions\nIf you are engaged in more than one \nat-risk activity or in both at-risk activities \nand not-at-risk activities, you must \nallocate income, gains, losses, and \ndeductions to each activity.\nPartnerships and S corporations must \ngive their partners and shareholders a \nseparate statement of income, \nexpenses, and deductions for each \nat-risk and not-at-risk activity.\nWhen filling in Parts I, II, and III, enter \nonly amounts that relate to the activity \nincluded on this form. Use accepted tax \naccounting methods to figure the \namounts to enter.\nIf you are a partner or an S corporation \nshareholder, enter any items for the \nactivity that are from your investment in \nthe activity or were passed through to \nyou on Schedule K-1 or a similar \nstatement.\nDescription of activity. After the \ndescription of the activity, if applicable, \nenter the name and identifying number \nof the partnership or S corporation.\nPart I—Current Year Profit \n(Loss) From the Activity, \nIncluding Prior Year \nNondeductible Amounts\nTaxpayers other than partners or\nS corporation shareholders. If you \nhave losses or deductions from an \nearlier tax year that you could not \ndeduct because of the at-risk rules, \ninclude those amounts on the \nappropriate form or schedule of your \ncurrent year tax return before starting \nPart I. For example, if 2020 is the \ncurrent year, and your 2019 Schedule C \n(Form 1040 or 1040-SR) had a $1,500 \nloss on line 31, but because of the \nat-risk rules your loss was limited to \n$500, include the $1,000 on your 2020 \nSchedule C (Form 1040 or 1040-SR) in \nPart V, Other Expenses, and identify it \nas a prior year loss.\nPartners and S corporation share-\nholders. If you have a loss or a \ndeduction from an earlier tax year that \nyou could not deduct because of the \nat-risk rules, these losses and \ndeductions must be included in the \ncurrent year amounts you enter in\nPart I. For example, if your prior year \nSchedule K-1 had a $1,500 loss in \nbox 1, but because of the at-risk rules \nyour loss was limited to $500, include \nboth the $1,000 loss from your prior \nyear and the amount from your current \nyear Schedule K-1 on line 1 of Form \n6198.\nClosely held corporations. A closely \nheld corporation must apply the \nlimitation on the deduction for interest \nexpense under section 163(j) before \napplying the at-risk limitations.\nLine 1\nOrdinary Income (Loss)\nTaxpayers other than partners or\nS corporation shareholders. Enter \nyour ordinary income or loss from the \nat-risk activity without regard to the \nat-risk limitations. This is the amount \nyou get when you subtract your total \ndeductions (including prior year \ndeductions that were not allowed \nbecause of the at-risk rules) from your \ntotal income from the activity for the \ncurrent year.\nDo not include on line 1 capital or \nordinary gains and losses from the sale \nor other disposition of assets used in the \nactivity or of an interest in the activity. \nThese amounts, casualty or theft gains \nand losses, and investment interest \nexpense are entered on lines 2a, 2b, 2c, \nand 4.\nPartners and S corporation share-\nholders. Enter the amount from box 1 \nof your current year Schedule K-1 (Form \n1065 or Form 1120-S) (plus any prior \nyear ordinary loss that you could not \ndeduct because of the at-risk rules).\nLines 2a, 2b, and 2c\nGain (Loss)\nCombine long- and short-term capital \ngains and losses and ordinary gains and \nlosses from the sale or other disposition \nof assets used in the activity or of your \ninterest in the activity. Enter gains and \nlosses without regard to the at-risk \nlimitations, the limitation on capital \nlosses, or the passive activity loss \nlimitations. If more than one item is \n-2-\n",
"included on a line, attach a statement \ndescribing each item\nDo not include amounts on\nlines 2a and 2b that are included on \nline 2c. Enter the form number or \nschedule letter to the left of the entry \nspace for line 2c. For example, if you file \nForm 4684, Casualties and Thefts, and \ncarry amounts from that form to Form \n4797, Sales of Business Property, either \n(a) enter the amounts attributable to the \nactivity from Form 4684 on line 2c and \nenter “Form 4684” on the dotted line \nnext to the entry space, or (b) enter the \namount attributable to the activity \ncarried from Form 4684 to Form 4797 \non line 2b. If you carry a loss from Form \n4684 to Schedule A (Form 1040 or \n1040-SR), enter on line 2c either the \nloss from Schedule A (Form 1040 or \n1040-SR) or the loss from Form 4684.\nTaxpayers other than partners or\nS corporation shareholders. Include \non your current year Schedule D (Form \n1040 or 1040-SR), Form 4797, or other \nforms and schedules any prior year \nlosses that you could not deduct \nbecause of the at-risk rules.\nPartners and S corporation share-\nholders. Include on lines 2a, 2b, and \n2c your current year gains and losses \nand prior year losses attributable to the \nactivity that you could not deduct \nbecause of the at-risk rules.\nLine 3\nOther Income and Gains From the \nActivity\nIf you were a partner or S corporation \nshareholder, include on line 3 other \nincome and gains from Schedule K-1 \nthat you did not include on lines 1 \nthrough 2c.\nLine 4\nOther Deductions and Losses \nFrom the Activity\nIf you were a partner or S corporation \nshareholder, include on line 4 other \ndeductions and losses from \nSchedule K-1 that you did not include \non lines 1 through 2c.\nIf you have investment interest expense \nfrom your at-risk activity, first complete \nForm 4952, Investment Interest \nExpense Deduction, to figure your \nallowable investment interest deduction.\nIf you have investment interest \nexpense from other activities on\nForm 4952, determine the allowable \ninvestment interest deduction \nattributable to the at-risk activity \nincluded on line 8 of Form 4952, and \nenter that amount on line 4 of\nForm 6198. You must reduce the \nallowable investment interest deduction \non Form 4952 by the amount you carry \nto Form 6198. If you filed Form 6198 for \nthe prior tax year, include on line 4 of \nyour current year Form 6198 any \ninvestment interest expense from the \nprior tax year that was limited because \nof the at-risk rules.\nLine 5\nCurrent Year Profit (Loss)\nIf line 5 shows a current year profit, you \nmay not have to complete the rest of \nthis form. Report all of the income, \ngains, deductions, and losses shown on \nlines 1 through 4 on the forms and \nschedules normally used, and attach \nthem to your tax return. Also attach \nForm 6198 and keep a copy for your \nrecords.\nIf your current year profit is from a \npassive activity and you have a loss \nfrom any other passive activity, see the \nInstructions for Form 8582, Passive \nActivity Loss Limitations, or the \nInstructions for Form 8810, Corporate \nPassive Activity Loss and Credit \nLimitations, whichever applies.\nEven if you have a current year \nprofit on line 5, you may have \nrecapture income if you \nreceived a distribution or had a \ntransaction during the year that reduced \nyour amount at risk in the activity to less \nthan zero at the close of the tax year. \nSee Pub. 925 for information on the \nrecapture rules.\nIf line 5 shows a current year loss, \nyour loss may be limited to the income \nor gains, if any, included on lines 1, 2, \nand 3. Separate the items of income, \ngains, deductions, and losses on lines 1 \nthrough 4. The income and gains are \nfully reportable on your tax return. The \ndeductions and losses are allowable \n(subject to any other limitation such as \nthe passive activity rules) to the extent \nof the income and gains. To determine \nthe allowable portion of each deduction \nor loss, divide each deduction or loss \nfrom the activity by the total loss from \nthe activity on line 5. Then, multiply the \ntotal income and gains by this fraction.\nComplete the rest of the form to see \nhow much, if any, of the excess loss can \nbe deducted.\nExample. Jill has a Schedule C \n(Form 1040 or 1040-SR) loss of $4,600 \non line 1 and a Schedule D (Form 1040 \nCAUTION\n!\nor 1040-SR) gain of $3,100 on line 2a. \nLine 5 shows a current year loss of \n$1,500. Jill reports the $3,100 gain on \nSchedule D (Form 1040 or 1040-SR) \nand can deduct $3,100 of the $4,600 \nloss on Schedule C (Form 1040 or \n1040-SR). Jill completes Part II or Part \nIII of Form 6198 and determines that \nonly $600 of the $1,500 excess loss on \nline 5 is deductible in the current year. \nShe replaces the $4,600 loss first \nentered on Schedule C (Form 1040 or \n1040-SR) with $3,700 ($3,100 + $600), \nthe total loss allowed in the current year.\nPart II—Simplified \nComputation of Amount At \nRisk\nPart II is a simplified method of figuring \nyour amount at risk. It can be used only \nif you know your adjusted basis in the \nactivity or in your interest in the \npartnership's or S corporation's at-risk \nactivity.\nPart III is a longer method of figuring \nyour amount at risk, which may allow a \nlarger amount at risk. You do not need \nto complete Part II if you use Part III.\nLine 6\nAdjusted Basis on the First Day of \nTax Year\nSole proprietors. Filers of Schedules \nC and F (Form 1040 or 1040-SR) must \nnot reduce the amount on this line by \nany liabilities. See Pub. 551, Basis of \nAssets, for rules on adjusted basis.\nPartners. To figure the adjusted basis, \nsee Pub. 541, Partnerships.\nS corporation shareholders. To \nfigure the adjusted basis, see the \nInstructions for Form 1120-S.\nIf the partnership or S \ncorporation is engaged in more \nthan one at-risk activity or in \nboth at-risk activities and not-at-risk \nactivities, you must figure the part of \nyour adjusted basis that is allocable to \neach at-risk activity. See Aggregation or \nSeparation of Activities, earlier, to \ndetermine each at-risk activity in which \na partnership or S corporation is \nengaged.\nLine 7\nIncreases for the Tax Year\nDo not include the current year income \nor gains shown on lines 1 through 3.\nInclude changes during the current \ntax year in amounts that increase your \namount at risk, such as the following.\nCAUTION\n!\n-3-\n",
"1. Net fair market value (FMV) of \nproperty you own (not used in the \nactivity) that secures nonrecourse loans \nused to finance the activity, to acquire \nproperty used in the activity, or to \nacquire your interest in the activity. \nInclude the nonrecourse loans on line 9 \n(if included on line 6). Generally, the net \nFMV is determined when the property is \npledged as security for the loan.\nDo not enter the net FMV if (a) the \nnonrecourse loan was from a person \nwho has an interest in the activity other \nthan as a creditor or who is related \nunder section 465(b)(3)(C) to a person \n(except you) having such an interest, \nand (b) the activity is described in (1) \nthrough (5) (or (6) for amounts borrowed \nafter May 3, 2004) under At-Risk \nActivities, earlier. However, (a) does not \napply to amounts borrowed by a \ncorporation from a person whose only \ninterest in the activity is as a \nshareholder of the corporation. See \nPub. 925 for definitions.\n2. Cash and the adjusted basis of \nother property (determined at the time of \nthe contribution) contributed to the \nactivity during the tax year. However, if \nyou used your own assets to repay a \nnonrecourse debt and you included an \namount in (1) above, the amount \nincluded as repayments cannot be more \nthan the amount by which the balance of \nthe loan at the time of repayment \nexceeds the net FMV of property you \nown (not used in the activity) that \nsecures the debt.\n3. Loans used to finance the \nactivity, to acquire property used in the \nactivity, or to acquire your interest in the \nactivity for which you are personally \nliable, and qualified nonrecourse \nfinancing (defined earlier under \nQualified Nonrecourse Financing). Do \nnot enter amounts included in (2) under \nIncreases for the Tax Year or on line 6.\n4. Percentage depletion for this year \ndeducted in excess of the adjusted \nbasis of depletable property for the \nactivity.\nLine 9\nDecreases for the Tax Year\nDo not include the current year \ndeductions or losses shown on lines 1 \nthrough 4.\nInclude changes during the current \ntax year in amounts that decrease your \namount at risk, such as the following.\n1. Nonrecourse loans (including \nrecourse loans changed to nonrecourse \nloans) other than qualified nonrecourse \nfinancing (defined earlier under \nQualified Nonrecourse Financing) used \nto finance the activity, to acquire \nproperty used in the activity, or to \nacquire your interest in the activity. Only \namounts included on line 6 can be \nentered on line 9.\n2. Cash, property, or borrowed \namounts protected against loss by a \nguarantee, stop-loss agreement, or \nother similar arrangement. Enter this \namount only if it was included on line 6. \nDo not include items covered by \ncasualty insurance or insurance against \ntort liability.\n3. Amounts borrowed from a person \nwho has an interest in the activity other \nthan as a creditor or who is related \nunder section 465(b)(3)(C) to a person \n(except you) having such an interest. \nThis does not apply to (a) amounts \nborrowed by a corporation from a \nperson whose only interest in the \nactivity is as a shareholder of the \ncorporation, or (b) amounts borrowed \nafter May 3, 2004, and secured by real \nproperty used in the activity of holding \nreal property (other than mineral \nproperty) that, if nonrecourse, would be \nqualified nonrecourse financing. Enter \nthese amounts only if they were \nincluded on line 6 and not included \nunder (1) or (2) above. This applies only \nto activities described in (1) through (5) \nunder At-Risk Activities, earlier. See \nPub. 925 for definitions and more \ndetails.\n4. Withdrawals and distributions \nduring the tax year — both cash and the \nadjusted basis of noncash items (less \nnonrecourse liabilities to which the \nnoncash items are subject) — including \nassets used in the activity to repay \ncertain debts.\n5. Nonrecourse liabilities included \non line 6 of property you contributed to \nthe activity.\nLine 10b\nAmount At Risk\nIf the amount on this line is smaller than \nyour overall loss from the activity \n(line 5), you may want to complete Part \nIII to see if Part III gives you a larger \namount at risk.\nIf the amount on line 10b is \nzero, you may be subject to the \nrecapture rules. See Pub. 925.\nPart III—Detailed \nComputation of Amount At \nRisk\nIf you completed Part III of Form 6198 \nfor this activity for the prior tax year, skip \nCAUTION\n!\nlines 11 through 14. Then, see the \ninstructions for lines 15 and 16, and the \ninstructions for line 18, later, to \ndetermine the amounts to enter on \nthose lines.\nIf the activity began on or after one of \nthe effective dates shown below and \nyou did not complete Part III of Form \n6198 for this activity for the prior tax \nyear, skip lines 11 through 14. Enter -0- \non line 15 and complete the rest of Part \nIII.\nEffective Dates\nGenerally, the effective date is the first \nday of the first tax year beginning after \n1975 if the activity is described in (1) \nthrough (4) under At-Risk Activities, \nearlier.\nIf the activity is described in (5) under \nAt-Risk Activities, earlier, the effective \ndate is usually October 1, 1978, for \nwells started after September 30, 1978. \nGenerally, a well started before October \n1, 1978, is not subject to the at-risk \nrules.\nThe activity of holding real property is \nsubject to the at-risk rules for property \nplaced in service after 1986, and for an \ninterest acquired after 1986 in an S \ncorporation, partnership, or other \npass-through entity engaged in an \nactivity of holding real property. An \nactivity of holding real property does not \ninclude the holding of mineral property. \nHolding mineral property may be \nsubject to at-risk limitations other than \nthe special rules that apply to activities \nof holding real property.\nIn most cases, the effective date for \nall other at-risk activities is the first day \nof the first tax year beginning after 1978.\nIf you are a partner or an S \ncorporation shareholder, the date you \nbecame a partner or shareholder may \ndetermine whether you are subject to \nthe at-risk rules.\nLine 11\nInvestment in the Activity at the \nEffective Date\nTaxpayers other than partners or\nS corporation shareholders. Use the \nLine 11 Worksheet and its instructions \nto figure your investment in the activity \nat the effective date. Enter all amounts \nas of the effective date.\nPartners and S corporation share-\nholders. Enter on line 11 the basis of \nyour investment in the partnership or S \ncorporation at the effective date. If the \npartnership or S corporation is engaged \nin both at-risk and not-at-risk activities, \n-4-\n",
"allocate your investment between the \nat-risk and not-at-risk activities. Enter \nthe part that is allocable to the at-risk \nactivity on line 11.\nLine 11 Worksheet—Figure Your Investment in the Activity at the \nEffective Date\nKeep for Your Records\n(If the activity began on or after the effective date, do not complete this worksheet.)\n1.\nCash on hand and in banks for the activity\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n1.\n \n2.\nInventories for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n2.\n \n3a.\nCost or other basis of depreciable assets for the activity (see instructions \nbelow) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n3a.\n \nb.\nAccumulated depreciation for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n3b.\n \n4.\nAdjusted basis of depreciable assets for the activity. Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . . . . . . . . .\n4.\n \n5a.\nCost or other basis of depletable assets at the time contributed to the \nactivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n5a.\n \nb.\nAccumulated depletion taken on or after property was contributed to the \nactivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n5b.\n \n6.\nAdjusted basis of depletable assets for the activity. Subtract line 5b from line 5a . . . . . . . . . . . . . . . . . . . . . . . . . .\n6.\n \n7.\nAdjusted basis of land for the activity (net of any amortization)\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n7.\n \n8.\nOther assets for the activity\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n8.\n \n9.\nCash basis taxpayer investment in the activity at the effective date. Add lines 1, 2, 4, 6, 7, and 8. Enter here and on \nForm 6198, line 11. (Accrual basis taxpayers also complete lines 10a through 14 below to figure the amount to enter \non Form 6198, line 11.)\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n9.\n \n10a.\nTrade notes and accounts receivable for the activity\n. . . . . . . . . . . . . . . . . . . . .\n10a. \nb.\nReserve for bad debts for the activity (see instructions below)\n. . . . . . . . . . . . . .\n10b. \n11.\nNet receivables for the activity. Subtract line 10b from line 10a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n11.\n \n12.\nAdd lines 9 and 11\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n12.\n \n13.\nAccounts payable for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n13.\n \n14.\nAccrual basis taxpayer investment in the activity at the effective date. Subtract line 13 from line 12. Enter here and on \nForm 6198, line 11\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n14.\n \nWorksheet Instructions\nLines 3a and 3b. See the instructions for line 16, item (2), earlier, for the rules on basis. Generally, the amounts for lines 3a and 3b can be taken directly from your \ndepreciation schedule. Use the depreciation schedule you filed at the effective date, not the schedule for the current tax year.\nLine 10b. If you use a reserve for bad debts, subtract from your accounts receivable the balance of the reserve on the effective date. But only subtract up to the amount you \nwere allowed as a deduction under repealed section 166(c) for years before the effective date.\n-5-\n",
"Line 12 Worksheet—Figure Your Total Losses From Years Before the \nEffective Date for Which There Were Equal or Greater Amounts Not \nAt Risk at Year End\nKeep for Your Records\n(a)\nYear\n(b)\nAmount of loss for the \nyear\n(c)\nAmount not at risk at end \nof year\n(d)\nTotal amounts from \ncolumn (f) for all prior years\n(e)\nSubtract (d) from (c)\n(f)\nSmaller of (b) or (e)\nTotal (include on Form 6198, line 12)\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶\nWorksheet Instructions\nUse the first line of the worksheet for the first year in which you had a loss and amounts not at risk. List each subsequent year in order. \nColumn (d). For each year after the first year, enter the total amount in column (f) for all prior years. \nExample. John had losses in 1970, 1971, and 1975. At the end of each of those years, John had outstanding amounts not at risk of $1,000. John had losses of $500 in 1970, \n$300 in 1971, and $500 in 1975. \nFor 1970, John enters $500 in column (b), $1,000 in column (c), $1,000 in column (e), and $500 in column (f).\nFor 1971, John enters $300 in column (b), $1,000 in column (c), $500 in column (d) (the total amount from column (f) for all prior years), $500 in column \n(e), and $300 in column (f).\nFor 1975, John enters $500 in column (b), $1,000 in column (c), $800 in column (d) (the total amount from column (f) for all prior years ($500 + $300)), \n$200 in column (e), and $200 in column (f). Of the $500 loss for 1975, only $200 is a loss for which there was an equal or greater amount not at risk at \nyear end.\nJohn's total loss from years before the effective date for which there were equal or greater amounts not at risk at year end is $1,000 (the total of the amounts \nin column (f)).\nLine 12\nIncreases at Effective Date\nEnter your share of amounts such as the \nfollowing.\n1. Net FMV of your own property \n(not used in the activity) that secures \nnonrecourse loans used to finance the \nactivity, to acquire property used in the \nactivity, or to acquire your interest in the \nactivity that will be included on line 14. \nGenerally, the net FMV is determined \nwhen the property is pledged as \nsecurity for a loan.\nDo not enter the net FMV if (a) the \nnonrecourse loan was from a person \nwho has an interest in the activity other \nthan as a creditor or who is related \nunder section 465(b)(3)(C) to a person \n(except you) having such an interest, \nand (b) the activity is described in (1) \nthrough (5) under At-Risk Activities, \nearlier. However, (a) does not apply to \namounts borrowed by a corporation \nfrom a person whose only interest in the \nactivity is as a shareholder of the \ncorporation. See Pub. 925 for \ndefinitions. If the activity is described in \n(6) under At-Risk Activities, earlier, you \ncan include these amounts.\n2. Total losses from years before \nthe effective date for which there were \nequal or greater amounts not at risk at \nyear end. Use the Line 12 Worksheet \nand its instructions to figure this amount.\nMake all entries on a year-by-year \nbasis. Include amounts only for years \nbefore the effective date. Do not \naccumulate totals of earlier losses or \nnonrecourse debts.\nIf you took a deduction for \npercentage depletion for an \nitem of depletable property in \nexcess of the adjusted basis of the \nproperty in a year for which you had a \nloss for the activity, subtract the amount \nof the excess from the loss for that year.\nLine 14\nDecreases at Effective Date\nEnter your share of amounts such as the \nfollowing.\n1. Nonrecourse loans outstanding at \nthe effective date used to finance the \nactivity, to acquire property used in the \nactivity, or to acquire your interest in the \nactivity, including recourse loans \nchanged to nonrecourse loans. Enter \nthis amount only if it was included on \nline 11.\n2. Cash, property, or borrowed \namounts, protected against loss by a \nguarantee, stop-loss agreement, or \nother similar arrangement outstanding \nCAUTION\n!\nat the effective date. Enter this amount \nonly if it was included on line 11. Do not \ninclude items covered by casualty \ninsurance or insurance against tort \nliability.\n3. Amounts outstanding at the \neffective date borrowed from a person \nwho has an interest in the activity other \nthan as a creditor or who is related \nunder section 465(b)(3)(C) to a person \n(except you) having such an interest. \nThis does not apply to amounts \nborrowed by a corporation from a \nperson whose only interest in the \nactivity is as a shareholder of the \ncorporation. Enter these amounts only if \nthey were included on line 11 and not \nincluded under (1) or (2) above. This \napplies only to activities described in (1) \nthrough (5) under At-Risk Activities, \nearlier. See Pub. 925 for definitions and \nmore details.\n4. If you are not an S corporation \nshareholder, also include liens and \nencumbrances on property you \ncontributed to the activity that are \nincluded on line 11. If you are an S \ncorporation shareholder, do not include \nany loans that were assumed by the \ncorporation or that were liens or \nencumbrances on property you \ncontributed to the corporation if the \n-6-\n",
"corporation took the property subject to \nthe debt.\nLine 15\nAmount At Risk\nIf you completed Part III of Form 6198 \nfor the prior tax year, check box b and \nenter the amount from line 19b of the \nprior year form on this line.\nDo not enter the amount from \nline 10b of the prior year tax \nform. Also, do not include on \nthis line any amounts that are not at risk.\nLine 16\nIncreases\nIf you completed Part III of Form 6198 \nfor your prior tax year, check box b and \nenter on this line any increases \ndescribed in (1) through (9) below that \noccurred since the end of your prior tax \nyear.\nIf you completed Part III of your prior \nyear form, “since effective date” means \nsince the end of your prior tax year.\nEnter your share of amounts such as \nthe following.\n1. Net FMV of property you own (not \nused in the activity) that secures \nnonrecourse loans that were acquired \nsince the effective date and were used \nto finance the activity, to acquire \nproperty used in the activity, or to \nacquire your interest in the activity. \nGenerally, the net FMV is determined \nwhen the property is pledged as \nsecurity for the loan.\nDo not enter the net FMV if (a) the \nnonrecourse loan was from a person \nwho has an interest in the activity other \nthan as a creditor or who is related \nCAUTION\n!\nunder section 465(b)(3)(C) to a person \n(except you) having such an interest, \nand (b) the activity is described in (1) \nthrough (5) (or (6) for amounts borrowed \nafter May 3, 2004) under At-Risk \nActivities, earlier. However, (a) does not \napply to amounts borrowed by a \ncorporation from a person whose only \ninterest in the activity is as a \nshareholder of the corporation. See \nPub. 925 for definitions.\n2. Cash and the adjusted basis of \nother property contributed to the activity \nsince the effective date. Adjusted basis \nis the basis that would be used to figure \nthe loss if the property was sold \nimmediately after you contributed it to \nthe activity. See Pub. 551 for details.\nIf you are an S corporation \nshareholder and you contributed \nproperty to the corporation subject to a \nliability, including a liability you are \npersonally required to repay, then you \nmust reduce the total of the adjusted \nbasis of all the property you contributed \nby the total of all liabilities the property \nwas subject to. This applies whether the \ncorporation took the property subject to, \nor assumed, the liabilities.\n3. Loans for which you are \npersonally liable that were used to \nfinance the activity, to acquire property \nused in the activity, or to acquire your \ninterest in the activity and qualified \nnonrecourse financing (defined under \nQualified Nonrecourse Financing, \nearlier). Do not enter amounts included \nin (2) above.\n4. Total net income from this activity \nsince the effective date (excess of all \nitems of income received or accrued \nover the allowable deductions). Do not \nenter any amount less than zero. Do not \ninclude the current year income or \ngains.\nIf you are not an S corporation \nshareholder, enter the total net income \nfrom the activity since the effective date, \ntaking into account only those years the \nactivity had net income. For years since \nthe effective date that the activity had a \nnet loss, see the instructions for line 18, \nitem (5), later.\nIf you are an S corporation \nshareholder, enter your total net income \nfrom the activity for profit years since the \neffective date. Income from the activity \nincludes gain recognized under section \n357(c) on contributions of property to \nthe activity. Include all distributions you \nreceived from the activity as well as your \nshare of the activity's taxable income.\n5. Gain recognized on the transfer \nor disposition of all or part of the activity \nor of your interest in the activity since \nthe effective date.\n6. Amounts you included in income \nsince the effective date because your \namount at risk was less than zero.\n7. All money from outside the \nactivity used since the effective date to \nrepay loans included on lines 14 and 18. \nIf, however, you used your own assets \nto repay a nonrecourse debt and you \nincluded an amount in Increases, \nearlier, the amounts included as \nrepayments cannot exceed the amount \nby which the balance of the loan at the \ntime of repayment exceeds the net FMV \nof property you own (not used in the \nactivity) that secures the debt.\n8. Percentage depletion deducted in \nexcess of the adjusted basis of the \ndepletable property for the activity since \nthe effective date. Use the Line 16 \nWorksheet to figure this amount. Be \nsure to include the amount for the \ncurrent year.\n9. If you are an S corporation \nshareholder, enter the loans you made \nLine 16 Worksheet (Item 8)—Figure Percentage Depletion Deducted in \nExcess of\nthe Adjusted Basis of Depletable Property\nKeep for Your Records\n(a)\nYear\n(b)\nPercentage depletion deduction\n(c)\nAdjusted basis of depletable property before \nany depletion deduction for \nthe year\n(d)\nExcess percentage depletion \n(column (b) minus column (c))\nbut not less than zero\nTotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶\n-7-\n",
"to your S corporation since the effective \ndate. Do not include notes that you have \ngiven to the activity that are still \noutstanding.\nLine 18\nDecreases\nIf you completed Part III of Form 6198 \nfor your prior tax year, check box b and \nenter on this line any decreases \ndescribed in (1) through (8) below that \noccurred since the end of your prior tax \nyear.\nIf you completed Part III of your prior \nyear tax form, “since effective date” \nmeans since the end of your prior tax \nyear.\nEnter your share of amounts such as \nthe following.\n1. Cash, property, or borrowed \namounts protected against loss by a \nguarantee, stop-loss agreement, or \nother similar arrangement entered into \nsince the effective date. Do not include \nitems covered by casualty insurance or \ninsurance against tort liability. Enter this \namount only if it was included on line 16. \nSee the instructions at the beginning of \nPart III, earlier, for information on \neffective dates.\n2. Amounts borrowed since the \neffective date from a person who has an \ninterest in the activity other than as a \ncreditor or who is related under section \n465(b)(3)(C) to a person (except you) \nhaving such an interest. However, this \ndoes not apply to (a) amounts borrowed \nby a corporation from a person whose \nonly interest in the activity is as a \nshareholder of the corporation, or (b) \namounts borrowed after May 3, 2004, \nand secured by real property used in the \nactivity of holding real property (other \nthan mineral property) that, if \nnonrecourse, would be qualified \nnonrecourse financing. Enter these \namounts only if they were included on \nline 16 and not included under (1) \nabove. This applies to activities \ndescribed in (1) through (5) (or (6) for \namounts borrowed after May 3, 2004) \nunder At-Risk Activities, earlier. See the \ninstructions at the beginning of Part III, \nearlier, for information on effective \ndates.\n3. Cash and the adjusted basis of \nother property withdrawn or distributed \nsince the effective date. Adjusted basis \nis the basis that would be used to figure \nthe loss if the property was sold by the \nactivity at the time you withdrew it or it \nwas distributed to you.\nIf you are an S corporation \nshareholder and the property is subject \nto debt that would be included on line 14 \n(or on this line except for the fact that \nthere are liens or encumbrances on the \nproperty in the activity), reduce the \nbasis of the distributed property by the \namount of the debt.\nIf you are not an S corporation \nshareholder, reduce the adjusted basis \nof property withdrawn by the amount, at \nthe time of withdrawal, of any \nnonrecourse liability to which the \nproperty is subject.\nDo not include any money from the \nactivity used to repay loans described in \nthe instructions for line 14 on page 5. \nInclude amounts that were withdrawn \nand recontributed. Recontributed \namounts must also be included on \nline 16.\nPartners and S corporation \nshareholders who recognize gain on \ndistributions from the partnership or S \ncorporation must include the \ndistributions on line 18. They must also \ntake them into account as income from \nthe activity on line 16 unless the gain is \nrecognized in the current year.\n4. Recourse loans (and qualified \nnonrecourse financing) changed to \nnonrecourse loans since the effective \ndate.\n5. Total losses from this activity \ndeducted since the effective date. Take \ninto account only those years in which \nyou had a net loss. Do not include \ncurrent year losses or deductions. Also, \ndo not include losses or deductions you \ncould not deduct because of the at-risk \nrules.\nYour prior tax year line 21 \ndeductible loss reduces your \nat-risk investment as of the \nbeginning of your current tax year.\n6. Nonrecourse liabilities of property \nyou contributed to the activity since the \neffective date.\n7. Any other at-risk amounts \nincluded on line 15 that changed to \namounts that are not at risk since the \neffective date.\n8. If you are an S corporation \nshareholder, do not include any loans \nthat were assumed by the corporation or \nthat were liens or encumbrances on \nproperty you contributed to the \ncorporation since the effective date if \nthe corporation took the property \nsubject to the debt.\nCAUTION\n!\nFor loans, enter the amount of \nthe loan you incurred, not the \ncurrent balance of the loan.\nLine 19b\nAmount At Risk\nIf the amount on line 19b is zero, you \nmay be subject to the recapture rules. \nSee Pub. 925.\nPart IV—Deductible Loss\nLine 21\nDeductible Loss\nIf the loss on line 5 is equal to or less \nthan the amount on line 20, report the \nitems in Part I in full on your return, \nsubject to any other limitations such as \nthe passive activity and capital loss \nlimitations. Follow the instructions for \nyour tax return.\nIf the loss on line 5 is more than the \namount on line 20, you must limit your \ndeductible loss to the amount on\nline 20, subject to any other limitations.\nExamples. (a) If line 5 is a loss of \n$400 and line 20 is $1,000, enter ($400) \non line 21. (b) If line 5 is a loss of $1,600 \nand line 20 is $1,200, enter ($1,200) on \nline 21. (c) If line 5 is a loss of $800 and \nline 20 is zero, enter -0- on line 21.\nWhen comparing lines 5 and 20, \ntreat the loss on line 5 as a \npositive number only for \npurposes of determining the amount to \nenter on line 21.\nIf the amount on line 21 is made up of \nonly one deduction or loss item, report \non your return the amount shown on \nline 21, subject to any other limitations. \nFollow the instructions for your tax \nreturn to determine where to report the \namount on your return.\nIf the amount on line 21 is made up of \nmore than one deduction or loss item in \nPart I (such as a Schedule C loss and a \nSchedule D loss), a portion of each \nsuch deduction or loss item is allowed \n(subject to other limitations) for the year. \nDetermine this portion by multiplying the \nloss on line 21 by a fraction. Figure the \nfraction by dividing each item of \ndeduction or loss from the activity by the \ntotal loss from the activity on line 5. The \nremaining portion of each deduction or \nloss item from the activity is disallowed \nand must be carried over to next year.\nPaperwork Reduction Act Notice.\nWe ask for the information on this form \nto carry out the Internal Revenue laws of \nTIP\nTIP\n-8-\n",
"the United States. You are required to \ngive us the information. We need it to \nensure that you are complying with \nthese laws and to allow us to figure and \ncollect the right amount of tax.\nYou are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records \nrelating to a form or its instructions must \nbe retained as long as their contents \nmay become material in the \nadministration of any Internal Revenue \nlaw. Generally, tax returns and return \ninformation are confidential, as required \nby section 6103.\nThe time needed to complete and file \nthis form will vary depending on \nindividual circumstances. The estimated \nburden for individual taxpayers filing this \nform is approved under OMB control \nnumber 1545-0074 and is included in \nthe estimates shown in the instructions \nfor their individual income tax return. \nThe estimated burden for all other \ntaxpayers who file this form is shown \nbelow.\nRecordkeeping. . . . . . .\n1 hr., 12 min.\nLearning about the law \nor the form . . . . . . . . . .\n1 hr.\nPreparing the form . . . .\n1 hr., 25 min.\nCopying, assembling, \nand sending the form \nto the IRS . . . . . . . . . . .\n20 min.\nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form \nsimpler, we would be happy to hear \nfrom you. See the instructions for the tax \nreturn with which this form is filed.\n-9-\n"
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f8582cr.pdf
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1219 Form 8582-CR (PDF)
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https://www.irs.gov/pub/irs-pdf/f8582cr.pdf
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[
"Form 8582-CR \n(Rev. December 2019)\nDepartment of the Treasury \nInternal Revenue Service\nPassive Activity Credit Limitations\n▶ See separate instructions.\n▶ Attach to Form 1040, 1040-SR, or 1041.\n▶ Go to www.irs.gov/Form8582CR for the latest information.\nOMB No. 1545-1034\nAttachment \nSequence No. 89\nName(s) shown on return\nIdentifying number\nPart I\nPassive Activity Credits\nCaution: If you have credits from a publicly traded partnership, see Publicly Traded Partnerships (PTPs) in the \ninstructions.\nCredits From Rental Real Estate Activities With Active Participation (Other Than Rehabilitation \nCredits and Low-Income Housing Credits) (See Lines 1a through 1c in the instructions.)\n1 \na\nCredits from Worksheet 1, column (a).\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1a \nb Prior year unallowed credits from Worksheet 1, column (b) .\n.\n.\n.\n.\n.\n.\n1b\nc Add lines 1a and 1b\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1c \nRehabilitation Credits From Rental Real Estate Activities and Low-Income Housing Credits for \nProperty Placed in Service Before 1990 (or From Pass-Through Interests Acquired Before 1990) \n(See Lines 2a through 2c in the instructions.)\n2 \na\nCredits from Worksheet 2, column (a).\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2a \nb Prior year unallowed credits from Worksheet 2, column (b) .\n.\n.\n.\n.\n.\n.\n2b\nc Add lines 2a and 2b\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2c \nLow-Income Housing Credits for Property Placed in Service After 1989 (See Lines 3a through 3c in \nthe instructions.)\n3a\nCredits from Worksheet 3, column (a).\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3a \nb Prior year unallowed credits from Worksheet 3, column (b) .\n.\n.\n.\n.\n.\n.\n3b\nc Add lines 3a and 3b\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3c \nAll Other Passive Activity Credits (See Lines 4a through 4c in the instructions.)\n4 \na\nCredits from Worksheet 4, column (a).\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4a \nb Prior year unallowed credits from Worksheet 4, column (b) .\n.\n.\n.\n.\n.\n.\n4b\nc Add lines 4a and 4b\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4c \n5 \nAdd lines 1c, 2c, 3c, and 4c .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \n6 \nEnter the tax attributable to net passive income (see instructions)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n7 \nSubtract line 6 from line 5. If line 6 is more than or equal to line 5, enter -0- and see instructions \n7 \nNote: If your filing status is married filing separately and you lived with your spouse at any time during the\nyear, do not complete Part II, III, or IV. Instead, go to line 37.\nPart II\nSpecial Allowance for Rental Real Estate Activities With Active Participation\nNote: Complete this part only if you have an amount on line 1c. Otherwise, go to Part III.\n8 \nEnter the smaller of line 1c or line 7\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nEnter $150,000. If married filing separately, see instructions\n.\n.\n.\n.\n.\n.\n9 \n10 \nEnter modified adjusted gross income, but not less than zero (see \ninstructions). If line 10 is equal to or more than line 9, skip lines 11 through 15 \nand enter -0- on line 16\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \n11 \nSubtract line 10 from line 9 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \n12 \nMultiply line 11 by 50% (.50). Do not enter more than $25,000. If married filing \nseparately, see instructions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \n13a\nEnter the amount, if any, from line 10 of Form 8582 .\n \n13a\nb Enter the amount, if any, from line 14 of Form 8582 .\n \n13b\nc Add lines 13a and 13b.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13c\n14 \nSubtract line 13c from line 12\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \n15 \nEnter the tax attributable to the amount on line 14 (see instructions).\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15 \n16 \nEnter the smaller of line 8 or line 15\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 \nFor Paperwork Reduction Act Notice, see instructions. \nCat. No. 64641R\nForm 8582-CR (Rev. 12-2019) \n",
"Form 8582-CR (Rev. 12-2019)\nPage 2 \nPart III\nSpecial Allowance for Rehabilitation Credits From Rental Real Estate Activities and Low-Income Housing \nCredits for Property Placed in Service Before 1990 (or From Pass-Through Interests Acquired Before 1990)\nNote: Complete this part only if you have an amount on line 2c. Otherwise, go to Part IV.\n17 \nEnter the amount from line 7.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17 \n18 \nEnter the amount from line 16\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \n19 \nSubtract line 18 from line 17. If zero, enter -0- here and on lines 30 and 36, and then go to Part V .\n. \n19 \n20 \nEnter the smaller of line 2c or line 19 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n20 \n21 \nEnter $250,000. If married filing separately, see instructions to find out if you\ncan skip lines 21 through 26 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n21 \n22 \nEnter modified adjusted gross income, but not less than zero. (See instructions\nfor line 10.) If line 22 is equal to or more than line 21, skip lines 23 through 29 \nand enter -0- on line 30\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n22 \n23 \nSubtract line 22 from line 21 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n23 \n24 \nMultiply line 23 by 50% (.50). Do not enter more than $25,000. If married filing \nseparately, see instructions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n24 \n25a\nEnter the amount, if any, from line 10 of Form 8582 .\n \n25a\nb Enter the amount, if any, from line 14 of Form 8582 .\n \n25b\nc Add lines 25a and 25b.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n25c\n26 \nSubtract line 25c from line 24\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n26 \n27 \nEnter the tax attributable to the amount on line 26 (see instructions) \n.\n.\n.\n27 \n28 \nEnter the amount, if any, from line 18 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n28 \n29 \nSubtract line 28 from line 27 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n29 \n30 \nEnter the smaller of line 20 or line 29 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n30 \nPart IV\nSpecial Allowance for Low-Income Housing Credits for Property Placed in Service After 1989\nNote: Complete this part only if you have an amount on line 3c. Otherwise, go to Part V.\n31 \nIf you completed Part III, enter the amount from line 19. Otherwise, subtract line 16 from line 7 .\n.\n.\n31 \n32 \nEnter the amount from line 30\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n32 \n33 \nSubtract line 32 from line 31. If zero, enter -0- here and on line 36\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n33 \n34 \nEnter the smaller of line 3c or line 33 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n34 \n35 \nTax attributable to the remaining special allowance (see instructions)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n35 \n36 \nEnter the smaller of line 34 or line 35 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n36 \nPart V\nPassive Activity Credit Allowed\n37 \nPassive Activity Credit Allowed. Add lines 6, 16, 30, and 36. See instructions to find out how to \nreport the allowed credit on your tax return and how to allocate allowed and unallowed credits if you\nhave more than one credit or credits from more than one activity. If you have any credits from a \npublicly traded partnership, see Publicly Traded Partnerships (PTPs) in the instructions.\n.\n.\n.\n.\n37 \nPart VI\nElection To Increase Basis of Credit Property\n38 \nIf you disposed of your entire interest in a passive activity or former passive activity in a fully taxable transaction, and you \nelect to increase your basis in credit property used in that activity by the unallowed credit that reduced your basis in the \nproperty, check this box. See instructions\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\n39 \nName of passive activity disposed of ▶\n40 \nDescription of the credit property for which the election is being made ▶\n41 \nAmount of unallowed credit that reduced your basis in the property .\n.\n.\n.\n.\n.\n.\n.\n ▶ $ \nForm 8582-CR (Rev. 12-2019) \n"
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p5334.pdf
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1119 Publ 5334 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5334.pdf
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[
"Do I Qualify for EITC?\nStep One: Answer All of the Following Questions\n1.\t Do you (and your spouse if filing a joint return) have a social security number valid for employment issued by the due date of\nyour return (including extensions)?\n2.\t Is your filing status married filing jointly, head of household, qualifying widow(er) or single?\n3.\t Have you (and your spouse if married) been a U.S. citizen or resident alien all year or are you or your spouse treated as a\nresident alien all year by filing a joint return?\n4.\t Are you NOT claiming a foreign earned income credit (Form 2555 or Form 2555-EZ)?\n5.\t Is your investment income (which includes interest, dividends, rents, royalties, and capital gains) $3,600 or less?\n6.\t Do you have earned income for the year?\n7\n.\t Are you NOT the qualifying child of another filer?\nNo\nIf you answered NO to any of the above \nquestions, you cannot file for the EITC\nYes\nIf you answered YES to all of the above \nquestions, continue to the next step\nStep Two: Do You Have Children?\nNo\nContinue to Questions 4, 5, and 6 in this \nStep\nYes\nAnswer Questions 1 through 3d in this Step\n1.\t Does the child have a social security number that is valid for employment issued by the due date of the return (including\nextensions)?\n2.\t Are you the only one who can claim this child or are you the one who can claim the child under the tie-breaker rules for a\nchild who is a qualifying child of more than one person?\n3.\t Does your child pass all four of the following tests?\na.\t\nResidency Test. Your child must have the same main home as you (or your spouse if you filing jointly) in United States\nfor more than half of the year.\nb.\t\nAge Test. Your child must be younger than you (or your spouse if filing a joint return) and must be under age 19 (age\n24 if your child is a “full-time student”) at the end of the year. Also, your child meets this test at any age if the child is\n”permanently and totally disabled.”\nc.\t\nJoint Return Test. Your child must not have filed a joint return or, if your child filed a joint return, your child and his or her\nspouse filed only to claim a refund of withheld or estimated taxes and were not otherwise required to file.\nd.\t\nRelationship Test. Your child must be your son, daughter, adopted child, stepchild, “eligible foster child,” brother, sister,\nhalf-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.\nNo\nIf you answer NO to Questions 4, 5, or 6 in \nthis Step, you cannot file for the EITC\nYes\nIf you answered YES to ALL of the above \nquestions, continue to Step Three\n4.\t Were you (or your spouse if filing a joint return) at least age 25 but under age 65 at the end of the year?\n5.\t Are you (and your spouse if filing jointly) NOT a dependent of another filer?\n6.\t Was your main home (and your spouse’s if filing a joint return) in the United States for more than half the year?\nStep Three: Are You Eligible?\nHow Many of Your Children Satisfy Every Condition of Questions 1, 2, and 3 in Step Two?\nNone\nOnly 1 Child\n2 Children\n3 or more children\nIs your adjusted gross income \nand earned income less than \n$15,570 ($21,370 if married filing \njointly)\nIs your adjusted gross income \nand earned income less than \n$41,094 ($46,884 if married filing \njointly)\nIs your adjusted gross income \nand earned income less than \n$46,703 ($52,493 if married filing \njointly)\nIs your adjusted gross income \nand earned income less than \n$50,162 ($55,952 if married filing \njointly)\nNo\nIf you answered NO to any of the above \nquestions, you CANNOT file for the EITC\nYes\nIf you answered YES to any of the above \nquestions, you CAN file for the EITC\nUse the EITC Assistant at http://www.irs.gov/eitcassistant to see if you qualify. This tool can help you determine the following: \nyour filing status, your child’s status as a qualifying child, your eligibility for and the estimated amount of the EITC.\nPublication 5334 (Rev. 11-2019) Catalog Number 72446U Department of the Treasury Internal Revenue Service www.irs.gov\n"
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f965d.pdf
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1219 Form 965-D (PDF)
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https://www.irs.gov/pub/irs-pdf/f965d.pdf
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[
"Form 965-D\n(December 2019)\nTransfer Agreement Under Section 965(i)(2)\nDepartment of the Treasury \nInternal Revenue Service\n▶ Go to www.irs.gov/Form965 for instructions and the latest information.\nFile in Duplicate \n(see When and Where To File \nin the separate instructions)\nOMB No. 1545-0123\nPart I \nTransferor Information\nName of eligible section 965(i) transferor (see instructions for definition)\nTaxpayer identification number\nAddress (number, street, room, suite, or P.O. box number)\nCity or town, state or province, country, and ZIP or foreign postal code\nPart II \nTransferee Information \nName of eligible section 965(i) transferee (see instructions for definition)\nTaxpayer identification number\nAddress (number, street, room, suite, or P.O. box number)\nCity or town, state or province, country, and ZIP or foreign postal code\nPart III \nIdentifying Information of the S Corporation (with respect to which the section 965(i) election was effective)\nName\nTaxpayer identification number\nPart IV \nTriggering Event Leading to Transfer Agreement\n1\nEnter the date of the triggering event .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\n2\nWas the transfer by reason of death of the transferor? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\n3 \n \nProvide the portion, expressed as a percentage, of the transferor’s section 965(i) deferred net tax liability with\nrespect to the S corporation which is properly allocable to the portion of stock being transferred to the\ntransferee .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n%\n4\nProvide a detailed description of the triggering event that led to the transfer agreement:\nPart V \nReport of Unpaid Section 965(i) Net Tax Liability or Portion Thereof Attributable to Transferred Stock\n5\nEnter the amount of the transferor’s unpaid section 965(i) net tax liability being assumed (see instructions)\n$\nPart VI\nTransferee’s Ability To Pay Remaining Liability\n6\nIs the transferee able to pay the section 965(i) net tax liability being assumed? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\n7\nDid the leverage ratio (see instructions) of the transferee, immediately after the triggering event, exceed 3:1? .\nYes\nNo\n8\nProvide any additional information pertaining to the transferee’s ability to pay (see instructions):\nFor Privacy Act and Paperwork Reduction Act Notice, see the separate instructions.\nCat. No. 72588B\nForm 965-D (12-2019)\n",
"Form 965-D (12-2019)\nPage 2\nPart VII\nTerms of Agreement\nBy signing this transfer agreement, you agree to the following.\n• This document constitutes an agreement by the transferee to assume the liability of the transferor for the unpaid portion of the \nsection 965(i) net tax liability or, in the case of a partial transfer, for the unpaid portion of the section 965(i) net tax liability \nattributable to the transferred stock;\n• The transferee agrees to comply with all the conditions and requirements of section 965(i) and Regulations section 1.965-7(c), \nincluding the annual reporting requirement, as well as any other applicable requirements of the regulations under section 965;\n• The transferor and any successor to the transferor will remain jointly and severally liable for the section 965(i) net tax liability being \nassumed by the transferee;\n• If the Commissioner requests additional information (for example, additional information regarding the ability of the transferee to \nfully pay the section 965(i) net tax liability), the transferee will provide such information; and\n• If the Commissioner determines, at the time of submission or such later date until the section 965(i) net tax liability has been fully \npaid, that this transfer agreement contains a material misrepresentation or material omission, or if the transferee does not provide \nthe additional information requested by the Commissioner within a reasonable timeframe communicated by the Commissioner, the \nCommissioner may reject the transfer agreement effective as of the date of the related triggering event or, in the alternative, on the \ndate the Commissioner determines that this transfer agreement includes a material misrepresentation or material omission.\nTransferor\nSign \nHere\nUnder penalties of perjury, I declare that I have examined this form, and to the best of my knowledge and belief, Parts I, III, IV, and V are true, correct and \ncomplete. I certify that I have the authority to execute this transfer agreement for the eligible section 965(i) transferor reported in Part I.\n▲\nSignature\n▲\nDate\nPrint name\nPrint title\nEmail address\nDaytime phone\nTransferee\nSign \nHere\nUnder penalties of perjury, I declare that I have examined this form, and to the best of my knowledge and belief, Parts II, III, IV, V, and VI are true, correct and \ncomplete. I certify that I have the authority to execute this transfer agreement for the eligible section 965(i) transferee reported in Part II.\n▲\nSignature\n▲\nDate\nPrint name\nPrint title\nEmail address\nDaytime phone\nForm 965-D (12-2019)\n"
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f965e.pdf
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1219 Form 965-E (PDF)
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https://www.irs.gov/pub/irs-pdf/f965e.pdf
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[
"Form 965-E\n(December 2019)\nConsent Agreement Under Section 965(i)(4)(D)\nDepartment of the Treasury \nInternal Revenue Service\n▶ Go to www.irs.gov/Form965 for instructions and the latest information.\nOMB No. 1545-0123\nFile in Duplicate \n(see When and Where To File \nin the separate instructions)\nPart I \nShareholder Information\nName of Shareholder\nTaxpayer identification number\nAddress (number, street, room, suite, or P.O. box number)\nCity or town, state or province, country, and ZIP or foreign postal code\nPart II \nIdentifying Information of the S Corporation (with respect to which the section 965(i) election was in effect)\nName\nTaxpayer identification number\nPart III \nTriggering Event Under Section 965(i)(2)(A)(ii) Giving Rise to Need for Consent\n1\nEnter the date of the triggering event .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\n2\nProvide a detailed description of the triggering event that gave rise to the need for consent to make a section 965(h) election:\nPart IV \nReport of Unpaid Section 965(i) Net Tax Liability for Which Consent Is Requested Under Section 965(i)(4)(D) \nfor a Section 965(h) Election To Be Made\n3 \nEnter the amount of the section 965(i) net tax liability remaining unpaid with respect to which the section\n965(h) election will be made .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n$\n4\nEnter the date on which the next installment payment will be due \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart V \nShareholder’s Ability To Make Payments Required Under Section 965(h)\n5 \nIs the shareholder able to make the payments required under section 965(h) and Regulations section 1.965-7(b) \nwith respect to the unpaid net tax liability reported on line 3? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\n6\nDid the leverage ratio (see instructions) of the shareholder, immediately after the triggering event, exceed 3:1? \nNo\nYes\n7\nProvide any additional information pertaining to the shareholder’s ability to pay (see instructions):\nFor Privacy Act and Paperwork Reduction Act Notice, see the separate instructions.\nCat. No. 72589M\nForm 965-E (12-2019)\n",
"Form 965-E (12-2019)\nPage 2\nPart VI \nTerms of Agreement\nBy signing this transfer agreement, you agree to the following.\n• The shareholder agrees to comply with all the conditions and requirements of section 965(h) and Regulations section 1.965-7(b), \nas well as any other applicable requirements of the regulations under section 965.\n• If the Commissioner requests additional information (for example, additional information regarding the ability of the shareholder to \nmake the payments required under section 965(h)), the shareholder will provide such information.\n• If the Commissioner determines, at the time of submission or such later date until the section 965(i) net tax liability has been fully \npaid, that this consent agreement contains a material misrepresentation or material omission, the Commissioner may reject the \nconsent agreement effective as of the date of the related triggering event.\nShareholder\nSign \nHere\nUnder penalties of perjury, I declare that I have examined this form, and to the best of my knowledge and belief, it is true, correct and complete. I certify that I \nhave the authority to execute this form for the Shareholder reported in Part I.\n▲\nSignature\n▲\nDate\nPrint name\nPrint title\nEmail address\nDaytime phone\nForm 965-E (12-2019)\n"
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i8903.pdf
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1219 Inst 8903 (PDF)
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https://www.irs.gov/pub/irs-pdf/i8903.pdf
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[
"Instructions for Form 8903\n(Rev. December 2019)\nDomestic Production Activities Deduction\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal \nRevenue Code unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Form 8903 \nand its instructions, such as \nlegislation enacted after they were \npublished, go to IRS.gov/Form8903.\nFuture revisions of Form 8903. \nThe IRS will revise the December \n2018 version of Form 8903 only when \nnecessary. Continue to use the 2018 \nversion of Form 8903 for tax years \nbeginning after 2017 until a new \nrevision is issued.\nWhat's New\nDomestic production activities de-\nduction (DPAD). DPAD under \nformer section 199 has been repealed \nfor tax years beginning after 2017. \nTaxpayers using Form 8903 to \ncompute DPAD for tax years, or items \narising from tax years, prior to repeal \nshould use the Instructions for Form \n8903 dated December 2018.\nFor specified agricultural or \nhorticultural cooperatives (specified \ncooperatives), a deduction under \nsection 199A(g) for income \nattributable to domestic production \nactivities is available for tax years \nbeginning after 2017. Specified \ncooperatives may use Form 8903, as \napplicable, to calculate the section \n199A(g) deduction.\nFor further guidance, until final \nregulations are published in the \nFederal Register, taxpayers may \ngenerally rely on the Proposed \nRegulations (REG-118425-18), \npublished June 19, 2019, provided \nthe taxpayer applies the rules in their \nentirety and in a consistent manner. \nFor purposes of the W-2 Wage \nLimitation, also see Notice 2019-27, \n2019-31 IRB, page 484 available at \nIRS.gov/IRB/2019-31.\nGeneral Instructions\nPurpose of Form\nUse Form 8903 to figure your \ndomestic production activities \ndeduction (DPAD).\nYour DPAD is generally 9% of the \nsmaller of:\n1. Your qualified production \nactivities income (QPAI), or\n2. Your adjusted gross income for \nan individual, estate, or trust (taxable \nincome for all other taxpayers) figured \nwithout the DPAD.\nReduced DPAD for oil-related \nQPAI. A taxpayer with oil-related \nQPAI also must reduce the DPAD by \n3% of the least of the following \namounts.\n• Oil-related QPAI.\n• QPAI.\n• Adjusted gross income for an \nindividual, estate, or trust (taxable \nincome for all other taxpayers) figured \nwithout DPAD.\nDPAD limited to wages paid. Your \nDPAD generally can't be more than \n50% of the Form W-2 wages you paid \nto your employees that are properly \nallocable to domestic production \ngross receipts (including Form W-2 \nwages allocated to you on a \nSchedule K-1).\nWho Must File\nDPAD for income attributable to \ndomestic production activities be-\nfore 2018. Individuals, corporations, \ncooperatives, estates, and trusts use \nForm 8903 to figure their allowable \nDPAD from certain trade or business \nactivities.\nShareholders of S corporations and \npartners include information provided \nby the S corporation or partnership \nwhen figuring their allowable DPAD. \nBeneficiaries of an estate or trust \ninclude information provided by the \nestate or trust when figuring their \nallowable DPAD. Patrons of certain \nagricultural or horticultural \ncooperatives may be allocated a \nshare of the cooperative's DPAD to \ninclude on Form 8903.\nMarried individuals filing a joint \nincome tax return figure the deduction \non one Form 8903 using the \napplicable items of both spouses.\nNote. Unless you were allocated a \nshare of a cooperative's DPAD or you \nare a member of an expanded \naffiliated group (EAG), you won't be \nallowed a DPAD unless you can enter \non Form 8903 a positive amount for all \nthree of the following.\n• Qualified production activities \nincome (QPAI).\n• Adjusted gross income for an \nindividual, estate, or trust (taxable \nincome for all other taxpayers).\n• Form W-2 wages you paid to your \nemployees. If you didn't pay any Form \nW-2 wages (or have Form W-2 wages \nallocated to you on a Schedule K-1), \nyou can't claim a DPAD.\nFor details, see the discussions of \nthese three items, later.\nDPAD for income attributable to \ndomestic production activities af-\nter 2017. DPAD has been repealed \nfor tax years beginning after 2017. \nDon’t use Form 8903 to claim DPAD \nfor 2018 or later years unless:\n1. Your tax year began before \nJanuary 1, 2018,\n2. You are a shareholder in an S \ncorporation or partner in a partnership \nand the entity has a tax year that \nbegan before January 1, 2018,\n3. You are a beneficiary of an \nestate or trust and the estate or trust \nhas a tax year that began before \nJanuary 1, 2018,\n4. You are a patron of an \nagricultural or horticultural cooperative \nwith a tax year that began before \nJanuary 1, 2018.\nSpecified cooperatives’ DPAD af-\nter 2017. For tax years beginning on \nor after January 1, 2018, specified \nagricultural or horticultural \ncooperatives to which part I of \nsubchapter T applies may qualify for a \ndeduction under section 199A(g).\nDec 20, 2019\nCat. No. 39878Q\n",
"For agricultural or horticultural \ncooperatives’ utilizing Form 8903 to \ncompute a deduction under section \n199A(g), write “SPECIFIED \nCOOPERATIVE DPAD” across the \ntop of Form 8903. The Form 8903 \nmust be attached to the cooperative’s \nreturn.\nDefinitions and Special \nRules\nTrade or business. QPAI and Form \nW-2 wages are figured by only taking \ninto account items that are attributable \nto the actual conduct of a trade or \nbusiness. An activity qualifies as a \ntrade or business if your primary \npurpose for engaging in the activity is \nfor income or profit and you are \ninvolved in the activity with continuity \nand regularity. For example, a \nsporadic activity or a hobby doesn't \nqualify as a trade or business.\nCoordination with other deduc-\ntions. Expenses that otherwise \nwould be taken into account for \npurposes of figuring the DPAD are \nonly taken into account if and to the \nextent the losses and deductions from \nall of your activities aren't disallowed \nby a provision of the Internal Revenue \nCode, including the following.\n• Basis limits on a partner's share of \npartnership losses.\n• Basis limits on a shareholder's \nshare of S corporation losses.\n• At-risk rules.\n• Passive activity rules.\nIf only a portion of your losses or \ndeductions are allowed in the current \ntax year, a proportionate share of the \nlosses or deductions that reflect \nexpenses allocated to your gross \nreceipts from qualified production \nactivities, after applying the provisions \ndiscussed earlier, is taken into \naccount for purposes of figuring the \nDPAD for the current tax year. If any \nof the losses or deductions disallowed \nfor tax years beginning after 2004 are \nallowed in a later tax year, a \nproportionate share of the expenses \nreflected in those losses or \ndeductions is taken into account in \nfiguring the DPAD in the later tax year.\nA net operating loss under section \n172 generally is figured without the \nsection 199 deduction.\nS corporations and partnerships. \nThe DPAD is applied at the \nshareholder or partner level. Certain S \ncorporations and partnerships can \nfigure QPAI and Form W-2 wages at \nthe entity level and allocate and report \nthese amounts to shareholders and \npartners. See Qualified Production \nActivities Income (QPAI) and Form \nW-2 Wages for more information.\nAll other S corporations and \npartnerships need to provide each \nshareholder or partner with \ninformation the shareholder or partner \nneeds to figure the DPAD.\nFilm production. S corporation \nshareholders or partners that own \n20% or more (directly or indirectly) of \nthe capital interests in the S \ncorporation or the partnership are \ntreated as having engaged directly in \nany film produced by the S \ncorporation or partnership, and the S \ncorporation or partnership is treated \nas having engaged directly in any film \nproduced by the S corporation \nshareholder or partner. See section \n199(d)(1)(A)(iv) for more information.\nEstates and trusts. Generally, an \nestate or trust will figure its:\n• QPAI (which may be less than \nzero), and\n• Form W-2 wages it paid to its \nemployees (including Form W-2 \nwages allocated to it on a \nSchedule K-1).\nThese items are then allocated among \nthe estate or trust and its beneficiaries \nbased on the relative proportion of the \nestate's or trust's distributable net \nincome (DNI) for the tax year that is \ndistributed or required to be \ndistributed to the beneficiary or \nretained by the estate or trust. If the \nestate or trust has no DNI for the tax \nyear, QPAI and Form W-2 wages are \nallocated entirely to the estate or trust.\nAlthough estates and trusts actually \nallocate their QPAI and Form W-2 \nwages to beneficiaries as discussed \nearlier, when completing Form 8903 \nthey must reduce the amounts \nreported on lines 8 and 18 to reflect \nthe portion of those amounts that \nwere allocated to beneficiaries as \nQPAI or Form W-2 wages. For details, \nsee Line 9, later.\nAgricultural and horticultural co-\noperatives. Generally, an \nagricultural or horticultural cooperative \ncan choose to allocate all, some, or \nnone of its allowable DPAD (but not \nQPAI) to its patrons.\nAn agricultural or horticultural \ncooperative is an organization \ndescribed in section 1381 that is \nengaged in:\n• Manufacturing, producing, growing, \nor extracting (MPGE) in whole or \nsignificant part any agricultural or \nhorticultural product, or\n• Marketing agricultural or \nhorticultural products that its patrons \nhave MPGE.\nAgricultural or horticultural products \nfor this purpose include fertilizer, \ndiesel fuel, and other supplies used in \nagricultural or horticultural production. \nAn organization engaged in marketing \nagricultural or horticultural products is \ntreated as having MPGE in whole or in \nsignificant part any qualifying \nproduction property marketed by the \norganization that its patrons have \nMPGE.\nAllocation of cooperative DPAD. \nQualified payments are the patronage \ndividends and per-unit retain \nallocations paid to patrons on which \nthe cooperative computed its DPAD. \nA patron who receives a qualified \npayment can be allocated any portion \nof the DPAD allowed with respect to \nthe portion of the QPAI to which such \npayment is attributable. The \ncooperative must identify the portion \nof its DPAD allocated to a patron in a \nwritten notice mailed to the patron no \nlater than the 15th day of the 9th \nmonth following the close of the \ncooperative's tax year. The qualified \npayments and allocated DPAD will \nalso be reported to patrons that aren't \ncorporations on Form 1099-PATR, \nTaxable Distributions Received From \nCooperatives.\nNote. For purposes of section 199, \npatrons of agricultural or horticultural \ncooperatives can't include any \ndistributions of qualified payments \nfrom the cooperative in the \ncomputation of their DPAD.\nAllocation of patronage and \nnonpatronage income and \ndeductions. Cooperatives must \ncalculate the DPAD separately to \ndetermine patronage and \nnonpatronage income or losses for \npurposes of determining unused \npatronage or nonpatronage losses on \nlines 12 and 13, respectively, of \nSchedule G, Form 1120-C.\nIf you have only patronage income \nand deductions, complete the Form \n-2-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"8903 as described in the instructions. \nHowever, if you have both patronage \nand nonpatronage income and \ndeductions, see Line 25 before \ncompleting Form 8903.\nExpanded affiliated groups \n(EAGs). All members of an EAG are \ntreated as a single corporation to \nfigure their DPAD. The DPAD is \nallocated among the members of the \ngroup in proportion to each member's \nrespective amount (if any) of QPAI. \nSee Line 24 before completing Form \n8903.\nAn EAG is an affiliated group as \ndefined in section 1504(a) \ndetermined:\n• By substituting \"more than 50%\" for \n\"at least 80%\" each place it appears, \nand\n• Without regard to paragraphs (2) \nand (4) of section 1504(b).\nA corporation's status as a member \nof an EAG is determined on a daily \nbasis. Also, if a corporation joins or \nleaves an EAG, its status as a \nmember of the EAG is determined at \nthe end of the day on which it joins or \nleaves the EAG.\nIf all the capital and profits interests \nof a partnership are owned by \nmembers of a single EAG at all times \nduring the partnership's tax year, the \npartnership and all members of the \ngroup are treated as a single taxpayer \nto figure their domestic production \ngross receipts (DPGR) for that tax \nyear.\nAlternative minimum tax (AMT). \nFor taxpayers other than corporations, \nthe DPAD used to determine regular \ntax is also used to determine \nalternative minimum taxable income \n(AMTI). Corporations use AMTI \n(instead of taxable income) figured \nwithout the DPAD to figure the \nalternative minimum DPAD used to \ndetermine AMTI.\nFor details on how corporations \nfigure DPAD for AMT, see the \nInstructions for Form 4626.\nStatistical sampling. You are \ngenerally allowed to use statistical \nsampling for purposes of calculating \nthe DPAD. For details about \nacceptable statistical sampling \nmethodologies, see Rev. Proc. \n2007-35 and Rev. Proc. 2011-42. You \ncan find Rev. Proc. 2007-35 on \npage 1349 of I.R.B. 2007-23 at \nIRS.gov/pub/irs-irbs/irb07-23.pdf. You \ncan find Rev. Proc. 2011-42 on \npage 318 of I.R.B. 2011-37 at \nIRS.gov/pub/irs-irbs/irb11-37.pdf.\nQualified Production \nActivities Income (QPAI)\nYour allowable DPAD generally can't \nbe more than 9% of your QPAI. If you \ndon't have QPAI, you generally aren't \nallowed a DPAD. However, you don't \nneed QPAI to claim a DPAD you are \nallocated as a patron of an agricultural \nor horticultural cooperative.\nFiguring QPAI. QPAI is the excess \n(if any) of:\n1. Domestic production gross \nreceipts (DPGR), over\n2. The sum of:\na. Cost of goods sold allocable to \nDPGR, and\nb. Other expenses, losses, or \ndeductions (other than the DPAD) \nwhich are properly allocable to DPGR.\nOil-related QPAI. A taxpayer with \noil-related QPAI must reduce the \nDPAD by 3% of the least of the \nfollowing amounts.\n• Oil-related QPAI.\n• QPAI.\n• Adjusted gross income for an \nindividual, estate, or trust (taxable \nincome for all other taxpayers) figured \nwithout the DPAD.\nOil-related QPAI is QPAI \nattributable to the production, refining, \nprocessing, transportation, or \ndistribution of oil or gas, or any \nprimary product from oil or gas (as \nused in section 927(a)(2)(C) before its \nrepeal).\nCosts related to transportation. \nWhen figuring QPAI and oil-related \nQPAI for tax years beginning after \n2015, only 25% of properly allocated \ncosts related to the transportation of \noil are allocable to DPGR if the \ntaxpayer is in the trade or business of \nrefining crude oil and is not a major \nintegrated oil company (as defined in \nsection 167(h)(5)(B) without regard to \nclause (iii)).\nPrimary products from oil. \nPrimary products from oil are oil and \nall products derived from the \ndestructive distillation of oil, including \nvolatile products, light oils such as \nmotor fuel and kerosene, distillates \nsuch as naphtha, lubricating oils, \ngreases, and waxes, and residues \nsuch as fuel oil.\nPrimary products from gas. \nPrimary products from gas are all gas \nand associated hydrocarbon \ncomponents from gas or oil wells, \nwhether recovered at the lease or \nupon further processing, including \nnatural gas; condensates; liquefied \npetroleum gases such as ethane, \npropane, and butane; and liquid \nproducts such as natural gasoline.\nSee Temporary Regulations \nsection 1.927(a)-1T(g)(2) for \nadditional information.\nS corporations and partnerships. \nS corporations and partnerships that \nmeet specific requirements can \nchoose to figure QPAI at the entity \nlevel and allocate QPAI to \nshareholders or partners. The \nshareholder or partner then combines \nthe allocated portion with QPAI from \nother sources on Form 8903 to \ndetermine the DPAD. S corporations \nor partnerships that aren't eligible to \nfigure QPAI at the entity level must \nreport each shareholder's or partner's \nshare of deductions, expenses, or \nlosses on Schedule K-1 with other \ninformation the shareholder or partner \nneeds to figure their DPAD.\nQPAI from an estate or trust. An \nestate or trust will figure its QPAI and \nreport each beneficiary's share on \nSchedule K-1 (Form 1041).\nCooperatives. Cooperatives figure \nQPAI without any deduction for \npatronage dividends, per-unit retain \nallocations, or nonpatronage \ndistributions under section 1382(b) or \n(c).\nDomestic Production Gross \nReceipts (DPGR)\nUsing any reasonable method that is \nsatisfactory to the Secretary based on \nthe facts and circumstances, you \nmust determine whether gross \nreceipts qualify as DPGR on an \nitem-by-item basis (and not, for \nexample, on a division-by-division, \nproduct line-by-product line, or \ntransaction-by-transaction basis); \nhowever, see Regulations section \n1.199-3(d)(2) for special rules and \nRegulations section 1.199-(3)(d)(3) \nfor an exception. See Regulations \nsection 1.199-(3)(d)(4) for examples.\nDPGR activities. Generally, your \ngross receipts (defined later) derived \nInstructions for Form 8903 (Rev. 12-2019)\n-3-\n",
"from the following activities are \nDPGR.\n1. Construction of real property \nyou perform in the United States in \nyour construction trade or business.\n2. Engineering or architectural \nservices you perform in the United \nStates in your engineering or \narchitectural services trade or \nbusiness for the construction of real \nproperty in the United States.\n3. Any lease, rental, license, sale, \nexchange, or other disposition of the \nfollowing.\na. Qualifying production property \nyou manufacture, produce, grow, or \nextract in whole or in significant part in \nthe United States. See Qualifying \nProduction Property and \nManufacturing, producing, growing, or \nextracting, later, for details.\nb. Any qualified film you produce.\nc. Electricity, natural gas, or \npotable water you produce in the \nUnited States.\nIn general, gross receipts derived \nfrom the following activities aren't \nDPGR.\n• Activities not attributable to the \nactual conduct of a trade or business.\n• The sale of food and beverages you \nprepare at a retail establishment.\n• The lease, rental, or license of \nproperty between certain persons \ntreated as a single employer.\n• The lease, rental, license, sale, \nexchange, or other disposition of land.\n• The transmission or distribution of \nelectricity, natural gas, or potable \nwater.\n• Advertising and product-placement; \nhowever, see Regulations section \n1.199-3(i)(5)(ii) for exceptions.\n• Customer and technical support, \ntelephone and other \ntelecommunications services, online \nservices (including Internet access \nservices, online banking services, and \nproviding access to online electronic \nbooks, newspapers, and journals), \nand other similar services; however, \nsee Regulations section 1.199-3(i)(6)\n(iii) for exceptions.\nActivities in the United States. \nFor purposes of determining DPGR, \nthe United States includes the 50 \nstates, the District of Columbia, the \nterritorial waters of the United States, \nand the seabed and subsoil of those \nsubmarine areas that are adjacent to \nthe territorial waters of the United \nStates and over which the United \nStates has exclusive rights, in \naccordance with international law, \nwith respect to the exploration and \nexploitation of natural resources. The \nUnited States does not include \npossessions and territories of the \nUnited States or the airspace or space \nover the United States and these \nareas.\nActivities in Puerto Rico. For \npurposes of determining DPGR, the \nUnited States includes Puerto Rico for \na taxpayer who has gross receipts \nfrom sources within Puerto Rico that \nare subject to tax under sections 1 or \n11, but only for the first 12 tax years of \nthe taxpayer that begin after 2005 and \nbefore 2018.\nGross receipts. Your gross receipts \nare receipts that are recognized under \nyour method of accounting for the tax \nyear. Gross receipts include the \nfollowing amounts from your trade or \nbusiness activities.\n• Total sales (net of returns and \nallowances).\n• Amounts received for services, not \nincluding wages received as an \nemployee.\n• Income from investments and from \nincidental or outside sources \n(including sales of business property).\n• Amounts received that are allocable \nto the payment of sales tax or other \nsimilar state and local taxes if the tax \nis legally imposed on you.\nGross receipts are generally not \nreduced by the:\n• Cost of goods sold, or\n• Adjusted basis of property (other \nthan capital assets) sold or otherwise \ndisposed of if such property is \ndescribed in section 1221(a)(1) \nthrough (5).\nAllocation of gross receipts. You \ngenerally must allocate your gross \nreceipts between DPGR and \nnon-DPGR. Allocate gross receipts \nusing a reasonable method that \naccurately identifies gross receipts \nthat are DPGR. However, if less than \n5% of your gross receipts are \nnon-DPGR, you can treat all of your \ngross receipts as DPGR. Also, if less \nthan 5% of your gross receipts are \nDPGR, you can treat all of your gross \nreceipts as non-DPGR.\nFor details, see Regulations \nsection 1.199-1(d).\nEAG partnerships. A partnership is \nan EAG partnership if a single EAG \nowns all the interests in the capital \nand profits of the partnership at all \ntimes during the tax year. If the \nrequirements are met, the EAG \npartnership and all members of the \nEAG are treated as a single taxpayer \nfor purposes of determining the \namount of domestic production gross \nreceipts (DPGR).\nSpecial rules apply to the \nattribution of gross receipts (a) to a \nmember of the EAG from the \ndisposition of property an EAG \npartnership engaged in MPGE, and \n(b) to an EAG partnership from the \ndisposition of property another EAG \npartnership engaged in MPGE, both \nof which are members of the same \nEAG. See Regulations section \n1.199-3(i)(8) for more information, \nexceptions, and other rules.\nQualifying Production Property\nThe following are qualifying \nproduction property.\n• Tangible personal property.\n• Computer software.\n• Sound recordings.\nTangible personal property. \nTangible personal property includes \nany tangible property other than land, \nbuildings (including structural \ncomponents), computer software, \nsound recordings, qualified films, \nelectricity, natural gas, or potable \nwater. Tangible personal property \nalso includes any gas (other than \nnatural gas), chemical, and similar \nproperty, such as steam, oxygen, \nhydrogen, or nitrogen.\nMachinery, printing presses, \ntransportation and office equipment, \nrefrigerators, grocery counters, testing \nequipment, display racks and shelves, \nand neon and other signs that are \ncontained in or attached to a building \nconstitute tangible personal property.\nNote. Local law doesn't control \nwhether property is tangible personal \nproperty.\nSee Regulations section 1.199-3(j)\n(2) for more information.\nComputer software. In general, \ncomputer software includes the \nfollowing.\n• Any program, routine, or sequence \nof machine-readable code that is \ndesigned to cause a computer to \n-4-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"perform a desired function or set of \nfunctions, and the documentation \nrequired to describe or maintain that \nprogram or routine. An electronic \nbook online or for download doesn't \nconstitute computer software.\n• Machine-readable code for (a) \nvideo games or similar programs, (b) \nequipment that is an integral part of \nother property, and (c) typewriters, \ncalculators, adding and accounting \nmachines, copiers, duplicating \nequipment, and similar equipment, \neven if the program isn't designed to \noperate on a computer as defined in \nsection 168(i)(2)(B).\n• Computer programs of all classes, \nincluding operating systems, \nexecutive systems, monitors, \ncompilers and translators, assembly \nroutines, utility programs, and \napplication programs.\n• Any incidental and ancillary rights \nthat are necessary for the acquisition \nof the title to, the ownership of, or the \nright to use computer software, and \nthat are used only in connection with \nthat specific software. These \nincidental and ancillary rights aren't \nincluded in the definition of a \ntrademark or trade name under \nRegulations section 1.197-2(b)(10)(i).\nException. Computer software \ndoesn't include any data or \ninformation base unless the data or \ninformation base is in the public \ndomain and is incidental to a \ncomputer program.\nExample. If a word processing \nprogram includes a dictionary feature \nthat may be used to spell-check a \ndocument, then the entire program \n(including the dictionary feature) is a \ncomputer software program \nregardless of the form in which the \ndictionary feature is maintained or \nstored.\nSee Regulations section 1.199-3(j)\n(3) for more information.\nSound recordings. Sound \nrecordings include any works that \nresult from the fixation of a series of \nmusical, spoken, or other sounds. The \ndefinition of sound recordings is \nlimited to the master copy of the \nrecordings (or other copy from which \nthe holder is licensed to make and \nproduce copies), and if the medium \n(such as compact discs, tapes, or \nother phonorecordings) in which the \nsounds may be embodied is tangible, \nthen the medium is considered \ntangible personal property.\nException. Sound recordings \ndon't include the creation of \ncopyrighted material in a form other \nthan a sound recording, such as lyrics \nor music composition.\nSee Regulations section 1.199-3(j)\n(4) for more information.\nManufacturing, producing, grow-\ning, or extracting (MPGE). MPGE \ngenerally include the following trade \nor business activities.\n• Activities related to manufacturing, \nproducing, growing, extracting, \ninstalling, developing, improving, and \ncreating qualifying production \nproperty.\n• Making qualifying production \nproperty (QPP) out of scrap, salvage, \nor junk material, or from new or raw \nmaterial by processing, manipulating, \nrefining, or changing the form of an \narticle, or by combining or assembling \ntwo or more articles.\n• Cultivating soil, raising livestock, \nfishing, and mining minerals.\n• Storage, handling, or other \nprocessing activities (other than \ntransportation activities) in the United \nStates related to the sale, exchange, \nor other disposition of agricultural \nproducts, provided the products are \nconsumed in connection with, or \nincorporated into, manufacturing, \nproducing, growing, or extracting \nQPP, whether or not by the taxpayer.\nGenerally, the packaging, \nrepackaging, labeling, or minor \nassembly of QPP does not qualify as \nan MPGE activity unless you engage \nin another MPGE activity with respect \nto that QPP. Furthermore, the \ninstallation of qualifying production \nproperty does not qualify as an MPGE \nactivity unless you MPGE the \nqualifying production property being \ninstalled and you have the benefits \nand burdens of ownership of the QPP \nunder federal income tax principles \nduring the installation period.\nFor details, see Regulations \nsection 1.199-3(e). Your MPGE of \nQPP must be in whole or in significant \npart within the United States. See \nRegulations section 1.199‐3(f) and \n(g).\nQualifying in-kind partnerships. \nIn general, partners of qualifying \nin-kind partnerships are treated as \nmanufacturing, producing, growing, or \nextracting the property they receive as \na distribution from the partnership. For \npurposes of section 199, a qualifying \nin-kind partnership is a partnership \nengaged in any of the following \nactivities.\n• The extraction, refining, or \nprocessing of oil, natural gas (as \ndescribed in Regulations section \n1.199-3(l)(2)), petrochemicals, or \nproducts derived from oil, natural gas, \nor petrochemicals, in whole or \nsignificant part within the United \nStates.\n• The production or generation of \nelectricity in the United States.\n• The extraction and processing of \nminerals (as defined in Regulations \nsection 1.611-1(d)(5)) within the \nUnited States.\n• Any other industry or activity \ndesignated as an industry or activity of \na qualifying in-kind partnership by \npublication in the Internal Revenue \nBulletin.\nFor more information on qualifying \nin-kind partnerships, see Regulations \nsections 1.199-3(i)(7). For qualifying \nin-kind partnerships engaged solely in \nthe extraction and processing of \nminerals, see Rev. Rul. 2007-30 on \npage 1277 of I.R.B. 2007-21 at \nIRS.gov/pub/irs-irbs/irb07-21.pdf.\nQualified Film\nA qualified film is any motion picture \nfilm, video tape, or live or delayed \ntelevision programming for which 50% \nor more of the total compensation \nrequired to produce the film is paid for \nservices performed by actors, \nproduction personnel, directors, and \nproducers in the United States.\nA qualified film includes the \ncopyrights, trademarks, or other \nintangibles related to the film. Also, a \nDPAD can be taken for the production \nof a qualified film regardless of the \nmethods and means by which the film \nis distributed.\nSee section 199(c)(6) and \nRegulations section 1.199-3(k) for \nmore information. For special rules \nrelated to S corporations, \npartnerships, S corporation \nshareholders, and partners \nparticipating in the production of films, \nsee Film production under S \ncorporations and partnerships, earlier.\nInstructions for Form 8903 (Rev. 12-2019)\n-5-\n",
"Cost of Goods Sold\nWhen figuring QPAI, cost of goods \nsold includes the:\n• Cost of goods sold to customers, \nand\n• Adjusted basis of non-inventory \nproperty you sold or otherwise \ndisposed of in your trade or business.\nAllocation of cost of goods sold. \nGenerally, you must allocate your cost \nof goods sold between DPGR and \nnon-DPGR using a reasonable \nmethod. If you use a method to \nallocate gross receipts between \nDPGR and non-DPGR, the use of a \ndifferent method to allocate cost of \ngoods sold won't be considered \nreasonable, unless it is more \naccurate. However, if you qualify to \nuse the small business simplified \noverall method, you can use it to \napportion both cost of goods sold and \nother deductions, expenses, and \nlosses between DPGR and \nnon-DPGR. For more information \nabout this allocation method, see \nSmall Business Simplified Overall \nMethod, later.\nFor details about allocating cost of \ngoods sold, see Regulations section \n1.199-4.\nOther Deductions, Expenses, or \nLosses\nWhen figuring QPAI, other \ndeductions, expenses, or losses \ninclude all deductions, expenses, or \nlosses from a trade or business other \nthan cost of goods sold and employee \nbusiness expenses.\nAllocation and apportionment of \nother deductions, expenses, or \nlosses. You must generally use one \nof the following three methods to \nallocate and apportion other trade or \nbusiness deductions, expenses, or \nlosses between DPGR and \nnon-DPGR.\n• Small business simplified overall \nmethod. (You must qualify to use this \nmethod.)\n• Simplified deduction method. (You \nmust qualify to use this method.)\n• Section 861 method.\nHowever, don't allocate and \napportion a net operating loss \ndeduction or deductions not \nattributable to the conduct of a trade \nor business to DPGR under any of the \nmethods.\nS corporations and \npartnerships. S corporations and \npartnerships that meet specific \nrequirements can choose to figure \nQPAI at the entity level and allocate \nthe QPAI to shareholders or partners. \nS corporations or partnerships that \naren't eligible to figure QPAI under \nthose rules must report each \nshareholder's or partner's share of its \ndeductions, expenses, or losses on \nSchedule K-1 with other information \nthe shareholder or partner needs to \nfigure their DPAD.\nEstates and trusts. An estate or \ntrust allocates directly attributable \ntrade or business deductions, \nexpenses, or losses between DPGR \nand non-DPGR under Regulations \nsection 1.652(b)-3. An estate or trust \nthat is eligible must use the simplified \ndeduction method to allocate \nindirectly attributable trade or \nbusiness deductions, expenses, or \nlosses between DPGR and \nnon-DPGR. Otherwise, the estate or \ntrust uses the section 861 method to \nallocate these indirect items.\nSmall Business Simplified Overall \nMethod\nYou generally can use the small \nbusiness simplified overall method to \napportion cost of goods sold and \nother deductions, expenses, and \nlosses between DPGR and \nnon-DPGR if you meet any of the \nfollowing tests.\n• You are engaged in the trade or \nbusiness of farming and aren't \nrequired to use the accrual method of \naccounting (see section 447).\n• Your average annual gross receipts \n(defined below) are $5 million or less.\n• You are eligible to use the cash \nmethod of accounting under Rev. \nProc. 2002-28. You can find Rev. \nProc. 2002-28 on page 815 of I.R.B. \n2002-18 at IRS.gov/pub/irs-irbs/\nirb02-18.pdf.\nUnder the small business simplified \noverall method, your total cost of \ngoods sold and other deductions, \nexpenses, and losses are ratably \napportioned between DPGR and \nnon-DPGR based on relative gross \nreceipts.\nExample. Your total cost of goods \nsold and other trade or business \ndeductions, expenses, or losses are \n$400 and don't include a net operating \nloss deduction. You have $1,000 total \ngross receipts and $750 DPGR. Your \nDPGR equal 75% of your total gross \nreceipts. Under the small business \nsimplified overall method, you \nsubtract $300 ($400 × 0.75) of your \ntotal cost of goods sold and other \ntrade or business deductions, \nexpenses, or losses from your DPGR \nto figure your QPAI, which is $450 \n($750 - $300).\nAverage annual gross receipts. \nFor this purpose, your average annual \ngross receipts are your average \nannual gross receipts for the \npreceding 3 tax years. If your \nbusiness hasn't been in existence for \n3 tax years, base your average on the \nperiod it has existed. Include any \nshort tax years by annualizing the \nshort tax year's gross receipts by (a) \nmultiplying the gross receipts for the \nshort period by 12, and (b) dividing \nthe result by the number of months in \nthe short period.\nEstates and trusts. Estates and \ntrusts can't use the small business \nsimplified overall method.\nS corporations and partnerships. \nAn S corporation or partnership (other \nthan a qualifying in-kind partnership or \nexpanded affiliated group partnership) \ncan choose to use the small business \nsimplified overall method to figure \nQPAI at the entity level and allocate \nthat QPAI to shareholders or partners \nif it meets the requirements of an \neligible small pass-through entity. A \nshareholder or partner who is \nallocated QPAI from an eligible small \npass-through entity must report that \nQPAI on line 7.\nFor a definition of a qualifying \nin-kind partnership, see Regulations \nsection 1.199-3(i)(7). For a definition \nof an expanded affiliated group \npartnership, see Regulations section \n1.199-3(i)(8).\nAn S corporation or partnership is \nan eligible small pass-through entity if \nit meets each of the following \nrequirements for the current tax year.\n• It satisfies one of the following \nrequirements: (a) it has average \nannual gross receipts for the 3 tax \nyears preceding the current tax year \nof $5 million or less, (b) it is engaged \nin the trade or business of farming and \nisn't required to use the accrual \nmethod of accounting, or (c) it is \neligible to use the cash method of \n-6-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"accounting under Rev. Proc. 2002-28 \n(that is, it has average annual gross \nreceipts of $10 million or less and isn't \nexcluded from using the cash method \nunder section 448 of the Internal \nRevenue Code).\n• It has total cost of goods sold and \ndeductions (excluding the net \noperating loss deduction) added \ntogether of $5 million or less.\n• It has DPGR.\n• If a partnership, it doesn't have a \npartner that is an ineligible partnership \n(qualifying in-kind partnerships or \nexpanded affiliated group \npartnerships).\nExpanded affiliated groups. For \nadditional rules that apply to \nexpanded affiliated groups, see \nRegulations section 1.199-4(f)(4).\nOil-related production activities. If \nyou have oil-related QPAI, and you \nchoose to use the small business \nsimplified overall method, you must \nallocate part of these costs to DPGR \nfrom oil-related production activities to \ndetermine oil-related QPAI. See \nLine 4, later.\nFor details about the small \nbusiness simplified overall method, \nsee Regulations section 1.199-4(f).\nSimplified Deduction Method\nYou generally can use the simplified \ndeduction method to apportion other \ndeductions, expenses, and losses \n(but not cost of goods sold) between \nDPGR and non-DPGR if you meet \neither of the following tests.\n• Your total trade or business assets \nat the end of your tax year are $10 \nmillion or less.\n• Your average annual gross receipts \n(defined above) are $100 million or \nless.\nUnder the simplified deduction \nmethod, your other trade or business \ndeductions, expenses, or losses are \nratably apportioned between DPGR \nand non-DPGR based on relative \ngross receipts.\nExample. Your total other trade or \nbusiness deductions, expenses, or \nlosses are $400 and don't include a \nnet operating loss. You have $240 of \ncost of goods sold allocable to DPGR. \nYou have $1,000 total gross receipts \nand $600 DPGR. Your DPGR equal \n60% of your total gross receipts. \nUnder the simplified deduction \nmethod, you subtract $240 ($400 × \n0.60) of your total other trade or \nbusiness deductions, expenses, or \nlosses from your DPGR to figure your \nQPAI, which is $120 ($600 - $240 -\n$240).\nS corporations and partnerships. \nAn S corporation or partnership (other \nthan a qualifying in-kind partnership or \nexpanded affiliated group partnership) \ncan choose to use the simplified \ndeduction method to figure QPAI at \nthe entity level and allocate that QPAI \nto shareholders or partners if it meets \nthe requirements of an eligible widely \nheld pass-through entity. A \nshareholder or partner who is \nallocated QPAI from an eligible widely \nheld pass-through entity must report \nthat QPAI on line 7.\nFor a definition of a qualifying \nin-kind partnership, see Regulations \nsection 1.199-3(i)(7). For a definition \nof an expanded affiliated group \npartnership, see Regulations section \n1.199-3(i)(8).\nAn S corporation or partnership is \nan eligible widely held pass-through \nentity if it meets each of the following \nrequirements for its current tax year.\n• Either of the two tests discussed \nearlier under Simplified Deduction \nMethod.\n• It has total cost of goods sold and \ndeductions added together of $100 \nmillion or less.\n• It has DPGR.\n• On every day during the current tax \nyear, all of its shareholders or partners \nare individuals, estates, or trusts \ndescribed (or treated as described) in \nsection 1361(c)(2).\n• On every day during the current tax \nyear, no shareholder or partner owns, \nalone or combined with the ownership \ninterests of all related persons, more \nthan 10% of (a) total shares of the S \ncorporation or (b) the profits or capital \ninterests in the partnership.\nEstates and trusts. If eligible by \nmeeting one of the two tests \ndescribed earlier, an estate or trust \nmust use the simplified deduction \nmethod to allocate its indirectly \nattributable trade or business \ndeductions, expenses, or losses \nbetween DPGR and non-DPGR. All \nestates and trusts must allocate \ndirectly attributable deductions, \nexpenses, or losses between DPGR \nand non-DPGR under Regulations \nsection 1.652(b)-3.\nExpanded affiliated groups. For \nadditional rules that apply to \nexpanded affiliated groups, see \nRegulations section 1.199-4(e)(4).\nOil-related production activities. If \nyou have oil-related QPAI, and you \nchoose to use the simplified \ndeduction method, you must allocate \npart of these costs to DPGR from \noil-related production activities to \ndetermine oil-related QPAI. See \nLine 3, later.\nSection 861 Method\nYou don't have to meet any tests to \nuse the section 861 method. Under \nthe section 861 method, you generally \nmust apply the rules of the section \n861 regulations to allocate and \napportion other trade or business \ndeductions, expenses, or losses \nbetween DPGR and non-DPGR. \nSection 199 is treated as an \n“operative section” described in \nRegulations section 1.861-8(f).\nFor details, see Regulations \nsection 1.199-4(d).\nFor guidance on automatic \napproval to change certain elections \nrelating to the apportionment of \ninterest expense and research and \nexperimentation expenditures, see \nRev. Proc. 2006-42. You can find \nRev. Proc. 2006-42 on page 931 of \nI.R.B. 2006-47 at IRS.gov/pub/irs-irbs/\nirb06-47.pdf.\nS corporations. An S corporation \ncan't use the section 861 method to \nfigure QPAI. Unless it is eligible to use \nthe small business simplified overall \nmethod or simplified deduction \nmethod, an S corporation must report \neach shareholder's share of its \ndeductions, expenses, or losses on \nSchedule K-1 (Form 1120S) that the \nshareholder needs to figure their \nDPAD.\nPartnerships. A partnership (other \nthan a qualifying in-kind partnership or \nexpanded affiliated group partnership) \ncan choose to use the 861 method to \nfigure QPAI at the entity level and \nallocate that QPAI to qualifying \npartners (defined later) if it meets the \nrequirements of an eligible 861 \npartnership. A partner who is \nallocated QPAI from an eligible 861 \npartnership must report that QPAI on \nline 7.\nInstructions for Form 8903 (Rev. 12-2019)\n-7-\n",
"For a definition of a qualifying \nin-kind partnership, see Regulations \nsection 1.199-3(i)(7). For a definition \nof an expanded affiliated group \npartnership, see Regulations section \n1.199-3(i)(8).\nAn eligible 861 partnership must \nmeet the following requirements for its \ncurrent tax year.\n• It has at least 100 partners on any \nday during the partnership's tax year.\n• At least 70% of the partnership is \nowned, at all times during its tax year, \nby qualifying partners (defined next).\n• It has DPGR.\nQualifying partner. A qualifying \npartner is a partner that, on each day \nduring the partnership's tax year that \nthe partner owns an interest in the \npartnership:\n• Is not a general partner or a \nmanaging member of a partnership \norganized as a limited liability \ncompany,\n• Doesn't materially participate \n(discussed later) in the activities of the \npartnership,\n• Doesn't hold, alone or combined \nwith the interests of all related \npersons (defined next), 5% or more of \nthe profits or capital interests in the \npartnership,\n• Is not an ineligible entity (qualifying \nin-kind partnership or expanded \naffiliated group partnership).\nRelated persons. For purposes of \ndetermining whether a partner is a \nqualifying partner, persons are related \nif they meet the requirements of \nsections 267(b) or 707(b), \ndisregarding sections 267(e)(1) and \n(f)(1)(A).\nMaterial participation. A \nqualifying partner can't materially \nparticipate in the activities of the \npartnership. See section 5.05 of Rev. \nProc. 2007-34 for the definition of \nmaterial participation.\nNon-qualifying partners. An \neligible 861 partnership can't allocate \nQPAI to non-qualifying partners (see \nQualifying partner, earlier). Instead, \nthe partnership must report each \nnon-qualifying partner's share of \ndeductions, expenses, or losses on \nSchedule K-1 that the partner needs \nto figure their DPAD. The partnership \nitems allocated to non-qualifying \npartners must be excluded for \npurposes of figuring QPAI at the \npartnership level.\nEstates and trusts. An estate or \ntrust that can't use the simplified \ndeduction method must use the \nsection 861 method to allocate and \napportion its indirectly attributable \ntrade or business deductions, \nexpenses, or losses between DPGR \nand non-DPGR. All estates and trusts \nmust allocate directly attributable \ndeductions, expenses, or losses \nbetween DPGR and non-DPGR under \nRegulations section 1.652(b)-3.\nOil-related production activities. If \nyou have oil-related QPAI, apply the \nrules of section 861 to determine the \namount of other trade or business \ndeductions, expenses, or losses to \ndeduct for purposes of determining \noil-related QPAI.\nAdjusted Gross or Taxable \nIncome\nYour allowable DPAD generally can't \nbe more than 9% of your adjusted \ngross income if you are an individual, \nestate, or trust (taxable income for all \nother taxpayers) figured without the \nDPAD. If you don't have adjusted \ngross or taxable income, you \ngenerally aren't allowed a DPAD.\nNote. Although patrons without \nadjusted gross or taxable income can \nclaim a DPAD, the DPAD can't create \nor increase a net operating loss under \nsection 172(d). However, you don't \nneed taxable income to claim a DPAD \nyou are allocated as a member of an \nExpanded Affiliated Group (EAG), and \nthe DPAD can create or increase a \nnet operating loss under Regulations \nsection 1.199-7(c)(2).\nAgricultural and horticultural co-\noperatives. For this purpose, figure \ntaxable income without taking into \naccount any allowable deduction for \npatronage dividends, per-unit retain \nallocations, or nonpatronage \ndistributions.\nEstates and trusts. See Line 11, \nlater, to figure adjusted gross income.\nUnrelated business taxable in-\ncome (UBTI). The allowable DPAD \nof an organization taxed on its UBTI \nunder section 511 generally can't be \nmore than 9% of its UBTI figured \nwithout the DPAD.\nForm W-2 Wages\nYour allowable DPAD generally can't \nbe more than 50% of the Form W-2 \nwages you paid to your employees \nthat are properly allocable to DPGR \n(including Form W-2 wages allocated \nto you on a Schedule K-1). If you \ndidn't pay Form W-2 wages, you \ngenerally aren't allowed a DPAD. \nHowever, you don't need Form W-2 \nwages to claim a DPAD you are \nallocated as a:\n• Patron of an agricultural or \nhorticultural cooperative, or\n• Member of an expanded affiliated \ngroup.\nNote. When figuring your DPAD, the \nlimit equal to 50% of Form W-2 wages \nis based only on Form W-2 wages \nproperly allocable to DPGR.\nForm W-2 wages from an S corpo-\nration or partnership. S \ncorporations and partnerships that \nmeet specific requirements can \nchoose to figure Form W-2 wages at \nthe entity level and report the \nallocated portion of Form W-2 wages \non Schedule K-1 to the S corporation \nshareholder or partner who then \ncombines the allocated portion with \nForm W-2 wages from other sources \non Form 8903 to determine the \nDPAD.\nIf the S corporation or partnership \nmeets the requirements to be \nclassified as one of the eligible entities \nlisted below, it can figure Form W-2 \nwages at the entity level and allocate \nForm W-2 wages to S corporation \nshareholders or partners.\n• Eligible small pass-through entity. \nSee S corporations and partnerships, \nunder Small Business Simplified \nOverall Method, earlier, for the \nrequirements.\n• Eligible widely held pass-through \nentity. See S corporations and \npartnerships, under Simplified \nDeduction Method, earlier, for the \nrequirements.\n• Eligible 861 partnership. See \nPartnerships, under Section 861 \nMethod, earlier, for the requirements.\nForm W-2 wages from an estate or \ntrust. An estate or trust generally will \nfigure its Form W-2 wages and \napportion them between the \nbeneficiary and the fiduciary (and \namong the beneficiaries) and report \neach beneficiary's share on \nSchedule K-1 (Form 1041).\nForm W-2 wages for services per-\nformed in Puerto Rico. Taxpayers \nthat determine DPGR under section \n-8-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"199(d)(8)(A), figure Form W-2 wages \nby including wages paid for services \nperformed in Puerto Rico without \nregard to section 3401(a)(8), but only \nduring the first 12 tax years of the \ntaxpayer that begin after 2005 and \nbefore 2018.\nForm W-2 wages paid to produce a \nqualified film. Form W-2 wages \ninclude compensation for services \nperformed in the United States by \nactors, production personnel, \ndirectors, and producers to produce a \nqualified film. See Qualified Film, \nearlier, for more information.\nFiguring Form W-2 Wages Used \nTo Figure the 50% Limit\nYou figure Form W-2 wages used to \nfigure the 50% limit in two steps. First, \nyou must determine the amount of \nwages to classify as Form W-2 wages \nunder Regulations section 1.199-2(e)\n(1). Second, you must figure Form \nW-2 wages that are properly allocable \nto DPGR.\nStep 1. Figuring Form W-2 Wages\nYou can use one of the following three \nmethods to figure your Form W-2 \nwages.\n• Unmodified box method.\n• Modified box 1 method.\n• Tracking wages method.\nAfter you figure Form W-2 wages, \nsee Step 2, later, to determine the \nForm W-2 wages to report on line 16 \nof Form 8903.\nRelevant Forms W-2. To figure your \nForm W-2 wages, generally use the \nsum of the amounts you properly \nreport for each employee on Form \nW-2, Wage and Tax Statement, for \nthe calendar year ending with or \nwithin your tax year. However, don't \nuse any amounts reported on a Form \nW-2 filed with the Social Security \nAdministration more than 60 days \nafter its due date (including \nextensions).\nShort tax year. If you have a short \ntax year, you generally will use the \nsum of the amounts you properly \nreport for each employee on Form \nW-2 for the calendar year ending with \nor within that short tax year. However, \nif you have a short tax year that \ndoesn't include a calendar year \nending within that short tax year, then \nwages you properly report on Form \nW-2 which you paid during the short \ntax year are treated as W-2 wages for \nthat short tax year.\nAcquisition or disposition of a \ntrade or business. If you acquired or \ndisposed of a trade or business that \ncauses you and another employer to \npay W-2 wages to employees of the \nacquired or disposed of trade or \nbusiness during the calendar year, \nthen the W-2 wages for the calendar \nyear of the acquisition or disposition \nare allocated between each employer \nbased on the period that the \nemployees of the acquired or \ndisposed of trade or business were \nemployed by each employer. If you \nhave a short tax year that doesn’t \ninclude a calendar year ending within \nyour short tax year, see Short tax \nyear, earlier.\nNon-duplication rule. Amounts that \nare treated as Form W-2 wages for a \ntax year under any method can't be \ntreated as Form W-2 wages for any \nother tax year. Also, an amount can't \nbe treated as Form W-2 wages by \nmore than one taxpayer.\nUnmodified box method. Under the \nunmodified box method, Form W-2 \nwages are the smaller of:\n1. The sum of the amounts \nreported in box 1 of the relevant \nForms W-2, or\n2. The sum of the amounts \nreported in box 5 of the relevant \nForms W-2.\nModified box 1 method. Under the \nmodified box 1 method, Form W-2 \nwages are figured as follows.\n1. Add the amounts reported in \nbox 1 of the relevant Forms W-2.\n2. Add all the amounts described \nbelow and included in box 1 of the \nrelevant Forms W-2.\na. Amounts not considered wages \nfor federal income tax withholding \npurposes.\nb. Supplemental unemployment \ncompensation benefits.\nc. Sick pay or annuity payments \nfrom which the recipient requested \nfederal income tax withholding.\n3. Subtract (2) from (1).\n4. Add together any amounts \nreported in box 12 of the relevant \nForms W-2 that are properly coded D, \nE, F, G, or S.\n5. Add (3) and (4).\nTracking wages method. Under the \ntracking wages method, Form W-2 \nwages are figured as follows.\n1. Add the amounts reported in \nbox 1 of the relevant Forms W-2 that \nare also wages for federal income tax \nwithholding purposes.\n2. Add any amounts reported in \nbox 1 of the relevant Forms W-2 that \nare both:\na. Wages for federal income tax \nwithholding purposes, and\nb. Supplemental unemployment \ncompensation benefits.\n3. Subtract (2) from (1).\n4. Add together any amounts \nreported in box 12 of the relevant \nForms W-2 that are properly coded D, \nE, F, G, or S.\n5. Add (3) and (4).\nStep 2. Form W-2 Wages\nAllocable to DPGR\nAfter you calculate Form W-2 wages, \nas discussed in Step 1, you must \nfigure Form W-2 wages that are \nproperly allocable to DPGR. You \nreport the Form W-2 wages that are \nproperly allocable to DPGR on line 16 \nof Form 8903.\nYou can figure Form W-2 wages \nthat are properly allocable to DPGR \nunder one of the following methods.\n• Small business simplified overall \nmethod safe harbor.\n• Wage expense safe harbor.\n• Any other reasonable method \nbased on all the facts and \ncircumstances.\nSmall business simplified overall \nmethod safe harbor. If you use the \nsmall business simplified overall \nmethod to allocate costs between \nDPGR and non-DPGR (see Small \nBusiness Simplified Overall Method, \nearlier), you can use the small \nbusiness simplified overall method \nsafe harbor to determine the amount \nof Form W-2 wages allocable to \nDPGR. Under this safe harbor \nmethod, the amount of Form W-2 \nwages that is properly allocable to \nDPGR equals the proportion of DPGR \nto total gross receipts.\nWage expense safe harbor. If you \nare using either the section 861 \nmethod of cost allocation under \nRegulations section 1.199-4(d) or the \nsimplified deduction method under \nInstructions for Form 8903 (Rev. 12-2019)\n-9-\n",
"Regulations section 1.199-4(e), you \ndetermine the amount of wages \nproperly allocable to DPGR by \nmultiplying the amount of wages for \nthe tax year by the ratio of your wage \nexpense included in calculating QPAI \nfor the tax year to your total wage \nexpense used in calculating your \ntaxable income (or adjusted gross \nincome) for the tax year without \nregard to any wage expenses \ndisallowed by sections 465, 469, \n704(d), or 1366(d).\nIf you use the section 861 method \nor the simplified deduction method, \nyou must use the same expense \nallocation and apportionment \nmethods that you use to determine \nQPAI to allocate and apportion wage \nexpense for purposes of the safe \nharbor.\nWage expense included in cost \nof goods sold. When figuring the \nratio of your wage expense included \nin calculating QPAI for the tax year to \nyour total wage expense used in \ncalculating your adjusted gross \nincome or taxable income (as the \ncase may be) for the tax year, \ndetermine the wage expense included \nin cost of goods sold using any \nreasonable method based on all of the \nfacts and circumstances. For \nexample, it may be reasonable to use \n(a) the amount of direct labor included \nin cost of goods sold or (b) section \n263A labor costs (as defined in \nRegulations section 1.263A-1(h)(4)\n(ii)) included in cost of goods sold.\nMore information. For more \ninformation on figuring your Form W-2 \nwages, see Regulations section \n1.199-2 and Rev. Proc. 2006-47. You \ncan find Rev. Proc. 2006-47 on \npage 869 of I.R.B. 2006-45 at \nIRS.gov/pub/irs-irbs/irb06-45.pdf.\nFor more information on figuring \nForm W-2 wages properly allocable to \nDPGR, see Regulations section \n1.199-2(e)(2).\nSpecific Instructions\nComplete lines 1 through 10, \ncolumn (a), only if you have \noil-related production \nactivities. All others, do not complete \nlines 1 through 9, column (a), and \nenter zero on line 10a.\nEnter amounts for all activities \n(including oil-related production \nCAUTION\n!\nactivities) on lines 1 through 10, \ncolumn (b).\nLine 1\nDomestic Production \nGross Receipts (DPGR)\nEnter your DPGR (defined earlier in \nthe General Instructions under \nDomestic Production Gross \nReceipts).\nLine 2\nAllocable Cost of Goods \nSold\nEnter your cost of goods sold \nallocable to DPGR on line 2 unless \nyou are using the small business \nsimplified overall method. If you are \nusing the small business simplified \noverall method, skip line 2, and go to \nLine 4.\nFor more information about \nallocating costs of goods sold, see \nCost of Goods Sold, earlier, in the \nGeneral Instructions. See Small \nBusiness Simplified Overall Method, \nearlier in the General Instructions, for \nmore information about using this \nmethod to allocate cost of goods sold \nand other deductions or losses to \nDPGR.\nLine 3\nAllocable Deductions and \nLosses\nEnter your other deductions or losses \nproperly allocable to DPGR on line 3 \nunless you are using the small \nbusiness simplified overall method. If \nyou are using the small business \nsimplified overall method, skip line 3, \nand go to Line 4.\nIf you are using the simplified \ndeduction method, enter on line 3 the \nother deductions or losses you ratably \napportion to DPGR. See Simplified \nDeduction Method, earlier in the \nGeneral Instructions, for more \ninformation about this method.\nIf you are using the section 861 \nmethod, enter on line 3 the other \ndeductions or losses you allocate or \napportion to DPGR. See Section 861 \nMethod, earlier in the General \nInstructions, for more information \nabout this method.\nOil-related production activities. If \nyou use the simplified deduction \nmethod to calculate the other \ndeductions or losses reported on \nline 3, column (b), you must make an \nadditional calculation to determine the \namount to report on line 3, column (a). \nMultiply the amount reported on line 3, \ncolumn (b), by the ratio of oil-related \nDPGR reported on line 1, column (a), \ndivided by DPGR from all activities \nreported on line 1, column (b). Enter \nthe result on line 3, column (a). Don't \nreduce the amount reported on line 3, \ncolumn (b), by this amount.\nIf you use the section 861 method, \napply the rules of section 861 to \ndetermine the amount to report on \nline 3, column (a).\nLine 4\nSmall Business Simplified \nOverall Method\nEnter the amount of cost of goods \nsold and other deductions or losses \nyou ratably apportion to DPGR using \nthe small business simplified overall \nmethod.\nOil-related production activities. If \nyou use the small business simplified \noverall method to calculate the cost of \ngoods sold and other deductions, \nexpenses, and losses reported on \nline 4, column (b), you must make an \nadditional calculation to determine the \namount to report on line 4, column (a). \nMultiply the amount reported on line 4, \ncolumn (b), by the ratio of oil-related \nDPGR reported on line 1, column (a), \ndivided by DPGR from all activities \nreported on line 1, column (b). Enter \nthe amount on line 4, column (a). \nDon't reduce the amount reported on \nline 4, column (b), by this amount.\nLine 7\nBeneficiaries of estates and trusts, \npartners, and S corporation \nshareholders report the QPAI \ndistributed from estates or trusts, and \ncertain partnerships or S corporations \non line 7. The QPAI should be \nreported to you on Schedule K-1 for \nForms 1041, 1065, or 1120S. See the \nrelated Schedule K-1 and its \ninstructions for more information.\nLine 9\nEstates and trusts must use \nRegulations section 1.652(b)-3 to \nallocate QPAI to beneficiaries if DNI is \ndistributed or required to be \ndistributed to beneficiaries. Report the \namount of QPAI allocated to \nbeneficiaries on line 9. See Estates \n-10-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"and trusts, earlier under Definitions \nand Special Rules.\nLine 10a Oil-Related \nQualified Production \nActivities Income\nAdd lines 1 through 9, column (a), to \ndetermine oil-related QPAI. If you \ndon't have oil-related QPAI, don't \ncomplete lines 1 through 9, column \n(a), and enter zero on line 10a.\nLine 11\nIncome Limitation\nIndividuals. Enter your adjusted \ngross income from line 7 of Form \n1040 figured without the DPAD.\nOlympic and Paralympic medals \nand USOC prize money. For \npurposes of figuring your DPAD, your \nadjusted gross income doesn't \ninclude the value of any medal \nawarded in, or any prize money \nreceived from the United States \nOlympic Committee on account of \ncompetition in the Olympic Games or \nParalympic Games. If line 7 of your \nForm 1040 includes these amounts, \nthen reduce your adjusted gross \nincome by them before entering it on \nline 11.\nCorporations. Enter your taxable \nincome from the applicable line of \nyour tax return (for example, line 30 of \nForm 1120) figured without the DPAD.\nMembers of EAGs. See Line 24, \nlater.\nAgricultural and horticultural co-\noperatives. Enter your taxable \nincome figured without the DPAD or \nthe deductions for patronage \ndividends, per-unit retain allocations, \nand nonpatronage distributions under \nsection 1382(b) or (c).\nEstates and trusts. Enter your \nadjusted gross income figured without \nthe DPAD. See the Instructions for \nForm 1041 to figure adjusted gross \nincome. Use the method discussed \nunder How to figure AGI for estates \nand trusts, under Line 15a–Other \nDeductions.\nUnrelated business taxable in-\ncome (UBTI). An organization taxed \non its UBTI under section 511 enters \nits UBTI from line 38 of Form 990-T \nfigured without the DPAD.\nNote. If you have extraterritorial \nincome (ETI), figure taxable income \nwithout regard to any claimed ETI \nexclusions.\nSee Regulations section 1.199-1(b)\n(1) for more information.\nLine 14a\nIf you have oil-related qualified \nproduction income, use line 14a to \ndetermine the least of the following \namounts.\n• Oil-related QPAI—line 10a,\n• QPAI—line 10b, or\n• Adjusted gross income for an \nindividual, estate, or trust (taxable \nincome for all other \ntaxpayers)—line 11.\nAll others, enter zero on line 14a.\nLine 14b Reduction for \nOil-Related Qualified \nProduction Activities \nIncome\nIf you have oil-related qualified \nproduction income, use line 14b to \nreduce your DPAD by 3% of the \namount reported on line 14a.\nAll others, enter zero on line 14b.\nLine 16\nForm W-2 Wages\nEnter your Form W-2 wages that are \nproperly allocable to DPGR \n(discussed earlier under Form W-2 \nWages). Don't include Form W-2 \nwages you must report on line 17.\nLine 17\nBeneficiaries of estates and trusts, \npartners, and S corporation \nshareholders report the Form W-2 \nwages distributed from estates or \ntrusts, and certain partnerships or S \ncorporations on line 17. The Form \nW-2 wages should be reported to you \non the Schedule K-1 for Forms 1041, \n1065, or 1120S. See the related \nSchedule K-1 and its instructions for \nmore information.\nLine 19\nEstates and trusts must use \nRegulations section 1.652(b)-3 to \nallocate Form W-2 wages to \nbeneficiaries if DNI is distributed or \nrequired to be distributed to \nbeneficiaries. Report the amount of \nthe Form W-2 wages allocated to \nbeneficiaries on line 19. See Estates \nand trusts, earlier under Definitions \nand Special Rules.\nLine 24\nExpanded Affiliated Group \nAllocation\nThese instructions explain how \nexpanded affiliated groups (EAGs) \n(defined earlier under Definitions and \nSpecial Rules) figure and report the \nDPAD. Certain members of an EAG \nmay not be required to complete the \nentire Form 8903. See How To \nReport, later.\nComputation of the EAG's \nDPAD\nIn general, the DPAD for an EAG is \ndetermined by aggregating each \nmember's taxable income or loss, \nQPAI, and Form W-2 wages. A \nmember's QPAI may be positive or \nnegative. Also, a member's taxable \nincome or loss and QPAI are \ndetermined under the member's \nmethod of accounting.\nMembers with different tax years. \nIf members of an EAG have different \ntax years, in determining the DPAD of \na member, the reporting member \nmust take into account the taxable \nincome or loss, QPAI, and Form W-2 \nwages of each group member that are \nboth:\n• Attributable to the period that the \nmember of the EAG and the reporting \nmember are both members of the \nEAG, and\n• Taken into account in a tax year \nthat ends with or within the tax year of \nthe reporting member with respect to \nwhich the DPAD is figured.\nFor an example that explains the \nabove requirements, see Regulations \nsection 1.199-7.\nNet operating losses. The net \noperating loss (NOL) of a member of \nan EAG that is used in the \ncomputation of the EAG's taxable \nincome isn't treated as an NOL \ncarryback or carryover to determine \nthe taxable income limitation in a prior \nor subsequent year for purposes of \nsection 199(a)(1)(B). See Regulations \nsection 1.199-7(b)(4) for more \ninformation.\nAllocation of the DPAD to \nMembers of the EAG\nThe EAG's DPAD is allocated among \nmembers of the EAG based on the \nratio of each member's QPAI to the \nInstructions for Form 8903 (Rev. 12-2019)\n-11-\n",
"total QPAI of the EAG. The allocation \nis made regardless of whether the \nEAG member has taxable income or \nloss or Form W-2 wages for the tax \nyear. If a member has negative QPAI, \nthat member's QPAI is treated as zero \nfor purposes of the allocation.\nConsolidated Groups\nUnder section 199, a consolidated \ngroup is treated as a single member of \nthe EAG. If all members of an EAG \nare members of the same \nconsolidated group, the DPAD of the \nconsolidated group is determined \nbased on the consolidated taxable \nincome or loss, QPAI, and Form W-2 \nwages of the group and not the \nseparate taxable income or loss, \nQPAI, and Form W-2 wages of its \nmembers. The consolidated group will \ngenerally file only one Form 8903. For \ndetails, see Regulations section \n1.199-7.\nIf an EAG includes both \nconsolidated and non-consolidated \nmembers, the consolidated (not \nseparate) taxable income or loss, \nQPAI, and Form W-2 wages of the \nconsolidated group are aggregated \nwith the taxable income or loss, QPAI, \nand Form W-2 wages of the \nnon-consolidated group members to \ndetermine the DPAD. For details, see \nRegulations section 1.199-7(d)(4).\nA consolidated group's DPAD (or \nthe DPAD allocated to a consolidated \ngroup that is a member of an EAG) is \nallocated to the members of the \nconsolidated group in proportion to \neach member's QPAI, if any, \nregardless of whether the \nconsolidated group member has:\n• Separate taxable income or loss for \nthe tax year, and\n• Form W-2 wages for the tax year.\nFor purposes of allocating the \nDPAD of a consolidated group among \nits members, any redetermination of a \ncorporation's receipts, cost of goods \nsold, or other deductions from an \nintercompany transaction described in \nRegulations section 1.1502-13(c)(1)(i) \nor (c)(4) isn't taken into account, and if \na consolidated group member has \nnegative QPAI, the member's QPAI is \ntreated as zero.\nSimplified deduction and small \nbusiness simplified overall meth-\nods. For purposes of applying the \nsimplified deduction method and the \nsmall business simplified overall \nmethod, a consolidated group \ndetermines its QPAI by reference to \nits members' DPGR, non-DPGR, cost \nof goods sold, and all other \ndeductions, expenses, or losses, \ndetermined on a consolidated basis.\nHow To Report\nAll members of an EAG are treated as \na single corporation for purposes of \ndetermining the DPAD. However, the \nDPAD is allocated to each member.\nEAG reporting member. The EAG \nchooses a reporting member from \namongst all members of the EAG with \nthe same tax year to figure the DPAD \nfor all EAG members (computing \nmembers). The reporting member \ncompletes lines 10a through 16 and \nlines 18 through 22 of the Form 8903 \nfor the group.\nThe reporting member also does \nthe following.\n1. Enters the portion of the \ndeduction allocated to the other \nmembers of the EAG (including \nnon-computing members) as a \nnegative number on line 24.\n2. Completes lines 23 and 25.\n3. Attaches a schedule showing \nhow the reporting member figured its \nown QPAI.\n4. Attaches a schedule that shows \nhow the DPAD was figured for the \ngroup and each member's name, EIN, \nand share of the DPAD.\n5. Provides a copy of the group \nDPAD computation schedule to the \nother computing members of the \ngroup.\nEAG computing member other \nthan the reporting member. An \nEAG computing member other than \nthe reporting member does the \nfollowing.\n1. Completes a separate Form \n8903, skips lines 1–22, and enters its \nshare of the group deduction on \nline 24 as a positive number.\n2. Completes lines 23 and 25.\n3. Attaches a schedule showing \nhow the computing member figured its \nown QPAI.\n4. Attaches a copy of the group \nDPAD computation schedule \nprovided by the reporting member.\nConsolidated groups. If the EAG is \ncomprised of a single consolidated \ngroup, the common parent of the \nconsolidated group completes lines 1 \nthrough 25 for the group. If the EAG is \ncomprised of more than just the \nmembers of a single consolidated \ngroup, the common parent files a \nForm 8903 for the consolidated group \nas either the reporting member or as \nan EAG member other than the \nreporting member, whichever is \nappropriate. In all events, the common \nparent attaches a schedule that \nshows the amount of the consolidated \ngroup's DPAD allocated to each \nmember of the consolidated group, \nand how the allocated amount was \ncalculated.\nLine 25\nDomestic Production \nActivities Deduction\nCombine lines 22 through 24 and \nenter the result on line 25. For Form \n1040 returns filed after tax year 2017, \ninclude the result from line 25 of Form \n8903 on Schedule 1 (Form 1040), \nline 36. For Form 1120 returns filed \nafter tax year 2017, enter the result \nfrom line 25 of Form 8903 on line 26, \nOther deductions.\nFor tax years beginning after \nDecember 31, 2017, additional \nguidance under section 199A(g) is \npending.\nAgricultural and Horticultural \nCooperatives\nReduce the amount the cooperative \ndeducts under section 1382 by the \nportion of the cooperative's DPAD \nallocated to its patrons. However, the \nentire amount on line 25, which \nincludes any amount allocated to \npatrons, is deductible under section \n199 by the cooperative. See \nAgricultural and horticultural \ncooperatives in the General \nInstructions for more information on \nthis subject.\nHow to report. Cooperatives aren't \npermitted to net patronage losses with \nnonpatronage income. Therefore, \nthey must figure taxable income from \npatronage or nonpatronage activities \nseparately on Schedule G, Form \n1120-C.\nPatronage income and \ndeductions only. Cooperatives that \nhave only patronage income and \ndeductions generally complete Form \n8903 as described earlier in the \ninstructions.\n-12-\nInstructions for Form 8903 (Rev. 12-2019)\n",
"Patronage and nonpatronage \nincome and deductions. For tax \nyears beginning before January 1, \n2018, cooperatives with both \npatronage and nonpatronage income \nor deductions must follow the \ninstructions below for completing \nForm 8903.\nReport the total amount of the \nDPAD to be claimed on Form 1120-C \non line 25 of Form 8903, and leave \nlines 1 through 24 blank. Attach to \nForm 8903 separate calculations of \nthe DPAD from patronage and \nnonpatronage activities, which \nconform to lines 1 through 24 of Form \n8903.\nEnter the DPAD from patronage \nand nonpatronage sources reported \non the attachment on line 6a, column \n(a), Patronage, and line 6a, column \n(b), Nonpatronage, respectively, of \nSchedule G, Form 1120-C.\nInstructions for Form 8903 (Rev. 12-2019)\n-13-\n",
"Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the \nUnited States. You are required to give us the information. We need it to ensure that you are complying with these laws \nand to allow us to figure and collect the right amount of tax.\nYou are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act \nunless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be \nretained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by section 6103.\nThe time needed to complete and file this form will vary depending on individual circumstances. The estimated burden \nfor individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the \nestimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers \nwho file this form is shown below:\nRecordkeeping\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n5 hr., 58 min.\nLearning about the law or the form\n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n7 hr., 33 min.\nPreparing, copying, assembling, and sending the form to the IRS\n. . . . . . . . . . . . . . . . . . . . . . . . . . .\n7 hr., 58 min.\nIf you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, \nwe would be happy to hear from you. See the instructions for the tax return with which this form is filed.\n-14-\nInstructions for Form 8903 (Rev. 12-2019)\n"
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p5341sp.pdf
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1219 Publ 5341 (SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/p5341sp.pdf
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[
"LLAVE\nLíneas\nParadas\nPreparación de la \nDeclaración de Impuestos\nProceso de la Declaración \nde Impuestos\nCobros\nOficina de\nApelaciones\nRevisión\nLitigio\nProceso\nFiltros para \nel robo de \nidentidad\nSin filtros para el \nrobo de identidad\nSe encontraron \nerrores en la \ndeclaración \nde impuestos\nSe encontraron errores \nen la declaración de \nimpuestos\nEl IRS corrige los errores \ny contabiliza la \ndeclaración de impuestos\nEl IRS corrige los\nerrores y contabiliza \nla declaración de \nimpuestos\nLa declaración \nde impuestos \nes revisada por \nel IRS para los \ncréditos \ncuestionables\nÁrea de \nRevisión\nOficina de \nRevisión\nCorrespondencia \nde Revisión\nCita programada\nConfirmación \nde la cita\nEl contribuyente \nproporciona la \ndocumentación\nEl contribuyente acepta \nlos cambios propuestos\nInforme de auditoría / \nCarta que le da al contribuyente \n30 días para responder\nIdentidad\nverificada\nDetenido el proceso \nde la declaración, \naviso emitido.\nCentros de asistencia \nal contribuyente del \nIRS (TAC)\nAcción / Decisión\nPunto de decisión\nElección\nFin / Caso cerrado\nAviso de impuestos\nProceso automatizado\nEl contribuyente\ncomienza el proceso\nde presentación\nEl contribuyente recibe \ny recopila la información \ntributaria\nEl contribuyente busca \nrespuestas a las preguntas \nsobre impuestos\nEl contribuyente prepara \nla declaración de impuestos\nEl contribuyente envía por \ncorreo su declaración de impuestos \nEl contribuyente estima \nel impuesto adeudado \ny envía el pago\nPresentar electrónicamente o \nen papel\nSÍ\nSÍ\nNO\nNO\nLa declaración de \nimpuestos es rechazada\nEl contribuyente aborda los \nerrores de e-File y presenta de \nnuevo su declaración de impuestos\nSÍ\nLa declaración de \nimpuestos pasa por filtros\nLa declaración\nde impuestos es\naceptada para \nprocesar\nEstación de \nProcesamiento\nSe verificaron \nlos salarios y \nlas retenciones\n¿Se verificaron los \ncréditos cuestionados? \n(Créditos cuestionables \nautomatizados)\nCuenta \najustada\nNO\nNO\nNO\nNO\nNO\nSÍ\nSÍ\nSÍ\nSÍ\nSÍ\nCuenta \najustada\n¿Puede el \ncontribuyente \npresentar su \ndeclaración de \nimpuestos antes \nde la fecha \nlímite?\n¿Adeuda el \ncontribuyente?\nEl contribuyente presenta \nuna prórroga para más tiempo\nEl saldo del contribuyente se evalúa \no se envía para revisión\nEl IRS categoriza el caso\ndel contribuyente\nEl contribuyente solicita la \nAudiencia de Proceso Debido \nde Cobro (CDP, por sus siglas en inglés) \n(dentro de 30 días) o la Audiencia Equivalente \n(dentro de 1 año); o el Programa de Apelaciones de Cobro \n(CAP, por sus siglas en inglés)\nCaso cerrado\nNinguna otra \nacción\nEl contribuyente \npresenta la \nSolicitud del \nPrograma de \nApelaciones de \nCobro (CAP, por sus \nsiglas en inglés)\nEl contribuyente \npresenta la Solicitud \nde Audiencia sobre \nel Proceso Debido \nde Cobro (CDP, por \nsus siglas en inglés) \ndentro de los 30 días\n del Aviso del CDP\nEl contribuyente\npresenta la Solicitud\nde Audiencia\nEquivalente dentro\nde 1 año del Aviso\ndel CDP\nConferencia con la \nOficina de \nApelaciones\nSaldo pagado\nAviso de Intención de Embargar \ny Derecho a la Audiencia de \nProceso Debido de Cobro\nSÍ\nSÍ\nAviso de Presentación de Gravamen \ny Derecho a la Audiencia de Proceso \nDebido de Cobro\nDuda sobre \nla cobrabilidad\nAdministración tributaria efectiva\n(Equidad, políticas públicas, dificultades económicas)\nRetiro del Aviso de Gravamen \npor el Impuesto Federal\nCancelación \nde gravamen\nLiberación \nde gravamen\nSubordinación\nde gravamen\nAlivio de embargo\nEmbargo erróneo\nLiberación de embargo\n(Con dificultades económicas)\nDevolución de los\ningresos de embargo\nPlan de pagos a plazos\nPlan de pagos a plazos \ncon pago parcial\nEl contribuyente está en desacuerdo \ncon la cantidad evaluada\nQuiebra (insolvencia)\nPagar los impuestos adeudados \nen su totalidad\nOfrecimiento de \ntransacción\nAlivio de gravamen\nActualmente no cobrable\nDuda en cuanto a la \nobligación tributaria\nEl formulario o la reclamación\nse examinan para su revisión\nCarta que notifica al contribuyente \nde la auditoría con solicitud de \ninformación adicional\nCarta de revisión que notifica al \ncontribuyente de la auditoría con \nsolicitud de información adicional \nEl IRS emite el \nAviso de error \nmatemático\nEl IRS emite \nel Aviso \nde error \nmatemático\nAviso de\nDeficiencia\nde 90 días\nAviso de rechazo \nde la reclamación\nOpciones \nde pago\nSÍ\nSÍ\nNO\nApelación o solicitud de \nreclamación del contribuyente\nCarta de 30 días sobre \nprotestas del contribuyente\nPara obtener más información visite TaxpayerAdvocate.irs.gov\nDirección de línea\nProceso de la declaración \nde impuestos\nCobros\nPreparación de \nimpuestos\nOficina de Apelaciones\nLitigio\nCobro privado de \ndeudas\nRevisión\nEstaciones de Salidas\nConferencia en \npersona o \ntelefónica\nEl contribuyente apela la \ndenegación de la reclamación \nde reembolso\nLa Oficina de \nApelaciones considera \nla reclamación de \nreembolso\nConferencia en\npersona o\ntelefónica\nLa Oficina de Apelaciones considera: \n• ¿Se siguieron todos los requisitos \n administrativos / legales?\n• Alternativas de cobro\n• Alivio del cónyuge inocente\n• Prueba de equilibrio: Si el interés del gobierno \n en recaudar eficientemente los impuestos no \n es más intrusivo de lo necesario \nAppeals Agrees\nWith Taxpayer\nLa Oficina de Apelaciones \nestá de acuerdo con \nel contribuyente\nLa Oficina de Apelaciones\nestá en desacuerdo con \nel contribuyente\nEl contribuyente presenta la petición \ndentro de los 30 días de la Carta \nde Determinación sobre el \nProceso Debido de Cobro \n(CDP, por sus siglas en inglés) \nLa Oficina de Apelaciones \nconsidera el riesgo de \nacudir a los tribunales \n(riesgos de litigio)\nAviso de \nrechazo de la \nreclamación de \nreembolso o 6 \nmeses desde la \npresentación de la \nreclamación de \nreembolso\nCobro Privado \nde deudas\nSÍ\nSÍ\nSÍ\nSÍ\nSÍ\nNO\nNO\nAviso de impuestos \nadeudados y \ndemanda de pago\nEl contribuyente \nsolicita el reembolso\nEl IRS envía Avisos de \ncobro a los contribuyentes\nNO\nNO\nNO\nEl contribuyente \nadeuda impuestos\nEstación de Evaluación\nEstación de Clasificación \nEstación de Apelación\nEstación de Alternativas de Cobro\nEstación de Examinación\nEstación de Litigios\nLlegadas a la Estación \nEstación de Alternativas de Revisión\n¿Paga el contribuyente \nel saldo adeudado?\nSÍ\nEl contribuyente \nestá en desacuerdo con \nla cantidad evaluada\nAviso de Presentación\nGravamen por \nel Impuesto Federal \n(en registros públicos)\nEstación de Cobros\nEl contribuyente solicita \nel Programa de Apelaciones \nde Cobro\nEmbargo / Incautación \nde activos\nAlternativas de cobro del contribuyente\nEl contribuyente \nsolicita la conferencia \ncon la Oficina de \nApelaciones\nEl contribuyente solicita\noportunamente la conferencia \ncon la Oficina de Apelaciones\nConsideración \nde la Oficina de \nApelaciones\nCaso \niniciado\nLínea telefónica \nsobre la Ley de \nImpuestos del IRS\nIRS.gov/espanol\nFormularios y \npublicaciones \ndel IRS\nPreparadores de \nlas declaraciones \nde impuestos\nSoftware \ntributario\nPreparador de declaraciones \nde impuestos remunerado\nSoftware tributario comercial\nPresentación gratuita / \nFormularios rellenables para la \npresentación gratuita \nAsistencia Voluntaria al \nContribuyente con los Impuestos \nsobre los Ingresos / \nAsesoramiento Tributario para \nlos Ancianos\nDeterminación de \nla Oficina de \nApelaciones\nContacto inicial \ncombinado con la carta \nde 30 días y el informe\nAcciones de cobro\nEl contribuyente \npresenta la petición \nante el Tribunal \nTributario\nApelación \nprevia del IRS\nEl contribuyente \npresenta la \nsolicitud de \ndeclaración de \nquiebra ante el \nTribunal Federal\nDecisión del \nTribunal Tributario\nNO\nEl contribuyente presenta \nelectrónicamente su declaración\nde impuestos (e-File) \nEl contribuyente llama al IRS \npara hablar sobre las alternativas de cobro\nEl contribuyente presenta su \ndeclaración de impuestos \nen papel\nSaldo adeudado de la \ndeclaración de impuestos\nAviso de Deficiencia de 90 días\nAviso que le da al contribuyente 90 días\n para presentar una solicitud ante\nel Tribunal Tributario\n(150 días si está fuera de los Estados Unidos)\nAviso de Error Matemático\nEl IRS contabiliza \nla declaración de \nimpuestos\nEl IRS contabiliza la \ndeclaración de impuestos\nReclamación de \nreembolso\nReembolso, si lo \nhubiera, emitido al \ncontribuyente\nCompensaciones de \nla Oficina de Servicio \nFiscal (BFS) para las \ndeudas no tributarias\nCompensaciones \ndel IRS para deudas \ndel IRS\nSaldo \nadeudado al \nIRS por el \ncontribuyente\nSin reembolso o \nsin saldo adeudado\nReembolso adeudado \nal contribuyente\nOficina de\nCobros\nEjecución de \ngravamen\nAcción para hacer\ncumplir el embargo\nEl gobierno \npresenta demanda \nante el Tribunal\nReembolso \nde otro \naño \naplicado \na la deuda\nCaso en espera \nde asignación \n(en la cola)\nCaso no \nasignado \n(archivado)\nSistema \nAutomatizado \nde Cobro\nSÍ\nNO\nReducir la \nevaluación \na juicio\nEjecución hipotecaria \nde gravamen tributario\nSÍ\nNO\nAviso de Deficiencia \nde 90 días\nAviso de \nDeficiencia \nde 90 días\nPresentados por \nel contribuyente\nDecisión del \nTribunal Federal\nEl contribuyente \npresenta una \nqueja ante el \nTribunal\nEl contribuyente prevalece \ny el gobierno no apela\nEl contribuyente \nprevalece\nNO\nEl contribuyente adeuda \nimpuestos y no apela\nApelaciones del contribuyente\no del gobierno\nTribunal Federal \nde Apelaciones\nDecisión del Tribunal\nFederal de Apelaciones\nTribunal Supremo \nde los Estados Unidos\nApelaciones del contribuyente \no del gobierno\nEl contribuyente \nadeuda impuestos\nEl contribuyente\nestá de acuerdo\ncon la Oficina de\nApelaciones\nNingún acuerdo o\nacuerdo parcial\nLiquidación con reservas\n(Acuerdo parcial con\nproblemas no resueltos)\nLa Oficina de Apelaciones\nestá de acuerdo con el contribuyente\nImpuesto evaluado\nImpuesto evaluado\nAviso de Deficiencia \nde 90 días\nLa Oficina de\nApelaciones está de\nacuerdo con el\ncontribuyente\nSÍ\nNO\nNO\nNO\nNO\nAviso de rechazo \nparcial o total de la \nreclamación\nEl contribuyente \npresenta una queja \nante el Tribunal\nLa Oficina de Apelaciones\nemite la Carta de Audiencia \nEquivalente\nLa Oficina de Apelaciones \nestá en desacuerdo con \nel contribuyente\nLa Oficina de Apelaciones \nemite la Carta de \nDeterminación sobre el \nProceso Debido de Cobro\nSÍ\nNO\nAviso de Deficiencia\nde 90 días\nEl contribuyente\npeticiona ante el\nTribunal Tributario\nEstación de\nEvaluación\nEstación de \nLitigio\nSÍ\nSÍ\nNO\nNO\nAviso de Error\nMatemático\nEl contribuyente\nestá de acuerdo\ncon el ajuste\nEliminación\ndel ajuste\nEl contribuyente\nsolicita eliminación\ndel ajuste dentro\nde 60 Días\nEl ajuste\npermanece\nen su lugar\nEl ajuste\npermanece\nen su lugar\nEstación\nde Revisión\nCarta 5157 o \nCarta 3324\nAviso / carta emitida \nen esta Estación \nCarta 12C\nCarta 5216(C/SP)\nCP712\nCarta 12C\nCP711\nCarta \n4800C\nCarta 2202 o\nCarta 2205-A\nCarta 525 o \nCarta 915\nCarta 3219 o \nCarta 531\nCarta 3402\nCarta 692 o \nCarta 1020 (DO)\nCarta \n3219C\nCP49\nCP749\nCarta 1058(SP) o \nCarta 3172(SP)\nCP523 or \nCP521\nCarta 1058(SP) o \nCarta 3172(SP)\nCarta 970\nCarta 105\n(C/SP)\nCP714\nCarta 5972C o \nCarta 16\nCP604 o \nCP604B o \nCP603 o \nCP601\nCarta 965 o \nCarta 966 o \nCarta 5248\nCarta 1278 o \nCarta 2682\nCarta 4837\nCarta 5100\nCarta 3171, Carta 3886, Carta 3177, \nCarta 4052 / 2272(C/SP), \nCarta 5259 / 2272(C/SP), Carta 2975, \nCP523, Carta 5603, Carta 4205, \nCarta 4027, Carta 4711, Carta 3975(C/SP), \nCarta 1058(SP)\nCarta 3219(SP) o \nCarta 5088 o \nCarta 3288 o \nCarta 3193\nOfrecimiento de \ntransacción \n(Duda en cuanto a la\nresponsabilidad \ntributaria)\nImpuesto \npagado\nReclamación de \nCónyuge Inocente\nImpuesto no \npagado\nEl contribuyente está en desacuerdo con la evaluación\nReclamación de \nCónyuge Inocente \nReconsideración\nde Auditoría\nReclamación de \nreembolso\nCarta 894\nFormulario 12257\nCarta 1277\nFormulario 12256\nCarta 3193\nCarta 3210\nCarta 913\nCarta 913\nCarta\n566S\nPetición del contribuyente \npresentada oportunamente\nNO\nSÍ\nEl caso vuelve \nnuevamente \nal IRS o el IRS \nretira el caso\nPlan de pagos \na plazos\nPago \ncompleto\nSin cambios en \nlos impuestos\n(con o sin ajustes)\nSÍ\nNO\nNO\nLa Hoja de Ruta del Contribuyente\nUna ilustración del sistema tributario moderno de los Estados Unidos\nCP05A\nEl IRS acepta completamente \nla documentación del contribuyente\nNO\nEl contribuyente \nproporciona \ndocumentación que \nel IRS acepta total o \nparcialmente\nSÍ\nReclamaciones \ngenerales que \npuede traer el \ncontribuyente\nLos ejemplos \nincluyen: \n• Reclamación del \n Cónyuge Inocente\n• Revisión de la \n determinación \n del Proceso \n Debido de Cobro\n• Solicitud de \n reducción de\n intereses\n• Costos \n administrativos\nCarta \n566B\nSÍ\nEl siguiente mapa ilustra, a un nivel muy alto, las etapas del viaje de un contribuyente, desde obtener respuestas a las preguntas \nsobre la ley tributaria, todo el camino a través de las auditorías, apelaciones, cobros y litigios. Muestra la complejidad de la \nadministración tributaria, con sus conexiones y solapamientos y repeticiones entre las etapas. Como se puede ver en sus \nnumerosos giros y vueltas, el camino hacia el cumplimiento no siempre es fácil de navegar. Pero esperamos que este mapa ayude \na los contribuyentes a encontrar su camino. Un proyecto del Servicio del Defensor del Contribuyente.\nv4\n",
"LLAVE\nLíneas\nParadas\nPreparación de la \nDeclaración de Impuestos\nProceso de la Declaración \nde Impuestos\nCobros\nRevisión\nLitigio\nProceso\nFiltros para \nel robo de \nidentidad\nSin filtros para el \nrobo de identidad\nSe encontraron \nerrores en la \ndeclaración \nde impuestos\nSe encontraron errores \nen la declaración de \nimpuestos\nEl IRS corrige los errores \ny contabiliza la \ndeclaración de impuestos\nEl IRS corrige los\nerrores y contabiliza \nla declaración de \nimpuestos\nLa declaración \nde impuestos \nes revisada por \nel IRS para los \ncréditos \ncuestionables\nÁrea de \nRevisión\nOficina de \nRevisión\nCorrespondencia \nde Revisión\nEl contribuyente \nproporciona la \ndocumentación\nEl contribuyente acepta \nlos cambios propuestos\nInforme de auditoría / \nCarta que le da al contribuyente \n30 días para responder\nIdentidad\nverificada\nDetenido el proceso \nde la declaración, \naviso emitido.\nCentros de asistencia \nal contribuyente del \nIRS (TAC)\nAcción / Decisión\nPunto de decisión\nElección\nFin / Caso cerrado\nAviso de impuestos\nProceso automatizado\nEl contribuyente\ncomienza el proceso\nde presentación\nEl contribuyente recibe \ny recopila la información \ntributaria\nEl contribuyente busca \nrespuestas a las preguntas \nsobre impuestos\nEl contribuyente prepara \nla declaración de impuestos\nEl contribuyente envía por \ncorreo su declaración de impuestos \nEl contribuyente estima \nel impuesto adeudado \ny envía el pago\nPresentar electrónicamente o \nen papel\nSÍ\nSÍ\nNO\nNO\nLa declaración de \nimpuestos es rechazada\nEl contribuyente aborda los \nerrores de e-File y presenta de \nnuevo su declaración de impuestos\nSÍ\nLa declaración de \nimpuestos pasa por filtros\nLa declaración\nde impuestos es\naceptada para \nprocesar\nEstación de \nProcesamiento\nSe verificaron \nlos salarios y \nlas retenciones\n¿Se verificaron los \ncréditos cuestionados? \n(Créditos cuestionables \nautomatizados)\nCuenta \najustada\nNO\nNO\nNO\nNO\nNO\nSÍ\nSÍ\nSÍ\nSÍ\nSÍ\nCuenta \najustada\n¿Puede el \ncontribuyente \npresentar su \ndeclaración de \nimpuestos antes \nde la fecha \nlímite?\n¿Adeuda el \ncontribuyente?\nEl contribuyente presenta \nuna prórroga para más tiempo\nEl saldo del contribuyente se evalúa \no se envía para revisión\nEl IRS categoriza el caso\ndel contribuyente\nEl contribuyente solicita la \nAudiencia de Proceso Debido \nde Cobro (CDP, por sus siglas en inglés) \n(dentro de 30 días) o la Audiencia Equivalente \n(dentro de 1 año); o el Programa de Apelaciones de Cobro \n(CAP, por sus siglas en inglés)\nCaso cerrado\nNinguna otra \nacción\nSaldo pagado\nAviso de Intención de Embargar \ny Derecho a la Audiencia de \nProceso Debido de Cobro\nSÍ\nSÍ\nAviso de Presentación de Gravamen \ny Derecho a la Audiencia de Proceso \nDebido de Cobro\nEl formulario o la reclamación\nse examinan para su revisión\nCarta de revisión que notifica al \ncontribuyente de la auditoría con \nsolicitud de información adicional \nEl IRS emite el \nAviso de error \nmatemático\nEl IRS emite \nel Aviso \nde error \nmatemático\nAviso de\nDeficiencia\nde 90 días\nAviso de rechazo \nde la reclamación\nOpciones \nde pago\nSÍ\nNO\nPara obtener más información visite TaxpayerAdvocate.irs.gov\nDirección de línea\nProceso de la declaración \nde impuestos\nCobros\nPreparación de \nimpuestos\nOficina de Apelaciones\nLitigio\nCobro privado de \ndeudas\nRevisión\nEstaciones de Salidas\nCobro Privado \nde deudas\nAviso de impuestos \nadeudados y \ndemanda de pago\nEl contribuyente \nsolicita el reembolso\nEl IRS envía Avisos de \ncobro a los contribuyentes\nNO\nNO\nNO\nEstación de Evaluación\nEstación de Clasificación \nEstación de Alternativas de Cobro\nEstación de Examinación\nEstación de Litigios\nLlegadas a la Estación \nEstación de Alternativas de \n¿Paga el contribuyente \nel saldo adeudado?\nSÍ\nEl contribuyente \nestá en desacuerdo con \nla cantidad evaluada\nAviso de Presentación\nGravamen por \nel Impuesto Federal \n(en registros públicos)\nAlternativas de cobro del contribuyente\nEl contribuyente solicita\noportunamente la conferencia \ncon la Oficina de Apelaciones\nLínea telefónica \nsobre la Ley de \nImpuestos del IRS\nIRS.gov/espanol\nFormularios y \npublicaciones \ndel IRS\nPreparadores de \nlas declaraciones \nde impuestos\nSoftware \ntributario\nPreparador de declaraciones \nde impuestos remunerado\nSoftware tributario comercial\nPresentación gratuita / \nFormularios rellenables para la \npresentación gratuita \nAsistencia Voluntaria al \nContribuyente con los Impuestos \nsobre los Ingresos / \nAsesoramiento Tributario para \nlos Ancianos\nContacto inicial \ncombinado con la carta \nde 30 días y el informe\nNO\nEl contribuyente presenta \nelectrónicamente su declaración\nde impuestos (e-File) \nEl contribuyente llama al IRS \npara hablar sobre las alternativas de cobro\nEl contribuyente presenta su \ndeclaración de impuestos \nen papel\nSaldo adeudado de la \ndeclaración de impuestos\nAviso de Deficiencia de 90 días\nAviso que le da al contribuyente 90 días\n para presentar una solicitud ante\nel Tribunal Tributario\n(150 días si está fuera de los Estados Unidos)\nEl IRS contabiliza \nla declaración de \nimpuestos\nEl IRS contabiliza la \ndeclaración de impuestos\nReclamación de \nreembolso\nReembolso, si lo \nhubiera, emitido al \ncontribuyente\nCompensaciones de \nla Oficina de Servicio \nFiscal (BFS) para las \ndeudas no tributarias\nCompensaciones \ndel IRS para deudas \ndel IRS\nSaldo \nadeudado al \nIRS por el \ncontribuyente\nSin reembolso o \nsin saldo adeudado\nReembolso adeudado \nal contribuyente\nOficina de\nCobros\nEjecución de\nAcción para hacer\nEl gobierno \npresenta demanda \nante el Tribunal\nReembolso \nde otro \naño \naplicado \na la deuda\nCaso en espera \nde asignación \n(en la cola)\nCaso no \nasignado \n(archivado)\nSistema \nAutomatizado \nde Cobro\nReducir la \nevaluación \na juicio\nEjecución hipotecaria \nde gravamen tributario\nSÍ\nNO\nAviso de Deficiencia \nde 90 días\nPresentados por \nl\nib\nAviso / carta emitida \nen esta Estación \nCarta 12C\nCarta 5216(C/SP)\nCP712\nCarta 12C\nCP711\nCarta \n4800C\nCarta 525 o \nCarta 915\nCarta 3219 o \nCarta 531\nCarta 692 o \nCarta 1020 (DO)\nCarta \n3219C\nCP49\nCP749\nCarta 1058(SP) o \nCarta 3172(SP)\nCarta 1058(SP) o \nCarta 3172(SP)\nCP714\nCP604 o \nCP604B o \nCP603 o \nCP601\nImpuesto \npagado\nImpuesto no \npagado\nEl contribuyente está en desacuerdo con la e\nReclamación de \nCónyuge Inocente \nReconsideración\nde Auditoría\nReclamación de \nreembolso\nCarta\n566S\nNO\nEl caso vuelve \nnuevamente \nal IRS o el IRS \nretira el caso\nPlan de pagos \na plazos\nPago \ncompleto\nSin cambios en\nlos impuestos\n(con o sin ajuste\nSÍ\nN\nLa Hoja de Ruta del Contribuyente\nUna ilustración del sistema tributario moderno de los Estados Unidos\nCP05A\nEl IRS acepta completamente \nla documentación del contribuyente\nNO\nEl contribuyente \nproporciona \ndocumentación que \nel IRS acepta total o \nparcialmente\nSÍ\nCarta \n566B\nEl siguiente mapa ilustra, a un nivel muy alto, las etapas del viaje de un contribuyente, desde obtener respuestas a las preguntas \nsobre la ley tributaria, todo el camino a través de las auditorías, apelaciones, cobros y litigios. Muestra la complejidad de la \nadministración tributaria, con sus conexiones y solapamientos y repeticiones entre las etapas. Como se puede ver en sus \nnumerosos giros y vueltas, el camino hacia el cumplimiento no siempre es fácil de navegar. Pero esperamos que este mapa ayude \na los contribuyentes a encontrar su camino. Un proyecto del Servicio del Defensor del Contribuyente.\nDepartment of the Treasury Internal Revenue Service www.IRS.gov\nYourVoiceAtIRS\nYourVoiceAtIRS\nTASNTA\ntaxpayer-advocate-service\nAviso de Deficiencia de 90 días\nCarta emitida al contribuyente que proporciona 90 días para \npresentar la petición ante el Tribunal Tributario de los EE. \nUU., para su revisión.\nCuenta ajustada\nAjuste realizado a una cuenta, aumentando o disminuyendo \nlos impuestos, multas o intereses.\nAcción para hacer cumplir el embargo\nDemanda presentada por el IRS para exhortar a una \npersona o empresa a entregar los ingresos de embargo o \nser considerado responsable de los fondos solicitados.\nReclamación acordada\nLa Oficina de Apelaciones o la Oficina de Revisión acepta \nuna reclamación de reembolso del contribuyente.\nEstación de alternativas: Alternativas \nde Cobro del Contribuyente\nOpciones para resolver las cuentas con saldos vencidos y \ndeclaraciones de impuestos morosas.\nEstación de alternativas: El \ncontribuyente está en desacuerdo con \nel monto evaluado\nUn contribuyente está en desacuerdo con los cambios de \nuna auditoría o la declaración de impuestos creada por el \nIRS.\nLa Oficina de Apelaciones está de \nacuerdo con el contribuyente\nCuando la Oficina de Apelaciones y el contribuyente están \nde acuerdo sobre el tratamiento de un elemento.\nConferencia con la Oficina de \nApelaciones \nConferencia con un empleado técnico de la Oficina de \nApelaciones para hablar sobre las acciones del IRS para \nresolver la obligación tributaria.\nLa Oficina de Apelaciones está en \ndesacuerdo con el contribuyente\nUn contribuyente impugna la cantidad que el IRS ha \ndeterminado que es adeudada.\nConfirmación de la cita\nCarta que confirma la hora y el lugar de la cita de revisión y \nlos documentos necesarios.\nLa Oficina de Apelaciones considera la \nreclamación de reembolso\nReclamación presentada por un contribuyente de una \ndeclaración enmendada que muestra un pago en exceso de \nimpuestos.\nLa Oficina de Apelaciones considera \nel riesgo de acudir a los tribunales \n(riesgos de litigio)\nConsideración de riesgos para el gobierno al considerar una \ndeterminación de impuestos.\nDeterminación de la Oficina de \nApelaciones \nIncluye la verificación de leyes o procedimientos \nadministrativos, cuestiones planteadas por el contribuyente \ny la prueba de equilibrio.\nLa Oficina de Apelaciones emite la \nCarta de Determinación sobre el \nDebido Proceso de Cobro\nLa oportunidad de un contribuyente de impugnar la \ndeterminación de la Oficina de Apelaciones ante el tribunal \nde impuestos.\nLa Oficina de Apelaciones emite la \nCarta de Audiencia Equivalente\nInforma de la decisión de la Oficina de Apelaciones; no \ngarantiza la revisión judicial.\nEstación de apelaciones: El \ncontribuyente presenta la Solicitud de \nApelación o de Reclamación\nUn contribuyente solicita la audiencia sobre el Proceso \nDebido de Cobro (CDP, por sus siglas en inglés) en respuesta \na un gravamen o un aviso de intención de embargar \npresentados públicamente por el IRS \nCita programada\nCarta informando a los contribuyentes que sus \ndeclaraciones están bajo auditoría, programando una cita \nde auditoría y solicitando documentación.\nEstación de evaluación: Se evalúa el \nsaldo de los contribuyentes\nEl IRS evalúa todo impuesto, multas e intereses aplicables \nadeudados por el contribuyente.\nInforme de auditoría - Carta que da al \ncontribuyente 30 días para responder\nInformación del IRS explicando los ajustes propuestos \npor Revisión; proporciona al contribuyente 30 días para \nresponder.\nSistema Automatizado de Cobro (ACS, \npor sus siglas en inglés)\nDepartamento de cobros basado en el sitio de llamadas \nque emite los avisos y responde las consultas de los \ncontribuyentes para resolver las cuentas con saldos \npendientes.\nSaldo adeudado en la cuenta\nLa cantidad pendiente que un contribuyente adeuda en una \ncuenta.\nSaldo adeudado al IRS por el \ncontribuyente\nUna declaración de impuestos cumple con todos los \nrequisitos y se acepta para su tramitación.\nQuiebra / Insolvencia\nUn contribuyente presenta una petición ante el tribunal de \nbancarrota. La insolvencia es la incapacidad de pagar una \ndeuda cuando se vence.\nCaso cerrado\nEl impuesto pagado en su totalidad o acuerdo realizado \npara satisfacer un saldo adeudado.\nCaso no asignado (archivado)\nLos casos no asignados actualmente, pero en cualquier \nmomento podrían asignarse al Sistema de cobro \nautomatizado (ACS, por sus siglas en inglés), al Cobro de la \nOficina o al Cobro Privado de deudas (PDC, por sus siglas \nen inglés).\nCaso en espera de asignación (puesto \nen la cola)\nCasos en espera de ser asignados a ACS o a la Oficina de \nCobros.\nPrograma de Apelaciones de Cobro \n(CAP, por sus siglas en inglés)\nDisponible para casos de cobro, un contribuyente puede \nsolicitar la conferencia con la Oficina de Apelaciones antes o \ndespués de que se tome la medida de cobro, pero no puede \nacudir al tribunal de impuestos si no está de acuerdo con la \ndecisión de la Oficina de Apelaciones.\nEstación de cobro: Acciones de cobro\nEl IRS trabaja activamente para cobrar el saldo de impuestos \nvencido de los contribuyentes y obtener las declaraciones de \nimpuestos atrasadas de aňos anteriores.\nCorrespondencia sobre la Revisión\nEl IRS realiza la auditoría a través del correo.\nActualmente no cobrable\nUn contribuyente y el IRS están de acuerdo en que se \nadeuda el impuesto, pero un contribuyente no puede pagar \ndebido a su situación financiera actual.\nAudiencia Equivalente (solicitud \ndentro de 1 año)\nDisponible para los casos de cobros; el contribuyente no \npuede acudir al tribunal tributario si está en desacuerdo con \nla decisión de la Oficina de Apelaciones.\nRevisión\nLa función de cumplimiento dentro del IRS que realiza \nauditorías de las declaraciones de los contribuyentes y \npropone ajustes a las correcciones.\nCarta de Revisión que notifica al \ncontribuyente de la auditoría con \nsolicitud de información adicional\nCarta informando al contribuyente que su declaración está \nbajo auditoría y se necesita documentación adicional.\nConferencia en persona / Telefónica\nConferencia con la Oficina de Apelaciones por teléfono o \nen persona.\nTribunal Federal de Apelaciones\nEl Tribunal de Apelaciones de los Estados Unidos que tiene \njurisdicción para revisar las decisiones de otros tribunales.\nOficina de Cobro\nUn Oficial de Cobro de Impuestos visita personalmente \na un contribuyente para resolver el saldo adeudado y la \nmorosidad de las cuentas.\nOficina de Revisión\nEl IRS va a la residencia o empresa del contribuyente para \nrealizar la auditoría.\nEjecución hipotecaria de gravamen \ntributario\nUn oficial de Cobro de Impuestos presenta una demanda \npara hacer cumplir un gravamen por el impuesto federal \npara el cobro de activos / propiedades específicos.\nPresentación gratuita / Formularios \nrellenables para la presentación \ngratuita\nSoftware utilizado por los contribuyentes para preparar y \npresentar las declaraciones de impuestos individuales de \nforma gratuita.\nReclamaciones generales que un \ncontribuyente puede traer\nUn contribuyente puede solicitar una revisión judicial de las \nacciones del IRS que no sean cuando el IRS haya impuesto \nuna deficiencia.\nCómo abordar un embargo\nEl IRS puede considerar liberar un gravamen si fue \nemitido por error o crea una dificultad económica para el \ncontribuyente.\nFormularios de declaraciones de \nimpuestos del IRS \nUn contribuyente ha aprobado la autenticación y la \ndeclaración se contabiliza en el Archivo maestro.\nContacto inicial combinado con \nla carta de 30 días e informe de \nauditoría\nCarta informando al contribuyente que su declaración \nde impuestos está bajo auditoría y le proporciona un \ninforme de auditoría que ajusta los elementos en cuestión. \nEl contribuyente tiene 30 días para proporcionar los \ndocumentos de respaldo y solicitar una apelación.\nPlan de pagos a plazos\nOpción para un plan de pago si un contribuyente no puede \npagar los impuestos en su totalidad cuando se vencen; el \nplan es acordado por el IRS.\nFormularios y publicaciones del IRS\nRecursos en línea gratuitos disponibles para los \ncontribuyentes para preparar sus declaraciones de \nimpuestos.\nEl IRS envía Avisos de Cobro a los \ncontribuyentes\nUn contribuyente recibe avisos de saldo adeudado, solicitud \nde pago e intención del IRS de embargar si no se recibe el \npago.\nLínea telefónica sobre la Ley de \nImpuestos del IRS\nLos contribuyentes pueden llamar a la línea telefónica del \nIRS para hacer preguntas generales o sobre la ley tributaria \ndurante la temporada de presentación.\nCentros de asistencia al contribuyente \ndel IRS (TAC, por sus siglas en inglés)\nCentros para proporcionar asistencia tributaria en persona \na un contribuyente durante la temporada de presentación \nque requiera una cita.\nIRS.gov/espanol\nSitio web oficial del IRS que proporciona una variedad de \ninformación, formularios, hojas de trabajo y enlaces sobre \ntodos los temas relacionados con los impuestos.\nLiberación de embargo (con \ndificultades económicas)\nUn gravamen que se libera porque impedía que el \ncontribuyente cubriera los gastos básicos y razonables de \nvida.\nEmbargo / Incautación de activos\nProceso iniciado por el IRS para obtener ingresos y/u otros \nactivos de un contribuyente para aplicar a una obligación \ntributaria.\nAlivio de gravámenes\nBajo ciertas condiciones, los contribuyentes pueden solicitar \nel retiro, subordinación o liberación de un gravamen.\nLitigio\nEl proceso de resolución de disputas presentando o \nrespondiendo a una queja a través del sistema de los \ntribunales tributarios.\nSin acuerdo / Acuerdo parcial\nSolo específicos elementos son acordados y tramitados \n\npor \nla Oficina de Apelaciones. Se emite una carta de 90 días \nsobre los elementos en desacuerdo.\nSin cambios en los impuestos (con o \nsin ajustes)\nEl IRS completa una revisión de la declaración de un \ncontribuyente y acepta o ajusta la cuenta, sin modificar el \nmonto del impuesto.\nAviso de Presentación de Gravamen \npor el Impuesto Federal (en los \nregistros públicos)\nDocumento presentado ante la oficina de registro local \nque identifica las obligaciones tributarias adeudadas por \nel contribuyente; establece los derechos prioritarios del \ngobierno contra ciertos otros acreedores.\nAviso de Intención de Embargar \ny Derecho a la Audiencia sobre el \nProceso Debido de Cobro\nUn aviso enviado a un contribuyente indicando que los \nimpuestos vencidos no se han pagado y el IRS tiene la \nintención de embargar/confiscar los ingresos y/u otros \nactivos.\nAviso de Presentación de Gravamen \npor el Impuesto Federal y Derecho a \nla Audiencia sobre el Proceso Debido \nde Cobro\nUn aviso enviado a un contribuyente indicando que el IRS \npresentó públicamente un aviso de gravamen tributario por \nlos impuestos no pagados.\nAviso de impuestos adeudados y \ndemanda de pago\nEl contribuyente recibe un aviso de requerimiento de pago \nporque adeuda dinero en impuestos sin pagar.\nOfrecimiento de transacción\nUn acuerdo entre un contribuyente y el IRS para que un \ncontribuyente pague menos del monto total adeudado.\nOficina de Revisión\nUn contribuyente entra en una oficina del IRS para la \nauditoría.\nPreparador de declaraciones de \nimpuestos remunerado \nUna persona contratada y pagada por los contribuyentes \npara preparar sus declaraciones de impuestos.\nPlan de pagos a plazos parcial\nUn acuerdo entre un contribuyente y el IRS para realizar \npagos sobre su responsabilidad tributaria con base en \nsu situación financiera actual que no pagaría el saldo por \ncompleto.\nPagar los impuestos adeudados en su \ntotalidad\nUn contribuyente paga el impuesto federal adeudado, en \nsu totalidad.\nOpciones de pago (revisión)\nEl IRS generalmente hablará sobre las opciones de pago \ncon los contribuyentes antes de la evaluación del impuesto \nadicional.\nCobro privado de deudas (PDC, por \nsus siglas en inglés)\nEl IRS tiene contratos con agencias privadas de cobro, \npara ayudar a cobrar ciertas deudas tributarias federales \nvencidas.\nReducir la evaluación a juicio\nUna demanda para obtener una sentencia judicial, \nprorrogando el plazo que el IRS puede cobrar de los activos \nde un contribuyente.\nReembolso de otro año aplicado a la \ndeuda tributaria\nEl IRS aplicó todo o parte del reembolso del contribuyente \npara pagar otra deuda tributaria.\nDeclaración de impuestos enviada \npor correo\nSe completa una declaración de impuestos y se envía por \ncorreo al IRS para su procesamiento.\nEstación de revisión: La declaración \no la reclamación se examinan para \nsu revisión\nLas declaraciones de impuestos se comparan con \ndeclaraciones similares, se revisan las partidas, problemas o \ntransacciones bajo la auditoría.\nEstación de clasificación: El IRS \nclasifica el caso del contribuyente\nEl IRS clasifica los casos de los contribuyentes con impuestos \nadeudados y los envía a ACS, a la Oficina de Cobros, los \ncoloca en la cola o los archiva.\nLey de Prescripción en las \nevaluaciones\nPor lo general, el gobierno debe evaluar los impuestos \ndentro de un cierto período, normalmente tres años \ndespués de la presentación de una declaración de \nimpuestos.\nEl contribuyente estima el impuesto \nadeudado y envía el pago\nLos contribuyentes estiman lo que adeudan al presentar \nuna prórroga y enviar el pago.\nDecisión del tribunal tributario\nUna vez que el tribunal determina sus resultados y \nconclusiones, la decisión se convierte en final 90 días \ndespués de presentada, a menos que haya una apelación.\nPreparadores de declaraciones de \nimpuestos\nUna persona contratada por los contribuyentes para \npreparar y a veces presentar sus impuestos.\nSoftware tributario\nSoftware utilizado por los contribuyentes para preparar y \npresentar las declaraciones de impuestos, ya sea por correo \no electrónicamente.\nEl contribuyente acepta los cambios \npropuestos\nUn contribuyente ha firmado el informe sobre la revisión en \nconformidad con los cambios de la revisión propuestos.\nEl contribuyente llama al IRS para \nhablar sobre las alternativas de cobro\nUn contribuyente y el IRS hablan sobre las opciones para \npagar una deuda tributaria.\nEl contribuyente reclama el \nreembolso\nUn contribuyente busca un reembolso de los impuestos que \nse han pagado en exceso.\nEl contribuyente está en desacuerdo \ncon la cantidad evaluada\nSe envía un aviso al contribuyente sobre los cambios en \nuna declaración de impuestos debido a una auditoría o una \ndeclaración de impuestos creada por el IRS con la que el \ncontribuyente está en desacuerdo.\nEl contribuyente no solicita la \naudiencia ante el Tribunal Tributario\nUn contribuyente no ha presentado una solicitud ante el \nTribunal Tributario de los EE. UU. en disputa de los ajustes \npropuestos por el IRS a su declaración de impuestos.\nEl contribuyente presenta solicitud \nde Audiencia del Tribunal de Debido \ncobro dentro de los 30 días del Aviso \ndel CDP\nDisponible para casos de cobro, los contribuyentes pueden \npresentar una solicitud ante el Tribunal Tributario si están \nen desacuerdo con la decisión de la Oficina de Apelaciones.\nEl contribuyente presenta prórroga \ndel plazo\nSi los contribuyentes no pueden presentar su declaración \nde impuestos antes de la fecha de vencimiento, pueden \nsolicitar una prórroga para presentarla en un formulario de \nimpuestos del IRS.\nEl contribuyente presenta \noportunamente la reclamacion del \ncónyuge inocente\nUn contribuyente presenta oportunamente una solicitud \npara el alivio del impuesto adicional adeudado debido a \nque su cónyuge o excónyuge no informó correctamente los \ningresos u otra información de la declaracion de impuestos.\nEl contribuyente presenta la petición \ndentro de los 30 días de la Carta de \nDeterminación del Proceso Debido de \nCobro (CDP, por sus siglas en inglés)\nAcción que permite al contribuyente la oportunidad de \napelar la acción de cobro y continuar ante el Tribunal \nTributario si el contribuyente está en desacuerdo con la \ndecisión de la Oficina de Apelaciones.\nEl contribuyente paga los impuestos\nLa revisión se concluye, el contribuyente elige pagar o hacer \nlos arreglos para pagar el saldo adeudado.\nCarta de 30 días sobre protestas del \ncontribuyente\nLa respuesta escrita de un contribuyente que detalla la \nrazón por la que está en desacuerdo con el ajuste de \nauditoría y solicita que el caso se traslade a la Oficina de \nApelaciones.\nEl contribuyente proporciona la \ndocumentación o información \nsolicitada\nUn contribuyente proporciona los documentos solicitados \nantes o durante la revisión para respaldar los montos en la \ndeclaración de impuestos.\nEl contribuyente solicita \nreconsideración de auditoría\nProceso utilizado por el IRS cuando el contribuyente está \nen desacuerdo con los resultados de una auditoría de \nuna declaración de impuestos; los contribuyentes pueden \nsolicitar una reconsideración de la auditoría cuando el saldo \nadeudado por la auditoría permanece sin pagar.\nEl contribuyente presenta solicitud de \nAudiencia sobre el Proceso Debido De \nCobro dentro de los 30 días\nUn contribuyente puede completar un formulario para \nsolicitar una audiencia con la Oficina de Apelaciones \ndespués de recibir un Aviso de Presentación de Gravamen \npor el Impuesto Federal, Aviso de Intención de Embargar \no Aviso de Embargo. El Proceso proporciona a los \ncontribuyentes el derecho de presentar una petición ante el \nTribunal Tributario, si están en desacuerdo con la decisión.\nEl contribuyente solicita el reembolso\nUn contribuyente solicita un reembolso / eliminación de \nintereses, multas, impuestos pagados en exceso y / o \nimpuestos adicionales.\nEl contribuyente busca respuestas a \npreguntas sobre impuestos\nUn contribuyente utiliza una de las múltiples opciones \ndisponibles para tratar de encontrar respuestas a sus \npreguntas sobre impuestos.\nEl contribuyente presenta \noportunamente una solicitud de \nreembolso\nUn contribuyente, que está en desacuerdo con los cambios \nde la revisión y pagó el impuesto adeudado, solicita un \nreembolso.\nEl contribuyente presenta \noportunamente la reclamación del \ncónyuge inocente\nProporciona alivio del pago de impuestos, intereses y \nmultas si un cónyuge o excónyuge informó u omitió \nincorrectamente elementos en una declaración de \nimpuestos presentada conjuntamente.\nEl contribuyente presenta \noportunamente solicitud de Audiencia \ndel Tribunal Tributario \nUn contribuyente ha presentado una petición ante el \nTribunal Tributario de los Estados Unidos dentro del plazo \nprescrito.\nEl contribuyente no responde\nUn contribuyente no responde ni firma el informe de la \nrevisión en conformidad con los cambios de la revisión.\nEl contribuyente presenta la queja \nante el tribunal\nUn contribuyente paga el impuesto y busca un reembolso \nante el Tribunal Federal.\nEl contribuyente presenta la petición \nante el Tribunal Tributario\nEl Tribunal Tributario revisará la decisión de la Oficina de \nApelaciones.\nAsistencia Voluntaria al \nContribuyente con los Impuestos \nsobre los Ingresos / Asesoramiento \ntributario para los ancianos\nVITA / TCE es una organización que brinda preparación \nbásica gratuita de las declaraciones de impuestos a los \ncontribuyentes que cumplen con ciertos criterios.\nGlosario\nAvisos comúnmente emitidos\nOficina de Apelaciones\n1\nCarta 5157, Reconocimiento y \nconferencia no registrados (en \ninglés)\n2\nCarta 3324, Propuesta al \ncontribuyente solicitando apelación \nde la multa (en inglés)\n3\nCarta 965, Conferencia programada \n- caso no registrado (en inglés)\n4\nCarta 966, Carta de la conferencia - \ncaso no registrado (en inglés)\n5\nCarta 5248, Introducción al proceso \nrápido de la Oficina de Apelaciones \n(en inglés)\nCobros\n1\nAviso CP714, Saldo adeudado, sin \nerror matemático\n2\nAviso CP604, Aviso final - Saldo \nadeudado\n3\nAviso CP749, Ajuste del pago en \nexceso - Compensación\n4\nCarta 5972C, Chat de texto del \nsistema de cobro automatizado (en \ninglés)\n5\nAviso CP604B, Aviso final - Saldo \nadeudado \nRevisión\n1\nCartas 2202(SP), 2205A, 5665, Carta \nde contacto inicial que informa al \ncontribuyente de la auditoría\n2\nCarta 566B, Carta de contacto inicial \n- Combo de 30 días (en inglés)\n3\nCarta 692, Solicitud de \nconsideración de conclusiones \nadicionales (en inglés)\n4\nCarta 525(SP), Carta general de 30 \ndías\n5\nCarta 3219(SP), Aviso de Deficiencia\nOficina de Apelaciones \n(Proceso Debido de Cobro)\n1\nCarta 5100, Carta de Clausura del \nCAP (en inglés)\n2\nCarta 1058(SP), Aviso de Intención \nde Embargo y Aviso de su derecho a \nuna audiencia \n3\nCarta 3172(SP), Aviso de \nPresentación de Gravamen por la \nContribución Federal y su derecho a \nuna audiencia \n4\nCarta 4837, Carta de reconocimiento \nuniforme de contacto sustantivo \n(en inglés)\n5\nCarta 3193, Aviso de determinación \nsobre las acciones de cobro según la \nSección 6320 y / o 6330 (en inglés)\nProceso de la Declaración \nde impuestos\n1\nCarta 5216(SP), el contribuyente no \npuede autenticarse\n2\nCarta 12C, Declaración de Impuestos \nIndividual, incompleta para la \ntramitación (en inglés)\n3\nAviso CP712, Error matemático, pago \nen exceso de $1 o más\n4\nCarta 4800C, Créditos Cuestionables \n- Para el uso exclusivo de PRP/RTC \n(en inglés)\n5\nAviso CP05A, Información sobre su \nreembolso (en inglés)\nLitigio\n1\nCarta 3193, Aviso de determinación \nsobre las acciones de cobro según \nlas Sección 6320 y/o 6330 (en inglés)\n2\nCarta 105(C-SP), Reclamación \nrechazada\n3\nCarta 3219(SP), Aviso de Deficiencia\n4\nCarta 5088, Carta de determinación \nfinal del cónyuge solicitante - No \npermitido (en inglés)\n5\nCarta 3288, Determinación final de \nla Oficina de Apelaciones al cónyuge \nsolicitante (en inglés)\nEl TAS es una organización independiente dentro del \nIRS que puede proteger sus derechos de contribuyente. \nPodemos ofrecerle ayuda si tiene un problema tributario \ncon el IRS que le está causando dificultades, o si lo ha \nintentado pero no ha podido resolver su problema con \nel IRS. Si califica para nuestra asistencia, que siempre es \ngratuita, haremos todo lo posible para ayudarlo.\nQuiénes Somos\nLa Hoja de Ruta\ndel Contribuyente\nUna ilustración del sistema tributario \nmoderno de los Estados Unidos\nAvisos comúnmente emitidos por volumen por estación.\nPublication 5341 (SP) (Rev. 12-2019) Catalog Number 73408Q\nVisite TaxpayerAdvocate.irs.gov\no llame al 1-877-777-4778\n"
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p5341.pdf
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1219 Publ 5341 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5341.pdf
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"KEY\nLines\nStops\nTax Return Preparation\nTax Return Processing\nCollection\nAppeals\nExam\nLitigation\nProcess\nID Theft\nFilters\nNo ID\nTheft Filters\nWere Errors\nFound on \nReturn\nWere Errors\nFound on \nReturn\nIRS Corrects \nErrors and \nPosts Return\nIRS Corrects\nErrors and \nPosts Return\nReturn \nReviewed by \nIRS for \nQuestionable \nRefundable \nCredits \nField\nExam\nOffice \nExam\nCorrespondence \nExam\nAppointment\nScheduled\nAppointment\nConfirmation\nTaxpayer Provides\nDocumentation \nTaxpayer Agrees \nWith Proposed Changes\nAudit Report/Letter \nGiving Taxpayer \n30 Days to Respond\nIdentity \nVerified\nReturn Processing\nStopped, Notice\nIssued. \nIRS Taxpayer\nAssistance Centers\n(TACs)\nAction/Decision\nDecision Point\nChoice\nEnd/Case Closed\nTax Notice\nAutomated Process\nTaxpayer \nBegins Filing \nProcess\nTaxpayer Receives\nand Gathers Tax\nInformation\nTaxpayer Seeks Answers\nto Tax Questions\nTaxpayer \nPrepares Return\nTaxpayer Mails Return\nTaxpayer Estimates\nTax Due and Submits\nPayment\nFile Electronically or Paper\nYES\nYES\nNO\nNO\nReturn \nRejected\nTaxpayer Addresses\n e-File Errors and Refiles\nYES\nReturn \nPasses Filters\nRETURN IS \nACCEPTED FOR \nPROCESSING\nPROCESSING\nSTATION\nWere \nWages and \nWithholding \nVerified\nDid Questioned\nCredits Get Verified\n(Automated Questionable \nCredits)\nAccount \nAdjusted\nNO\nNO\nNO\nNO\nNO\nYES\nYES\nYES\nYES\nYES\nAccount\nAdjusted\nCan Taxpayer \nFile Return \nby Deadline\nDoes \nTaxpayer\nOwe\nTaxpayer Files Extension\nfor More Time\nTAXPAYER’S BALANCE IS ASSESSED\nOR SENT TO EXAM\nIRS CATEGORIZES \nTAXPAYER’S CASE\nTaxpayer Requests:\n• Collection Due Process (CDP)\n Hearing (Within 30 Days);\n• Equivalent Hearing (Within 1 Year); or\n• Collection Appeals Program (CAP)\nCase Closed\nNo Further\nAction\nTaxpayer Files \nCollection Appeals \nProgram (CAP)\nRequest\nTaxpayer Files \nCollection Due\nProcess (CDP)\nHearing Request\nWithin 30 Days of\nCDP Notice\nTaxpayer Files\nEquivalent Hearing\nRequest Within \n1 Year of CDP Notice\nAppeals \nConference\nBalance \nPaid\nNotice of Intent to Levy \nand Right to Collection Due\nProcess Hearing \nYES\nYES\nNotice of Lien Filed and \nRight to Collection Due\nProcess Hearing \nDoubt As to\nCollectability\nEffective Tax Administration\n(Equity, Public Policy, Economic Hardship)\nWithdrawal of Notice\nof Federal Tax Lien\nLien Discharge\nLien Release\nLien Subordination\nLevy Relief\nWrongful Levy\nLevy Release \n(With Economic Hardship)\nReturn of \nLevy Proceeds\nInstallment Agreement\nPartial Pay\nInstallment Agreement\nTaxpayer Disagrees With\nAssessed Amount\nBankruptcy (Insolvency)\nPay Tax Due in Full\nOffer in Compromise\nLien Relief\nCurrently Not Collectible\nDoubt As \nto Liability\nRETURN OR CLAIM \nIS SCREENED FOR EXAM\nLetter Notifying Taxpayer \nof Audit With Request for \nAdditional Information\nExam Letter Notifying \nTaxpayer of Audit With \nRequest for Additional \nInformation \nIRS Issues\nMath Error\nNotice\nIRS Issues\nMath Error\nNotice\n90-Day Notice \nof Deficiency\nNotice of Claim\nDisallowance\nPayment \nOptions\nYES\nYES\nNO\nTAXPAYER FILES APPEAL \nOR CLAIM REQUEST\nTaxpayer Protests\n30-Day Letter\nThe map below illustrates, at a very high level, the stages of a taxpayer’s journey, from getting answers to tax law questions, all \nthe way through audits, appeals, collection, and litigation. It shows the complexity of tax administration, with its connections \nand overlaps and repetitions between stages. As you can see from its numerous twists and turns, the road to compliance isn’t \nFor more information visit TaxpayerAdvocate.irs.gov\nLine Direction\nTax Return Processing\nCollection\nTax Preparation\nAppeals\nLitigation\nPrivate Debt Collection\nExam\nStation’s Departures\nFace-to-Face\nor Telephone\nConference\nTaxpayer Appeals\nRefund Claim Denial\nAppeals Considers\nRefund Claim\nFace-to-Face\nor Telephone\nConference\nAppeals Considers:\n• Were All Administrative/Legal \n Requirements Followed\n• Collection Alternatives\n• Innocent Spouse Relief\n• Balancing Test - Whether Government’s\n Interest in Efficiently Collecting Tax\n Is No More Intrusive Than Necessary\nAppeals Agrees\nWith Taxpayer\nAppeals Agrees\nWith Taxpayer\nAppeals Does Not\nAgree With Taxpayer\nTaxpayer Files\nPetition Within 30 Days\nof Collection Due \nProcess (CDP) \nDetermination Letter\nAppeals Considers\nRisk of Going to\nCourt (Hazards\nof Litigation)\nNotice of\nRefund Claim\nDisallowance or\n6 Months Since\nRefund Claim\nFiled\nPRIVATE DEBT\nCOLLECTION\nYES\nYES\nYES\nYES\nYES\nNO\nNO\nNotice of Tax \nDue and Demand \nfor Payment \nTaxpayer \nRequests Refund\nIRS Sends Taxpayer \nCollection Notices\nNO\nNO\nNO\nTaxpayer \nOwes Tax\nASSESSMENT STATION\nSORTING STATION\nAPPEAL STATION\nCOLLECTION ALTERNATIVES STATION\nSCREENING STATION\nLITIGATION STATION\nStation’s Arrivals\nEXAM ALTERNATIVES STATION\nDoes Taxpayer Pay\nBalance Due\nYES\nTaxpayer \nDisagrees With \nAssessed Amount\nNotice of Federal \nTax Lien Filed\n(in Public Records)\nCOLLECTION \nSTATION\nTaxpayer Requests\nCollection Appeals\nProgram\nLevy/Seizure\nof Assets\nTAXPAYER COLLECTION ALTERNATIVES \nTaxpayer Requests \nAppeals Conference \nTaxpayer Timely \nPetitions Tax Court\nAppeals\nConsideration\nCase\nSettled\nIRS Tax Law\nPhone Line\nIRS.gov\nIRS Forms and\nPublications\nTax Return\nPreparers\nTax Software\nPaid Return Preparer\nCommercial \nTax Software\nFree File/Free File Fillable\nForms\nVolunteer Income Tax\nAssistance / Tax \nCounseling for the Elderly\nAppeals \nDetermination\nInitial Contact \nCombined With 30-Day \nLetter and Report\nCOLLECTION ACTIONS\nTaxpayer Files \nTax Court \nPetition\nPrevious\nIRS Appeal\nTaxpayer \nFiles for \nBankruptcy in \nFederal Court\nTax Court\nDecision\nNO\nTaxpayer \ne-Files Return\nTaxpayer Calls IRS to Discuss \nCollection Alternatives\nTaxpayer Files Return \non Paper\nBalance \nDue Return\n90-DAY NOTICE OF DEFICIENCY\nNotice Giving Taxpayer 90 Days \nto Petition Tax Court \n(150 Days If Outside United States)\nMATH ERROR NOTICE\nIRS Posts \nReturn\nIRS Posts \nReturn\nRefund\nClaim\nRefund, If Any, \nIssued to Taxpayer\nBureau of Fiscal \nService (BFS) Offsets \nfor Non-Tax Debts\nIRS Offsets for\nIRS Debts\nBalance \nDue to IRS \nby Taxpayer\nNo Refund or\nNo Balance Due\nRefund Due \nto Taxpayer\nField\nCollection\nLien \nEnforcement\nAction to\nEnforce Levy\nGovernment\nFiles Suit\nin Court\nRefund\nFrom\nAnother \nYear\nApplied to\nDebt \nCase Waiting \nfor Assignment \n(Queue)\nCase Not \nAssigned \n(Shelved)\nAutomated\nCollection\nSystem\nYES\nNO\nReduce Assessment\nto Judgment\nForeclosure of \nTax Lien\nYES\nNO\n90-Day Notice\nof Deficiency\n90-Day Notice \nof Deficiency\nFILED BY TAXPAYER\nFederal Court\nDecision\nTaxpayer Files\nComplaint in \nCourt\nTaxpayer Prevails\nand Government\nDoes Not Appeal\nTaxpayer Prevails\nNO\nTaxpayer Owes Tax \nand Does Not Appeal\nTaxpayer or\nGovernment Appeals\nFederal \nAppeals Court\nFederal Appeals\nCourt Decision\nUnited States\nSupreme Court\nTaxpayer or\nGovernment Appeals\nTaxpayer Owes Taxes\nTaxpayer Agrees\nWith Appeals\nNo Agreement\nor Partial Agreement\nSettlement With\nReservations (Partial Agreement\nWith Unresolved Issues)\nAppeals Agrees\nWith Taxpayer\nTax Assessed\nTax Assessed\n90-Day Notice\nof Deficiency\nAppeals Agrees\nWith Taxpayer\nYES\nNO\nNO\nNO\nNO\nNotice of Partial\nor Full Claim\nDisallowance\nTaxpayer Files\nComplaint in Court\nAppeals Issues\nEquivalent\nHearing Letter\nAppeals Does \nNot Agree With\nTaxpayer\nAppeals Issues\nCollection Due\nProcess Determination\nLetter\nYES\nNO\n90-Day Notice \nof Deficiency\nTaxpayer\nPetitions\nTax Court\nASSESSMENT \nSTATION\nLITIGATION\nSTATION\nYES\nYES\nNO\nNO\nMath Error\nNotice\nTaxpayer\nAgrees With\nAdjustment\nAdjustment\nAbated\nTaxpayer Requests\nAbatement of\nAdjustment Within\n60 Days\nAdjustment\nRemains\nin Place\nAdjustment\nRemains\nin Place\nEXAM\nSTATION\nLetter 5157 or \nLetter 3324\nNotice/Letter Issued\nat This Stop\nLetter 12C\nLetter 5216C\nCP12\nLetter 12C\nCP11\nLetter\n4800C\nLetter 2202 or\nLetter 2205-A\nLetter 525 or \nLetter 915\nLetter 3219\nor Letter 531\nLetter 3402\nLetter 692 or\nLetter 1020(DO)\nLetter\n3219C\nCP49\nCP49\nLetter 1058 or \nLetter 3172\nCP523 or \nCP521\nLetter 1058 or \nLetter 3172\nLetter 970\nLetter\n105C\nCP14\nLetter 5972C\nor Letter 16\nCP504 or\nCP504B or \nCP503 or \nCP501\nLetter 965 or \nLetter 966 or \nLetter 5248\nLetter 1278 or \nLetter 2682\nLetter 4837\nLetter 5100\nLetter 3171, Letter 3886, \nLetter 3177, Letter 4052/2272C, \nLetter 5259/2272C, Letter 2975, \nCP523, Letter 5603, Letter 4205, \nLetter 4027, Letter 4711, Letter 3975,\nLetter 1058\nLetter 3219 or \nLetter 5088 or \nLetter 3288 or \nLetter 3193 \nOffer in Compromise \n(Doubt As to Liability)\nTax Is Paid\nInnocent \nSpouse Claim\nTax Is Not Paid\nTAXPAYER DISAGREES WITH ASSESSMENT \nInnocent \nSpouse Claim\nAudit\nReconsideration\nClaim for Refund\nLetter 894\nForm 12257\nLetter 1277\nForm 12256\nLetter 3193\nLetter 3210\nLetter 913\nLetter 913\nLetter\n566S\nTaxpayer \nTimely Petitions\nNO\nYES\nCase Returns\nto IRS or IRS \nRecalls Case\nInstallment\nAgreement\nFull\nPayment\nNo Change in Tax\n(With or Without\nAdjustments)\nYES\nNO\nNO\nThe Taxpayer Roadmap\nAn Illustration of the Modern United States Tax System\nCP05A\nIRS Fully Accepts \nTaxpayer Documentation\nNO\nTaxpayer Provides \nDocumentation \nThat IRS Fully or \nPartially Accepts\nYES\nGeneral Claims \nTaxpayer \nCan Bring\nExamples \nIncluding:\n• Innocent \n Spouse Claim\n• Review of \n Collection Due\n Process\n Determination\n• Request for\n Interest \n Abatement\n• Administrative\n Costs\nLetter\n566B\nYES\nv4\n",
"KEY\nLines\nStops\nTax Return Preparation\nTax Return Processing\nCollection\nExam\nLitigation\nProcess\nID Theft\nFilters\nNo ID\nTheft Filters\nWere Errors\nFound on \nReturn\nWere Errors\nFound on \nReturn\nIRS Corrects \nErrors and \nPosts Return\nIRS Corrects\nErrors and \nPosts Return\nReturn \nReviewed by \nIRS for \nQuestionable \nRefundable \nCredits \nField\nExam\nOffice \nExam\nCorrespondence \nExam\nTaxpayer Provides\nDocumentation \nTaxpayer Agrees \nWith Proposed Changes\nAudit Report/Letter \nGiving Taxpayer \n30 Days to Respond\nIdentity \nVerified\nReturn Processing\nStopped, Notice\nIssued. \nIRS Taxpayer\nAssistance Centers\n(TACs)\nAction/Decision\nDecision Point\nChoice\nEnd/Case Closed\nTax Notice\nAutomated Process\nTaxpayer \nBegins Filing \nProcess\nTaxpayer Receives\nand Gathers Tax\nInformation\nTaxpayer Seeks Answers\nto Tax Questions\nTaxpayer \nPrepares Return\nTaxpayer Mails Return\nTaxpayer Estimates\nTax Due and Submits\nPayment\nFile Electronically or Paper\nYES\nYES\nNO\nNO\nReturn \nRejected\nTaxpayer Addresses\n e-File Errors and Refiles\nYES\nReturn \nPasses Filters\nRETURN IS \nACCEPTED FOR \nPROCESSING\nPROCESSING\nSTATION\nWere \nWages and \nWithholding \nVerified\nDid Questioned\nCredits Get Verified\n(Automated Questionable \nCredits)\nAccount \nAdjusted\nNO\nNO\nNO\nNO\nNO\nYES\nYES\nYES\nYES\nYES\nAccount\nAdjusted\nCan Taxpayer \nFile Return \nby Deadline\nDoes \nTaxpayer\nOwe\nTaxpayer Files Extension\nfor More Time\nTAXPAYER’S BALANCE IS ASSESSED\nOR SENT TO EXAM\nIRS CATEGORIZES \nTAXPAYER’S CASE\nTaxpayer Requests:\n• Collection Due Process (CDP)\n Hearing (Within 30 Days);\n• Equivalent Hearing (Within 1 Year); or\n• Collection Appeals Program (CAP)\nCase Closed\nNo Further\nAction\nBalance \nPaid\nNotice of Intent to Levy \nand Right to Collection Due\nProcess Hearing \nYES\nYES\nNotice of Lien Filed and \nRight to Collection Due\nProcess Hearing \nRETURN OR CLAIM \nIS SCREENED FOR EXAM\nExam Letter Notifying \nTaxpayer of Audit With \nRequest for Additional \nInformation \nIRS Issues\nMath Error\nNotice\nIRS Issues\nMath Error\nNotice\n90-Day Notice \nof Deficiency\nNotice of Claim\nDisallowance\nPayment \nOptions\nYES\nNO\nThe map below illustrates, at a very high level, the stages of a taxpayer’s journey, from getting answers to tax law questions, all \nthe way through audits, appeals, collection, and litigation. It shows the complexity of tax administration, with its connections \nand overlaps and repetitions between stages. As you can see from its numerous twists and turns, the road to compliance isn’t \nFor more information visit TaxpayerAdvocate.irs.gov\nLine Direction\nTax Return Processing\nCollection\nTax Preparation\nAppeals\nLitigation\nPrivate Debt Collection\nExam\nStation’s Departures\nPRIVATE DEBT\nCOLLECTION\nNotice of Tax \nDue and Demand \nfor Payment \nTaxpayer \nRequests Refund\nIRS Sends Taxpayer \nCollection Notices\nNO\nNO\nNO\nASSESSMENT STATION\nSORTING STATION\nCOLLECTION ALTERNATIVES STATION\nSCREENING STATION\nLITIGATION STATION\nStation’s Arrivals\nEXAM ALTERNATIVES STATIO\nDoes Taxpayer Pay\nBalance Due\nYES\nTaxpayer \nDisagrees With \nAssessed Amount\nNotice of Federal \nTax Lien Filed\n(in Public Records)\nTaxpayer Timely \nPetitions Tax Court\nIRS Tax Law\nPhone Line\nIRS.gov\nIRS Forms and\nPublications\nTax Return\nPreparers\nTax Software\nPaid Return Preparer\nCommercial \nTax Software\nFree File/Free File Fillable\nForms\nVolunteer Income Tax\nAssistance / Tax \nCounseling for the Elderly\nInitial Contact \nCombined With 30-Day \nLetter and Report\nNO\nTaxpayer \ne-Files Return\nTaxpayer Calls IRS to Discuss \nCollection Alternatives\nTaxpayer Files Return \non Paper\nBalance \nDue Return\n90-DAY NOTICE OF DEFICIENCY\nNotice Giving Taxpayer 90 Days \nP\ni i\nT\nC\nIRS Posts \nReturn\nIRS Posts \nReturn\nRefund\nClaim\nRefund, If Any, \nIssued to Taxpayer\nBureau of Fiscal \nService (BFS) Offsets \nfor Non-Tax Debts\nIRS Offsets for\nIRS Debts\nBalance \nDue to IRS \nby Taxpayer\nNo Refund or\nNo Balance Due\nRefund Due \nto Taxpayer\nField\nCollection\nGovernment\nFiles Suit\nin Court\nRefund\nFrom\nAnother \nYear\nApplied to\nDebt \nCase Waiting \nfor Assignment \n(Queue)\nCase Not \nAssigned \n(Shelved)\nAutomated\nCollection\nSystem\nReduce Assessment\nto Judgment\nForeclosure of \nTax Lien\nYES\nNO\n90-Day Notice\nof Deficiency\nNotice/Letter Issued\nat This Stop\nLetter 12C\nLetter 5216C\nCP12\nLetter 12C\nCP11\nLetter\n4800C\nLetter 525 or \nLetter 915\nLetter 3219\nor Letter 531\nLetter 692 or\nLetter 1020(DO)\nLetter\n3219C\nCP49\nCP49\nLetter 1058 or \nLetter 3172\nLetter 1058 or \nLetter 3172\nCP14\nCP504 or\nCP504B or \nCP503 or \nCP501\nTax Is Paid\nTax Is Not Paid\nTAXPAYER DISAGREES WITH ASSESSMENT \nInnocent \nSpouse Claim\nAudit\nReconsideration\nClaim for Refund\nLetter\n566S\nNO\nCase Returns\nto IRS or IRS \nRecalls Case\nInstallment\nAgreement\nFull\nPayment\nNo Change in Tax\n(With or Without\nAdjustments)\nYES\nN\nThe Taxpayer Roadmap\nAn Illustration of the Modern United States Tax System\nCP05A\nIRS Fully Accepts \nTaxpayer Documentation\nNO\nTaxpayer Provides \nDocumentation \nThat IRS Fully or \nPartially Accepts\nYES\nLetter\n566B\nTAXPAYER\nROADMAP\nAn Illustration of the Modern \nUnited States Tax System\nDepartment of the Treasury Internal Revenue Service www.IRS.gov\nor call 1-877-777-4778\nYourVoiceAtIRS\nYourVoiceAtIRS\nTASNTA\ntaxpayer-advocate-service\n90-Day Notice of Deficiency\nLetter issued to the taxpayer providing 90 days to file \npetition in the U.S. Tax Court for review.\nAccount Adjusted\nAdjustment made to an account, increasing or \ndecreasing tax, penalties, or interest.\nAction to Enforce Levy\nLawsuit submitted by the IRS to encourage a person \nor business to turn over levy proceeds or be held \nliable for the funds requested.\nAgreed Claim\nExam or Appeals accepts a taxpayer’s refund claim.\nAlternatives Station: Taxpayer \nCollection Alternatives\nOptions for resolving balance due accounts and \ndelinquent tax returns. \nAlternatives Station: Taxpayer \nDisagrees With Assessed Amount\nA taxpayer disagrees with the changes from an audit \nor IRS-created tax return.\nAppeals Agrees With Taxpayer\nWhen Appeals and a taxpayer agree regarding the \ntreatment of an item.\nAppeals Conference\nConference with a technical Appeals employee to \ndiscuss IRS actions to resolve the tax liability.\nAppeals Does Not Agree With \nTaxpayer\nA taxpayer contests the amount the IRS has \ndetermined is owed.\nAppointment Confirmation\nLetter confirming the time and place of the \nexamination appointment and documents needed.\nAppeals Considers Refund Claim\nClaim filed by a taxpayer on an amended return \nshowing an overpayment of tax.\nAppeals Considers Risk of Going \nto Court (Hazards of Litigation)\nConsideration of risks to the government when \nconsidering a tax determination.\nAppeals Determination\nIncludes verification of laws or administrative \nprocedures, issues raised by taxpayer, and the \nbalancing test.\nAppeals Issues Collection Due \nProcess Determination Letter\nA taxpayer’s opportunity to contest Appeals \ndetermination before tax court.\nAppeals Issues Equivalent \nHearing Letter\nAdvises of Appeal decision; does not provide for \njudicial review.\nAppeal Station Taxpayer Files \nAppeal or Claim Request\nA taxpayer requests Collection Due Process (CDP) \nhearing in response to IRS publicly filed lien or notice \nof intent to levy.\nAppointment Scheduled\nLetter informing taxpayers their return is under audit, \nscheduling an audit appointment and requesting \ndocumentation. \nAssessment Station Taxpayers \nBalance Is Assessed\nThe IRS assesses any applicable tax, penalty, and \ninterest owed by the taxpayer.\nAudit Report - Letter Giving \nTaxpayer 30 Days to Respond\nStatement from the IRS explaining proposed \nadjustments by examination; provides taxpayer 30 \ndays to respond.\nAutomated Collection System \n(ACS)\nCallsite-based collection department that issues \nnotices and answers taxpayer inquiries to resolve \nbalance due accounts.\nBalance Due on Account\nThe outstanding amount a taxpayer owes on an \naccount.\nBalance Due to IRS by Taxpayer\nA tax return has met all the requirements and is \naccepted for processing.\nBankruptcy / Insolvency\nA taxpayer files a petition in bankruptcy court. \nInsolvency is the inability to pay a debt as it becomes \ndue.\nCase Closed\nTax paid in full or agreement made to satisfy a \nbalance due.\nCase Not Assigned (Shelved)\nCases not currently assigned but at any time could be \nassigned to Automated Collection System (ACS), Field \nCollection, or Private Debt Collection (PDC).\nCase Waiting for Assignment \n(Queue)\nCases waiting to be assigned to ACS or Field \nCollection.\nCollection Appeals Program (CAP)\nAvailable for Collection cases, a taxpayer can request \nAppeals conference before or after collection action \nis taken but cannot go to tax court if they disagree \nwith the Appeals decision.\nCollection Station: Collection \nActions\nIRS is actively working to collect taxpayers' overdue tax \nbalance and secure delinquent past year(s) tax returns.\nCorrespondence Exam\nIRS conducts the audit through the mail.\nCurrently Not Collectible\nA taxpayer and the IRS agree the tax is owed but a \ntaxpayer cannot pay due to their current financial \nsituation. \nEquivalent Hearing (Request \nWithin 1 Year)\nAvailable for Collection cases; taxpayer cannot go to \ntax court if they disagree with the Appeals decision.\nExam\nThe compliance function within the IRS that \nconducts audits of taxpayers' returns and proposes \nadjustments to corrections. \nExam Letter Notifying Taxpayer \nof Audit With Request for \nAdditional Information \nLetter telling a taxpayer their return is under audit \nand additional documentation is needed.\nFace-to-Face / Telephone \nConference\nConference with Appeals on the telephone or in \nperson.\nFederal Appeals Court\nThe United States Court of Appeals that has \njurisdiction to review the decisions of other courts.\nField Collection\nA Revenue Officer personally visits a taxpayer to \nresolve balance due accounts and delinquencies.\nField Exam\nThe IRS goes to a taxpayer’s residence or business to \nconduct the audit.\nForeclosure of Tax Lien\nA Revenue Officer files a lawsuit to enforce a federal \ntax lien for specific assets/property for collection.\nFree File / Free File Fillable Forms\nSoftware used by taxpayers to prepare and file \nindividual income tax returns for free.\nGeneral Claims a Taxpayer Can \nBring\nA taxpayer may seek court review of IRS actions other \nthan when the IRS has asserted a deficiency.\nHow to Address a Levy \nThe IRS may consider releasing a levy if it was \nwrongfully issued or creates an economic hardship \nfor the taxpayer.\nIRS Posts Return\nA taxpayer has passed authentication and the return \nis posted to Master File.\nInitial Contact Combined With \n30-Day Letter and Audit Report\nLetter informing the taxpayer their return is under \naudit and providing an audit report adjusting items \nin question. The taxpayer has 30 days to provide \nsupporting documents and request an appeal. \nInstallment Agreement\nOption for a payment plan if a taxpayer cannot pay \ntaxes in full when it is due; plan is agreed to by IRS.\nIRS Forms and Publications\nFree online resources available to taxpayers to \nprepare their tax returns.\nIRS Sends Taxpayer Collection \nNotices\nA taxpayer receives notices of balance due, request \nfor payment, and IRS intent to levy if payment is not \nreceived.\nIRS Tax Law Phone Line\nIRS phone line taxpayers can call to ask general or tax \nlaw questions during filing season.\nIRS Taxpayer Assistance Centers \n(TACs)\nCenters to provide in-person tax law assistance to \na taxpayer during the filing season that require an \nappointment.\nIRS.gov\nOfficial website of the IRS that provides a range of \ninformation, forms, worksheets, and links on all \ntax-related topics.\nLevy Release (With Economic \nHardship)\nA levy that is released because it was preventing \nthe taxpayer from meeting basic, reasonable living \nexpenses.\nLevy / Seizure of Assets\nIRS-initiated process to obtain income and/or other \nassets of a taxpayer to apply toward a tax liability.\nLien Relief\nUnder certain conditions, taxpayers may request the \nwithdrawal, subordination, or release of a lien. \nLitigation\nThe process of resolving disputes by filing or \nanswering a complaint through the tax court system.\nNo Agreement / Partial \nAgreement\nOnly specific items are agreed on and processed by \nAppeals. A 90-day letter is issued on unagreed items.\nNo Change in Tax (With or \nWithout Adjustments)\nThe IRS completes an examination of a taxpayer’s \nreturn and accepts or adjusts the account, without a \nchange to the tax amount. \nNotice of Federal Tax Lien Filed \n(in Public Records)\nDocument filed with the local recording office \nthat identifies tax liabilities owed by the taxpayer; \nestablishes the government’s priority rights against \ncertain other creditors. \nNotice of Intent to Levy and Right \nto Collection Due Process Hearing\nA notice sent to a taxpayer stating overdue taxes are \nnot paid and the IRS intends to levy/seize income \nand/or other assets.\nNotice of Lien Filed and Right to \nCollection Due Process Hearing\nA notice sent to a taxpayer stating the IRS publicly \nfiled a notice of tax lien for unpaid taxes.\nNotice of Tax Due and Demand \nfor Payment\nTaxpayer receives notice to pay because they owe \nmoney on unpaid taxes.\nOffer in Compromise\nAn agreement between a taxpayer and IRS for a \ntaxpayer to pay less than the full amount owed.\nOffice Exam\nA taxpayer goes into an IRS office for the audit.\nPaid Return Preparer\nAn individual hired by taxpayers to prepare their \nfederal tax return.\nPartial Pay Installment \nAgreement\nAn agreement between a taxpayer and the IRS to \nmake payments on their liability based on their \ncurrent financial situation that will not fully pay the \nbalance.\nPay Tax Due in Full\nA taxpayer pays federal tax due, in full.\nPayment Options (Exam)\nThe IRS will typically discuss payment options with \ntaxpayers prior to the assessment of additional tax.\nPrivate Debt Collection (PDC)\nThe IRS contracts with Private Collection Agencies to \nhelp collect certain overdue federal tax debts.\nReduce Assessment to Judgment\nA lawsuit to obtain a court judgment thereby \nextending the time the IRS can collect from a \ntaxpayer’s assets.\nRefund From Another Year \nApplied to Tax Debt\nThe IRS applied all or part of taxpayer’s refund to pay \nanother tax debt.\nReturn Mailed\nA return is completed and sent by mail to the IRS for \nprocessing.\nScreening Station Return or Claim \nIs Screened for Exam\nTax returns are compared to similar returns, \nreviewed for entries, issues, or transactions under \naudit.\nSorting Station: IRS Categorizes \nTaxpayer’s Case\nThe IRS categorizes taxpayers’ cases with taxes due \nand routes them to ACS, Field Collection, Queue, or \nShelved.\nStatute of Limitations on \nAssessments\nThe government must generally assess tax within a \ncertain period, usually three years after a tax return \nis filed.\nTaxpayer Estimates Tax Due and \nSubmits Payment\nTaxpayers estimate what they owe when filing an \nextension and submit payment.\nTax Court Decision\nOnce the court determines its findings and \nconclusions, the decision becomes final 90 days after \nentered unless there is an appeal.\nTax Return Preparers\nAn individual hired by taxpayers to prepare and \nsometimes file their taxes.\nTax Software\nSoftware used by taxpayers to prepare and file \nreturns either by mail or electronically.\nTaxpayer Agrees With Proposed \nChanges\nA taxpayer has signed the examination report in \nagreement with proposed examination changes.\nTaxpayer Calls IRS to Discuss \nCollection Alternatives\nA taxpayer and the IRS discuss options to pay a tax \ndebt.\nTaxpayer Claims Refund\nA taxpayer seeks a refund of taxes that have been \noverpaid.\nTaxpayer Disagrees With \nAssessed Amount\nA notice is sent to the taxpayer about changes on a \nreturn due to an audit or IRS-created return that the \ntaxpayer does not agree with.\nTaxpayer Does Not Petition Tax \nCourt Hearing\nA taxpayer has not petitioned the U.S. Tax Court in \ndispute of proposed IRS adjustments to their return.\nTaxpayer Files Collection Due \nProcess (CDP) Hearing Request \nWithin 30 Days of CDP Notice\nAvailable for Collection Cases, taxpayers can petition \nTax Court if they disagree with the Appeals decision.\nTaxpayer Files Extension for More \nTime\nIf taxpayers cannot file by the due date of the return, \nthey can request an extension of time to file on an \nIRS tax form.\nTaxpayer Timely Files Innocent \nSpouse Claim\nA taxpayer timely files for relief from additional tax \nowed due to his or her spouse or former spouse \nfailing to report income or other return information \nproperly. \nTaxpayer Files Petition Within 30 \nDays of Collection Due Process \n(CDP) Determination Letter\nAction that allows a taxpayer the opportunity to \nappeal the collection action and continue to Tax \nCourt if the taxpayer disagrees with the Appeals \ndecision.\nTaxpayer Pays Taxes\nThe examination is concluded, the taxpayer chooses \nto pay, or make arrangements to pay, balance due.\nTaxpayer Protests 30-Day Letter\nA taxpayer's written response detailing the reason \nthey do not agree to the audit adjustment and \nrequests the case move to Appeals. \nTaxpayer Provides \nDocumentation or Requested \nInformation\nA taxpayer provides documents requested either \nbefore or during the examination to support \namounts on tax return.\nTaxpayer Requests Audit \nReconsideration\nProcess used by the IRS when the taxpayer disagrees \nwith the results of an audit of a tax return; taxpayers \ncan request an audit reconsideration when the \nbalance due from the audit remains unpaid.\nTaxpayer Requests Collection Due \nProcess Hearing Within 30 Days\nA taxpayer can complete a form to request a hearing \nwith Appeals after receiving a Notice of Federal Tax \nLien Filing, Notice of Intent to Levy, or Notice of Levy. \nThe Process provides taxpayers the right to petition \nTax Court, if they disagree with the decision. \nTaxpayer Requests Refund\nA taxpayer requests refund/abatement of interest, \npenalties, overpaid tax, and/or additional tax. \nTaxpayer Seeks Answers to Tax \nQuestions\nA taxpayer uses one of the multiple options available \nto them to try to find answers to their tax questions.\nTaxpayer Timely Files a Request \nfor Refund\nA taxpayer, who disagrees with the examination \nchanges and paid the tax due, requests a refund.\nTaxpayer Timely Files Innocent \nSpouse Claim\nProvides relief from paying tax, interest, and \npenalties if a spouse or former spouse improperly \nreported or omitted items on a jointly filed tax return. \n \nTaxpayer Timely Petitions Tax \nCourt Hearing\nA taxpayer has filed a petition with the U.S. Tax Court \nwithin the prescribed timeframe. \nTaxpayer Does Not Respond\nA taxpayer does not respond or sign the examination \nreport in agreement with examination changes.\nTaxpayer Files Complaint in Court\nA taxpayer pays the tax and seeks a refund in Federal \nCourt.\nTaxpayer Files Tax Court Petition\nTax Court will review the Appeals decision.\nVolunteer Income Tax Assistance \n/ Tax Counseling for the Elderly\nVITA/TCE is an organization that provides free basic \nincome tax return preparation to taxpayers who \nmeet certain criteria. \nGlossary\nCommonly Issued Notices\nAppeals\n1\nLetter 5157, Non-docketed \nAcknowledgment & Conference\n2\nLetter 3324, Proposal to Taxpayer \nRequesting Penalty Appeal\n3\nLetter 965, Conference Scheduled – \nNon-Docketed Case\n4\nLetter 966, Conference Letter \nNon-Docketed Case\n5\nLetter 5248, Introduction to Rapid \nAppeals Process\nCollection\n1\nCP14, Notice, Balance Due $5 or \nMore, No Math Error \n2\nCP504, Notice, Final Notice - \nBalance Due\n3\nCP49, Notice, Overpayment \nAdjustment - Offset \n4\nLetter 5972C, Automated Collection \nSystem Text Chat \n5\nCP504B, Notice, Final Notice - \nBalance Due \nExam\n1\nLetter 2202, 2205A, 566S, Initial \nContact Letter Informing Taxpayer \nof Audit\n2\nLetter 566B, Initial Contact Letter - \n30-Day Combo\n3\nLetter 692, Request for \nConsideration of Additional Findings\n4\nLetter 525, General 30-Day Letter\n5\nLetter 3219, Notice of Deficiency\nAppeals (Collection Due \nProcess)\n1\nLetter 5100, CAP Closing Letter \n2\nLetter 1058, Notice of Intent to \nLevy and Notice of Your Right to a \nHearing\n3\nLetter 3172, Notice of Federal Tax \nLien Filing and Your Right to a \nHearing\n4\nLetter 4837, Substantive Contact \nUniform Acknowledgment Letter\n5\nLetter 3193, Notice of Determination \nConcerning Collection Action(s) \nUnder Section 6320 and/or 6330\nTax Return Processing\n1\nLetter 5216C, Taxpayer Cannot \nAuthenticate\n2\nLetter 12C, Individual Return, \nIncomplete Processing \n3\nCP12, Math Error, Overpayment of \n$1 or More\n4\nLetter 4800C, Questionable Credits\n5\nCP05A, Information Regarding Your \nRefund\nLitigation\n1\nLetter 3193, Notice of Determination \nConcerning Collection Action(s) \nUnder Sections 6320 and/or 6330\n2\nLetter 105C, Claim Disallowed\n3\nLetter 3219, Notice of Deficiency\n4\nLetter 5088, Requesting Spouse Final \nDetermination Letter—Disallowed\n5\nLetter 3288, Final Appeals \nDetermination to Requesting Spouse\nWho We Are\nTAS is an independent organization within the \nIRS that can help protect your taxpayer rights. \nWe can offer you help if your tax problem is \ncausing a hardship, or you’ve tried but haven’t \nbeen able to resolve your problem with the IRS. \nIf you qualify for our assistance, which is always \nfree, we will do everything possible to help you.\nMost commonly issued notices by volume per station.\nPublication 5341 (Rev. 12-2019) Catalog Number 72692K\nVisit TaxpayerAdvocate.irs.gov\n"
] |
p5376.pdf
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1219 Publ 5376 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5376.pdf
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[
" \n \nPublication 5376 (12-2019) Catalog Number 73503O Department of the Treasury Internal Revenue Service www.irs.gov \n \n \n \nDecember 2019 \nVITA Grant Reporting \nRequirements \nThe Recipient is responsible for ensuring requests for information and/or documents are acted upon promptly \nand responded to by the requested date and to ensure all reports are timely and accurately filed throughout the \ngrant period and until close out of the grant. The following information requests, reports and reporting dates \napply to the VITA Grant. \n \nItem \nDescription \nMethod \nFrequency \nDue \n1 \nGrant Notification – In order to establish and fund the grant \ncertain actions must be completed in a timely manner. \nDue to IRS \nAnnually upon \nnotification of \ngrant award \nWithin 20 calendar \ndays of grant \nnotification \n2 \nKey Personnel Changes – Notify your assigned grant officer \nwhen key program personnel change. \nDue to IRS \nVariable \nWithin 10 business \ndays of change \n3 \nCash Sub-Awards of $1,000 or more Reporting – See VITA \nGrant Program Terms and Conditions to determine applicability \nto your organization. \nDue to IRS \nVariable \nWithin 30 days of \nsub-award \n4 \nRelated Party Transaction Reporting – See VITA Grant \nProgram Terms and Conditions to determine applicability to \nyour organization. \nDue to IRS \nVariable \nWithin 30 days of \ntransaction \n5 \nSite Establishment Report – List of all sites planned to open \n(December 1) or opened under the grant (September 30). \nUpdate the VITA Target Audience worksheet in the VITA Grant \nWorkbook submitted with your application. If no changes are \nrequired to previously submitted information, an email notifying \nthe grant officer that there are no changes is sufficient. \nDue to IRS \nBefore filing \nseason and \nwith final \nreporting \nDecember 1 \nSeptember 30 \n6 \nFederal Financial Report (FFR) Cash Transaction Report \n(Standard Form 425) - This report provides quarterly financial \ninformation. Reporting continues until all grant funds are \nwithdrawn and reported. \nFile \nelectronically in \nthe Payment \nManagement \nSystem (PMS) \nQuarterly once \nfunds are \ndeposited in \nPMS account \nJanuary 30 \nApril 30 \nJuly 30 \nOctober 30 \n7 \nMatching Funds Documentation – Due if sufficient matching \nwas not already provided in the application. \nDue to IRS \nAnnually \nJanuary 31 \n8 \nSub-award Reporting – Applicability includes consideration of \naward amount, whether your organization sub-awards, and \nexisting reporting of executive compensation. See 2 CFR Part \n170, Appendix A for full information. \nElectronically \nfiled at \nwww.fsrs.gov \nand \nwww.SAM.gov \nUpon sub-\naward of funds \nmeeting \ndescribed \nconditions \nBy the end of the \nmonth following the \nmonth during which \nyou make the sub-\naward \n9 \nMinimum Returns Expected Questionnaire – Reconciles \nreturns completed and sites established per IRS data with the \norganization’s data. A communication is generally sent in late \nApril or early May. \nDue to IRS \nAnnually \nWithin 10 calendar \ndays of receipt of \nrequest for response \n10 \nUnused Funds Notification – Provide IRS with confirmation \nthat all funds awarded will be utilized; if not, provide amount \nthat can be released. \nDue to IRS \nAnnually \nJune 30 \n11 \nFinal Report – This report covers the entire grant period. It \nincludes a final program plan narrative, final budget detail \nexplanation, and items 5, 12, and 13. Detailed instructions are \nprovided in Publication 4883, Grant Programs Resource Guide. \nDue to IRS \nAnnually 90 \ndays after end \nof the grant \nperiod \nSeptember 30 \n",
" \nItem \nDescription \nMethod \nFrequency \nDue \n12 \nStandard Form PPR-A, Performance Measures - Detailed \ninstructions are provided in Publication 4883, Grant Programs \nResource Guide. \nDue to IRS \nAnnually 90 \ndays after end \nof the grant \nperiod \nSeptember 30 \n13 \nFFR Financial Status Report – This covers the entire grant \nperiod and it is one component of final report. \nFile \nelectronically in \nthe PMS \nAnnually 90 \ndays after end \nof the grant \nperiod \nSeptember 30 \n \n"
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f8985v.pdf
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1219 Form 8985-V (PDF)
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https://www.irs.gov/pub/irs-pdf/f8985v.pdf
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[
"Form\n8985-V\n(December 2019)\nDepartment of the Treasury \nInternal Revenue Service\nTax Payment by a Pass-Through Partner\nOMB No. 1545-0123\nPrint or type\nCheck the box for type of payment\nBBA exam push out\nBBA AAR push out\nFile only if you are making a payment by check or money order. Mail this voucher \nwith your check or money order payable to “United States Treasury.” Write your \ntaxpayer identification number (TIN) and “Form 8985” on your check or money \norder. Do not send cash. Enclose, but do not staple or attach, your payment with \nthis voucher.\nAmount you are paying by check or \nmoney order.\n$\nPayment due date (MM/DD/YYYY)\n/\n/\nThis payment amount is for the following:\nAn imputed underpayment\nPenalties\nInterest\nAudit control number (if applicable)\nType of tax return filed by the Partner\nForm 1065\nForm 1120-S\nForm 1041\nOther (enter form number)\nPartner’s Representative\nName\nPhone\nPartner’s applicable tax year ending date (MM/DD/YYYY)\nPartner’s TIN\nName of Pass-Through Partner\nAddress (number, street, and apt. no.)\nCity\nState\nZIP code\nForeign country name\nForeign province/county\nForeign postal code\nFor Privacy Act and Paperwork Reduction Act Notice, see instructions.\nCat. No. 71711W\n"
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f8886.pdf
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1219 Form 8886 (PDF)
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https://www.irs.gov/pub/irs-pdf/f8886.pdf
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[
"Form 8886 \n(Rev. December 2019) \nDepartment of the Treasury \nInternal Revenue Service \nReportable Transaction Disclosure Statement \n▶ Attach to your tax return. \n▶ See separate instructions. \n▶ Go to www.irs.gov/Form8886 for instructions and the latest information. \nOMB No. 1545-1800 \nAttachment \nSequence No. 137 \nName(s) shown on return (individuals enter last name, first name, middle initial) \nIdentifying number\nNumber, street, and room or suite no. \n City or town\n State\n ZIP code\nA \n \nIf you are filing more than one Form 8886 with your tax return, sequentially number \neach Form 8886 and enter the statement number for this Form 8886 .\n.\n.\n.\n.\n.\n▶Statement number \nof \nB \nEnter the form number of the tax return to which this form is attached or related \n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nEnter the year of the tax return identified above .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nIs this Form 8886 being filed with an amended tax return? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nC \nCheck the box(es) that apply. See instructions. \nInitial year filer \nProtective disclosure \n1a \nName of reportable transaction \n1 \nb\nInitial year participated in transaction \n1c\nReportable transaction or tax shelter registration number. See instructions.\n2 \nIdentify the type of reportable transaction. Check all boxes that apply. See instructions. \na \nListed \nb \nConfidential \nc \nContractual protection \nd \nLoss \ne \nTransaction of interest\n3 \nIf you checked box 2a or 2e, enter the published guidance number for the listed transaction or transaction \nof interest .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶ \n4 \nEnter the number of “same as or substantially similar” transactions reported on this form .\n.\n.\n.\n.\n.\n.\n.\n▶\n5 \nIf you participated in this reportable transaction through a partnership, S corporation, trust, and foreign entity, check the applicable boxes and \nprovide the information below for the entity(ies). See instructions. (Attach additional sheets, if necessary.)\na\nType of entity .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nPartnership \nS corporation \nTrust \nForeign \nPartnership \nS corporation \nTrust \nForeign \nb\nName \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nc\nEmployer identification number (EIN), if known \n. ▶\nd\nDate Schedule K-1 received from entity (enter \n“none” if Schedule K-1 not received) \n.\n.\n.\n. ▶\n6 \n \n \nEnter below the name and address of each individual or entity to whom you paid a fee with regard to the transaction if that individual or entity \npromoted, solicited, or recommended your participation in the transaction, or provided tax advice related to the transaction. (Attach additional \nsheets, if necessary.) \na \nName \nIdentifying number (if known) \nFees paid \n$\nNumber, street, and room or suite no. \nCity or town\n State\n ZIP code\nb \nName \nIdentifying number (if known) \nFees paid \n$\nNumber, street, and room or suite no. \nCity or town\n State\n ZIP code\nFor Paperwork Reduction Act Notice, see separate instructions. \nCat. No. 34654G \nForm 8886 (Rev. 12-2019) \n",
"Form 8886 (Rev. 12-2019) \nPage 2 \n7 \nFacts \na \nIdentify the type of tax benefit generated by the transaction. Check all the boxes that apply. See instructions. \nDeductions \nExclusions from gross income \nAbsence of adjustments to basis\nTax credits\nCapital loss \nNonrecognition of gain \nDeferral \nOrdinary loss \nAdjustments to basis \nOther\nb\nEnter the total dollar amount of your tax benefits identified in 7a. See instructions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n$\nc\nEnter the anticipated number of years the transaction provides the tax benefits stated in 7b. See instructions .\n.\n.\nd\nEnter your total investment or basis in the transaction. See instructions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n$\ne\nFurther describe the amount and nature of the expected tax treatment and expected tax benefits generated by the transaction for all affected \nyears. Include facts of each step of the transaction that relate to the expected tax benefits including the amount and nature of your investment. \nInclude in your description your participation in the transaction and all related transactions regardless of the year in which they were entered \ninto. Also, include a description of any tax result protection with respect to the transaction. \n8 \n \n \n \nIdentify all individuals and entities involved in the transaction that are tax-exempt, foreign, or related. Check the appropriate box(es). See \ninstructions. Include their name(s), identifying number(s), address(es), and a brief description of their involvement. For each foreign entity, \nidentify its country of incorporation or existence. For each individual or related entity, explain how the individual or entity is related. Attach \nadditional sheets, if necessary.\na \nType of individual or entity: \nTax-exempt \nForeign \nRelated \nName \nIdentifying number\nAddress \nDescription\nb \nType of individual or entity: \nTax-exempt \nForeign \nRelated \nName \nIdentifying number\nAddress \nDescription\nForm 8886 (Rev. 12-2019) \n"
] |
i56.pdf
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1219 Inst 56 (PDF)
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https://www.irs.gov/pub/irs-pdf/i56.pdf
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[
"Instructions for Form 56\n(Rev. December 2019)\nNotice Concerning Fiduciary Relationship\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue \nCode unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Form 56 and its \ninstructions, such as legislation enacted \nafter they were published, go to IRS.gov/\nForm56.\nPhotographs of Missing \nChildren\nThe IRS is a proud partner with the \nNational Center for Missing & Exploited \nChildren® (NCMEC). Photographs of \nmissing children selected by the Center \nmay appear in instructions on pages that \nwould otherwise be blank. You can help \nbring these children home by looking at \nthe photographs and calling \n1-800-THE-LOST (1-800-843-5678) if you \nrecognize a child.\nGeneral Instructions\nPurpose of Form\nForm 56 is used to notify the IRS of the \ncreation or termination of a fiduciary \nrelationship under section 6903 and \nprovide the qualification for the fiduciary \nrelationship under section 6036.\nForm 56 cannot be used to update \nthe last known address of the \nperson, business, or entity for \nwhom you are acting. Use Form 8822, \nChange of Address, or Form 8822-B, \nChange of Address or Responsible \nParty—Business, to update the last known \naddress.\nWho Should File\nForm 56 should be filed by a fiduciary (see \nDefinitions below) to notify the IRS of the \ncreation or termination of a fiduciary \nrelationship under section 6903. For \nexample, if you are acting as fiduciary for \nan individual, a decedent’s estate, or a \ntrust, you may file Form 56.\nReceivers and assignees for the \nbenefit of creditors also file Form 56 to \ngive notice of qualification under section \n6036. However, a bankruptcy trustee, \ndebtor-in-possession, or other like \nfiduciary in a bankruptcy proceeding is not \nrequired to give notice of qualification \nunder section 6036. Trustees, etc., in \nbankruptcy proceedings are subject to the \nCAUTION\n!\nnotice requirements under title 11 of the \nUnited States Code (Bankruptcy Rules).\nDo not use Form 56 if you are \nnotifying the IRS that you are the \nauthorized representative of the \ntaxpayer. Instead, use Form 2848, Power \nof Attorney and Declaration of \nRepresentative.\nA fiduciary is treated by the IRS as if he \nor she is actually the taxpayer. Upon \nappointment, the fiduciary automatically \nhas both the right and the responsibility to \nundertake all actions the taxpayer is \nrequired to perform. For example, the \nfiduciary must file returns and pay any \ntaxes due on behalf of the taxpayer.\nAn authorized representative is treated \nby the IRS as the agent of the taxpayer. \nHe or she can only perform the duties \nauthorized by the taxpayer, as indicated \non Form 2848. An authorized \nrepresentative is not required nor \npermitted to do anything other than the \nactions explicitly authorized by the \ntaxpayer.\nDefinitions\nFiduciary. A fiduciary is any person in a \nposition of confidence acting on behalf of \nany other person. A fiduciary assumes the \npowers, rights, duties, and privileges of \nthe person or entity on whose behalf he or \nshe is acting. Examples of fiduciaries \ninclude administrators, conservators, \ndesignees, executors, guardians, \nreceivers, trustees of a trust, trustees in \nbankruptcy, personal representatives, \npersons in possession of property of a \ndecedent’s estate, or debtors-in-\npossession of assets in any bankruptcy \nproceeding by order of the court.\nPerson. A person is any individual, trust, \nestate, partnership, association, company, \nor corporation.\nDecedent’s estate. A decedent’s estate \nis a taxable entity separate from the \ndecedent that comes into existence at the \ntime of the decedent’s death. It generally \ncontinues to exist until the final distribution \nof the estate’s assets is made to the heirs \nand other beneficiaries.\nTerminating entities. A terminating \nentity, such as a corporation, partnership, \ntrust, etc., only has the legal capacity to \nestablish a fiduciary relationship while it is \nin existence. Establishing a fiduciary \nrelationship prior to termination of the \nentity allows the fiduciary to represent the \nCAUTION\n!\nentity on all tax matters after it is \nterminated.\nWhen and Where To File\nNotice of fiduciary relationship. \nGenerally, you should file Form 56 when \nyou create (or terminate) a fiduciary \nrelationship. File Form 56 with the Internal \nRevenue Service Center where the person \nfor whom you are acting is required to file \ntax returns.\nProceedings (other than bankruptcy) \nand assignments for the benefit of \ncreditors. A fiduciary who is appointed or \nauthorized to act as:\n• A receiver in a receivership proceeding \nor similar fiduciary (including a fiduciary in \naid of foreclosure); or\n• An assignee for the benefit of creditors, \nmust file Form 56 on, or within 10 days of, \nthe date of appointment with the Advisory \nGroup Manager, of the area office of the \nIRS having jurisdiction over the person for \nwhom you are acting. See Pub. 4235, \nCollection Advisory Group Numbers and \nAddresses, for more information.\nThe receiver or assignee may also file \na separate Form 56 with the service center \nwhere the person for whom the fiduciary is \nacting is required to file tax returns to \nprovide the notice required by section \n6903.\nSpecific Instructions\nPart I—Identification\nProvide all the information called for in this \npart. If there is more than one fiduciary, \neach fiduciary must file a separate Form \n56 or otherwise provide notice of their \nstatus to the IRS.\nName. File a separate Form 56 for each \nperson for whom you are acting in a \nfiduciary capacity. For example, if you will \nbe filing the decedent’s final Form 1040 \nand are the executor/administrator of the \ndecedent’s estate, file one Form 56 \nentering the name of the decedent as the \nperson for whom you are acting and file \none Form 56 entering the name of the \nestate as the name of the person for \nwhom you are acting.\nIdentifying number. If you are acting for \nan individual, an individual debtor, or other \nperson whose assets are controlled, the \nidentifying number is the social security \nnumber (SSN) or individual taxpayer \nidentification number (ITIN). If you are \nDec 12, 2019\nCat. No. 57937U\n",
"acting for a person other than an \nindividual, the identifying number is the \nemployer identification number (EIN).\nDecedents. If you are acting on behalf of \na decedent, enter the decedent's SSN or \nITIN shown on his or her final Form 1040 \nin the space provided. If you are acting on \nbehalf of a decedent’s estate that must file \na Form 706, United States Estate (and \nGeneration-Skipping Transfer) Tax \nReturn, enter the decedent’s SSN or ITIN \nand the EIN (if applicable) as discussed \nunder Identifying number, earlier.\nAddress. Include the suite, room, or \nother unit number after the street address.\nIf the postal service does not deliver \nmail to the street address and the fiduciary \nhas a P.O. box, show the box number \ninstead of the street address.\nFor a foreign address, enter the \ninformation in the following order: city, \nprovince or state, and country. Follow the \ncountry’s practice for entering the postal \ncode. Please do not abbreviate the \ncountry name.\nForm 8822 or Form 8822-B must \nbe used to update the last known \naddress of the person, business, \nor entity for whom you are acting.\nSection A. Authority\nLine 1a. Testate estates. Check the box \non line 1a if you are the executor of an \nestate of a decedent who died testate (i.e., \nhaving left a valid will) and have been \nauthorized to serve by a court of \nappropriate jurisdiction. Attach to your \nForm 56, current letters testamentary or a \ncourt certificate as proof of your court \nappointment. Enter the decedent’s date of \ndeath on line 2a.\nLine 1b. Intestate estates with court \nappointment. Check the box on line 1b if \nyou have been appointed the \nadministrator or representative of an \nestate of a decedent who died intestate \n(that is, without leaving a valid will). Attach \nto your Form 56, current letters \ntestamentary or a court certificate as proof \nof your court appointment. Enter the \ndecedent’s date of death on line 2a.\nLine 1c. Guardianship. Check the box \non line 1c if a court of appropriate \nCAUTION\n!\njurisdiction has appointed you to serve as \nguardian, custodian, or conservator over \nthe interests of another person or entity. \nEnter the date you were appointed on \nline 2b.\nLine 1d. Intestate estates with no court \nappointment. Check the box on line 1d if \nyou are the fiduciary of a decedent who \ndied intestate (that is, without leaving a \nvalid will). Only check this box if there is \nno court appointed administrator or \nrepresentative for the estate of the \ndecedent and you are the sole person \ncharged with the property of the decedent. \nEnter the decedent's date of death on \nline 2a.\nLine 1e. Trusts. If you were named a \ntrustee under a valid instrument, check the \nbox on line 1e and enter the date of your \nappointment or the date of the transfer of \nassets on line 2b.\nLine 1f. Bankruptcy or assignment for \nthe benefit of creditors. If you are a \nbankruptcy trustee or an assignee for the \nbenefit of creditors, check the box on \nline 1f. Enter the date the assets were \nassigned to you on line 2b.\nLine 1g. Other proceedings. If you are \nacting in a fiduciary capacity under \ncircumstances different from those listed \non lines 1a through 1f, check the box on \nline 1g and describe the authority for the \nfiduciary relationship in the space \nprovided. Enter the date you were \nappointed or assets were transferred or \nassigned to you on line 2b.\nLine 2a. Date of death. Complete this \nline only if you checked the box on line 1a, \nline 1b, or line 1d.\nLine 2b. Date of appointment or trans\nfer of assets. Complete this line only if \nyou checked the box on line 1c, 1e, 1f, or \n1g.\nYou must be prepared to furnish \nevidence that substantiates your \nauthority to act as a fiduciary.\nSection B. Nature of \nLiability and Tax Notices\nLines 3 and 4. Check the appropriate \nbox(es) indicating the type of tax and \nCAUTION\n!\nforms you will be filing in performance of \nyour fiduciary duties.\nLine 5. If your authority does not cover all \nyears or tax periods, check the box and \nlist the specific years or periods within \nyour authority.\nForm 56 cannot be used to \nrequest copies of notices and \ncorrespondence.\nPart II—Revocation or \nTermination of Notice\nComplete Part II only if you are revoking or \nterminating a prior notice concerning a \nfiduciary relationship. Completing \nSection B or C does not relieve any new or \nsubstitute fiduciary of the requirement to \nfile a Form 56 or to otherwise give notice.\nPart III—Court and \nAdministrative \nProceedings\nComplete this part only if you have been \nappointed a receiver, trustee, or fiduciary \nby a court or other governmental unit in a \nproceeding other than a bankruptcy \nproceeding.\nIf proceedings are scheduled for more \nthan one date, time, or place, attach a \nseparate schedule of the proceedings.\nAssignment for the benefit of cred-\nitors. If you have been appointed as an \nassignee for the benefit of creditors, you \nmust attach the following information:\n1.\nA brief description of the assets \nthat were assigned; and\n2.\nAn explanation of the action to be \ntaken regarding such assets, including \nany hearings, meetings of creditors, sale, \nor other scheduled action.\nPart IV—Signature\nSign Form 56 under penalty of perjury and \nenter a title describing your role as a \nfiduciary (for example, assignee, executor, \nguardian, trustee, personal representative, \nreceiver, conservator, surviving spouse, or \nsole heir in possession of the property of \nthe decedent).\nCAUTION\n!\nPaperwork Reduction Act and Privacy Act Notice. We ask for the information on this form to carry out the Internal Revenue laws \nof the United States. Form 56 is provided for your convenience in meeting this requirement and its use is voluntary. Sections 6903 and \n6036 require you to inform the IRS of the creation or termination of a fiduciary relationship. Under section 6109 you must disclose the \nsocial security number or other identification number of the individual or entity for which you are acting. The principal purpose of this \ndisclosure is to secure proper identification of the taxpayer. We also need this information to gain access to the tax information in our \nfiles and properly respond to your request. We may disclose this information to the Department of Justice for civil or criminal litigation, \nand to cities, states, and the District of Columbia for use in administering their tax laws. We may also disclose this information to other \ncountries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and \nintelligence agencies to combat terrorism. If you do not disclose this information, we may suspend processing the notice of fiduciary \nrelationship and not consider this as proper notification until you provide the information. Providing false information may subject you \nto penalties.\n-2-\n",
"You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form \ndisplays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents \nmay become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential \nas required by section 6103.\nThe time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:\nRecordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 min.\nLearning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 min.\nPreparing the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 min.\nCopying, assembling, and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 min.\nIf you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be \nhappy to hear from you. You can send us comments from IRS.gov/FormsComments. Or you can write to the Internal Revenue \nService, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Don’t send the form to \nthis office.\n-3-\n"
] |
p5386.pdf
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1219 Publ 5386 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5386.pdf
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[
" \n \nPublication 5386 (12-2019) Catalog Number 73626O Department of the Treasury Internal Revenue Service irs.gov \n \n \n \nDecember 2019 \nFrequently Asked Questions \nTax Year 2019 Link & Learn Taxes and Volunteer Certification Test \nLink & Learn Taxes provides online courses and certification tests for all individuals interested in \nvolunteering for the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly \n(TCE) programs. \n■ \nQuestion: How do I access the online test? \nAnswer: You can log into VITA/TCE Central directly or you can select it from the Link & Learn \nTaxes course page. If you have an existing account, enter your user name and password. If not, \ncreate a new account. Once you are logged in, select your preferred certification level from the tabs \nalong the top of the screen. You must first complete the Volunteer Standards of Conduct exam and \nthe Intake/Interview and Quality Review exam. When you are ready to complete any subsequent \nexams, click on the exam link and select “Launch” from the upper right-hand corner of the pop-up \nbox. If the word “Launch” does not appear, you have not yet completed a prerequisite for the exam \nyou selected. \n■ \nQuestion: What is the passing score for certification? \nAnswer: The passing score is 80% or higher. \n■ \nQuestion: What if I do not pass a test on the first attempt? \nAnswer: If you are taking the paper test, Form 6744, there is a retest following each test which asks \ndifferent questions for the same scenarios used in the test. The online test allows a total of two \nattempts at certification for each test. \n■ \nQuestion: What if I am unable to complete an online test in one session? \nAnswer: The system will bookmark where you stop in an online test. When you log back in, select the \n“in progress” link to continue from the point where you stopped. \n■ \nQuestion: What if I need to change an answer on the online test? \nAnswer: You can use the “Back” button to change your answer to a question. Your answers, and any \nquestions that have been skipped, will be displayed at the end of the test. This is the last opportunity \nto change answers. When you are finished, select “Submit.” The “Help” link provides tips to avoid \ninput errors. \n■ \nQuestion: What characters can be entered for the fill-in answers? \nAnswer: When entering fill-in answers, use only numbers; do not use symbols such as dollar signs, \ncommas, or decimal points. \n \n \n",
" \n \n■ \nQuestion: What documentation can I obtain if I certify online using Link & Learn Taxes? \nAnswer: Once you successfully complete a test, you can print a course certificate. You are also able \nto electronically sign and save or print a copy of Form 13615, Volunteer Standards of Conduct \nAgreement. \n■ \nQuestion: What if I forget my password? \nAnswer: Select the “Forgot Password” link at the bottom of the login screen. During the registration \nprocess, be sure to enter your email address correctly so you can receive lost password notifications. \nIf you are unable to reset your password, you can contact the help desk. \n■ \nQuestion: Can I use references to complete the test? \nAnswer: This is an open book test. Use the VITA/TCE training materials and any other forms, \ninstructions or publications you find helpful. You should complete the test on your own. \n■ \nQuestion: What tax year does the test use? \nAnswer: The answers are based on tax year 2019 law. Returning volunteers should review the \nImportant Changes lesson before taking the test. \n■ \nQuestion: Do I have to take the Basic course before taking any other courses? \nAnswer: On Link & Learn Taxes, each course is self-contained. The Basic tab includes just the Basic \ncourse. The Advanced tab includes all Basic and Advanced information. The optional courses contain \nthe information for that subject only. If you are an experienced volunteer, you can choose to review \nthe Important Changes lesson rather than the entire Basic or Advanced course. If you received \ntraining in a classroom setting or by using Publication 4491, VITA/TCE Training Guide, you may \nproceed directly to the online test without reviewing the Link & Learn Taxes courses. \nFor certification testing - you must first pass the Volunteer Standards of Conduct and the \nIntake/Interview and Quality Review tests. You can then choose the Basic test, the Advanced test or \nthe Foreign Students and Scholars test. After completing the Basic or Advanced test you may take \nthe optional Health Savings Accounts or the Puerto Rico test. With Advanced certification, you have \nthe option of taking the Military or International tests. Note: You do not have to complete the Basic \ntest before taking the Advanced test. \n \nVITA/TCE volunteers with the professional designation of attorney, certified public accountant or \nenrolled agent have the option to certify on new provisions and tax law changes by completing the \nFederal Tax Law Update Test for Circular 230 Professionals. These volunteers are first required to \ncertify on the Volunteer Standards of Conduct test and the Intake/Interview & Quality Review test. \nThe test is available on Link & Learn Taxes and is also printed in Form 6744, VITA/TCE Volunteer \nAssistor’s Test/Retest. Once the required certifications are successfully completed, these eligible \nvolunteers are authorized to prepare all tax returns within the scope of the VITA/TCE programs. \n■ \nQuestion: How do I access Site Coordinator training? \nAnswer: On the My Account tab, select “Yes” for the question “Do you want to take the Site \nCoordinator course?” and save. A link for the course will then appear on the Certification Test tab. \n■ \nQuestion: If I created an account last year, must I register again this year? \nAnswer: No, you can use the same login and password from last year. Volunteers are allowed only \none account in the system. \n \n \n",
" \n \n■ \nQuestion: How do I update my information? \nAnswer: Log in and select the My Account tab. Make any necessary changes to your group, address, \nemail, telephone number or any other information and update the number of years you have \nvolunteered. Select “Save” to keep your changes. \n■ \nQuestion: I’m a Volunteer Instructor. How do I access the test answers so I can grade my students’ \ntests? \nAnswer: Site Coordinators, Volunteer Instructors and SPEC Territory Managers must select the \napplicable role on the My Account tab. After achieving a passing score of 80% or higher, Publication \n4189, VITA/TCE Test/Retest Answers, will be accessible via a link in the lower right-hand corner of \nthe Certification Test tab. \n■ \nQuestion: How do I get continuing education credits? \nAnswer: Refer to the instructions in Publication 5362, Fact Sheet for VITA/TCE Partners and \nVolunteers: Continuing Education Credits. \n \n \n \n \n \n \n \n"
] |
f8916a.pdf
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1119 Form 8916-A (PDF)
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https://www.irs.gov/pub/irs-pdf/f8916a.pdf
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[
"Form 8916-A\n(Rev. November 2019)\nDepartment of the Treasury \nInternal Revenue Service\nSupplemental Attachment to Schedule M-3\n▶ Attach to Schedule M-3 for Form 1065, 1120, 1120-L, 1120-PC, or 1120-S.\n▶ Go to www.irs.gov/Form1120 for the latest information.\nOMB No. 1545-0123\nName of common parent\nEmployer identification number\nName of subsidiary\nEmployer identification number\nPart I\nCost of Goods Sold\nCost of Goods Sold Items \n \n(a) \n Expense per \nIncome Statement\n(b) \nTemporary \nDifference\n(c) \n Permanent \nDifference\n(d) \n Deduction per Tax \nReturn\n1\nAmounts attributable to cost flow assumptions\n.\n2\nAmounts attributable to:\na\nStock option expense .\n.\n.\n.\n.\n.\n.\n.\n.\n.\nb\nOther equity-based compensation .\n.\n.\n.\n.\n.\nc\nMeals and entertainment .\n.\n.\n.\n.\n.\n.\n.\n.\nd\nParachute payments\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\ne\nCompensation with section 162(m) limitation\n.\n.\nf\nPension and profit sharing\n.\n.\n.\n.\n.\n.\n.\n.\ng\nOther post-retirement benefits .\n.\n.\n.\n.\n.\n.\nh\nDeferred compensation\n.\n.\n.\n.\n.\n.\n.\n.\n.\ni\nReserved .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n \nj\nAmortization .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \nk\nDepletion .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nl\nDepreciation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \nm Corporate-owned life insurance premiums .\n.\n.\nn\nOther section 263A costs.\n.\n.\n.\n.\n.\n.\n.\n. \n3\nInventory shrinkage accruals.\n.\n.\n.\n.\n.\n.\n.\n4\nExcess inventory and obsolescence reserves .\n.\n \n5\nLower of cost or market write-downs .\n.\n.\n.\n.\n6\nOther items with differences (attach statement)\n.\n7\nOther items with no differences .\n.\n.\n.\n.\n.\n.\n8 \n \n \nTotal cost of goods sold. Add lines 1 through 7 in \ncolumns a, b, c, and d. Enter totals on the \napplicable Schedule M-3. See instructions .\n.\n.\nFor Paperwork Reduction Act Notice, see instructions.\nCat. No. 48657X\nForm 8916-A (Rev. 11-2019)\n",
"Form 8916-A (Rev. 11-2019)\nPage 2\nPart II\nInterest Income\nInterest Income Item\n(a) \nIncome (Loss) per Income \nStatement\n(b) \nTemporary \nDifference\n(c) \nPermanent \nDifference\n(d) \nIncome (Loss) per \n Tax Return\n1 \n \nTax-exempt interest \nincome\n2 \n \nInterest income from hybrid \nsecurities\n3\nSale/lease interest income\n4a \n \n \nIntercompany interest \nincome — From outside tax \naffiliated group\n4b \n \n \nIntercompany interest \nincome — From tax \naffiliated group\n5\nOther interest income\n6 \n \n \n \n \nTotal interest income. Add \nlines 1 through 5 in columns \na, b, c, and d. Enter total on \nthe applicable Schedule M-3. \nSee instructions.\nPart III\nInterest Expense\nInterest Expense Item\n(a) \nExpense per Income \nStatement\n(b) \nTemporary \nDifference\n(c) \nPermanent \nDifference\n(d) \nDeduction per Tax Return\n1 \n \nInterest expense from \nhybrid securities\n2 \n \nLease/purchase interest \nexpense\n3a \n \n \nIntercompany interest \nexpense — Paid to outside \ntax affiliated group\n3b \n \n \nIntercompany interest \nexpense — Paid to tax \naffiliated group\n4\nOther interest expense\n5 \n \n \n \n \nTotal interest expense. Add \nlines 1 through 4 in columns \na, b, c, and d. Enter total on \nthe applicable Schedule M-3. \nSee instructions.\nForm 8916-A (Rev. 11-2019)\n",
"Form 8916-A (Rev. 11-2019)\nPage 3\nSection references are to the Internal Revenue Code unless \notherwise noted.\nFuture Developments\nFor the latest information about developments related to \nForm 8916-A and its instructions, such as legislation \nenacted after they were published, go to \nwww.irs.gov/Form1120.\nGeneral Instructions\nPurpose of Form\nUse Form 8916-A to provide a detailed schedule of the \namounts reported on the applicable Schedule M-3 for cost \nof goods sold, interest income, and interest expense.\nWho Must File\nGenerally, Form 8916-A must be filed for each separate \nentity required to file a Schedule M-3 for Form 1065, Form \n1120, Form 1120-C, Form 1120-L, Form 1120-PC, or Form \n1120-S. \nHowever, certain separate entities that (a) are required to \nfile a Schedule M-3 and have less than $50 million in total \nassets at the end of the tax year, or (b) are not required to \nfile a Schedule M-3 and voluntarily file a Schedule M-3, are \nnot required to file Form 8916-A but may voluntarily do so. \nSee the instructions for the applicable Schedule M-3 for \neach separate entity. \nNote. Schedule M-3 (Form 1120) mixed group filers, all \nSchedule M-3 (Form 1120-L) filers, and all Schedule M-3 \n(Form 1120-PC) filers must file Form 8916-A.\nConsolidated groups. In the case of a consolidated tax \ngroup, a Form 8916-A must be filed as part of the Schedules \nM-3 prepared for the parent company, each subsidiary, the \neliminations Schedule M-3, and the consolidated Schedule \nM-3. It is not required that the supporting detail for Form \n8916-A, Part I, line 6, be presented for the eliminations \nSchedule M-3 or the consolidated Schedule M-3.\nMixed groups. In the case of a mixed group (as described in \nthe instructions for Schedule M-3 for Form 1120, Form \n1120-L, and Form 1120-PC), a Form 8916-A, if applicable, is \nrequired at the sub-consolidated level and the sub-\nconsolidated elimination level.\nHow To File\nAttach Form 8916-A to each applicable separate Schedule \nM-3.\nSpecific Instructions\nNote. Any filer that completes Parts II and III of Schedule \nM-3 (Form 1120) and Form 8916-A must complete all \ncolumns, without exception. See the instructions for Parts II \nand III of the applicable Schedule M-3.\nPart I. Cost of Goods Sold\nLine 1\nReport differences attributable to cost flow assumptions, for \nexample, differences between book and tax LIFO \ncomputations. Generally, differences in the LIFO reserves for \nbook and tax purposes should be reported on this line.\nLine 2n\nReport differences attributable to section 263A. For example, \nif book inventory costs do not equal section 471 inventory \ncosts, report differences between section 471 inventory \ncosts and section 263A inventory costs. This includes all \ncost of goods sold differences, not just differences \nattributable to additional section 263A cost adjustments to \nending inventory. LIFO taxpayers using the simplified \nproduction method or the simplified resale method should \nreport the amount of additional section 263A costs \ncomputed after LIFO computations. LIFO taxpayers not \nusing a simplified section 263A method should report costs \nattributable to additional section 263A prior to performing \nLIFO computation. Differences due to purchasing, and \nstorage and handling costs, should generally be reported on \nline 2n (to the extent not already included in lines 2a through \n2m). Report the additional section 263A cost adjustments to \nending inventory on line 2n (and the reversal of the prior year \nending inventory, if applicable).\nLines 4 and 5\nIf the taxpayer does not distinguish between obsolescence \nand excess inventory reserves and lower of cost or market \nwrite-downs in its general ledger, report all amounts relating \nto these reserves on line 4 for excess inventory and \nobsolescence reserves.\nLine 6\nAttach a statement that separately states and adequately \ndiscloses the nature and amount of each expense reported \non this line. See the instructions for the applicable Schedule \nM-3 for a definition of “separately stated and adequately \ndisclosed.” It is not required that the supporting detail for \nForm 8916-A, Part I, line 6, be presented for the eliminations \nSchedule M-3 or the consolidated Schedule M-3. Report \ndifferences between book inventory costs and section 471 \ninventory costs on this line.\nLine 7\nReport all other items with no differences on this line. For \nexample, if book inventory costs equal section 471 inventory \ncosts, this line should report total book inventory and section \n471 inventory costs without regard to amounts reported on \nlines 1 through 5.\nLine 8\nLine 8 should equal the amount reported on Schedule M-3 \n(Form 1120), Part II, line 17; Schedule M-3 (Form 1120-S), \nPart II, line 15; or Schedule M-3 (Form 1065), Part II, line 15. \nSee the instructions for the applicable Schedule M-3.\n",
"Form 8916-A (Rev. 11-2019)\nPage 4\nPart II. Interest Income\nLine 1\nReport on line 1, column (a), tax-exempt interest income \ndefined under section 103. Complete columns (b) and (c), as \napplicable.\nLine 2\nReport on line 2, column (a), the total amount of interest \nincome included on Schedule M-3, Part I, line 11, from \nhybrid securities characterized as debt for financial \naccounting and as equity for tax purposes. Report on line 2, \ncolumn (d), the total amount of interest income from hybrid \nsecurities characterized as equity for financial accounting \nand as debt for tax purposes. Complete columns (b) and (c), \nas applicable. Report interest income from a debt that is \nboth a hybrid debt and a related party debt on line 2 and not \non line 4a or 4b.\nLine 3\nReport on line 3, column (a), the total interest income from \nperiodic payments from transactions characterized as a \nlease for financial accounting and as a sale for tax purposes. \nReport on line 3, column (d), the total interest income from \nperiodic payments from transactions characterized as a sale \nfor financial accounting and as a lease for tax purposes. \nComplete columns (b) and (c), as applicable. See the \ninstructions for sale versus lease for Schedule M-3, Part II, \nline 18 (Forms 1120 and 1120-L), line 17 (Form 1120-PC), or \nline 16 (Forms 1120-S and 1065).\nLine 4a\nReport on line 4a total intercompany interest income from an \nentity included on Schedule M-3, Part I, line 4, but not \nincluded on Schedule M-3, Part I, line 11. Report hybrid \nsecurity interest income on line 2 and sale/lease interest \nincome on line 3 but not on line 4a.\nLine 4b\nReport on line 4b total intercompany interest income from an \nentity within the tax affiliated group. Report hybrid security \ninterest income on line 2 and sale/lease interest income on \nline 3 but not on line 4b.\nNote. Report interest income from a debt that is both a \nhybrid debt and a related party debt on line 2 but not on line \n4a or 4b.\nLine 5\nReport on line 5 total interest income not required to be \nreported on lines 1 through 4b.\nLine 6\nLine 6 must equal the amount for all columns reported on \nSchedule M-3, Part II, line 13 (Forms 1120, 1120-L, and \n1120-PC) or line 11 (Forms 1120-S and 1065). See the \ninstructions for the applicable Schedule M-3.\nPart III. Interest Expense\nLine 1\nReport on line 1, column (a), total interest expense from \nhybrid securities characterized as debt for financial \naccounting and as equity for tax purposes. Report on line 1, \ncolumn (d), total interest expense from hybrid securities \ncharacterized as equity for financial accounting and as debt \nfor tax purposes. Complete columns (b) and (c), as \napplicable. Report interest expense from a debt that is both \na hybrid debt and a related party debt on line 1 but not on \nline 3a or 3b.\nLine 2\nReport on line 2, column (a), total interest expense from \nperiodic payments from transactions characterized as a \nlease for financial accounting and as a purchase for tax \npurposes. Report on line 2, column (d), total interest expense \nfrom periodic payments from transactions characterized as a \npurchase for financial accounting and as a lease for tax \npurposes. Complete columns (b) and (c), as applicable. See \nthe instructions for Schedule M-3, Part III, line 34 (Form \n1120), line 35 (Forms 1120-L and 1120-PC), or line 28 \n(Forms 1120-S and 1065).\nLine 3a\nReport on line 3a total intercompany interest expense \nincluded on Schedule M-3, Part I, line 4, but not included on \nSchedule M-3, Part I, line 11. Report hybrid security interest \nexpense or deduction on line 1 and purchase/lease interest \nexpense or deduction on line 2 but not on line 3a.\nLine 3b\nReport on line 3b total intercompany interest expense to an \nentity within the tax affiliated group. Report hybrid security \ninterest expense or deduction on line 1 and purchase/lease \ninterest expense or deduction on line 2 but not on line 3b.\nNote. Report interest expense from a debt that is both a \nhybrid debt and a related party debt on line 1 but not on line \n3a or 3b.\nLine 4\nReport on line 4 total interest expense not required to be \nreported on lines 1 through 3b.\nLine 5\nLine 5 must equal the amounts for all columns reported on \nSchedule M-3 (Form 1120), Part III, line 8; Schedule M-3 \n(Forms 1120-PC and 1120-L), Part III, line 36; Schedule M-3 \n(Form 1065), Part III, line 27; or Schedule M-3 (Form 1120-S), \nPart III, line 26. See the instructions for the applicable \nSchedule M-3.\nPaperwork Reduction Act Notice. We ask for the \ninformation on this form to carry out the Internal Revenue \nlaws of the United States. You are required to give us the \ninformation. We need it to ensure that you are complying \nwith these laws and to allow us to figure and collect the right \namount of tax.\nYou are not required to provide the information requested \non a form that is subject to the Paperwork Reduction Act \nunless the form displays a valid OMB control number. Books \nor records relating to a form or its instructions must be \nretained as long as their contents may become material in \nthe administration of any Internal Revenue law. Generally, \ntax returns and return information are confidential, as \nrequired by section 6103.\nThe time needed to complete and file this form will vary \ndepending on individual circumstances. The estimated \nburden for business taxpayers filing this form is approved \nunder OMB control number 1545-0123 and is included in the \nestimates shown in the instructions for their business income \ntax return.\nIf you have comments concerning the accuracy of these \ntime estimates or suggestions for making this form simpler, \nwe would be happy to hear from you. See the instructions \nfor the tax return with which this form is filed.\n"
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f1120sm3.pdf
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1219 Form 1120 (Schedule M-3) (PDF)
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https://www.irs.gov/pub/irs-pdf/f1120sm3.pdf
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[
"SCHEDULE M-3 \n(Form 1120)\n(Rev. December 2019)\nDepartment of the Treasury \nInternal Revenue Service\nNet Income (Loss) Reconciliation for Corporations \nWith Total Assets of $10 Million or More\n▶ Attach to Form 1120 or 1120-C. \n ▶ Go to www.irs.gov/Form1120 for instructions and the latest information.\nOMB No. 1545-0123\nName of corporation (common parent, if consolidated return)\nEmployer identification number\nCheck applicable box(es):\n(1)\nNon-consolidated return\n(2)\nConsolidated return (Form 1120 only)\n(3)\nMixed 1120/L/PC group\n(4)\nDormant subsidiaries schedule attached\nPart I\nFinancial Information and Net Income (Loss) Reconciliation (see instructions)\n1 \na\nDid the corporation file SEC Form 10-K for its income statement period ending with or within this tax year?\nYes.\nSkip lines 1b and 1c and complete lines 2a through 11 with respect to that SEC Form 10-K.\nNo.\nGo to line 1b. See instructions if multiple non-tax-basis income statements are prepared.\nb Did the corporation prepare a certified audited non-tax-basis income statement for that period?\nYes.\nSkip line 1c and complete lines 2a through 11 with respect to that income statement.\nNo.\nGo to line 1c.\nc Did the corporation prepare a non-tax-basis income statement for that period?\nYes.\nComplete lines 2a through 11 with respect to that income statement.\nNo.\nSkip lines 2a through 3c and enter the corporation’s net income (loss) per its books and records on line 4a.\n2 \na\nEnter the income statement period: Beginning\nMM/DD/YYYY\nEnding\nMM/DD/YYYY\nb Has the corporation’s income statement been restated for the income statement period on line 2a?\nYes.\n(If “Yes,” attach an explanation and the amount of each item restated.)\nNo.\nc Has the corporation’s income statement been restated for any of the five income statement periods immediately \npreceding the period on line 2a?\nYes.\n(If “Yes,” attach an explanation and the amount of each item restated.)\nNo.\n3 \na\nIs any of the corporation’s voting common stock publicly traded?\nYes.\nNo.\nIf “No,” go to line 4a.\nb Enter the symbol of the corporation’s primary U.S. publicly traded voting common\nstock .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nc Enter the nine-digit CUSIP number of the corporation’s primary publicly traded voting \ncommon stock .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \na\nWorldwide consolidated net income (loss) from income statement source identified in Part I, line 1 \n.\n4a \nb Indicate accounting standard used for line 4a (see instructions):\n (1)\nGAAP\n(2)\nIFRS\n(3)\nStatutory\n(4)\nTax-basis\n(5)\nOther (specify)\n5 \na\nNet income from nonincludible foreign entities (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5a ( )\nb Net loss from nonincludible foreign entities (attach statement and enter as a positive amount) .\n.\n.\n5b\n6 \na\nNet income from nonincludible U.S. entities (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6a ( )\nb Net loss from nonincludible U.S. entities (attach statement and enter as a positive amount) .\n.\n.\n.\n6b\n7 \na\nNet income (loss) of other includible foreign disregarded entities (attach statement) \n.\n.\n.\n.\n.\n.\n7a \nb Net income (loss) of other includible U.S. disregarded entities (attach statement) \n.\n.\n.\n.\n.\n.\n.\n7b\nc Net income (loss) of other includible entities (attach statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7c \n8 \nAdjustment to eliminations of transactions between includible entities and nonincludible entities (attach\nstatement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nAdjustment to reconcile income statement period to tax year (attach statement) \n.\n.\n.\n.\n.\n.\n.\n9 \n10a\nIntercompany dividend adjustments to reconcile to line 11 (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n10a\nb Other statutory accounting adjustments to reconcile to line 11 (attach statement) .\n.\n.\n.\n.\n.\n.\n10b\nc Other adjustments to reconcile to amount on line 11 (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10c\n11 \nNet income (loss) per income statement of includible corporations. Combine lines 4 through 10 .\n11 \nNote: Part I, line 11, must equal Part II, line 30, column (a), or Schedule M-1, line 1 (see instructions).\n12 \nEnter the total amount (not just the corporation’s share) of the assets and liabilities of all entities included or removed on the\nfollowing lines.\nTotal Assets\nTotal Liabilities\na Included on Part I, line 4 .\n.\n.\n.\n.\n.\n. ▶\nb Removed on Part I, line 5 \n.\n.\n.\n.\n.\n. ▶\nc Removed on Part I, line 6 \n.\n.\n.\n.\n.\n. ▶\nd Included on Part I, line 7 .\n.\n.\n.\n.\n.\n. ▶\nFor Paperwork Reduction Act Notice, see the Instructions for Form 1120.\nCat. No. 37961C\nSchedule M-3 (Form 1120) (Rev. 12-2019)\n",
"Schedule M-3 (Form 1120) (Rev. 12-2019)\nPage 2 \nName of corporation (common parent, if consolidated return)\nEmployer identification number\nCheck applicable box(es): (1)\nConsolidated group\n(2)\nParent corp \n(3)\nConsolidated eliminations \n(4)\nSubsidiary corp \n(5)\nMixed 1120/L/PC group\nCheck if a sub-consolidated: (6)\n1120 group\n(7)\n1120 eliminations\nName of subsidiary (if consolidated return)\nEmployer identification number\nPart II\nReconciliation of Net Income (Loss) per Income Statement of Includible Corporations With Taxable \nIncome per Return (see instructions)\n( )\n( )\nIncome (Loss) Items \n(Attach statements for lines 1 through 12)\n(a) \nIncome (Loss) per \nIncome Statement\n(b) \nTemporary \nDifference\n(c) \nPermanent \nDifference\n(d) \n Income (Loss) \nper Tax Return\n1\nIncome (loss) from equity method foreign corporations\n2 Gross foreign dividends not previously taxed .\n.\n. \n3 Subpart F, QEF, and similar income inclusions .\n.\n4 Gross-up for foreign taxes deemed paid .\n.\n.\n.\n5 Gross foreign distributions previously taxed .\n.\n.\n6 Income (loss) from equity method U.S. corporations \n7 U.S. dividends not eliminated in tax consolidation\n.\n8 Minority interest for includible corporations \n.\n.\n.\n9 Income (loss) from U.S. partnerships \n.\n.\n.\n.\n.\n10 Income (loss) from foreign partnerships \n.\n.\n.\n.\n11 Income (loss) from other pass-through entities .\n.\n12 Items relating to reportable transactions \n.\n.\n.\n.\n 13 Interest income (see instructions) \n.\n.\n.\n.\n.\n.\n14 Total accrual to cash adjustment .\n.\n.\n.\n.\n.\n.\n15 Hedging transactions \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 Mark-to-market income (loss) .\n.\n.\n.\n.\n.\n.\n.\n17 Cost of goods sold (see instructions) \n.\n.\n.\n.\n.\n18 Sale versus lease (for sellers and/or lessors) .\n.\n.\n 19 Section 481(a) adjustments \n.\n.\n.\n.\n.\n.\n.\n.\n 20 Unearned/deferred revenue \n.\n.\n.\n.\n.\n.\n.\n.\n21 Income recognition from long-term contracts \n.\n.\n22 Original issue discount and other imputed interest . \n23a \n \nIncome statement gain/loss on sale, exchange, \nabandonment, worthlessness, or other disposition of \nassets other than inventory and pass-through entities\nb Gross capital gains from Schedule D, excluding \namounts from pass-through entities .\n.\n.\n.\n.\n.\nc \n \nGross capital losses from Schedule D, excluding \namounts from pass-through entities, abandonment \nlosses, and worthless stock losses .\n.\n.\n.\n.\n.\nd \n \nNet gain/loss reported on Form 4797, line 17, \nexcluding amounts from pass-through entities, \nabandonment losses, and worthless stock losses\n.\ne Abandonment losses \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nf Worthless stock losses (attach statement) .\n.\n.\n.\ng Other gain/loss on disposition of assets other than inventory\n24 Capital loss limitation and carryforward used .\n.\n.\n25\nOther income (loss) items with differences (attach statement)\n 26\nTotal income (loss) items. Combine lines 1 through 25 \n27\nTotal expense/deduction items (from Part III, line 39) \n28 Other items with no differences .\n.\n.\n.\n.\n.\n.\n29a Mixed groups, see instructions. All others, combine \nlines 26 through 28 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nb PC insurance subgroup reconciliation totals .\n.\n.\nc Life insurance subgroup reconciliation totals .\n.\n.\n30\nReconciliation totals. Combine lines 29a through 29c \nNote: Line 30, column (a), must equal Part I, line 11, and column (d) must equal Form 1120, page 1, line 28.\nSchedule M-3 (Form 1120) (Rev. 12-2019)\n",
"Schedule M-3 (Form 1120) (Rev. 12-2019)\nPage 3 \nName of corporation (common parent, if consolidated return)\nEmployer identification number\nCheck applicable box(es): (1)\nConsolidated group\n(2)\nParent corp\n(3)\nConsolidated eliminations\n(4)\nSubsidiary corp\n(5)\nMixed 1120/L/PC group\nCheck if a sub-consolidated: (6)\n1120 group\n(7)\n1120 eliminations\nName of subsidiary (if consolidated return)\nEmployer identification number\nPart III\nReconciliation of Net Income (Loss) per Income Statement of Includible Corporations With Taxable \nIncome per Return—Expense/Deduction Items (see instructions)\nExpense/Deduction Items \n(a) \nExpense per \nIncome Statement\n(b) \nTemporary \nDifference\n(c) \n Permanent \nDifference\n(d) \nDeduction per \nTax Return\n1 U.S. current income tax expense .\n.\n.\n.\n.\n.\n.\n2 U.S. deferred income tax expense .\n.\n.\n.\n.\n.\n3 State and local current income tax expense .\n.\n.\n4 State and local deferred income tax expense .\n.\n.\n5 Foreign current income tax expense (other than \nforeign withholding taxes) .\n.\n.\n.\n.\n.\n.\n.\n.\n6 Foreign deferred income tax expense .\n.\n.\n.\n.\n7 Foreign withholding taxes .\n.\n.\n.\n.\n.\n.\n.\n.\n8 Interest expense (see instructions) .\n.\n.\n.\n.\n.\n9 Stock option expense \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 Other equity-based compensation .\n.\n.\n.\n.\n.\n 11 Meals and entertainment \n.\n.\n.\n.\n.\n.\n.\n.\n.\n 12 Fines and penalties .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 13 Judgments, damages, awards, and similar costs \n.\n 14 Parachute payments .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 15 Compensation with section 162(m) limitation .\n.\n.\n16 Pension and profit-sharing .\n.\n.\n.\n.\n.\n.\n.\n.\n 17 Other post-retirement benefits \n.\n.\n.\n.\n.\n.\n.\n 18 Deferred compensation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 19\nCharitable contribution of cash and tangible property \n20 Charitable contribution of intangible property \n.\n.\n 21 Charitable contribution limitation/carryforward \n.\n.\n 22 Domestic production activities deduction (see \ninstructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n23 Current year acquisition or reorganization \ninvestment banking fees \n.\n.\n.\n.\n.\n.\n.\n.\n.\n24 Current year acquisition or reorganization legal and \naccounting fees \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n25 Current year acquisition/reorganization other costs .\n 26 Amortization/impairment of goodwill \n.\n.\n.\n.\n.\n27 Amortization of acquisition, reorganization, and \nstart-up costs .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n28 Other amortization or impairment write-offs .\n.\n.\n 29 Reserved \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 30 Depletion \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 31 Depreciation \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 32 Bad debt expense \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n 33 Corporate owned life insurance premiums \n.\n.\n.\n34\nPurchase versus lease (for purchasers and/or lessees) .\n 35 Research and development costs \n.\n.\n.\n.\n.\n.\n 36 Section 118 exclusion (attach statement) .\n.\n.\n. \n37 Section 162(r)—FDIC premiums paid by certain \nlarge financial institutions (see instructions) \n.\n.\n.\n38 Other expense/deduction items with differences \n(attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n39 \n \n \nTotal expense/deduction items. Combine lines 1 \nthrough 38. Enter here and on Part II, line 27, \nreporting positive amounts as negative and \nnegative amounts as positive .\n.\n.\n.\n.\n.\n.\n.\nSchedule M-3 (Form 1120) (Rev. 12-2019)\n"
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f5578.pdf
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1119 Form 5578 (PDF)
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https://www.irs.gov/pub/irs-pdf/f5578.pdf
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"Form 5578\n(Rev. November 2019) \nDepartment of the Treasury \nInternal Revenue Service \nAnnual Certification of Racial Nondiscrimination \nfor a Private School Exempt From Federal Income Tax\n(for use by organizations that do not file Form 990 or Form 990-EZ) \n▶ Go to www.irs.gov/Form5578 for the latest information.\nOMB No. 1545-0047 \nOpen to Public \nInspection \nFor IRS Use Only\nFor the period beginning \n, 20\n and ending \n, 20\n1a\nName of organization that operates, supervises, and/or controls school(s). \nAddress (number and street or P.O. box no., if mail is not delivered to street address) \nRoom/suite \nCity or town, state, and ZIP + 4 (If foreign address, list city or town, state or province, and country. Include postal code.) \n1b Employer identification number \n2a \nName of central organization holding group exemption letter covering the school(s). (If same as 1a above, write \n“Same” and complete 2c.) If the organization in 1a holds an individual exemption letter, write “Not Applicable.” \nAddress (number and street or P.O. box no., if mail is not delivered to street address) \nRoom/suite \nCity or town, state, and ZIP + 4 (If foreign address, list city or town, state or province, and country. Include postal code.) \n2b Employer identification number \n2c Group exemption number (see \ninstructions under Definitions) \n3a \nName of school. (If more than one school, write “See Attached” and attach a list of the names, complete addresses, \nincluding postal codes, and employer identification numbers of the schools.) If same as 1a, write “Same.” \nAddress (number and street or P.O. box no., if mail is not delivered to street address) \nRoom/suite \nCity or town, state, and ZIP + 4 (If foreign address, list city or town, state or province, and country. Include postal code.) \n3b Employer identification number, \nif any \nUnder penalties of perjury, I hereby certify that I am authorized to take official action on behalf of the above school(s) and that to the best of my knowledge and belief the \nschool(s) has (have) satisfied the applicable requirements of sections 4.01 through 4.05 of Rev. Proc. 75-50, 1975-2 C.B. 587, for the period covered by this certification. \n(Signature) \n(Type or print name and title.) \n(Date) \nFor Paperwork Reduction Act Notice, see instructions. \nCat. No. 42658A \nForm 5578 (Rev. 11-2019) \n",
"Form 5578 (Rev. 11-2019) \nPage 2\nGeneral Instructions \nSection references are to the Internal \nRevenue Code unless otherwise noted. \nNote: This form is open to public \ninspection. \nFuture Developments \nFor the latest information about \ndevelopments related to Form 5578 and its \ninstructions, such as legislation enacted \nafter they were published, go to \nwww.irs.gov/Form5578.\nWhat’s New \nRev. Proc. 2019-22; 2019-22 C.B. 1260, \navailable at www.irs.gov/irb/2019-22_IRB, \nmodified Rev. Proc. 75-50; 1975-2 C.B. \n587, available at www.irs.gov/pub/irs-tege/\nrp1975-50.pdf, to provide a third method \nfor a private school to satisfy the publicity \nrequirement in section 4.03. In general, an \norganization will meet the requirement if \nthe organization has publicized its racially \nnondiscriminatory policy on its primary \npublicly accessible Internet homepage at \nall times during its taxable year in a manner \nreasonably expected to be noticed by \nvisitors on the homepage. See paragraph \n1(c) under “Section 4.03, Publicity” below \nfor more details.\nPurpose of Form \nForm 5578 may be used by organizations \nthat operate tax-exempt private schools to \nprovide the Internal Revenue Service with \nthe annual certification of racial \nnondiscrimination required by Rev. Proc. \n75-50 (the relevant part of which is \nreproduced in these instructions). Rev. \nProc. 2019-22 modified Rev. Proc. 75-50 to \nprovide a third method for a private school \nto satisfy the requirement in Section 4.03.\nWho Must File \nEvery organization that claims exemption \nfrom federal income tax under section \n501(c)(3) of the Internal Revenue Code and \nthat operates, supervises, or controls a \nprivate school(s) must file a certification of \nracial nondiscrimination. If an organization \nis required to file Form 990, Return of \nOrganization Exempt From Income Tax, or \nForm 990-EZ, Short Form Return of \nOrganization Exempt From Income Tax, \neither as a separate return or as part of a \ngroup return, the certification must be \nmade on Schedule E (Form 990 or 990-EZ), \nSchools, rather than on this form. \nAn authorized official of a central \norganization may file one form to certify for \nthe school activities of subordinate \norganizations that would otherwise be \nrequired to file on an individual basis, but \nonly if the central organization has enough \ncontrol over the schools listed on the form \nto ensure that the schools maintain a racially \nnondiscriminatory policy as to students. \nDefinitions \nA racially nondiscriminatory policy as to \nstudents means that the school admits the \nstudents of any race to all the rights, \nprivileges, programs, and activities \ngenerally accorded or made available to \nstudents at that school and that the school \ndoes not discriminate on the basis of race \nin the administration of its educational \npolicies, admissions policies, scholarship \nand loan programs, and athletic and other \nschool-administered programs. \nThe IRS considers discrimination on the \nbasis of race to include discrimination on \nthe basis of color or national or ethnic origin. \nA school is an educational organization \nthat normally maintains a regular faculty \nand curriculum and normally has a \nregularly enrolled body of pupils or \nstudents in attendance at the place where \nits educational activities are regularly \ncarried on. The term includes primary, \nsecondary, preparatory, or high schools \nand colleges and universities, whether \noperated as a separate legal entity or as \nan activity of a church or other \norganization described in section 501(c)(3). \nThe term also includes preschools and any \nother organization that is a school as \ndefined in section 170(b)(1)(A)(ii). \nA central organization is an organization \nthat has one or more subordinates under its \ngeneral supervision or control. A subordinate \nis a chapter, local, post, or other unit of a \ncentral organization. A central organization \nmay also be a subordinate, as in the case of \na state organization that has subordinate \nunits and is itself affiliated with a national \norganization. \nThe group exemption number (GEN) is a \nfour-digit number issued to a central \norganization by the IRS. It identifies a \ncentral organization that has received a \nruling from the IRS recognizing on a group \nbasis the exemption from federal income \ntax of the central organization and its \ncovered subordinates. \nWhen To File \nUnder Rev. Proc. 75-50, a certification of \nracial nondiscrimination must be filed \nannually by the 15th day of the 5th month \nafter the organization’s accounting period \nends (May 15th for a calendar-year filer). If \nthe due date falls on a Saturday, Sunday, \nor legal holiday, file on the next business \nday. A business day is any day that isn’t a \nSaturday, Sunday, or legal holiday.\nWhere To File \nMail Form 5578 to: \nDepartment of the Treasury \nInternal Revenue Service Center \nOgden, UT 84201-0027 \nCertification Requirement \nSection 4.06 of Rev. Proc. 75-50 requires \nan individual authorized to take official \naction on behalf of a school that claims to \nbe racially nondiscriminatory as to \nstudents to certify annually, under \npenalties of perjury, that to the best of his \nor her knowledge and belief the school has \nsatisfied the applicable requirements of \nsections 4.01 through 4.05 of the Revenue \nProcedure, reproduced below: \nRev. Proc. 75-50 \nSection 4.01, Organizational \nRequirements. A school must include a \nstatement in its charter, bylaws, or other \ngoverning instrument, or in a resolution of \nits governing body, that it has a racially \nnondiscriminatory policy as to students \nand therefore does not discriminate against \napplicants and students on the basis of \nrace, color, and national or ethnic origin.\nSection 4.02, Statement of Policy. \nEvery school must include a statement of \nits racially nondiscriminatory policy as to \nstudents in all its brochures and catalogues \ndealing with student admissions, \nprograms, and scholarships. A statement \nsubstantially similar to the Notice \ndescribed in paragraph (a) of subsection 1 \nof section 4.03, infra, will be acceptable for \nthis purpose. Further, every school must \ninclude a reference to its racially \nnondiscriminatory policy in other written \nadvertising that it uses as a means of \ninforming prospective students of its \nprograms. The following references will be \nacceptable:\nThe (name) school admits students of \nany race, color, and national or ethnic origin. \nSection 4.03, Publicity. The school must \nmake its racially nondiscriminatory policy \nknown to all segments of the general \ncommunity served by the school. \n1. The school must use one of the \nfollowing three methods to satisfy this \nrequirement: \n(a) The school may publish a notice of \nits racially nondiscriminatory policy in a \nnewspaper of general circulation that \nserves all racial segments of the community. \nThis publication must be repeated at least \nonce annually during the period of the \nschool’s solicitation for students or, in the \nabsence of a solicitation program, during \nthe school’s registration period. Where \nmore than one community is served by a \nschool, the school may publish its notice in \nthose newspapers that are reasonably likely \nto be read by all racial segments of the \ncommunities that it serves. The notice must \nappear in a section of the newspaper likely \nto be read by prospective students and \ntheir families and it must occupy at least \nthree column inches. It must be captioned \nin at least 12 point boldface type as a notice \nof nondiscriminatory policy as to students, \nand its text must be printed in at least 8 \npoint type. The following notice will be \nacceptable: \nNotice Of Nondiscriminatory \nPolicy As To Students \nThe (name) school admits students of any \nrace, color, national, and ethnic origin to all \nthe rights, privileges, programs, and \nactivities generally accorded or made \navailable to students at the school. It does \nnot discriminate on the basis of race, color, \nnational and ethnic origin in administration \nof its educational policies, admissions \npolicies, scholarship and loan programs, \nand athletic and other school-administered \nprograms.\n",
"Form 5578 (Rev. 11-2019) \nPage 3\n(b) The school may use the broadcast \nmedia to publicize its racially \nnondiscriminatory policy if this use makes \nsuch nondiscriminatory policy known to all \nsegments of the general community the \nschool serves. If this method is chosen, the \nschool must provide documentation that \nthe means by which this policy was \ncommunicated to all segments of the \ngeneral community was reasonably \nexpected to be effective. In this case, \nappropriate documentation would include \ncopies of the tapes or script used and \nrecords showing that there was an \nadequate number of announcements, that \nthey were made during hours when the \nannouncements were likely to be \ncommunicated to all segments of the \ngeneral community, that they were of \nsufficient duration to convey the message \nclearly, and that they were broadcast on \nradio or television stations likely to be \nlistened to by substantial numbers of \nmembers of all racial segments of the \ngeneral community. Announcements must \nbe made during the period of the school’s \nsolicitation for students or, in the absence \nof a solicitation program, during the \nschool’s registration period. \n(c) The school may display a notice of its \nracially nondiscriminatory policy on its \nprimary publicly accessible Internet \nhomepage at all times during its taxable \nyear (excluding temporary outages due to \nwebsite maintenance or technical \nproblems) in a manner reasonably \nexpected to be noticed by visitors to the \nhomepage. The notice used to satisfy the \npublicity requirement under 1(a), above, is \nacceptable. A publicly accessible \nhomepage is one that does not require a \nvisitor to input information, such as an \nemail address or a user name and \npassword, to access the homepage. \nFactors to be considered in determining \nwhether the notice is reasonably expected \nto be noticed by visitors to the homepage \ninclude the size, color, and graphic \ntreatment of the notice in relation to other \nparts of the homepage, whether the notice \nis unavoidable, whether other parts of the \nhomepage distract attention from the \nnotice, and whether the notice is visible \nwithout a visitor having to do anything \nother than simple scrolling on the \nhomepage. A link on the homepage to \nanother page where the notice appears, or \na notice that appears in a carousel or only \nby selecting a drop down or by hovering \n(mouse over) is not acceptable. If a school \ndoes not have its own website, but it has \nweb pages contained in a website, the \nschool must display a notice of its racially \nnondiscriminatory policy on its primary \nlanding page within the website in a \nmanner that satisfies all other requirements \nof this subsection 1(c) to use this \npublication method.\nCommunication of a racially \nnondiscriminatory policy as to students by \na school to leaders of racial groups as the \nsole means of publicity generally will not \nbe considered effective to make the policy \nknown to all segments of the community.\n2. The requirements of subsection 1 of \nthis section will not apply when one of the \nfollowing paragraphs applies: \n(a) If for the preceding 3 years the \nenrollment of a parochial or other church-\nrelated school consists of students at least \n75% of whom are members of the \nsponsoring religious denomination or unit, \nthe school may make known its racially \nnondiscriminatory policy in whatever \nnewspapers or circulars the religious \ndenomination or unit utilizes in the \ncommunities from which the students are \ndrawn. These newspapers and circulars \nmay be those distributed by a particular \nreligious denomination or unit or by an \nassociation that represents a number of \nreligious organizations of the same \ndenomination. If, however, the school \nadvertises in newspapers of general \ncirculation in the community or \ncommunities from which its students are \ndrawn and paragraphs (b) and (c) of this \nsubsection are not applicable to it, then it \nmust comply with paragraph (a) of \nsubsection 1 of this section. \n(b) If a school customarily draws a \nsubstantial percentage of its students \nnationwide or world-wide or from a large \ngeographic section or sections of the \nUnited States and follows a racially \nnondiscriminatory policy as to students, the \npublicity requirement may be satisfied by \ncomplying with section 4.02, supra. Such a \nschool may demonstrate that it follows a \nracially nondiscriminatory policy within the \nmeaning of the preceding sentence either \nby showing that it currently enrolls students \nof racial minority groups in meaningful \nnumbers or, when minority students are not \nenrolled in meaningful numbers, that its \npromotional activities and recruiting efforts \nin each geographic area were reasonably \ndesigned to inform students of all racial \nsegments in the general communities within \nthe area of the availability of the school. The \nquestion whether a school satisfies the \npreceding sentence will be determined on \nthe basis of the facts and circumstances of \neach case. \n(c) If a school customarily draws its \nstudents from local communities and follows \na racially nondiscriminatory policy as to \nstudents, the publicity requirement may be \nsatisfied by complying with section 4.02, \nsupra. Such a school may demonstrate that it \nfollows a racially nondiscriminatory policy \nwithin the meaning of the preceding sentence \nby showing that it currently enrolls students \nof racial minority groups in meaningful \nnumbers. The question whether a school \nsatisfies the preceding sentence will be \ndetermined on the basis of the facts and \ncircumstances of each case. One of the facts \nand circumstances that the Service will \nconsider is whether the school’s promotional \nactivities and recruiting efforts in each area \nwere reasonably designed to inform students \nof all racial segments in the general \ncommunities within the area of the availability \nof the school. \nThe Service recognizes that the failure by \na school drawing its students from local \ncommunities to enroll racial minority group \nstudents may not necessarily indicate the \nabsence of a racially nondiscriminatory \npolicy as to students when there are \nrelatively few or no such students in these \ncommunities. Actual enrollment is, \nhowever, a meaningful indication of a \nracially nondiscriminatory policy in a \ncommunity in which a public school or \nschools became subject to a desegregation \norder of a federal court or otherwise \nexpressly became obligated to implement a \ndesegregation plan under the terms of any \nwritten contract or other commitment to \nwhich any federal agency was a party.\nThe Service encourages schools to \nsatisfy the publicity requirement by the \nmethods described in subsection 1 of this \nsection, regardless of whether a school \nconsiders itself within subsection 2, \nbecause it believes these methods to be \nthe most effective to make known a \nschool’s racially nondiscriminatory policy. \nIn this regard it is each school’s \nresponsibility to determine whether \nparagraph (a), (b), or (c) of subsection 2 \napplies to it. On audit, a school must be \nprepared to demonstrate that the failure to \npublish its racially nondiscriminatory policy \nin accordance with subsection 1 of this \nsection was justified by the application to it \nof paragraph (a), (b), or (c) of subsection 2. \nFurther, a school must be prepared to \ndemonstrate that it has publicly disavowed \nor repudiated any statements purported to \nhave been made on its behalf (after \nNovember 6, 1975) that are contrary to its \npublicity of a racially nondiscriminatory \npolicy as to students, to the extent that the \nschool or its principal official were aware of \nsuch statements. \nSection 4.04, Facilities and Programs. A \nschool must be able to show that all of its \nprograms and facilities are operated in a \nracially nondiscriminatory manner. \nSection 4.05, Scholarship and Loan \nPrograms. As a general rule, all \nscholarship or other comparable benefits \nprocurable for use at any given school \nmust be offered on a racially \nnondiscriminatory basis. Their availability \non this basis must be known throughout \nthe general community being served by the \nschool and should be referred to in the \npublicity required by this section in order \nfor that school to be considered racially \nnondiscriminatory as to students, \nscholarships and loans that are made \npursuant to financial assistance programs \nfavoring members of one or more racial \nminority groups that are designed to \npromote a school’s racially \nnondiscriminatory policy will not adversely \naffect the school’s exempt status. Financial \nassistance programs favoring members of \none or more racial groups that do not \nsignificantly derogate from the school’s \nracially nondiscriminatory policy similarly \nwill not adversely affect the school’s \nexempt status. \n",
"Form 5578 (Rev. 11-2019) \nPage 4\nHow To Get Tax Help \nInternet \nYou can access the IRS website at IRS.gov \n24 hours a day, 7 days a week.\n• Download forms, including talking tax \nforms, instructions, and publications. \n• Order IRS products online.\n• Research your tax questions online.\n• Search publications online by topic or \nkeyword. \n• Use the online Internal Revenue Code, \nRegulations, or other official guidance.\n• View Internal Revenue Bulletins (IRBs) \npublished in the last few years.\n• Sign up to receive local and national tax \nnews by email.\nTIP\nOrdering forms, instructions, \nand publications. \nYou can download items from \nthe IRS website at www.irs.gov/\nOrderForms to order \ncurrent-year forms, instructions, and \npublications, and prior-year forms and \ninstructions. You should receive your order \nwithin 10 days.\nBy Phone \nIf you have questions and/or need help \ncompleting this form, please call \n877-829-5500. This toll free telephone \nservice is available Monday thru Friday.\nPaperwork Reduction Act Notice. We \nask for the information on this form to carry \nout the Internal Revenue laws of the United \nStates. You are required to give us the \ninformation. We need it to ensure that you \nare complying with these laws and to allow \nus to figure and collect the right amount of \ntax.\nYou are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records relating \nto a form or its instructions must be \nretained as long as their contents may \nbecome material in the administration of \nany Internal Revenue law. Generally, tax \nreturns and return information are \nconfidential, as required by section 6103. \nHowever, certain returns and return \ninformation of tax exempt organizations \nand trusts are subject to public disclosure \nand inspection, as provided by section \n6104.\nThe time needed to complete and file \nthis form will vary depending on individual \ncircumstances. The estimated burden for \ntax exempt organizations filing this form is \napproved under OMB control number \n1545-0047 and is included in the estimates \nshown in the instructions for their \ninformation return.\nComments and suggestions. If you have \ncomments concerning the accuracy of this \ntime estimate or suggestions for making \nthis form simpler, we would be happy to \nhear from you. You can send us comments \nfrom http://www.irs.gov/FormComments. \nOr you can write to:\nInternal Revenue Service \nTax Forms and Publications Division \n1111 Constitution Ave. NW, IR-6526 \nWashington, DC 20224\nDon’t send your return to this address. \nInstead, see Where To File, earlier, for the \nlocation for filing your form.\n"
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f8896.pdf
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1219 Form 8896 (PDF)
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https://www.irs.gov/pub/irs-pdf/f8896.pdf
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[
"Form 8896\n(Rev. December 2019)\nDepartment of the Treasury \nInternal Revenue Service \nLow Sulfur Diesel Fuel Production Credit\n▶ Attach to your tax return. \n▶ Go to www.irs.gov/Form8896 for the latest information.\nOMB No. 1545-1914\nAttachment \nSequence No. 142\nName(s) shown on return\nIdentifying number \n1 \nLow sulfur diesel fuel produced (in gallons) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n1 \n2 \nMultiply line 1 by $0.05 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n2 \n3 \nQualified costs limitation (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n3 \n4 \nTotal low sulfur diesel fuel production credits allowed for all prior tax years (see instructions)\n.\n.\n. \n4 \n5 \nSubtract line 4 from line 3 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \n6 \nEnter the smaller of line 5 or line 2 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n6 \n7 \nLow sulfur diesel fuel production credit from partnerships, S corporations, and cooperatives (see \ninstructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n8 \n \nAdd lines 6 and 7. Cooperatives, go to line 9. Partnerships and S corporations, stop here and report \nthis amount on Schedule K. All others, stop here and report this amount on Form 3800, Part III, \nline 1m \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n8 \n9 \nAmount allocated to patrons of the cooperative (see instructions)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \n10\nCooperatives, subtract line 9 from line 8. Report this amount on Form 3800, Part III, line 1m \n.\n.\n. \n10 \nGeneral Instructions \nSection references are to the Internal Revenue Code unless \notherwise noted. \nFuture Developments\nFor the latest information about developments related to Form \n8896 and its instructions, such as legislation enacted after they \nwere published, go to www.irs.gov/Form8896.\nPurpose of Form \nUse Form 8896 to claim the low sulfur diesel fuel production \ncredit. \nThe credit generally is 5 cents for every gallon of low sulfur \ndiesel fuel produced by a qualified small business refiner during \nthe tax year. However, the total credits allowed for all tax years \ncannot be more than the refiner’s qualified costs limitation on \nline 3. This credit is part of the general business credit. \nPartnerships, S corporations, and cooperatives must file this \nform to claim the credit. All other taxpayers are not \nrequired to complete or file this form if their only source for this \ncredit is a partnership, S corporation, or cooperative. \nInstead, they can report this credit directly on line 1m in Part III \nof Form 3800, General Business Credit.\nDefinitions \nLow Sulfur Diesel Fuel \nThis is diesel fuel with a sulfur content of 15 parts per million or \nless. \nSmall Business Refiner \nA small business refiner generally is a refiner of crude oil with an \naverage daily domestic refinery run or average retained \nproduction for all facilities that did not exceed 205,000 barrels \nfor the 1-year period ending on December 31, 2002. To figure \nthe average daily domestic refinery run or retained production, \nonly include refineries that were refineries of the refiner or a \nrelated person (within the meaning of section 613A(d)(3)) on \nApril 1, 2003. However, a refiner is not a small business refiner \nfor a tax year if more than 1,500 individuals are engaged in the \nrefinery operations of the business on any day during the tax \nyear. \nQualified Costs \nFor each facility, qualified costs are costs paid or incurred to \ncomply with the highway diesel fuel sulfur control requirements \nof the Environmental Protection Agency (EPA) during the period \nbeginning January 1, 2003, and ending on the earlier of: \n• The date 1 year after the date on which the refiner must \ncomply with these EPA requirements with respect to such \nfacility; or \n• December 31, 2009. \nQualified costs include costs for the construction of new \nprocess operation units or the dismantling and reconstruction \nof existing process units to be used in the production of low \nsulfur diesel fuel, associated adjacent or offsite equipment \n(including tankage, catalyst, and power supply), engineering, \nconstruction period interest, and site work. \nIn addition, the small business refiner must obtain certification \nfrom the IRS (which will consult with the EPA) that the \ntaxpayer’s qualified costs will result in compliance with the \napplicable EPA regulations. This certification must be obtained \nnot later than June 29, 2008, or, if later, the date that is 30 \nmonths after the first day of the first tax year in which the credit \nis determined. For details, see Rev. Proc. 2007-69, 2007-49 \nI.R.B. 1137, available at \nwww.irs.gov/irb/2007-49_IRB#RP-2007-69.\nTIP\nUnless you elect not to take this credit, your \ndeductions will be reduced by the amount of your \ncredit. For details, see section 280C(d). \nAdditional Information \nFor more information, see section 45H. \nSpecific Instructions \nUse lines 1 through 6 to figure any low sulfur diesel fuel \nproduction credit from your own trade or business. \nLine 1 \nEnter the number of gallons of diesel fuel produced with a sulfur \ncontent of 15 parts per million or less. \nFor Paperwork Reduction Act Notice, see instructions. \nCat. No. 37704F \nForm 8896 (Rev. 12-2019) \n",
"Form 8896 (Rev. 12-2019) \nPage 2 \nLine 3 \nEnter 25% of the qualified costs (defined earlier) for the facility \nthat produced the fuel reported on line 1 if your average daily \ndomestic refinery runs were not more than 155,000 barrels for \nthe 1-year period ending on December 31, 2002. If your average \ndaily domestic refinery runs were more than 155,000 barrels, the \n25% is reduced (but not below zero) by multiplying it by 1 minus \nyour excess over 155,000 barrels divided by 50,000 barrels. \nExample. Your average daily domestic refinery runs were \n165,000 barrels for the 1-year period ending on December 31, \n2002. First divide 10,000 (your excess over 155,000 barrels) by \n50,000 to get 0.2. Next subtract 0.2 from 1.0 to get 0.8. Then \nmultiply 25% (0.25) by 0.8 to get 20% (0.20). On line 3, enter \n20% of the qualified costs for the facility that produced the fuel \nreported on line 1. \nLine 4 \nEnter the total low sulfur diesel fuel production credits allowed \nfor all prior tax years (as determined for line 6). \nLine 7 \nEnter total low sulfur diesel fuel production credits from:\n• Schedule K-1 (Form 1065), Partner’s Share of Income, \nDeductions, Credits, etc., box 15 (code P);\n• Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, \nDeductions, Credits, etc., box 13 (code P); and\n• Form 1099-PATR, Taxable Distributions Received From \nCooperatives, box 12 (box 11 for 2019; box 10 before 2019), or \nother notice of credit allocation.\nPartnerships, S corporations, and cooperatives report the \nabove credits on line 7. All other filers figuring a separate credit \non earlier lines also report the above credits on line 7. All others \nnot using earlier lines to figure a separate credit can report the \nabove credits directly on Form 3800, Part III, line 1m.\nLine 9 \nCooperative election to allocate credit to patrons. A \ncooperative described in section 1381(a) can elect to allocate \nany part of the low sulfur diesel fuel production credit to patrons \nof the cooperative. The credit is allocated among the patrons \neligible to share in patronage dividends on the basis of the \nquantity or value of business done with or for the patrons for the \ntax year. \nIf the cooperative is subject to the passive activity rules, \ninclude on line 7 any Form 8896 credits from passive activities \ndisallowed for prior years and carried forward to this year. \nComplete Form 8810, Corporate Passive Activity Loss and \nCredit Limitations, to determine the allowed credits that can be \nallocated to patrons. For details, see the Instructions for Form \n8810.\nThe cooperative is deemed to have made the election by \ncompleting line 9. However, the election is not effective unless: \n• It is made on a timely filed return (including extensions), and\n• The cooperative designates the apportionment in a written \nnotice or on Form 1099-PATR mailed to its patrons during the \npayment period described in section 1382(d).\nIf you timely file your return without making an election, you \ncan still make the election by filing an amended return within 6 \nmonths of the due date of the return (excluding extensions). \nWrite “Filed pursuant to section 301.9100-2” on the amended \nreturn. \nOnce made, the election cannot be revoked. \nPaperwork Reduction Act Notice. We ask for the information \non this form to carry out the Internal Revenue laws of the United \nStates. You are required to give us the information. We need it \nto ensure that you are complying with these laws and to allow \nus to figure and collect the right amount of tax. \nYou are not required to provide the information requested on \na form that is subject to the Paperwork Reduction Act unless \nthe form displays a valid OMB control number. Books or \nrecords relating to a form or its instructions must be retained as \nlong as their contents may become material in the \nadministration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by \nsection 6103. \nThe time needed to complete and file this form will vary \ndepending on individual circumstances. The estimated burden \nfor individual and business taxpayers filing this form is approved \nunder OMB control number 1545-0074 and 1545-0123 and is \nincluded in the estimates shown in the instructions for their \nindividual and business income tax return. The estimated \nburden for all other taxpayers who file this form is shown below.\nRecordkeeping \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. 2 hr., 52 min.\nLearning about the law or the form .\n.\n.\n.\n.\n.\n. 30 min.\nPreparing and sending the form to the IRS .\n.\n.\n. 34 min.\nIf you have comments concerning the accuracy of these time \nestimates or suggestions for making this form simpler, we would \nbe happy to hear from you. See the instructions for the tax \nreturn with which this form is filed. \n"
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f5310a.pdf
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1110 Form 5310-A (PDF)
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https://www.irs.gov/pub/irs-pdf/f5310a.pdf
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[
"The form you are looking for begins on the next page of this file. Before viewing it, \nplease see the important update information below.\nNew Mailing Address\nThe mailing address for certain forms have change since the forms were last published. \nThe new mailing address are shown below. \nMailing Address for Forms 1023, 1024, 1024-A, 1028, 5300, 5307, 5310, 5310-A, 5316, \n8717, 8718, 8940:\nInternal Revenue Service \nTE/GE Stop 31A Team 105 \nP.O. Box 12192 \nCovington, KY 41012–0192\nDeliveries by private delivery service (PDS) should be made to:\nInternal Revenue Service \n7940 Kentucky Drive \nTE/GE Stop 31A Team 105 \nFlorence, KY 41042\nThis update supplements these forms’ instructions. Filers should rely on this update for \nthe change described, which will be incorporated into the next revision of the form’s \ninstructions.\n",
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"Form 5310-A\n(Rev. November 2010)\nDepartment of the Treasury \nInternal Revenue Service\nNotice of Plan Merger or Consolidation, Spinoff, or \nTransfer of Plan Assets or Liabilities; Notice of \nQualified Separate Lines of Business \nUnder sections 6058(b) and 414(r) of the Internal Revenue Code.\nSee Who Must File instructions before filing this form.\nOMB No. 1545-1225\n1\nReason for filing (see specific instructions for code to enter):\nFor Internal Use Only\nPart I\nAll filers must complete lines 1 and 2.\n2a\nName of plan sponsor (employer if single-employer plan)\n2b\nAddress of plan sponsor (if a P.O. Box, see instructions)\n2c City\n2d State\n2e Zip Code\n2f\nCountry\n2g\nEmployer identification number (EIN) \n2h Telephone number\n2i Fax number\n3a\nPerson to contact if more information is needed. (See instructions.) \n(If a Power of Attorney is attached, check box and do not complete this line.)\nContact person’s name\n3b\nContact person’s address\n3c City\n3d State\n3e Zip Code\n3f\nTelephone number\n3g Fax number\nIf more space is needed for any item, attach additional sheets the same size as this form. Identify each additional sheet with the plan \nsponsor’s name and EIN and identify each item.\nUnder penalties of perjury, I declare that I have examined this notice, including accompanying statements and schedules, and to the \nbest of my knowledge and belief, it is true, correct, and complete.\nSIGN HERE ▶\nDate ▶\nType or print name\nType or print title\nFor Privacy Act and Paperwork Reduction Act Notice, see separate instructions.\nCat. No. 12783Y\nForm 5310-A (Rev. 11-2010)\n",
"Form 5310-A (Rev. 11-2010)\nPage 2 \nPart II\nComplete lines 4 through 6 if this is a notice of a plan merger or consolidation, spinoff, or transfer of \nplan assets or liabilities to another plan.\n4a\nName of plan (plan name may not exceed 70 characters including spaces):\n4b\nEnter 3-digit plan number:\n5a\nIs this a defined benefit plan? If “Yes,” enter “1.” If “No,” enter “2.”\nIf you enter 1, attach an actuarial statement of valuation showing compliance with the requirements of section 401(a)(12) and \nthe regulations under section 414(I). See instructions.\n5b\nIf this is a defined contribution plan, enter the appropriate code. See instructions.\n6\nOther plan(s) involved in the transaction. See instructions.\na\nEnter the total number of plans involved in the transaction other than the plan listed on line 4a:\nComplete the following information for the other plan. If more than one other plan, see instructions for the required attachment(s).\nb\nIf more than one other plan is involved in the transaction, enter the number of this statement (1 of 3, etc.):\nc\nPlan name\nd\nName of employer\ne\nEIN\nf\nPlan number (3 digits):\ng\nDate of merger or consolidation, spinoff, or transfer of plan assets or liabilities:\nh\nType of plan (see instructions for code to enter):\nPart III\nComplete lines 7 through 12 if you are filing a notice of qualified separate lines of business (QSLOB).\n7a\nHas the employer previously filed a notice of QSLOB? See instructions.\nIf “Yes,” enter “1” and complete lines 7b and 7c. If “No,” enter “2” and skip lines 7b and 7c.\nb\nEnter the first day of the first testing year for which such notice applied: ▶\nc\nEnter the filing date: ▶\nForm 5310-A (Rev. 11-2010)\n",
"Form 5310-A (Rev. 11-2010)\nPage 3 \n8\nFirst testing year for which this notice applies: ▶\n9 \n \nAre you filing this form to give notice that you are revoking a previously filed notice and that you are no longer testing on a \nQSLOB basis?\nIf “Yes,” enter “1” and complete line 10 and skip lines 11 and 12. If “No,” enter “2” and complete lines 10-12.\n10 \n \nCheck the box(es) for the appropriate code section(s) for which the employer is testing on a QSLOB basis (or for which the \nemployer tested, if the answer to line 9 is “Yes”).\nSection 410(b)\nSection 401(a)(26)\nSection 129(d)(8)\n11\nOn an attached list, identify each QSLOB operated by the employer. See instructions. \n12 \n \nEnter the following information relating to each plan maintained by the employer. If more than 1 plan, attach a \nschedule for each plan showing the information requested on lines 12a through 12e. See instructions.\na\nName of plan:\nb\nDate of determination letter, if any: ▶\nc\nIf this is a pre-approved plan, enter:\n(1) Date of the letter ▶\n(2) Serial or advisory letter number, if any: ▶\nd\nDate of the pending determination letter request, if any: ▶\ne\nList each QSLOB that has employees benefiting under the plan: See instructions.\nForm 5310-A (Rev. 11-2010)\n"
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f1028.pdf
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0906 Form 1028 (PDF)
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https://www.irs.gov/pub/irs-pdf/f1028.pdf
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[
"The form you are looking for begins on the next page of this file. Before viewing it, \nplease see the important update information below.\nNew Mailing Address\nThe mailing address for certain forms have change since the forms were last published. \nThe new mailing address are shown below. \nMailing Address for Forms 1023, 1024, 1024-A, 1028, 5300, 5307, 5310, 5310-A, 5316, \n8717, 8718, 8940:\nInternal Revenue Service \nTE/GE Stop 31A Team 105 \nP.O. Box 12192 \nCovington, KY 41012–0192\nDeliveries by private delivery service (PDS) should be made to:\nInternal Revenue Service \n7940 Kentucky Drive \nTE/GE Stop 31A Team 105 \nFlorence, KY 41042\nThis update supplements these forms’ instructions. Filers should rely on this update for \nthe change described, which will be incorporated into the next revision of the form’s \ninstructions.\n",
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"Form 1028\n(Rev. September 2006)\nDepartment of the Treasury \nInternal Revenue Service \nApplication for Recognition of Exemption\nUnder Section 521 of the Internal Revenue Code \nFor the use of farmers', fruit growers', or like associations applying for recognition of \nexemption as cooperatives.\n \n▶ See separate instructions.\nOMB No. 1545-0058\nIf your organization does not have an organizing document, do not file this application. Every organization must furnish all the information specified \non the form and in the instructions. An attachment may be used if more space is needed for any item. If the required information and appropriate \ndocuments are not submitted along with Form 8718 (with payment of the appropriate user fee), the application may be returned to you. \nPart I \nIdentification \n1a Full name of organization (See instructions.) \nb Employer identification number (See \ninstructions.) \n2a Number, street, and room or suite no. (or P.O. box number if mail is not delivered to street address) \n b City or town, county, state, and ZIP code \n3 Name and telephone number (including area code) of person to be \n contacted during business hours \n4 Date incorporated or formed \n5 Month the annual accounting period ends \n6 \na\nHas the organization filed Federal income tax returns? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nb If “Yes,” state the form numbers, years filed, and Internal Revenue office where filed ▶\nPart II \nType of Entity and Organizational Documents (See instructions)\nCheck the applicable entity box below and attach a conformed copy of the organizing and operational documents listed. \nCorporation—Articles of Incorporation, bylaws\nOther—Constitution or Articles of Association, bylaws\nPart III \nActivities and Operational Information\n1 \nNumber of shares of each class of capital stock currently outstanding, if any, the value of the consideration for which issued, \nand the rate of dividend paid: \nShares \nAmount \nRate of Dividend \na Preferred stock (voting) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1a \nb Preferred stock (nonvoting) .\n.\n.\n.\n.\n.\n.\n.\n.\n1b \nc Common stock (voting) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1c \nd Common stock (nonvoting) .\n.\n.\n.\n.\n.\n.\n.\n.\n1d \n2 \nNumber of shares of capital stock (other than nonvoting preferred) owned by: \na Producers \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2a \nb Nonproducers .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2b \nc Current and active producers .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2c \nd Total number of shares—Add lines 2a and 2b .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2d \ne Percentage owned by current and active producers—Divide line 2c by line 2d .\n.\n.\n.\n.\n.\n.\n2e \n% \n3 What provision is made for retiring the voting stock held by a nonproducer? \n4 Describe who is accorded voting rights in the cooperative and how many votes one person may have. If a person may be \nentitled to more than one vote, explain in detail how voting rights are acquired. \n5 \nLegal rate of interest in the state where the association is located \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPlease \nSign \nHere \nUnder penalties of perjury, I declare that I am authorized to sign this application on behalf of the above organization; and I have examined this application,\nincluding the accompanying statements, and to the best of my knowledge and belief it is true, correct, and complete. (See General Instruction “C.”) \n▲\n(Signature) \n(Title or authority of signer) \n(Date) \nFor Paperwork Reduction Act Notice, see page 2 of the separate instructions. \nCat. No. 17138N \nForm 1028 (Rev. 9-2006) \n",
"Form 1028 (Rev. 9-2006) \nPage 2 \nPart III \nActivities and Operational Information (Continued)\n6 If the association issues any nonvoting preferred stock, explain whether the owners, upon dissolution or liquidation, may \nparticipate in the profits of the association beyond fixed dividends. \n7a\nDoes state law require the accumulation and maintenance of reserves? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nb If “Yes,” state the names and purposes of the reserves and enter the amount of each: \nAmount \n8 \na\nDoes the association maintain or plan to maintain any reserve or reserves other than those required by \nstate law? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n .\nYes\nNo\nb If “Yes,” state the names and purposes of the reserves and enter the amount of each: \nAmount \n9 \nDoes the association deal or plan to deal with both members and nonmembers? .\n.\n.\n.\n.\n.\n.\n.\n .\nYes\nNo\n10a\nDoes the association pay or plan to pay patronage dividends? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n .\nYes\nNo\nb If “Yes,” are they paid or will they be paid to all patrons, both member and nonmember, on the same basis? .\n.\nYes\nNo\n11a\nIs the allocation of patronage dividends based on an obligation in existence before the cooperative \nreceived the amounts allocated? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n .\nYes\nNo\nb If “Yes,” is the obligation in: \nOrganizing document (specify) ▶\nBylaws\n12 Explain all of the activities in which the association is or will be engaged. \n13 Explain how distribution is or will be made of the proceeds of products marketed for members and nonmembers. Also, if the \norganization operates on a basis of allocated units (i.e., functional, departmental, etc.), explain how losses are or will \nbe treated. \n14 Explain how the association charges for supplies and equipment bought for members and nonmembers. \nForm 1028 (Rev. 9-2006) \n",
"Form 1028 (Rev. 9-2006) \nPage 3 \nPart III \nActivities and Operational Information (Continued)\n15 Explain the requirements for membership in the association. \n16 \nFederated cooperatives only: \na Are all the association’s member cooperatives exempt under section 521? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nb If “No,” do the nonexempt member cooperatives have the same annual accounting period as the \nassociation’s? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nc If “No,” to 16b, check the method below that the association used, or will use, to provide a common or comparable unit of \ntime for analyzing and evaluating its operations and those of its members. \nNote: Methods listed below do not apply to the filing of returns or the manner in which operating results are reported by a \nfederated cooperative and its members. \n1. \nMethod 1—The association uses the operations of members for those months that correspond to the months that \nmake up its tax year. \n2. \nMethod 2—The association uses the tax years of members that end within its tax year. \n3. \nMethod other than 1 or 2 above (explain) ▶\n17 \nValue of agricultural products marketed or handled \nfor: (See instructions.) \n3 prior tax years \nCurrent tax \nyear \n*a \nMembers— \n(a) From \nto \n(b) \n(c) \n(d) \n1. Actually produced by members \n2. Not actually produced by members but \nmarketed by them through the association \nb Nonmembers— \n1. Actually produced by nonmembers \n2. Not actually produced by nonmembers but \nmarketed by them through the association \nc Nonproducers (purchased from nonproducers \nfor marketing by the association) .\n.\n.\n.\n.\n18 \nValue of supplies and equipment purchased for \nor sold to: (See instructions.)\n*a \nMembers who were producers .\n.\n.\n.\n.\n.\nb Nonmembers who were producers \n.\n.\n.\n.\nc Members and nonmembers who were not producers \n19 \nAmount of business done with the United States \nGovernment or any of its agencies \n.\n.\n.\n.\n20 \nDoes the association plan to do business with the United States Government or any of its agencies in the future? \nYes\nNo\n21a\nWere all of the net earnings (after payment of dividends, if any, on capital stock) for the years shown on \nlines 17–19 distributed as patronage dividends? (See instructions for lines 17–19.) .\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nb If “No,” were undistributed net earnings apportioned on the records to all patrons on a patronage basis? \nYes\nNo\n22a\nHas the organization operated in a manner consistent with the information given since the date formed? \nYes\nNo\nb If “No,” state the changes that have occurred and dates of the changes. \n*If it is necessary to own one or more shares of stock in order to become a member, include on lines 17a and 18a only the amount \nof business transacted with persons actually owning the required number of shares. \nForm 1028 (Rev. 9-2006) \n",
"Form 1028 (Rev. 9-2006) \nPage 4 \nPart IV \nFinancial Data (See instructions.)\nComplete the Statement of Receipts and Expenditures and Balance Sheets for the current year and for each of the \nthree immediately preceding years that the organization was in existence. \nStatement of Receipts and Expenditures, for period ending \n, \n. \n(If you prepare a statement of receipts and expenditures that is more descriptive and detailed than the statement below, you \nmay submit that statement instead of this one.) \nReceipts \n1 \nGross dues and assessments from members .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1 \n2 \nGross dues and assessments from affiliated organizations .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2 \n3 \na\nGross amount derived from activities related to organization’s exempt \npurpose (attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3a \nb Less cost of goods sold .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3b ( ) 3c \n4a\nGross amount from other business activities (attach schedule) \n.\n.\n.\n4a \nb Less cost of goods sold .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4b ( ) 4c \n5 \na\nGross amount received from sale of assets, excluding inventory items \n(attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5a \nb Less cost or other basis and sales expense of assets sold (attach schedule) \n5b ( ) 5c \n6 \nInterest, dividends, rents and royalties \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n7 \nOther receipts (attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n8 \nTotal receipts—Add lines 1 through 7 in far right column .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \nExpenditures \n9 \nCompensation of officers, directors, and trustees (attach schedule) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \n10 \nOther salaries and wages .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \n11 \nInterest .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \n12 \nRent .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \n13 \nDepreciation and depletion .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13 \n14 \nDues and assessments to affiliated organizations .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \n15 \nOther expenditures (see instructions—attach schedule) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15 \n16 \nPatronage dividends (see instructions—attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 \n17 \nTotal expenditures—Add lines 9 through 16 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17 \n18 \nExcess of receipts over expenditures (line 8 less line 17) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \nBalance Sheets \nEnter \ndates ▶\nBeginning date \nEnding date \nAssets \n19 \nCash \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n19 \n20 \nTrade notes and accounts receivable (less allowance for bad debts) \n.\n.\n.\n20 \n21 \nInventories \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n21 \n22 \nInvestments (attach schedule) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n22 \n23 \nOther current assets (attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n23 \n24 \nDepreciable and depletable assets (less accumulated depreciation/depletion) \n24 \n25 \nLand (net of any amortization) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n25 \n26 \nOther assets (attach schedule) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n26 \n27 \nTotal assets .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n27 \nLiabilities and Capital \n28 \nAccounts payable .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n28 \n29 \nMortgages, notes, bonds payable in less than one year .\n.\n.\n.\n.\n.\n.\n.\n29 \n30 \nOther current liabilities (attach schedule) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n30 \n31 \nMortgages, notes, bonds payable in one year or more \n.\n.\n.\n.\n.\n.\n.\n.\n31 \n32 \nOther liabilities (attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n32 \n33 \nPatronage dividends allocated in noncash form, other than capital stock and \ninterest-bearing obligations .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n33 \n34 \nPer-unit retains allocated in noncash form .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n34 \n35 \nCapital stock (enter numbers at \nend of year): \nNumber of \nshareholders \nNumber of shares \nIssued for \nmoney \nIssued as \npatronage benefits \n \n \n \n \n \na Voting preferred stock .\n.\n.\n.\n35a \nb Nonvoting preferred stock \n.\n.\n35b \nc Voting common stock .\n.\n.\n.\n35c \nd Nonvoting common stock \n.\n.\n35d \n36 \nPaid-in or capital surplus .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n36 \n37 \nRetained earnings (attach schedule) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n37 \n38 \nLess cost of treasury stock .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n38 ( ) ( ) \n39 \nTotal liabilities and capital .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n39 \nForm 1028 (Rev. 9-2006) \n"
] |
i1099sb.pdf
|
1219 Inst 1099-SB (PDF)
|
https://www.irs.gov/pub/irs-pdf/i1099sb.pdf
|
[
"Instructions for Form \n1099-SB\n(Rev. December 2019)\nSeller's Investment in Life Insurance Contract\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code \nunless otherwise noted.\nFuture Developments \nFor the latest information about developments related to \nForm 1099-SB and its instructions, such as legislation \nenacted after they were published, go to IRS.gov/\nForm1099SB.\nReminders\nIn addition to these specific instructions, you should also \nuse the current General Instructions for Certain \nInformation Returns. Those general instructions include \ninformation about the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the general instructions from General \nInstructions for Certain Information Returns at IRS.gov/\n1099GeneralInstructions or go to IRS.gov/Form1099SB.\nContinuous-use form and instructions. Form 1099-SB \nand these instructions have been converted from an \nannual revision to continuous use. Both the form and its \ninstructions will be updated as needed. For the most \nrecent version, go to IRS.gov/Form1099SB.\nOnline fillable Copies B and C. To ease statement \nfurnishing requirements, Copies B and C have been made \nfillable online in a PDF format available at IRS.gov/\nForm1099SB. You can complete these copies online for \nfurnishing statements to recipients and for retaining in \nyour own files.\nSpecific Instructions\nThis form is used by the issuer of a life insurance contract \n(also known as a life insurance policy) to report the \nseller’s investment in the contract and surrender amount \nwith respect to an interest in a life insurance contract \ntransferred in a “reportable policy sale” or transferred to a \nforeign person.\nIn general, a reportable policy sale is any direct or \nindirect acquisition of any interest in a life insurance \ncontract if the acquirer, at the time of the acquisition, has \nno substantial family, business, or financial relationship \nwith the person insured under that contract, apart from the \nacquirer’s interest in such life insurance contract. See \nsection 101(a)(3). Certain exceptions may apply. See \nRegulations section 1.101-1(c)(2). The acquisition of an \ninterest in a partnership, trust, or other entity that holds an \ninterest in a life insurance contract may be an indirect \nacquisition of that interest in a life insurance contract and \nmay be a reportable policy sale. See Regulations section \n1.101-1(e)(3)(ii).\nIn general, an issuer is any person that bears any part \nof the risk with respect to a life insurance contract and any \nperson responsible for administering the contract, \nincluding collecting premiums and paying death benefits. \nSee Regulations section 1.6050Y-1(a)(8)(i). An issuer’s \ndesignee is also considered an issuer. See Regulations \n1.6050Y-1(a)(8)(i) and (iv).\nA seller is any person that holds an interest in a life \ninsurance contract and transfers that interest, or any part \nof that interest, to an acquirer in a reportable policy sale or \nthat owns a life insurance contract and transfers title to, \npossession of, or legal ownership of that contract to a \nforeign person. See Regulations section 1.6050Y-1(a)\n(18).\nAn acquirer is any person that acquires an interest in a \nlife insurance contract (through a direct acquisition or \nindirect acquisition of the interest) in a reportable policy \nsale. See Regulations section 1.6050Y-1(a)(1).\nWho Must File\nGenerally, file Form 1099-SB if you are the issuer of a life \ninsurance contract and either of the following occurs. See \nRegulations sections 1.6050Y-3(a) and 1.6050Y-1(a)(8)\n(iii).\n• You receive a statement from an acquirer in a \nreportable policy sale provided under section 6050Y(a), \nsuch as a copy of a Form 1099-LS, Reportable Life \nInsurance Sale, reporting the transfer of the life insurance \ncontract, or an interest therein, in a reportable policy sale.\n• You receive, from a source other than the issuer \nresponsible for administering the life insurance contract \n(or its designee), notice of a transfer of the life insurance \ncontract to a foreign person. In general, notice of a \ntransfer to a foreign person means any notice that you \nreceive of a transfer of title to, possession of, or legal \nownership of a life insurance contract that includes foreign \nindicia, including information provided for nontax \npurposes such as a change of address notice for purpose \nof sending statements or for other purposes, or \ninformation relating to loans, premiums, or death benefits \nwith respect to the contract, unless you know that no \ntransfer of the contract has occurred or know that the \ntransferee is a U.S. person. See Regulations section \n1.6050Y-1(a)(10). However, if you are not the issuer \nresponsible for administering the life insurance contract, \nincluding collecting premiums and paying death benefits \nunder the contract on the date the notice is received, you \nNov 20, 2019\nCat. No. 71419D\n",
"are not required to file Form 1099-SB if you or your \ndesignee provide the issuer responsible for administering \nthe life insurance contract (or its designee) with such \nnotice and with any available information necessary to \naccomplish reporting on the Form 1099-SB. See \nRegulations section 1.6050Y-1(a)(8)(iii)(B). You may not \nhave to file Form 1099-SB if you qualify for an exception in \nRegulations section 1.6050Y-3(f) or if another issuer or \nthird party information reporting contractor reports on your \nbehalf under the unified reporting provisions of \nRegulations section 1.6050Y-3(b). You may qualify for an \nexception in Regulations section 1.6050Y-3(f) if the seller \nis a foreign beneficial owner, if you receive notice of a \ntransfer to a foreign person but did not receive a written \nstatement from an acquirer reporting the transfer as a \nreportable policy sale, or you received a written statement \nfrom an acquirer reporting your issuance of a life \ninsurance contract in a section 1035 exchange as a \nreportable policy sale.\nEnter your name, address, telephone number, and TIN. \nAdditionally, enter the name and telephone number of \nyour information contact, if different from your own. This \ncontact information must provide direct access to a \nperson who can answer questions about this information \nreturn. The information contact may be a call center \nproviding access to a person who can answer such \nquestions.\nReporting\nYou must file a separate Form 1099-SB for each seller of \nan interest in a life insurance contract with respect to \nwhich you received a statement provided under section \n6050Y(a) or for each seller of a life insurance contract with \nrespect to which you received notice of a transfer to a \nforeign person. Enter the name, address, and TIN of the \nseller; the policy number of the life insurance contract; the \nseller’s investment in the contract; and the surrender \namount.\nPolicy Number\nThe policy number is the unique identifying number \nassigned to the life insurance contract by the issuer \nresponsible for administering the contract.\nSeller’s Investment in the Contract\nInvestment in the contract means, with respect to the \noriginal policyholder of a life insurance contract, the \naggregate amount of premiums or other consideration \npaid for the contract, less the aggregate amount received \nunder the contract, to the extent that such amount was \nexcludable from gross income. See Regulations section \n1.6050Y-1(a)(7)(i). With respect to any other person, \ninvestment in the contract means estimate of investment \nin the contract, which is the aggregate amount of \npremiums paid for the contract by that person, less the \naggregate amount received under the contract by that \nperson, to the extent such information is known to or can \nreasonably be estimated by the issuer. See Regulations \nsection 1.6050Y-1(a)(7). Accordingly, with respect to any \nseller other than the original policyholder, the issuer’s \nobligation to report the seller’s investment in the contract \non any date will be limited to the information that is known \nto the issuer.\nSurrender Amount\nIn general, the surrender amount is the amount the seller \nwould have received from the issuer responsible for \nadministering the life insurance contract if the seller had \nsurrendered the life insurance contract to the issuer on the \ndate of the reportable policy sale or the transfer of the \ncontract to a foreign person. See Regulations section \n1.6050Y-3(a)(3).\nStatement to Seller\nIf you are required to file Form 1099-SB, you must furnish \na statement or acceptable substitute to the seller, such as \nCopy B of Form 1099-SB. For more information about the \nrequirement to furnish a statement to the seller, see part \nM in the current General Instructions for Certain \nInformation Returns.\nThe issuer's information contact name must be \nprovided in the appropriate box. The individual \nnamed must be familiar with the reporting \nrequirements of reportable policy sales.\nTruncating recipient’s TIN. Pursuant to Regulations \nsection 301.6109-4, all filers of this form may truncate the \nseller’s TIN (social security number (SSN), individual \ntaxpayer identification number (ITIN), adoption taxpayer \nidentification number (ATIN), or employer identification \nnumber (EIN)) on statements furnished to a seller (Copy \nB). Truncation is not allowed on any documents the filer \nfiles with the IRS. An issuer’s TIN may not be truncated on \nany form. See part J in the current General Instructions for \nCertain Information Returns.\nRescission of Reportable Policy Sale\nIf a reportable policy sale or transfer of an insurance \ncontract to a foreign person is rescinded and you have \nfiled Form 1099-SB with respect to the reportable policy \nsale or transfer, you must file a corrected Form 1099-SB \nwithin 15 calendar days of the receipt of notice of the \nrescission. If a reportable policy sale or transfer of an \ninsurance contract is rescinded and you have furnished a \nstatement with respect to the reportable policy sale or \ntransfer to a seller, you must furnish the recipient of the \nstatement with a corrected statement within 15 calendar \ndays of the receipt of notice of the rescission. See \nRegulations section 1.6050Y-3(e).\nBox 1. Investment in Contract\nEnter the seller’s investment in the contract.\nBox 2. Surrender Amount\nEnter the surrender amount.\nCAUTION\n!\n-2-\nInstructions for Form 1099-SB (Rev. 12-2019)\n"
] |
f1098q.pdf
|
1219 Form 1098-Q (PDF)
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https://www.irs.gov/pub/irs-pdf/f1098q.pdf
|
[
" \nForm 1098-Q\n(Rev. December 2019)\nCat. No. 67073Z\nQualifying \nLongevity Annuity \nContract \nInformation\nCopy A \nFor \nInternal Revenue \nService Center \n \nFile with Form 1096. \nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-2234\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns. \n7474\nFor calendar year \n20\nVOID \nCORRECTED \nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPARTICIPANT’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\nPlan number\nName of plan\nPlan sponsor’s EIN\nISSUER’S TIN \nPARTICIPANT’S TIN\n1a Annuity amount on start date\n$ \n1b Annuity start date\n2 Check if start date may be \naccelerated\n3 Total premiums\n$ \n4 FMV of QLAC\n$\n5a January\n$\ndd\n5b February\n$\ndd\n5c March\n$\ndd\n5d April\n$\ndd\n5e May\n$\ndd\n5f June\n$\ndd\n5g July \n$ \ndd\n5h August\n$ \ndd\n5i September\n$ \ndd\n5j October\n$ \ndd\n5k November\n$ \ndd\n5l December\n$ \ndd\nForm 1098-Q (Rev. 12-2019)\nwww.irs.gov/Form1098Q\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1098-Q\n(Rev. December 2019)\nQualifying \nLongevity Annuity \nContract \nInformation\nCopy B \n For Participant\nDepartment of the Treasury - Internal Revenue Service\nThis information is \nbeing furnished \nto the IRS. \nOMB No. 1545-2234\nFor calendar year \n20\nCORRECTED (if checked)\nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPARTICIPANT’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\nPlan number\nName of plan\nPlan sponsor’s EIN\nISSUER’S TIN \nPARTICIPANT’S TIN\n1a Annuity amount on start date\n$ \n1b Annuity start date\n2 If checked, start date may \nbe accelerated\n3 Total premiums\n$ \n4 FMV of QLAC\n$\n5a January\n$\ndd\n5b February\n$\ndd\n5c March\n$\ndd\n5d April\n$\ndd\n5e May\n$\ndd\n5f June\n$\ndd\n5g July \n$ \ndd\n5h August\n$ \ndd\n5i September\n$ \ndd\n5j October\n$ \ndd\n5k November\n$ \ndd\n5l December\n$ \ndd\nForm 1098-Q (Rev. 12-2019)\n(Keep for your records)\nwww.irs.gov/Form1098Q\n",
"Instructions for Participant\nThe information on this Form 1098-Q is submitted to the IRS \nby the issuer of your qualifying longevity annuity contract \n(QLAC) to report the status of the contract. Prior to \nannuitization, the value of any QLAC held by your plan or IRA \n(section 401(a), 403(a), 403(b), or 408 (other than a Roth IRA); \nor eligible governmental plan under section 457(b)) is not \nincluded when calculating the required minimum distribution \n(RMD) from your plan or IRA.\nYou will receive this statement annually beginning with the \nfirst year in which premiums are paid and ending with the \nearlier of the year in which you attain age 85 or die. In the \nevent of your death, if the sole beneficiary under the contract \nis your surviving spouse, this annual statement will be \nfurnished to your surviving spouse until distributions \ncommence, or if earlier, the year in which your surviving \nspouse dies.\nIf you have questions about your QLAC, contact the issuer \nat the address and phone number shown on the front of the \nform.\nAccount number. May show an account or other unique \nnumber the issuer assigned to distinguish your account.\nParticipant’s taxpayer identification number (TIN). For your \nprotection, this form may show only the last four digits of your \nTIN (social security number (SSN), individual taxpayer \nidentification number (ITIN), adoption taxpayer identification \nnumber (ATIN), or employer identification number (EIN)). \nHowever, the issuer has reported your complete TIN to the \nIRS. \nPlan number, name, and EIN. Shows, if the contract was \npurchased under a plan, the number of the plan, the name of \nthe plan, and the EIN of the plan sponsor.\nBox 1a. Annuity amount on start date. If the payments have \nnot started, shows the annuity amount payable on start date. \nBox 1b. Annuity start date. If the payments have not started, \nshows the date on which the annuity is scheduled to start. The \ndate reported is shown in the format month, day, and year, \nmm/dd/yyyy.\nBox 2. If checked, shows that the start date may be \naccelerated.\nBox 3. Shows the cumulative total amount of premiums paid \nfor the contract. Beginning in 2020, your cumulative total \npremiums paid for all QLACs cannot exceed $135,000. Also, \nQLACs purchased under an IRA cannot exceed 25% of your \ntotal IRA account balances and QLACs purchased under an \nemployer’s plan cannot exceed 25% of your account balance \nin the plan. If you have paid more than that, contact your \ncontract issuer.\nBox 4. Shows the fair market value (FMV) of your QLAC as of \nDecember 31 of the reporting year.\nBoxes 5a–5l. Show the amount of each premium paid for the \ncontract and the date each premium payment was made in \nthe reporting year. If there is more than one payment per \nmonth, the box for that month will include the total payments \nfor the month and the date of the last payment in the month. \nFuture developments. For the latest information about \ndevelopments related to Form 1098-Q and its instructions, \nsuch as legislation enacted after they were published, go to \nwww.irs.gov/Form1098Q. \n",
" \nForm 1098-Q\n(Rev. December 2019)\nQualifying \nLongevity Annuity \nContract \nInformation\nCopy C \nFor Issuer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-2234\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\nFor calendar year \n20\nVOID\nCORRECTED \nISSUER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPARTICIPANT’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\nPlan number\nName of plan\nPlan sponsor’s EIN\nISSUER’S TIN \nPARTICIPANT’S TIN\n1a Annuity amount on start date\n$ \n1b Annuity start date\n2 Check if start date may be \naccelerated\n3 Total premiums\n$ \n4 FMV of QLAC\n$\n5a January\n$\ndd\n5b February\n$\ndd\n5c March\n$\ndd\n5d April\n$\ndd\n5e May\n$\ndd\n5f June\n$\ndd\n5g July \n$ \ndd\n5h August\n$ \ndd\n5i September\n$ \ndd\n5j October\n$ \ndd\n5k November\n$ \ndd\n5l December\n$ \ndd\nForm 1098-Q (Rev. 12-2019)\nwww.irs.gov/Form1098Q\n",
"Instructions for Issuer\nTo complete Form 1098-Q, use:\n• The current General Instructions for Certain \nInformation Returns, and\n• The current Instructions for Form 1098-Q.\nTo order these instructions and additional forms, go \nto www.irs.gov/Form1098Q. \nCaution: Because paper forms are scanned during \nprocessing, you cannot file Forms 1096, 1097, 1098, \n1099, 3921, or 5498 that you print from the IRS website.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220. The IRS does not provide a fill-in form option for \nCopy A.\nNeed help? If you have questions about reporting on \nForm 1098-Q, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
i1120ss3.pdf
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1219 Inst 1120-S (Schedule M-3) (PDF)
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https://www.irs.gov/pub/irs-pdf/i1120ss3.pdf
|
[
"Instructions for\nSchedule M-3 (Form 1120-S)\n(Rev. December 2019)\nNet Income (Loss) Reconciliation for S Corporations With Total Assets of\n$10 Million or More\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue \nCode unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Schedule M-3 \n(Form 1120-S) and its instructions, such \nas legislation enacted after they were \npublished, go to\nIRS.gov/Form1120S.\nGeneral Instructions\nApplicable schedule and instruc-\ntions. Due to the generally unchanging \nnature of Schedule M-3 (Form 1120-S), \nthese instructions will no longer be \nupdated annually, unless necessary.\nFor previous tax years, see the \napplicable Schedule M-3 (Form 1120-S) \nand instructions. For example, use the \n2018 Schedule M-3 (Form 1120-S) with \nthe 2018 Instructions for Schedule M-3 \n(Form 1120-S) for tax years ending \nDecember 31, 2018, through December \n30, 2019.\nPurpose of Schedule\nSchedule M-3, Part I, asks certain \nquestions about the corporation's \nfinancial statements and reconciles \nfinancial statement worldwide net \nincome (loss) for the corporation (or \nconsolidated financial statement group, \nif applicable), as reported on Part I, \nline 4a, to income (loss) per the income \nstatement of the corporation for U.S. \nincome tax purposes, as reported on \nPart I, line 11.\nSchedule M-3, Parts II and III, \nreconcile financial statement net income \n(loss) for the U.S. tax return (per \nSchedule M-3, Part I, line 11) to total \nincome (loss) on Form 1120-S, \nSchedule K, line 18.\nWhere To File\nIf the corporation is required to file (or \nvoluntarily files) Schedule M-3 (Form \n1120-S), the corporation must file Form \n1120-S and all attachments, schedules, \nincluding Schedule M-3 (Form 1120-S), \nand statements at the following \naddress.\nDepartment of the Treasury\nInternal Revenue Service Center\nOgden, UT 84201-0013\nWho Must File\nAny corporation required to file Form \n1120-S, U.S. Income Tax Return for an \nS Corporation, that reports on \nSchedule L of Form 1120-S total assets \nat the end of the corporation's tax year \nthat equal or exceed $10 million must \nfile Schedule M-3 (Form 1120-S). A \ncorporation or group of corporations that \ncompletes Parts II and III of \nSchedule M-3, isn't required to \ncomplete Form 1120-S, Schedule M-1, \nReconciliation of Income (Loss) per \nBooks With Income (Loss) per Return.\nA U.S. corporation filing Form 1120-S \nthat isn't required to file Schedule M-3 \nmay voluntarily file Schedule M-3 \ninstead of Schedule M-1.\nAny corporation filing Schedule M-3 \nmust check the box on Form 1120-S, \nitem C, indicating that Schedule M-3 is \nattached (whether required or \nvoluntary).\nExample 1. \n1. U.S. corporation A owns U.S. \nsubsidiary B and foreign subsidiary F. \nFor its current tax year, A prepares \nconsolidated financial statements with B \nand F that report total assets of $12 \nmillion. A files a U.S. income tax return \nwith B (a corporation that has made a \nqualified subchapter S subsidiary \nelection) and reports total assets on \nSchedule L of $8 million. A's U.S. tax \ngroup isn't required to file Schedule M-3 \nfor the current tax year. A may \nvoluntarily file Schedule M-3 for the \ncurrent tax year. If A doesn't file \nSchedule M-3, it must file \nSchedule M-1. If A files Schedule M-3, it \nmust either: (i) complete Schedule M-3 \nentirely; or (ii) complete Schedule M-3 \nthrough Part I and complete \nSchedule M-1 instead of completing \nParts II and III of Schedule M-3.\n2. U.S. corporation C owns U.S. \nsubsidiary D. For its current tax year, C \nprepares consolidated financial \nstatements with D, but C and D file \nseparate U.S. income tax returns. The \nconsolidated accrual basis financial \nstatements for C and D report total \nassets at the end of the tax year of $12 \nmillion after intercompany eliminations. \nC reports separate company total \nyear-end assets on its Schedule L of $7 \nmillion. D reports separate company \ntotal year-end assets on its Schedule L \nof $6 million. Neither C nor D is required \nto file Schedule M-3 for the current tax \nyear. C or D may voluntarily file \nSchedule M-3 for the current tax year. If \nC or D doesn't file Schedule M-3, it must \nfile Schedule M-1. If C or D files \nSchedule M-3, it must either: (i) \ncomplete Schedule M-3 entirely; or (ii) \ncomplete Schedule M-3 through Part I \nand complete Schedule M-1 instead of \ncompleting Parts II and III of \nSchedule M-3.\nCompleting Schedule M-3 \n(Form 1120-S)\nA corporation that is required to file \nSchedule M-3 (Form 1120-S) and has at \nleast $50 million total assets at the end \nof the tax year must complete \nSchedule M-3 (Form 1120-S) entirely.\nA corporation that (a) is required to \nfile Schedule M-3 (Form 1120-S) and \nhas less than $50 million total assets at \nthe end of the tax year or (b) isn't \nrequired to file Schedule M-3 (Form \n1120-S) and voluntarily files \nSchedule M-3 (Form 1120-S) must \neither (i) complete Schedule M-3 (Form \n1065) entirely or (ii) complete \nSchedule M-3 (Form 1120-S) through \nPart I and complete Form 1120-S, \nSchedule M-1 instead of completing \nParts II and III of Schedule M-3 (Form \n1120-S). If the corporation chooses to \ncomplete Form 1120-S, Schedule M-1 \ninstead of completing Parts II and III of \nSchedule M-3 (Form 1120-S), line 1 of \nForm 1120-S, Schedule M-1 must equal \nline 11 of Part I of Schedule M-3 (Form \n1120-S).\nFor any part of Schedule M-3 (Form \n1120-S) that is completed, all columns \nmust be completed, all applicable \nquestions must be answered, all \nnumerical data asked for must be \nNov 21, 2019\nCat. No. 48245B\n",
"provided, any statement required to \nsupport a line item must be attached \nand provide the information required for \nthat line item.\nAny corporation filing Schedule M-3 \nmust check the box on Form 1120-S, \nitem C, indicating that Schedule M-3 is \nattached (whether required or \nvoluntary).\nOther Issues Affecting \nSchedule M-3 Filing \nRequirements\nIf a corporation was required to file \nSchedule M-3 for the preceding tax \nyear, but reports on Form 1120-S, \nSchedule L, total assets at the end of \nthe current tax year of less than $10 \nmillion, the corporation isn't required to \nfile Schedule M-3 for the current tax \nyear.\nFor purposes of determining whether \nthe corporation has total assets at the \nend of the current tax year of $10 million \nor more, the corporation's total assets \nmust be determined on an overall \naccrual method of accounting unless \nboth of the following apply: (a) the tax \nreturn of the corporation is prepared \nusing an overall cash method of \naccounting, and (b) no includible entity \nin the U.S. tax return prepares or is \nincluded in financial statements \nprepared on an accrual basis.\nSee the instructions for Part I, \nline 1, for a discussion of \nnon-tax-basis income \nstatements and related non-tax-basis \nbalance sheets to be used in the \npreparation of Schedule M-3 and of \nForm 1120-S, Schedule L.\nOther Form 1120-S \nSchedules Affected by \nSchedule M-3 \nRequirements\nSchedule L\nIf a non-tax-basis income statement and \nrelated non-tax-basis balance sheet is \nprepared for any purpose for a period \nending with or within the tax year, \nSchedule L must be prepared showing \nnon-tax-basis amounts. See the \ninstructions for Part I, line 1, for a \ndiscussion of non-tax-basis income \nstatements and related non-tax-basis \nbalance sheets prepared for any \npurpose and the impact on the selection \nof the income statement used for \nSchedule M-3 and the related \nnon-tax-basis balance sheet amounts \nthat must be used for Schedule L.\nTIP\nTotal assets shown on Schedule L, \nline 15, column (d), must equal the total \nassets of the corporation as of the last \nday of the tax year, and must be the \nsame total assets reported by the \ncorporation in the non-tax-basis \nfinancial statements, if any, used for \nSchedule M-3. If the corporation doesn't \nprepare non-tax-basis financial \nstatements, Schedule L must be based \non the corporation's books and records. \nThe Schedule L balance sheet can \nshow tax-basis balance sheet amounts \nif the corporation is allowed to use \nbooks and records for Schedule M-3 \nand the corporation's books and records \nreflect only tax-basis amounts.\nGenerally, total assets at the \nbeginning of the year (Schedule L, \nline 15, column (b)) must equal total \nassets at the close of the prior year \n(Schedule L, line 15, column (d)). For \neach Schedule L balance sheet item \nreported for which there is a difference \nbetween the current opening balance \nsheet amount and the prior closing \nbalance sheet amount, attach a \nstatement that reports the balance sheet \nitem, the prior closing amount, the \ncurrent opening amount, and a short \nexplanation of the difference. In \nparticular, indicate if the differences \noccurred because of acquisitions or \nmergers.\nFor purposes of measuring total \nassets at the end of the year, the \ncorporation's assets may not be netted \nor reduced by the corporation's \nliabilities. In addition, total assets may \nnot be reported as a negative amount. If \nSchedule L is prepared on a \nnon-tax-basis method, an investment in \na partnership may be shown as \nappropriate under the corporation's \nnon-tax-basis method of accounting, \nincluding, if required by the \ncorporation's reporting methodology, \nthe equity method of accounting for \ninvestments. If Schedule L is prepared \non a tax-basis method, an investment \nby the corporation in a partnership must \nbe shown as an asset and measured by \nthe corporation's adjusted basis in its \npartnership interest. Any liabilities \ncontributing to such adjusted basis must \nbe shown on Schedule L as corporate \nliabilities. In any event, any investments \nor other assets reported on Schedule L \ncan never be reported as negative \namounts.\nSchedule M-1\nA corporation that completes Parts II \nand III of Schedule M-3 isn't required to \ncomplete Form 1120-S, Schedule M-1.\nEntity Considerations for \nSchedule M-3\nFor purposes of Schedule M-3, \nreferences to the classification of an \nentity (for example, as a corporation, a \npartnership, or a trust) are references to \nthe treatment of the entity for U.S. \nincome tax purposes. An entity that \ngenerally is disregarded as separate \nfrom its owner for U.S. income tax \npurposes (disregarded entity) mustn't \nbe separately reported on Schedule M-3 \nexcept, if required, on Part I, line 7a, 7b, \nor 7c. On Schedule M-3, Parts II and III, \nany item of income, gain, loss, \ndeduction, or credit of a disregarded \nentity must be reported as an item of its \nowner. In particular, the income or loss \nof a disregarded entity mustn't be \nreported on Part II, line 7, 8, or 9 as from \na separate partnership or other \npass-through. The financial statement \nincome or loss of a disregarded entity \nother than a qualified subchapter S \nsubsidiary (QSub) is included on Part I, \nline 7b, if and only if its financial \nstatement income or loss is included on \nPart I, line 11, but not on Part I, line 4a. \nThe financial statement income or loss \nof a QSub is included on Part I, line 7c, if \nand only if its financial statement \nincome or loss is included on Part I, \nline 11, but not on Part I, line 4a.\nQualified Subchapter S Subsidiaries \n(QSubs). Because a QSub is a \ndisregarded entity, for purposes of \nSchedule M-3, Schedule L, and the tax \nreturn in general, the subsidiary is \ndeemed to have liquidated into the \nparent S corporation. As such, all \nQSubs are treated as divisions of the S \ncorporation parent and they mustn't be \nseparately reported on Schedule M-3 \nexcept, if required, on Part I, line 7c.\nReportable Entity Partner \nReporting Responsibilities\nA reportable entity partner to a \npartnership filing Form 1065, U.S. \nReturn of Partnership Income, is an \nentity that:\n• Owns or is deemed to own, directly or \nindirectly, under these instructions, a \n50% or greater interest in the income, \nloss, or capital of the partnership on any \nday of the tax year; and\n• Was required to file Schedule M-3 on \nits most recently filed U.S. federal \nincome tax return or return of income \nfiled prior to that day.\nFor the purposes of these \ninstructions:\n1. The parent corporation of a \nconsolidated tax group is deemed to \nown all corporate and partnership \n-2-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"interests owned or deemed to be owned \nunder these instructions by any member \nof the tax consolidated group;\n2. The owner of a disregarded entity \nis deemed to own all corporate and \npartnership interests owned or deemed \nto be owned under these instructions by \nthe disregarded entity;\n3. The owner of 50% or more of a \ncorporation by vote on any day of the \ncorporation tax year is deemed to own \nall corporate and partnership interests \nowned or deemed to be owned under \nthese instructions by the corporation \nduring the corporation tax year;\n4. The owner of 50% or more of \npartnership income, loss, or capital on \nany day of the partnership tax year is \ndeemed to own all corporate and \npartnership interests owned or deemed \nto be owned under these instructions by \nthe partnership during the partnership \ntax year; and\n5. The beneficial owner of 50% or \nmore of the beneficial interest of a trust \nor nominee arrangement on any day of \nthe trust or nominee arrangement tax \nyear is deemed to own all corporate and \npartnership interests owned or deemed \nto be owned under these instructions by \nthe trust or nominee arrangement.\nA reportable entity partner to a \npartnership (as defined above) must \nreport the following to the partnership \nwithin 30 days of first becoming a \nreportable entity partner and, after first \nreporting to the partnership under these \ninstructions, after that within 30 days of \nthe date of any change in the interest it \nowns or is deemed to own, directly or \nindirectly, under these instructions, in \nthe partnership.\n1. Name.\n2. Mailing address.\n3. Taxpayer identification number \n(TIN or EIN), if applicable.\n4. Entity or organization type.\n5. State or country in which it is \norganized.\n6. Date on which it first became a \nreportable entity partner.\n7. Date for which it is reporting a \nchange in its ownership interest in the \npartnership, if applicable.\n8. The interest in the partnership it \nowns or is deemed to own in the \npartnership, directly or indirectly (as \ndefined under these instructions) as of \nthe date for which it is reporting.\n9. Any change in that interest as of \nthe date for which it is reporting.\nThe reportable entity partner must \nkeep copies of required reports it makes \nto partnerships under these instructions. \nEach partnership must keep copies of \nthe required reports it receives under \nthese instructions from reportable entity \npartners.\nExample 2. A, a limited liability \ncompany (LLC) filing a Form 1065 for its \ncurrent tax year is owned 50% by U.S. \ncorporation Z which files Form 1120-S. \nA owns 50% of each of B, C, D, and E, \neach also an LLC filing a Form 1065 for \nits current tax year. Z was first required \nto file Schedule M-3 (Form 1120-S) for \nits prior corporate tax year ended \nDecember 31 and filed its Form 1120-S \nwith Schedule M-3 on September 15. \nAs of September 16, Z was a reportable \nentity partner regarding A and, through \nA, regarding B, C, D, and E. On October \n5, Z reports to A, B, C, D, and E, as it is \nrequired to do within 30 days of \nSeptember 16, that Z is a reportable \nentity partner directly owning (regarding \nA) or deemed to own indirectly \n(regarding B, C, D, and E) a 50% \ninterest. So, because Z was a \nreportable entity partner for its current \ntax year, each of A, B, C, D, and E is \nrequired to file Schedule M-3 (Form \n1065) for its current tax year, regardless \nof whether they would otherwise be \nrequired to file Schedule M-3 for that \nyear.\nSpecific Instructions \nfor Part I\nPart I. Financial \nInformation and Net \nIncome (Loss) \nReconciliation\nLine 1. Questions Regarding \nthe Type of Income Statement \nPrepared\nFor Part I, lines 1 through 12, use only \nthe financial statements of the U.S. \ncorporation filing the U.S. income tax \nreturn.\nNon-Tax-Basis Financial \nStatements and Tax-Basis \nFinancial Statements\nA tax-basis income statement is allowed \nfor Schedule M-3 and a tax-basis \nbalance sheet for Schedule L only if no \nnon-tax-basis income statement and no \nnon-tax-basis balance sheet was \nprepared for any purpose and the books \nand records of the corporation reflect \nonly tax-basis amounts. The corporation \nis deemed to have non-tax-basis \nincome statements and the related \nnon-tax-basis balance sheets for the \ncurrent tax year for purposes of \nSchedule M-3 and Schedule L if such \nnon-tax-basis financial statements were \nprepared for and presented to \nmanagement, creditors, shareholders, \ngovernment regulators, or any other \nthird parties for a period ending with or \nwithin the tax year.\nIf a non-tax-basis income statement \nis prepared that is a certified \nnon-tax-basis income statement for the \nperiod ending with or within the tax year, \nthe corporation must check “Yes” for \nPart I, line 1a, and use that income \nstatement for Schedule M-3. If no \ncertified non-tax-basis income \nstatement is prepared but an unaudited \nnon-tax-basis income statement is \nprepared for the period ending with or \nwithin the tax year, the corporation must \ncheck “Yes” for Part I, line 1b, and use \nthat income statement for \nSchedule M-3.\nOrder of priority in accounting \nstandards. If two or more \nnon-tax-basis income statements are \nboth certified non-tax-basis income \nstatements for the period, the income \nstatement prepared according to the \nfollowing order of priority in accounting \nstandards must be used.\n1. U.S. Generally Accepted \nAccounting Principles (GAAP).\n2. International Financial Reporting \nStandards (IFRS).\n3. Any other International \nAccounting Standards (IAS).\n4. Other regulatory accrual \naccounting.\n5. Any other accrual accounting \nstandard.\n6. Any fair market value standard.\n7. Any cash basis standard.\nIf no non-tax-basis income statement \nis certified and two or more \nnon-tax-basis income statements are \nprepared, the income statement \nprepared according to the first listed of \nthe accounting standards listed above \nmust be used.\nIf no non-tax-basis financial \nstatements are prepared for a U.S. \ncorporation filing Schedule M-3 (Form \n1120-S), the U.S. corporation must \ncheck “No” on questions 1a and 1b, skip \nPart I, lines 2, 3a, and 3b, and enter the \nnet income (loss) per the books and \nrecords of the U.S. corporation on Part I, \nline 4a.\nInstructions for Schedule M-3 (Form 1120-S)\n-3-\n",
"Lines 2 and 3. Questions \nRegarding Income Statement \nPeriod and Restatements\nEnter the beginning and ending dates \non line 2 for the corporation's annual \nincome statement period ending with or \nwithin the current tax year.\nThe questions on Part I, lines 3a and \n3b, regarding income statement \nrestatements refer to the worldwide \nconsolidated income statement issued \nby the corporation filing the U.S. income \ntax return and used to prepare \nSchedule M-3. Answer “Yes” on lines 3a \nand/or 3b if the corporation's annual \nincome statement has been restated for \nany reason. Attach a short explanation \nof the reasons for the restatement in net \nincome for each annual income \nstatement period that is restated, \nincluding the original amount and \nrestated amount of each annual \nstatement period's net income.\nLine 4. Worldwide Consolidated \nNet Income (Loss) per Income \nStatement\nReport on Part I, line 4a, the worldwide \nconsolidated net income (loss) per the \nincome statement (or books and \nrecords, if applicable) of the \ncorporation.\nIn completing Schedule M-3, the \ncorporation must use financial \nstatement amounts from the financial \nstatement type checked “Yes” on Part I, \nline 1, or from its books and records if \nPart I, line 1b, is checked “No.”\nIf a corporation prepares \nnon-tax-basis financial statements, the \namount on line 4a must equal the \nfinancial statement net income (loss) for \nthe income statement period ending \nwith or within the tax year as indicated \non Part I, line 2.\nIf the corporation prepares \nnon-tax-basis financial statements and \nthe income statement period differs \nfrom the corporation's tax year, the \nincome statement period indicated on \nPart I, line 2, applies for purposes of \nPart I, lines 4 through 8.\nIf the corporation doesn't prepare \nnon-tax-basis financial statements and \nhas checked “No” on Part I, line 1b, \nenter the net income (loss) per the \nbooks and records of the U.S. \ncorporation on Part I, line 4a.\nIndicate on Part I, line 4b, which of \nthe following accounting standards were \nused for line 4a.\n1. U.S. Generally Accepted \nAccounting Principles (GAAP).\n2. International Financial Reporting \nStandards (IFRS).\n3. Tax basis.\n4. Other (Specify).\nReport on Part I, lines 5a through 10, \nas instructed below, all adjustment \namounts required to adjust worldwide \nnet income (loss) reported on this Part I, \nline 4a (whether from financial \nstatements or books and records), to \nnet income (loss) of the corporation that \nmust be reported on Part I, line 11. \nReport on line 12a the worldwide \nconsolidated total assets and total \nliabilities amounts for the corporation \nusing the same financial statements (or \nbook and records) used for the \nworldwide consolidated income (loss) \namount reported on line 4a.\nLine 5. Net Income (Loss) of \nNonincludible Foreign Entities\nRemove the financial net income \n(line 5a) or loss (line 5b) of each foreign \nentity that is included on line 4a and isn't \nan includible entity in the U.S. tax return \n(nonincludible foreign entity). In \naddition, on Part I, line 8, adjust for \nconsolidation eliminations and correct \nfor minority interest and intercompany \ndividends between any nonincludible \nforeign entity and the entity filing Form \n1120-S. Don't remove in Part I the \nfinancial net income (loss) of any \nnonincludible foreign entity accounted \nfor on line 4a using the equity method.\nAttach a supporting statement that \nprovides the name, EIN (if applicable), \nand net income (loss) included on \nline 4a that is removed on this line 5 for \neach separate nonincludible foreign \nentity. Also state the total assets and \ntotal liabilities for each such separate \nnonincludible foreign entity and include \nthose assets and liabilities amounts in \nthe total assets and total liabilities \nreported on Part I, line 12b. The \namounts of income (loss) detailed on \nthe supporting statement should be \nreported for each separate \nnonincludible foreign entity without \nregard to the effect of consolidation or \nelimination entries. If there are \nconsolidation or elimination entries \nrelating to nonincludible foreign entities \nwhose income (loss) is reported on the \nattached statement that aren't \nreportable on Part I, line 8, the net \namounts of all such consolidation and \nelimination entries must be reported on \na separate line on the attached \nstatement, so that the separate financial \naccounting income (loss) of each \nnonincludible foreign entity remains \nseparately stated.\nFor example, if the net income (after \nconsolidation and elimination entries) of \na nonincludible foreign \nsub-consolidated group is being \nreported on line 5a, the attached \nsupporting statement should report the \nincome (loss) of each separate \nnonincludible foreign legal entity from \neach such entity's own financial \naccounting net income statement or \nbooks and records, and any \nconsolidation or elimination entries (for \nintercompany dividends, minority \ninterests, etc.) not reportable on Part I, \nline 8, should be reported on the \nattached supporting statement as a net \namount on a line separate and apart \nfrom lines that report each nonincludible \nforeign entity's separate net income \n(loss).\nLine 6. Net Income (Loss) of \nNonincludible U.S. Entities\nRemove the financial net income \n(line 6a) or loss (line 6b) of each U.S. \nentity that is included on line 4a and isn't \nan includible entity in the U.S. tax return \n(nonincludible U.S. entity). In addition, \non Part I, line 8, adjust for consolidation \neliminations and correct for minority \ninterest and intercompany dividends \nbetween any nonincludible U.S. entity \nand any includible entity. Don't remove \nin Part I the financial net income (loss) \nof any nonincludible U.S. entity \naccounted for on line 4a using the \nequity method.\nAttach a supporting statement that \nprovides the name, EIN, and net income \n(loss) included on line 4a that is \nremoved on this line 6 for each separate \nnonincludible U.S. entity. Also state the \ntotal assets and total liabilities for each \nsuch separate nonincludible U.S. entity \nand include those assets and liabilities \namounts in the total assets and total \nliabilities reported on Part I, line 12c. \nThe amounts of income (loss) detailed \non the supporting statement should be \nreported for each separate \nnonincludible U.S. entity without regard \nto the effect of consolidation or \nelimination entries. If there are \nconsolidation or elimination entries \nrelating to nonincludible U.S. entities \nwhose income (loss) is reported on the \nattached statement that aren't \nreportable on Part I, line 8, the net \namounts of all such consolidation and \nelimination entries must be reported on \na separate line on the attached \nstatement, so that the separate financial \naccounting income (loss) of each \nnonincludible U.S. entity remains \nseparately stated. For example, if the \nnet income (after consolidation and \n-4-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"elimination entries) of a nonincludible \nU.S. sub-consolidated group is being \nreported on line 6a, the attached \nsupporting statement should report the \nincome (loss) of each separate \nnonincludible U.S. legal entity from each \nsuch entity's own financial accounting \nnet income statement or books and \nrecords, and any consolidation or \nelimination entries (for intercompany \ndividends, minority interests, etc.) not \nreportable on Part I, line 8, should be \nreported on the attached supporting \nstatement as a net amount on a line \nseparate and apart from lines that report \neach nonincludible U.S. entity's \nseparate net income (loss).\nLines 7a, 7b, and 7c. Net \nIncome (Loss) of Other Foreign \nDisregarded Entities, Net \nIncome (Loss) of Other \nDisregarded Entities (Except \nQualified Subchapter S \nSubsidiaries), and Net Income \n(Loss) of Other Qualified \nSubchapter S Subsidiaries \n(QSubs)\nInclude on line 7a the financial income \nof any foreign disregarded entity that \nisn't included on Part I, line 4a, but is \nincluded in Part I, line 11 (other foreign \ndisregarded entities). Include on line 7b \nor 7c the financial net income or (loss) \nof each disregarded entity in the U.S. \ntax return that isn't included in the \nconsolidated financial group and \ntherefore not included in the income \nreported on Part I, line 4a. Include on \nline 7b the financial income of any U.S. \ndisregarded entity that isn't a qualified \nsubchapter S subsidiary (QSub) or a \nforeign disregarded entity and that isn't \nincluded in the income reported on Part \nI, line 4a, but is included in Part I, line 11 \n(other disregarded entities). Include on \nline 7c the financial income of any QSub \nthat isn't included in the income \nreported on line 4a, but is included on \nline 11 (other QSub). In addition, on Part \nI, line 8, adjust for consolidation \neliminations and correct for minority \ninterest and intercompany dividends for \nany other disregarded entity or other \nQSub.\nAttach a supporting statement that \nprovides the name, EIN, and net income \n(loss) per the financial statement or \nbooks and records on this line 7 for \neach separate other disregarded entity \nor other QSub. Also state the total \nassets and total liabilities for each such \nseparate included entity and include \nthose assets and liabilities amounts in \nthe total assets and total liabilities \nreported on Part I, line 12d. The \namounts of income (loss) detailed on \nthe supporting statement should be \nreported for each separate other \ndisregarded entity or other QSub \nwithout regard to the effect of \nconsolidation or elimination entries \nsolely between or among the entities \nlisted. If there are consolidation or \nelimination entries relating to such other \ndisregarded entities or other QSub \nwhose income (loss) is reported on the \nattached statement that aren't \nreportable on Part I, line 8, the net \namounts of all such consolidation and \nelimination entries must be reported on \na separate line on the attached \nstatement, so that the separate financial \naccounting income (loss) of each other \ndisregarded entity or other QSub \nremains separately stated. For example, \nif the net income (after consolidation \nand elimination entries) of a \nsub-consolidated group of other \ndisregarded entities is being reported \non line 7b, the attached supporting \nstatement should report the income \n(loss) of each separate other \ndisregarded entity from each entity's \nown financial accounting net income \nstatement or books and records, and \nany consolidation or elimination entries \n(for intercompany dividends, minority \ninterests, etc.) not reportable on Part I, \nline 8, should be reported on the \nattached supporting statement as a net \namount on a line separate and apart \nfrom lines that report each other \ndisregarded entity's separate net \nincome (loss).\nLine 8. Adjustment to \nEliminations of Transactions \nBetween Includible Entities and \nNonincludible Entities\nAdjustments on Part I, line 8, to reverse \ncertain financial accounting \nconsolidation or elimination entries are \nnecessary to ensure that transactions \nbetween includible entities and \nnonincludible U.S. or foreign entities \naren't eliminated, in order to report the \ncorrect total amount on Part I, line 11. \nAlso, additional consolidation entries \nand elimination entries may be \nnecessary on Part I, line 8, related to \ntransactions between includible entities \nthat are in the consolidated financial \ngroup and other disregarded entities \nand QSubs that aren't in the \nconsolidated financial group but that are \nreported on Part I, line 7a, 7b, or 7c, in \norder to report the correct total amount \non Part I, line 11.\nInclude on Part I, line 8, the total of \nthe following: (a) amounts of any \nadjustments to consolidation entries \nand elimination entries that are \ncontained in the amount reported on \nPart I, line 4a, required as a result of \nremoving amounts on Part I, line 5 or 6; \nand (b) amounts of any additional \nconsolidation entries and elimination \nentries that are required as a result of \nincluding amounts on Part I, line 7a, 7b, \nor 7c. This is necessary in order that the \nconsolidation entries and intercompany \nelimination entries included in the \namount reported on Part I, line 11, are \nonly those applicable to the financial net \nincome (loss) of includible entities for \nthe financial statement period. For \nexample, adjustments must be reported \non line 8 to remove minority interest and \nto reverse the elimination of \nintercompany dividends included on \nPart I, line 4a, that relate to the net \nincome of entities removed on Part I, \nline 5 or 6, because the income to which \nthe consolidation or elimination entries \nrelate has been removed. Also, for \nexample, consolidation or elimination \nentries must be reported on line 8 to \neliminate any intercompany dividends \nbetween entities whose income is \nincluded on Part I, line 7a, 7b, or 7c, and \nother entities included in the U.S. \nincome tax return. See Example 3A, 3B, \nand 4 in the instructions for line 11.\nIf a corporate owner of an interest in \nanother entity: (a) accounts for the \ninterest in entity in the owner \ncorporation's separate general ledger \non the equity method, and (b) fully \nconsolidates entity in the owner \ncorporation's consolidated financial \nstatements, but entity isn't includible in \nthe owner corporation's U.S. income tax \nreturn, then, as part of reversing all \nconsolidation and elimination entries for \nthe nonincludible entity, the corporate \nowner must reverse on Schedule M-3, \nPart I, line 8, the elimination of the equity \nincome inclusion from entity. If the \nowner corporation doesn't account for \nentity on the equity method on its own \ngeneral ledger, it won't have eliminated \nthe equity income for consolidated \nfinancial statement purposes, so it will \nhave no elimination of equity income to \nreverse.\nThe attached supporting statement \nfor Part I, line 8, must identify the type \n(for example, minority interest, \nintercompany dividends, etc.) and \namount of consolidation or elimination \nentries reported, as well as the names \nof the entities to which they pertain. It \nisn't necessary, but it is permitted, to \nreport intercompany eliminations that \nInstructions for Schedule M-3 (Form 1120-S)\n-5-\n",
"net to zero on Part I, line 8, such as \nintercompany interest income and \nexpense.\nLine 9. Adjustment To \nReconcile Income Statement \nPeriod to Tax Year\nInclude on line 9 any adjustments \nnecessary to the income (loss) of \nincludible entities to reconcile \ndifferences between the corporation's \nincome statement period reported on \nline 2 and the corporation's tax year. \nAttach a statement describing the \nadjustment.\nLine 10. Other Adjustments To \nReconcile to Amount on Line 11\nInclude on line 10 any other \nadjustments to reconcile net income \n(loss) on Part I, line 4a, through Part I, \nline 9, with net income (loss) on Part I, \nline 11.\nFor any adjustments reported on Part \nI, line 10, attach a supporting statement \nwith an explanation of each net \nadjustment included on line 10.\nLine 11. Net Income (Loss) per \nIncome Statement of the \nCorporation\nReport on line 11 the net income (loss) \nper the income statement (or books and \nrecords, if applicable) of the \ncorporation. Amounts reported in \ncolumn (a) of Parts II and III (see later) \nmust be reported on the same \naccounting method used to report the \namount of net income (loss) per income \nstatement of the corporation on Part I, \nline 11.\nDon't, in any event, report on this \nline 11 the net income of entities not \nincluded in the U.S. income tax return \nfor the tax year. For example, it isn't \npermissible to remove the income of \nnonincludible entities on lines 5 and/or \n6, above, then to add back such income \non lines 7 through 10, such that the \namount reported on line 11 includes the \nnet income of entities not includible in \nthe U.S. income tax return. A principal \npurpose of Schedule M-3 is to report on \nthis Part I, line 11, only the financial \naccounting net income of only the \nentities included in the U.S. income tax \nreturn.\nWhether or not the corporation \nprepares financial statements, Part I, \nline 11, must include all items that \nimpact the net income (loss) of the \ncorporation even if they aren't recorded \nin the profit and loss accounts in the \ncorporation's general ledger, including, \nfor example, all post-closing adjusting \nentries (including workpaper \nadjustments) and dividend income or \nother income received from \nnonincludible entities. If the corporation \nprepares unconsolidated financial \nstatements using the same accounting \nmethod used to determine worldwide \nconsolidated net income (loss) for Part I, \nline 4a, and if it uses the equity method \nfor investments, the amount reported on \nPart I, line 11, will equal the amount of \nthe unconsolidated net income (loss) \nreported on the unconsolidated financial \nstatements. See items 3 and 4 under \nExample 3B, later.\nExample 3A. U.S. corporation P \nfiles a Form 1120-S U.S. tax return and \nprepares certified audited income \nstatements for GAAP. P owns 100% of \nthe stock of U.S. corporations DS1 \nthrough DS75, between 51% and 99% \nof the stock of U.S. corporations DS76 \nthrough DS100, and 100% of the stock \nof foreign entities FS1 through FS50. P \neliminates all dividend income from DS1 \nthrough DS100 and FS1 through FS50 \nin financial statement consolidation \nentries. Furthermore, P eliminates the \nminority interest ownership, if any, of \nDS76 through DS100 in financial \nstatement consolidation entries.\nP must check “Yes” on Part I, line 1a. \nOn Part I, line 4a, P must report the \nconsolidated net income for the \nconsolidated financial statement group \nof P, DS1 through DS100, and FS1 \nthrough FS50. P must remove the net \nincome (loss) of FS1 through FS50 on \nPart I, line 5a or 5b, as applicable, and \nremove on Part I, line 6a or 6b, as \napplicable, any net income (loss) from \nDS1 through DS75 where a QSub \nelection hasn't been made by P. P must \nremove the net income (loss) before \nminority interests of DS76 through \nDS100 on Part I, line 6a or 6b, as \napplicable. P must reverse on Part I, \nline 8, the elimination of any \ntransactions between the includible \nentity (P and any QSubs) and the \nnonincludible entities (DS1 through \nDS75 with no QSub election, DS76 \nthrough DS100 and FS1 through FS50), \nincluding dividends received from \nnon-QSub DS1 through DS75, DS76 \nthrough DS100, and FS1 through FS50 \nand the minority interest's share of the \nnet income (loss) of DS76 through \nDS100.\nP reports on Part I, line 11, the \nconsolidated financial statement net \nincome (loss) attributable to the \ncorporation and QSubs. Intercompany \ntransactions between the corporation \nand the QSubs that had been eliminated \nin the net income amount on line 4a \nremain eliminated in the net income \namount on line 11. Transactions \nbetween the corporation and the \nnonincludible entities that are eliminated \nin the net income amount on line 4a are \nincluded in the net income amount on \nline 11 since the elimination of those \ntransactions were reversed on line 8.\nExample 3B. \n1. U.S. corporation P owns 60% of \ncorporation DS1 which is fully \nconsolidated in P's financial statements. \nP doesn't account for DS1 in P's \nseparate general ledger on the equity \nmethod. DS1 has net income of $100 \n(before minority interests) and pays \ndividends of $50, of which P receives \n$30. The dividend is eliminated in the \nconsolidated financial statements. In its \nfinancial statements, P consolidates \nDS1 and includes $60 of net income \n($100 less the minority interest of $40) \non Part I, line 4a.\nP must remove the $100 net income \nof DS1 on Part I, line 6a. P must reverse \non Part I, line 8, the elimination of the \n$40 minority interest net income of DS1. \nIn addition, P reverses its elimination of \nthe $30 intercompany dividend in its \nfinancial statements on Part I, line 8. \nThe net result is that P includes the $30 \ndividend from DS1 at Part I, line 11, and \non Part II, line 6, column (a). P's \ndividend income included on the tax \nreturn from DS1 must be reported on \nPart II, line 6, column (d).\n2. U.S. corporation C owns 60% of \nthe capital and profits interests in U.S. \nLLC N. C doesn't account for N in C's \nseparate general ledger on the equity \nmethod. N has net income of $100 \n(before minority interests) and makes no \ndistributions during the tax year. C \ntreats N as a corporation for financial \nstatement purposes and as a \npartnership for U.S. income tax \npurposes. In its financial statements, C \nconsolidates N and includes $60 of net \nincome ($100 less the minority interest \nof $40) on Part I, line 4a.\nC must remove the $100 net income \nof N on Part I, line 6a. C must reverse on \nPart I, line 8, the elimination of the $40 \nminority interest net income of N. The \nresult is that C includes no income for N \neither on Part I, line 11, or on Part II, \nline 7, column (a). C's taxable income \nfrom N must be reported by C on Part II, \nline 7, column (d).\n3. U.S. corporation P owns 60% of \ncorporation DS1, which is fully \nconsolidated in P's financial statements. \nP accounts for DS1 in P's separate \ngeneral ledger on the equity method. \n-6-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"DS1 has net income of $100 (before \nminority interests) and pays dividends of \n$50, of which P receives $30. The \ndividend reduces P's investment in DS1 \nfor equity method reporting on P's \nseparate general ledger where P \nincludes its 60% equity share of DS1 \nincome, which is $60. In its financial \nstatements, P eliminates the DS1 equity \nmethod income of $60 and consolidates \nDS1, including $60 of net income ($100 \nless the minority interest of $40) on Part \nI, line 4a.\nP must remove the $100 net income \nof DS1 on Part I, line 6a. P must reverse \non Part I, line 8, the elimination of the \n$40 minority interest net income of DS1 \nand the elimination of the $60 of DS1 \nequity income. The net result is that P \nincludes the $60 of equity method \nincome from DS1 at Part I, line 11, and \non Part II, line 5, column (a). P's \ndividend income included on the tax \nreturn from its investment in DS1 must \nbe reported on Part II, line 6, column (d).\n4. U.S. corporation C owns 60% of \nthe capital and profits interests in U.S. \nLLC N. C accounts for N in C's separate \ngeneral ledger on the equity method. N \nhas net income of $100 (before minority \ninterests) and makes no distributions \nduring the tax year. C treats N as a \ncorporation for financial statement \npurposes and as a partnership for U.S. \nincome tax purposes. For equity method \nreporting on C's separate general \nledger, C includes its 60% equity share \nof N income, which is $60. In its \nfinancial statements, C eliminates the \n$60 of N net income ($100 less the \nminority interest of $40) on Part I, \nline 4a.\nC must remove the $100 net income \nof N on Part I, line 6a. C must reverse on \nPart I, line 8, the elimination of the $40 \nminority interest net income of N and the \nelimination of the $60 of N equity \nmethod income. The result is that C \nincludes the $60 of equity method \nincome for N on Part I, line 11, and on \nPart II, line 7, column (a). C's taxable \nincome from N must be reported by C \non Part II, line 7, column (d).\nExample 4. U.S. corporation P \nowns 100% of the stock of QSub \ncorporation DS1. DS1 is included in P's \nfederal income tax return, even though \nDS1 isn't included in P's consolidated \nfinancial statements on either a \nconsolidated basis or on the equity \nmethod. DS1 has current year net \nincome of $100 after taking into account \nits $40 interest payment to P. P has net \nincome of $1,040 after recognition of the \ninterest income from DS1. Because \nDS1 is a QSub, 100% of the net income \nof both P and DS1 must be reported on \nForm 1120-S of P's U.S. income tax \nreturn, and the intercompany interest \nincome and expense must be removed \nby consolidation elimination entries.\nP must report its financial statement \nnet income of $1,040 on Part I, line 4a, \nand reports DS1's net income of $100 \non Part I, line 7c. Then, in order to \nreflect the full consolidation of the \nfinancial accounting net income of P \nand DS1 at Part I, line 11, the following \nconsolidation and elimination entries are \nreported on Part I, line 8: offsetting \nentries to remove the $40 of interest \nincome received from DS1 included by \nP on line 4a, and to remove the $40 of \ninterest expense of DS1 included in \nline 7c for a net change of zero. The \nresult is that Part I, line 11, reports \n$1,140: $1,040 from line 4a, and $100 \nfrom line 7c. Stated another way, Part I, \nline 11, includes the entire $1,000 net \nincome of P, measured before \nrecognition of the intercompany interest \nincome from DS1 and the consolidation \nof DS1 operations, plus the entire $140 \nnet income of DS1, measured before \ninterest expense to P. P's U.S. income \ntax group isn't required to include on the \nattached supporting statement for Part I, \nline 8, the offsetting adjustment to the \nintercompany elimination of interest \nincome and interest expense (though it \nis permitted to do so).\nLine 12. Total Assets and \nLiabilities of Entities Included \nor Removed on Part I, Lines 4, \n5, 6, and 7\nLine 12 must be completed by all \ncorporations that file Schedule M-3. \nReport on lines 12a, 12b, 12c, and 12d \nthe total amount (not just the \ncorporation's share) of assets and \nliabilities of entities included or removed \non Part I, lines 4, 5, 6, and 7. All assets \nand liabilities reported on lines 12a \nthrough 12d must be reported as \npositive amounts.\nOn line 12a, enter the worldwide \nconsolidated total assets and total \nliabilities of all of the entities included in \ncomputing Part I, line 4a. On line 12b, \nenter the total assets and total liabilities \nof the entities removed in completing \nPart I, line 5. On line 12c, enter the total \nassets and total liabilities removed in \ncompleting Part I, line 6. On line 12d, \nenter total assets and total liabilities \nincluded in completing Part I, line 7.\nSpecific Instructions for \nParts II and III\nGeneral Reporting information\nA schedule or statement may be \nattached to any line even if none is \nrequired.\nFor each line item in Parts II and III, \nreport in column (a) the amount of net \nincome (loss) included in Part I, line 11, \nand report in column (d) the amount \nincluded in total income (loss) on Form \n1120-S, Schedule K, line 18.\nPart II, line 26, column (a) must \nequal Part I, line 11, and column \n(d) must equal the amount on \nForm 1120-S, Schedule K, line 18.\nFor any item of income, gain, loss, \nexpense, or deduction for which there is \na difference between columns (a) and \n(d), the portion of the difference that is \ntemporary must be entered in column \n(b) and the portion of the difference that \nis permanent must be entered in column \n(c).\nIf financial statements are prepared \nby the corporation under with generally \naccepted accounting principles (GAAP), \ndifferences that are treated as \ntemporary under GAAP must be \nreported in column (b) and differences \nthat are permanent (that is, not \ntemporary) for GAAP must be reported \nin column (c). Generally, under to \nGAAP, a temporary difference affects \n(creates, increases, or decreases) a \ndeferred tax asset or liability.\nIf the corporation doesn't prepare \nfinancial statements, or the financial \nstatements aren't prepared under \nGAAP, report in column (b) any \ndifference that the corporation believes \nwill reverse in a future tax year (that is, \nhave an opposite effect on total income \n(loss) in a future tax year (or years) due \nto the difference in timing of recognition \nfor financial accounting and U.S. \nincome tax purposes) or is the reversal \nof such a difference that arose in a prior \ntax year. Report in column (c) any \ndifference that the corporation believes \nwon't reverse in a future tax year (and \nisn't the reversal of such a difference \nthat arose in a prior tax year).\nIf the corporation is unable to \ndetermine whether a difference between \ncolumn (a) and column (d) for an item \nwill reverse in a future tax year or is the \nreversal of a difference that arose in a \nprior tax year, report the difference for \nthat item in column (c).\nTIP\nInstructions for Schedule M-3 (Form 1120-S)\n-7-\n",
"Example 5. At the end of \nCorporation A's first tax year, it wasn't \nrequired to file Schedule M-3 for any \nreason.\nA may elect to file Schedule M-3 \ninstead of completing Schedule M-1.\nIf A elects to file schedule M-3, it \nmust either (i) complete Schedule M-3 \nentirely or (ii) complete Schedule M-3 \nthrough Part I and complete \nSchedule M-1 instead of completing \nParts II and III of Schedule M-3.\nIf A elects to complete Schedule M-3 \nentirely, it must complete all columns of \nParts II and III.\nIf A completes Schedule M-3 through \nPart I and completes Schedule M-1 \ninstead of completing Parts II and III of \nSchedule M-3, line 11 of Part I of \nSchedule M-3 must equal line 1 of \nSchedule M-1.\nExample 6. Corporation B is a U.S. \ncorporation that files a U.S. tax return \nand prepares GAAP financial \nstatements. In prior years, B acquired \nintellectual property (IP) and goodwill. \nThe IP is amortizable for both U.S. \nincome tax and financial statement \npurposes. In the current year, B's annual \namortization expense for IP is $9,000 for \nU.S. income tax purposes and $6,000 \nfor financial statement purposes. In its \nfinancial statements, B treats the \ndifference in IP amortization as a \ntemporary difference. The goodwill isn't \namortizable for U.S. income tax \npurposes and is subject to impairment \nfor financial statement purposes. In the \ncurrent year, B records an impairment \ncharge on the goodwill of $5,000. In its \nfinancial statements, B treats the \ngoodwill impairment as a permanent \ndifference. B must report the \namortization attributable to the IP on \nPart III, line 21, and report $6,000 in \ncolumn (a), a temporary difference of \n$3,000 in column (b), and $9,000 in \ncolumn (d). B must report the goodwill \nimpairment on Part III, line 19, and \nreport $5,000 in column (a), a \npermanent difference of ($5,000) in \ncolumn (c), and $0 in column (d).\nReporting Requirements \nfor Parts II and III\nGeneral Reporting \nRequirements\nIf an amount is attributable to a \nreportable transaction described in \nRegulations section 1.6011-4(b), the \namount must be reported in columns \n(a), (b), (c), and (d), as applicable, of \nPart II, line 10, regardless of whether the \namount would otherwise be reported on \nSchedule M, Part II or Part III. So, if a \ntaxpayer is required to file Form 8886, \nReportable Transaction Disclosure \nStatement, the amounts attributable to \nthat reportable transaction must be \nreported on Part II, line 10.\nA corporation is required to report in \ncolumn (a) of Parts II and III the amount \nof any item specifically listed on \nSchedule M-3 that is in any manner \nincluded in the corporation's current \nyear financial statement net income \n(loss) or in an income or expense \naccount maintained in the corporation's \nbooks and records, even if there is no \ndifference between that amount and the \namount included in total income (loss) \nunless (a) otherwise provided in these \ninstructions or (b) the amount is \nattributable to a reportable transaction \ndescribed in Regulations section \n1.6011-4(b) so it is reported on Part II, \nline 10. For example, with the exception \nof interest income reflected on a \nSchedule K-1 received by a corporation \nas a result of the corporation's \ninvestment in a partnership or other \npass-through entity, all interest income \nincluded on Part I, line 11, whether from \naffiliated companies, third parties, \nbanks, or other entities, whether from \nforeign or domestic sources, whether \ntaxable or exempt from tax, and whether \nclassified as some other type of income \nfor U.S. income tax purposes (such as \ndividends), must be included on Part II, \nline 11, column (a). Likewise, all fines \nand penalties included in Part I, line 11, \npaid to a government or other authority \nfor the violation of any law for which \nfines or penalties are assessed must be \nincluded on Part III, line 9, column (a), \nregardless of the government authority \nthat imposed the fines or penalties, \nregardless of whether the fines or \npenalties are civil or criminal, regardless \nof the classification, nomenclature, or \nterminology attached to the fines or \npenalties by the imposing authority in its \nactions or documents.\nIf a corporation would be required to \nreport in column (a) of Parts II and III the \namount of any item specifically listed on \nSchedule M-3 in accordance with the \npreceding paragraph, except that the \ncorporation has capitalized the item of \nincome or expense and reports the \namount in its financial statement \nbalance sheet or in asset and liability \naccounts maintained in the \ncorporation's books and records, the \ncorporation must report the proper tax \ntreatment of the item in columns (b), (c), \nand (d), as applicable.\nFurthermore, in applying the two \npreceding paragraphs, a corporation is \nrequired to report in column (a) of Parts \nII and III the amount of any item \nspecifically listed on Schedule M-3 that \nis included in the corporation's financial \nstatements or exists in the corporation's \nbooks and records, regardless of the \nnomenclature associated with that item \nin the financial statements or books and \nrecords. Accurate completion of \nSchedule M-3 requires reporting \namounts according to the substantive \nnature of the specific line items included \nin Schedule M-3 and consistent \nreporting of all transactions of like \nsubstantive nature that occurred during \nthe tax year. For example, all expense \namounts that are included in the \nfinancial statements or exist in the \nbooks and records that represent some \nform of “Bad debt expense,” must be \nreported on Part III, line 25, in column \n(a), regardless of whether the amounts \nare recorded or stated under different \nnomenclature in the financial \nstatements or the books and records \nsuch as: “Provision for doubtful \naccounts”; “Expense for uncollectible \nnotes receivable”; or “Impairment of \ntrade accounts receivable.” Likewise, as \nstated in the preceding paragraph, all \nfines and penalties must be included on \nPart III, line 9, column (a), regardless of \nthe terminology or nomenclature \nattached to them by the corporation in \nits books and records or financial \nstatements.\nWith limited exceptions, Part II \nincludes lines for specific items of \nincome, gain, or loss (income items). \n(See Part II, lines 1 through 21.) If an \nincome item is described in Part II, lines \n1 through 21, report the amount of the \nitem on the applicable line, regardless of \nwhether there is a difference for the \nitem. If there is a difference for the \nincome item, or only a portion of the \nincome item has a difference and a \nportion of the item doesn't have a \ndifference, and the item isn't described \nin Part II, lines 1 through 21, report and \ndescribe the entire amount of the item \non Part II, line 22.\nWith limited exceptions, Part III \nincludes lines for specific items of \nexpense or deduction (expense items). \n(See Part III, lines 1 through 28.) If an \nexpense item is described on Part III, \nlines 1 through 28, report the amount of \nthe item on the applicable line, \nregardless of whether there is a \ndifference for the item. If there is a \ndifference for the expense item, or only \na portion of the expense item has a \ndifference and a portion of the item \n-8-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"doesn't have a difference and the item \nisn't described in Part III, lines 1 through \n28, report and describe the entire \namount of the item on Part III, line 31.\nIf there is no difference between the \nfinancial accounting amount and the \ntaxable amount of an entire item of \nincome, loss, expense, or deduction \nand the item isn't described or included \nin Part II, lines 1 through 21, or Part III, \nlines 1 through 28, report the entire \namount of the item in columns (a) and \n(d) of Part II, line 25.\nSeparately stated and adequately \ndisclosed. Each difference reported in \nParts II and III must be separately stated \nand adequately disclosed. In general, a \ndifference is adequately disclosed if the \ndifference is labeled in a manner that \nclearly identifies the item or transaction \nfrom which the difference arises. For \nfurther guidance about adequate \ndisclosure, see Regulations section \n1.6662-4(f). If a specific item of income, \ngain, loss, expense, or deduction is \ndescribed on Part II, lines 7 through 21, \nor Part III, lines 1 through 28, and the \nline doesn't indicate to “attach \nstatement,” and the specific instructions \nfor the line don't call for an attachment \nof a statement, then the item is \nconsidered separately stated and \nadequately disclosed if the item is \nreported on the applicable line and the \namount(s) of the item(s) are reported in \nthe applicable columns of the applicable \nline. See the instructions for Part II, lines \n1 through 6, for specific additional \ninformation required to be provided for \nthese particular lines.\nExcept as otherwise provided, \ndifferences for the same item must be \ncombined or netted together and \nreported as one amount on the \napplicable line of Schedule M-3. \nHowever, differences for separate items \nmustn't be combined or netted together. \nEach item (and corresponding amount \nattributable to that item) must be \nseparately stated and adequately \ndisclosed on the applicable line of \nSchedule M-3, or any statement \nrequired to be attached, even if the \namounts are below a certain dollar \namount.\nRequired statements for Part II, \nline 22, and Part III, line 31. A \nseparate statement must be attached to \nSchedule M-3 (Form 1120-S) that \nincludes a detailed description of each \nitem and adjustment entered on Part II, \nline 22, and Part III, line 31.\nThe description for each amount \nentered in column (a) must be readily \nidentifiable to the name of the account \nin the financial statements or books and \nrecords of the taxpayer, under which the \namount in column (a) was recorded in \nthe accounting records. Also, the \ndescription for each amount entered in \ncolumn (a) must include detailed \ninformation supporting each adjustment \nreported in columns (b) and (c), \nincluding how the adjustment is \nidentified in the accounting records. The \nentire description is considered the tax \ndescription for the amount reported in \ncolumn (d) for each item reported on \nPart II, line 22, or Part III, line 31.\nEach description should adequately \ndescribe all four columns of Part II, \nline 22, or Part III, line 31. If additional \ninformation is required to provide an \nacceptable description, provide a \nsupporting statement.\nExample 7. Corporation C is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. C placed in service 10 \ndepreciable fixed assets in a previous \nyear. C's total depreciation expense for \nits current tax year for five of the assets \nis $50,000 for income statement \npurposes and $70,000 for U.S. income \ntax purposes. C's total annual \ndepreciation expense for its current tax \nyear for the other five assets is $40,000 \nfor income statement purposes and \n$30,000 for U.S. income tax purposes. \nIn its financial statements, C treats the \ndifferences between financial statement \nand U.S. income tax depreciation \nexpense as giving rise to temporary \ndifferences that will reverse in future \nyears. C must combine all of its \ndepreciation adjustments. Accordingly, \nC must report on Part III, line 24, for its \ncurrent tax year income statement \ndepreciation expense of $90,000 in \ncolumn (a), a temporary difference of \n$10,000 in column (b), and U.S. income \ntax depreciation expense of $100,000 in \ncolumn (d).\nExample 8. Corporation D is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. On December 31, of its \ncurrent tax year, D establishes three \nreserve accounts in the amount of \n$100,000 for each account. One \nreserve account is an allowance for \naccounts receivable that are estimated \nto be uncollectible. The second reserve \nis an estimate of coupons outstanding \nthat may have to be paid. The third \nreserve is an estimate of future warranty \nexpenses. In its financial statements, D \ntreats the three reserve accounts as \ngiving rise to temporary differences that \nwill reverse in future years. The three \nreserves are expenses in D's current \nfinancial statements but aren't \ndeductions for U.S. income tax \npurposes in its current tax years. D \nmustn't combine the Schedule M-3 \ndifferences for the three reserve \naccounts. D must report the amounts \nattributable to the allowance for \nuncollectible accounts receivable on \nPart III, line 25, and must separately \nstate and adequately disclose the \namounts attributable to each of the \nother two reserves, coupons \noutstanding and warranty costs, on a \nrequired, attached statement that \nsupports the amounts at Part III, line 31.\nD must also provide a description for \neach reserve that meets the \nrequirements for Part III, line 31, \ndiscussed earlier under Required \nstatements for Part II, line 22, and Part \nIII, line 31. In this example, an \nacceptable description would be \n\"Coupon Issue Reserves - Rewards \nExpense\" and \"Future Warranty \nExpense Reserve.\"\nThere is no need to add the title \nof the reserve account to the \ndescription if the account name \nfor the amount in column (a) is already \npart of the adjustment description.\nExample 9. Corporation E is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. On January 2 of its \ncurrent tax year, E establishes an \nallowance for uncollectible accounts \nreceivable (bad debt reserve) of \n$100,000. During its current tax year, E \nincreased the reserve by $250,000 for \nadditional accounts receivable that may \nbecome uncollectible. Additionally, \nduring its current tax year, E decreases \nthe reserve by $75,000 for accounts \nreceivable that were discharged in \nbankruptcy during its current tax year. \nThe balance in the reserve account on \nDecember 31 of its current tax year is \n$275,000. The $100,000 amount to \nestablish the reserve account and the \n$250,000 to increase the reserve \naccount are expenses on E's current tax \nyear financial statements but aren't \ndeductible for U.S. income tax purposes \nin its current tax year. However, the \n$75,000 decrease to the reserve is \ndeductible for U.S. income tax purposes \nin its current tax year. In its financial \nstatements, E treats the reserve \naccount as giving rise to a temporary \ndifference that will reverse in future tax \nyears. E must report on Part III, line 25, \nfor its current tax year income statement \nbad debt expense of $350,000 in \ncolumn (a), a temporary difference of \nTIP\nInstructions for Schedule M-3 (Form 1120-S)\n-9-\n",
"($275,000) in column (b), and U.S. \nincome tax bad debt expense of \n$75,000 in column (d).\nExample 10. Corporation F is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. During its current tax \nyear, F incurs $200 in meal expenses \nand $100 in entertainment expenses \nthat F deducts in computing net income \nper the income statement. All of the \n$200 meal expense is subject to the \n50% limitation under section 274(n). \nThe $100 of entertainment expenses is \ndisallowed as a deduction under section \n274(a). In its financial statements, F \ntreats the limitation on deductions for \nmeals and entertainment as a \npermanent difference. Because meal \nand entertainment expenses are \nspecifically described in Part III, line 8, F \nmust report all of its meal and \nentertainment expenses on this line, \nregardless of whether there is a \ndifference. Accordingly, F must report \n$300 in column (a), $200 in column (c), \nand $100 in column (d). F must report \nall meal and entertainment expenses, \nwhether allowed fully or subject to \nlimitations, on Part III, line 8. No amount \nshould be reflected on Part II, line 25.\nPart II. Reconciliation of \nNet Income (Loss) per \nIncome Statement of the \nCorporation With Total \nIncome (Loss) per Return\nLines 1 Through 9. Additional \nInformation for Each Entity\nFor any item reported on Part II, lines 1, \nand 3 through 5, attach a supporting \nstatement that provides the name of the \nentity for which the item is reported, the \nentity's EIN (if applicable), the type of \nentity (corporation, partnership, etc.), \nand the item amounts for columns (a) \nthrough (d). See the instructions for Part \nII, lines 2 and 6 through 9, for the \nspecific information required for those \nparticular lines.\nLine 1. Income (Loss) From \nEquity Method Foreign \nCorporations\nReport on line 1, column (a), the \nfinancial income (loss) included in Part I, \nline 11, for any foreign corporation \naccounted for on the equity method and \nremove such amount in column (b) or \n(c), as applicable. Report the amount of \ndividends received and other taxable \namounts received or includible from \nforeign corporations on Part II, lines 2 \nthrough 4, as applicable.\nLine 2. Gross Foreign \nDividends Not Previously \nTaxed\nExcept as otherwise provided in this \nparagraph, report on line 2, column (d), \nthe amount (before any withholding tax) \nof any foreign dividends included in \ncurrent year total income (loss) on Form \n1120-S, Schedule K, line 18, and report \non line 2, column (a), the amount of \ndividends from any foreign corporation \nincluded in Part I, line 11. Don't report \non line 2 any amounts that must be \nreported on Part II, line 3, or dividends \nthat were previously taxed and must be \nreported on Part II, line 4. (See the \ninstructions below for Part II, lines 3 and \n4.) Report withholding taxes on Part III, \nline 31, or Part II, line 25, as applicable.\nFor any dividends reported on Part II, \nline 2, that are received on a class of \nvoting stock of which the corporation \ndirectly or indirectly owned 10% or more \nof the outstanding shares of that class at \nany time during the tax year, report on \nan attached supporting statement: (1) \nthe name of the dividend payer, (2) the \npayer's EIN (if applicable), (3) the class \nof voting stock on which the dividend \nwas paid, (4) the percentage of the \nclass directly or indirectly owned, and \n(5) the amounts for columns (a) through \n(d).\nLine 3. Subpart F, QEF, and \nSimilar Income Inclusions\nReport on line 3, column (d), the amount \nincluded in income under section 951 \n(relating to Subpart F), the amount \nincluded in income under section 951A \n(relating to global intangible low-taxed \nincome (GILTI)), gains or other income \ninclusions resulting from elections under \nsections 1291(d)(2) and 1298(b)(1), and \nany amount included in income \npursuant to section 1293 (relating to \nqualified electing funds (QEFs)). The \namount of Subpart F income \ncorresponds to the total of the amounts \nreported by the corporation on \nSchedule I, lines 1 through 4, of all \nForms 5471, Information Return of U.S. \nPersons With Respect To Certain \nForeign Corporations. The amount of \nQEF income corresponds to the total of \nthe amounts reported by the corporation \non all Forms 8621, Information Return \nby a Shareholder of a Passive Foreign \nInvestment Company or Qualified \nElecting Fund. See Form 8621 and the \nInstructions for Form 8621.\nAlso include on line 3 passive foreign \ninvestment company (PFIC) \nmark-to-market gains and losses under \nsection 1296. Don't report such gains \nand losses on Part II, line 14.\nLine 4. Gross Foreign \nDistributions Previously Taxed\nReport on line 4, column (a), any \ndistributions received from foreign \ncorporations that were included in Part I, \nline 11, and that were previously taxed \nfor U.S. income tax purposes. For \nexample, include in column (a) amounts \nthat are excluded from income under \nsections 959 and 1293(c). Remove \nsuch amount in column (b) or (c), as \napplicable. Report the full amount of the \ndistribution before any withholding tax. \nReport withholding taxes on Part III, \nline 31, or Part II, line 25, as applicable. \nSince previously taxed foreign \ndistributions aren't currently taxable, \nline 4, column (d), is shaded. Also, see \nthe instructions above for Part II, line 2.\nLine 5. Income (Loss) From \nEquity Method U.S. \nCorporations\nReport on line 5, column (a), the \nfinancial income (loss) included in Part I, \nline 11, for any U.S. corporation \naccounted for on the equity method and \nremove such amount in column (b) or \n(c), as applicable. Report on Part II, \nline 6, dividends received from any U.S. \ncorporation accounted for on the equity \nmethod.\nLine 6. U.S. Dividends Not \nEliminated in Tax Consolidation\nReport on line 6, column (a), the amount \nof dividends included in Part I, line 11, \nthat were received from any U.S. \ncorporation. Report on line 6, column \n(d), the amount of any U.S. dividends \nincluded in total income (loss) on Form \n1120-S, Schedule K, line 18.\nFor any dividends included on Part II, \nline 6, that are received on classes of \nvoting stock in which the corporation \ndirectly or indirectly owned 10% or more \nof the outstanding shares of that class at \nany time during the tax year, report on \nan attached supporting statement for \nPart II, line 6: (1) the name of the \ndividend payer, (2) the payer's EIN (if \napplicable), (3) the class of voting stock \non which the dividend was paid, (4) the \npercentage of the class directly or \nindirectly owned, and (5) the item \namounts for columns (a) through (d).\n-10-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"Line 7. Income (Loss) From \nU.S. Partnerships and Line 8. \nIncome (Loss) From Foreign \nPartnerships\nFor any interest owned by the \ncorporation that is treated as an \ninvestment in a partnership for U.S. \nincome tax purposes (other than an \ninterest in a disregarded entity), report \namounts on Part II, line 7 or 8, as \ndescribed below.\n1. In column (a), the sum of the \ncorporation's distributive share of \nincome or loss from a U.S. or foreign \npartnership that is included in Part I, \nline 11.\n2. In column (b) or (c), as \napplicable, the sum of all differences, if \nany, attributable to the corporation's \ndistributive share of income or loss from \na U.S. or foreign partnership.\n3. In column (d), the sum of all \namounts of income, gain, loss, or \ndeduction attributable to the \ncorporation's distributive share of \nincome or loss from a U.S. or foreign \npartnership (that is, the sum of all \namounts reportable on the corporation's \nSchedule(s) K-1 received from the \npartnership (if applicable)), without \nregard to any limitations computed at \nthe partner level.\nFor each partnership reported on \nline 7 or 8, attach a supporting \nstatement that provides the name, EIN \n(if applicable), end of year profit-sharing \npercentage (if applicable), end of year \nloss-sharing percentage (if applicable), \nand the amount reported in column (a), \n(b), (c), or (d) of lines 7 or 8, as \napplicable.\nExample 11. U.S. corporation H is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. H has an investment in \na U.S. partnership USP. H prepares \nfinancial statements in accordance with \nGAAP. In its financial statements, H \ntreats the difference between financial \nstatement net income and taxable \nincome from its investment in USP as a \npermanent difference. For its current tax \nyear, H's financial statement net income \nincludes $10,000 of income attributable \nto its share of USP's net income. H's \nSchedule K-1 from USP reports $5,000 \nof ordinary income, $7,000 of long-term \ncapital gains, $4,000 of charitable \ncontributions, and $200 of section 179 \nexpense. H must report on Part II, line 7, \n$10,000 in column (a), a permanent \ndifference of ($2,200) in column (c), and \n$7,800 in column (d).\nLine 9. Income (Loss) From \nOther Pass-Through Entities\nFor any interest in a pass-through entity \n(other than an interest in a partnership \nreportable on Part II, line 7 or 8, as \napplicable) owned by the corporation \n(other than an interest in a disregarded \nentity), report the following on line 9.\n1. In column (a), the sum of the \ncorporation's distributive share of \nincome or loss from the pass-through \nentity that is included in Part I, line 11.\n2. In column (b) or (c), as \napplicable, the sum of all differences, if \nany, attributable to the pass-through \nentity.\n3. In column (d), the sum of all \ntaxable amounts of income, gain, loss, \nor deduction reportable on the \ncorporation's Schedules K-1 received \nfrom the pass-through entity (if \napplicable).\nFor each pass-through entity \nreported on line 9, attach a supporting \nstatement that provides that entity's \nname, EIN (if applicable), the \ncorporation's end of year profit-sharing \npercentage (if applicable), the \ncorporation's end of year loss-sharing \npercentage (if applicable), and the \namounts reported by the corporation in \ncolumn (a), (b), (c), or (d) of line 9, as \napplicable.\nLine 10. Items Relating to \nReportable Transactions\nAny amounts attributable to any \nreportable transactions (as described in \nRegulations section 1.6011-4(b)) must \nbe included on Part II, line 10, \nregardless of whether the difference, or \ndifferences, would otherwise be \nreported elsewhere in Part II or Part III. \nSo, if a taxpayer is required to file Form \n8886 for any reportable transaction \ndescribed in Regulations section \n1.6011-4(b), the amounts attributable to \nthat reportable transaction must be \nreported on Part II, line 10. In addition, \nall income and expense amounts \nattributable to a reportable transaction \nmust be reported on Part II, line 10, \ncolumns (a) and (d), even if there is no \ndifference between the financial \namounts and the taxable amounts.\nEach difference attributable to a \nreportable transaction must be \nseparately stated and adequately \ndisclosed. A corporation will be \nconsidered to have separately stated \nand adequately disclosed a reportable \ntransaction on line 10 if the corporation \nsequentially numbers each Form 8886 \nand lists by identifying number on the \nsupporting statement for Part II, line 10, \neach sequentially numbered reportable \ntransaction and the amounts required \nfor Part II, line 10, columns (a) through \n(d).\nIn lieu of the requirements of the \npreceding paragraph, a corporation will \nbe considered to have separately stated \nand adequately disclosed a reportable \ntransaction if the corporation attaches a \nsupporting statement that provides the \nfollowing for each reportable \ntransaction.\n1. A description of the reportable \ntransaction disclosed on Form 8886 for \nwhich amounts are reported on Part II, \nline 10.\n2. The name and reportable \ntransaction or tax shelter registration \nnumber, if applicable, as reported on \nlines 1a and 1c, respectively, of Form \n8886.\n3. The type of reportable transaction \n(that is, listed transaction, confidential \ntransaction, transaction with contractual \nprotection, etc.) as reported on line 2 of \nForm 8886.\nIf a transaction is a listed transaction \ndescribed in Regulations section \n1.6011-4(b)(2), the description also \nmust include the description provided \non line 3 of Form 8886. In addition, if the \nreportable transaction involves an \ninvestment in the transaction through \nanother entity such as a partnership, the \ndescription must include the name and \nEIN (if applicable) of that entity as \nreported on line 5 of Form 8886.\nExample 12. Corporation J is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. J incurred seven \ndifferent abandonment losses during its \ncurrent tax year. One loss of $12 million \nresults from a reportable transaction \ndescribed in Regulations section \n1.6011-4(b)(5), another loss of $5 \nmillion results from a reportable \ntransaction described in Regulations \nsection 1.6011-4(b)(4), and the \nremaining five abandonment losses \naren't reportable transactions. J \ndiscloses the reportable transactions \ngiving rise to the $12 million and $5 \nmillion losses on separate Forms 8886 \nand sequentially numbers them X1 and \nX2, respectively. J must separately state \nand adequately disclose the $12 million \nand $5 million losses on Part II, line 10. \nThe $12 million loss and the $5 million \nloss will be adequately disclosed if J \nattaches a supporting statement for \nline 10 that lists each of the sequentially \nnumbered forms, Form 8886-X1 and \nInstructions for Schedule M-3 (Form 1120-S)\n-11-\n",
"Form 8886-X2, and for each reportable \ntransaction reports the appropriate \namounts required for Part II, line 10, \ncolumns (a) through (d). Alternatively, \nJ's disclosures will be adequate if the \ndescription provided for each loss on \nthe supporting statement includes the \nnames and reportable transaction or tax \nshelter registration numbers, if any, \ndisclosed on the applicable Form 8886, \nidentifies the type of reportable \ntransaction for the loss, and reports the \nappropriate amounts required for Part II, \nline 10, columns (a) through (d). J must \nreport the losses attributable to the \nother five abandonment losses on Part \nII, line 21e, regardless of whether a \ndifference exists for any or all of those \nabandonment losses.\nExample 13. Corporation K is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. K enters into a \ntransaction with contractual protection \nthat is a reportable transaction \ndescribed in Regulations section \n1.6011-4(b)(4). This reportable \ntransaction is the only reportable \ntransaction for K's current tax year and \nresults in a $7 million capital loss for \nboth financial accounting purposes and \nU.S. income tax purposes. Although the \ntransaction doesn't result in a \ndifference, K is required to report on \nPart II, line 10, the following amounts: \n($7 million) in column (a), zero in \ncolumns (b) and (c), and ($7 million) in \ncolumn (d). The transaction will be \nadequately disclosed if K attaches a \nsupporting statement for line 10 that (a) \nsequentially numbers the Form 8886 \nand refers to the sequentially-numbered \nForm 8886-X1 and (b) reports the \napplicable amounts required for line 10, \ncolumns (a) through (d). Alternatively, \nthe transaction will be adequately \ndisclosed if the supporting statement for \nline 10 includes a description of the \ntransaction, the name and tax shelter \nregistration number, if any, and the type \nof reportable transaction disclosed on \nForm 8886.\nLine 11. Interest Income\nAttach Form 8916-A, Supplemental \nAttachment to Schedule M-3. Complete \nPart II and enter the amounts shown on \nline 6, columns (a) through (d), on \nSchedule M-3, line 11, columns (a) \nthrough (d), as applicable.\nAny corporation that files Form \n1120-S that (a) is required to file \na Schedule M-3 and has less \nthan $50 million in total assets at the \nend of the tax year or (b) isn't required \nto file a Schedule M-3 and voluntarily \nTIP\nfiles a Schedule M-3, isn't required to \nfile Form 8916-A but may voluntarily do \nso.\nReport on Part II, line 11, column (a), \nthe total amount of interest income \nincluded on Part I, line 11, and report on \nPart II, line 11, column (d), the total \namount of interest income included on \nForm 1120-S, Schedule K, line 18, that \nisn't required to be reported elsewhere \non Schedule M-3. In columns (b) or (c), \nas applicable, adjust for any amounts \ntreated for U.S. income tax purposes as \ninterest income that are treated as some \nother form of income for financial \naccounting purposes, or vice versa. For \nexample, adjustments to interest \nincome resulting from adjustments \nmade in accordance with the \ninstructions for Part II, line 16, should be \nmade in columns (b) and (c) of this \nline 11.\nDon't report on this line 11 or include \non Form 8916-A amounts reported in \naccordance with instructions for Part II, \nlines 7, 8, 9, 10, and 20.\nLine 12. Total Accrual to Cash \nAdjustment\nThis line is completed by a corporation \nthat prepares financial statements (or \nbooks and records, if permitted) using \nan overall accrual method of accounting \nand uses an overall cash method of \naccounting for U.S. income tax \npurposes (or vice versa). With the \nexception of amounts required to be \nreported on Part II, line 10, the \ncorporation must report on Part II, \nline 12, a single amount net of all \nadjustments attributable solely to the \nuse of the different overall methods of \naccounting (for example, adjustments \nrelated to accounts receivable, \naccounts payable, compensation, \naccrued liabilities, etc.), regardless of \nwhether a separate line on \nSchedule M-3 corresponds to an item \nwithin the accrual to cash reconciliation. \nDifferences not attributable to the use of \nthe different overall methods of \naccounting must be reported on the \nappropriate lines of Schedule M-3 (for \nexample, a depreciation difference must \nbe reported on Part III, line 24).\nExample 14. Corporation L is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. L prepares financial \nstatements in accordance with GAAP \nusing an overall accrual method of \naccounting. L uses an overall cash \nmethod of accounting for U.S. income \ntax purposes. L's financial statements \nfor the year ending December 31 of its \ncurrent tax year report accounts \nreceivable of $35,000, an allowance for \nbad debts of $10,000, and accounts \npayable of $17,000 related to current \nyear acquisition and reorganization \nlegal and accounting fees. In addition, \nfor L's year ending December 31 of its \ncurrent tax year, L reported financial \nstatement depreciation expense of \n$15,000 and depreciation for U.S. \nincome tax purposes of $25,000. For L's \ncurrent tax year using an overall cash \nmethod of accounting, L doesn't \nrecognize the $35,000 of revenue \nattributable to the accounts receivable, \ncan't deduct the $10,000 allowance for \nbad debt, and can't deduct the $17,000 \nof accounts payable. In its financial \nstatements, L treats both the difference \nin overall accounting methods used for \nfinancial statement and U.S. income tax \npurposes and the difference in \ndepreciation expense as temporary \ndifferences. L must combine all \nadjustments attributable to the \ndifferences related to the overall \naccounting methods on Part II, line 12. \nAs a result, L must report on Part II, \nline 12, $8,000 in column (a) ($35,000 – \n$10,000 – $17,000), ($8,000) in column \n(b), and zero in column (d). L mustn't \nreport the accrual to cash adjustment \nattributable to the legal and accounting \nfees on Part III, line 17. Because the \ndifference in depreciation expense \ndoesn't relate to the use of the cash or \naccrual method of accounting, L must \nreport the depreciation difference on \nPart III, line 24, and report $15,000 in \ncolumn (a), $10,000 in column (b), and \n$25,000 in column (d).\nLine 13. Hedging Transactions\nReport on line 13, column (a), the net \ngain or loss from hedging transactions \nincluded on Part I, line 11. Report in \ncolumn (d) the amount of income (loss) \nfrom hedging transactions as defined in \nsection 1221(b)(2). Use columns (b) \nand (c) to report all differences caused \nby treating hedging transactions \ndifferently for financial accounting \npurposes and for U.S. income tax \npurposes. For example, if a portion of a \nhedge is considered ineffective under \nGAAP but still is a valid hedge under \nsection 1221(b)(2), the difference must \nbe reported on line 13. The hedge of a \ncapital asset, which isn't a valid hedge \nfor U.S. income tax purposes but may \nbe considered a hedge for GAAP \npurposes, must also be reported here.\nReport hedging gains and losses \ncomputed under the mark-to-market \nmethod of accounting on line 13 and not \non Part II, line 14.\n-12-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"Report any gain or loss from \ninventory hedging transactions on \nline 13 and not on Part II, line 15.\nLine 14. Mark-to-Market Income \n(Loss)\nReport on line 14 any amount \nrepresenting the mark-to-market income \nor loss for any securities held by a \ndealer in securities, a dealer in \ncommodities having made a valid \nelection under section 475(e), or a \ntrader in securities or commodities \nhaving made a valid election under \nsection 475(f). “Securities” for these \npurposes are securities described in \nsection 475(c)(2) and “commodities” are \ndescribed in section 475(e)(2). \n“Securities” don't include any items \nspecifically excluded from sections \n475(c)(2) and 475(e)(2), such as certain \ncontracts to which section 1256(a) \napplies.\nReport hedging gains and losses \ncomputed under the mark-to-market \nmethod of accounting on Part II, line 13, \nand not on line 14.\nTraders in securities and commodi-\nties. For a trader in securities or \ncommodities that made a valid election \nunder section 475(f) to use the \nmark-to-market method to account for \nsecurities or commodities held in \nconnection with a trading business that \nfiles Form 4797, Sales of Business \nProperty, any Schedule M-3 entries \nrequired as a result of marking to market \nthese securities or commodities are \nreported as follows: (a) mark-to-market \ngains and losses from Form 4797, \nline 10, are included on Schedule M-3 \n(Form 1120-S), Part II, line 14; (b) any \nother Schedule M-3 entries required \nbased on other results (non \nmark-to-market gains and losses) \nincluded in the total reported on Form \n4797, line 17, should be reported on \nSchedule M-3 (Form 1120-S), Part II, \nline 21d, unless the instructions for \nSchedule M-3 require the amounts to be \nreported on another line.\nLine 15. Cost of Goods Sold\nReport on line 15 any amounts \ndeducted as part of cost of goods sold \nduring the tax year, regardless of \nwhether the amounts would otherwise \nbe reported elsewhere in Part II or Part \nIII.\nExamples of amounts that must be \nincluded as cost of goods sold items are \namounts attributable to inventory \nvaluation, such as amounts attributable \nto cost-flow assumptions, additional \ncosts required to be capitalized \n(including depreciation) such as section \n263A costs, inventory shrinkage \naccruals, inventory obsolescence \nreserves, and lower of cost or market \n(LCM) write-downs.\nComplete Part I of Form 8916-A. \nEnter the amounts from line 8, columns \n(a) through (d) of Form 8916-A, on \nSchedule M-3, Part II, line 15, columns \n(a) through (d), as applicable. Attach \nForm 8916-A.\nThe entries in columns (a) and \n(d) of Schedule M-3, line 15, are \nnegative amounts.\nDon't report the following on line 15 \nor on Form 8916-A.\n• Amounts reportable on Part II, line 10.\n• Any gain or loss from inventory \nhedging transactions reportable on Part \nII, line 13.\n• Amounts reportable on Part II, line 16.\n• Amounts reportable on Part II, line 19.\n• Mark-to-market income or (loss) \nassociated with the inventories of \ndealers in securities under section 475 \nreportable on Part II, line 14.\n• Section 481(a) adjustments related to \ncost of goods sold or inventory valuation \nreportable on Part II, line 17.\n• Fines and penalties reportable on \nPart III, line 9.\n• Judgments, damages, awards, and \nsimilar costs, reportable on Part III, \nline 10.\n• Amounts included on Part III, line 28.\nForm 8916-A. Any corporation filing \nForm 1120-S that (a) is required to file a \nSchedule M-3 and has less than $50 \nmillion in total assets at the end of the \ntax year or (b) isn't required to file a \nSchedule M-3 and voluntarily files a \nSchedule M-3, isn't required to file Form \n8916-A but may voluntarily do so.\nIf you are required to (or voluntarily) \nfile Form 8916-A, complete Part I to \nprovide a detailed schedule of cost of \ngoods sold. Enter the amounts from \nline 8, columns (a) through (d) of Form \n8916-A, on Schedule M-3, Part II, \nline 15, columns (a) through (d), as \napplicable. Attach Form 8916-A.\nExample 15. Corporation C is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. C placed in service 10 \ndepreciable fixed assets in a previous \ntax year. C's total depreciation expense \nfor its current tax year for five of the \nassets is $50,000 for financial \naccounting purposes and $70,000 for \nU.S. income tax purposes. C's total \nannual depreciation expense for its \ncurrent tax year for the other five assets \nis $40,000 for financial accounting \nTIP\npurposes and $30,000 for U.S. income \ntax purposes. In addition, C incurs $200 \nof meal expenses that C deducts in \ncomputing net income for financial \naccounting purposes. All $200 of the \nmeal expenses is subject to the 50% \nlimitation under section 274(n). In its \nfinancial statements, C treats the \n$50,000 depreciation and $100 of the \nmeals as other costs in computing cost \nof goods sold. C must include on \nSchedule M-3, Part II, line 15, in column \n(a), the $50,000 of depreciation and \n$100 of meals. C must also include a \ntemporary difference of $20,000 in \ncolumn (b), a permanent difference of \n($50) in column (c), and $70,050 in \ncolumn (d) ($70,000 depreciation and \n$50 meal expenses). In addition, C must \nreport on Part III, line 24, for its current \ntax year income statement, depreciation \nexpense of $40,000 in column (a), a \ntemporary difference of ($10,000) in \ncolumn (b), and $30,000 in column (d); \nand on Part III, line 8, meals and \nentertainment expense of $100 in \ncolumn (a), a permanent difference of \n($50) in column (c), and $50 in column \n(d). All other cost of goods sold items \nwould be added to the amounts \nincluded on Part II, line 15, detailed in \nthis example and reported on Part II, \nline 15, in the appropriate columns.\nLine 16. Sale Versus Lease (for \nSellers and/or Lessors)\nAlso see the instructions at Part \nIII, line 28.\nAsset transfer transactions with periodic \npayments characterized for financial \naccounting purposes as either a sale or \na lease may, under some \ncircumstances, be characterized as the \nopposite for tax purposes. If the \ntransaction is treated as a lease, the \nseller/lessor reports the periodic \npayments as gross rental income and \nalso reports depreciation expense or \ndeduction. If the transaction is treated \nas a sale, the seller/lessor reports gross \nprofit (sale price less cost of goods sold) \nfrom the sale of assets and reports the \nperiodic payments as payments of \nprincipal and interest income.\nOn Part II, line 16, column (a), report \nthe gross profit or gross rental income \nfor financial accounting purposes for all \nsale or lease transactions that must be \ngiven the opposite characterization for \nU.S. income tax purposes. On Part II, \nline 16, column (d), report the gross \nprofit or gross rental income for federal \nincome tax purposes. Interest income \namounts for such transactions must be \nTIP\nInstructions for Schedule M-3 (Form 1120-S)\n-13-\n",
"reported on Part II, line 11, in column (a) \nor (d), as applicable. Depreciation \nexpense for such transactions must be \nreported on Part III, line 24, in column \n(a) or (d), as applicable. Use columns \n(b) and (c) of Part II, lines 11 and 16, \nand Part III, line 24, as applicable to \nreport the differences between column \n(a) and (d).\nExample 16. Corporation M is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. M sells and leases \nproperty to customers. For financial \naccounting purposes, M accounts for \neach transaction as a sale. For U.S. \nincome tax purposes, each of M's \ntransactions must be treated as a lease. \nIn its financial statements, M treats the \ndifference in the financial accounting \nand the U.S. income tax treatment of \nthese transactions as temporary. During \nits current tax year, M reports in its \nfinancial statements $1,000 of sales and \n$700 of cost of goods sold regarding its \ncurrent tax year lease transactions. M \nreceives periodic payments of $500 in \nits current tax year for these current tax \nyear transactions and similar \ntransactions from prior years and treats \n$400 as principal and $100 as interest \nincome. For financial accounting \npurposes, M reports gross profit of $300 \n($1,000 – $700) and interest income of \n$100 from these transactions. For U.S. \nincome tax purposes, M reports $500 of \ngross rental income (the periodic \npayments) and (based on other facts) \n$200 of depreciation deduction on the \nproperty. On its current tax year \nSchedule M-3, M must report on Part II, \nline 11, $100 in column (a), ($100) in \ncolumn (b), and zero in column (d). In \naddition, M must report on Part II, \nline 16, $300 of gross profit in column \n(a), $200 in column (b), and $500 of \ngross rental income in column (d). \nLastly, M must report on Part III, line 24, \n$200 in columns (b) and (d).\nLine 17. Section 481(a) \nAdjustments\nWith the exception of a section 481(a) \nadjustment that is required to be \nreported on Part II, line 10, for \nreportable transactions, any difference \nbetween an income or expense item \nattributable to an authorized (or \nunauthorized) change in method of \naccounting made for U.S. income tax \npurposes that results in a section 481(a) \nadjustment must be reported on Part II, \nline 17, regardless of whether a \nseparate line for that income or expense \nitem exists in Part II or Part III.\nExample 17. Corporation N is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. N was depreciating \ncertain fixed assets over an erroneous \nrecovery period and, effective for its \ncurrent tax year, N receives IRS consent \nto change its method of accounting for \nthe depreciable fixed assets and begins \nusing the proper recovery period. The \nchange in method of accounting results \nin a positive section 481(a) adjustment \nof $100,000 that is required to be \nspread over 4 tax years, beginning with \nthe current tax year. In its financial \nstatements, N treats the section 481(a) \nadjustment as a temporary difference. N \nmust report on Part II, line 17, $25,000 \nin columns (b) and (d) for its current tax \nyear and each of the subsequent 3 tax \nyears (unless N is otherwise required to \nrecognize the remainder of the 481(a) \nadjustment earlier). N mustn't report the \nsection 481(a) adjustment on Part III, \nline 24.\nLine 18. Unearned/Deferred \nRevenue\nReport on line 18, column (a), amounts \nof revenues included in Part I, line 11, \nthat were deferred from a prior financial \naccounting year. Report on line 18, \ncolumn (d), amounts of revenues \nrecognizable for U.S. income tax \npurposes in the current tax year that are \nrecognized for financial accounting \npurposes in a different year. Also report \non line 18, column (d), any amount of \nrevenues reported on line 18, column \n(a), that are recognizable for U.S. \nincome tax purposes in the current tax \nyear. Use columns (b) and (c) of line 18, \nas applicable, to report the differences \nbetween columns (a) and (d).\nLine 18 mustn't be used to report \nincome recognized from long-term \ncontracts. Instead, use line 19.\nLine 19. Income Recognition \nFrom Long-Term Contracts\nReport on line 19 the amount of net \nincome or loss for financial statement \npurposes (or books and records, if \napplicable) or U.S. income tax purposes \nfor any contract accounted for under a \nlong-term contract method of \naccounting.\nLine 20. Original Issue Discount \nand Other Imputed Interest\nReport on line 20 any amounts of \noriginal issue discount (OID) and other \nimputed interest. The term “original \nissue discount and other imputed \ninterest” includes, but isn't limited to:\n1. The excess of a debt instrument's \nstated redemption price at maturity over \nits issue price, as determined under \nsection 1273;\n2. Amounts that are imputed interest \non a deferred sales contract under \nsection 483;\n3. Amounts treated as interest or \nOID under the stripped bond rules under \nsection 1286; and\n4. Amounts treated as OID under \nthe below-market interest rate rules \nunder section 7872.\nLine 21a. Income Statement \nGain/Loss on Sale, Exchange, \nAbandonment, Worthlessness, \nor Other Disposition of Assets \nOther Than Inventory and \nPass-Through Entities\nReport on line 21a, column (a), all gains \nand losses on the disposition of assets \nexcept for (a) gains and losses on the \ndisposition of inventory, and (b) gains \nand losses allocated to the corporation \nfrom a pass-through entity (for example, \non Schedule K-1) that are included in \nthe net income (loss) of the corporation \nreported on Part I, line 11. Reverse the \namount reported in column (a) in \ncolumn (b) or (c), as applicable. The \ncorresponding gains and losses for U.S. \nincome tax purposes are reported on \nPart II, lines 21b through 21g, as \napplicable.\nLine 21b. Gross Capital Gains \nFrom Schedule D, Excluding \nAmounts From Pass-Through \nEntities\nReport on line 21b gross capital gains \nreported on Schedule D (Form 1120-S), \nCapital Gains and Losses and Built-in \nGains, or Form 8949, Sales and Other \nDispositions of Capital Assets, \nexcluding capital gains from \npass-through entities, which must be \nreported on Part II, lines 7, 8, or 9, as \napplicable.\nLine 21c. Gross Capital Losses \nFrom Schedule D, Excluding \nAmounts From Pass-Through \nEntities, Abandonment Losses, \nand Worthless Stock Losses\nReport on line 21c gross capital losses \nreported on Schedule D (Form 1120-S) \nor Form 8949, excluding capital losses \nfrom (a) pass-through entities, which \nmust be reported on Part II, lines 7, 8, or \n9, as applicable; (b) abandonment \nlosses, which must be reported on Part \nII, line 21e; and (c) worthless stock \n-14-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"losses, which must be reported on Part \nII, line 21f.\nLine 21d. Net Gain/Loss \nReported on Form 4797, \nLine 17, Excluding Amounts \nFrom Pass-Through Entities, \nAbandonment Losses, and \nWorthless Stock Losses\nReport on line 21d the net gain or loss \nreported on line 17 of Form 4797, \nexcluding amounts from (a) \npass-through entities, which must be \nreported on Part II, lines 7, 8, or 9, as \napplicable; (b) abandonment losses, \nwhich must be reported on Part II, \nline 21e; and (c) worthless stock losses, \nwhich must be reported on Part II, \nline 21f. The amount reported on \nline 21d is the amount that would have \nbeen carried to line 17 of Form 4797 in \nthe case of a corporation that isn't an S \ncorporation.\nTraders in securities or \ncommodities that have made a \nvalid election under section \n475(f) to use the mark-to-market \nmethod to account for securities or \ncommodities, see the instructions for \nPart II, line 14.\nLine 21e. Abandonment Losses\nReport on line 21e any abandonment \nlosses, regardless of whether the loss is \ncharacterized as an ordinary loss or a \ncapital loss.\nLine 21f. Worthless Stock \nLosses\nReport on line 21f any worthless stock \nloss, regardless of whether the loss is \ncharacterized as an ordinary loss or a \ncapital loss. Attach a statement that \nseparately states and adequately \ndiscloses each transaction that gives \nrise to a worthless stock loss and the \namount of each loss.\nLine 21g. Other Gain/Loss on \nDisposition of Assets Other \nThan Inventory\nReport on line 21g any gains or losses \nfrom the sale or exchange of property \nother than inventory that aren't reported \non lines 21b through 21f.\nLine 22. Other Income (Loss) \nItems With Differences\nSeparately state and adequately \ndisclose on Part II, line 22, all items of \nincome (loss) with differences that aren't \notherwise listed on Part II, lines 1 \nthrough 21. Attach a statement that \nitemizes the type of income (loss) and \nTIP\nthe amount of each item and provides a \ndescription that states the income (loss) \nname for book purposes for the amount \nrecorded in column (a) and describes \nthe adjustment being recorded in \ncolumn (b) or (c). The entire description \ncompletes the tax description for the \namount included in column (d) for each \nitem separately stated on this line.\nThe attached statement should have \nfive columns. The first column has the \ndescription for the next four columns. \nThe second column is column (a) \nincome (loss) per income statement, \nthird column is column (b) temporary \ndifference, the fourth column is column \n(c) permanent difference, and the fifth \ncolumn is column (d) income (loss) per \ntax return. Every item listed on the \nattached statement for line 22 must \nalways have columns (a) + (b) + (c) = \n(d). Each item with amounts in columns \n(a), (b), (c), and (d) will be totaled and \nincluded as one line on line 22.\nIf any “comprehensive income” as \ndefined by Statement of Financial \nAccounting Standards (SFAS) No. 130 \nis reported on this line, describe the \nitem(s) in detail. Examples of sufficiently \ndetailed descriptions include “Foreign \ncurrency translation \nadjustments—comprehensive income” \nand “Gains and losses on \navailable-for-sale \nsecurities—comprehensive income.”\nLine 23. Total Income (Loss) \nItems\nCombine lines 1 through 22 and enter \nthe total on line 23.\nLine 15, Cost of goods sold, \ncolumns (a) and (d), are \nnegative amounts which will \naffect the totals entered on line 23.\nLine 24. Total Expense/\nDeduction Items\nReport on Part II, line 24, columns (a) \nthrough (d), as applicable, the negative \nof the amounts reported on Part III, \nline 32, columns (a) through (d). For \nexample, if Part III, line 32, column (a), \nreflects an amount of $1 million, then \nreport on Part II, line 24, column (a), ($1 \nmillion). Similarly, if Part III, line 32, \ncolumn (b), reflects an amount of \n($50,000), then report on Part II, line 24, \ncolumn (b), $50,000.\nLine 25. Other Items With No \nDifferences\nIf there is no difference between the \nfinancial accounting amount and the \ntaxable amount of an entire item of \nincome, gain, loss, expense, or \nTIP\ndeduction and the item isn't described \nor included in Part II, lines 1 through 22, \nor Part III, lines 1 through 31, report the \nentire amount of the item in columns (a) \nand (d) of line 25. If a portion of an item \nof income, loss, expense, or deduction \nhas a difference and a portion of the \nitem doesn't have a difference, don't \nreport any portion of the item on line 25. \nInstead, report the entire amount of the \nitem (that is, both the portion with a \ndifference and the portion without a \ndifference) on the applicable line of Part \nII, lines 1 through 22, or Part III, lines 1 \nthrough 31. See Example 10, earlier.\nPart III. Reconciliation of \nNet Income (Loss) per \nIncome Statement of the \nCorporation With Total \nIncome (Loss) per \nReturn—Expense/\nDeduction Items\nExpense amounts that reduce \nfinancial accounting income \nmust be reported on Part III, \ncolumn (a), as positive amounts. \nDeduction amounts that reduce taxable \nincome must be reported on Part III, \ncolumn (d), as positive amounts. \nAmounts reported on Part II, line 24, \nmust be the negative of the amounts \nreported on Part III, line 32.\nLines 1 Through 6. Income Tax \nExpense\nIf the corporation doesn't distinguish \nbetween current and deferred income \ntax expense in its financial statements \n(or its books and records, if applicable), \nreport income tax expense as current \nincome tax expense using lines 1, 3, \nand 5, as applicable.\nLine 7. Equity-Based \nCompensation\nReport on line 7 any amounts for \nequity-based compensation or \nconsideration that are reflected as \nexpense for financial accounting \npurposes (column (a)) or deducted in \nthe U.S. income tax return (column (d)) \nother than amounts reportable \nelsewhere on Schedule M-3, Parts II \nand III. Examples of amounts reportable \non line 7 include payments attributable \nto stock options (including incentive \nstock options and nonqualified stock \noptions), employee stock purchase \nplans (ESPPs), phantom stock options, \nphantom stock units, stock warrants, \nstock appreciation rights, and restricted \nstock, regardless of whether such \nTIP\nInstructions for Schedule M-3 (Form 1120-S)\n-15-\n",
"payments are made to employees or \nnon-employees, or as payment for \nproperty or compensation for services.\nLine 8. Meals and \nEntertainment\nReport on line 8, column (a), any \namounts paid or accrued by the \ncorporation during the tax year for \nmeals, beverages, and entertainment \nthat are accounted for in financial \naccounting income, regardless of the \nclassification, nomenclature, or \nterminology used for such amounts, and \nregardless of how or where such \namounts are classified in the \ncorporation's financial income statement \nor the income and expense accounts \nmaintained in the corporation's books \nand records. Report only amounts not \notherwise reportable elsewhere on \nSchedule M-3, Parts II and III (for \nexample, Part II, line 15).\nLine 9. Fines and Penalties\nReport on line 9 any fines or similar \npenalties paid to a government or other \nauthority for the violation of any law for \nwhich fines or penalties are assessed. \nAll fines and penalties expensed in \nfinancial accounting income (paid or \naccrued) must be included on this line 9, \ncolumn (a), regardless of the \ngovernment or other authority that \nimposed the fines or penalties, \nregardless of whether the fines and \npenalties are civil or criminal, regardless \nof the classification, nomenclature, or \nterminology used for the fines or \npenalties by the imposing authority in its \nactions or documents, and regardless of \nhow or where the fines or penalties are \nclassified in the corporation's financial \nincome statement or the income and \nexpense accounts maintained in the \ncorporation's books and records. Also \nreport on line 9, column (a), the reversal \nof any overaccrual of any amount \ndescribed in this paragraph. See section \n162(f) for additional guidance.\nReport on line 9, column (d), any \nsuch amounts as described in the \npreceding paragraph that are includible \nin taxable income, regardless of the \nfinancial accounting period in which \nsuch amounts were or are included in \nfinancial accounting net income. \nComplete columns (b) and (c) as \nappropriate.\nDon't report on this Part III, line 9, \namounts required to be reported in \naccordance with instructions for Part III, \nline 10.\nDon't report on this Part III, line 9, \namounts recovered from insurers or any \nother indemnitors for any fines and \npenalties described above.\nLine 10. Judgments, Damages, \nAwards, and Similar Costs\nReport on line 10, column (a), the \namount of any estimated or actual \njudgments, damages, awards, \nsettlements, and similar costs, however \nnamed or classified, included in \nfinancial accounting income, regardless \nof whether the amount deducted was \nattributable to an estimate of future \nanticipated payments or actual \npayments. Also report on line 10, \ncolumn (a), the reversal of any \noveraccrual of any amount described in \nthis paragraph.\nReport on line 10, column (d), any \nsuch amounts as are described in the \npreceding paragraph that are includible \nin taxable income, regardless of the \nfinancial accounting period in which \nsuch amounts were or are included in \nfinancial accounting net income. \nComplete columns (b) and (c) as \nappropriate.\nDon't report on this Part III, line 10, \namounts required to be reported in \naccordance with instructions for Part III, \nline 9.\nDon't report on this Part III, line 10, \namounts recovered from insurers or any \nother indemnitors for any judgments, \ndamages, awards, or similar costs \ndescribed above.\nLine 11. Pension and \nProfit-Sharing\nReport on line 11 any amounts \nattributable to the corporation's pension \nplans, profit-sharing plans, and any \nother retirement plans.\nLine 12. Other Post-Retirement \nBenefits\nReport on line 12 any amounts \nattributable to other post-retirement \nbenefits not otherwise includible on Part \nIII, line 11 (for example, retiree health \nand life insurance coverage, dental \ncoverage, etc.).\nLine 13. Deferred \nCompensation\nReport on line 13, column (a), any \ncompensation expense included in the \nnet income (loss) amount reported in \nPart I, line 11, that isn't deductible for \nU.S. income tax purposes in the current \ntax year and that wasn't reported \nelsewhere on Schedule M-3, column \n(a). Report on line 13, column (d), any \ncompensation deductible in the current \ntax year that wasn't included in the net \nincome (loss) amount reported in Part I, \nline 11, for the current tax year and that \nisn't reportable elsewhere on \nSchedule M-3. For example, report \noriginations and reversals of deferred \ncompensation subject to section 409A \non line 13.\nLine 15. Charitable \nContribution of Intangible \nProperty\nReport on line 15 any charitable \ncontribution of intangible property, for \nexample, contributions of:\n• Intellectual property, patents \n(including any amounts of additional \ncontributions allowable by virtue of \nincome earned by donees subsequent \nto the year of donation), copyrights, \ntrademarks;\n• Securities (including stocks and their \nderivatives, stock options, and bonds);\n• Conservation easements (including \nscenic easements or air rights);\n• Railroad rights of way;\n• Mineral rights; and\n• Other intangible property.\nLine 16. Current Year \nAcquisition or Reorganization \nInvestment Banking Fees\nReport on line 16 any investment \nbanking fees paid or incurred in \nconnection with a taxable or tax-free \nacquisition of property (for example, \nstock or assets) or a tax-free \nreorganization. Report on this line any \ninvestment banking fees incurred at any \nstage of the acquisition or \nreorganization process including, for \nexample, fees paid or incurred to \nevaluate whether to investigate an \nacquisition, fees to conduct an actual \ninvestigation, and fees to consummate \nthe acquisition. Also include on this \nline 16 investment banking fees incurred \nin connection with the liquidation of a \nsubsidiary, a spin-off of a subsidiary, or \nan initial public stock offering.\nLine 17. Current Year \nAcquisition or Reorganization \nLegal and Accounting Fees\nReport on line 17 any legal and \naccounting fees paid or incurred in \nconnection with a taxable or tax-free \nacquisition of property (for example, \nstock or assets) or tax-free \nreorganization. Report on this line any \nlegal and accounting fees incurred at \nany stage of the acquisition or \nreorganization process including, for \nexample, fees paid or incurred to \nevaluate whether to investigate an \nacquisition, fees to conduct an actual \n-16-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"investigation, and fees to consummate \nthe acquisition. Also include on this line \nlegal and accounting fees incurred in \nconnection with the liquidation of a \nsubsidiary, a spin-off of a subsidiary, or \nan initial public stock offering.\nLine 18. Current Year \nAcquisition/Reorganization \nOther Costs\nReport on line 18 any other fees paid or \nincurred in connection with a taxable or \ntax-free acquisition of property (for \nexample, stock or assets) or a tax-free \nreorganization not otherwise reportable \non Schedule M-3 (for example, Part III, \nline 16 or 17). Report on this line any \nfees paid or incurred at any stage of the \nacquisition or reorganization process \nincluding, for example, fees paid or \nincurred to evaluate whether to \ninvestigate an acquisition, fees to \nconduct an actual investigation, and \nfees to consummate the acquisition. \nAlso include on this line other \nacquisition/reorganization costs \nincurred in connection with the \nliquidation of a subsidiary, a spin-off of a \nsubsidiary, or an initial public stock \noffering.\nLine 19. Amortization/\nImpairment of Goodwill\nReport on line 19 amortization of \ngoodwill or amounts attributable to the \nimpairment of goodwill.\nLine 20. Amortization of \nAcquisition, Reorganization, \nand Start-Up Costs\nReport on line 20 amortization of \nacquisition, reorganization, and start-up \ncosts. For purposes of columns (b), (c), \nand (d), include amounts amortizable \nunder section 167, 195, or 248.\nLine 21. Other Amortization or \nImpairment Write-Offs\nReport on line 21 any amortization or \nimpairment write-offs not otherwise \nincludible on Schedule M-3.\nLine 22.\nWhen using this line to figure amounts \non other tax forms or worksheets, this \nline should be considered to be zero.\nLine 23a. Depletion—Oil & Gas\nReport on line 23a, column (a), any oil \nand gas depletion included on Part I, \nline 11.\nLine 23b. Depletion—Other \nthan Oil & Gas\nReport on line 23b any depletion \nexpense/deduction other than oil and \ngas that isn't required to be reported \nelsewhere on Schedule M-3 (for \nexample, on Part II, line 7, 8, 9, or 15).\nLine 24. Depreciation\nReport on line 24 any depreciation \nexpense that isn't required to be \nreported elsewhere on Schedule M-3 \n(for example, on Part II, line 7, 8, 9, or \n15).\nLine 25. Bad Debt Expense\nReport on line 25, column (a), any \namounts attributable to an allowance for \nuncollectible accounts receivable or \nactual write-offs of accounts receivable \nincluded on Part I, line 11. Report in \ncolumn (d) the amount of bad debt \nexpense deductible for federal income \ntax purposes under section 166.\nLine 26. Interest Expense\nAttach Form 8916-A. Complete Part III \nand enter the amounts shown on line 5, \ncolumns (a) through (d), on \nSchedule M-3, line 27, columns (a) \nthrough (d), as applicable.\nAny corporation that files Form \n1120-S that (a) is required to file \na Schedule M-3 and has less \nthan $50 million in total assets at the \nend of the tax year or (b) isn't required \nto file a Schedule M-3 and voluntarily \nfiles a Schedule M-3, isn't required to \nfile Form 8916-A but may voluntarily do \nso.\nReport on Part III, line 26, column (a), \nthe total amount of interest expense \nincluded on Part I, line 11, and report on \nPart III, line 26, column (d), the total \namount of interest deduction included \non Form 1120-S, Schedule K, line 18, \nthat isn't required to be reported \nelsewhere on Schedule M-3. In columns \n(b) or (c), as applicable, include any \nadjustments for any amounts treated for \nU.S. income tax purposes as interest \ndeduction that are treated as some \nother form of expense for financial \naccounting purposes, or vice versa. For \nexample, adjustments to interest \nexpense/deduction resulting from \nadjustments made in accordance with \nthe instructions for Part III, line 28, \nshould be made in columns (b) and (c), \nas applicable, of this line 26.\nDon't report on Form 8916-A and on \nline 26 amounts reported in accordance \nwith the instructions for Part II, lines 7, 8, \n9, and 10.\nLine 27. Corporate Owned Life \nInsurance Premiums\nReport on line 27 all amounts of \ninsurance premiums attributable to any \nTIP\nlife insurance policy if the corporation is \ndirectly or indirectly a beneficiary under \nthe policy or if the policy has a cash \nvalue. Report in column (d) the amount \nof the premiums that are deductible for \nfederal income tax purposes.\nLine 28. Purchase Versus \nLease (for Purchasers and/or \nLessees)\nAlso see the instructions for \nsellers and/or lessors in the \ninstructions for Part II, line 16.\nAsset transfer transactions with periodic \npayments characterized for financial \naccounting purposes as either a \npurchase or a lease may, under some \ncircumstances, be characterized as the \nopposite for tax purposes.\nIf a transaction is treated as a lease, \nthe purchaser/lessee reports the \nperiodic payments as gross rental \nexpense. If the transaction is treated as \na purchase, the purchaser/lessee \nreports the periodic payments as \npayments of principal and interest and \nalso reports depreciation expense or \ndeduction regarding the purchased \nasset.\nReport in column (a) gross rent \nexpense for a transaction treated as a \nlease for financial accounting purposes \nbut as a sale for U.S. income tax \npurposes. Report in column (d), gross \nrental deductions for a transaction \ntreated as a lease for U.S. income tax \npurposes but as a purchase for financial \naccounting purposes. Report interest \nexpense for such transactions on Part \nIII, line 26, in column (a) or (d), as \napplicable. Report depreciation \nexpense or deductions for such \ntransactions on Part III, line 24, in \ncolumn (a) or (d), as applicable. Use \ncolumns (b) and (c) of Part III, lines 24, \n26, and 28, as applicable, to report the \ndifferences between column (a) and (d) \nfor such recharacterized transactions.\nExample 18. U.S. Corporation X is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. X acquired property in \na transaction that, for financial \naccounting purposes, X treats as a \nlease. Because of its terms, the \ntransaction is treated for U.S. income \ntax purposes as a purchase and X must \ntreat the periodic payments it makes \npartially as payment of principal and \npartially as payment of interest. In its \nfinancial statements, X treats the \ndifference between the financial \naccounting and U.S. income tax \ntreatment of this transaction as a \nTIP\nInstructions for Schedule M-3 (Form 1120-S)\n-17-\n",
"temporary difference. During its current \ntax year, X reports in its financial \nstatements $1,000 of gross rental \nexpense that, for U.S. income tax \npurposes, is recharacterized as a $700 \npayment of principal and a $300 \npayment of interest, accompanied by a \ndepreciation deduction of $1,200 \n(based on other facts). On its current tax \nyear Schedule M-3, X must report the \nfollowing on Part III, line 28: column (a), \n$1,000, its financial accounting gross \nrental expense; column (b), ($1,000); \nand column (d), zero. On Part III, line 26, \nX reports zero in column (a) and $300 in \ncolumns (b) and (d) for the interest \ndeduction. On Part III, line 24, X reports \nzero in column (a) and $1,200 in \ncolumns (b) and (d) for the depreciation \ndeduction.\nLine 29. Research and \nDevelopment Costs\nReport in column (a) the amount of \nexpenses included in net income \nreported on Part I, line 11, that are \nrelated to research and development \nexpense. Report in column (d) the \namount of deductions included in Form \n1120-S, line 21, and/or separately \nreported on Form 1120-S, Schedule K, \nthat are recognized and reported as \nSection 174 research and experimental \nexpenditures consistent with the \ncorporation’s adopted method of \naccounting for such expenditures. In \ncolumn (c), as applicable, include any \nadjustments for any amounts treated for \nU.S. income tax purposes as research \nor experimental expenditures that are \ntreated as some other form of expense \nfor financial accounting purposes, or \nvice versa. Report any difference in \ntiming recognition in column (b). For \nexample, if the taxpayer's financial \naccounting method doesn't specify \notherwise, column (b) adjustments \ninclude adjustments for timing \ndifferences between financial and tax \naccounting for: (1) deferral and \namortization of research expenditures, \n(2) reduction of section 174 \nexpenditures under section 280C or \nsection 482, (3) costs attributable to \nobtaining a patent, (4) research in social \nsciences, and (5) cost elements for \nproperty of a character subject to \ndepreciation.\nSection 174 provides two methods \nfor the treatment of research and \nexperimental expenditures paid or \nincurred by a taxpayer in connection \nwith the taxpayer’s trade or business. \nThese expenditures may be treated as \nexpenses not chargeable to a capital \naccount and deducted in the year in \nwhich they are paid or incurred, or they \nmay be deferred and amortized.\nExample 19. Corporation X is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. During its current tax \nyear, X incurred $100,000 of research \nand development costs that X \nrecognized as an expense in its \nfinancial statements. Also, X incurred \n$20,000 in attorney fees in obtaining a \npatent application that X capitalized and \namortized in its financial statements. X \nrecognized a $2,000 amortization \ndeduction. In compliance with its \nadopted method of accounting under \nsection 174, X deducts research and \nexperimental expenditures for U.S. \nincome tax purposes. Accordingly, X \nmust report $100,000 in column (a), \n$20,000 in column (b), and $120,000 in \ncolumn (d). X must also report $2,000 in \ncolumn (a), ($2,000) in column (b), and \n$0 in column (d) on Part III, line 21.\nExample 20. Assume the same \nfacts as Example 19 except Corporation \nX elected to capitalize and amortize its \nresearch and expenditures over 60 \nmonths for all its research programs for \nU.S. tax purposes. X first realized \nbenefits from such expenditures on \nAugust 1. Accordingly, X must report \n$100,000 in column (a), a temporary \ndifference of ($90,000) ($20,000 less \n($120,000/60 months X 55 months)) in \ncolumn (b), and $10,000 in column (d).\nExample 21. Corporation X is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. X adopted the current \nexpense method for research and \nexperimental expenditures for U.S. \nincome tax purposes. During it current \ntax year, X incurred $50,000 of research \nand development costs that X \nrecognized as an expense in its \nfinancial statements. Also, X undertook \nto develop a new machine for its \nbusiness. X expended $30,000 on the \nproject of which $10,000 represents \nactual costs of material, labor, and \ncomponent cost to construct the \nmachine, and $20,000 represents \nresearch costs not attributable to the \nmachine itself. X capitalized all costs of \n$30,000 related to the machine and \nrecognized $6,000 of depreciation \nexpense in its financial statements. X’s \ndepreciation expense on the $10,000 of \ncosts related to the machine itself was \n$2,000 for U.S. income tax purposes. \nAccordingly, X must report $50,000 in \ncolumn (a), $20,000 (research costs \nwhich aren't attributable to the machine \nitself) in column (b), and $70,000 in \ncolumn (d). X must also report $6,000 in \ncolumn (a), ($4,000) in column (b), and \n$2,000 in column (d) on Part III, line 24.\nExample 22. Corporation X is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. During its current tax \nyear, X incurred $10,000 of research \nand development costs related to social \nsciences that it recognized as an \nexpense in its financial statements. X \nadopted the current expense method for \nresearch and experimental \nexpenditures for U.S. income tax \npurposes. Because such costs aren't \nallowable costs under section 174, X \nmust report $10,000 in column (a), \npermanent difference ($10,000) in \ncolumn (c), and $0 in column (d). If such \ncosts are otherwise deductible for U.S. \nincome tax purposes, X must report this \nitem of expense on Part III, line 31.\nExample 23. Corporation X is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. During its current tax \nyear, X paid $75,000 to acquire or \nin-license intangible assets under a \ncollaborative arrangement with another \ncompany that X recognized as a \nresearch and development expense in \nits financial statements. X adopted the \ncurrent expense method for research \nand experimental expenditures for U.S. \nincome tax purposes. Because \npayments made to acquire rights to a \nproduct or technology are excluded \ncosts from the definition of research and \nexperimental expenditures, X must \nreport $75,000 in column (a), ($75,000) \nin column (c), and $0 in column (d). X \nmust report any amortization otherwise \nallowable related to the payments on \nPart III, line 21.\nLine 30. Section 118 Exclusion\nReport on line 30 any inducements \nreceived in the current year and treated \nas contributions to the capital of a \ncorporation by a non-shareholder. The \nfollowing non-shareholder contributions \nto capital are not eligible for exclusion \nunder section 118.\n• Any contribution in aid of construction \nor any other contribution as a customer \nor potential customer.\n• Any contribution by any civic group.\n• Any contribution by any governmental \nentity, except any contribution made \nafter December 22, 2017, and made \npursuant to a master development plan \nthat was approved prior to December \n22, 2017, by a governmental entity.\n-18-\nInstructions for Schedule M-3 (Form 1120-S)\n",
"Report in column (a) any income \namount as a negative number and any \nexpense amount as a positive number.\nCorporations must identify on an \naccompanying statement referencing \nline 36 the fair market value of land or \nother property (including cash) provided \nto the corporation by any \nnon-shareholder, including a \ngovernmental unit as an inducement, or \nfor any other purpose.\nOn the accompanying statement, \nalso identify any inducements that \ninclude refundable or transferable tax \ncredits, including transferable credits \nthat were sold.\nThe statement must separately state, \nadequately disclose, and identify all of \nthe dollar amounts summarized by this \nline. An accompanying statement is \nrequired even if there are no dollar \namounts reported on line 30.\nLine 31. Other Expense/ \nDeduction Items With \nDifferences\nSeparately state and adequately \ndisclose on Part III, line 31, all items of \nexpense/deduction that aren't otherwise \nlisted on Part III, lines 1 through 30.\nAttach a statement that describes \nand itemizes the type of expense/\ndeduction and the amount of each item, \nand provides a description that states \nthe expense/deduction name for book \npurposes for the amount recorded in \ncolumn (a) and describes the \nadjustment being recorded in column \n(b) or (c). The entire description \ncompletes the tax description for the \namount included in column (d) for each \nitem separately stated on this line.\nThe statement of details attached to \nthe Schedule M-3 for line 31 must \nseparately state and adequately \ndisclose the nature and amount of the \nexpense related to each reserve and/or \ncontingent liability. The appropriate level \nof disclosure depends upon each \ntaxpayer’s operational activity and the \nnature of its accounting records. For \nexample, if a corporation’s net income \namount reported in the income \nstatement includes anticipated \nexpenses for a discontinued operation \nas a single amount, and its general \nledger or other books, records, and \nwork papers provide details for the \nanticipated expenses under more \nexplanatory and defined categories, \nsuch as employee termination costs, \nlease cancellation costs, loss on sale of \nequipment, etc., a supporting statement \nthat lists those categories of expenses \nand their details will satisfy the \nrequirement to separately state and \nadequately disclose. In order to \nseparately state and adequately \ndisclose the employee termination \ncosts, it isn't required that an anticipated \ntermination cost amount be listed for \neach employee, or that each asset (or \ncategory of asset) be listed along with \nthe anticipated loss on disposition.\nThe attached statement should have \nfive columns. The first column has the \ndescription for the next four columns. \nThe second column is column (a) \nexpense per income statement, the third \ncolumn is column (b) temporary \ndifference, the fourth column is column \n(c) permanent difference, and the fifth \ncolumn is column (d) deduction per tax \nreturn. Every item listed on the attached \nstatement for line 31 must always have \ncolumns (a) + (b) + (c) = (d). Each item \nwith amounts in columns (a), (b), (c), \nand (d) will be totaled and included as \none line on line 31.\nComprehensive income. If any \n“comprehensive income” as defined by \nSFAS No. 130 is reported on this line, \ndescribe the item(s) in detail as, for \nexample, “Foreign currency translation \nadjustments—comprehensive income” \nand “Gains and losses on \navailable-for-sale \nsecurities—comprehensive income.”\nReserves and contingent liabilities. \nReport on line 31 amounts related to the \nchange in each reserve or contingent \nliability that isn't required to be reported \nelsewhere on Schedule M-3. For \nexample: (1) amounts relating to \nchanges in reserves for litigation must \nbe reported on Part III, line 10; and (2) \namounts relating to changes in reserves \nfor uncollectible accounts receivable \nmust be reported on Part III, line 25. See \nExample 8 and Example 9, earlier; and \nExample 24, later.\nReport on line 31, the amortization of \nvarious items of prepaid expense, such \nas prepaid subscriptions and license \nfees, prepaid insurance, etc.\nReport on line 31, column (a), \nexpenses included in net income \nreported on Part I, line 11, that are \nrelated to reserves and contingent \nliabilities. Report on line 31, column (d), \namounts related to liabilities for reserves \nand contingent liabilities that are \ndeductible in the current tax year for \nU.S. income tax purposes. Examples of \nreserves that are allowed for book \npurposes, but not for tax purposes, \ninclude warranty reserves, restructuring \nreserves, reserves for discontinued \noperations, and reserves for \nacquisitions and dispositions. Only \nreport on line 31 items that aren't \nrequired to be reported elsewhere on \nSchedule M-3, Parts II and III.\nExample 24. Corporation Q is a \ncalendar year taxpayer that files and \nentirely completes Schedule M-3 for its \ncurrent tax year. On July 1 of each year, \nQ has a fixed liability for its annual \ninsurance premiums on its home office \nbuilding that provides a 12-month \ncoverage period beginning July 1 \nthrough June 30. In addition, Q \nhistorically prepays 12 months of \nadvertising expense on July 1. On July \n1 of its current tax year, Q prepays its \ninsurance premium of $500,000 and \nadvertising expenses of $800,000. For \nfinancial accounting purposes, Q \ncapitalizes and amortizes the prepaid \ninsurance and advertising over 12 \nmonths. For U.S. income tax purposes, \nQ deducts the insurance premium when \npaid and amortizes the advertising over \nthe 12-month period. In its financial \nstatements, Q treats the differences \nattributable to the financial statement \ntreatment and U.S. income tax \ntreatment of the prepaid insurance and \nadvertising as temporary differences.\nQ also has a legal expense reserve \nwhere $300,000 was expensed for \nfinancial accounting purposes and a \n($100,000) temporary difference was \ncalculated to arrive at the income tax \ndeduction of $200,000. The statement \nattached to Q's return for Part III, line 31, \nmust be separately stated and \nadequately disclosed as shown below.\nLine 32. Total Expense/\nDeduction Items\nReport on Part II, line 24, columns (a) \nthough (d), as applicable, the negative \nof the amounts reported on Part III, \nline 32, columns (a) through (d), as \napplicable. Report positive amounts as \nnegative and negative amounts as \npositive. For example, if Part III, line 32, \ncolumn (a), reflects an amount of $1 \nmillion, then report on Part II, line 24, \ncolumn (a), ($1 million). Similarly, if Part \nIII, line 32, column (b), reflects an \namount of ($50,000), then report on Part \nII, line 24, column (b), $50,000.\nInstructions for Schedule M-3 (Form 1120-S)\n-19-\n",
"Line 31—Example 24\nStatement Concerning Other Expense/Deduction Items With Differences\nDescription\nColumn (a) Expense \nper Income Statement\nColumn (b) Temporary \nDifference\nColumn (c) \nPermanent Difference\nColumn (d) Deduction \nper Tax Return\nPrepaid insurance premium \nexpensed not capitalized\n$250,000\n$250,000\n-0-\n$500,000\nLegal expense reserve\n$300,000\n($100,000)\n-0-\n$200,000\nTotal line 31\n$550,000\n$150,000\n-0-\n$700,000\n-20-\nInstructions for Schedule M-3 (Form 1120-S)\n"
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f1120ss3.pdf
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1219 Form 1120-S (Schedule M-3) (PDF)
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https://www.irs.gov/pub/irs-pdf/f1120ss3.pdf
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"SCHEDULE M-3 \n(Form 1120-S) \n(Rev. December 2019)\nDepartment of the Treasury \nInternal Revenue Service \nNet Income (Loss) Reconciliation for S Corporations \nWith Total Assets of $10 Million or More \n▶ Attach to Form 1120-S.\n▶ Go to www.irs.gov/Form1120S for instructions and the latest information.\nOMB No. 1545-0123 \nName of corporation \nEmployer identification number \nPart I \nFinancial Information and Net Income (Loss) Reconciliation (see instructions) \n1a\nDid the corporation prepare a certified audited non-tax-basis income statement for the period ending with or within this tax \nyear? See instructions if multiple non-tax-basis income statements are prepared.\nYes. Skip line 1b and complete lines 2 through 11 with respect to that income statement. \nNo. Go to line 1b. \nb Did the corporation prepare a non-tax-basis income statement for that period? \nYes. Complete lines 2 through 11 with respect to that income statement. \nNo. Skip lines 2 through 3b and enter the corporation’s net income (loss) per its books and records on line 4a. \n2 \nEnter the income statement period: Beginning \n/ \n/ \nEnding \n/ \n/ \n3 \na\nHas the corporation’s income statement been restated for the income statement period on line 2? \nYes. If “Yes,” attach an explanation and the amount of each item restated.\nNo. \nb\nHas the corporation’s income statement been restated for any of the five income statement periods immediately preceding the\nperiod on line 2? \nYes. If “Yes,” attach an explanation and the amount of each item restated.\nNo. \n4a\nWorldwide consolidated net income (loss) from income statement source identified in Part I, line 1 \n.\n4a \nb Indicate accounting standard used for line 4a (see instructions): \n(1) \nGAAP \n(2) \nIFRS \n(3) \nTax-basis \n(4) \nOther (specify)\n5a\nNet income from nonincludible foreign entities (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5a ( ) \nb Net loss from nonincludible foreign entities (attach statement and enter as a positive amount) .\n.\n.\n5b \n6 \na\nNet income from nonincludible U.S. entities (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6a ( ) \nb Net loss from nonincludible U.S. entities (attach statement and enter as a positive amount) .\n.\n.\n.\n6b \n7a\nNet income (loss) of other foreign disregarded entities (attach statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7a \nb\nNet income (loss) of other U.S. disregarded entities (except qualified subchapter S subsidiaries) \n(attach statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7b \nc Net income (loss) of other qualified subchapter S subsidiaries (QSubs) (attach statement) \n.\n.\n.\n.\n7c \n8\nAdjustment to eliminations of transactions between includible entities and nonincludible entities \n(attach statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nAdjustment to reconcile income statement period to tax year (attach statement) \n.\n.\n.\n.\n.\n.\n.\n9 \n10 \nOther adjustments to reconcile to amount on line 11 (attach statement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \n11 \nNet income (loss) per income statement of the corporation. Combine lines 4 through 10 \n.\n.\n.\n11 \nNote: Part I, line 11, must equal Part II, line 26, column (a); or Schedule M-1, line 1. See instructions. \n12 \nEnter the total amount (not just the corporation’s share) of the assets and liabilities of all entities included or removed on the following lines:\nTotal Assets \nTotal Liabilities \na Included on Part I, line 4 \nb Removed on Part I, line 5 \nc Removed on Part I, line 6 \nd Included on Part I, line 7 \nFor Paperwork Reduction Act Notice, see the Instructions for Form 1120-S. \nCat. No. 39666W \nSchedule M-3 (Form 1120-S) (Rev. 12-2019)\n",
"Schedule M-3 (Form 1120-S) (Rev. 12-2019)\nPage 2 \nName of corporation \nEmployer identification number \nPart II \nReconciliation of Net Income (Loss) per Income Statement of the Corporation With Total Income \n(Loss) per Return (see instructions) \n( )\n( )\nIncome (Loss) Items \n (attach statements for lines 1 through 10)\n(a) \nIncome (Loss) per \nIncome Statement \n(b) \nTemporary \nDifference \n(c) \nPermanent \nDifference \n(d) \nIncome (Loss) per \nTax Return \n1 \nIncome (loss) from equity method foreign corporations \n2 \nGross foreign dividends not previously taxed .\n.\n.\n3 \nSubpart F, QEF, and similar income inclusions \n.\n.\n4 \nGross foreign distributions previously taxed \n.\n.\n.\n5 \nIncome (loss) from equity method U.S. corporations .\n6 \nU.S. dividends not eliminated in tax consolidation \n.\n7 \nIncome (loss) from U.S. partnerships .\n.\n.\n.\n.\n.\n8 \nIncome (loss) from foreign partnerships .\n.\n.\n.\n.\n9 \nIncome (loss) from other pass-through entities \n.\n.\n10 \nItems relating to reportable transactions .\n.\n.\n.\n.\n11 \nInterest income (see instructions) .\n.\n.\n.\n.\n.\n.\n12 \nTotal accrual to cash adjustment .\n.\n.\n.\n.\n.\n.\n13 \nHedging transactions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \nMark-to-market income (loss) .\n.\n.\n.\n.\n.\n.\n.\n15 \nCost of goods sold (see instructions) .\n.\n.\n.\n.\n.\n16 \nSale versus lease (for sellers and/or lessors) \n.\n.\n.\n17 \nSection 481(a) adjustments .\n.\n.\n.\n.\n.\n.\n.\n.\n18 \nUnearned/deferred revenue .\n.\n.\n.\n.\n.\n.\n.\n.\n19 \nIncome recognition from long-term contracts .\n.\n.\n20 \nOriginal issue discount and other imputed interest \n.\n21a \n \nIncome statement gain/loss on sale, exchange, \nabandonment, worthlessness, or other disposition of \nassets other than inventory and pass-through entities \nb Gross capital gains from Schedule D, excluding \namounts from pass-through entities .\n.\n.\n.\n.\n.\nc \n \nGross capital losses from Schedule D, excluding \namounts from pass-through entities, abandonment \nlosses, and worthless stock losses \n.\n.\n.\n.\n.\n.\nd \n \nNet gain/loss reported on Form 4797, line 17, \nexcluding amounts from pass-through entities, \nabandonment losses, and worthless stock losses \n.\ne Abandonment losses .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nf \nWorthless stock losses (attach statement) .\n.\n.\n.\ng Other gain/loss on disposition of assets other than \ninventory .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n22 \nOther income (loss) items with differences (attach \nstatement) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n23 \nTotal income (loss) items. Combine lines 1 through \n22 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n24 \nTotal expense/deduction items (from Part III, line \n32) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n25 \nOther items with no differences \n.\n.\n.\n.\n.\n.\n.\n26 \nReconciliation totals. Combine lines 23 through 25 \nNote: Line 26, column (a), must equal Part I, line 11, and column (d) must equal Form 1120-S, Schedule K, line 18. \nSchedule M-3 (Form 1120-S) (Rev. 12-2019)\n",
"Schedule M-3 (Form 1120-S) (Rev. 12-2019)\nPage 3 \nName of corporation \nEmployer identification number \nPart III \nReconciliation of Net Income (Loss) per Income Statement of the Corporation With Total Income \n(Loss) per Return—Expense/Deduction Items (see instructions) \nExpense/Deduction Items \n(a) \nExpense per \nIncome Statement \n(b) \nTemporary \nDifference \n(c) \nPermanent \nDifference \n(d) \nDeduction per \nTax Return \n1 \nU.S. current income tax expense .\n.\n.\n.\n.\n.\n.\n2 \nU.S. deferred income tax expense \n.\n.\n.\n.\n.\n.\n3 \nState and local current income tax expense \n.\n.\n.\n4 \nState and local deferred income tax expense .\n.\n.\n5 \nForeign current income tax expense (other than \nforeign withholding taxes) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \nForeign deferred income tax expense \n.\n.\n.\n.\n.\n7 \nEquity-based compensation \n.\n.\n.\n.\n.\n.\n.\n.\n8 \nMeals and entertainment .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \nFines and penalties \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \nJudgments, damages, awards, and similar costs .\n.\n11 \nPension and profit-sharing .\n.\n.\n.\n.\n.\n.\n.\n.\n12 \nOther post-retirement benefits .\n.\n.\n.\n.\n.\n.\n.\n13 \nDeferred compensation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \nCharitable contribution of cash and tangible \nproperty .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15 \nCharitable contribution of intangible property .\n.\n.\n16 \nCurrent year acquisition or reorganization investment \nbanking fees .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17 \nCurrent year acquisition or reorganization legal and \naccounting fees .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \nCurrent year acquisition/reorganization other costs .\n19 \nAmortization/impairment of goodwill .\n.\n.\n.\n.\n.\n20 \nAmortization of acquisition, reorganization, and \nstart-up costs \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n21 \nOther amortization or impairment write-offs \n.\n.\n.\n22 \nReserved .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n23a\nDepletion—Oil & Gas .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nb Depletion—Other than Oil & Gas .\n.\n.\n.\n.\n.\n.\n24 \nDepreciation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n25 \nBad debt expense .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n26 \nInterest expense (see instructions) \n.\n.\n.\n.\n.\n.\n27 \nCorporate-owned life insurance premiums .\n.\n.\n.\n28 \nPurchase versus lease (for purchasers and/or \nlessees) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n29\nResearch and development costs .\n.\n.\n.\n.\n.\n.\n30\nSection 118 exclusion (attach statement)\n.\n.\n.\n.\n31 \nOther expense/deduction items with differences \n(attach statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n32 \n \n \nTotal expense/deduction items. Combine lines 1 \nthrough 31. Enter here and on Part II, line 24, \nreporting positive amounts as negative and negative \namounts as positive \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nSchedule M-3 (Form 1120-S) (Rev. 12-2019)\n"
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f4461a.pdf
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1119 Form 4461-A (PDF)
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https://www.irs.gov/pub/irs-pdf/f4461a.pdf
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[
"Form 4461-A\n(Rev. November 2019)\nDepartment of the Treasury \nInternal Revenue Service \nApplication for Approval of Standardized or \nNonstandardized Pre-Approved Defined \nBenefit Plan\n▶ Go to www.irs.gov/Form4461A for the latest information.\nOMB No. 1545-0169 \nThis Form Is Open to Public Inspection \nFile This Form With the Internal Revenue Service \nFor IRS Use Only \nFile folder number\nSection references are to the Internal Revenue Code unless otherwise noted. \nComplete every applicable item on this form and Attachment 1-A. (See Rev. Proc. 2017-41, 2017-29 I.R.B. 92.)\nSee instructions before completing this form. \n1 \nEnter amount of user fee submitted \n$ \n2 \na Approval requested: \nInitial application \nAmendment—Enter file folder number in line 2b \nand date of last letter issued in line 2c .\n.\n▶\n2b File folder number \n2c Date of last letter issued \n3 \na Name of applicant \nAddress (number, street, room or suite no.) (If a P.O. box, see instructions.) \nCity \nState \nZIP code \n3b Employer identification number \n(EIN) of applicant \n3c Applicant’s telephone number \n3 \nd\nType of applicant (see Definitions in the instructions): \nProvider\nMass submitter\n4a Name of person to be contacted \n4b Telephone number \n4c Fax number \n4 \nd\nEmail address \n4e If a power of attorney is attached, check box \n.\n.\n ▶\n5a Basic plan document or single document plan number \n5b Adoption agreement number, if applicable\n6 \nForm of plan: \nAdoption agreement plan\nSingle document plan \n7 \nType of plan (select all that apply):\nWithout permitted disparity\nWith permitted disparity\nGovernmental\nNonelecting church\nWithout cash balance features\nWith cash balance features\n8 \nFiling status of plan: \nStandardized plan \nNonstandardized plan \nUnder penalties of perjury, I declare that I have examined this application, including accompanying statements, and, to the best of my knowledge and \nbelief, it is true, correct, and complete. \nSignature ▶\nTitle ▶\nDate ▶\nFor Privacy Act and Paperwork Reduction Act Notice, see the instructions. \nCat. No. 11416U \nForm 4461-A (Rev. 11-2019) \n",
"Form 4461-A (Rev. 11-2019) \nPage 2 \n9 \nProcedural requirements: \nYes \nNo \na Have the following been submitted as required by instructions:\n(1) \nAdoption agreement, if applicable? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(2) \nCopy of plan? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(3) \nCopy of Certification of Interim Amendments? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nb\nDo you have a procedure in place for the adoption and distribution of interim amendments made on behalf of\nadopting employers? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nc\nIs the plan patterned after, and substantially the same as, another plan submitted? (If “Yes,” see Specific \nInstructions.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nd\nProvider (non-mass submitter) request.\n(1) \nDo you have at least 15 employer-clients which are reasonably expected to adopt this plan’s basic plan \ndocument and adoption agreement or single document plan? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(2) \nIf you have more than one pre-approved plan, do you have at least 30 employer-clients in the aggregate \nwhich are reasonably expected to adopt at least one of the plans? (If you don’t have more than one\npre-approved plan, skip this question.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\ne\nMass submitter request. \n(1) \nAre applications on behalf of the requisite number of providers who are adopting the same basic plan \ndocument on a word-for-word identical basis included? If “No,” complete (2) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n(2) \nIf “No” to (1), enter the file folder number of the basic plan document for which the requisite number \nof adopting providers requirement is met: \n(3) \nIs this a flexible plan? If “Yes,” answer (a) and (b). If “No,” skip (a) and (b) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(a) Have you bracketed and identified the optional provisions of the plan? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(b) Have you included a copy of the written representation describing the choices available to providers \nand the coordination of optional provisions? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nNote: This application is designed to be used in conjunction with Rev. Proc. 2017-41. A List of Required Modifications (LRMs) is also \nrecommended for use and may be obtained from the IRS website at www.irs.gov/lrms.\nForm 4461-A (Rev. 11-2019) \n",
"Form 4461-A (Rev. 11-2019) \nPage 3 \nGeneral Instructions \nSection references are to the Internal \nRevenue Code unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Form 4461-A, \nsuch as legislation enacted after the \nform was published, go to \nwww.irs.gov/Form4461A.\nPurpose of Form \nForm 4461-A is used to apply for \napproval of standardized or \nnonstandardized pre-approved defined \nbenefit plans. \nBe sure to submit a complete and \naccurate application, including Form \n4461-A and Attachment 1-A (see \nwww.irs.gov/retirement-plans/\npreapproved-plan-submission-\nprocedures or Rev. Proc. 2017-41, \n2017-29 I.R.B. 92). Complete every \napplicable line on the application. If an \nitem on the Attachment 1-A doesn’t \napply, check the “N/A” box or enter \n“N/A” on the line where indicated as an \noption. If your application isn’t complete, \nwe will return it without processing it. \nThe first page must be typed. Unless \notherwise noted, the questions on Form \n4461-A and Attachment 1-A apply to \nboth standardized and nonstandardized \npre-approved defined benefit plans. \nRequests for additional information. If \na letter requesting additional information \nor changes to plan documents is sent to \nthe pre-approved plan provider, or an \nauthorized representative, such \ninformation and/or changes must be \nreceived no later than 30 days from the \ndate of the letter. Failure to respond \ntimely may result in the application being \nconsidered withdrawn. An extension of \nthe 30-day time limit will be granted only \nfor good cause. \nInadequate submissions. We will \nreturn, without further action, plans that \naren’t in substantial compliance with the \nqualification requirements or plans that \nare so deficient that they can’t be \nreviewed in a reasonable amount of time. \nWho May File \nA provider or mass submitter of a pre-\napproved defined benefit plan may file a \nForm 4461-A. See Definitions, later.\nWhat To File \nSubmit one copy of Form 4461-A and \nAttachment 1-A for each separate \nadoption agreement or for each single \ndocument plan where no adoption \nagreement is used.\nFor approval, file this application and \neach applicable document listed on line \n9a. A mass submitter should also file \nForm(s) 4461-B, Application for Approval \nof Standardized or Nonstandardized Pre-\nApproved Plans, as needed.\nMultiple adoption agreement plans. A \nprovider may use one basic plan \ndocument for several plans. A provider \nmay, for example, use one basic plan \ndocument with a standardized plan with \nor without permitted disparity as well as \na nonstandardized plan with or without \npermitted disparity. Submit a separate \nadoption agreement and completed \napplication for each such defined benefit \nplan. See section 9.06 of Rev. Proc. \n2017-41 for more details, including the \nspecial rules for governmental and \nnonelecting church plans. In the case of \nsimultaneous submissions of plans using \nthe same basic plan document, submit \nonly one copy of the basic plan \ndocument. If the requests aren’t \nsimultaneous, submit separate basic \nplan documents and include a cover \nletter identifying the original submission. \nThe number assigned to the basic plan \ndocument of a standardized or \nnonstandardized pre-approved plan \nmust remain the same as in the prior \nsubmission. One basic plan document \nmay not be used for both defined benefit \nand defined contribution plans. \nTwo or more single document plans. A \nprovider may not combine different \ncategories in a single document plan or \napplication. See section 9.07 of Rev. \nProc. 2017-41 for more details, including \nthe special rules for governmental and \nnonelecting church plans.\nWhere To File \nSend Form 4461-A to: \nInternal Revenue Service \nAttn: Pre-Approved Plans \nCoordinator \nRoom 6-403, Group 7521 \nP.O. Box 2508 \nCincinnati, OH 45201-2508\nIf using Express Mail or a private \ndelivery service, use this address: \nInternal Revenue Service \nAttn: Pre-Approved Plans \nCoordinator \nRoom 6-403, Group 7521 \n550 Main Street \nCincinnati, OH 45202 \nSignature. The application must be \nsigned by a partner or officer of the \napplicant who is authorized to sign, or \nother person authorized by a power of \nattorney. The power of attorney should \nbe filed with the application. \nDisclosure requested by taxpayer. A \ntaxpayer may request the IRS to \ndisclose and discuss the return or return \ninformation with any person(s) the \ntaxpayer designates in a written request. \nIf you want to designate a person(s) to \nassist in an application for approval, you \nmust provide the IRS office of \njurisdiction with a written request that \ncontains the following. \n• The taxpayer’s name, address, EIN, \nand plan number(s). \n• The name, address, social security \nnumber, and telephone number(s) of the \nperson or persons whom you are \nauthorizing to receive return information. \n• A paragraph that clearly describes the \nreturn or return information that you \nauthorize the IRS to disclose. \n• An authorized signature (see above). \nAs an alternative to providing the \nabove statement, you may submit \nForm 2848, Power of Attorney and \nDeclaration of Representative. \nDefinitions \nAdoption agreement. An adoption \nagreement is the portion of the plan \ncontaining all the options that the \nadopting employer may select. The \nadoption agreement may include blanks \nor fill-in provisions for the employer to \ncomplete if it also includes parameters \non these provisions that preclude an \nemployer from completing them in a \nmanner that could violate the \nqualification requirements. Each \nseparate adoption agreement is treated \nas a separate plan and will receive its \nown opinion letter. \nBasic plan document. A basic plan \ndocument is the portion of the plan \ncontaining all the nonelective provisions \napplicable to all adopting employers. No \noptions (including blanks to be \ncompleted) may be provided in the \nbasic plan document except for options \nin flexible plans. \nSingle document plan. A single \ndocument plan may contain alternate \nparagraphs and options that may be \nselected by an adopting employer. A \nsingle document plan may include \nblanks or fill-in provisions for the \nemployer to complete only if the plan \nalso includes parameters on these \nprovisions that preclude an employer \nfrom completing them in a manner that \ncould violate the qualification \nrequirements.\n",
"Form 4461-A (Rev. 11-2019) \nPage 4 \nFlexible plan. A flexible plan is a plan \nsubmitted by a mass submitter which \ncontains certain optional provisions as \nallowed by section 10.03(1) of Rev. Proc. \n2017-41. Providers that adopt a flexible \nplan may include or delete any optional \nprovision designated as such in the \nmass submitter’s plan. A flexible plan \nadopted by a provider which differs from \nthe mass submitter plan only because of \nthe deletion of certain optional \nprovisions will be treated as a plan that \nis word-for-word identical to the mass \nsubmitter plan. \nMass submitter. As set forth in Rev. \nProc. 2017-41, any entity that submits \napplications on behalf of at least 30 \nunaffiliated providers each of which is \nsponsoring, on a word-for-word identical \nbasis, the same plan is a mass \nsubmitter. A mass submitter is treated as \na mass submitter with respect to all of its \nplans, provided the 30-unaffiliated-\nprovider requirement is met with respect \nto at least one plan.\nAffiliation is determined under sections \n414(b) and (c). Additionally, the following \nwill be considered to be affiliated: any \nlaw firm, accounting firm, consulting \nfirm, etc., with its partners, members, \nassociates, etc. For purposes of \ndetermining whether 30 unaffiliated \nproviders sponsor on a word-for-word \nidentical basis the same plan document, \nthe mass submitter is treated as an \nunaffiliated provider.\nPre-approved plan. A pre-approved \nplan is a plan (including a plan covering \nself-employed individuals) that is made \navailable by a provider for adoption by \nemployers. The term pre-approved plan \nincludes both standardized and \nnonstandardized plans. A pre-approved \nplan may be an adoption agreement plan \nor a single document plan. An adoption \nagreement plan consists of a basic plan \ndocument and an adoption agreement. A \nsingle document plan consists of a \nsingle plan document offered by a \nprovider without an adoption agreement. \nProvider. A provider is any person \n(including a mass submitter, if \napplicable) that (1) has an established \nplace of business in the United States \nwhere it is accessible during every \nbusiness day; and (2) represents to the \nIRS that it has at least 15 employer-\nclients, each of which is reasonably \nexpected to adopt the same pre-\napproved plan of the provider.\nA provider may request an opinion \nletter for more than one plan provided it \nrepresents to the IRS that it has at least \n30 employer-clients in the aggregate, \neach of which is reasonably expected to \nadopt at least one of the provider’s \nplans.\nA provider also includes any person \nthat has an established place of \nbusiness in the United States where it is \naccessible during every business day \nand offers a plan as a word-for-word \nidentical adopter or minor modifier \nadopter of a plan of a mass submitter, \nregardless of the number of employers \nthat are expected to adopt the plan.\nStandardized plan. A standardized plan \nis a pre-approved plan (other than a \nstatutory hybrid plan) that meets the \nrequirements set forth in section 5.16 of \nRev. Proc. 2017-41.\nNonstandardized plan. A \nnonstandardized plan is a pre-approved \nplan that isn’t a standardized plan and \nthat satisfies section 5.15 of Rev. Proc. \n2017-41.\nStatutory hybrid plan. A statutory \nhybrid plan is a defined benefit plan that \ncontains a statutory hybrid benefit \nformula, as defined in Regulations \nsection 1.411(a)(13)-1(d)(4). Section 6.03 \nof Rev. Proc. 2017-41 (as revised by \nRev. Proc. 2018-21, 2018-14 I.R.B. 467) \nprovides a list of areas not covered by \nopinion letters. This list includes \nstatutory hybrid plans with certain \nfeatures, such as a statutory hybrid \nbenefit formula that isn’t a cash balance \nformula. See section 6.03 of Rev. Proc. \n2017-41 for the complete list.\nSpecific Instructions \nLine 1. All applications submitted must \nbe accompanied by the appropriate user \nfee and Form 8717-A, User Fee for \nEmployee Plan Opinion Letter Request, \nas determined from the schedule in Rev. \nProc. 2019-4, 2019-1 I.R.B. 146 (or the \nlatest annual update). Applications \nsubmitted without the proper user fee \nwon’t be processed and will be returned \nto the applicant. \nLine 3a. Enter the name and address of \nthe applicant. If the Post Office doesn’t \ndeliver mail to the street address and \nthe applicant has a P.O. box number, \nshow the P.O. box number instead of the \nstreet address. \nLine 4a. If the person to be contacted is \nother than an employee of the applicant, \nplease enclose an authorized power of \nattorney. See Disclosure requested by \ntaxpayer, earlier. \nLine 4c. Enter a fax number to receive \nnotice of preliminary approval of the \napplicable plan, subject to final approval \nby opinion letter.\nLine 5a. Enter the two-digit number you \nhave assigned to your single document \nplan or basic plan document that \naccompanies the adoption agreement \nfor which you are requesting approval.\nIf multiple adoption agreements are \nlinked to the same basic plan document, \nthe same two-digit basic plan document \nnumber should be used for all \napplications.\nLine 5b. Enter the three-digit number \nyou have assigned to the adoption \nagreement for which this application is \nsubmitted. Each different adoption \nagreement designed to accompany a \nsingle basic plan document should be \ngiven a different three-digit number \nbeginning with “001.” For example, if the \nfirst basic plan document of a sponsor \nhas four different adoption agreements, \nthey should be numbered “001” through \n“004,” and the provider should submit \nfour separate Forms 4461-A. Adoption \nagreements submitted with the second \nor any subsequent basic plan \ndocuments (that aren’t word-for-word \nidentical to a previously submitted basic \nplan document) should be similarly \nnumbered beginning with “001.” \nLine 9. Procedural requirements. \nSubmit a separate application for each \ndifferent plan/adoption agreement \ncombination or single document plan. \nLine 9c. If you checked “Yes,” submit a \ncopy of such plan with language \ndifferences highlighted. Attach a cover \nletter that includes the following.\n• The name and file folder number of the \nplan, including the name and EIN of the \nprovider.\n• A list of all plans written by the plan \ndrafter that are substantially identical to \nthe lead plan, including the information \ndescribed above.\n• A description of each place where the \nplan for which the application is being \nsubmitted isn’t word-for-word identical \nto the language of the lead plan, \nincluding an explanation of the purpose \nand effect of each difference.\n• A certification made under penalty of \nperjury by the plan drafter that the \ninformation describing where the plan \nlanguage isn’t word-for-word identical is \ntrue and complete.\nLine 9e. In addition to filing Form \n4461-A, the mass submitter should use \nForm 4461-B, when submitting \napplications on behalf of its adopting \nproviders, and submit Form 8717-A. \n",
"Form 4461-A (Rev. 11-2019) \nPage 5 \nPrivacy Act and Paperwork Reduction \nAct Notice. We ask for the information \non this form to carry out the Internal \nRevenue laws of the United States. You \nare required to give us this information. \nWe need it to determine whether you \nmeet the legal requirements for plan \napproval. \nYou aren’t required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records \nrelating to a form or its instructions must \nbe retained as long as their content may \nbecome material in the administration of \nany Internal Revenue law. Generally, tax \nreturns and return information are \nconfidential, as required by Code section \n6103. \nThe time needed to complete and file \nthis form will vary depending on \nindividual circumstances. The estimated \naverage time is: \nRecordkeeping \n.\n.\n. 42 hr., 5 min. \nLearning about the law \nor the form .\n.\n.\n.\n. 5 hr., 55 min. \nPreparing the form .\n. 7 hr., 48 min. \nCopying, assembling, and \nsending the form to the IRS . 16 min. \nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form \nsimpler, we would be happy to hear from \nyou. You can send us comments from \nwww.irs.gov/FormComments. Or you \ncan write to the Internal Revenue \nService, Tax Forms and Publications \nDivision, 1111 Constitution Ave. NW, \nIR-6526, Washington, DC 20224. Don’t \nsend Form 4461-A to this address. \nInstead, see Where To File, earlier.\n"
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f1097btc.pdf
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1219 Form 1097-BTC (PDF)
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https://www.irs.gov/pub/irs-pdf/f1097btc.pdf
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[
" \nForm 1097-BTC\n(Rev. December 2019)\nCat. No. 54293T\nBond \nTax \nCredit\nDepartment of the Treasury - Internal Revenue Service\nCopy A\nFor \nInternal Revenue \nService Center\nFile with Form 1096.\nOMB No. 1545-2197\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\nFor calendar year\n20\n5050\nVOID\nCORRECTED\nFORM 1097-BTC ISSUER’S name, street address, city or town, state or \nprovince, country, ZIP or foreign postal code, and telephone no.\nFORM 1097-BTC ISSUER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n Form 1097-BTC issuer is (check one):\nIssuer of bond or its agent filing current year \nForm 1097-BTC for credit being reported\nAn entity or a person that received or should have received \na current year Form 1097-BTC and is distributing part or all \nof that credit to others\n1 Total \n$\n2a Code\n2b Unique identifier\n3 Bond type\n4\n5a January \n$ \n5b February\n$ \n5c March\n$ \n5d April\n$ \n5e May\n$ \n5f June\n$ \n5g July \n$ \n5h August\n$ \n5i September\n$ \n5j October\n$ \n5k November\n$ \n5l December\n$ \n6 Comments\nForm 1097-BTC (Rev. 12-2019)\nwww.irs.gov/Form1097BTC\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1097-BTC\n(Rev. December 2019)\nBond \nTax \nCredit\nDepartment of the Treasury - Internal Revenue Service\nCopy B\nFor Recipient\nThis is important tax \ninformation and is \nbeing furnished to the \nIRS. If you are required \nto file a return, a \nnegligence penalty or \nother sanction may be \nimposed on you if an \namount of tax credit \nexceeding the amount \nreported on this form is \nclaimed on your \nincome tax return. \nOMB No. 1545-2197\nFor calendar year\n20\nCORRECTED (if checked)\nFORM 1097-BTC ISSUER’S name, street address, city or town, state or \nprovince, country, ZIP or foreign postal code, and telephone no.\nFORM 1097-BTC ISSUER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n Form 1097-BTC issuer is: \nIssuer of bond or its agent filing current year \nForm 1097-BTC for credit being reported\nAn entity or a person that received or should have received \na current year Form 1097-BTC and is distributing part or all \nof that credit to others\n1 Total \n$\n2a Code\n2b Unique identifier\n3 Bond type\n4\n5a January \n$ \n5b February\n$ \n5c March\n$ \n5d April\n$ \n5e May\n$ \n5f June\n$ \n5g July \n$ \n5h August\n$ \n5i September\n$ \n5j October\n$ \n5k November\n$ \n5l December\n$ \n6 Comments\nForm 1097-BTC (Rev. 12-2019)\n(keep for your records)\nwww.irs.gov/Form1097BTC\n",
"Instructions for Recipient\nIssuers of certain tax credit bonds or their agents, and recipients of \nForm 1097-BTC from the bond issuer or agent who are further \ndistributing the credit, such as brokers, nominees, mutual funds, or \npartnerships, must report to you on at least a quarterly basis and file \nwith the IRS annually on a separate Form 1097-BTC the amount of tax \ncredit you are allowed for each month of the calendar year. \nRecipient’s taxpayer identification number (TIN). For your \nprotection, this form may show only the last four digits of your TIN \n(social security number (SSN), individual taxpayer identification \nnumber (ITIN), adoption taxpayer identification number (ATIN), or \nemployer identification number (EIN)). However, the issuer has \nreported your complete TIN to the IRS.\n▲\n!\nCAUTION\nYou will not receive a separate 4th quarter report. The \ncredits for the 4th quarter will be reported together with the \nannual aggregate total amount of allowable credits \nfurnished to you on or before the 15th day of the 2nd \ncalendar month after the close of the calendar year.\nNote: The first 3 quarters reported on the annual report are duplicative \namounts previously reported. You are allowed to take the credit \namount from each quarter only once.\nThe checkbox shows if the filer is the issuer of the bond or its agent, \nor is an entity or a person that received or should have received this \nform and is making a further distribution of the credit.\nBox 1. Shows the aggregate total of credits allowed for the calendar \nyear. \nBox 2a. Indicates if the unique identification number is your account \nnumber, the CUSIP number of the bond, or another identifier. For \nfilings of Form 1097-BTC by the issuer of the bond or its agent (as \nindicated by the first checkbox being checked), the first nine \ncharacters of the unique identifier in box 2b must be the CUSIP \nnumber, if available. For further identification, if necessary or desired \nby the issuer, the CUSIP number can be followed by an optional \nhyphen and then an account number or other unique identifying \nnumber.\nIf no CUSIP number is available, the account number, or other \nunique identifying number by which the bond transaction is tracked by \nthe issuer, is shown in box 2b.\nC—CUSIP number\nA—Account number\nO—Any other identifier \nBox 2b. Shows the unique identifier assigned by the Form 1097-BTC \nissuer, limited to 39 alphanumeric characters. \nBox 3. Shows the codes for tax credit bonds that are reported on \nseparate Forms 1097-BTC:\n101—Clean renewable energy bond\n199—Other\nBoxes 5a–5l. These boxes show the amount of the credit you are \nallowed for the month during the calendar year.\nYou may be entitled to claim a credit against your income tax \nliabilities, subject to certain limitations under section 54A(c).\nAdditionally, clean renewable energy bond credits received from a \npass-through entity are limited to the income received from the pass-\nthrough entity. New clean renewable energy bond and qualified \nenergy conservation bond credits are limited to 70% of the credit \namounts determined under section 54A(b); the credit reported on \nForm 1097-BTC is the credit amount after the 70% limit has been \napplied. For more information, see Form 8912.\nBox 6. May show any additional information provided by the form \nissuer. \nFuture developments. For the latest information about \ndevelopments related to Form 1097-BTC and its instructions, such as \nlegislation enacted after they were published, go to \nwww.irs.gov/Form1097BTC.\n",
" \nForm 1097-BTC\n(Rev. December 2019)\nBond \nTax \nCredit\nDepartment of the Treasury - Internal Revenue Service\nCopy C\nFor Payer\nOMB No. 1545-2197\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\nFor calendar year\n20\nVOID\nCORRECTED\nFORM 1097-BTC ISSUER’S name, street address, city or town, state or \nprovince, country, ZIP or foreign postal code, and telephone no.\nFORM 1097-BTC ISSUER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n Form 1097-BTC issuer is (check one):\nIssuer of bond or its agent filing current year \nForm 1097-BTC for credit being reported\nAn entity or a person that received or should have received \na current year Form 1097-BTC and is distributing part or all \nof that credit to others\n1 Total \n$\n2a Code\n2b Unique identifier\n3 Bond type\n4\n5a January \n$ \n5b February\n$ \n5c March\n$ \n5d April\n$ \n5e May\n$ \n5f June\n$ \n5g July \n$ \n5h August\n$ \n5i September\n$ \n5j October\n$ \n5k November\n$ \n5l December\n$ \n6 Comments\nForm 1097-BTC (Rev. 12-2019)\nwww.irs.gov/Form1097BTC\n",
"Instructions for Payer\nTo complete Form 1097-BTC, use: \n• The current General Instructions for Certain Information \nReturns, and\n• The current Instructions for Form 1097-BTC.\nTo order these instructions and additional forms, go to \nwww.irs.gov/Form1097BTC.\nFiling and furnishing. Furnish the information shown on \nCopy B of this form to the recipient on or before the 15th \nday of the 2nd calendar month after the close of the \ncalendar quarter in which the credit is allowed. \nFor the first 3 quarters, report to the recipient only the \namounts for the months of the applicable quarter. Box 1 \nshould not be completed and box 6 is optional.\nYou are not required to furnish a separate report solely \nfor the 4th quarter because the 4th quarter amounts are \nreported with the annual filing. For the annual filing, report \nthe credits for each month in boxes 5a–5l, report the total \nof those amounts in box 1, and complete the rest of the \nform as applicable. If any amounts previously furnished for \nthe first 3 quarters need to be corrected, report the correct \namounts for the annual reporting and explain the correction \nto the recipient; no explanation is required for the IRS filing. \n For the report furnished to the recipient (quarterly or \nannual), you may use Copy B or your own substitute \nstatement reporting all the same applicable information \n(the reporting for the first 3 quarters may be furnished \nelectronically). \nThe IRS encourages Form 1097-BTC issuers to provide \nthe credit information to the recipient monthly, if \napplicable, and as soon after the end of the month in which \na credit arises as possible.\nFor filing and furnishing instructions, and to request filing \nor furnishing extensions, see the current General \nInstructions for Certain Information Returns. To file \nelectronically, you must have software that generates a file \naccording to the specifications in Pub. 1220.\nNeed help? If you have questions about reporting on Form \n1097-BTC, call the information reporting customer service \nsite toll free at 866-455-7438 or 304-263-8700 (not toll \nfree). Persons with a hearing or speech disability with \naccess to TTY/TDD equipment can call 304-579-4827 (not \ntoll free). \n"
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f5306a.pdf
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1119 Form 5306-A (PDF)
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https://www.irs.gov/pub/irs-pdf/f5306a.pdf
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[
"Form 5306-A\n(Rev. November 2019)\nDepartment of the Treasury \nInternal Revenue Service \nApplication for Approval of Prototype Simplified Employee \nPension (SEP) or Savings Incentive Match Plan for \nEmployees of Small Employers (SIMPLE IRA Plan)\n(Under section 408(k) or (p) of the Internal Revenue Code) \n▶ Go to www.irs.gov/Form5306A for the latest information.\nOMB No. 1545-0199\nFor IRS Use Only \nFile folder number\n1 \nEnter amount of user fee submitted. See Specific Instructions ▶\n$ \nPart I \nIdentifying Information (see instructions before completing this part) \n2 \nApproval requested for: \na Type of plan— \n(1) \nPrototype simplified employee pension (SEP) under section 408(k) \n(2) \nPrototype savings incentive match plan for employees of small employers (SIMPLE IRA plan) under section 408(p) \nb \nInitial application \nc \nAmendment—Enter ▶\n(1) Latest letter serial number \n(2) Date letter issued \n(3) File folder number \n3 \nIf the SEP contains elective deferral provisions, check this box .\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\n4a Name of applicant \n4b Applicant’s employer identification number \nNumber, street, and room or suite no. (if a P.O. box, see instructions) \nCity or town, state, and ZIP code \n5a Name of person to be contacted\n5b Telephone number\n5c\nEmail address \n5d If a power of attorney is attached, check box \n.\n.\n ▶\n6 \nType of submission (check one box): \na \nNot a mass submitter \nb \nMass submitter \nc \nIdentical adoption of a mass submitter \nd \nMinor modification of a mass submitter \n7a If box 6c or 6d is checked, enter the mass submitter’s name:\nb File folder number of the mass submitter’s SEP or SIMPLE IRA plan on which this submission is based: \n8 \nType of sponsoring organization: \na \nInsurance company \nb \nTrade or professional organization \nc \nSavings and loan association that qualifies as a bank \nd \nBank \ne \nRegulated investment company \nf \nFederally insured credit union \ng \nApproved non-bank trustee (attach copy of approval \nletter) \nPart II \nSEP Information \nAttach a copy of the SEP documents and indicate the article or section and the page number where \nthe following provisions appear. If any item does not apply, write “N/A.” Sample language, or a listing \nof required modifications (LRMs), is available at www.irs.gov/LRMS. Sponsors are encouraged to use \nLRM language. \nPlan Article or \nSection \nReference \nPlan \nPage \nNumber \nFor \nIRS Use \nOnly \n9a \n \n \nDoes the SEP cover all employees who have attained age 21, performed service \nfor the employer in 3 of the immediately preceding 5 years, and received at least \n$600* in compensation from the employer for the year, other than employees who \nmay be excluded under section 410(b)(3)(A) or (C)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1 \nb Does the SEP provide that all eligible employees will share in an allocation? .\n.\n2 \nc Does the SEP contain a definite allocation formula that does not discriminate in \nfavor of highly compensated employees? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \nd Does the SEP require that it be used only with pre-approved traditional IRAs? .\n5 \ne Does the SEP prohibit restrictions on withdrawals (other than restrictions \npermitted under section 408(d)(7)(A) in the case of a salary reduction SEP)? .\n.\n6 \nf \n \nDoes the SEP define “compensation” in a manner that satisfies one of the safe \nharbor definitions under section 414(s) and limit compensation under section \n408(k)(3)(C)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n* This is the amount for 2019 and 2020. The amount may be increased in future years for cost-of-living adjustments. \nSign \nHere \nUnder penalties of perjury, I declare that I have examined this application, including accompanying statements, and, to the best of my knowledge and belief, it \nis true, correct, and complete. \n▲\nSignature of officer \nDate \n▲\nTitle \nFor Paperwork Reduction Act Notice, see the instructions. \nCat. No. 32621R \nForm 5306-A (Rev. 11-2019) \n",
"Form 5306-A (Rev. 11-2019) \nPage 2 \nPart III \nSIMPLE IRA Plan Information \nAttach a copy of the SIMPLE IRA plan documents and indicate the article or section and the page \nnumber where the following provisions appear. If an item does not apply, enter “N/A.” Sample \nlanguage, or a listing of required modifications (LRMs), is available at www.irs.gov/LRMS. Sponsors \nare encouraged to use LRM language. \nPlan Article or \nSection \nReference \nPlan \nPage \nNumber \nFor \nIRS Use \nOnly \n10a Does the plan define the term “employer” to include all members of such groups \nor entities required to be aggregated with the employer? .\n.\n.\n.\n.\n.\n.\n.\n1 \nb \n \nDoes the plan limit adoption to employers that have 100 or fewer employees who \nearned $5,000 or more in compensation from the employer during the preceding \ncalendar year? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2 \nc Does the plan limit adoption to employers that do not maintain another qualified \nplan to which contributions are made or benefits accrued? \n.\n.\n.\n.\n.\n.\n.\n3 \nd Does the plan define the term “employee” to include leased employees and \nemployees described in section 401(c)(1)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \ne Does the plan cover all employees except those who may be excluded under \nsection 408(p)(4)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \nf \n \nDoes the plan provide that each eligible employee may make or modify a salary \nreduction agreement during the 60-day period immediately preceding the \ncalendar year after receiving proper notice? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \ng Does the plan provide that salary reduction contributions may not exceed the \nstatutory limits? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \nh Under the plan, is an eligible employee permitted to terminate a salary reduction \nelection at any time? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \ni \nIs the interest of an eligible employee in the plan nonforfeitable at all times? .\n.\n9 \nj \n \n \nDoes the plan provide that the employer will make matching contributions to each \neligible employee’s SIMPLE IRA equal to the employee’s salary reduction \ncontribution, up to a limit of 3% of the employee’s compensation for the calendar \nyear? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \nk Does the plan provide that the employer will make a 2% nonelective contribution \nto each eligible employee’s SIMPLE IRA in lieu of matching contributions? \n.\n.\n11 \nl \n \nDoes the plan require that the employer will make salary reduction contributions \nto eligible employees’ SIMPLE IRAs no later than 30 days after the month in which \nthe amounts would otherwise have been payable to the employee in cash? .\n.\n \n12 \nm Unless the employer has chosen, does the plan allow each eligible employee to \nselect the financial institution for their SIMPLE IRA? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13 \nn \n \nIf the employer has selected the financial institution, does the plan require the \nfinancial institution to meet the notification requirements of section 408(p)(7) and \nlimited in accordance with section 408(p)(2)(B)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \no Does the plan define “compensation” as described in section 408(p)(6)(A)? .\n.\n15 \np Does the plan require that it be used only with pre-approved SIMPLE IRAs? .\n.\n16 \nq Does the plan prohibit restrictions on withdrawals? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17 \nr \n \nDoes the plan provide that amendments will become effective only at the \nbeginning of a calendar year and will conform to the content of the plan notice for \nthe calendar year? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \nForm 5306-A (Rev. 11-2019) \n",
"Form 5306-A (Rev. 11-2019) \nPage 3 \nGeneral Instructions \nSection references are to the Internal \nRevenue Code unless otherwise noted. \nFuture Developments\nFor the latest information about \ndevelopments related to Form 5306-A \nand its instructions, such as legislation \nenacted after they were published, go to \nwww.irs.gov/Form5306A.\nPurpose of form. Form 5306-A is used \nby sponsors who want to get IRS \napproval of their prototype simplified \nemployee pension (SEP) agreements or \nsavings incentive match plans for \nemployees of small employers (SIMPLE \nIRA plans). \nWho may file. Use Form 5306-A to \nrequest a favorable opinion letter if: \n• You are a bank, federally insured credit \nunion, savings and loan association that \nqualifies as a bank, insurance company, \nregulated investment company, or trade \nor professional society or association \n(other than an employee association); \nand \n• You want to get a favorable opinion \nletter that a SEP agreement or SIMPLE \nIRA plan to be used by more than one \nemployer is acceptable in form. \nWho does not need to file. Instead of \ndesigning their own SEP or SIMPLE IRA \nplan, sponsors may use one of the Form \n5304 or 5305 series of model forms to \nestablish a SEP or a SIMPLE IRA plan. \nSponsors who use one of these forms \nwith individual retirement accounts or \nannuities for which the IRS has issued a \nfavorable opinion or ruling letter, or with \nmodel individual retirement accounts \nissued by the IRS, are considered to \nhave established a SEP or SIMPLE IRA \nplan that meets the requirements of \nsection 408(k) or 408(p). Do not file \nForm 5306-A if you use a model form. \nNote: The IRS will not issue an opinion \nletter on a document submitted with \nForm 5306-A that is a combination of a \nprototype SEP or SIMPLE IRA plan and \na prototype individual retirement account \nor annuity. \nWhat to file. File this application and \none copy of all documents that make up \nthe SEP agreement or SIMPLE IRA plan. \nIf this is an amendment, include a \ncopy of the amendment and an \nexplanation of its effect on the SEP \nagreement or SIMPLE IRA plan. \nWhere to file. File Form 5306-A at this \naddress.\nInternal Revenue Service \nAttn: EP Opinion Letters \nTE/GE Stop 31A Team 105 \nP.O. Box 12192 \nCovington, KY 41012-0192\nPrivate delivery services (PDSs). PDSs \ncan't deliver to the address shown \nabove. If you choose to use a PDS, send \nForm 5306-A to this address.\nInternal Revenue Service \nAttn: EP Opinion Letters \n7940 Kentucky Drive \nTE/GE Stop 31A Team 105 \nFlorence, KY 41042\nGo to www.irs.gov/PDS for the current \nlist of designated services.\nSignature. An officer who is authorized \nto sign or another person authorized \nunder a power of attorney must sign this \napplication. (Send the power of attorney \nwith this application when you file it.) \nSpecific Instructions \nUser fee. All applications must be \naccompanied by the appropriate user \nfee. Applications submitted without the \nproper user fee will not be processed \nand will be returned to the applicant. \nTo determine the proper user fee, see \nRev. Proc. 2019-4, 2019-1 I.R.B. 146, \navailable at www.irs.gov/\nirb/2019-01_IRB#RP-2019-04, or the \nlatest annual update.\nLine 2c. If you are amending your \npreviously approved SEP or SIMPLE IRA \nplan, enter the letter serial number, date, \nand file folder number from the latest \nopinion letter you received for your SEP \nor SIMPLE IRA plan. \nLine 3. If the application is for a SEP \nthat provides for elective deferrals \nintended to meet the requirements of \nsection 408(k)(6), check the box. \nThe Small Business Job Protection Act \nof 1996 (P.L. 104-188) repealed section \n408(k)(6), effective December 31, 1996, \nexcept with respect to a SEP of an \nemployer if the terms of the SEP of such \nemployer, as in effect on December 31, \n1996, provided for elective deferrals. \nLine 4a. Include the suite, room, or other \nunit number after the street number. If \nthe Post Office does not deliver mail to \nthe street address and you have a P.O. \nbox, show the box number instead of the \nstreet address. \nPaperwork Reduction Act \nNotice \nWe ask for the information on this form \nto carry out the Internal Revenue laws of \nthe United States. We need it to ensure \nthat you are complying with these laws \nand to allow us to figure and collect the \nright amount of tax. This information is \nneeded to process your application and \nto determine whether your prototype \nSEP or SIMPLE IRA plan meets the \nrequirements of section 408(k) or 408(p). \nYou are not required to apply for \napproval; however, if you want to receive \nan opinion letter from the IRS regarding \nyour prototype SEP or SIMPLE IRA plan, \nyou are required to provide the \ninformation requested on this form. \nYou are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records \nrelating to a form or its instructions must \nbe retained as long as their contents \nmay become material in the \nadministration of any Internal Revenue \nlaw. Generally, tax returns and return \ninformation are confidential, as stated in \nsection 6103. \nThe time needed to complete and file \nthis form will vary depending on \nindividual circumstances. The estimated \naverage time is: \nRecordkeeping .\n.\n.\n 15 hr., 46 min. \nLearning about the law \nor the form \n.\n.\n.\n.\n. 1 hr., 23 min. \nPreparing, copying, assembling, \nand sending the form \nto the IRS .\n.\n.\n.\n.\n. 1 hr., 42 min. \nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form \nsimpler, we would be happy to hear from \nyou. You can send us comments from \nwww.irs.gov/FormComments. Or you \ncan write to Internal Revenue Service, \nTax Forms and Publications Division, \n1111 Constitution Ave. NW, IR-6526, \nWashington, DC 20224. Do not send the \nform to this address. Instead, see Where \nto file, earlier. \n"
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f5306.pdf
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1119 Form 5306 (PDF)
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https://www.irs.gov/pub/irs-pdf/f5306.pdf
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[
"Form 5306 \n(Rev. November 2019) \nDepartment of the Treasury \nInternal Revenue Service \nApplication for Approval of Prototype or Employer \nSponsored Individual Retirement Arrangement (IRA) \n(Under section 408(a), (b), (c), or (p) or section 408A of the Internal Revenue Code) \n▶ Go to www.irs.gov/Form5306 for the latest information.\nOMB No. 1545-0390 \nFor IRS Use Only \nFile folder number\n1 \nEnter amount of user fee submitted. See Specific Instructions ▶\n$ \nPart I \nIdentifying Information (see instructions before completing this part) \n2 \nApproval requested for: \na Type of individual retirement arrangement— \n(1) \nPrototype traditional IRA under section 408(a) or 408(b) \n(2) \nPrototype Roth IRA under section 408A \n(3) \nPrototype dual-purpose IRA \n(4) \nPrototype SIMPLE IRA under section 408(p) \n(5) \nRoth or traditional IRA established by employer or \nemployee association under section 408(c)\nb \nInitial application \nc \nAmendment—Enter ▶\n(1) Latest letter serial number \n(2) Date letter issued \n(3) File folder number \n3a Name of applicant \nNumber, street, and room or suite no. (if a P.O. box, see instructions) \nCity or town, state, and ZIP code \n3b Employer identification \nnumber of applicant \n4a Name of person to be contacted \n4b Telephone number \n4 \nc\nEmail address \n4d If a power of attorney is attached, check box \n.\n.\n ▶\n5 \na Type of sponsoring organization (if you are applying for a ruling under section 408(c), do not complete this item): \n(1)\nInsurance company \n(2)\nTrade or professional association \n(3)\nSavings and loan association that qualifies as a bank \n(4)\nBank \n(5)\nRegulated investment company \n(6)\nFederally insured credit union \n(7)\nApproved non-bank trustee (attach copy of approval letter)\nb\nType of submission (check one box):\n(1)\nNot a mass submitter\n(2)\nMass submitter\n(3)\nIdentical adoption of a mass submitter\n(4)\nMinor modification of a mass submitter\n6 \nName of trustee or custodian \nNumber, street, and room or suite no. (if a P.O. box, see instructions) \nCity or town, state, and ZIP code \n7 \nType of funding entity: \na \nTrust \nb \nCustodial account \nc \nInsurance company\nAnnuity contract or endorsement number (see instructions) ▶\nSign \nHere \nUnder penalties of perjury, I declare that I have examined this application, including accompanying statements, and, to the best of my knowledge and belief, \nit is true, correct, and complete. \n▲\nSignature of officer \nDate \n▲\nTitle \nFor Privacy Act and Paperwork Reduction Act Notice, see instructions. \nCat. No. 11830C \nForm 5306 (Rev. 11-2019) \n",
"Form 5306 (Rev. 11-2019) \nPage 2 \nPart II \nPlan Information \nAttach a copy of the plan documents and indicate the article or section reference and the page number \nwhere the following provisions appear. If an item does not apply, enter “N/A.” Sample language, or a listing \nof required modifications (LRMs), is available at www.irs.gov/LRMS. Sponsors are encouraged to use LRM \nlanguage.\nArticle or \nSection \nReference \nPage \nNumber \nFor IRS \nUse \nOnly \n8a \n \nDoes the IRA provide that the trust is created for the exclusive benefit of the participant \nor his or her beneficiaries, or that the annuity contract must be owned only by the \nannuitant? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1/13 \nb Does the IRA describe the type of allowable contributions (that is, only cash except \nfor rollovers) and maximum limitation? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2/14 \nc \n \n \nDoes the IRA prohibit the investment of trust assets in collectibles, or contain a \nstatement informing individuals that an investment in collectibles, except for \ninvestments in certain coins and precious metals, will be treated as a taxable \ndistribution? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \nd Does the IRA prohibit investment in life insurance contracts? .\n.\n.\n.\n.\n.\n.\n.\n.\n4 \ne Does the IRA provide the rules on required distributions commencing before death? .\n5/15 \nf \nDoes the IRA provide the rules on required distributions commencing after death? \n.\n6/16 \ng Does the IRA provide that the account is nonforfeitable? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7/17 \nh Does the IRA provide that the contract is nontransferable? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \ni \n \nDoes the IRA provide for application of premium refund (other than refunds attributable \nto excess contributions) before the end of the calendar year following the year of the \nrefund toward the payment of future premiums or the purchase of additional benefits? \n19 \nj \nDoes the IRA prohibit commingling assets of trusts? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \nk Does the IRA provide that annuity contracts must have flexible premiums? .\n.\n.\n.\n20 \nl \nDoes the IRA provide for a separate accounting for the interest of each employee or \nmember of the association? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \nm Does the IRA provide for annual calendar-year reports by trustees or issuers? .\n.\n.\n10/21 \nn Does the IRA require substitution of non-bank trustee or custodian when notified by \nthe Commissioner of the Internal Revenue Service? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \no Does the IRA define compensation? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12/22 \nForm 5306 (Rev. 11-2019) \n",
"Form 5306 (Rev. 11-2019) \nPage 3 \nGeneral Instructions\nSection references are to the Internal \nRevenue Code unless otherwise noted. \nFuture developments. For the latest \ninformation about developments related \nto Form 5306 and its instructions, such \nas legislation enacted after this form and \ninstructions were published, go to \nwww.irs.gov/Form5306. \nPurpose of form. Sponsoring \norganizations, employers, or employee \nassociations, use Form 5306 to request \na ruling as to: \n• Whether a trust or custodial account \nagreement meets the requirements of \nsection 408(a), 408(c), 408(p), or 408A; or \n• Whether an individual annuity meets \nthe requirements of section 408(b), \n408(p), or 408A. \nWho May File\nOpinion letters on prototype IRAs. \nForm 5306 may be filed by a sponsoring \norganization that is: \n• A bank (including savings and loan \nassociations that qualify as banks and \nfederally insured credit unions), \n• Any person who has IRS approval to \nact as a trustee or custodian, \n• An insurance company, \n• A regulated investment company, or \n• A trade or professional society or \nassociation (other than employee \nassociations).\nRulings under section 408(c). \nEmployers or employee associations \nwho want a ruling under section 408(c) \nfor a trust that will be used for individual \nretirement accounts may file this form. \nThe term “employee association” means \nany organization composed of two or \nmore employees, including, but not \nlimited to, an employee association \ndescribed in section 501(c)(4). \nWho does not need to file. Sponsors of \nprograms that use any of the Form 5305 \nseries of model forms should not submit \ntheir programs to the IRS. These model \nforms, issued by the IRS, contain \nlanguage that, if followed, will satisfy the \napplicable statutory requirements. \nWhat to file. File Form 5306 and a copy \nof the trust, custodial account, or annuity \ncontract and all other applicable \ndocuments. If you are requesting an \nopinion letter for an annuity where all the \nInternal Revenue Code requirements are \nset forth in a separate endorsement that \nsupersedes any conflicting language in \nany contract to which it may be \nattached, submit the endorsement and \nnot the contract.\nWhere to file. File Form 5306 at this \naddress.\nInternal Revenue Service \nAttn: EP Opinion Letters \nTE/GE Stop 31A Team 105 \nP.O. Box 12192 \nCovington, KY 41012-0192\nPrivate delivery services (PDSs). PDSs \ncan’t deliver to the address shown \nabove. If you choose to use a PDS, send \nForm 5306 to this address.\nInternal Revenue Service \nAttn: EP Opinion Letters \nTE/GE Stop 31A Team 105 \n7940 Kentucky Drive \nFlorence, KY 41042\nGo to www.irs.gov/PDS for the current \nlist of designated services.\nAddress. Include the suite, room, or \nother unit number after the street \nnumber. If the Post Office does not \ndeliver mail to the street address and \nyou have a P.O. box, show the box \nnumber instead of the street address. \nSignature. An officer who is authorized \nto sign or another person authorized \nunder a power of attorney must sign this \napplication. Send the power of attorney \nwith this application when you file it. \nSpecific Instructions \nUser fee. All applications must be \naccompanied by the appropriate user \nfee. Applications submitted without the \nproper user fee will not be processed \nand will be returned to the applicant. \nTo find the proper user fee, see Rev. \nProc. 2019-4, 2019-1 I.R.B. 146, \navailable at www.irs.gov/\nirb/2019-01_IRB#RP-2019-04, or the \nlatest annual update.\nLine 2c. If you are amending your plan, \nenter the file folder number, letter serial \nnumber, and date from the latest opinion \nletter you received for your plan. \nLine 7c. Identify the endorsement, the \ncontract, or both for which you are \nrequesting an opinion letter.\nPrivacy Act and Paperwork \nReduction Act Notice \nWe ask for the information on this form to \ncarry out the Internal Revenue laws of the \nUnited States. We need it to ensure that \nyou are complying with these laws and to \nallow us to figure and collect the right \namount of tax. This information is needed \nto process your application and to \ndetermine whether your individual \nretirement account or individual \nretirement annuity meets the \nrequirements of section 408(a), 408(b), \n408(c), 408(p), or 408A. You are not \nrequired to apply for approval; however, if \nyou want to receive a ruling from the IRS \nregarding your prototype or employee \nsponsored individual retirement \narrangement, you are required to provide \nthe information requested on this form. \nSection 6109 requires you to provide the \nrequested identification numbers. Failure \nto provide the information may delay or \nprevent processing your application; \nproviding any false information may \nsubject you to penalties.\n You are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records \nrelating to a form or its instructions must \nbe retained as long as their contents \nmay become material in the \nadministration of any Internal Revenue \nlaw. \nGenerally, tax returns and return \ninformation are confidential, as stated in \nsection 6103. However, section 6103 \nallows or requires the Internal Revenue \nService to disclose or give such \ninformation to the Department of Justice \nfor civil and criminal litigation, and to \ncities, states, the District of Columbia, \nand U.S. commonwealths and \npossessions for use in administering \ntheir tax laws. We may also disclose this \ninformation to other countries under a \ntax treaty, to federal and state agencies \nto enforce federal nontax criminal laws, \nor to federal law enforcement and \nintelligence agencies to combat \nterrorism. \nThe time needed to complete and file \nthis form will vary depending on \nindividual circumstances. The estimated \naverage time is: \nRecordkeeping .\n.\n.\n 11 hr., 43 min.\nLearning about the \nlaw or the form .\n.\n.\n.\n.\n. 53 min.\nPreparing and sending \nthe form to the IRS \n.\n.\n 1 hr., 7 min.\nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form \nsimpler, we would be happy to hear from \nyou. You can send us comments from \nwww.irs.gov/FormComments. Or you \ncan write to Internal Revenue Service, \nTax Forms and Publications Division, \n1111 Constitution Ave. NW, IR-6526, \nWashington, DC 20224. Do not send the \nform to this address. Instead, see Where \nto file, earlier.\n"
] |
f5308.pdf
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1119 Form 5308 (PDF)
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https://www.irs.gov/pub/irs-pdf/f5308.pdf
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[
"Form 5308\n(Rev. November 2019)\nDepartment of the Treasury \nInternal Revenue Service \nRequest for Change in Plan/Trust Year\n(Under section 412(d)(1) of the Internal Revenue Code) \n▶ Go to www.irs.gov/Form5308 for the latest information.\nOMB No. 1545-0201\nFile in \nDuplicate\nBefore you complete this form, read the instructions to see if your request for a change in plan/trust year qualifies \nfor automatic approval. \nPlease type or print \nName of employer (or plan administrator if a multiple employer plan or a multiemployer plan) \nNumber, street, and room or suite no. (if a P.O. box, see instructions) \nCity or town, state, and ZIP code \nEmployer identification number \nCheck one or both: \nChange in plan year .\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nChange in trust year .\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\n1 \nEnter amount of user fee submitted ▶\n$ \n2 \nName of plan and/or trust \n3 Plan number (enter each \ndigit in a separate block) ▶\n4 \nPresent plan and/or trust year ends \n5 Permission is requested to change to a plan and/or trust year ending \n6 \nThe above change will require a return for a short period \nbeginning \n, \n, ending \n, \n7 Telephone number \n8 \nDate of latest IRS determination letter (or opinion/advisory letter if the plan is a Master or Prototype/Volume Submitter Plan) \n9 \nIf this change affects the way deductions are taken for the tax year, please explain. \n10 \n \nIf you do not meet all the requirements for automatic approval for change in plan/trust year listed below, indicate the requirements you \ndo not meet by checking the appropriate box(es). Explain on an attached statement why you cannot meet the requirement(s). If you \ncannot comply with item a, your request for approval will not be granted. \na \nAll actions necessary to implement the change of plan \nyear, including plan amendment and a resolution of the \nBoard of Directors, if applicable, have been taken on or \nbefore the last day of the short period. \nb \nNo plan year is longer than 12 months. \nc \nThe requested change will not delay the time when the \nplan would otherwise have been required to conform to \nthe requirements of any statute, regulation, or published \nposition of the IRS. \nd \nThe trust, if any, retains its exempt status for the \nshort period required to effect the change as well as \nfor the tax year immediately preceding the short \nperiod. \ne \nThe trust, if any, has no unrelated business taxable income \nunder section 511 for the short period. \nf \nNo change of plan year has been made for any of the 4 \npreceding plan years. \ng \nDefined benefit plan deductions are taken as described in \nsection 5 of Rev. Proc. 87-27, 1987-1 C.B. 769. \nSign \nHere \nUnder penalties of perjury, I declare that I have examined this application, including any accompanying schedules and statements, and, to the best of my \nknowledge and belief, it is true, correct, and complete. \n▲\nPrint name \n▲\nTitle \n▲\nSignature \nDate \nDo not write in the space below—For IRS Use Only \nApproval Action \nBased solely on the information furnished in this application, the \nrequested change in the plan and/or trust year indicated above is \napproved. \n▲\nEmployee Plans Technical Manager \nDate \nPerson to contact ▶\nPhone ▶\nSymbols ▶\nDisapproval Action \nThis application cannot be approved for the following reason: \nNot timely filed \nOther \n▲\nEmployee Plans Technical Manager \nDate \nPerson to contact ▶\nPhone ▶\nSymbols ▶\nFor Privacy Act and Paperwork Reduction Act Notice, see the instructions.\nCat. No. 11834U \nForm 5308 (Rev. 11-2019) \n",
"Form 5308 (Rev. 11-2019) \nPage 2 \nInstructions \nSection references are to the Internal Revenue Code unless otherwise \nnoted. \nFuture Developments\nFor the latest information about developments related to Form 5308 and \nits instructions, such as legislation enacted after they were published, \ngo to www.irs.gov/Form5308.\nPurpose of Form \nUse this form instead of Form 1128, Application To Adopt, Change, or \nRetain a Tax Year, to request approval to change the plan/trust year of \ncertain employee retirement plans. \nChange in funding methods. Do not file Form 5308 to change your \nplan’s funding method. See Rev. Proc. 2017-56, 2017-44 I.R.B. 465 \n(automatic approval for certain changes in funding method for \nsingle-employer plans that are subject to section 430); Rev. Proc. \n2017-57, 2017-44 I.R.B. 474 (requests for approval of changes in funding \nmethod); and Rev. Proc. 2000-40, 2000-42 I.R.B. 357 (automatic approval \nfor certain changes in funding method for multiemployer plans and CSEC \nplans).\nWho Must File \nExcept as described below, for any employee retirement plan to which the \nminimum funding standards of section 412 apply (such as a defined \nbenefit plan, money purchase pension plan, or target benefit plan), in order \nto change the plan year of the plan, the employer or plan administrator \nmust file Form 5308 to request approval for the change if automatic \napproval for the change does not apply pursuant to Rev. Proc. 87-27.\nAny employees’ trust forming a part of a qualified plan (whether or not \nthe trust is part of a plan subject to section 412) must file Form 5308 to \nrequest approval to change its trust year. \nExceptions. The following plans do not have to file Form 5308 to \nrequest approval to change their plan year.\n• Profit-sharing plans. \n• Stock bonus plans. \n• Insurance contract plans described in section 412(e)(2). \n• Governmental plans described in section 414(d). \n• Church plans described in section 414(e) that have not made the \nelection under section 410(d). \n• Plans that have not, at any time after September 2, 1974, provided for \nemployer contributions. \n• Certain plans established and maintained by fraternal benefit societies, \norders, or associations (see section 412(e)(2)). \n• Certain plans established and maintained by voluntary employee’s \nbeneficiary associations (see section 412(e)(2)). \nAutomatic approval. Instead of filing Form 5308, a plan or trust is \ngranted automatic approval to change its plan/trust year if all the \nfollowing requirements are met.\n• All actions necessary to implement the change of plan year, including \nplan amendment and a resolution of the Board of Directors (if \napplicable), have been taken on or before the short period. \n• No plan year is longer than 12 months. \n• The change will not delay the time when the plan would otherwise \nhave been required to conform to the requirements of any statute, \nregulation, or published position of the IRS. \n• The trust, if any, retains its exempt status for the short period required \nto effect the change as well as for the tax year immediately preceding \nthe short period. \n• The trust, if any, has no unrelated business taxable income under \nsection 511 for the short period. \n• No change of plan year has been made for any of the 4 preceding plan \nyears. \n• Defined benefit plan deductions are taken as described in section 5 of \nRev. Proc. 87-27.\nSee Rev. Proc. 87-27 for more information about changing a plan/\ntrust year. \nAddress \nInclude the suite, room, or other unit number after the street address. If \nthe post office does not deliver mail to the street address and the plan \nhas a P.O. box, show the box number instead of the street address. \nWhen and Where To File \nFile this form in duplicate at this address on or before the last day of the \nend of the short period required to make the change.\nInternal Revenue Service \nAttn: EP Letter Rulings \nTE/GE Stop 31A Team 105 \nP.O. Box 12192 \nCovington, KY 41012-0192\nPrivate delivery services (PDSs). PDSs can’t deliver to the address \nshown above. If you choose to use a PDS, send Form 5308 to this \naddress. \nInternal Revenue Service \nAttn: EP Letter Rulings \n7940 Kentucky Drive \nTE/GE Stop 31A Team 105 \nFlorence, KY 41042 \nGo to www.irs.gov/PDS for the current list of designated services.\nOn each attachment to Form 5308, write “Form 5308” and show the \nplan’s or trust’s name, identifying number, address, and date of filing. \nUser Fee \nAll applications must be accompanied by the appropriate user fee. \nApplications submitted without the proper user fee will not be \nprocessed and will be returned to the applicant. \nTo determine the proper user fee, see Rev. Proc. 2019-4, 2019-1 \nI.R.B. 146, available at www.irs.gov/irb/2019-01_IRB#RP-2019-04, or \nthe latest annual update.\nInformation Requested \nYou must furnish all of the applicable information requested. Otherwise, \nyour request may not be approved. \nSignature \nAn application for a single employer plan must be signed by the \nemployer. An application for a plan of more than one employer must be \nsigned by the plan administrator. \nIf someone else is filing Form 5308 on behalf of a taxpayer, a power of \nattorney must be included specifically authorizing that person to \nrepresent the taxpayer. Form 2848, Power of Attorney and Declaration \nof Representative, may be used for this purpose. \nPrivacy Act and Paperwork Reduction Act Notice \nWe ask for information on this form to carry out the Internal Revenue laws \nof the United States. We need it to ensure you are complying with these \nlaws, to determine whether you meet the requirements for changing the \nplan/trust year, and to process your request. You are not required to \nrequest a change in the plan/trust year; however, if you want to request \nsuch a change, you are required to provide the information requested on \nthis form. Section 6109 requires you to provide the requested \nidentification numbers. Failure to provide this information timely and in \naccordance with instructions, or providing false information, may delay or \nprevent processing your request and may subject you to penalties. \nYou are not required to provide the information requested on a form \nthat is subject to the Paperwork Reduction Act unless the form displays a \nvalid OMB control number. Books or records relating to a form or its \ninstructions must be retained as long as their contents may become \nmaterial in the administration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by section \n6103. However, section 6103 sometimes permits or requires us to \ndisclose information. We may give the information to the Department of \nJustice for civil and criminal litigation, to the Department of Labor for \nadministration of ERISA, and to other federal agencies as provided by \nlaw. We may give it to cities, states, the District of Columbia, and U.S. \ncommonwealths or possessions to administer their tax laws. We may \ngive it to foreign governments under a tax treaty, and to federal and state \nagencies to enforce federal nontax criminal laws and to combat terrorism.\nThe time needed to complete and file this form will vary depending on \nindividual circumstances. The estimated average time is 7 hr., 42 min. \nIf you have comments concerning the accuracy of this time estimate \nor suggestions for making this form simpler, we would be happy to hear \nfrom you. You can send us comments from www.irs.gov/\nFormComments. Or you can write to the Internal Revenue Service, Tax \nForms and Publications Division, 1111 Constitution Ave. NW, IR-6526, \nWashington, DC 20224. Do not send the form to this address. Instead, \nsee When and Where To File above. \n"
] |
f1065sb1.pdf
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0819 Form 1065 (Schedule B-1) (PDF)
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https://www.irs.gov/pub/irs-pdf/f1065sb1.pdf
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[
"SCHEDULE B-1 \n(Form 1065)\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service \nInformation on Partners Owning 50% or \nMore of the Partnership\n▶ Attach to Form 1065. \n▶ Go to www.irs.gov/Form1065 for the latest information.\nOMB No. 1545-0123\nName of partnership\nEmployer identification number (EIN)\nPart I\nEntities Owning 50% or More of the Partnership (Form 1065, Schedule B, Question 2a (Question 3a for \n2009 through 2017))\nComplete columns (i) through (v) below for any foreign or domestic corporation, partnership (including any entity treated as a \npartnership), trust, tax-exempt organization, or any foreign government that owns, directly or indirectly, an interest of 50% or more in \nthe profit, loss, or capital of the partnership (see instructions).\n(i) Name of Entity\n(ii) Employer \nIdentification Number \n(if any)\n(iii) Type of Entity\n(iv) \nCountry of Organization\n(v) Maximum \nPercentage Owned \n in Profit, Loss, \n or Capital\nPart II\nIndividuals or Estates Owning 50% or More of the Partnership (Form 1065, Schedule B, Question 2b \n(Question 3b for 2009 through 2017))\nComplete columns (i) through (iv) below for any individual or estate that owns, directly or indirectly, an interest of 50% or more in the \nprofit, loss, or capital of the partnership (see instructions).\n(i) Name of Individual or Estate\n(ii) Identifying Number \n(if any)\n(iii) Country of Citizenship (see instructions)\n(iv) Maximum \nPercentage Owned in \nProfit, Loss, \nor Capital\nFor Paperwork Reduction Act Notice, see the Instructions for Form 1065.\nCat. No. 49842K\nSchedule B-1 (Form 1065) (Rev. 8-2019)\n",
"Schedule B-1 (Form 1065) (Rev. 8-2019)\nPage 2\nGeneral Instructions\nSection references are to the Internal Revenue Code unless \notherwise noted.\nFuture Developments\nFor the latest information about developments related to \nSchedule B-1 (Form 1065) and its instructions, such as \nlegislation enacted after the form and instructions were \npublished, go to www.irs.gov/Form1065.\nPurpose of Form\nUse Schedule B-1 (Form 1065) to provide the information \napplicable to certain entities, individuals, and estates that own, \ndirectly or indirectly, an interest of 50% or more in the profit, \nloss, or capital of the partnership.\nWho Must File\nSchedule B-1 (Form 1065) must be filed by all partnerships that \nanswer “Yes” to question 2a or question 2b (question 3a or \nquestion 3b for 2009 through 2017) on Form 1065, Schedule B. \nAttach Schedule B-1 to Form 1065.\nSpecific Instructions\nPart I\nComplete Part I if the partnership answered “Yes” to Form \n1065, Schedule B, question 2a (question 3a for 2009 through \n2017). List each corporation, partnership, trust, tax-exempt \norganization, or foreign government owning, directly or \nindirectly, an interest of 50% or more in the profit, loss, or \ncapital of the partnership at the end of the tax year. Enter the \nname, EIN, type of entity (corporation, partnership, trust, tax-\nexempt organization, or foreign government), country of \norganization, and the maximum percentage interests owned, \ndirectly or indirectly, in the profit, loss, or capital of the \npartnership. For an affiliated group filing a consolidated tax \nreturn, list the parent corporation rather than the subsidiary \nmembers. List the entity owner of a disregarded entity rather \nthan the disregarded entity. If the owner of a disregarded entity \nis an individual rather than an entity, list the individual in Part II. \nIn the case of a tax-exempt organization, enter “tax-exempt \norganization” in column (iii).\nExample 1. Corporation A owns, directly, an interest of 50% \nin the profit, loss, or capital of Partnership B. Corporation A \nalso owns, directly, an interest of 15% in the profit, loss, or \ncapital of Partnership C. Partnership B owns, directly, an \ninterest of 70% in the profit, loss, or capital of Partnership C. \nTherefore, Corporation A owns, directly or indirectly, an \ninterest of 50% in the profit, loss, or capital of Partnership C \n(15% directly and 35% indirectly through Partnership B). On \nPartnership C’s Form 1065, it must answer “Yes” to question \n2a (question 3a for 2009 through 2017) of Schedule B. \nPartnership C must also complete Part I of Schedule B-1. In \nPart I, Partnership C must identify Corporation A, which includes \nentering “50%” in column (v) (its maximum percentage owned). \nIt also must identify Partnership B, and enter “70%” in column \n(v).\nPart II\nComplete Part II if the partnership answered “Yes” to Form \n1065, Schedule B, question 2b (question 3b for 2009 through \n2017). List each individual or estate owning, directly or \nindirectly, an interest of 50% or more in the profit, loss, or \ncapital of the partnership at the end of the tax year. Enter the \nname, social security or employer identification number, country \nof citizenship (for an estate, the citizenship of the decedent), \nand the maximum percentage interests owned, directly or \nindirectly, in the profit, loss, or capital of the partnership.\nExample 2. A owns, directly, 50% of the profit, loss, or capital \nof Partnership X. B, the daughter of A, does not own, directly, \nany interest in X and does not own, indirectly, any interest in X \nthrough any entity (corporation, partnership, trust, or estate). \nBecause family attribution rules apply only when an individual \n(in this example, B) owns a direct interest in the partnership or \nan indirect interest through another entity, A’s interest in \nPartnership X is not attributable to B. On Partnership X’s Form \n1065, it must answer “Yes” to question 2b (question 3b for 2009 \nthrough 2017) of Schedule B. Partnership X must also complete \nPart II of Schedule B-1. In Part II, Partnership X must identify A, \nwhich includes entering “50%” in column (iv). Partnership X will \nnot identify B in Part II.\n"
] |
f8805.pdf
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1119 Form 8805 (PDF)
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https://www.irs.gov/pub/irs-pdf/f8805.pdf
|
[
"Form 8805\n(Rev. November 2019)\nForeign Partner’s Information Statement \nof Section 1446 Withholding Tax\nDepartment of the Treasury \nInternal Revenue Service \nCopy A \nFor Internal Revenue Service\nAttach to Form 8804.\n▶ Go to www.irs.gov/Form8805 for instructions and the latest information.\nOMB No. 1545-0123\nFor partnership’s calendar year \n, or tax year beginning\n, 20\n, and ending\n, 20\n1a Foreign partner’s name\nb U.S. identifying number\nc Address (if a foreign address, see instructions)\n2 Account number assigned by partnership (if any)\n3 Type of partner (specify—see instructions) ▶\n4 Country code of partner (enter two-letter code—see instructions)\n5a Name of partnership\nb U.S. Employer \nIdentification Number (EIN)\nc Address (if a foreign address, see instructions)\n6 Withholding agent’s name. If partnership is also the withholding agent, \nenter “SAME” and do not complete line 7.\n7 Withholding agent’s U.S. EIN\n8a\nCheck if the partnership identified on line 5a owns an interest in one or more partnerships \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nb\nCheck if any of the partnership’s effectively connected taxable income (ECTI) is exempt from U.S. tax for the partner identified on line 1a ▶\n9\nPartnership’s ECTI allocable to partner for the tax year (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nTotal tax credit allowed to partner under section 1446 (see instructions). Individual and corporate partners: \nClaim this amount as a credit against your U.S. income tax on Form 1040-NR, Form 1120-F, etc. .\n.\n.\n.\n10\nSchedule T—Beneficiary Information (see instructions)\n11a Name of beneficiary\nb U.S. identifying number of beneficiary\nc Address (if a foreign address, see instructions)\n12\nAmount of ECTI on line 9 to be included in the beneficiary’s gross income (see instructions) .\n.\n.\n.\n.\n12\n13\nAmount of tax credit on line 10 that the beneficiary is entitled to claim on its return (see instructions) \n.\n.\n13\nFor Paperwork Reduction Act Notice, see separate Instructions for Forms 8804, 8805, and 8813.\nCat. No. 10078E\nForm 8805 (Rev. 11-2019)\n",
"Form 8805\n(Rev. November 2019)\nForeign Partner’s Information Statement \nof Section 1446 Withholding Tax\nDepartment of the Treasury \nInternal Revenue Service \nCopy B \nFor Partner \nKeep for your records.\n▶ Go to www.irs.gov/Form8805 for instructions and the latest information.\nOMB No. 1545-0123\nFor partnership’s calendar year \n, or tax year beginning\n, 20\n, and ending\n, 20\n1a Foreign partner’s name\nb U.S. identifying number\nc Address (if a foreign address, see instructions)\n2 Account number assigned by partnership (if any)\n3 Type of partner (specify—see instructions) ▶\n4 Country code of partner (enter two-letter code—see instructions)\n5a Name of partnership\nb U.S. Employer \nIdentification Number (EIN)\nc Address (if a foreign address, see instructions)\n6 Withholding agent’s name. If partnership is also the withholding agent, \nenter “SAME” and do not complete line 7.\n7 Withholding agent’s U.S. EIN\n8a\nCheck if the partnership identified on line 5a owns an interest in one or more partnerships \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nb\nCheck if any of the partnership’s effectively connected taxable income (ECTI) is exempt from U.S. tax for the partner identified on line 1a ▶\n9\nPartnership’s ECTI allocable to partner for the tax year (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nTotal tax credit allowed to partner under section 1446 (see instructions). Individual and corporate partners: \nClaim this amount as a credit against your U.S. income tax on Form 1040-NR, Form 1120-F, etc. .\n.\n.\n.\n10\nSchedule T—Beneficiary Information (see instructions)\n11a Name of beneficiary\nb U.S. identifying number of beneficiary\nc Address (if a foreign address, see instructions)\n12\nAmount of ECTI on line 9 to be included in the beneficiary’s gross income (see instructions) .\n.\n.\n.\n.\n12\n13\nAmount of tax credit on line 10 that the beneficiary is entitled to claim on its return (see instructions) \n.\n.\n13\nForm 8805 (Rev. 11-2019)\n",
"Form 8805\n(Rev. November 2019)\nForeign Partner’s Information Statement \nof Section 1446 Withholding Tax\nDepartment of the Treasury \nInternal Revenue Service \nCopy C \nFor Partner \nAttach to your federal \ntax return.\n▶ Go to www.irs.gov/Form8805 for instructions and the latest information.\nOMB No. 1545-0123\nFor partnership’s calendar year \n, or tax year beginning\n, 20\n, and ending\n, 20\n1a Foreign partner’s name\nb U.S. identifying number\nc Address (if a foreign address, see instructions)\n2 Account number assigned by partnership (if any)\n3 Type of partner (specify—see instructions) ▶\n4 Country code of partner (enter two-letter code—see instructions)\n5a Name of partnership\nb U.S. Employer \nIdentification Number (EIN)\nc Address (if a foreign address, see instructions)\n6 Withholding agent’s name. If partnership is also the withholding agent, \nenter “SAME” and do not complete line 7.\n7 Withholding agent’s U.S. EIN\n8a\nCheck if the partnership identified on line 5a owns an interest in one or more partnerships \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nb\nCheck if any of the partnership’s effectively connected taxable income (ECTI) is exempt from U.S. tax for the partner identified on line 1a ▶\n9\nPartnership’s ECTI allocable to partner for the tax year (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nTotal tax credit allowed to partner under section 1446 (see instructions). Individual and corporate partners: \nClaim this amount as a credit against your U.S. income tax on Form 1040-NR, Form 1120-F, etc. .\n.\n.\n.\n10\nSchedule T—Beneficiary Information (see instructions)\n11a Name of beneficiary\nb U.S. identifying number of beneficiary\nc Address (if a foreign address, see instructions)\n12\nAmount of ECTI on line 9 to be included in the beneficiary’s gross income (see instructions) .\n.\n.\n.\n.\n12\n13\nAmount of tax credit on line 10 that the beneficiary is entitled to claim on its return (see instructions) \n.\n.\n13\nForm 8805 (Rev. 11-2019)\n",
"Form 8805\n(Rev. November 2019)\nForeign Partner’s Information Statement \nof Section 1446 Withholding Tax\nDepartment of the Treasury \nInternal Revenue Service \nCopy D \nFor Withholding Agent\n▶ Go to www.irs.gov/Form8805 for instructions and the latest information.\nOMB No. 1545-0123\nFor partnership’s calendar year \n, or tax year beginning\n, 20\n, and ending\n, 20\n1a Foreign partner’s name\nb U.S. identifying number\nc Address (if a foreign address, see instructions)\n2 Account number assigned by partnership (if any)\n3 Type of partner (specify—see instructions) ▶\n4 Country code of partner (enter two-letter code—see instructions)\n5a Name of partnership\nb U.S. Employer \nIdentification Number (EIN)\nc Address (if a foreign address, see instructions)\n6 Withholding agent’s name. If partnership is also the withholding agent, \nenter “SAME” and do not complete line 7.\n7 Withholding agent’s U.S. EIN\n8a\nCheck if the partnership identified on line 5a owns an interest in one or more partnerships \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nb\nCheck if any of the partnership’s effectively connected taxable income (ECTI) is exempt from U.S. tax for the partner identified on line 1a ▶\n9\nPartnership’s ECTI allocable to partner for the tax year (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nTotal tax credit allowed to partner under section 1446 (see instructions). Individual and corporate partners: \nClaim this amount as a credit against your U.S. income tax on Form 1040-NR, Form 1120-F, etc. .\n.\n.\n.\n10\nSchedule T—Beneficiary Information (see instructions)\n11a Name of beneficiary\nb U.S. identifying number of beneficiary\nc Address (if a foreign address, see instructions)\n12\nAmount of ECTI on line 9 to be included in the beneficiary’s gross income (see instructions) .\n.\n.\n.\n.\n12\n13\nAmount of tax credit on line 10 that the beneficiary is entitled to claim on its return (see instructions) \n.\n.\n13\nForm 8805 (Rev. 11-2019)\n"
] |
i1099q.pdf
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1119 Inst 1099-Q (PDF)
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https://www.irs.gov/pub/irs-pdf/i1099q.pdf
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[
"Instructions for\nForm 1099-Q\n(Rev. November 2019)\nPayments From Qualified Education Programs (Under Sections 529 and 530)\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code unless \notherwise noted.\nFuture Developments\nFor the latest information about developments related to \nForm 1099-Q and its instructions, such as legislation enacted \nafter they were published, go to IRS.gov/Form1099Q.\nReminders\nIn addition to these specific instructions, you should also use \nthe current General Instructions for Certain Information \nReturns. Those general instructions include information \nabout the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the General Instructions for Certain \nInformation Returns at IRS.gov/1099GeneralInstructions, or \ngo to IRS.gov/Form1099Q.\nContinuous-use form and instructions. Form 1099-Q and \nthese instructions have been converted from an annual \nrevision to continuous use. Both the form and instructions will \nbe updated as needed. For the most recent version, go to \nIRS.gov/Form1099Q.\nOnline fillable form. Due to the very low volume of paper \nForms 1099-Q received and processed by the IRS each \nyear, this form has been converted to an online fillable \nformat. You may fill out the form, found online at IRS.gov/\nForm1099Q, and send Copy B to the recipient. For filing with \nthe IRS, follow the applicable procedures if you are required \nto file electronically, or, for this form only, if you are \nqualified to file on paper, send in the black‐and‐white Copy A \nwith Form 1096 that you print from the IRS website.\nSpecific Instructions \nFile Form 1099-Q, Payments From Qualified Education \nPrograms (Under Sections 529 and 530), if you (a) are an \nofficer or an employee, or the designee of an officer or \nemployee, having control of a program established by a state \nor eligible educational institution; and (b) made a distribution \nfrom a qualified tuition program (QTP). A trustee of a \nCoverdell education savings account (ESA) must file Form \n1099-Q to report distributions made from Coverdell ESAs.\nDo not file Form 1099-Q for a change in the name of the \ndesignated beneficiary on a QTP account if the new \nbeneficiary is a member of the former beneficiary's family. \nFor a Coverdell ESA, the new beneficiary must be a member \nof the designated beneficiary's family and be under age 30 \n(except beneficiaries with special needs).\nFamily members of the designated beneficiary include the \nbeneficiary's spouse. Also included are the beneficiary's \nchildren, stepchildren, foster children, and their descendants; \nsiblings and their children; parents, their siblings, and \nancestors; stepparents; in-laws; the spouse of any of the \nforegoing; and any first cousin of the designated beneficiary.\nStatements to Recipients\nIf you are required to file Form 1099-Q, you also must furnish \na statement to the recipient. Furnish a copy of Form 1099-Q \nor an acceptable substitute statement to each recipient. See \npart M in the current General Instructions for Certain \nInformation Returns.\nTruncating recipient’s TIN on payee statements. \nPursuant to Regulations section 301.6109-4, all filers of this \nform may truncate a recipient’s TIN (social security number \n(SSN), individual taxpayer identification number (ITIN), \nadoption taxpayer identification number (ATIN), or employer \nidentification number (EIN)) on payee statements. Truncation \nis not allowed on any documents the filer files with the IRS. A \npayer’s/trustee's TIN may not be truncated on any form. See \npart J in the current General Instructions for Certain \nInformation Returns.\nPayer's Name and TIN\nQTP. For the payer's/trustee's name and TIN, enter the \nname and EIN of the QTP. For a program established and \nmaintained by a state that uses the EIN of the state, enter the \nname of the state on the first name line and the name of the \nprogram on the second name line.\nCoverdell ESA. Enter the name and EIN of the trustee.\nRecipient's Name and TIN\nQTP. List the designated beneficiary as the recipient only if \nthe distribution is made (a) directly to the designated \nbeneficiary, or (b) to an eligible educational institution for the \nbenefit of the designated beneficiary. Otherwise, list the \naccount owner as the recipient of the distribution. Enter the \nTIN for the applicable recipient.\nCoverdell ESA. Enter the name and TIN of the designated \nbeneficiary as the recipient.\nAccount Number\nThe account number is required if you have multiple \naccounts for a recipient for whom you are filing more than \none Form 1099-Q. Additionally, the IRS encourages you to \ndesignate an account number for all Forms 1099-Q that you \nfile. See part L in the current General Instructions for Certain \nInformation Returns.\nBox 1. Gross Distribution\nGross distributions from a QTP, whether in cash or in-kind, \ninclude amounts for tuition credits or certificates, payment \nvouchers, tuition waivers, or other similar items. Gross \nNov 07, 2019\nCat. No. 32260M\n",
"distributions also include a refund to the account owner or \nthe designated beneficiary, or to the beneficiary upon death \nor disability. For more information on reporting distributions, \nsee Proposed Regulations section 1.529-4.\nGross distributions from a Coverdell ESA include amounts \nfor a refund, a payment upon death or disability, or a \nwithdrawal of excess contributions plus earnings.\nIf earnings and basis are not reported for Coverdell \nESA distributions, leave boxes 2 and 3 blank. Do not \nenter zero. Instead, you must report the fair market \nvalue (FMV) as of the end of the year in the blank box below \nboxes 5 and 6. Label the amount “FMV.” See Notice \n2003-53, 2003-33 I.R.B. 362, available at IRS.gov/irb/\n2003-33_IRB#NOT-2003-53, for more reporting \nrequirements.\nBox 2. Earnings\nTo determine the earnings or (loss) on the gross distribution \nreported in box 1, use the earnings ratio described in \nProposed Regulations section 1.529-3, Notice 2001-81, and \nNotice 2016-13. You can find Notice 2001-81 on page 617 of \nInternal Revenue Bulletin 2001-52 at IRS.gov/pub/irs-irbs/\nirb01-52.pdf and Notice 2016-13 at IRS.gov/irb/\n2016-07_IRB#NOT-2016-13.\nEnter the earnings in box 2. If there is a loss and this is not \nthe final year for distributions from the account or there are \nno earnings, enter zero in box 2. Enter a loss in box 2 only if \nthis is the final year for distributions from the account. \nEarnings are not subject to backup withholding.\nIf you are reporting a distribution from a Coverdell ESA \nthat includes a returned contribution plus earnings, you \nshould file two Forms 1099-Q, one to report the returned \ncontribution plus earnings, the other to report the distribution \nof the other part of the account.\nYou should file a separate Form 1099-Q for any \ntrustee-to-trustee transfer.\nFor Coverdell ESAs, if you are not reporting earnings, see \nthe Caution above.\nFor Coverdell ESAs, if you are reporting earnings on \na distribution of excess contributions, use the method \nunder Regulations section 1.408-11 for figuring the \nnet income attributable to IRA contributions that are \ndistributed as a returned contribution.\nIf the amount in box 2 includes earnings on excess \ncontributions, enter distribution code 2 or 3 (as applicable) in \nthe box below boxes 5 and 6 (below the shading). See \nNotice 2003-53 for more information.\nBox 3. Basis\nFor QTPs and Coverdell ESAs, if you can determine basis, \nenter in box 3 the basis included in the gross distribution \nreported in box 1. The amount in box 3 must equal box 1 \nminus box 2.\nFor determining basis of a Coverdell ESA, you may \nrely on Notice 2001-81.\nBox 4. Trustee-to-Trustee Transfer Checkbox\nCheck this box if the distribution was made directly \n(trustee-to-trustee transfer) from one QTP to another, or from \nCAUTION\n!\nTIP\nTIP\na QTP to an ABLE account. For a Coverdell ESA, check this \nbox if the distribution was made directly to another Coverdell \nESA or to a QTP.\nIn a trustee-to-trustee transfer between qualified \neducation programs, the distributing program must provide \nyou with a statement reporting the earnings portion of the \ndistribution within 30 days of the distribution or by January \n10, whichever is earlier. You must properly account for this in \nfiguring the earnings or (loss) reported in box 2 and the basis \nreported in box 3.\nIf you do not have records showing that a gross \ndistribution from a Coverdell ESA made in the current \nyear was a trustee-to-trustee transfer, leave box 4 \nblank.\nBox 5. Checkbox\nCheck the “Private” box if the distribution is from a QTP \nestablished by one or more private eligible educational \ninstitutions, or check the “State” box if the distribution is from \na QTP established by a state. Otherwise, check the \n“Coverdell ESA” box.\nBox 6. Designated Beneficiary Checkbox\nCheck the box if the recipient is not the designated \nbeneficiary under a QTP or a Coverdell ESA (see section \n529(e)(1)).\nDistribution Codes\nFor the current year, you may, but are not required to, include \none of the following distribution codes in the blank box below \nboxes 5 and 6. You may abbreviate as needed. For example, \nfor distribution code 1, you may enter “distr. code 1.”\nDistribution Code\nUse this code for...\n1–Distributions\nDistributions (including transfers) to \nthe recipient and any direct \npayments to a qualified educational \nfacility. However, use code 2 or 3 \nfor withdrawals of excess \ncontributions.\n2–Excess contributions plus \nearnings taxable in current year\nWithdrawals of excess Coverdell \nESA contributions and earnings \nunless code 3 applies.\n3–Excess contributions plus \nearnings taxable in prior year\nWithdrawals of excess \ncontributions from a Coverdell ESA. \nAdvise payees, at the time the \ndistribution is made, that the \nearnings are taxable in the year in \nwhich the excess contributions \nwere made. \n4–Disability\nDistributions you made after the \nrecipient was disabled (see section \n72(m)(7)).\n5–Death\nPayments to a decedent's \nbeneficiary, including an estate.\n6–Prohibited transaction\nProhibited transactions. See \nsections 408(e)(2) and 408(e)(4) for \nsimilar rules that apply to a \nCoverdell ESA.\nTIP\n-2-\nInstructions for Form 1099-Q (Rev. 11-2019)\n"
] |
p5366.pdf
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1019 Publ 5366 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5366.pdf
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[
" \n \n \n \n \n \nOctober is National Work and Family Month \nEmployers May \nClaim Credit \nFor Providing \nPaid Family & \nMedical Leave \nWritten Policy \nTo claim the credit, eligible \nemployers must have a written \npolicy with certain requirements, \nincluding at least 2 weeks \nof paid leave to full-time \nemployees. The paid leave \nmust be at least 50% of the \nemployee’s normal wages. \nQualifying Employees \nA qualifying employee is any \nemployee under the Fair Labor \nStandards Act who: \n• has been employed by the \nemployer for one year or more \n• had compensation not more \nthan a certain amount for the \npreceding year \nForm for Employers \nThe credit is generally effective \nfor wages the employer paid in \ntaxable years beginning after \nDec. 31, 2017\n, and before \nJan. 1, 2020. Eligible employers \nuse Form 8994, Credit for Paid \nFamily and Medical Leave, to \nfigure the credit. \nPublication 5327\n, New tax credit for employers who provide paid \nfamily and medical leave, also available in Spanish, on IRS.gov \nprovides more information. \nFind us on the \nfollowing: \nIRS.gov \nPublication 5366 (10-2019) Catalog Number 73352H Department of the Treasury Internal Revenue Service www.irs.gov \n"
] |
p5366sp.pdf
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1019 Publ 5366 (SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/p5366sp.pdf
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[
" \n \n \n \nOctubre es el Mes Nacional del Trabajo y la Familia \nLOS EMPLEADORES \nPUEDEN RECLAMAR \nCRÉDITO POR \nPROVEER LICENCIA \nFAMILIAR Y MÉDICA \nPAGADA \nPolítica Escrita \nPara reclamar el crédito, los \nempleadores elegibles deben \ntener una política escrita con \nciertos requisitos que incluyen al \nmenos dos semanas de licencia \npagada para empleados a tiempo \ncompleto. La licencia pagada \ndebe ser al menos el 50% del \nsalario normal del empleado. \nEmpleados Calificados \nUn empleado calificado es cualquier \nempleado bajo la Ley de Normas \nLaborales Justas que: \n• ha estado empleado por el \nempleador por un año o más \n• recibió compensación que no \nsobrepasa una cierta cantidad \npara el año anterior \nFormulario para \nEmpleadores \nGeneralmente, el crédito es efectivo \npara los salarios que el empleador \npagó en los años tributarios a \npartir del 31 de diciembre de 2017 \ny antes del 1° de enero de 2020. \nLos empleadores elegibles usan el \nFormulario 8994, Crédito por Licencia \nFamiliar y Médica Pagada (en inglés), \npara calcular el crédito. \nLa Publicación 5327 (SP), Nuevo crédito tributario para los \nempleadores que proporcionan licencia familiar y médica \npagada, en IRS.gov, provee más información. \nEncuéntrenos en \nlos siguiente: \nIRS.gov/ \nespanol \nPublication 5366 (SP) (10-2019) Catalog Number 73363O Department of the Treasury Internal Revenue Service www.irs.gov \n"
] |
p3908.pdf
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0919 Publ 3908 (PDF)
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https://www.irs.gov/pub/irs-pdf/p3908.pdf
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[
"Gaming Tax Law and \nBank Secrecy Act Issues\nfor Indian Tribal Governments \nPublication 3908 (Rev. 9-2019) Catalog Number 32755Y Department of the Treasury Internal Revenue Service www.irs.gov\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION \nI OVERVIEW\nFederal Law and Regulations \n.....................................................................................................1\nIndian Gaming Regulatory Act (IGRA)\nBank Secrecy Act (BSA), Title 31 of the Code of Federal Regulations \nSection 352 of the USA PATRIOT Act of 2001\nFederal Agency Partners \n............................................................................................................2\nDepartment of the Interior/Bureau of Indian Affairs\nNational Indian Gaming Commission (NIGC) \nFinancial Crimes Enforcement Network (FinCEN) \nOffice of Foreign Assets Control (OFAC)\nDetermining Federal Tax Status of Indian Tribal Governments ..................................................3\nSECTION II RECORDKEEPING AND REPORTING\nThe Tribe’s Legal Responsibilities ..............................................................................................4\nBank Secrecy Act \n.......................................................................................................................4\nCasino Definition \nRecordkeeping Requirements\nAnti-Money Laundering Compliance Programs (AML)\nSuspicious Transactions\nStructuring\nCurrency Transaction Reporting\nDomestic and Foreign Vendors\nSECTION III DISTRIBUTIONS FROM GAMING REVENUE\nPer Capita Payments \n................................................................................................................10\nGuidelines for Per Capita Distribution Plans ............................................................................10\nGaming Distributions to Minors \n................................................................................................10\nWithholding Requirements of Distributions from Net Gaming Revenue ..................................11\nSECTION IV EMPLOYMENT TAX = PAYROLL TAX\nEmployment Tax .......................................................................................................................................12\nReporting Tip Income \n...............................................................................................................13\nTip Rate Determination/Education Program (TRD/EP) \n............................................................14\nIndependent Contractor vs. Employee ....................................................................................14\nHow to Make Federal Tax Payments \n........................................................................................15\nEmployment Tax Penalties .......................................................................................................17\nCONTENTS\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION V TAX ON WAGERING\nDefinitions \n.........................................................................................................................................18\nWagering Excise Tax \n................................................................................................................................18\nOccupational Tax \n......................................................................................................................................19\nSECTION VI FILING REQUIREMENTS\nSummary Filing Requirements for Tribal Gaming Operations \n....................................................21\nIRS Tax Forms to File for \nGaming Activities .......................................................................22\nReporting and Withholding Gaming Winnings \n...................................................................23\nVerifying Residency \n..................................................................................................................28\nFIRE \n..........................................................................................................................................29\nGaming Withholding and Reporting Threshold — Forms Needed \n............................................30\nGaming Guidelines When to Withhold and Report Gaming Wins ..................................................31\nSECTION VII RESOURCES AND ASSISTANCE\nTax Information Materials .........................................................................................................32\nReporting Abuses/Schemes \n.....................................................................................................32\nCustomer Service Assistance ..................................................................................................32\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION I OVERVIEW\nAll tribal governments conducting or sponsoring gaming activities must understand and comply with federal \nrequirements on income tax reporting, employment tax and excise tax. The requirements apply to gaming \nactivities whether they take place one time or throughout the year, and whether in their primary place of \noperation or at remote sites. \nThe Indian Gaming Regulatory Act divides gaming activities into three classes:\n• Class I consists of social games that have prizes of minimal value and traditional tribal games played in \nconnection with tribal ceremonies or celebrations.\n• Class II primarily includes bingo (whether or not it is electronically enhanced), pull-tabs, lotto, punch \nboards, tip jars, instant bingo, games similar to bingo and non-banking card games allowed by state law.\n• Class III gaming includes all gaming that is not Class I or Class II gaming, primarily slot machines, casino \ngames, banking card games, dog racing, horse racing and lotteries.\nThis Internal Revenue Service (IRS) publication provides you with the tax law on gaming operations for these \nactivities. You’ll learn about recordkeeping, employment tax, tax on wagering, per capita distributions, forms \nto file and more. You can download or order all IRS forms and publications mentioned in this publication at \nwww.irs.gov/forms-pubs.\nVisit www.irs.gov/tribes for information for Indian Tribal Governments (ITG). For more information on gaming \ntax law, you can contact your ITG specialist or the ITG group manager in your area (see Section VII). For \nCustomer Account Services, call 877-829-5500.\nFederal Law and Regulations\nIndian Gaming Regulatory Act (IGRA)\nSince IGRA’s passage in 1988, tribes and states have successfully negotiated hundreds of Tribal-state gaming \ncompacts. Gaming provides significant revenues for many Indian tribes.\nHighlights of IGRA include:\n• Provides a statutory basis for the regulation of Indian gaming to ensure that tribes are the primary \nbeneficiaries\n• Establishes federal standards for Indian gaming\n• Shields gaming from organized crime and other corrupting influences\n• Ensures that the operators and players conduct gaming fairly and honestly\n• Provides a statutory basis for the operation of gaming by Indian tribes to promote tribal economic \ndevelopment, self-sufficiency and strong tribal governments\n• Establishes the National Indian Gaming Commission (NIGC)\nú Independent federal regulatory authority for Indian gaming\nú Meets congressional concerns about Indian gaming and protects gaming as a means of generating \ntribal revenue\n1\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nBank Secrecy Act (BSA), Title 31 of the Code of Federal Regulations\nCasinos are cash intensive businesses that can offer a broad array of financial services, such as: \n• Deposit or credit accounts \n• Facilities for transmitting and receiving funds transfers directly from other institutions\n• Check cashing and currency exchange services\nSince these services are similar to those provided by depository institutions and other financial firms, casinos \nare vulnerable to abuse by money launderers and tax evaders.\nHighlights of the BSA include:\n• Provides rules and regulations on reporting currency transactions greater than $10,000\n• Provides rules and regulations on identification and recordkeeping requirements\n• Creates an audit trail to help minimize illegal financial transactions\n• Covers casinos with gross annual gaming revenue exceeding $1,000,000\n• Extends coverage to Indian casino operations in August 1996 and card clubs in August 1998\nSection 352 of the USA PATRIOT Act of 2001\nSection 352 of the USA PATRIOT Act of 2001 requires financial institutions to establish anti-money laundering \nprograms. Casinos and card clubs comply with this requirement if they implement and maintain adequate \nprograms for compliance with the Bank Secrecy Act. See the United States Code, Title 31, Section 5318(h).\nFederal Agency Partners\nDepartment of the Interior/Bureau of Indian Affairs\nThrough its relationships with the Bureau of Indian Affairs and the National Indian Gaming Commission, the \nDepartment of the Interior has approval responsibility for various reservation and tribal issues. This includes \noverseeing revenue allocation plans associated with Indian gaming. The Bureau of Indian Affairs provides \nservices directly or through contracts, grants or compacts to the federally recognized tribes with a service \npopulation of about 1.9 million American Indian and Alaska Natives.\nNational Indian Gaming Commission (NIGC)\nThe NIGC oversees Indian gaming. Its primary mission is to regulate gaming activities conducted by tribes on \nIndian lands.\nNIGC’s goals are:\n• Promoting tribal economic development, self-sufficiency and strong tribal governments;\n• Maintaining the integrity of the Indian gaming industry; and\n• Ensuring that tribes are the primary beneficiaries of their gaming activities.\nFinancial Crimes Enforcement Network (FinCEN)\nThe U.S. Department of the Treasury established the Financial Crimes Enforcement Network to provide a \ngovernment-wide multisource financial intelligence and analysis network. The organization’s operation was \nbroadened in 1994 to include regulatory responsibilities for administering the Bank Secrecy Act.\n2\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nOffice of Foreign Assets Control (OFAC)\nThe Office of Foreign Assets Control of the U.S. Department of the Treasury administers and enforces \neconomic and trade sanctions against targeted foreign countries and regimes, terrorists, international \nnarcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, \nand other threats to the national security, foreign policy or economy of the United States.\nDetermining Federal Tax Status of Indian Tribal Governments\nWhile the NIGC is responsible for overseeing Indian gaming, the IRS is responsible for federal taxation issues \non gaming. The IRS is also responsible for any other federal tax issues involving Indian tribal governments. \nDue to gaming compacts negotiated between the tribes and states, other types of regulations exist that \ninvolve state oversight. Ultimately, the IRS interprets federal tax law on tribal entities and enterprises.\nEven though Indian tribes are not subject to federal income tax, an individual tribal member not exempt from \nincome taxation must report gross income amounts distributed or constructively received.1 In tribal gaming, \nstructure and ownership of a gaming operation has a significant impact on the taxability of the income.\nExample 1: A tribe may operate unincorporated businesses in or away from Indian country. The income \nderived is not subject to federal income tax. If the tribe decides to incorporate its business, income may be \nsubjected to tax based on how the corporation is formed.\nExample 2: A tribe may incorporate under the Indian Reorganization Act of 1934. This type of corporation \nisn’t subject to income tax regardless of where the business is located. An approval article or certificate \nsigned by the Secretary of the Interior is evidence of incorporation under the Indian Reorganization Act.\nExample 3: An Indian tribe located in Oklahoma is not eligible to incorporate under the Indian Reorganization \nAct. Instead, an Oklahoma tribe may incorporate under the Oklahoma Indian Welfare Act. This type of \ncorporation is not subject to income tax regardless of where the business is located. An approval article or \ncertification signed by the Secretary of the Interior is evidence of incorporation under the Oklahoma Indian \nWelfare Act.\nExample 4: An Indian tribe may also form a corporation under state law. This type of corporation is ordinarily \nsubject to federal income tax on income earned on or after October 1, 1994, regardless of where the business \nis located. Because the state charter creates an entity separate and distinct from the tribe, the federal income \ntax applies to this new entity. A state issued certification of incorporation is evidence of incorporation under \nstate law.\n3\n \n1Constructively received means you are generally taxed on income that is available to you, regardless of whether it is actually in your \npossession.\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION II RECORDKEEPING AND REPORTING\nThe Tribe’s Legal Responsibilities\nTribal governments that conduct gaming operations deal with large numbers of individuals and currency. \nTribal gaming operations should actively oversee and control all the gaming activities to ensure that they \ndon’t divert funds to private individuals or for private purposes. The IGRA provides the framework to handle \nnecessary recordkeeping when a tribe is involved in Class II or Class III gaming and annual gross gaming \nrevenue is greater than $1 million. Note: Class I gaming on Indian land is not subject to IGRA provisions.\nA wholly-owned tribal gaming operation must follow NIGC’s regulations outlined in the Minimum Internal \nControl Standards (MICS) for Indian gaming. MICS apply to all tribal gaming operations regardless of whether \nthe tribe has hired a management company to run gaming operations or is directly overseeing gaming \noperations. Most tribal gaming operations are formed through tribal-state gaming compacts. The compacts \nalso contain MICS. These standards apply if they are more stringent than the MICS.\nThe NIGC regulations cover the internal controls needed for all Class II and Class III gaming operations. A \ntribe must also have an independent certified public accountant verify that the internal control systems in \nplace are compliant with either NIGC’s or the tribal-state compact internal control standards, whichever \nstandards are the most stringent. Failure to meet these standards may result in temporary closure and/or civil \nfines.\nBank Secrecy Act\nCasino Definition\nBSA requirements apply to casinos and card clubs and designate them as financial institutions if:\n• State, local or tribal governments have licensed or authorized them to do business as casinos or card \nclubs in the United States\n• They have gross annual gaming revenues over $1,000,000\nSee the Code of Federal Regulations, Title 31, Sections 1010.100(t)(5)(i) and (t)(6)(i). \nRecordkeeping Requirements\nWhether the tribe has hired a management company to run their gaming operation or is running the operation \nitself, the tribe must:\n• Maintain all books and records used to determine gross and net income\n• Determine information reporting responsibilities\nExample 1: A tribal gaming operation sells pull-tabs during its bingo session. The box of pull-tabs contains \n2,400 tickets that sell for $1 each. The gross receipts for that box of pull-tabs is $2,400, and the gaming \noperation records must reflect that amount.\nExample 2: A player cashes in a $1 winning ticket for another ticket. $1 must be included in gaming operation \ngross receipts and $1 is included is prizes awarded. The amounts cannot be “netted.”\nExample 3: If the player does not have a Social Security number (SSN), determine if the player is a foreign \nnational subject to foreign withholding and Form 1042, Annual Withholding Tax Return for U.S. Source Income \nof Foreign Persons, and Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, filing \nrequirements.\n4\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nThe NIGC regulations require the tribe to keep its books and records of Class II or Class III operations for at \nleast five years. Additionally, the tribe must preserve its records to the later of:\n• Four years after the employment tax return’s due date, or\n• Four years from the date it paid the tax.\nTribal-state compacts may contain additional recordkeeping and reporting requirements for tribal gaming \noperations. There are also special recordkeeping requirements for excise tax application. See Section V – Tax \non Wagering.\nThe BSA requires a casino or card club to maintain and retain the following operation records:\n• Transmitted funds\nú More than $3,000\nú Must require identity verification\nú Must record and report to other financial institutions in the payment chain regardless of the method of \npayment\n• Funds deposits, opened accounts or extended lines of credit\nú Must include the customer’s verified identification plus similar information for anyone else having a \nfinancial interest in the account regardless of residency\n• Receipts showing transactions for or through each customer’s deposit or credit account \nú Must include the customer’s verified identification regardless of residency\n• Bookkeeping entries containing a debit or credit to a deposit account or credit account\n• Statements, ledger cards or other records of each deposit or credit account \nú Must show all transactions\n• Credit extensions over $2,500\nú Must include the customer’s verified identification regardless of residency\n• Requests, instructions or advice on any transactions involving people, accounts or places outside the \nUnited States\nú Must include the customer’s verified identification regardless of residency\n• Records prepared or received in the ordinary course of business that would be needed to reconstruct a \ncustomer’s deposit or credit account\n• Records required by other governmental agencies, for example, federal, state, local or tribal\n• Records prepared or used to monitor customers’ gaming activity, for example, player rating records, \nmultiple transaction logs\n• A list of transactions involving various types of instruments, cashed or disbursed, in face amounts of \n$3,000 or more, regardless of whether currency is involved, including customer’s name and address\n• A copy of the casino’s written compliance program\n5\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nAdditionally, card clubs must maintain and retain records of all customers’ currency transactions, including \nall records in the form of currency transaction logs and multiple currency transaction logs. If a casino or card \nclub records, stores or retains any part of its records on any form of electronic media, they must ensure that \nthe data will be available and accessible for review in the same media. A casino or card club must retain \nthe originals (or on microfilm) of all required records outlined by the Code of Federal Regulations, Title 31 - \nChapter X for five years. These records must be filed or stored to be accessible within a reasonable period of \ntime. For more information regarding record retention, see the Code of Federal Regulations, Title 31, Section \n1010.410.\nAnti-Money Laundering Compliance Programs (AML)\nSection 352 of the USA PATRIOT Act of 2001 requires financial institutions to establish anti-money laundering \nprograms. See the United States Code, Title 31, Section 5318(h) and the Code of Federal Regulations, \nTitle 31, Section 1021.210(a). A casino or card club complies with this requirement if the casino or card \nclub implements and maintains an adequate program for compliance with the Bank Secrecy Act. Section \n1021.210(b) contains the specific compliance program requirements. Casinos and card clubs must develop \nand implement a written program designed to assure and monitor compliance with the BSA.\nThe Bank Secrecy Act compliance program must include:\n• A system of internal controls to assure ongoing compliance\n• BSA requirements training for personnel\n• Designated individuals to assure day-to-day compliance\n• If available, automated data processing systems to be used in assuring compliance\n• Internal or external independent testing for compliance with a scope and frequency commensurate with the \nrisks of money laundering and terrorist financing, and the products and services provided\n• Procedures for using all available information to determine and verify - when required - the person’s name, \naddress, Social Security or taxpayer identification number and other identifying information\n• Procedures for using all available information to determine whether any suspicious transactions or patterns \nof transactions should be reported\nFor more information on the Bank Secrecy Act’s anti-money laundering compliance program requirements, \nsee the Code of Federal Regulations, Section 1021.210. \nThe Office of Foreign Assets Control (OFAC) is a separate office within the U.S. Treasury Department. \nOFAC also maintains requirements under their own compliance program for anti-money laundering. For \nmore information related to OFAC compliance programs, see the FAQ section of Questions from Financial \nInstitutions, specifically Question #30. To avoid penalties from this separate program, casinos and card \nclubs must additionally maintain a compliance program very similar to the Bank Secrecy Act’s anti-money \nlaundering program.\n6\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSuspicious Transactions\nThe BSA requires a casino or card club to file a suspicious activity report when it knows, suspects or has \nreason to suspect that a transaction or pattern of transactions is suspicious and involves or aggregates \nto $5,000 or more in funds or other assets. A transaction (conducted or attempted) is “suspicious” if the \ntransaction:\n• Involves funds derived from illegal activity or is intended or conducted to hide or disguise funds or assets \nderived from illegal activity, or to disguise the ownership, nature, source, location or control of the funds;\n• Is designed to evade Bank Secrecy Act requirements, whether through structuring or other means; or\n• Has no business or apparent lawful purpose, or is not the sort in which the customer would normally be \nexpected to engage, and the casino or card club knows of no reasonable explanation for the transaction \nafter examining the available facts, including the background and possible purpose of the transaction, or \ninvolves the use of the casino or card club to facilitate criminal activity.\nSee the Code of Federal Regulations, Title 31, Section 1021.320.\nCasinos and card clubs must use the Financial Crimes Enforcement Network BSA E-Filing System to report \nsuspicious activity. A casino or card club must file this form within 30 calendar days after initial detection of \nthe suspicious transaction. If the casino or card club does not identify the suspect on the date of detection, \nit may delay filing a suspicious activity report for an additional 30 calendar days to do so. However, a casino \nor card club must always report a suspicious transaction within 60 calendar days after the date of initial \ndetection. The following examples demonstrate how an activity may appear suspicious:\nExample 1: A customer seeks to cash out chips, tokens or a ticket in an amount more than $10,000, but \nwhen asked for identification for completing a Currency Transaction Report (CTR), they reduce the amount to \nbe cashed out to less than $10,000.\nExample 2: A customer purchases large amounts of chips with currency at table games, engages in minimal \ngaming and then redeems the chips for casino checks.\nExample 3: A customer furnishes identification documents that are false or altered (for example, address \nchanged, photograph substituted).\nExample 4: A customer requests the issuance of multiple casino checks that are made out to third parties or \nchecks without a specified payee.\nExample 5: A casino suspects that customers are involved in credit card or check cashing fraud.\nNote: When using the FinCEN BSA E-Filing System, a casino must use the legal name of the tribal casino. \nA tribal casino’s legal name is found in the articles of incorporation or corporation charter. If the casino \nis an unincorporated entity of the tribe then the legal name is the tribe itself. It’s important to make the \ndistinction between the casino’s legal name and trade name.\nThe Financial Crimes Enforcement Network’s Suspicious Activity Reporting Guidance for Casinos explains \nhow to prepare a complete and sufficient “narrative” and provides examples.\n7\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nStructuring\nFederal law prohibits a financial institution, including a casino or card club, to structure, attempt to structure \nor assist in structuring transactions. Structuring pertains to conduct engaged in to evade a Bank Secrecy \nAct reporting or recordkeeping requirement. It is unlawful under the Bank Secrecy Act and subjects a person \nto civil and criminal penalties. See the United States Code, Title 31, Sections 5321, 5322 and 5324, and the \nCode of Federal Regulations, Title 31, Section 1010.314.\nCurrency Transaction Reporting\nA casino or card club must file a report for each cash-in or cash-out currency transaction it handles that \nis more than $10,000. It must aggregate multiple currency transactions if the cash-in or cash-out amounts \nduring a single gaming day total more than $10,000. It would treat the cash-in or cash-out transactions as \na single transaction and as though conducted by or for the same person. It isn’t necessary to personally \nobserve the multiple transactions. The books, records, logs and computer files should contain the information \nshowing that the reportable currency transactions occurred. See the Code of Federal Regulations, Title 31, \nSections 1021.311 and 1021.313.\nExample: While reviewing a customer’s account status on a computer in the gaming pit, a floor person \nnotices that a customer has already purchased $9,000 in chips with cash at another pit. Later, the customer \nasks to purchase from the dealer an additional $5,000 in chips with cash that is approved by the floor person. \nThe casino is required to file a CTR because a casino employee had knowledge that the customer had cash-\nin transactions over $10,000 in one gaming day.\nWhen a winner’s aggregate amount exceeds $10,000, the casino or card club must report and file with \nFinCEN’s BSA E-Filing System. To properly file the form, it must secure certain information from the customer \n(including foreign nationals) before concluding the transaction unless the transaction is identified through \nan “after the fact aggregation” process. During the “after the fact aggregation” process, the casino or card \nclub is still required to file a completed form. It should obtain all the required information if available through \ninternal records or systems examinations.\nSee the FinCEN CTR for instructions on how to complete the form and the Code of Federal Regulations, Title \n31, Section 1010.312 for the requirement to identify persons involved in currency transactions.\nMultiple currency transactions may reach the threshold reporting requirements for FinCEN CTR without \nrequiring Form W-2G, Certain Gambling Winnings, reporting. Casinos and card clubs must have procedures \nin place to ensure accurate filing. An example would be multiple slot jackpots below $1,200 aggregating to \nmore than $10,000.\nIf a currency transaction exceeds $10,000 and is suspicious, a casino or card club must file a CTR \n(reporting the currency transaction) and a Suspicious Activity Report (reporting the suspicious aspects of \nthe transaction). The casino or card club must transmit all completed FinCEN forms electronically within 15 \ncalendar days from the date of the transaction through FinCEN’s BSA E-Filing System. \nCurrency transactions in other operational aspects of a casino complex may be subject to other reporting \nrequirements such as:\n• Independent check cashers, money remitters, wire transfer companies, and so on, operating inside or \noutside of a casino use a Currency Transaction Report.\n• Casino nongaming activities such as hotels, retail outlets and other establishments use Form 8300, Report \nof Cash Payments Over $10,000 Received in a Trade or Business. Cash for Form 8300 reporting purposes \nincludes coin, currency and cashier’s checks, bank drafts, traveler’s checks or money orders received \nduring a 12-month period.\n8\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nDomestic and Foreign Vendors\nA tribal gaming operation deals with vendors daily, and there are filing and withholding issues related to this \ninteraction. Domestic vendors generally provide Form W-9, Request for Taxpayer Identification Number and \nCertification, to tribal gaming operations to avoid backup withholding when they are providing services. \nA best practice for tribal gaming operations is to require the W-9 prior to payment of invoices for services \nrendered. Tribal gaming operations that use foreign vendors must be aware of additional filing and withholding \nrequirements. The backup withholding for failure to provide a taxpayer identification number (TIN), discussed \nmore completely in Section VI, applies to domestic vendors.\nIt’s important to note that vendors from foreign countries are not subject to backup withholding rules but \ninstead, are subject to Internal Revenue Code (IRC) Section 1441 foreign withholding rules. These rules are \nsimilar to the gaming withholding rules for nonresident aliens covered in Section VI of this publication. Foreign \nvendors with domestic operations should have an EIN and domestic address, which would allow Form W-9 \nsubmission. Generally, Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax \nWithholding and Reporting (Individuals), is similarly used for foreign vendors.\nThere is no dollar threshold for withholding or reporting purposes related to Form 1042-S, Foreign Person’s \nU.S. Source Income Subject to Withholding. A tribal gaming operation must withhold taxes and report any \npayments paid to a nonresident vendor. The withholding rate on nonresident vendors is generally 30% unless \nthe foreign country has a treaty with the United States for a lower rate.\nYou can use Form W-8BEN for status determination of nonresident vendors. Use Section 1 for identification. \nNonresident vendors may claim a lower withholding rate under a treaty, if applicable, by preparing Section 2 \nof Form W-8BEN. However, a vendor still needs to provide a U.S. TIN to receive this treatment. If a vendor is \nfrom a treaty country, but does not have a U.S. TIN, withhold 30% on Form 1042-S. Refer to Publication 901, \nU.S. T\nax Treaties, and Publication 515, Withholding of T\nax on Nonresident Aliens and Foreign \nEntities.\nUse Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, for reporting \npayments made to nonresident aliens and required withholding.\nFile Form 1042-T, Annual Summary and Transmittal of Forms 1042-S, with paper Forms 1042-S, Foreign \nPerson’s U.S. Source Income Subject to Withholding. Submit these forms to the IRS by March 15 of the \nfollowing year. Y\nou may voluntarily file electronically using the FIRE system.\nIf a tribal gaming operation files 250 or more Forms 1042-S during a year, the operation must submit the \nforms electronically. Penalties may be assessed against a tribal gaming operator if the information shown on \nthe Form 1042-S is incomplete or incorrect.\nFailure to Pay Withholding Tax\nA tribal gaming operation is responsible for paying to the IRS the amount of foreign withholding due, whether \nor not it collects the withholding from the recipient. The best time to collect foreign withholding is before it is \npaid. Penalties are assessed for failure to deposit taxes withheld, failure to file a return on time and failure to \npay taxes on a return.\n9\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION III DISTRIBUTIONS FROM GAMING REVENUE\nPer Capita Payments\nWhen a tribe distributes revenue to all its members or groups of members, it has provided a per capita \npayment. Under IGRA, a federally recognized Indian tribe may use net revenues from Class II or Class III \ngaming activities to make per capita payments to its tribal members only if four conditions are met:\n1. It must prepare a plan to allocate revenues only for IGRA authorized uses to: \n \nú\nfund tribal government operations or programs,\n \nú\nprovide for the general welfare of the Indian tribe and its members,\n \nú\npromote tribal economic development,\n \nú\ndonate to charitable organizations, or\n \nú\nfund local government and agency operations.\n2. The Secretary of the Interior must approve the revenue’s use, particularly when it’s for funding tribal \ngovernment operations or programs and for promoting tribal economic development.\n3. The tribe must protect and preserve minors’ and other legally incompetent persons’ interests who are \nentitled to receive any of the per capita payments. The tribe disperses these payments to their parents or \nlegal guardian for their health, education or welfare, under a plan approved by the Secretary and the tribe’s \ngoverning body.\n4. The per capita payments are subject to federal taxation and tribes notify members of this tax liability when \npayments are made.\nGuidelines for Per Capita Distribution Plans\nThe Department of Interior issues guidelines to govern the review and approval of per capita distribution \nplans also known as revenue allocation plans (RAP). Tribal governments can make periodic or occasional \ndistributions by ordinance or resolution in the absence of a RAP\n. These guidelines provide procedures for \nhow tribes must submit tribal revenue allocation plans or ordinances for review and approval. These plans \nand ordinances contain information about how tribes distribute net revenue distributions that comes from \na gaming activity. For approval, the allocation plan must provide enough detail indicating it complies with \nthe guidelines and IGRA. The tribe must also provide a percentage breakdown of how it intends to use and \nallocate its net gaming revenues. The allocation plan must provide that the tribe plans to dedicate a significant \nportion of its net gaming revenues to one or more purposes as cited in the guidelines.\nGaming Distributions to Minors\nThe IGRA requires protections of the minors’ interests for gaming revenue distribution. To satisfy this \nrequirement, many tribes establish trusts for minors and legal incompetents. A tribe may serve as the grantor \nand owner of the trust.\nRevenue Procedure 2011-56 clarifies that deposits into a trust are taxable at the time the deposits are made. \nIf the funds are left in the trust account until the beneficiary reaches the age of majority the principal and \ninterest are not reported as taxable income to the beneficiary. The revenue procedure states that when an \nIGRA trust earns money or receives a deposit, the beneficiaries are not required to include those amounts \nin their gross income. However, beneficiaries who receive trust distributions would include the amounts as \ntaxable income when actually or constructively received.2\n10\n2When a beneficiary has the unqualified right to the funds in a trust, the beneficiary must include it as taxable income.\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nExample: Jane, a minor, is a member of a federally recognized tribe. The tribe creates a trust for her. She \ncannot receive any distributions from the trust before she reaches age 18. Therefore, Jane does not include \nthe trust’s income as part of her gross income. She is not in constructive receipt of the funds placed in trust or \nincome earned by the trust, because she doesn’t have the unqualified right to receive immediate payment. As \na result, the accumulated per capita distributions and the related income are not taxable. However, if the tribe \ngives the trustee (Jane’s legal guardian) approval to access the funds, those funds become taxable.\nWithholding Requirements of Distributions from Net Gaming Revenue\nPer capita distributions from gaming are subject to federal taxation under IRC Section 3402(r). Tribes must \nnotify its members of the tax liability when it makes the payments, reporting the per capita distributions on \nForm 1099-MISC, Miscellaneous Income. When the tribal members receive their Forms 1099-MISC, they \nreport the income on the “Other Income” line of their Form 1040, U.S. Individual Income Tax Return, and \ninclude a description as “Indian gaming profits.” These distributions are also subject to withholding. The \nSocial Security number of all payees should be secured prior to making payments. Otherwise, the tribe is \npotentially liable for backup withholding provisions under IRC Section 3406. See Reporting and Withholding \nGaming Winnings of this publication and Form 945 filing requirements for more information. In the payments \nsection of Form 1040, the payee should report any withholding reflected on Form 1099 as “federal income \ntax withheld from Forms W-2 or 1099.” The tribe determines the withholding amount based on the total \npayment to the tribal member for the year. Publication 15-A, Employer’s Supplemental Tax Guide, contains \nthe withholding tables (identified as “Tables for Withholding on Distributions of Indian Gaming Profits to Tribal \nMembers”). The tribe is potentially liable for the difference between the amount required to be withheld under \nthe tables and the amount actually withheld.\nThe withholding tables are revised each year and generally published in January. There is a threshold for \nrequiring withholding which often changes annually. Once the threshold distribution amount is reached, \nwithholding is required between 10-24%.\nExample: A tribe distributes $31,000 of per capita payments to tribal members during 2018. A regular monthly \nper capita payment of $2,000 is issued during the months January through December. During December, an \nadditional per capita payment is made of $7,000, for a cumulative distribution of $9,000.\nThe computation for withholding on monthly per capita payments would be based on the $2,000 monthly \npayment for January to November and for December, the aggregate payment amount of $9,000. Using the \ntables for 2018 for monthly distributions, payments of $2,000 are subject to 10% withholding on the amount \nover $1,000, or $100 (.10 x $1,000). The December payment would be $1,174.12 plus 24% of the amount \nover $7,875 or $1,444.12 (1,174.12 + 270 (.24 x ($9,000 - $7,875))).\nTo avoid incorrect withholding, payments during a chosen distribution period should be aggregated as in the \nexample above.\n11\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION IV EMPLOYMENT TAX = PAYROLL TAX\nEmployment Tax\n“Wages” for purposes of FICA (Social Security and Medicare) and federal income tax withholding means all \npayments received for “employment” with certain exceptions. Unless payments to employees are excepted \nfrom the term “wages” or the services performed by the employee are excepted from the term “employment,” \nthe payments are subject to FICA and federal income tax withholding. Independent contractors and \nemployees are generally involved in gaming operations, and the gaming operation is responsible for filing \ncertain IRS tax forms. See the Independent Contractor vs. Employee section of this publication.\nTribal gaming operations (employers) must generally withhold income and FICA taxes. These are deposited to \nthe IRS on the employees’ behalf. Employers may also be subject to depositing unemployment tax on wages \npaid to an employee (see exception below).\nEmployers are responsible for filing Form W-2, Wage and Tax Statement, and Form 941, Employer’s Quarterly \nFederal Tax Return. To know how much income tax to withhold from employees’ wages, employers should \nhave a Form W-4, Employee’s Withholding Allowance Certificate, on file for each employee.\nException – Federal employment tax also includes tax imposed under the Federal Unemployment Tax Act \n(FUTA). Beginning January 1, 2000, Indian tribes and any wholly owned tribal business are not required to \nfile Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, if they participate in the State \nUnemployment Tax Act (SUTA) system. The employer is no longer exempt from FUTA if the employer elects \nnot to participate in SUTA. The employer will become liable for FUTA taxes and will be required to file Form \n940 with the IRS. Employers should be aware that nonparticipation in the state unemployment program may \nmake tribal employees ineligible for unemployment benefits. For more information on FUTA tax for tribal \ngovernments and their wholly owned tribal businesses, see Publication 4268, Employment Tax For Indian \nTribal Governments.\nForms to File for Employees\nForm\nEmployer’s responsibility\nWhen\nW-4\nRequest signed W-4 from all employees\nAs soon as an employee starts work and should be \neffective with the first wage payment\nW-2\nFurnish employee a copy of Form W-2\nBy January 31 of the year following year of payment\nW-2\nFurnish W-2 to the Social Security Administration\nBy January 31 of the following year\nW-3\nTransmit paper Forms W-2 to the Social Security \nAdministration\nBy January 31 of the following year\n941\nEach employer is responsible for filing Form 941 - reporting \nwages, federal income tax withholding, Social Security and \nMedicare tax withholding each quarter\nBy the last day of the month following the end of the \ncalendar quarter\n940\nEach employer is responsible for filing Form 940 unless \nparticipating in the state unemployment system and in full \ncompliance with its requirements.\nBy January 31 following the tax year\n12\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nReporting Tip Income\nAll tips received by an employee are taxable income subject to federal income tax. An employee must include \nin gross income all tips received directly or indirectly such as:\n• Cash tips\n• Charge tips\n• Tip-outs\n• An employee’s share of a tip-splitting or tip-pooling arrangement\nWhen an employee receives tips greater than $20 in a calendar month while working for any one employer, \nFICA and federal income tax withholding applies to these funds. FICA and federal tax withholding does not \napply to tips of less than $20 in a calendar month. Once the tip amount in a calendar month reaches $20, the \nemployee must report their tips to the employer to be included as wages – not just the amount over $20. This \nmust be done in writing by the tenth day of the month following the month the employee receives the tips.\nExample: Joe is a dealer at a tribal casino. He received $800 in tips in March. Joe must report his tips to his \nemployer by April 10, or more frequently if required by the employer. The tips are subject to FICA and federal \nincome tax withholding.\nThe IRS office of Indian Tribal Governments offers workshops and presentations on tip income reporting. The \nIRS has developed tools to assist employers and employees with tip compliance. Employees are required to \nreport tips to their employer monthly unless the tips were less than $20. Publication 1244, Employee’s Daily \nRecord of Tips and Report to Employer, a pocket-sized record available for order from the IRS, includes two \nforms, 4070 and 4070A, for facilitating this reporting. The Form 4070A, Employee’s Daily Record of Tips, is \na monthly form tipped employees may use for keeping a daily record of tips received and tips paid out. The \nForm 4070, Employee’s Report of Tips to Employer, is a monthly form tipped employees may use to provide \ntheir employer a summary of the total amounts of tips received. For more information see Publication 531, \nReporting Tip Income, or contact the Indian Tribal Governments specialist in your area.\nMany tribal gaming establishments have restaurants or bars that may run extended hours and allow \ntipping. These establishments often meet the definition of a large food or beverage establishment resulting \nin a filing requirement for Form 8027, Employer’s Annual Information Return of Tip Income and Allocated \nTips. Generally, a large food or beverage establishment is where there are more than 10 employees who \ncollectively work more than 80 hours in the typical business day. For more information consult the Form 8027 \nInstructions.\nOther Resources\nPublication 3144, Tips on Tips: A Guide to Tip Income Reporting for Employers in Businesses where Tip \nIncome is Customary\nPublication 3148, Tips on Tips: A Guide to Tip Income Reporting for Employees Who Receive Tip Income\n13\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nTip Rate Determination/Education Program (TRD/EP)\nCompliance with tip income reporting requirements can be one of the most complicated and difficult issues \nfor employers and employees. If noncompliance exists, both parties can be liable for payment of significant \ntax, penalties and interest. To reduce burden and improve tip reporting compliance by employers and \nemployees, the IRS has developed TRD/EP\n. In addition to participating in ITG educational and outreach \nprograms, gaming operations may enter into a Tip Rate Determination Agreement (TRDA) or a Gaming \nIndustry Tip Compliance Agreement (GITCA).\n• TRDA – Under this arrangement, the employer determines tip rates for various occupations within the \nestablishment using historical tip data. The IRS reviews the data and validates the rates. At least 75% of \nthe tipped employees must agree to participate by signing a Tipped Employee Participation Agreement. \nThis arrangement is available for all tipped employees, gaming or nongaming, at the tribal gaming \noperation.\n• GITCA – Under this arrangement, a gaming industry employer and the IRS work together to reach an \nagreement that objectively establishes minimum tip rates for tipped employees in specified occupational \ncategories, prescribes a threshold level of participation by the employer’s employees and reduces \ncompliance burdens for the employee and enforcement burdens for the IRS. See Revenue Procedure \n2007-32 for more information on GITCAs.\nOther Resources\nPublication 4932, Gaming Industry Tip Compliance Agreement (GITCA)\nPublication 4985, Gaming Industry Tip Compliance Agreement (GITCA) for Tipped Employees\nIndependent Contractor vs. Employee\nFor federal tax purposes, the distinction between independent contractor and employee is important. Workers \nmay be classified as employees or independent contractors. Worker classification affects your employees’ \neligibility for Social Security and Medicare benefits and determines your tax responsibilities. The courts \nhave considered many facts in deciding whether a worker is an independent contractor or an employee. \nThese relevant facts fall into three main categories: behavioral control, financial control and relationship of \nthe parties. In each case, it is important to consider all the facts – no single fact provides the answer. (see \nPublication 1779, Independent Contractor or Employee) This determination is necessary for the purposes of \nfiling the correct forms and paying the appropriate taxes (see Publication 4268, Employment Tax For Indian \nTribal Governments). For more information contact the Indian Tribal Governments specialist in your area.\nA trade or business must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to \npersons not treated as employees for services performed in a trade or business. The $600 threshold applies \nto all payments made during the calendar year, not to any one payment. If you have a question regarding \nForm 1099-MISC, refer to the 1099-MISC instructions or contact the Indian Tribal Governments specialist in \nyour area.\nForm 1099-MISC requires a worker’s name, address and TIN. The worker should complete Form W-9, \nRequest for Taxpayer Identification Number and Certification. Employers use Form W-9 to verify a worker’s \nTIN and to certify that the TIN is correct. Employers should secure the worker’s TIN before making the first \npayment; otherwise, payments would be subject to backup withholding. Report backup withholding on Form \n945, Annual Return of Withheld Federal Income Tax. See Section VI for additional information related to filing \nelectronically and the TIN matching program.\n14\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nForms to File for Independent Contractors\nForm\nPayer’s responsibility\nWhen\nW-9\nRequest and receive a properly completed and \nsigned W-9\nW-9 should be received and kept on file prior to \nmaking any payments\n1099\nComplete and furnish to each payee of $600 or \nmore (cumulative payments) per year\nMust be sent to the IRS by January 31\n. Must furnish \nto payee by last day of January 31 of the year \nfollowing the year of payment\n1096\nTransmittal form summarizing all 1099s issued\nMust be filed by January 31 of the year following the \nyear of payment\n945\nPayer must file 945 for voluntary/backup \nwithholding\nMust be filed by January 31 of the year following the \nyear of payment\nExample 1: Employer pays John $1,000 per week to clean the bingo hall. John operates his own janitorial \nservice that performs work for numerous entities, has the right to hire and fire his own help, and provides his \nown tools and supplies. The employer does not have the right to direct and control John. Therefore, he is not \nan employee. The employer should file Form 1099-MISC for John.\nExample 2: Employer pays Jack $500 per week to clean the bingo hall. Jack works for only this employer, \ndoes not have the right to hire and fire assistants and the employer requires that he personally does the work. \nThe employer provides the supplies and tools for Jack. Based on the above facts, Jack is an employee. The \nemployer should withhold income tax and employment taxes and report the payments on Form W-2.\nHow to Make Federal Tax Payments\nYou must deposit through Electronic Federal Tax Payment System (EFTPS) amounts withheld such as:\n• Employer and employee Social Security and Medicare taxes (Form 941)\n• Income tax withheld (Form 941)\n• Backup withholding (Form 945)\n• Gambling withholding (Form 945)\n• Foreign person withholding (Form 1042) (See Section VI)\nUsing EFTPS to deposit federal taxes provides substantial benefits to taxpayers and the government. EFTPS \nusers can make tax payments 24 hours a day, seven days a week with a computer or by telephone. EFTPS \nalso significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers \nschedule dates to make payments even when they are out of town or on vacation when a payment is due. \nEFTPS business users can schedule payments up to 120 days in advance of the desired payment date. You \ncan find more information including how to enroll online or by calling EFTPS Customer Service at 800-555-\n4477 (TDD 800-733-4829).\nWhen to Make Deposits\nIf you have a deposit requirement for Form 941, you may make a deposit:\n• The same day you pay your employees, or\n• Before the due date.\n15\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nForm 941 Deposit Due Date\nIf you are a new employer and have never filed a Form 941, you are a monthly schedule depositor for the first \ncalendar year of your business unless you meet a special exception to the rule. Monthly schedule depositors \nshould deposit taxes from all their paydays in a month by the 15th of the next month, even if they pay wages \nevery week.\nEmployers with prior payrolls and taxes of $2,500 or more per quarter must determine if they make either \nmonthly schedule deposits or semiweekly schedule deposits. This determination is based on your Form 941 \ntaxes during a four-quarter lookback period.\n1. Identify your lookback period.\nYour Lookback Period for Calendar Year 2020\n2018\n2019\nJuly 1 to September 30 \n3rd Quarter\nOctober 1 to December 31 \n4th Quarter\nJanuary 1 to March 31 \n1st Quarter\nApril 1 to June 30 \n2nd Quarter\n2. Add the total taxes reported during the lookback period.\n3. Determine your deposit schedule.\nIf the Total Taxes You Reported in the Lookback Period Were:\nThen You Are A:\n$50,000 or less\nMonthly schedule depositor\nMore than $50,000\nSemiweekly schedule depositor\nMonthly Schedule Depositors\nDeposit each month’s taxes by the 15th day of the following month (for example, taxes from paydays during \nJuly are deposited by August 15).\nSemiweekly Schedule Depositors\nIf the Payday Falls on A:\nThen Deposit Taxes by the Following:\nWednesday, Thursday or Friday\nWednesday\nSaturday, Sunday, Monday or Tuesday\nFriday\nException: If you accumulate a tax liability of $100,000 or more on any day during a deposit period, you \nmust deposit the tax by the next business day, whether you are a monthly or semiweekly schedule depositor. \nMonthly depositors must then follow the semiweekly schedule for the rest of the year. For more information \nabout the $100,000 Next-Day Deposit Rule and the applicable deposit period, see Publication 15. (Circular E), \nEmployer’s Tax Guide, Depositing Taxes.\nRemember: Deposit rules are based on when wages are paid, not earned. For example, monthly schedule \ndepositors with wages earned in June, but paid in July, deposit August 15. Form 945 and Form 1042 may \nhave different deposit requirements. For more information, refer to the form instructions or contact your Indian \nTribal Governments specialist. Some businesses paying a minimal amount of tax may make their payments \nwith the tax returns.\n16\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nResource\nThe Employer’s Tax Calendar from Publication 509, Tax Calendars, lists due dates for filing returns and for \nmaking employment tax deposits throughout the year. Use this calendar with Publication 15, which explains \nthe deposit rules.\nEmployment Tax Penalties\nEmployment tax penalties can multiply quickly. There are three main employment tax penalties: failure to \ndeposit, failure to file and failure to pay. These penalties are often assessed at the same time.\n• Failure to deposit - this penalty reaches 10% when past due by 16 days. This means even before the return \nis due you could have a 10% penalty.\n• Failure to file - accrues at 5% per month reduced by applicable failure to pay penalty, capping at 25%.\n• Failure to pay - begins accruing once the return due date has passed and all tax is not paid, also capping \nat 25%.\nExample: The last deposit of the quarter is due at the end of the month and it is not paid. Your employment \ntax return preparer misses a week of work beginning near the last day of the next month (when the return is \ndue). At this point, the deposit is late, the return is late and failure to pay the tax is now assessed. For being \n45 days late the penalties are 15% and increasing by 5% per month for the next 4 months, going from 15% to \n35%. If the last deposit was supposed to be $20,000 then the penalty at 45 days is $3,000 and at 5 months is \n$7,000.\nFor more information see the chapter on penalties in Publication 4268, Employment Tax For Indian Tribal \nGovernments, and Publication 5343, Helpful Hints for Indian Tribes and Tribal Entities to Avoid Penalties on \nFederal Tax Deposits and Information Returns.\nTrust Fund Recovery Penalty (Failure to Withhold and Pay Employment Tax)\nA trust fund recovery penalty may apply when an employer does not withhold or deposit employment tax \nthat is withheld or supposed to be withheld. This penalty can be applied to any entity, including governmental \nentities such as Indian tribes. Under this penalty, officers or employees of a tribal gaming operation could \nbecome personally liable for the tax payment and could be penalized an amount equal to the unpaid tax. \nThis penalty may apply when unpaid tax cannot be immediately collected from the tribal gaming operation. \nThe trust fund recovery penalty may be imposed on anyone the IRS determines is responsible for collecting, \naccounting for and depositing this tax, and who acted willfully in not doing so. Willfully, in this case, means \nvoluntarily, consciously and intentionally.\n17\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION V TAX ON WAGERING\nDefinitions\nThis section explains the application of excise tax on wagering (wagering tax and occupational tax) on tribal \ngaming operations conducting certain games, such as bingo games, pull-tabs, raffles and tip boards.\nTribes that conduct gaming activities should be aware that wagering tax and occupational tax might apply \nbased on the gaming activities that are offered. The facts and circumstances of the types of wagering \nconducted, as well as the benefits derived, may have a bearing on whether the wagers are subject to tax.\nThere are two types of wagering tax: wagering tax imposed on the gross amount of a wager, and an \noccupational tax imposed on persons engaged in receiving taxable wagers. In general, the tax on wagering \napplies to:\n• Wagers placed on a sports event or contest with a person engaged in the business of accepting wagers.\n• Wagers placed in a wagering pool on a sports event or contest, if the pool is conducted for profit.\n• Wagers placed in a lottery conducted for profit (other than a state-conducted lottery).\nNote: Pull-tabs, raffles and tip jar games generally are taxable lotteries. Bingo (not instant bingo) is \nspecifically excluded from the wagering tax. Keno may be excluded from the wagering tax. The general \nrule is if a Keno game is live, meaning all players are present and winnings are paid before the beginning of \nthe next game, it is not subject to the gaming excise tax. Generally, with Keno games over 20, the player \nmay leave and collect his winnings later (usually up to one year). This type of Keno game is subject to the \nwagering tax. Contact the Indian Tribal Governments specialist in your area with questions on the wagering \ntax to a specific game.\nThe gross amount of the wager upon which tax is imposed is the amount risked by the bettor, including any \ncharge or fee incident to placing the wager. The taxable amount, for purposes of the excise tax, does not \ndepend on the amount that a bettor may win in the wager.\nThe law specifically exempts certain wagers from the wagering tax (gaming exemptions related to games \nconducted by a state or state agencies are beyond the scope of this publication). Exemptions relevant to \nIndian tribal government gaming include wagers placed:\n1. With a pari-mutuel wagering enterprise, including horse racing, dog racing and jai alai, licensed under state \nlaw;\n2. In a coin-operated device, such as slot machines, pinball machines or video games (including electronic \npull-tab machines); and\n3. Through drawings conducted by an organization exempt from tax under IRC Sections 501 and 521, as long \nas the net proceeds of the drawing do not benefit a private shareholder or individual.\nSee Form 730, Monthly Tax Return for Wagers.\nWagering Excise Tax\nThe wagering tax is imposed on gross wagers received before any payout of prizes or other expense.\nExample: The wagering tax applies to an organization selling pull-tabs. The tax applies to the gross sales per \nbox. If a box of $1 pull-tabs contains 2,400 cards and the entire box is sold, the tax is computed on $2,400.\n18\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nRate of Tax\nThe tax rate depends upon whether the wager is authorized under the law of the state in which it is accepted:\n• If the wager is authorized under the law of the state in which it is accepted, the rate of tax is 0.25% of the \nthe wager. Thus, if the gross wagers are $1,000, the tax is $2.50 ($1,000 x .0025).\n• If a wager is not authorized under the law of the state in which it is accepted, the rate of tax is 2% of the \nwager. Thus, if the gross wagers are $1,000, the tax is $20 ($1,000 x .02).\nFiling IRS Form 730, Monthly Tax Return for Wagers\nTo report and file taxable wagers, you must file Form 730. This is a monthly return that must be filed by the \nlast day of the month following the month you report taxable wagers. Once you begin filing, Form 730 must \nbe filed each month until a final return is filed, even if you receive no wagers in a month. These returns will \nreport a liability of zero for the month. If you stop accepting wagers, you must file a final Form 730. Check the \n“Final Return” box on the form. The instructions to Form 730 provide additional filing information. A tribe may \nbe subject to a penalty for failure to file the form and for failure to pay the tax.\nOccupational Tax\nThe occupational tax is imposed on those who receive wagers that are subject to tax. The tax applies to \npersons receiving taxable wagers, whether they receive compensation or are volunteers.\nPersons required to pay tax must register certain information with the IRS. This includes both principals \n(persons in the business of accepting taxable wagers on their own behalf) and agents (persons who accept \ntaxable wagers on behalf of a principal). Both principals and agents must file Form 11-C, Occupational Tax \nand Registration Return for Wagering, to register and to pay the occupational tax before they accept wagers \nand annually thereafter (presently due on July 1). An employer identification number (EIN) must be used on \nForm 11-C, not a Social Security number. If a principal or agent does not have an EIN, they must apply for \none by:\n• Visiting www.irs.gov/ein and applying online;\n• Calling 800-829-4933; or\n• Mailing a completed Form SS-4, Application for Employer Identification Number, to the IRS. Attach a copy \nof the SS-4 to the Form 11-C when the Form 11-C is filed.\nExample: A tribe sells pull-tabs and arranges for 10 people to receive wagers from the public on the tribe’s \nbehalf. The tribe also employs a secretary and a bookkeeper. The tribe and each of the 10 people are liable \nfor the occupational tax. They must each file Form 11-C and pay the occupational tax. The secretary and \nbookkeeper are not liable for the tax unless they also accept wagers for the tribe.\nTax Amount\nYou must pay the occupational tax if you accept taxable wagers for yourself or another person. There are two \namounts of occupational tax ($50 or $500). One or the other applies depending on whether the wagers you \naccept are authorized by the laws of the state in which you accept the wager.\n• If yes, then the amount of the occupational tax is $50 per year per person.\n• For all other wagers, the amount of the tax is $500 per year per person.\n19\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nExample: A tribe sells pull-tabs at its tribally-owned gas stations through paid employees of the tribe. In \nthe state where the tribe is located, the sale of pull-tabs must be conducted by volunteer labor. The tribe \nis liable for the wagering tax at a rate of 2%. Because it is liable for the tax, the tribe is also subject to the \noccupational tax at the amount of $500 per person selling pull-tabs.\nThe tribe is subject to the 2% rate and $500 amount because the wager is not authorized under the law of the \nstate in which it is accepted. State law only allows the sale of pull-tabs by volunteer labor, and this tribe uses \npaid cashiers to sell the pull-tabs.\n20\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION VI FILING REQUIREMENTS\nSummary Filing Requirements for Tribal Gaming Operations\nBusiness Operations\nUser\nForm\nSend to IRS\nComments\nReference\nReporting\nPayment\nEmployer\n941\nMail\nEFTPS\nSec IV\nEmployer\nW-2\nMail/SSA BSO\nN/A\nPaper filing requires Form W-3\nSec IV\nEmployer\n940*\nMail\nEFTPS\nSec IV\nAll employees\nFinCEN SAR\nBSA E-Filing System\nSec II\nCash reporting\nFinCEN CTR\nBSA E-Filing System\nSec II\nPull-tabs etc.\n730\nMail\nEFTPS\nSec V\nPull-tabs etc.\n11-C\nMail\nEFTPS\nSec V\nResident vendor\n1099-MISC\nMail/FIRE\nEFTPS1\nPaper filing requires Form 1096\nSec II\nNonresident vendor\n1042-S\nMail/FIRE\nEFTPS2\nPaper filing requires Form 1042-T\nSec II\nFood/beverage\n8027\nMail/FIRE\nN/A\nPaper filing requires Form 8027-T \nwhen multiple venues\nSec IV\n*If not participating in a state unemployment program\n1Report on Form 945 if withholding required\n2Report on Form 1042 if withholding required\nPatrons\nRecipient**\nForm\nSend to IRS\nComments\nReference\nReporting\nPayment\nWinnings to resident\nW-2G\nMail/FIRE\nEFTPS1\nSec VI\nPrizes to resident\n1099-MISC\nMail/FIRE\nEFTPS1\nPaper filing requires \nForm 1096\nSec VI\nWinnings to nonresident\n1042-S\nMail/FIRE\nEFTPS2\nPaper filing requires \nForm 1042-T\nSec VI\nPrizes to nonresident\n1042-S\nMail/FIRE\nEFTPS2\nPaper filing requires \nForm 1042-T\nSec VI\n** Consult the OFAC SDN list prior to payment to ensure that it is not a prohibited transaction. If there are multiple winners or nominee winners, then \nprepare and retain Form 5754.\n1 Report on Form 945 if withholding required\n2 Report on Form 1042 if withholding required\n21\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nIRS Tax Forms to File for Gaming Activities\nForms W-2G, 1099, 945, 1042-S, 1042\nDetermining the right form to file requires knowledge about the type of winnings as well as the person \nreceiving them. Most individuals will receive either Form W-2G or Form 1099-MISC depending on their \nwinnings. However, foreign individuals will receive Form 1042-S.\nFile Form W-2G, Certain Gambling Winnings, when an individual wager results in a win (jackpot) with a \nminimum specific dollar amount at a gaming event.\nTribal gaming operations generally report winnings if the amount is $600 or more and at least 300 times the \namount of the wager. However, these requirements do not apply to winnings from bingo, electronic gaming \ndevices (for example, slot machines) and keno. Winnings (not reduced by the wager) from a bingo game or \nslot machine of $1,200 or more are reportable gaming winnings. Winnings from a keno game (reduced by the \nwager) of $1,500 or more are reportable gaming winnings.\nFile Form 1099-MISC when a prize is awarded from an event without a wager. When filing paper returns, \ntransmit to the IRS Form W-2G and Form 1099-MISC (with Form 1096, Annual Summary and Transmittal of \nU.S. Information Returns). You will find more information on Form 1042-S filing and withholding requirements \non foreign winners (as well as Form 1042 filing requirements) in the Verifying Residency section of this \npublication.\nIn addition to filing information returns, you may be required to withhold on gaming winnings. Deposit this \nwithholding with the IRS and reconcile on annual returns using either Form 945 or Form 1042. For more \ninformation on Form 945 see the Reporting and Withholding Gaming Winnings section of this publication.\nIdentification Requirements\nForm W-2G must contain the winner’s name, address and Social Security number. It must also contain a \ngeneral description of two types of valid identification (for example, driver’s license, Social Security card \nor voter registration card) furnished to the gaming operator who will use these to verify the winner’s name, \naddress and Social Security number. A valid ID is an unexpired government-issued form.\nExamples of official government-issued IDs include:\n• Driver’s license\n• State-issued identification card\n• Tribal-issued identification card\n• Passport\n• Alien registration card\n• Military identification\nIf a gaming operator makes a payment without securing the winner’s TIN, they must perform backup \nwithholding on the winnings. See page 27 for more information about backup withholding and Form 945 filing \nrequirements.\nThe verification requirements for Form 1099-MISC are not the same as Form W-2G. While Form 1099-MISC \nalso requires the winner’s name, address and Social Security number, it does not require two separate forms \nof ID or descriptions. One valid photo identification is recommended to verify the name and address. You can \nsubstitute a Form W-9 for a Social Security card to certify a winner’s TIN. The patron does not sign the Form \n1099-MISC.\n22\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nReporting and Withholding Gaming Winnings\nThe following presumes the winner is a U.S. resident. Foreign persons are subject to different withholding \nrequirements. For more information on winners who are foreign persons, see the section on Verifying \nResidency.\nReport gambling winnings on Form W-2G if: \n• The winnings (not reduced by the wager) from a bingo game or slot machine are $1,200 or more; \n• The winnings (reduced by the wager) from a keno game are $1,500 or more; \n• The winnings (reduced by the wager or buy-in) from a poker tournament are more than $5,000; \n• The winnings (except winnings from bingo, slot machines, keno and poker tournaments) reduced, at the \noption of the payer, by the wager are $600 or more and at least 300 times the amount of the wager; or\n• The winnings are subject to federal income tax withholding (either regular gambling withholding or backup \nwithholding).\nTypes of Winnings\nRegular Bingo Game Win – A bingo game operator must complete Form W-2G for a single bingo win of \n$1,200 or more. The winner must furnish the bingo game operator with their TIN (typically Social Security \nnumber). \nExample 1: A tribal gaming operation conducts a weekly bingo game. A payout of $1,300 is made for a single \ngame. The winner furnishes identifying information, along with the TIN to the tribal gaming operation. The \ntribal gaming operation must complete Form W-2G, but is not required to withhold income tax.\nIf the winner does not provide a TIN, the bingo game operator must withhold tax (known as backup \nwithholding) at the current backup withholding rate.\nExample 2: If the winner in Example 1 had refused to provide their TIN, the tribal gaming operation would \ncomplete Form W-2G without the TIN and apply backup withholding. The gaming operation reports withheld \nincome tax on Form 945, Annual Return of Withheld Federal Income Tax. In 2018 the winner would receive \n$988 ($1,300 gross winnings minus $312 - federal income tax withheld at the rate of 2018 backup withholding \nrate of 24%). (Rates can change – check irs.gov for the current rate).\nLotteries, Sweepstakes, Horse Races, Dog Races, Instant Bingo Game Wins/Pull-Tabs, Jai Alai and \nOther Wagering Transactions – A single win less than $600 involving lotteries, sweepstakes, horse races, \ndog races, instant bingo game wins/pull-tabs, jai alai and other wagering transactions does not require \ncompleting a Form W-2G or withholding federal income tax.\nA single win of at least $600 requires completing a Form W-2G if the prize is at least 300 times the amount of \nthe wager. The winner must furnish proper identification to the game operator along with their TIN. If the TIN \nisn’t provided, the game operator must withhold tax at the current backup withholding rate. See Section VI \nfor identification requirements. Backup withholding applies to the amount of winnings reduced, at the option \nof the payer, by the amount wagered. See Reportable Gambling Winnings in the Instructions for Forms W-2G \nand 5754 for more information.\nExample 1: A tribal gaming operation sells pull-tabs at its weekly bingo session. Each pull-tab costs $1. One \ntype of pull-tab sold pays a progressive jackpot. The winning ticket from each box entitles the ticket holder to \n23\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nselect a number from a second punchboard without making an additional wager. If the ticket holder selects \nthe winning punchboard number, the holder wins the jackpot. If the winning ticket holder does not select the \nwinning punchboard number, the gaming operation may pay a consolation prize. The jackpot is increased and \ncarried over to the next box of pull-tabs sold. If a patron wins $100 on the winning ticket from the box of pull-\ntabs and then selects a winning number from the progressive punchboard that pays $550, the tribal gaming \noperation must complete a Form W-2G. Since the initial ticket purchase entitled the patron to both amounts, \nthe gaming operation combines them as a single win of $649 ($650 - $1 – the pull-tab cost).\nExample 2: A tribal gaming operation sells instant bingo game tickets. A winner receives $950 from one \nof the pull-tabs that cost $1. The winner refuses to provide their identification number; therefore, the tribe \nmust complete Form W-2G and withhold 24% of the winnings. The gaming operation reports the income tax \nwithheld on Form 945. The winner receives $721.24 ($950 minus $1 wager, less $227.76 federal income tax \nwithheld at the rate of 24% ($949 x .24 = $227.76).\nWins of more than $5,000 – If a single win, less the wager, exceeds $5,000, the gaming operation must \ncomplete a Form W-2G and withhold on the net winnings at the current rate. \nExample 3: A tribal gaming operation has a winner of $5,100 from one of the pull-tabs, which cost $10. \nBecause the winnings, less the wager, exceed $5,000, complete Form W-2G and withhold federal income \ntax. Report the income tax withheld on Form 945. If the winner provides identification, the winner receives \n$3,878.40 ($5,100 gross winnings less $1,221.60 withholding tax = computed $5,100 minus $10 wager, times \n24%).\nThe following chart describes when a tribal gaming operation must issue a Form W-2G:\nGame\nWin is Equal to or Greater Than\nLotteries, sweepstakes, horse races, dog races, instant bingo game \nprizes/pull-tabs, jai alai and other wagering transactions1\n$600\nBingo\n$1,200\nSlot machines\n$1,200\nKeno\n$1,500\n1 and at least 300 times the amount of the wager is subject to income tax withholding\nMultiple Winners – When paying out a win from a wagering activity, a tribal gaming operation needs to \ndetermine whether it’s paying a member of a group of two or more winners on a single ticket or to a person \nwho is not the actual winner.\nIf so, the tribal gaming operation must obtain a completed Form 5754, Statement by Person(s) Receiving \nGambling Winnings. This form enables the tribal gaming operation to prepare Form W-2G. There are two parts \nto Form 5754. The first part lists the identification of the person who is receiving the winnings. The second \npart lists the actual winners and their respective share of the winnings. The tribal gaming operation must use \nthe information to complete Form W-2G for each winner. The tribal gaming operation does not submit Form \n5754 to the IRS, but it should keep the form with its tax records for four years.\nThe amount paid on the winning ticket, not each individual’s share of the proceeds, determines whether the \ntribal gaming operation will need to complete a Form W-2G.\nExample: A tribal gaming operation sells pull-tabs at its weekly bingo session. John Doe and Judy Smith \n24\n",
"Gaming Tax Law and Bank Secrecy Act Issues\njointly purchased a $1 pull-tab that was the winning ticket of a $1,200 jackpot. John Doe appears at the cage \nto redeem the pull-tab.\nIf John and Judy contributed equal amounts toward the purchase of the ticket and agreed to share equally in \nany winnings, complete Form 5754 as follows:\n• Part I - List the name, address and identification number of the individual who was actually paid (win must \nbe paid to one individual). In the box for amount received, include the total $1,200 win.\n• Part II - List John Doe’s name, address and identification number. Include in box (d) $600 as the amount \nwon (his share of the win). List Judy Smith’s name, address and identification number. Include in box (d) \nunder her name $600 (her share of the $1,200 win).\n• Signature - If the tribal gaming operation withholds federal income tax, then John Doe signs and dates the \nform (not required in this instance unless John Doe refuses to supply his TIN).\nThe tribal gaming operator should complete the Form W-2G upon paying the winnings to the winner. Copies \nB, C and 2 of the form may be given to the winner at the time of completion. However, the winner must \nreceive these copies no later than January 31 of the following year. The tribal gaming operator must submit \nto the IRS Copy A of Form W-2G and Form 1096 by February 28 of the year following the year the gaming \nwinnings were paid, if filing paper returns. The tribal gaming operator submits Copy 1 of Form W-2G to the \nstate and retains Copy D.\nA tribal gaming operation may voluntarily file electronically using the FIRE system (see FIRE at the end of this \nsection). However, if it prepares 250 or more information returns, it must file electronically. The requirement \napplies separately to each type of form.\nExample: If you must file 500 Forms W-2G and 100 Forms 1099-MISC, you must file Forms W-2G \nelectronically, but you are not required to file Forms 1099-MISC electronically.\nNon-Wagering Prizes – Tribal gaming operations must issue a Form 1099-MISC to each patron who receives \n$600 or more in a calendar year in cash or prizes where there is no wager. See the Gaming Withholding \nand Reporting Threshold – Forms Needed chart in Section VI. Aggregate and report separate transactions \ninvolving the same patron onto a single form for the calendar year as shown by the following examples:\nExample 1: Jim wins a television with a fair market value of $800 in a drawing on January 17. On October 16 \nof the same year, Jim wins a cash door prize of $300. Issue Form 1099-MISC to Jim for $1,100.\nExample 2: The tribal gaming operation has a 4th of July drawing for a vehicle. Players that put at least \n$1,000 cash into slot machines, receive a ticket. Also, any table game player who buys in with $100 or more \nreceives a ticket. All the drawing tickets are dropped into a secure box and held until the day of the drawing. \nOn July 4, a ticket is drawn, and the winner receives the vehicle. The casino issues a Form 1099–MISC to the \nwinner.\nNote: If an employee of the tribal gaming operation wins a prize see Section IV regarding reporting.\nThe IRS may assess penalties against a tribal gaming operator if the Form 1099 or Form W-2G contains \nincomplete or incorrect information. Publication 5343, Helpful Hints for Indian Tribes and Tribal Entities \nto Avoid Penalties on Federal Tax Deposits and Information Returns, offers suggestions on how to avoid \npenalties and outlines what to do if the IRS assesses penalties.\n25\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nWithholding\nTribal gaming operations making payment of certain gambling winnings must withhold tax from these \npayments. This is referred to as regular gambling withholding. The current rate for this withholding is 24%. \nThe tribal gaming operation reports the amount of gambling withholding on Form 945, Annual Return of \nWithheld Federal Income Tax. If there are tribal-state compact requirements for state withholding, the tribal \ngaming operation reports that amount on the state forms.\nWithhold at the 24% rate if the winnings minus the wager are more than $5,000 and are from:\n• Sweepstakes;\n• Wagering pools;\n• Lotteries;\n• Wagering transactions in a pari-mutuel pool with respect to horse races, dog races or jai alai, if the \nwinnings are at least 300 times the amount wagered; or\n• Other wagering transactions, if the winnings are at least 300 times the amount wagered.\nRegular gambling withholding doesn’t apply to winnings from bingo, keno or slot machines, nor does it apply \nto winnings from other wagering transactions if the winnings are $5,000 or less. However, backup withholding \nmay apply if the winner doesn’t provide a TIN.\nRegular gambling withholding applies to the total amount of gross proceeds, not merely the amount over \n$5,000. View About Form W-2G, Certain Gambling Winnings for regular withholding rates on gambling \nwinnings.\nTax Year Effective Date\nRate\n2005 - 2017\n25% \n2018 - 2025\n24% \nIf a wagering win is not cash, the fair market value of the item won determines the amount of the winnings. If \nrequired, the gaming operation applies withholding or backup withholding rates to the fair market value of the \nitem won. It may collect the amount from the winner before delivering the win or pay the taxes on the winner’s \nbehalf and increase the amount of the win. The Form W-2G instructions for non-cash payments provides \ndetailed examples.\nWhat if the tribal gaming operation pays the tax as a part of the winner’s proceeds? If a tribal gaming \noperation wants to award the full amount of the win, then the win needs to be “grossed up.” The tribal \ngaming operation pays the federal tax it is required to withhold without deducting the taxes from the winner’s \nproceeds, and the winner’s proceeds are deemed to include the tax paid by the tribal gaming operation. On \nForm W-2G, the tax paid by the tribal gaming operation appears in the box for federal income tax withheld. \nThe tax paid is also added to the amount of the winnings and the combined amount is reported as the win.\nThe following chart illustrates the withholding and backup withholding rates.\nTax Year Effective Date\nWithholding Rate/Percentage\nBackup Withholding Rate/Percentage\n2005 - 2017\n33.33% \n38.89% \n2018 - 2025\n31.58% \n31\n.58% \n26\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nNote: These rates are subject to change when the underlying withholding rates change (check rates on irs.gov \nor contact your ITG specialist)\nBackup withholding applies when the winner fails to provide a TIN to the tribal gaming operation for a \nreportable win or prize. If the TIN does not contain nine digits or contains alpha characters, the winner has not \nprovided a valid TIN. The gaming operation can use a Form W-9 to request a winner’s TIN. If the tribal gaming \noperation makes payment before securing the TIN, then it may be held liable for backup withholding taxes. \nThe following chart illustrates the backup withholding rates (rates can change – check irs.gov).\nTax Year Effective Date\nRate/Percentage\n2005 - 2017\n28% \n2018 - 2025\n24% \nExample 1: A tribal gaming operation owes a reportable pull-tab win of $750 to a single ticket winner. The \nwinner would only give their name and address. Since the winner failed to supply a TIN, the tribal gaming \noperation should collect backup withholding of $180 ($750 times 24%) and pay the winner $570 ($750 - \n$180). If the winner had supplied their TIN, no withholding would be required.\nReporting Withholding – The tribal gaming operation must use Form 945 to report regular withholding from \ngaming proceeds. Report withholding on line 1 and backup withholding on line 2. File this form annually by \nJanuary 31 of the year following the year of the winnings.\nNote: If you made deposits on time in full payment of the taxes for the year, confirm the grace period filing by \nreviewing Form 945 instructions.\nThe table below identifies games and when withholding and backup withholding are required.\nGame\nRegular Gambling Withholding \nWinnings More Than\nBackup Withholding Winnings Equal to or More Than \n(When no TIN Is Furnished)\nBingo\nN/A\n$1,200\nSlot machines\nN/A\n$1,200\nKeno\nN/A\n$1,500\nWagering transaction ($5,000 or less)\nN/A\n$600\nLotteries, sweepstakes, horse races, \ndog races, instant bingo game prizes/\npull-tabs and jai alai\n$5,000\n$600\nWagering transactions when winnings \nare at least 300 times the amount \nwagered\n$5,000\n$600\nA tribal gaming operation is responsible for paying to the IRS the amount of regular gambling withholding or \nbackup withholding due regardless if it collects the withholding from the recipient. The best time to collect \nwithholding or backup withholding is before paying the winnings.\nExample: Jack purchased a $1 ticket for a raffle conducted by a tribal gaming operation. On October 31, the \ndrawing was held, and Jack won $6,000. Since the proceeds from the wager are greater than $5,000 ($6,000 \nminus the $1 cost of the ticket), the tribal gaming operation must withhold $1,439.76 ($6,000 prize-$1 wager \nX 24%). Jack receives $4,560.24 cash. If the tribe fails to withhold, it will be liable for the tax.\nThe IRS will assess penalties for failure to deposit taxes withheld, failure to file a return on time and failure to \npay taxes on a return.\n27\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nVerifying Residency\nIf the winning patron provides you a foreign address and no Social Security number you should withhold at \n30% for nonresident aliens on Form 1042-S. Form 1042-S may either be filed on paper or electronically, using \nthe FIRE system. For more information, see Publication 1187, Specifications for Electronic Filing of Form \n1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.\nNote: Gaming operations report foreign person withholding on Form 1042, not Form 945.\nIf the winner cannot provide a valid driver’s license and Social Security number, then you should request other \nforms of identification, such as:\n• National identification card\n• U.S. state-issued identification card\n• Passport\n• Visa\n• U.S. military identification card\n• U.S. Citizenship and Immigration Service (USCIS) photo identification\n• U.S. resident alien card (often referred to as a “green card”)\nIf the winner does not have a Social Security number or a U.S. address, provide them with Form W-8BEN, \nCertificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting \n(Individuals). Usually nonresident aliens (commonly known as foreign persons) are visitors from other \ncountries or are temporarily residing in the U.S. If the individual is a nonresident alien, use Form 1042-S, \nForeign Person’s U.S. Source Income Subject to Withholding, to report payments made to them.\nNote: Individuals born in U.S. Virgin Islands, Puerto Rico and Guam are generally U.S. citizens and receive \nForms 1099/W-2G. Persons born in American Samoa or the Commonwealth of Northern Mariana Islands are \nconsidered nonresident aliens subject to foreign withholding and Form 1042-S.\nIn addition, the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers \nand enforces economic and trade sanctions based on U.S. foreign policy and national security goals against:\n• Targeted foreign countries and regimes, terrorists, international narcotics traffickers;\n• Those engaged in activities related to the proliferation of weapons of mass destruction; and\n• Other threats to the national security, foreign policy or economy of the United States.\nAs part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled \nby, or acting for or on behalf of, targeted countries. OFAC also lists individuals, groups and entities, such \nas terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, \nthese individuals and companies are called “Specially Designated Nationals.” Their assets are blocked and \nU.S. persons are generally prohibited from dealing with them. Consult this list before making payments \nto nonresident aliens. Note, U.S. persons can be on this list. OFAC has authority to assess penalties for \ncompliance failures.\nUnlike the requirements for Forms W-2G and 1099-MISC, there is no dollar threshold for withholding or \nreporting purposes related to Form 1042-S. A tribal gaming operation must withhold taxes and report any \ngambling proceeds or other payments paid to a nonresident. The withholding rate on nonresident aliens is \ngenerally 30% unless the foreign country has a tax treaty with the U.S. for a lower rate.\n28\n",
"Gaming Tax Law and Bank Secrecy Act Issues\n29\nYou can use Form W-8BEN for status determination of nonresident aliens. Use Section 1 for identification. \nNonresident aliens may claim a lower withholding rate under a treaty, if applicable, by preparing Section 2 \nof Form W-8BEN. Refer to Publication 901, U.S. Tax Treaties, and Publication 515, Withholding of Tax on \nNonresident Aliens and Foreign Entities.\nA patron can submit a Form W-8BEN to receive a reduced rate or an exemption from withholding as \na resident from a tax treaty country. However, a winner still needs to provide a U.S. TIN to receive this \ntreatment. If a winner is from a treaty country but does not have a U.S. TIN, then withhold at 30% on Form \n1042-S.\nException – Proceeds from certain games are exempt from taxation. You are not required to impose tax or \nreport gambling income of a nonresident alien playing traditional blackjack, baccarat, craps, roulette and big-\n6 wheel games in the United States.\nUse Form 1042 to report payments made to nonresident aliens and required withholding. File Form \n1042-T with paper Forms 1042-S. Submit these forms to the IRS by March 15 of the following year. You may \nvoluntarily file electronically using the FIRE system. If you file 250 or more Forms 1042-S during a year, then \nthe tribal gaming operation must submit them electronically. The IRS may assess penalties against a tribal \ngaming operator if the information shown on the Form 1042-S is incomplete or incorrect.\nA tribal gaming operation is responsible for paying to the IRS the amount of foreign withholding due, whether \nor not it collects the withholding from the recipient. The best time to collect foreign withholding is before it \nis paid. The IRS will assess penalties for failure to deposit taxes withheld, failure to file a return on time and \nfailure to pay taxes on a return.\nFIRE\nYou can file electronically using the Filing Information Returns Electronically (FIRE) System. The FIRE System \noperates 24 hours a day, 7 days a week. Publication 1220, Specifications for Electronic Filing of Forms 1097, \n1098, 1099, 3921, 3922, 5498, and W-2G, provides information on preparing files for upload through the FIRE \nSystem. You can use FIRE to file Forms 1042-S, 1098, 1099, 8027 and W-2G. If you file 250 or more of these \nreturns for any calendar year, you must file your information returns electronically. If you file fewer than 250 \ninformation returns, then you can voluntarily use the FIRE System.\nThe benefits of using FIRE include:\n• It’s paperless - no Form 4804 requirements\n• It’s a secure system that supports SSL 128-bit encryption\n• It’s easy to use\n• It’s efficient, with a 1-2 day notification of receipt of returns\n• It’s fast because transmission time is reduced by up to 95% \n• It’s flexible because due dates are extended for electronically filed forms 1098, 1099 and W-2G\nTo enroll, complete Form 4419, Application for Filing Information Returns Electronically (FIRE), and mail it to \nIRS-Martinsburg Computing Center (MCC). You can also contact MCC toll-free at 866-455-7438 between \n8:30 a.m. and 4:30 p.m. Eastern time or by email.\n",
"Gaming Tax Law and Bank Secrecy Act Issues\n30\nGaming Withholding and Reporting Threshold — Forms Needed\nGame\nForm \n1099 \nRequired\nForm W-2G \nProceeds \nNot Reduced \nby Wager\nForm W-2G \nProceeds \nReduced by \nWager\nForm W-2G \nWithholding \nRequired 1\nForm 1042-S \nForeign Payouts \nVerifiable \nPayments 2\nExcise Tax (Based on \nthe Wager)\nSlot win (slot tournament with entry fee)\n$1,200\nYes\nNo\nBingo win (Bingo tournament with entry \nfee)\n$1,200\nYes\nNo\nKeno win (IRC 4421(2)(A) applicable) 3, 5\n$1,500\nYes\nNo\nKeno win (IRC 4421(2)(A) not applicable) \n4, 5\n$1,500\nYes\nYes\nSweepstakes, lotteries, wagering pools \n(proceeds at least 300 times the amount \nwagered)\n$600\nYes\nYes (state conducted \nlotteries are exempt)\nSweepstakes, lotteries, wagering pools. \nWithholding required regardless of payout \nratio\n$5,000\nYes\nYes (state conducted \nlotteries are exempt)\nWagering transactions with proceeds at \nleast 300 times the amount wagered\n$600\n$5,000\nYes\nNo\nTournament – no entry fee\n$600\nYes\nNo\nTournament – with entry fee 6, 7\nPari-mutuel, including horseracing, dog \nracing and jai alai with proceeds at least \n300 times the amount wagered\n$600\n$5,000\nYes\nNo\nPrizes received with no wager (drawings, \npromotions, bad beat poker win, etc.)\n$600\nYes\nNo\nSports event or contest (only reportable \nif proceeds are at least 300 times the \nwager)\n$600\n$5,000\nYes\nYes\nPull-tabs\n$600\n$5,000\nYes\nYes 8\n1 Winnings proceeds must exceed $5,000 after reduction of the amount wagered\n2 Payments made to nonresident aliens are subject to withholding and reporting on Form 1042-S (Proceeds from traditional blackjack, craps, \nroulette, baccarat or big 6-wheel are exempt from withholding and reporting)\n3 Wagers placed, winners determined and disbursement of prizes made in the presence of all participants\n4 Either advance wagers accepted or winner not required to be present results in excise tax\n5 Multi-race and Multi-way Keno games must be aggregated and reported as a single transaction as indicated above\n6 See Revenue Procedure 2007-57 for poker tournament filing and withholding requirements\n7 For tournaments other than poker tournaments, entry fees must be analyzed to see if the entry fee is a wager, and if the proceeds exceed the \nwager by 300 times or more, or if the tournament is a wagering pool\n8 Electronic (coin-operated) pull-tabs are not subject to the gaming excise tax \nForm W-2G must be issued for slot machine and bingo wins of $1,200 or more and for keno wins of $1,500 or more. Keno winnings from one game must \nbe reduced by the amount wagered in one game.\n",
"31\nGaming Guidelines When to Withhold and Report Gaming Wins\nEnd\nCustomer Wins\nIs the win\nfrom traditional\nblackjack, craps,\nbaccarat, roulette,\nor Big-6 wheel?\nNo withholding\nor reporting is\nrequired.\nIssue Form 1099 if $600 or more.\nNo withholding is required.\nBackup withholding is required for:\nBingo/Slots - $1,200 or more\nKeno - $1,500 or more\nOthers - $600 or more\nNo withholding is required.\nWithhold if win is greater than $5,000 \n(reduced by the amount of the wager). \nFor exceptions see Rev. Proc. 2007-57.\nWithholding if proceeds are more \nthan $5,000 (reduced by the \namount of the wager) if payout \nratio is at least 300 times the \namount of the wager.\nRequest Form W-8 BEN from winner.\nIssue Form 1042-S. Withholding is required.\nIssue Form 1042-S and withhold \nat treaty rate.\nAre they\na nonresident \nalien?\nIs it \nfrom wagering \ntransaction?\nIs Form\nW-8 BEN\nsecured?\nIs the \nwin from a \nsweepstakes,\nwagering pool,\nor lottery?\nIs the win\nfrom bingo, keno,\nor slots?\nDid the customer\nprovide taxpayer ID\nnumber?\nWithholding may be\nrequired.\nIs the rate\nof withholding\naffected by a\ntax treaty?\nYES\nNO\nYES\nNO\nYES\nNO\nNO\nNO\nYES\nNO\nNO\nYES\nYES\nYES\nYES\nNO\nYES\nIssue Form W-2G at:\nBingo or slots - $1,200 or more\nKeno - $1,500 or more (reduced by the amount of the wager)\nAll others - If payout ratios are 300 to 1 or higher and wins are greater \nthan $600, except sweepsakes, wagering pools, and lotteries require \nForm W-2G at $5,000 or more regardless of payout ratio.\n",
"Gaming Tax Law and Bank Secrecy Act Issues\nSECTION VII RESOURCES AND ASSISTANCE\nTax Information Materials\nThe IRS has free tax publications, forms and instructions that cover gaming law topics:\n• Publication 15, (Circular E) Employer’s Tax Guide\n• Publication 15-A, Employer’s Supplemental Tax Guide\n• Publication 509, Tax Calendars\n• Publication 510, Excise Taxes\n• Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities\n• Publication 531, Reporting Tip Income\n• Publication 966, Electronic Federal Tax Payment System, A Guide to Getting Started\n• Publication 1771, Charitable Contributions - Substantiation and Disclosure Requirements\n• Publication 4132, EFTPS Online Factsheet\n• Publication 4268, Employment Tax for Indian Tribal Governments\n• Annual Instructions for Forms 1099, 1098, W-2G, 8027, 1042-S\n• Title-31-Bank Secrecy Act tool\n• Tip Income Reporting tool\n• Gaming Information Return Reporting tool\n• Employment Tax Videos for ITG\nYou can view tax-related information and download most publications and forms at IRS.gov, or you can order \nthem at no charge by calling 800-829-3676.\nReporting Abuses/Schemes\nIRS continues to work with tribes and tribal officials to address financial abuses and schemes being promoted \nin Indian country. Working together can help ensure the integrity of tribal finances, and eliminate the threats \nposed by individuals with schemes that appear “too good to be true” and often are.\nIf you are aware of financial impropriety, or of a promoter advocating a scheme that appears highly suspect, \nyou can contact the ITG Abuse Detection and Prevention Team at 503-415-7080, or by email at tege.itg.\[email protected].\nCustomer Service Assistance\nVisit IRS.gov/tribes for tribal tax law information, call toll-free for assistance, or write or email our office with \nyour questions.\n• Indian Tribal Governments \nSE:T:GESS:ITG \nInternal Revenue Service \n1111 Constitution Avenue, NW, \nWashington, DC 20224\n• 877-829-5500\n• Email: [email protected]\n"
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i1097btc.pdf
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1219 Inst 1097-BTC (PDF)
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https://www.irs.gov/pub/irs-pdf/i1097btc.pdf
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[
"Instructions for Form \n1097-BTC\n(Rev. December 2019)\nBond Tax Credit\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code unless \notherwise noted.\nFuture Developments\nFor the latest information about developments related to \nForm 1097-BTC and its instructions, such as legislation \nenacted after they were published, go to IRS.gov/\nForm1097BTC.\nReminders\nIn addition to these specific instructions, you also should use \nthe current General Instructions for Certain Information \nReturns. Those general instructions include information \nabout the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and voided returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the current general instructions from General \nInstructions for Certain Information Returns at IRS.gov/\n1099GeneralInstructions or go to IRS.gov/Form1097BTC.\nContinuous-use form and instructions. Form 1097-BTC \nand these instructions have been converted from an annual \nrevision to continuous use. Both the form and instructions will \nbe updated as needed. For the most recent version, go to \nIRS.gov/Form1097BTC.\nOnline fillable forms. You may fill out the form, found \nonline at IRS.gov/Form1097BTC, and send Copy B to the \nrecipient. For filing with the IRS, follow the applicable \nprocedures if you are required to file electronically, or, for \nthis form only, if you are qualified to file on paper, send in \nthe black-and-white copy A with Form 1096 that you print \nfrom the IRS website.\nSpecific Instructions\nIssuers of certain tax credit bonds (or their agents) and \nrecipients of Form 1097-BTC from the bond issuer or agent, \nsuch as mutual funds or partnerships, who are further \ndistributing the credit must file Form 1097-BTC for each tax \ncredit distributed from the following tax credit bonds.\n• New clean renewable energy bonds.\n• Qualified energy conservation bonds.\n• Qualified zone academy bonds.\n• Qualified school construction bonds.\n• Clean renewable energy bonds.\n• Build America bonds (Tax Credit).\nFilings of Form 1097-BTC with respect to a bond, by the \nissuer or the issuer's agent, must be made on a separate \nForm 1097-BTC for each bond.\nFor tax credit bonds issued with two or more maturities, \neach maturity must be reported separately on the Form \n1097-BTC issued by the bond issuer or its agent.\nRecipients of Form 1097-BTC from the bond issuer or \nagent, such as brokers, nominees, mutual funds, or \npartnerships, who are further distributing the credit must file \nonly one Form 1097-BTC per recipient or account, \naggregating credit from all applicable bonds.\nNote. Issuers that elected to issue build America bonds \n(Direct Pay) under section 54AA(g) or specified tax credit \nbonds under section 6431(f) to receive a refundable credit \nunder section 6431(a) in lieu of tax credits under section 54A \nshould not file Form 1097-BTC.\nDefinitions\nTax credit bond. Generally, a tax credit bond is an \nobligation issued under sections 54, 54A, 54AA, 1397E, or \n1400N(l) that entitles the taxpayer holding such bond on one \nor more credit allowance dates occurring during any tax year \nto a credit against the federal income tax imposed for that tax \nyear.\nPublic Law Number 115-97, 131 Stat. 2054 (2017), \nrepealed sections 54, 54A-F, and 54AA effective for \nbonds issued after December 31, 2017.\nQualified tax credit bond. Qualified tax credit bonds under \nsection 54A include new clean renewable energy bonds \nunder section 54C, qualified energy conservation bonds \nunder section 54D, qualified zone academy bonds under \nsection 54E, and qualified school construction bonds under \nsection 54F.\nNew clean renewable energy bond. An obligation issued \nbefore January 1, 2018, that is part of an issue, 100% of the \navailable project proceeds of which are to be used for capital \nexpenditures incurred by governmental bodies, public power \nproviders, or cooperative electric companies for one or more \nqualified renewable energy facilities, as defined in section \n54C. The annual credit allowed is 70% of the annual credit \namount determined by applying section 54A(b).\nQualified energy conservation bond. An obligation issued \nbefore January 1, 2018, that is part of an issue, 100% of the \navailable project proceeds of which are to be used for one or \nmore qualified energy conservation purposes, as defined in \nsection 54D. The annual credit allowed is 70% of the annual \ncredit amount determined by applying section 54A(b).\nQualified zone academy bond. An obligation issued \nbefore January 1, 2018, that is part of an issue, 100% of the \navailable project proceeds of which are to be used for a \nqualified purpose with respect to a qualified zone academy \nestablished by an eligible local education agency, as \nprovided in section 54E; or an obligation that is part of an \nissue, 95% or more of the proceeds of which are to be so \nCAUTION\n!\nOct 31, 2019\nCat. No. 54657F\n",
"used and issued before October 4, 2008, as provided in \nsection 1397E.\nQualified school construction bond. An obligation issued \nbefore January 1, 2018, that is part of an issue, 100% of the \navailable project proceeds of which are to be used for the \nconstruction, rehabilitation, or repair of a public school facility \nor for the acquisition of land on which such a facility is to be \nconstructed with the proceeds, as provided in section 54F.\nClean renewable energy bond. An obligation issued after \nDecember 31, 2005, and before January 1, 2010, that is part \nof an issue, 95% or more of the proceeds of which are used \nfor capital expenditures incurred by qualified borrowers for \none or more qualified projects, as defined in section 54.\nBuild America bond (Tax Credit). An obligation issued \nafter February 17, 2009, and before January 1, 2011, issued \nby a state or local government (excluding private activity \nbonds under section 141) as defined in section 54AA(d).\nWho Must Receive Form 1097-BTC\nEach person who is allowed a tax credit as a holder, directly \nor indirectly, of a tax credit bond or a stripped credit coupon \non one or more credit allowance dates during the calendar \nyear in an amount of at least $10 must be issued Form \n1097-BTC.\nCredit Allowance Dates\nThe tax credit from tax credit bonds or stripped credit \ncoupons is allowed on each credit allowance date for which \nthe bond was outstanding or to which the stripped credit \ncoupon corresponds. For qualified tax credit bonds and \nclean renewable energy bonds, the credit allowance dates \nare March 15, June 15, September 15, December 15, and \nthe last day on which the bond is outstanding. For bonds \nissued during the 3-month period ending on a credit \nallowance date, the amount of the credit is determined \nratably based on the portion of the 3-month period during \nwhich the bond is outstanding. The same ratable \ndetermination of credit applies when a bond is redeemed or \nmatures. For build America bonds (Tax Credit), the credit \nallowance dates are the interest payment dates. For qualified \nzone academy bonds issued before October 4, 2008, the \ncredit allowance date is the last day of the 1-year period \nbeginning on the issue date of the bond and each \nanniversary of such day thereafter.\nThe tax credit allowed to holders of any tax credit bonds or \nstripped credit coupons is treated as interest which is \nincluded in gross income and must be reported as interest \nincome on a Form 1099-INT or Form 1099-OID, as \napplicable. For more information on reporting the tax credit \ntreated as interest income paid from tax credit bonds, see the \nInstructions for Forms 1099-INT and 1099-OID.\nWhen To File\nFor filing due dates, please refer to current General \nInstructions for Certain Information Returns. See Statement \nto Recipient, later, for furnishing statements to recipients.\nPenalties for Failure To File\nThere are penalties for failure to file correct information \nreturns by the due date and for failure to furnish correct \npayee statements. See part O in the current General \nInstructions for Certain Information Returns for details. \nFailure to file Forms 1097-BTC also includes failure to file \nelectronically, when required. For more information on \npenalties for failure to file electronically, see part F in the \ncurrent General Instructions for Certain Information Returns.\nStatement to Recipient\nIf required to file Form 1097-BTC, you must furnish a \nstatement to the recipient quarterly for each credit amount \nindicated on or before the 15th day of the 2nd calendar \nmonth after the close of the calendar quarter in which the \ncredit was allowed.\nQuarterly Furnishing Dates\nReporting period:\nTo recipient (on or before):\n1st Quarter: January–March\nMay 15*\n2nd Quarter: April–June\nAugust 15*\n3rd Quarter: July–September\nNovember 15*\nAnnual/4th Quarter: October–\nDecember\nFebruary 15*\n*Dates may change due to weekends or holidays.\nFor the first 3 quarters, report to the recipient only the \namounts for the months of the applicable quarter. Box 1 \nshould not be completed and box 6 is optional.\nYou are not required to furnish a separate report solely for \nthe 4th quarter because the 4th quarter amounts are reported \nwith the annual filing. For the annual filing, report the credits \nfor each month in boxes 5a–5l; report the total of those \namounts in box 1; and complete the rest of the form as \napplicable. Furnish the annual filing to the recipient by \nFebruary 15, of the subsequent year.\nIf any amounts previously furnished for the first 3 quarters \nneed to be corrected, report the correct amounts for the \nannual reporting and explain the correction to the recipient; \nno explanation is required for the IRS filing.\nFor the report furnished to the recipient (quarterly or \nannual), you may use Copy B or your own substitute \nstatement reporting all the same applicable information (the \nreporting for the first 3 quarters may be furnished \nelectronically). See Pub. 1179 for specific rules about \nproviding substitute statements to recipients.\nThe IRS encourages Form 1097-BTC issuers to provide \nthe credit information to the recipient monthly if applicable, \nand as soon after the end of the month in which a credit \narises as possible.\nFor more information about the requirement to furnish a \nstatement to the recipient, see part M in the current General \nInstructions for Certain Information Returns.\nBond issuer. If issuing the Form 1097-BTC as an issuer of \nthe bond or its agent, box 2a of the form will always reflect \ncode “C” and box 2b must reflect the CUSIP number for the \nbond or stripped coupon, unless a CUSIP number was not \nissued for the bond. See the instructions for boxes 2a and \n2b.\nForm 1097-BTC Issuer's Name, Address, and \nTelephone Number\nEnter the name, street address, city or town, state or \nprovince, country, ZIP or foreign postal code, and telephone \nnumber of the entity issuing the Form 1097-BTC.\nEnter the entity's true name (as set forth in the legal \ndocuments creating it). Enter the address of the entity's \n-2-\nInstructions for Form 1097-BTC (Rev. 12-2019)\n",
"principal office or place of business. Include the suite, room, \nor other unit number after the street address. If the post office \ndoes not deliver mail to the street address and the entity has \na P.O. box, show the box number instead.\nNote. Do not use the address of the registered agent for the \nstate in which the entity is incorporated. For example, if a \nbusiness is incorporated in Delaware or Nevada and the \ncorporation's principal office is located in Little Rock, AR, the \ncorporation should enter the Little Rock address.\nIf the entity receives its mail in care of a third party (such \nas an accountant or an attorney), enter for the street address \n“C/O” followed by the third party's name and street address \nor P.O. box.\nForm 1097-BTC Issuer's TIN\nEnter the Form 1097-BTC issuer's TIN, such as an employer \nidentification number (EIN). Do not truncate the Form \n1097-BTC issuer's TIN. An issuer that does not have an EIN \nshould apply for one. See Form SS-4, Application for \nEmployer Identification Number, and its separate \ninstructions, available at IRS.gov. Applications can be \nsubmitted online, by phone, fax, or mail.\nTruncating Recipient's TIN on Recipient \nStatements\nPursuant to Regulations section 301.6109-4, all filers of this \nform may truncate a recipient's TIN (social security number \n(SSN), employer identification number (EIN), individual \ntaxpayer identification number (ITIN), or adoption taxpayer \nidentification number (ATIN)) on recipient statements. \nTruncation is not allowed on any documents the filer files with \nthe IRS. A filer's TIN may not be truncated on any form. See \npart J in the current General Instructions for Certain \nInformation Returns.\nRecipient's TIN\nEnter the TIN of the recipient of the distributed (or stripped) \ncredit from the tax credit bond. Do not truncate the recipient's \nTIN on the form filed with the IRS. Truncation of the \nrecipient's TIN is allowed on the statement to the recipient. \nSee the current General Instructions for Certain Information \nReturns.\nRecipient's Name\nEnter the name of the recipient of the distributed (or stripped) \ncredit from the tax credit bond. If not an individual, enter the \nentity's true name (as set forth in the legal documents \ncreating it).\nRecipient's Street Address (Including Apt. No.)\nEnter the street address, city or town, state or province, \ncountry, and ZIP or foreign postal code of the recipient's \nprincipal residence, office, or place of business. Include the \napartment, suite, room, or other unit number after the street \naddress. If the post office does not deliver mail to the street \naddress and the entity has a P.O. box, show the box number \ninstead.\nNote. Do not use the address of the registered agent for the \nstate in which the recipient is incorporated.\nIf the recipient receives its mail in care of a third party \n(such as an accountant or an attorney), enter for the street \naddress “C/O” followed by the third party's name and street \naddress or P.O. box.\nCheck, as applicable, whether you are the issuer of the \nbond (or its agent) filing the Form 1097-BTC for the bond, or \nare an entity or a person that received or should have \nreceived a Form 1097-BTC for credit(s) that was or should \nhave been reported and that is distributing part or all of that \ncredit to others.\nBox 1. Total\nEnter the total amount of credits distributed to the recipient \nwith respect to the amounts reported in boxes 5a–5l for the \ncalendar year.\nThis box should be only filled out when filing Copy A and \nwhen the annual statement (Copy B of the form) is sent to the \nrecipient. See Statement to Recipient, earlier.\nBox 2a. Code\nEnter the unique identification number code. Enter “C” for \nCUSIP number, “A” for account number, and “O” if the unique \nidentification number is not an account number or a CUSIP \nnumber, such as a self-provided identification number. If you \nchecked the first box under Form 1097-BTC issuer, and a \nCUSIP number is assigned to the bond(s), enter “C.” If no \nCUSIP number is assigned to the bond(s), and you checked \nthe first box under Form 1097-BTC issuer, use the account \nnumber as the unique identifier and enter “A” or “O” if you are \nusing any other unique identifying number. See Box 2b. \nUnique Identifier next.\nBox 2b. Unique Identifier\nThe unique identification number is assigned by the Form \n1097-BTC issuer and is limited to 39 alphanumeric \ncharacters. It can be the CUSIP number, account number, or \nany other unique identification number by which you track the \nbond transactions.\nFor a bond issuer (or its agent) filing Form 1097-BTC for a \nbond, the unique identification number must start with the \nCUSIP number(s), if available, and may be expanded by the \naccount number or any other self-provided number(s). If a \nCUSIP number was not issued for the bond, the bond issuer \nmay use or devise its own unique identifier, preferably the \naccount number or other reference number by which you \ntrack and account for the bond transaction. A recipient of a \nForm 1097-BTC that issues its own Form 1097-BTC to \nfurther distribute the credit may use or devise its own unique \nidentifier using whatever means it deems best.\nBox 3. Bond Type\nEnter code “101” for clean renewable energy bonds issued \nunder section 54. Enter code “199” for all other bonds.\nMultiple bond types can be entered on one Form \n1097-BTC, other than clean renewable energy \nbonds. Credits from clean renewable energy bonds \nmust be reported on a separate Form 1097-BTC.\nBox 4\nReserved.\nBoxes 5a–5l\nEnter the amount of credit allowed for each month during the \ncalendar year, calculated by using STEPS 1 and 2, following.\nSTEP 1. For each recipient, multiply the outstanding face \namount of the qualified tax credit bond, clean renewable \nenergy bond, or qualified zone academy bond issued before \nTIP\nInstructions for Form 1097-BTC (Rev. 12-2019)\n-3-\n",
"October 4, 2008, by the applicable credit rate. The \noutstanding face amount of the bond is the face amount of \nthe bond minus any principal that has been paid. The credit \nrate for the qualified tax credit bond, clean renewable energy \nbond, or qualified zone academy bond issued before \nOctober 4, 2008, is the rate published on the Treasury Direct \nwebsite under “IRS Tax Credit Bond Rates” at \nTreasuryDirect.gov/govt/rates/rates_irstcb.htm for the first \nday on which there is a binding contract in writing for the sale \nor exchange of the bond.\nThe credit rate for qualified zone academy bonds issued \nbefore July 1, 1999, is 110% (1.10) of the long-term \napplicable federal rate (AFR), compounded annually, for the \nmonth and year the bond is issued. The IRS announces the \nlong-term AFR monthly in a series of revenue rulings \npublished in the Internal Revenue Bulletin.\nFor build America bonds (Tax Credit), multiply by 35% \n(0.35) the amount of interest payable with respect to the \ninterest payment date for which you are filing Form \n1097-BTC or sending a statement to the credit recipient. \nEnter the credit amount so determined in boxes 5a–5l for the \nmonth in which the interest payment date occurred. Thus, if \nthe interest payment dates for a build America bond are June \n30 and December 31, enter the credit amounts in boxes 5f \nand 5l.\nFor qualified zone academy bonds issued before October \n4, 2008, enter the amount so determined in the box 5 that \ncorresponds to the credit allowance date. When filing the \nannual Form 1097-BTC with the IRS, enter the same amount \nin box 1.\nSTEP 2. For qualified tax credit bonds or clean renewable \nenergy bonds only, multiply the credit amount so determined \nin STEP 1 by 25% (0.25) for each credit allowance date you \nhold a qualified tax credit bond or clean renewable energy \nbond during your tax year. Enter the credit amount \ndetermined in STEP 2 in the box for the month in which the \ncredit allowance date occurred.\nExample 1. You issued a qualified energy conservation \nbond on March 15, 2018. For the Form 1097-BTC statement \nfor the March 15, 2020, credit allowance date, due to the \nrecipient by May 15, 2020, you would enter 25% (0.25) of the \namount computed in STEP 1 in 5c. For the Form 1097-BTC \nstatement for the June 15, 2020, credit allowance date, due \nto the recipient by August 17, 2020, you would enter 25% \n(0.25) of the amount computed in STEP 1 in box 5f. For the \nForm 1097-BTC statement for the September 15, 2020, \ncredit allowance date, due to the recipient by November 16, \n2020, you would enter 25% (0.25) of the amount computed in \nSTEP 1 in 5i. For the annual Form 1097-BTC and December \n15, 2020, credit allowance date, due to the recipient by \nFebruary 16, 2021, and to the IRS by March 1, 2021 (March \n31, 2021, if filed electronically), enter 25% (0.25) of the credit \namount determined in STEP 1 in box 5l and 100% (1.0) of the \ncredit amount determined in STEP 1 in box 1.\nHowever, the 25% will be prorated for any credit \nallowance date if a clean renewable energy bond or qualified \ntax credit bond is issued, redeemed, or matures during the \n3-month period ending on a credit allowance date with \nrespect to which you are reporting the credit. The percentage \nof credit allowed for that credit allowance date is prorated for \nthe number of days the bond was outstanding during the \n3-month period.\nSee Caution regarding the repeal of sections 54, 54A, and \n54AA, earlier.\nExample 2. A qualified zone academy bond that you \nissued matures on March 23, 2020. Since the bond was not \noutstanding for the entire 3-month period on June 15, 2020, \nthe prorated portion of the 25% is figured by dividing (a) the \nnumber of days the bond was outstanding beginning on the \nday after the prior (March 15) credit allowance date and \nending on March 23, 2020, by (b) the number of days \nincluded in the 3-month period beginning on the day after the \nprior (March 15) credit allowance date and ending on the \nnext (June 15) credit allowance date. See Proration \nCalculation below.\nProration Calculation\n8 days (number of days from March \n16 through March 23) \n= 0.087 x 0.25 = 2% (0.02)\n92 days (number of days from \nMarch 16 through June 15)\nThus, for the credit allowance date with respect to the \n3-month period in which the bond matures, you would \nmultiply the credit amount determined in STEP 1 by the \nprorated percentage. In Example 2, for the 2nd quarter \nreporting period for 2020, due to the recipient by August 17, \n2021, you would enter the amount determined by multiplying \n2% (0.02) with the credit amount determined in STEP 1 in \nbox 5f. You would carry the same percentage to the Total \nannual credit reported in box 1 for the annual/4th quarter \nreporting period filed with the IRS and sent to the recipient. \nThus, in Example 2, you would enter in box 1 “27%” (0.27) of \nthe amount determined in STEP 1.\nNote. For new clean renewable energy bonds issued under \nsection 54C and qualified energy conservation bonds issued \nunder section 54D, report the credit amount after the 70% \nlimit has been applied.\nBox 6. Comments\nEnter any additional information.\n-4-\nInstructions for Form 1097-BTC (Rev. 12-2019)\n"
] |
p4573.pdf
|
1019 Publ 4573 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4573.pdf
|
[
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n I R S logo\nTax Exempt & \nGovernment Entities \nGroup Exemptions \nWhat is a group exemption letter? \nThe IRS sometimes recognizes a group of organizations as tax-exempt if they are affiliated with a central organization. This avoids the \nneed for each of the organizations to apply for exemption individually. A group exemption letter has the same effect as an individual \nexemption letter except that it applies to more than one organization. \nWhat is the reason for group exemptions? \nGroup exemptions are an administrative convenience for both the IRS and organizations with many affiliated organizations. Subordinates \nin a group exemption do not have to file, and the IRS does not have to process, separate applications for exemption. Consequently, \nsubordinates do not receive individual exemption letters. \nWhat types of organizations can qualify for group exemptions? \nExempt organizations that have, or plan to have, related organizations that are very similar to each other may apply for a group \nexemption. \nWhat are central and subordinate organizations? \nGroups of organizations with group exemption letters have a “head” or main organization, referred to as a central organization. The central \norganization generally supervises or controls many chapters, called subordinate organizations. The subordinate organizations typically have \nsimilar structures, purposes and activities. \nExample: X is a national, fraternal organization exempt under Internal Revenue Code (IRC) Section 501(c)(8). X has several state and hundreds of \nlocal chapters that have nearly identical articles of incorporation, by-laws, purposes and activities. As the national organization, X is considered the \ncentral organization; the state and local chapters are subordinate organizations and are covered under X’s group exemption. \nWhat criteria must organizations meet to be included in a group exemption? \nTo qualify for a group exemption, the central organization and its subordinates must have a defined relationship. Subordinates must be: \n• \nAffiliated with the central organization; \n• \nSubject to the central organization’s general supervision or control; and \n• \nExempt under the same paragraph of IRC 501(c), though not necessarily the paragraph under which the central organization is \nexempt. \nRevenue Procedure 80-27, 1980-1 C.B. 677 sets forth additional criteria. \nMust the central organization be recognized by the IRS as tax-exempt before the organization can obtain a \ngroup exemption? \nNo. A central organization may submit its request for a group exemption at the same time it submits its exemption application on Form \n1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code; Form 1024, Application for \nRecognition of Exemption Under 501(a); or Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal \nRevenue Code. Although churches are not required to apply for recognition of their own status to be tax-exempt, under the procedures \nfor group rulings, a church must request recognition of its own exempt status to be the central organization in a group ruling. \nAre there any special rules for churches? \nWith limited exceptions, churches are subject to the same general requirements on group rulings as other organizations. However, churches are \nnot required to file annual updates notifying the IRS of changes in the composition of the group. \nWhere does a central organization apply for exemption and submit a request for a group exemption? \nA central organization submits its application for exemption, the request for a group exemption and the required user fee as directed \nin the most recent revenue procedure on Exempt Organizations determination letters on exempt status (Rev. Proc. 2019-5, updated \nannually). \nPublication 4573 (Rev. 10-2019) Catalog Number 49351Q Department of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \nroup Exemptions | 2 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nWhat must a request for a group exemption contain? \nThe central organization submits a letter to the IRS on behalf of itself and its subordinates. The letter includes: \na. Information verifying the existence of the required relationship; \nb. A sample copy of a uniform governing instrument (such as a charter, trust indenture or articles of association) adopted by the \nsubordinates; \nc. A detailed description of the subordinates' purposes and activities including the sources of receipts and the nature of expenditures; \nd. An affirmation by a principal officer that, to the best of the officer’s knowledge, the subordinates' purposes and activities are as \nstated in (b) and (c) above; \ne. A statement that each subordinate to be included in the group exemption letter has furnished written authorization to the central \norganization; \nf. \nA list of subordinates to be included in the group exemption letter to which the IRS has issued an outstanding ruling or determination \nletter relating to exemption; \ng. If the application for a group exemption letter involves IRC 501(c)(3), an affirmation to the effect that, to the best of the officer’s \nknowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as defined in IRC 509(a); \nh. For each subordinate that is a school claiming exemption under IRC 501(c)(3), the information required by Rev. Proc. 75-50, 1975-2 \nC.B. 587 (as modified by Rev. Proc. 2019-22, 2019-22 I.R.B 1260) and Revenue Ruling 71-447, 1971-2 C.B. 230; and \ni. \nA list of the names, mailing addresses (including ZIP Code), actual addresses (if different) and employer identification numbers of \nsubordinates to be included in the group exemption letter. A current directory of subordinates may be furnished in lieu of the list if it \nincludes the required information and if the subordinates not to be included in the group exemption letter are identified. \nThe rules for applying for a group exemption are set forth in Rev. Proc. 80-27, 1980-1 C.B. 677. \nHow does the group exemption process work? \nUpon receipt of an application Form 1023, 1024 or 1024-A and a request for group exemption, the IRS first determines whether the \ncentral organization and the existing subordinates qualify for tax exemption. Once the IRS grants the exemption, the central organization \nis responsible for: \n1. Ensuring that its current subordinates continue to qualify to be exempt; \n2. Verifying that any new subordinates are exempt; and \n3. Updating the IRS annually of new subordinates, subordinates no longer to be included and subordinates that have changed their \nnames or addresses. \nWhat is included in an annual update? \nAnnual updates must contain: \na. Information about changes in purposes, character or method of operation of subordinates included in the group exemption letter. \nb. Lists of: \n1. Subordinates that have changed their names or addresses during the year; \n2. Subordinates no longer to be included in the group exemption letter because they have ceased to exist, disaffiliated or \nwithdrawn their authorization to the central organization; and \n3. Subordinates to be added to the group exemption letter because they are newly organized or affiliated or have newly authorized \nthe central organization to include them. \nEach list must show the names, mailing address (including ZIP Codes), actual address (if different) and employer identification \nnumbers of the affected subordinates. \nAn annotated directory of subordinates will not be accepted for this purpose. If none of these changes occurred, the central \norganization must submit a statement to that effect. \nc. The same information about new subordinates that was required in the initial request. If a new subordinate does not differ in any \nmaterial respects from the subordinates included in the original request, however, a statement to this effect may be submitted in lieu \nof detailed information. \nG\n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nWhere does a central organization submit an annual update? \nAnnual updates go to: \nInternal Revenue Service Center \nOgden, Utah 84201-0027 \nWhat are the filing requirements for organizations that hold group exemptions? \nA group exemption letter does not change the filing requirements for exempt organizations. The central organization and the sub\nordinates must file Forms 990, Return of Organization Exempt from Income Tax, (or 990-EZ, Short-Form Return of Organization Exempt \nfrom Income Tax), unless they meet a filing exception. If the central organization is required to file an annual return, it must file its own \nseparate return but may also file a group return on behalf of some or all its subordinates. To see how the subordinates are reported on a \ngroup return, please consult the form instructions. \nHow do I verify that an organization is included as a subordinate in a group exemption ruling? \nThe central organization that holds a group exemption (rather than the IRS) determines which organizations are included as subordinates \nunder its group exemption ruling. Therefore, you can verify that an organization is a subordinate under a group exemption ruling by \nconsulting the official subordinate listing approved by the central organization or by contacting the central organization directly. You may \nuse either method to verify that an organization is a subordinate under a group exemption ruling. \nHow do donors verify that contributions are deductible under Section 170 with respect to a subordinate \norganization in a Section 501(c)(3) group exemption ruling? \nSubordinate units that are included in group exemption letters are not listed separately in Tax Exempt Organization Search (Publication \n78 data). Donors should obtain a copy of the group exemption letter from the central organization. The central organization’s listing in \nTax Exempt Organization Search will indicate that contributions to its subordinate organizations covered by the group exemption ruling \nare also deductible, even though most subordinate organizations are not separately listed in Tax Exempt Organization Search or on the \nExempt Organizations Business Master File. Donors should then verify with the central organization, by either of the methods indicated \nabove, whether the particular subordinate is included in the central organization's group ruling. The subordinate organization need not \nitself be listed in Tax Exempt Organization Search or on the EO Business Master File. Donors may rely on central organization verification \nabout deductibility of contributions to subordinates covered in a Section 501(c)(3) group exemption ruling. \nWhere can you get more information? \nYou can get more information about group exemptions and the group ruling process from the IRS Exempt Organizations Office: \nEO Website www.irs.gov/eo \nPublication 557, Tax-Exempt Status for Your Organization \nEO Customer Account Services \nYou may direct questions about group exemptions to the IRS Tax Exempt and Government Entities Customer Account Services \nat 877-829-5500 (toll-free number). \nIf you prefer to write, you may write us at: \nInternal Revenue Service \n \nExempt Organizations Determinations \n \nP.O. Box 2508 \n \nCincinnati, OH 45201 \nGroup Exemptions | 3 \n"
] |
p5352.pdf
|
0819 Publ 5352 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5352.pdf
|
[
"www.irs.gov\nPublication 5352 (8-2019)\n \nDepartment of Treasury Internal Revenue Service\nCatalog Number 72958R \nIndividual Income Tax Returns with \nsmall Business Income and Losses, \nTax Years 2015-2017\nwww.irs.gov/statistics\nStatistics of Income\nIndividual Income Tax Returns \nwith Small Business Income and Losses, \nTax Years 2015–2017\nwww.irs.gov/statistics | \nPublication 5352 (8–2019) Catalog Number 72958R\nDepartment of the Treasury Internal Revenue Service www.irs.gov\nStatistics of Income \nThe IRS Statistics of Income (SOI) Division has recently made available on SOI’s Tax Stats Web Page new \ntabulations for individual returns that contain small business income or losses. These include income from \nSchedule C, Profit or Loss from Business, Schedule E, Supplemental Income or Loss, and Schedule F, Profit \nor Loss from Farming.\nhttps://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-return-form-1040-statistics\nHighlights of the Data\n●For 2017, nearly 28 percent of all individual income\ntax returns (42.3 million returns) had some small\nbusiness income and/or losses. This was a small\nincrease from both 2015 and 2016 (27.5%).\n●These taxpayers reported 47.1 percent of total\nadjusted gross income (AGI) and paid 60.4 percent\nof income tax. Similar percentages were reported\nfor 2015 and 2016.\n●For 2017, average AGI for returns with small busi-\nnesses was $122,414 vs. $72,006 average AGI for all\nreturns. Both were increases from 2015 ($115,900 vs.\n$67,846) and 2016 ($114,274 vs. $68,049).\n●For 2017, salaries and wages were the largest\nsource of income for small businesses (52.8%), a\ndecline from 2015 (53.7%) and 2016 (55.0%). In\ncontrast, wages represented 68.8 percent of AGI for \nthe overall tax return population for 2017.\n●For 2017, net income less losses from Schedules C,\nE and F totaled $1.1 trillion (21.1% of AGI for returns\nwith these schedules). Similarly, this income was\n$1.0 trillion for 2015 and 2016.\n●In each of the three years, the largest portion of\nsmall business income came from partnership/S\ncorporation income less losses. For 2017, it was\n$680.3 billion (13.1% of AGI); for 2015, it was $628.7\nbillion; and $629.0 billion for 2016.\n●For 2017, the average tax rate for returns with\nsmall business income or losses was appreciably\nhigher (18.7%) than the overall rate for individual tax\nreturns (14.6%). \n0\n10%\n20%\n30%\n40%\n50%\n60%\n70%\nNumber of returns\nAGI\nTotal income tax\nReturns with Small Business Income\nas a Percentage of All Returns\n2015 2016 2017 \n0\n2%\n4%\n6%\n8%\n10% 12% 14% 16% 18% 20%\nAll returns\nReturns with small business income\n2015\n2016\n2017\nAverage Tax Rate \n 0\n 10%\n 20%\n 30%\n 40%\n 50%\n 60%\nOther income items\nOther Schedule E income\nTaxable interest and\nordinary dividends\nBusiness or profession\n(Schedule C) and Farm\n(Schedule F) income/loss\nTaxable IRA distributions,\npensions, and annuities\nPartnership and\nS corporation\nincome/loss\nSales of capital assets\nreported on Form 1040 and\ncapital gain distributions\nSalaries and wages\nIncome Items as a Percentage of Adjusted\nGross Income for Returns with Small\nBusiness Income\n2017\n2016\n2015\n"
] |
f1098c.pdf
|
1119 Form 1098-C (PDF)
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https://www.irs.gov/pub/irs-pdf/f1098c.pdf
|
[
" \nForm 1098-C \n(Rev. November 2019)\nCat. No. 39732R\nContributions of \nMotor Vehicles, \nBoats, and \nAirplanes\nCopy A \nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service \nFile with Form 1096.\nOMB No. 1545-1959 \nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns. \nFor calendar year\n20\n7878\nVOID \nCORRECTED \nDONEE’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no. \nDONEE’S TIN\nDONOR’S TIN\nDONOR’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code \n1 Date of contribution \n2a Odometer mileage\n2b Year \n2c Make\n2d Model\n3 Vehicle or other identification number \n4a \nDonee certifies that vehicle was sold in arm’s \nlength transaction to unrelated party \n4b Date of sale \n4c Gross proceeds from sale (see instructions) \n$ \n5a \nDonee certifies that vehicle will not be transferred for money, other property, or services before completion of material \nimprovements or significant intervening use \n5b \nDonee certifies that vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of \ndonee’s charitable purpose \n5c Donee certifies the following detailed description of material improvements or significant intervening use and duration of use \n6a Did you provide goods or services in exchange for the vehicle? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nYes \nNo \n6b Value of goods and services provided in exchange for the vehicle \n$ \n6c Describe the goods and services, if any, that were provided. If this box is checked, donee certifies that the goods and services \nconsisted solely of intangible religious benefits .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\n7 Under the law, the donor may not claim a deduction of more than $500 for this vehicle if this box is checked .\n.\n.\n.\n.\n ▶\nForm 1098-C (Rev. 11-2019)\nwww.irs.gov/Form1098C\n",
" \nForm 1098-C \n(Rev. November 2019)\nContributions of \nMotor Vehicles, \nBoats, and \nAirplanes\nCopy B \nOMB No. 1545-1959 \nFor Donor \nDepartment of the Treasury - Internal Revenue Service \nIn order to take \na deduction of \nmore than $500 \nfor this \ncontribution, you \nmust attach this \ncopy to your \nfederal tax \nreturn. \nUnless box 5a or \n5b is checked, \nyour deduction \ncannot exceed \nthe amount in \nbox 4c. \nAttachment Sequence No. 155A\nFor calendar year\n20\nCORRECTED (if checked)\nDONEE’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no. \nDONEE’S TIN\nDONOR’S TIN\nDONOR’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code \n1 Date of contribution \n2a Odometer mileage\n2b Year \n2c Make\n2d Model\n3 Vehicle or other identification number \n4a \nDonee certifies that vehicle was sold in arm’s \nlength transaction to unrelated party \n4b Date of sale \n4c Gross proceeds from sale (see instructions) \n$ \n5a \nDonee certifies that vehicle will not be transferred for money, other property, or services before completion of material \nimprovements or significant intervening use \n5b \nDonee certifies that vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of \ndonee’s charitable purpose \n5c Donee certifies the following detailed description of material improvements or significant intervening use and duration of use \n6a Did you provide goods or services in exchange for the vehicle? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nYes \nNo \n6b Value of goods and services provided in exchange for the vehicle \n$ \n6c Describe the goods and services, if any, that were provided. If this box is checked, donee certifies that the goods and services \nconsisted solely of intangible religious benefits .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\n7 Under the law, the donor may not claim a deduction of more than $500 for this vehicle if this box is checked .\n.\n.\n.\n.\n ▶\nForm 1098-C (Rev. 11-2019)\nwww.irs.gov/Form1098C\n",
" \nForm 1098-C \n(Rev. November 2019)\nContributions of \nMotor Vehicles, \nBoats, and \nAirplanes\nCopy C \nOMB No. 1545-1959 \nFor Donor’s \nRecords\nDepartment of the Treasury - Internal Revenue Service \nThis \ninformation is \nbeing furnished \nto the IRS \nunless box 7 \nis checked.\nFor calendar year\n20\nCORRECTED (if checked)\nDONEE’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no. \nDONEE’S TIN\nDONOR’S TIN\nDONOR’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code \n1 Date of contribution \n2a Odometer mileage\n2b Year \n2c Make\n2d Model\n3 Vehicle or other identification number \n4a \nDonee certifies that vehicle was sold in arm’s \nlength transaction to unrelated party \n4b Date of sale \n4c Gross proceeds from sale (see instructions) \n$ \n5a \nDonee certifies that vehicle will not be transferred for money, other property, or services before completion of material \nimprovements or significant intervening use \n5b \nDonee certifies that vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of \ndonee’s charitable purpose \n5c Donee certifies the following detailed description of material improvements or significant intervening use and duration of use \n6a Did you provide goods or services in exchange for the vehicle? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nYes \nNo \n6b Value of goods and services provided in exchange for the vehicle \n$ \n6c Describe the goods and services, if any, that were provided. If this box is checked, donee certifies that the goods and services \nconsisted solely of intangible religious benefits .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\n7 Under the law, the donor may not claim a deduction of more than $500 for this vehicle if this box is checked .\n.\n.\n.\n.\n ▶\nForm 1098-C (Rev. 11-2019)\n(keep for your records)\nwww.irs.gov/Form1098C\n",
"Instructions for Donor \nCaution: You must attach Copy B of Form 1098-C to \nyour income tax return in order to take a deduction for \nthe contribution of a qualified vehicle with a claimed \nvalue of more than $500. (If you e-file your return, you \nmust (a) attach Copy B of Form 1098-C to Form 8453 \nand mail the forms to the IRS, or (b) include \nForm 1098-C as a PDF attachment if your software \nprogram permits.) If you do not attach Copy B of Form \n1098-C to your return (or to Form 8453) when required, \nthe IRS will disallow your deduction. Generally, you \nmust also attach Form 8283, Noncash Charitable \nContributions, if the amount you deduct for all noncash \ngifts is more than $500. See the Instructions for Form \n8283 for exceptions. \nYou received Form 1098-C because you donated a \nmotor vehicle, boat, or airplane (“donated vehicle”) to \nthe charity shown on the front of this form. Generally, \nthe charity must furnish this form to you no later than 30 \ndays after the date it sold the donated vehicle (if box 4a \nis checked) or 30 days after the date of the contribution \n(if box 5a or 5b is checked). If none of these boxes is \nchecked, you must obtain this form by the due date \n(including extensions) of your tax return for the year of \nthe contribution (or, if earlier, the date you file that \nreturn). \nDonor’s taxpayer identification number (TIN). For \nyour protection, this form may show only the last four \ndigits of your TIN (social security number (SSN), \nindividual taxpayer identification number (ITIN), adoption \ntaxpayer identification number (ATIN), or employer \nidentification number (EIN)). However, the issuer has \nreported your complete TIN to the IRS.\nBox 1. Shows the date the charity received the \ndonated vehicle. \nBoxes 2a–2d. Shows the vehicle odometer mileage \nreading (motor vehicles only), make, model, and year of \nthe donated vehicle.\nBox 3. Shows the vehicle identification number (VIN) for \na motor vehicle, the hull identification number for a \nboat, or the aircraft identification number for an airplane. \nBox 4a. This box is required to be checked by the \ncharity to certify that the donated vehicle was sold for \nmore than $500 to an unrelated party in an arm’s length \ntransaction. \nBox 4c. Shows the gross proceeds the charity received \nfrom the sale of the donated vehicle. If box 4a is \nchecked, you generally can take a deduction equal to \nthe smaller of the amount in box 4c or the vehicle’s fair \nmarket value (FMV) on the date of the contribution. \nHowever, if that value was more than your cost or other \nbasis, see Pub. 526, Charitable Contributions. \nBox 5a. This box is required to be checked by the \ncharity to certify that the donated vehicle will not be \nsold before completion of a significant intervening use \nor material improvement by the charity. If the box is \nchecked, you generally can take a deduction equal to \nthe vehicle’s FMV on the date of the contribution. \nHowever, if that value was more than your cost or other \nbasis, see Pub. 526. \nBox 5b. This box is required to be checked by the \ncharity to certify that the donated vehicle is to be \ntransferred to a needy individual in direct furtherance of \nthe donee’s charitable purpose of relieving the poor and \ndistressed or underprivileged who are in need of a \nmeans of transportation. If this box is checked, you \ngenerally can take a deduction equal to the vehicle’s \nFMV on the date of the contribution. However, if that \nvalue was more than your cost or other basis, see \nPub. 526. \nBox 6b. Shows a good faith estimate by the charity of \nthe value of any goods and services provided to you for \nthe donated vehicle. Generally, the amount of your \ncharitable contribution is reduced by the value of the \ngoods and services provided. However, see the \ninstructions for box 6c below. Also, see Contributions \nFrom Which You Benefit in Pub. 526. \nBox 6c. This box is required to be checked by the \ncharity if the goods and services consisted solely of \nintangible religious benefits. If checked, you do not have \nto reduce the amount of your charitable contribution by \nthe value of such benefits. An intangible religious benefit \nmeans a benefit that generally is not sold in a \ncommercial transaction, such as admission to a \nreligious ceremony. \nBox 7. If this box is checked, your deduction in most \ncases equals the smaller of $500 or the donated \nvehicle’s FMV on the date of the contribution. However, \nif that value was more than your cost or other basis, see \nPub. 526. \nFuture developments. For the latest information about \ndevelopments related to Form 1098-C and its \ninstructions, such as legislation enacted after they were \npublished, go to www.irs.gov/Form1098C.\n",
" \nForm 1098-C \n(Rev. November 2019)\nContributions of \nMotor Vehicles, \nBoats, and \nAirplanes\nCopy D \nOMB No. 1545-1959 \nFor Donee\nDepartment of the Treasury - Internal Revenue Service \nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns. \nFor calendar year\n20\nVOID \nCORRECTED \nDONEE’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no. \nDONEE’S TIN\nDONOR’S TIN\nDONOR’S name \nStreet address (including apt. no.) \nCity or town, state or province, country, and ZIP or foreign postal code \n1 Date of contribution \n2a Odometer mileage\n2b Year \n2c Make\n2d Model\n3 Vehicle or other identification number \n4a \nDonee certifies that vehicle was sold in arm’s \nlength transaction to unrelated party \n4b Date of sale \n4c Gross proceeds from sale (see instructions) \n$ \n5a \nDonee certifies that vehicle will not be transferred for money, other property, or services before completion of material \nimprovements or significant intervening use \n5b \nDonee certifies that vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of \ndonee’s charitable purpose \n5c Donee certifies the following detailed description of material improvements or significant intervening use and duration of use \n6a Did you provide goods or services in exchange for the vehicle? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nYes \nNo \n6b Value of goods and services provided in exchange for the vehicle \n$ \n6c Describe the goods and services, if any, that were provided. If this box is checked, donee certifies that the goods and services \nconsisted solely of intangible religious benefits .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\n7 Under the law, the donor may not claim a deduction of more than $500 for this vehicle if this box is checked .\n.\n.\n.\n.\n ▶\nForm 1098-C (Rev. 11-2019)\nwww.irs.gov/Form1098C\n",
"Instructions for Donee \nTo complete Form 1098-C, use: \n• The current General Instructions for \nCertain Information Returns, and\n• The current Instructions for Form \n1098-C.\nTo order these instructions and \nadditional forms, go to \nwww.irs.gov/Form1098C.\nFiling and furnishing. Generally, you \nmust furnish Copies B and C of this \nform to the donor no later than 30 days \nafter the date of sale if box 4a is \nchecked or 30 days after the date of the \ncontribution if box 5a or 5b is checked. \nIf box 7 is checked, do not file Copy \nA with the IRS and do not furnish \nCopy B to the donor. You may furnish \nCopy C to the donor. The donor is \nrequired to obtain Copy C or a similar \nacknowledgment by the earlier of the \ndue date (including extensions) of the \ndonor’s income tax return for the year \nof the contribution or the date that \nreturn is filed. \nFor filing and furnishing instructions, \nincluding due dates, and to request \nfiling or furnishing extensions, see the \ncurrent General Instructions for Certain \nInformation Returns. \nTo file electronically, you must have \nsoftware that generates a file according \nto the specifications in Pub. 1220. \nNeed help? If you have questions \nabout reporting on Form 1098-C, call \nthe information reporting customer \nservice site toll free at 866-455-7438 or \n304-263-8700 (not toll free). Persons \nwith a hearing or speech disability with \naccess to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
i1098c.pdf
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1119 Inst 1098-C (PDF)
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https://www.irs.gov/pub/irs-pdf/i1098c.pdf
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[
"Instructions for Form 1098-C\n(Rev. November 2019)\nContributions of Motor Vehicles, Boats, and Airplanes\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code unless otherwise \nnoted.\nFuture Developments\nFor the latest information about developments related to Form 1098-C \nand its instructions, such as legislation enacted after they were \npublished, go to IRS.gov/Form1098C.\nReminders\nIn addition to these specific instructions, you also should use the current \nGeneral Instructions for Certain Information Returns. Those general \ninstructions include information about the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the general instructions at IRS.gov/\n1099GeneralInstructions or IRS.gov/Form1098C.\nContinuous-use form and instructions. Form 1098-C and these \ninstructions have been converted from an annual revision to continuous \nuse. Both the form and instructions will be updated as needed. For the \nmost recent version, go to IRS.gov/Form1098C.\nOnline fillable form. Due to the very low volume of paper Forms \n1098-C received and processed by the IRS each year, this form has \nbeen converted to an online fillable format. You may fill out this form, \nfound online at IRS.gov/Form1098C, and send Copies B and C to the \ndonor. For filing with the IRS, follow the applicable procedures if you are \nrequired to file electronically, or, for this form only, if you are qualified \nto file on paper, send in the black-and-white copy A with Form 1096 that \nyou print from the IRS website.\nSpecific Instructions\nWho Must File\nA donee organization must file a separate Form 1098-C, Contributions of \nMotor Vehicles, Boats, and Airplanes, with the IRS for each contribution \nof a qualified vehicle that has a claimed value of more than $500. A \nqualified vehicle is any motor vehicle manufactured primarily for use on \npublic streets, roads, and highways; a boat; or an airplane. However, \nproperty held by the donor primarily for sale to customers, such as \ninventory of a car dealer, is not a qualified vehicle.\nContemporaneous Written Acknowledgment\nIf a donor contributes a qualified vehicle to you with a claimed value of \nmore than $500, you must furnish a contemporaneous written \nacknowledgment of the contribution to the donor under section 170(f)\n(12) containing the same information shown on Form 1098-C. \nOtherwise, the donor cannot claim a deduction of more than $500 for \nthat vehicle. Copy B of Form 1098-C may be used for this purpose. An \nacknowledgment is considered contemporaneous if it is furnished to the \ndonor no later than 30 days after the:\n• Date of the sale, if you are required to check box 4a; or\n• Date of the contribution, if you are required to check box 5a or 5b.\nProvide the donor with Copies B and C of Form 1098-C or your own \nacknowledgment that contains the required information. See the current \nGeneral Instructions for Certain Information Returns for information on \nhow to file.\nDo not file Form 1098-C for a contribution of a qualified vehicle \nwith a claimed value of $500 or less. However, you may use it as \nthe contemporaneous written acknowledgment under section \n170(f)(8) by providing the donor with Copy C only. If you use Copy C as \nthe acknowledgment, you must check box 7. In addition, do not \ncomplete boxes 4a through 5c or enter the donor's TIN on the form. You \nmay, but are not required to, enter the donee's federal TIN on the form.\nSection 6720 Penalties\nSection 6720 imposes penalties on any donee organization that is \nrequired under section 170(f)(12) to furnish an acknowledgment to a \ndonor if the donee organization knowingly:\n• Furnishes a false or fraudulent acknowledgment; or\n• Fails to furnish an acknowledgment in the manner, at the time, and \nshowing the information required by section 170(f)(12).\nOther penalties may apply. See part O in the current General \nInstructions for Certain Information Returns.\nAn acknowledgment containing a certification described in box 5a or \n5b will be presumed to be false or fraudulent if the qualified vehicle is \nsold to a buyer other than a needy individual (as explained in the \ninstructions for box 5b) without a significant intervening use or material \nimprovement (as explained in the instructions for box 5a) within 6 \nmonths of the date of the contribution. If a charity sells a donated vehicle \nat auction, the IRS will not accept as substantiation an acknowledgment \nfrom the charity stating the vehicle is to be transferred to a needy \nindividual for significantly below fair market value (FMV). Vehicles sold at \nauction are not sold at prices significantly below FMV, and the IRS will \nnot treat vehicles sold at auction as qualifying for this exception.\nThe penalty for an acknowledgment relating to a qualified vehicle for \nwhich box 4a must be checked is the larger of:\n• The gross proceeds from the sale, or\n• The sales price stated in the acknowledgment multiplied by 39.6% \n(0.396).\nThe penalty for an acknowledgment relating to a qualified vehicle for \nwhich box 5a or 5b must be checked is the larger of:\n• $5,000, or\n• The claimed value of the vehicle multiplied by 39.6% (0.396).\nDonor's TIN\nSee part J of the current General Instructions for Certain Information \nReturns for details on requesting the donor's TIN. If the donor does not \nprovide a TIN, you must check box 7 because the acknowledgment will \nnot meet the requirements of section 170(f)(12) and the donor will not be \nallowed to claim a deduction of more than $500 for the qualified vehicle.\nTruncating donor's TIN on acknowledgements. Pursuant to \nRegulations section 301.6109-4, all filers of this form may truncate a \ndonor’s TIN (social security number (SSN), individual taxpayer \nidentification number (ITIN), adoption taxpayer identification number \n(ATIN), or employer identification number (EIN)) on written \nacknowledgements. Truncation is not allowed on any documents the filer \nfiles with the IRS. A filer’s TIN may not be truncated on any form. See \npart J in the current General Instructions for Certain Information Returns.\nBox 1. Date of Contribution\nEnter the date you received the motor vehicle, boat,\nor airplane from the donor.\nCAUTION\n!\nCAUTION\n!\nOct 30, 2019\nCat. No. 39750N\n",
"Boxes 2a, 2b, 2c, and 2d. Odometer Mileage, \nYear, Make, and Model of Vehicle\nEnter the appropriate information in each box. Enter mileage only for \nmotor vehicles in box 2a. The following table shows three examples.\nBox 2a - \nOdometer \nmileage \nBox 2b - Year\nBox 2c - Make\nBox 2d - Model\nExample 1 - \ncar\n90,000\n2006\nFord\nExplorer\nExample 2 - \nairplane\n1968\nPiper\nCub\nExample 3 - \nboat\n2008\nLarson\nLXI 208\nDonees must ensure that the odometer reading is in miles, not \nkilometers. If the odometer is calibrated in kilometers, you must \nconvert the kilometers to miles using the following calculation.\nKilometers x 0.62137 = miles.\nBox 3. Vehicle or Other Identification Number\nFor any vehicle contributed, this number is generally affixed to the \nvehicle. For a motor vehicle, the vehicle identification number (VIN) is 17 \nalphanumeric characters in length. Refer to the vehicle owner's manual \nfor the location of the VIN. For a boat, the hull identification number is 12 \ncharacters in length and is usually located on the starboard transom. For \nan airplane, the aircraft identification number is 6 alphanumeric \ncharacters in length and is located on the tail of a U.S. aircraft.\nBox 4a. Vehicle Sold in Arm's Length \nTransaction to Unrelated Party\nIf the vehicle is sold to a buyer other than a needy individual (as \nexplained in the instructions for box 5b) without a significant intervening \nuse or material improvement (as explained in the instructions for box 5a), \nyou must certify that the sale was made in an arm's length transaction \nbetween unrelated parties. Check the box to make the certification. Also \ncomplete boxes 4b and 4c. Skip this box if the qualified vehicle has a \nclaimed value of $500 or less.\nBox 4b. Date of Sale\nIf you checked box 4a, enter the date that the vehicle was sold in the \narm's length transaction. Skip this box if the qualified vehicle has a \nclaimed value of $500 or less.\nBox 4c. Gross Proceeds\nIf you checked box 4a, enter the gross proceeds from the sale of the \nvehicle. This is generally the sales price. Do not reduce this amount by \nany expenses or fees. Skip this box if the qualified vehicle has a claimed \nvalue of $500 or less.\nBox 5a. Vehicle Will Not Be Transferred Before \nCompletion of Material Improvements or \nSignificant Intervening Use\nIf you intend to make a significant intervening use of or a material \nimprovement to this vehicle, you must check box 5a to certify that the \nvehicle will not be transferred for cash, other property, or services before \ncompletion of the use or improvement. Also complete box 5c. Skip this \nbox if the qualified vehicle has a claimed value of $500 or less.\nThere is significant intervening use only if the organization actually \nuses the vehicle to substantially further the organization's regularly \nconducted activities, and the use is significant, not incidental. Factors in \ndetermining whether a use is a significant intervening use include its \nnature, extent, frequency, and duration. For this purpose, use includes \nproviding transportation on a regular basis for a significant period of time \nor significant use directly relating to training in vehicle repair. Use does \nCAUTION\n!\nnot include the use of a vehicle to provide training in business skills, such \nas marketing or sales. Examples of significant use include the following.\n• Driving a vehicle every day for 1 year to deliver meals to needy \nindividuals, if delivering meals is an activity regularly conducted by the \norganization.\n• Driving a vehicle for 10,000 miles over a 1-year period to deliver \nmeals to needy individuals, if delivering meals is an activity regularly \nconducted by the organization.\nMaterial improvements include major repairs and additions that \nimprove the condition of the vehicle in a manner that significantly \nincreases the value. To be a material improvement, the improvement \ncannot be funded by an additional payment to the donee from the donor \nof the vehicle. Material improvements do not include cleaning, minor \nrepairs, routine maintenance, painting, removal of dents or scratches, \ncleaning or repair of upholstery, and installation of theft deterrent \ndevices.\nBox 5b. Vehicle To Be Transferred to a Needy \nIndividual for Significantly Below FMV\nCheck box 5b if you intend to sell the vehicle to a needy individual at a \nprice significantly below FMV or make a gratuitous transfer of the vehicle \nto a needy individual in direct furtherance of your organization's \ncharitable purpose of relieving the poor and distressed or \nunderprivileged who are in need of a means of transportation. Do not \nenter any amount in box 4c. The donor's contribution deduction for a \nsale for this purpose is not limited to the gross proceeds from the sale. \nSkip this box if the qualified vehicle has a claimed value of $500 or less.\nBox 5c. Description of Material Improvements or \nSignificant Intervening Use and Duration of Use\nDescribe in detail the intended material improvements to be made by the \norganization or the intended significant intervening use and duration of \nthe use by the organization. Skip this box if the qualified vehicle has a \nclaimed value of $500 or less.\nBox 6a. Checkbox for Whether Donee Provided \nGoods and Services in Exchange for the Vehicle \nDescribed\nYou must check the box to indicate whether you provided goods or \nservices to the donor in exchange for the vehicle described in boxes 2a, \n2b, 2c, 2d, and 3.\nBox 6b. Value of Goods and Services Provided \nin Exchange for the Vehicle Described\nIf you checked “Yes” in box 6a, complete box 6b. You must give a good \nfaith estimate of the value of those goods and services including \nintangible religious benefits. Include the value of any goods and services \nyou may provide in a year other than the year that the qualified vehicle \nwas donated. Pub. 561, Determining the Value of Donated Property, \nprovides guidance for providing an estimate for the value of goods and \nservices.\nBox 6c. Description of the Goods and Services\nIf you checked “Yes” in box 6a, describe in detail the goods and \nservices, including intangible religious benefits, that were provided to the \ndonor. If the donor received only intangible religious benefits, check the \nbox.\nAn intangible religious benefit is one that is provided by an \norganization organized exclusively for religious purposes and which \ngenerally is not sold in a commercial transaction outside the donative \ncontext.\nBox 7. Checkbox for a Vehicle With a Claimed \nValue of $500 or Less\nIf the vehicle has a claimed value of $500 or less or the donor did not \nprovide a TIN, you must check box 7. If you check box 7, do not file \nCopy A with the IRS and do not furnish Copy B to the donor.\n-2-\nInstructions for Form 1098-C (Rev. 11-2019)\n"
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f921p.pdf
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0415 Form 921-P (PDF)
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https://www.irs.gov/pub/irs-pdf/f921p.pdf
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[
"Catalog Number 32811X\nwww.irs.gov\nForm 921-P (Rev. 4-2015)\n(See back of form for signature instructions)\nForm 921-P \n(April 2015)\nDepartment of the Treasury-Internal Revenue Service\nConsent Fixing Period of Limitation on Assessment of \nIncome and Profits Tax\n(Partnerships and Limited Liability Companies) \n Estimated Future Common Expense Allowance for Real Estate Sales Under Contract\nIn reply refer to\nTaxpayer Identification \nNumber(s)\nFor income or profits tax purposes, the Commissioner of Internal Revenue has tentatively allowed\n(Entity Name)\na\n(Partnership, Limited Liability Company, Etc.)\n, whose address is\n(Number, Street, City or Town, State, ZIP Code)\n, to consider in whole\nor in part the estimated cost of future common improvements as part of the cost or other basis of certain real estate sold \nor otherwise disposed of under contract. Real Estate Project covered by this consent agreement:\nAs a provision of this tentative allowance, the undersigned taxpayer, a Tax Matters Partner of the entity named above, \nand the Commissioner of Internal Revenue agree that:\nThe amount of any federal income tax due with respect to all partners attributable to partnership items resulting from this \ntax treatment for the specified project for the above named partnership for tax year(s) ended\nmay be assessed\nat any time before and up to one year after a return is filed for tax year ended\n(Ending Date for Tax Year of Expected Project Completion)\n.\nA return filed before the expected project completion date shall be considered filed on the day prescribed above without. \nregard to extensions. This consent agreement to extend the time to assess tax is limited to the assessment of deficiencies \nattributable to the use of the alternative cost method with respect to the real estate project described above. If a notice of \nFinal Partnership Administrative Adjustment is mailed to the Tax Matters Partner, the time for assessing the tax for the \nperiod(s) stated in the notice of Final Partnership Administrative Adjustment shall be suspended for the period during which \nan action may be brought under 6226 of the Internal Revenue Code (and, if an action with respect to such administrative \nadjustment is brought during such period until the decision of the court in such action becomes final) and for 1 year \nthereafter.\n THIS CONSENT AGREEMENT DOES NOT DEPRIVE THE TAXPAYER(S) OF ANY \n APPEAL RIGHTS TO WHICH THEY WOULD OTHERWISE BE ENTITLED.\nPartnership name\nUnder penalties of perjury, I declare that I am not currently in bankruptcy nor have I previously been named as a debtor in \na bankruptcy proceeding in which the United States could have filed a claim for income tax due with respect to any \npartnership taxable year covered by this consent.\nTax Matters Partner’s name (type or print)\nTax Matters Partner’s signature\nDate\nAuthorized Person’s name (type or print)\nAuthorized Person’s signature\nDate\n(You must also attach written authorization as stated in the instructions on the back of this form.)\nINTERNAL REVENUE SERVICE SIGNATURE AND TITLE\nIRS Official’s name - See Instructions (type or print)\nIRS Official’s Title - See Instructions\nIRS Official’s Signature - See Instructions\nDate\n",
"Page 2\nCatalog Number 32811X\nwww.irs.gov\nForm 921-P (Rev. 4-2015)\nInstructions for Internal Revenue Service Employees\nInstructions for Taxpayer(s)\nPlease sign and return the original and copy of Form 921-P, Consent Fixing Period of Limitation On Assessment of \nIncome and Profits Tax, to apply for a consent in accordance with Revenue Procedure 92-29 and its successors. \n \n1. The consent generally applies to partnership returns filed for partnership tax years beginning after September 3, 1982. \nOther entities (those not subject to the unified audit and litigation procedures for TEFRA partnerships) must \nuse Form 921-I. \n \n2. The consent may be signed for the partnership in the appropriate space by either: a. The Tax Matters Partner for the \npartnership for the year(s) covered by the consent, or b. any other person authorized by the partnership in writing to \nsign the consent (see item 5 below). \n \n3. If the Tax Matters Partner is not an individual and the consent is signed by a person acting in a representative capacity \nfor the Tax Matters Partner, for example, the trustee of a trust, the declaration above the signature line for the Tax \nMatters Partner refers to the bankruptcy of the Tax Matters Partner, not the person who actually signed the consent. \n \n4. If the Tax Matters Partner has filed a joint return with his or her spouse for the taxable years(s) covered by the consent \nand the consent is signed by the Tax Matters Partner, the declaration above the signature line for the Tax Matters \nPartner refers to the bankruptcy of either spouse, not just to the person who actually signed the consent. \n \n5. If the consent is signed by any person other than the Tax Matters Partner, a copy of the written authorization from the \npartnership must be attached to the consent. The information that must be included in the authorization is described in \nTemporary Regulations 301.6229(b)-l and is listed below. The written authorization must: \n \na. Provide that it is an authorization for a person other than the Tax Matters Partner to extend the assessment period \nwith respect to all partners. \n \nb. Identify the partnership and the person being authorized by name, address, and taxpayer identification number. \n \nc. Specify the partnership tax year or years for which the authorization is effective, and \n \nd. Include the signatures of all persons who were general partners at any time during the year or years for which the \nauthorization is effective.\nComplete the delegated IRS official’s name and title of the employee who is signing the form on behalf of the IRS. \n \nAn IRS official delegated authority under Delegation Order 25-2 must sign and date the consent. (IRM 1.2.52.3) \n"
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i1099ltc.pdf
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1019 Inst 1099-LTC (PDF)
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https://www.irs.gov/pub/irs-pdf/i1099ltc.pdf
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[
"Instructions for Form \n1099-LTC\n(Rev. October 2019)\nLong-Term Care and Accelerated Death Benefits\nDepartment of the Treasury\nInternal Revenue Service\nFuture Developments \nFor the latest information about developments related to Form \n1099-LTC and its instructions, such as legislation enacted after \nthey were published, go to IRS.gov/Form1099LTC.\nReminders\nIn addition to these specific instructions, you should also use the \ncurrent General Instructions for Certain Information Returns. \nThose general instructions include information about the \nfollowing topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the General Instructions for Certain Information \nReturns at IRS.gov/Form1099GeneralInstructions or go to \nIRS.gov/Form1099LTC.\nContinuous-use form and instructions. Form 1099-LTC and \nthese instructions have been converted from an annual revision \nto continuous use. Both the form and instructions will be updated \nas needed. For the most recent version, go to IRS.gov/\nForm1099LTC\nOnline fillable form. Due to the very low volume of paper \nForms 1099-LTC received and processed by the IRS each year, \nthis form is available in an online fillable format. You may fill out \nthe form, found online at IRS.gov/Form1099LTC, and send Copy \nB to the recipient. For filing with the IRS, follow the applicable \nprocedures for filing electronically, or, for this form only, if you \nare qualified to file on paper, send in the black-and-white Copy A \nwith Form 1096 that you print from the IRS website.\nSpecific Instructions\nFile Form 1099-LTC if you paid any long-term care benefits.\nLong-Term Care Benefits\n“Long-term care benefits” means:\n1.\nAny payments made under a product that is advertised, \nmarketed, or offered as long-term care insurance (whether \nqualified or not); and\n2.\nAccelerated death benefits (excludable in whole or in part \nfrom gross income under section 101(g)) paid under a life \ninsurance contract or paid by a viatical settlement provider.\nWho Must File\nPayers of long-term care benefits who must file Form 1099-LTC \ninclude insurance companies, governmental units, and viatical \nsettlement providers.\nViatical Settlement Providers\nA viatical settlement provider is any person who:\n1.\nIs regularly engaged in the trade or business of \npurchasing or taking assignments of life insurance contracts on \nthe lives of terminally or chronically ill individuals, and\n2.\nIs licensed in the state where the insured lives. If licensing \nis not required in the state, the provider must meet other \nrequirements (including those below) depending on whether the \ninsured is terminally or chronically ill.\na.\nIf the insured is terminally ill, the provider must meet the \nrequirements of sections 8 and 9 of the Viatical Settlements \nModel Act of the National Association of Insurance \nCommissioners (NAIC), relating to disclosure and general rules. \nThe provider must also meet the requirements of the Model \nRegulations of the NAIC for evaluating the reasonableness of \namounts paid in viatical settlement transactions with terminally ill \nindividuals.\nb.\nIf the insured is chronically ill, the provider must meet \nrequirements similar to those of sections 8 and 9 of the Viatical \nSettlements Model Act of the NAIC and must also meet any \nstandards of the NAIC for evaluating the reasonableness of \namounts paid in viatical settlement transactions with chronically \nill individuals.\nHowever, if a state enacts a licensing requirement but \ndoes not permit viatical settlement providers to engage \nin business until the licenses are granted, the provider \nwill not be considered as licensed under section 101(g)(2)(B)(i)\n(I). See Rev. Rul. 2002-82, which is on page 978 of Internal \nRevenue Bulletin 2002-51 at IRS.gov/pub/irs-irbs/irb02-51.pdf.\nQualified Long-Term Care Insurance Contract\nA contract issued after 1996 is a qualified long-term care \ninsurance contract if it meets the requirements of section 7702B, \nincluding the requirement that the insured must be a chronically \nill individual (see Chronically Ill Individual, later). A contract \nissued before 1997 generally is treated as a qualified long-term \ncare insurance contract if it met state law requirements for \nlong-term care insurance contracts and it has not been \nmaterially changed.\nAccelerated Death Benefits\nAn accelerated death benefit is any amount paid under a life \ninsurance contract for an insured individual who is terminally or \nchronically ill. It also includes any amount paid by a viatical \nsettlement provider for the sale or assignment of a death benefit \nunder a life insurance contract for a chronically or terminally ill \nindividual.\nChronically Ill Individual\nA chronically ill individual is someone who has been certified (at \nleast annually) by a licensed health care practitioner as:\n1.\nBeing unable to perform, without substantial assistance \nfrom another individual, at least two daily living activities (eating, \nCAUTION\n!\nOct 24, 2019\nCat. No. 27981Y\n",
"toileting, transferring, bathing, dressing, and continence) for at \nleast 90 days due to a loss of functional capacity; or\n2.\nRequiring substantial supervision to protect the individual \nfrom threats to health and safety due to severe cognitive \nimpairment.\nTerminally Ill Individual\nA terminally ill individual is someone who has been certified by a \nphysician as having an illness or physical condition that can \nreasonably be expected to result in death in 24 months or less \nafter the date of certification.\nReporting\nReport payments only if the policyholder is an individual. \nReportable payments are those made to the policyholder, to the \ninsured, or to a third party.\nYou may report benefits paid from each contract on a \nseparate Form 1099-LTC. At your option, you may aggregate \nbenefits paid under multiple contracts on one Form 1099-LTC if \nthe same information is reportable on the form for each contract \n(other than the amount of benefits paid).\nPolicyholder\nThe policyholder is the individual who owns the contract, \nincluding the owner of a contract sold or assigned to a viatical \nsettlement provider. In the case of a group contract, the term \n“policyholder” includes the certificate holder (or similar \nparticipant). You must report long-term care benefits to the \npolicyholder even if the payments were made to the insured or to \na third party (for example, a nursing home, caretaker, or \nphysician). The policyholder may also be the insured.\nEnter the name, address, and TIN of the policyholder on \nForm 1099-LTC. If the policyholder is not an individual, no \nreporting is required.\nInsured\nThe insured is the chronically or terminally ill individual on whose \nbehalf long-term care benefits are paid.\nEnter the name, address, and TIN of the insured on Form \n1099-LTC.\nStatement to Policyholder and Insured\nIf you are required to file Form 1099-LTC, you must furnish a \nstatement or acceptable substitute to both the policyholder and \nto the insured as shown.\nIF the statement is for the ...\nTHEN use...\nPolicyholder\nCopy B\nInsured\nCopy C\nPolicyholder and the policyholder is \nthe insured\nCopy B (Copy C is optional)\nFor more information about the requirement to furnish a \nstatement to the policyholder and to the insured, see part M in \nthe current General Instructions for Certain Information Returns.\nTruncating recipient’s TIN on payee statements. Pursuant \nto Regulations section 301.6109-4, all filers of this form may \ntruncate a recipient’s TIN (social security number (SSN), \nindividual taxpayer identification number (ITIN), adoption \ntaxpayer identification number (ATIN), or employer identification \nnumber (EIN)) on payee statements. Truncation is not allowed \non any documents the filer files with the IRS. A payer's TIN may \nnot be truncated on any form. See part J in the current General \nInstructions for Certain Information Returns.\nAccount Number\nThe account number is required if you have multiple accounts for \na recipient for whom you are filing more than one Form \n1099-LTC. Additionally, the IRS encourages you to designate an \naccount number for all Forms 1099-LTC that you file. See part L \nin the current General Instructions for Certain Information \nReturns.\nBox 1. Gross Long-Term Care Benefits Paid\nEnter the gross long-term care benefits paid this year (other than \naccelerated death benefits). These benefits are all amounts paid \nout on a per diem or other periodic basis or on a reimbursed \nbasis. It includes amounts paid to the insured, to the \npolicyholder, and to third parties. You are not required to \ndetermine whether any benefits are taxable or nontaxable.\nBox 2. Accelerated Death Benefits Paid\nEnter the gross accelerated death benefits paid under a life \ninsurance contract this year to or on behalf of an insured who \nhas been certified as terminally or chronically ill. Include the \namount paid by a viatical settlement provider for the sale or \nassignment of the insured's death benefit under a life insurance \ncontract.\nBox 3. Check if Per Diem or Reimbursed \nAmount\nCheck a box to indicate whether the payments were made on a \nper diem or other periodic basis or on a reimbursed basis. For \naccelerated death benefits, do not check a box if you made \npayments on behalf of a terminally ill person. “Per diem basis” \nmeans payments made on any periodic basis without regard to \nactual expenses. “Reimbursed basis” means payments made for \nactual expenses incurred.\nBox 4. Qualified Contract (Optional)\nCheck the box to indicate whether long-term care insurance \nbenefits are paid from a qualified long-term care insurance \ncontract. See Qualified Long-Term Care Insurance Contract, \nearlier.\nBox 5. Check if Chronically Ill or Terminally Ill \n(Optional)\nCheck the box to indicate whether the insured was chronically or \nterminally ill. Also, enter the latest date certified. If the insured \nwas neither chronically nor terminally ill, leave this box blank. \nSee Chronically Ill Individual and Terminally Ill Individual, earlier.\n-2-\nInstructions for Form 1099-LTC (Rev. 10-2019)\n"
] |
f921i.pdf
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0415 Form 921-I (PDF)
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https://www.irs.gov/pub/irs-pdf/f921i.pdf
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[
"Catalog Number 31727W\nwww.irs.gov\nForm 921-I (Rev. 4-2015)\n(See back of form for signature instructions)\nForm 921-I \n(April 2015)\nDepartment of the Treasury-Internal Revenue Service\nConsent Fixing Period of Limitation on Assessment of \nIncome and Profits Tax\n(S-Corporations, Partnerships, Limited Liability Companies, Trusts, Syndicates, Pools, Etc.) \nEstimated Future Expense Allowance for Real Estate Sales Under Contract\nIn reply refer to\nTaxpayer Identification \nNumber(s)\nFor income or profits tax purposes, the Commissioner of Internal Revenue has tentatively allowed\n(Entity Name)\na\n(S-Corporation, Partnership, Limited Liability Company, \nTrust, Syndicate, Pool, Etc.)\nwith identifying numbers\n(Taxpayer Identification Number)\n, whose address is\n(Number, Street, City or Town, State, ZIP Code)\n, to consider in whole\nor in part the allocable share of the estimated cost of future common improvements as part of the cost or other basis of \ncertain real estate sold or otherwise disposed of under contract.\nReal Estate Project covered by this consent agreement:\nAs a provision of this tentative allowance, the undersigned taxpayer,\n(Name of Investor)\na\n(Shareholder, Partner, Member, Beneficiary, Etc.)\nof the entity named above and the Commissioner of Internal Revenue agree that:\nThe amount of federal income or profits tax due on any return filed by or for the taxpayer for tax year(s) ended\nmay be assessed\nat any time before and up to one year after a return is filed for tax year ended\n(Ending Date for Tax Year of Expected Project Completion)\n.\nA return filed before the expected project completion date shall be considered filed on the day prescribed above without \nregard to extensions. This consent agreement to extend the time to assess tax is limited to the assessment of deficiencies \nattributable to the use of the alternative cost method with respect to the real estate project described above. If a notice of \ntax deficiency is sent to the taxpayer by certified or registered mail on or before the date above, the time to assess income \ntax under this consent agreement is further extended by the assessment suspension period, plus 60 days.\n THIS CONSENT AGREEMENT DOES NOT DEPRIVE THE TAXPAYER(S) OF ANY \nAPPEAL RIGHTS TO WHICH THEY WOULD OTHERWISE BE ENTITLED\nYour name (type or print)\nYour signature\nDate signed\nSpouse’s name (type or print)\nSpouse’s signature\nDate signed\nTaxpayer's representative’s name (type or print)\nTaxpayer’s representative’s signature\nDate signed\nEntity name (S-Corporation, Partnership, Limited Liability Company, Trust, Syndicate, Pool, Etc.)\nEntity officer’s name and title (type or print)\nEntity officer’s signature\nDate signed\nEntity officer’s name and title (type or print)\nEntity officer’s signature\nDate signed\nINTERNAL REVENUE SERVICE SIGNATURE AND TITLE\nIRS Official’s name - See Instructions (type or print)\nIRS Official’s Title - See Instructions\nIRS Official’s Signature - See Instructions\nDate signed\n",
"Page 2\nCatalog Number 31727W\nwww.irs.gov\nForm 921-I (Rev. 4-2015\nInstructions for Internal Revenue Service Employees\nInstructions for Taxpayer(s)\nThis form should be used by investors in the electing S-Corporation, Partnership, Limited Liability Company, Trust, \nSyndicate, Pool, etc. that are not subject to unified audit and litigation procedures for TEFRA (Tax Equity & Fiscal \nResponsibility Act) partnerships. \n \nPlease sign and return the original and copy of Form 921-I , Consent Fixing Period of Limitation On Assessment of \nIncome and Profits Tax, to apply for an extension according to Revenue Procedure 92-29 and its successors. \n \nForm 921 must be signed by each partner/shareholder/beneficiary or their authorized representative. If you’re an \nindividual and this consent form includes tax years where a joint return was filed, the signature of both husband and wife \nis required. One spouse may sign as agent for the other, if acting under an authorized power of attorney. \n \nIf you’re an attorney or agent for the taxpayer(s), you may sign the consent form provided the action is specifically \nauthorized by a power of attorney. If you haven’t filed a power of attorney, please include it with this form. If you’re acting \nas a fiduciary (executor, administrator, trustee, etc.) you must include a completed Form 56, Notice Concerning Fiduciary \nRelationship, if you haven't already filed one. \n \nIf the investor is a corporation or a multiple-owned entity, the shareholder/partner/member/ beneficiary/officer(s) duly \nauthorized to sign on behalf of the entity must sign the consent. Include the name and entity type and the name, \nsignature, name and title of the officer(s)/signer(s). It isn't necessary to affix a seal, unless the entity is required by charter \nor by law of jurisdictions to affix the seal in the execution of instruments. \n \nInvestors in electing entities that fall under TEFRA requirements must use Form 921-P.\nComplete the delegated IRS official’s name and title of the employee who is signing the form on behalf of the IRS. \n \nAn IRS official delegated authority under Delegation Order 25-2 must sign and date the consent. (IRM 1.2.52.3) \n"
] |
fw7sp.pdf
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0919 Form W-7 (SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/fw7sp.pdf
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[
"Formulario W-7(SP)\n(Rev. septiembre de 2019)\nDepartment of the Treasury \nInternal Revenue Service \nSolicitud de Número de Identificación Personal \ndel Contribuyente del Servicio de Impuestos Internos \n▶ Para uso por personas físicas que no son ciudadanos o residentes permanentes de EE.UU. \n▶ Vea las instrucciones por separado.\nOMB No. 1545-0074\nEl número de identificación personal del contribuyente del IRS se utiliza únicamente para propósitos de los \nimpuestos federales estadounidenses. \nAntes de empezar: \n• No presente este formulario si tiene, o si cumple los requisitos para obtener, un número de Seguro Social (SSN, por sus \nsiglas en inglés) de los Estados Unidos. \nTipo de solicitud (marque solo uno):\nSolicitar un ITIN nuevo\nRenovar un ITIN que se ha asignado \npreviamente\nRazón por la que presenta el Formulario W-7(SP). Lea las instrucciones para el recuadro que marque. Aviso: Si marca el recuadro b, c, d, e, f o g, tiene que presentar \nuna declaración de impuestos federales de los EE.UU. junto con el Formulario W-7(SP), a menos que le corresponda una excepción (vea las instrucciones). \na \nExtranjero no residente obligado a obtener un ITIN para poder reclamar beneficios de un tratado tributario \nb \nExtranjero no residente que presenta una declaración de impuestos federales de los EE.UU.\nc \nExtranjero residente de los EE.UU. (basado en el número de días que esté presente en los EE.UU.) que presenta una declaración de impuestos federales de los EE.UU.\nd \nDependiente de un ciudadano/extranjero residente de los EE.UU. \ne \nCónyuge de un ciudadano/extranjero residente de los EE.UU. }\nSi escoge d, anote la relación con el ciudadano/extranjero residente de los EE.UU. (vea las\ninstrucciones) ▶\nSi escoge d o e, anote el nombre y el SSN/ITIN del ciudadano/extranjero residente de los EE.UU.\n(vea las instrucciones) ▶\nf \nEstudiante, profesor o investigador extranjero no residente que presenta una declaración de impuestos federales de los EE.UU. o reclama una excepción \ng \nDependiente/cónyuge de un extranjero no residente con visa estadounidense \nh \nOtra (vea las instrucciones) ▶\nInformación adicional para a y f: Anote el país con tratado tributario ▶\ny el número del artículo del tratado ▶\nNombre \n(vea las instrucciones)\n1a Primer nombre \nSegundo nombre \nApellido \nNombre al nacer, si \nes diferente \n.\n. ▶\n1b Primer nombre \nSegundo nombre \nApellido \nDirección Postal \ndel Solicitante \n2 Calle y número, apartamento o ruta rural. Si tiene un apartado postal, vea las instrucciones por separado. \nCiudad o pueblo, estado o provincia y país. Incluya el código postal (ZIP) si corresponde. \nDomicilio en el \nExtranjero \n(vea las instrucciones) \n3 Calle y número, apartamento o ruta rural. No anote un número de apartado postal. \nCiudad o pueblo, estado o provincia y país. Incluya el código postal si corresponde. \nNacimiento \n4\nFecha de nacimiento (mes / día / año)\n/ /\nPaís de nacimiento \nCiudad y estado o provincia (opcional) \n5 \nHombre \nMujer \nInformación \nDiversa \n6a Ciudadanía (País(es)) \n6b Núm. de identificación tributaria en el extranjero (si existe) 6c Clase de visa estadounidense (si alguna), número \ny fecha de vencimiento \n6d Documentos de identificación presentados (vea las instrucciones): \nPasaporte \nLicencia para conducir/ \nIdentificación estatal \nDocumentación del USCIS \nOtro \nEmitido por: \nNúm.: \nVence: \n/ /\nFecha de llegada a \nlos Estados Unidos \n(MM/DD/AAAA):\n / /\n6e\n¿Ha recibido anteriormente un ITIN o un número de identificación del Servicio de Impuestos Internos (IRSN, por sus siglas en inglés)? \nNo/No sé. En este caso, ignore la línea 6f. \nSí. Conteste la línea 6f. Si es más de uno, utilice una hoja adicional y adjúntela a este formulario (vea las instrucciones). \n6f\nAnote el ITIN y/o el IRSN ▶ \nITIN \n–\n–\nIRSN\n–\n–\ny el\nnombre bajo el cual se emitió ▶ \nPrimer nombre\nSegundo nombre\nApellido\n6g Nombre del colegio universitario/universidad o empresa (vea las instrucciones) ▶ \nCiudad y estado ▶ \nTiempo de estancia ▶ \nFirme \nAquí \n \nGuarde una copia de \neste formulario en sus \narchivos. \nBajo pena de perjurio, yo (solicitante/delegado/agente tramitador) declaro haber examinado esta solicitud, incluyendo las declaraciones y \ndocumentación que la acompañan y que, según mi leal saber y entender, la información indicada es verídica, correcta y completa. Autorizo al \nIRS a compartir la información pertinente con mi agente tramitador para poder perfeccionar este Formulario W-7(SP), Solicitud de Número de \nIdentificación Personal del Contribuyente del Servicio de Impuestos Internos.\n▲\nFirma del solicitante (si es del delegado, vea las instrucciones) Fecha (mes / día / año) \n/ \n/ \nNúmero telefónico\n▲\nNombre del delegado, si corresponde (use máquina o letra \nde molde) \nRelación o parentesco del \ndelegado con el solicitante \n▲\nPadre \nTutor legal\nPoder legal \nPara Uso \nEXCLUSIVO del \nAgente Tramitador \n▲\nFirma \nFecha (mes / día / año) \n/ \n/ \nTel.\nFAX \n▲\nNombre y cargo (use máquina o letra de molde) \nNombre de la empresa \nEIN \nPTIN\nCódigo de oficina \nVea el Aviso sobre la Ley de Reducción de Trámites en las instrucciones por separado. \nCat. No. 23117S \nFormulario W-7(SP) (Rev. 9-2019)\n"
] |
i1099cap.pdf
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0919 Inst 1099-CAP (PDF)
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https://www.irs.gov/pub/irs-pdf/i1099cap.pdf
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[
"Instructions for Form \n1099-CAP\n(Rev. September 2019)\nChanges in Corporate Control and Capital Structure\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue Code \nunless otherwise noted.\nFuture Developments\nFor the latest information about developments related to \nForm 1099-CAP and its instructions, such as legislation \nenacted after they were published, go to IRS.gov/\nForm1099CAP.\nReminders\nIn addition to these specific instructions, you should also \nuse the current General Instructions for Certain \nInformation Returns. Those general instructions include \ninformation about the following topics.\n• Who must file.\n• When and where to file.\n• Electronic reporting.\n• Corrected and void returns.\n• Statements to recipients.\n• Taxpayer identification numbers (TINs).\n• Backup withholding.\n• Penalties.\n• Other general topics.\nYou can get the general instructions at General \nInstructions for Certain Information Returns or go to \nIRS.gov/Form1099CAP.\nContinuous-use form and instructions. Form \n1099-CAP and its instructions have been converted from \nan annual revision to continuous use. Both the form and \ninstructions will be updated as needed. For the most \nrecent version, go to IRS.gov/Form1099CAP.\nOnline fillable form. Due to the very low volume of \npaper Forms 1099-CAP received and processed by the \nIRS each year, this form has been converted to an online \nfillable format. You may fill out the form, found online at \nIRS.gov/Form1099CAP, and send Copy B to the recipient. \nFor filing with the IRS, follow the applicable procedures if \nyou are required to file electronically. If you are filing this \nform on paper due to a low volume of recipients, for this \nform only, you may send in the black-and-white Copy A \nwith a Form 1096 that you print from the IRS website.\nSpecific Instructions\nFile Form 1099-CAP, Changes in Corporate Control and \nCapital Structure, for shareholders of a corporation if \ncontrol of the corporation was acquired or it underwent a \nsubstantial change in capital structure. Form 1099-CAP is \nfurnished to shareholders who receive cash, stock, or \nother property from an acquisition of control or a \nsubstantial change in capital structure.\nWho Must File\nAny broker who holds shares on behalf of a \ncustomer in a corporation that the broker knows or \nhas reason to know based on readily available \ninformation has engaged in a transaction of acquisition of \ncontrol or substantial change in capital structure must file \nForm 1099-B unless the customer is an exempt recipient. \nReadily available information includes information from a \nclearing organization, such as the Depository Trust \nCompany (DTC). Information is also published on the IRS \nwebsite. Go to IRS.gov and enter keyword “Form 8806” in \nthe upper right corner.\nA domestic corporation that is required to file Form 8806, \nInformation Return for Acquisition of Control or Substantial \nChange in Capital Structure, must file Form 1099-CAP \nwith the IRS and furnish a copy to each shareholder who \nreceives cash, stock, or other property as a result of the \nacquisition of control or substantial change in capital \nstructure and who is not an exempt recipient. However, if \nthe corporation can reasonably determine that the receipt \nof such stock would not cause the shareholder to \nrecognize gain, then the corporation is not required to \nreport the fair market value (FMV) of any stock provided to \na shareholder. Corporations do not file Form 1099-CAP \nunder one of the following conditions.\n• The transaction involves the acquisition of control within \nan affiliated group or involves stock valued at less than \n$100 million.\n• The corporation makes the consent election on Form \n8806. Under the election, the corporation is not required \nto file Form 1099-CAP with respect to shares held by a \nclearing organization because it allows the IRS to publish \ninformation necessary for brokers to meet their reporting \nobligations.\n• The corporation properly reports the transaction under \nsection 6043(a) on Form 966, Corporate Dissolution or \nLiquidation.\n• Information returns are filed under section 6042 (Form \n1099-DIV) or section 6045 (Form 1099-B), unless the \ncorporation knows or has reason to know that such \nreturns were not filed.\nExempt Recipients\nThe corporation is not required to file Form 1099-CAP for \nthe following shareholders including brokers who are also \nexempt.\n• Any shareholder who receives stock in an exchange \nthat is not subject to gain recognition under section 367(a) \nand the regulations.\n• Any shareholder whose amount of cash plus the FMV \nof any stock and other property does not exceed $1,000.\nTIP\nOct 16, 2019\nCat. No. 35150T\n",
"• Any shareholder from whom the corporation has \nreceived a properly completed exemption certificate.\n• Any one of the following.\n1. A corporation, except a subchapter S corporation.\n2. A tax-exempt organization.\n3. An individual retirement account (IRA).\n4. The U.S. Government or a state.\n5. A foreign government, an international organization, \nor a foreign central bank of issue.\n6. A real estate investment trust (REIT).\n7. A regulated investment company (RIC).\n8. A securities or commodities dealer.\n9. An entity registered under the Investment Company \nAct of 1940.\n10. A common trust fund.\n11. A financial institution such as a bank, savings and \nloan, credit union, or similar organization.\n• Any foreign person the corporation associates with a \nvalid Form W-8BEN, Certificate of Foreign Status of \nBeneficial Owner for United States Tax Withholding, or \nother documentation upon which the corporation relies in \norder to treat the shareholder as a foreign beneficial \nowner or foreign payee. See Regulations section \n1.6049-5(c) for more information.\nCorporations are not relieved of their withholding \nobligations on nonresident aliens under section \n1441.\nAcquisition of Control\nAn acquisition of control of a corporation (first corporation) \noccurs if, in a transaction or series of related transactions, \nbefore an acquisition of stock of the first corporation \n(directly or indirectly) by a second corporation, the second \ncorporation does not have control of the first corporation; \nafter the acquisition, the second corporation has control of \nthe first corporation; the FMV of the stock acquired in the \ntransaction and in any related transactions as of the date \nor dates on which the stock was acquired is $100 million \nor more; the shareholders of the first corporation receive \nstock or other property pursuant to the acquisition; and \nthe first corporation or any of its shareholders is required \nto recognize gain under section 367(a) as a result of the \ntransaction.\nFor these purposes, control is defined as the ownership \nof stock possessing at least 50% of the total combined \nvoting power of all classes of stock entitled to vote, or at \nleast 50% of the total value of shares of all classes of \nstock.\nSee Form 8806 and Regulations section 1.6043-4 for \ndetails and special rules with respect to constructive \nownership of stock.\nSection 338 election. An acquisition of stock of a \ncorporation under which a section 338 election is made is \ntreated as an acquisition of stock and not as an \nacquisition of the assets of the corporation.\nCAUTION\n!\nSubstantial Change in Capital Structure\nA change in capital structure occurs if:\n• The amount of cash or other property provided to its \nshareholders is $100 million or more and the corporation \nin a transaction or series of transactions merges, \nconsolidates, or otherwise combines with another \ncorporation or transfers all or substantially all of its assets \nto one or more corporations;\n• Transfers all or part of its assets to another corporation \nunder bankruptcy proceedings including distributing its \nstock or securities; or\n• Changes its identity, form, or place of organization; and\n• The corporation or any of its shareholders is required to \nrecognize gain under section 367(a) as a result of the \ntransaction.\nWhen To File\nSee part C in the current General Instructions for Certain \nInformation Returns and its Guide to Information Returns \nfor filing and furnishing dates. But see the separate \nguidance for clearing organizations in Special reporting \ndate–clearing organizations next.\nSpecial reporting date–clearing organizations. A \ncorporation must file Form 1099-CAP and furnish a copy \nto each of its shareholders who receives any stock or \nother consideration in the transaction and who is not an \nexempt recipient. A clearing organization, such as the \nDTC, is not an exempt recipient. The corporation is \ntherefore required to file and furnish a copy of Form \n1099-CAP to a clearing organization with respect to \nshares held by the clearing organization unless it makes a \nconsent election, as discussed below. Furnish Form \n1099-CAP to the clearing organization by the due date \nshown in the current General Instructions for Certain \nInformation Returns. If you are furnishing the DTC with \nForms 1099-CAP, see Notice 2004-9, 2004-04 I.R.B. 334, \navailable at IRS.gov/irb/2004-04_IRB#NOT-2004-9.\nPenalties for Failure To File\nThe penalties under section 6652(l) for failure to file \ninformation returns under section 6043(c) apply. For \npurposes of the section 6652(l) penalty, Form 8806 and \nall Forms 1099-CAP required to be filed are treated as \none return. Thus, the penalty will not exceed $500 for \neach day the failure continues, up to a maximum of \n$100,000, for any acquisition of control or any substantial \nchange in capital structure. If a corporation (transferor) \ntransfers all or substantially all of its assets to another \nentity (transferee) and is required to file Form 1099-CAP, \nthe transferor must satisfy the reporting requirements. If \nthe transferor fails to file Form 1099-CAP, then the \ntransferee must meet the filing requirements. If the filing \nrequirements are not met by either the transferor or \ntransferee, then both are jointly and severally liable for the \napplicable penalties.\nFailure to file Forms 1099-CAP also includes the \nrequirement to file electronically. For more information on \npenalties for failure to file electronically, see part F in the \ncurrent General Instructions for Certain Information \nReturns.\n-2-\nInstructions for Form 1099-CAP (Rev. 9-2019)\n",
"Statement to Shareholder\nIf required to file Form 1099-CAP, you must furnish a \nstatement to the shareholder. For more information about \nthe requirement to furnish a statement to the shareholder, \nsee part M in the current General Instructions for Certain \nInformation Returns.\nTruncating recipient’s TIN. Under Regulations section \n301.6109-4, corporations required to file Form 1099-CAP \nmay truncate a recipient’s TIN (social security number \n(SSN), individual taxpayer identification number (ITIN), \nadoption taxpayer identification number (ATIN), or \nemployer identification number (EIN)) on payee \nstatements. A filer's TIN may not be truncated on any \nform. Truncation is not allowed on any documents the filer \nfiles with the IRS. See part J in the current General \nInstructions for Certain Information Returns.\nAccount Number\nThe account number is required if you have multiple \naccounts for a recipient for whom you are filing more than \none Form 1099-CAP. Additionally, the IRS encourages \nyou to designate an account number for all Forms \n1099-CAP that you file. See part L in the current General \nInstructions for Certain Information Returns.\nCorporation’s Name, Address, Telephone \nNumber, and Federal Identification Number\nGenerally, this will be the reporting corporation's \ninformation and EIN.\nBox 1. Date of Sale or Exchange\nEnter the trade date of the sale or exchange, actually or \nconstructively received.\nBox 2. Aggregate Amount Received\nEnter the aggregate amount of cash and the FMV of any \nstock and other property received in exchange for the \nnumber of shares exchanged in the reporting corporation.\nBox 3. No. of Shares Exchanged\nEnter the number of shares the shareholder exchanged in \nthe reporting corporation for cash or other property \nreceived.\nBox 4. Classes of Stock Exchanged\nEnter the class or classes of stock (for example, \npreferred, common, etc.) exchanged in the reporting \ncorporation for cash or other property received. \nAbbreviate the class to fit the entry. For example, you may \nenter “C” for common stock, “P” for preferred, or “O” for \nother. Also, abbreviate any subclasses.\nInstructions for Form 1099-CAP (Rev. 9-2019)\n-3-\n"
] |
f1099q.pdf
|
1119 Form 1099-Q (PDF)
|
https://www.irs.gov/pub/irs-pdf/f1099q.pdf
|
[
" \nForm 1099-Q\n(Rev. November 2019)\nFor calendar year \n20\nCat. No. 32223J\nPayments From \nQualified \nEducation \nPrograms \n(Under Sections \n529 and 530)\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1760\nFile with Form 1096.\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\n3131\nVOID\nCORRECTED\nPAYER’S/TRUSTEE’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nPAYER’S/TRUSTEE’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings\n$\n3 Basis\n$\n4 Trustee-to-trustee \ntransfer\n5 Distribution is from:\n• Qualified tuition program—\nPrivate\nor State\n• Coverdell ESA\n6 Check if the recipient is \nnot the designated \nbeneficiary\nForm 1099-Q (Rev. 11-2019)\nwww.irs.gov/Form1099Q\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-Q\n(Rev. November 2019)\nFor calendar year \n20\nPayments From \nQualified \nEducation \nPrograms \n(Under Sections \n529 and 530)\nCopy B\nFor Recipient\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1760\nThis is important tax \ninformation and is \nbeing furnished to \nthe IRS. If you are \nrequired to file a return, \n a negligence penalty \nor other sanction may \nbe imposed on you \n if this income is \ntaxable and the IRS \ndetermines that it has \nnot been reported.\nCORRECTED (if checked)\nPAYER’S/TRUSTEE’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nPAYER’S/TRUSTEE’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings\n$\n3 Basis\n$\n4 Trustee-to-trustee \ntransfer\n5 Distribution is from:\n• Qualified tuition program—\nPrivate\nor State\n• Coverdell ESA\n6 If this box is checked, the \nrecipient is not the \ndesignated beneficiary\nIf the fair market value (FMV) is shown below, see Pub. 970, \nTax Benefits for Education, for how to figure earnings.\nForm 1099-Q (Rev. 11-2019)\n(keep for your records)\nwww.irs.gov/Form1099Q\n",
"Instructions for Recipient\nDistributions from Coverdell education savings accounts (CESAs) under section 530 \nand qualified tuition programs (QTPs) under section 529, including rollovers, may be \ntaxable. Nontaxable distributions from CESAs and QTPs are not required to be \nreported on your income tax return. You must determine the taxability of any \ndistribution. See Pub. 970 and the Instructions for Forms 1040 and 1040-SR for more \ninformation. Also see Form 5329 and its separate instructions.\nRecipient’s taxpayer identification no. (TIN). For your protection, this form may \nshow only the last four digits of your TIN (SSN, ITIN, ATIN, or EIN). However, the payer \nor trustee has reported your complete TIN to the IRS.\nAccount number. May show an account or other unique number the payer has \nassigned to distinguish your account.\nBox 1. Shows the gross distribution (including in-kind distributions) paid to you this \nyear from a QTP or a CESA. This amount is the total of the amounts shown in boxes 2 \nand 3. See Pub. 970 for more information.\nCaution: For CESA distributions (other than earnings on excess contributions) made during the \ncalendar year, the payer/trustee is not required to report amounts in boxes 2 and 3. Instead, the \npayer/trustee may report the fair market value of the CESA as of December 31 of the calendar \nyear in the blank box below boxes 5 and 6. To figure your earnings and basis, use the Coverdell \nESA—Taxable Distributions and Basis worksheet in Pub. 970.\nBox 2. Shows the earnings part of the gross distribution shown in box 1. Generally, \namounts distributed that are used to pay for qualified education expenses, transferred \nbetween trustees, or rolled over to another qualified education program or to an ABLE \naccount, within 60 days, are not included in income. \n Under a QTP, the amount in box 2 is included in income if there has been (a) more \nthan one transfer or rollover within any 12-month period with respect to the same \nbeneficiary, or (b) a change in the designated beneficiary and the new designated \nbeneficiary is not a family member. \nUnder a CESA, the amount in box 2 is included in income if there has been a \nchange in the designated beneficiary and the new designated beneficiary is not a \nfamily member or is over age 30 (except for beneficiaries with special needs).\nAlso, an additional 10% tax may apply to part or all of any amount included in \nincome from the CESA or QTP. See Form 5329 and your tax return instructions for \nmore information.\nIf a final (total) distribution is made from your account and you have not recovered \nyour contributions, see Pub. 970 to determine if you have a deductible loss and how to \nclaim it.\nBox 3. Shows your basis in the gross distribution reported in box 1.\nBox 4. This box is checked if a trustee-to-trustee transfer was made from one QTP to \nanother QTP, from one CESA to another CESA, from a CESA to a QTP, or from a QTP to an \nABLE account. However, in certain transfers from a CESA, the box will be blank.\nBox 5. Shows whether the gross distribution was from a QTP (private or state) or from \na CESA.\nBox 6. The designated beneficiary is the individual named in the document creating \nthe trust or custodial account to receive the benefit of the funds in the account. If you \nare not the designated beneficiary, see Pub. 970 and the Instructions for Forms 1040 \nand 1040-SR.\nDistribution codes. For the calendar year, the payer/trustee may, but is not required \nto, report (in the box below boxes 5 and 6) one of the following codes to identify the \ndistribution you received: 1—Distributions (including transfers); 2—Excess \ncontributions plus earnings taxable in the calendar year; 3—Excess contributions plus \nearnings taxable in the prior calendar year; 4—Disability; 5—Death; or 6—Prohibited \ntransaction. \nFuture developments. For the latest information about developments related to Form \n1099-Q and its instructions, such as legislation enacted after they were published, go \nto www.irs.gov/Form1099Q.\n",
" \nForm 1099-Q\n(Rev. November 2019)\nFor calendar year \n20\nPayments From \nQualified \nEducation \nPrograms \n(Under Sections \n529 and 530)\nCopy C\nFor Payer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1760\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nVOID\nCORRECTED\nPAYER’S/TRUSTEE’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nPAYER’S/TRUSTEE’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings\n$\n3 Basis\n$\n4 Trustee-to-trustee \ntransfer\n5 Distribution is from:\n• Qualified tuition program—\nPrivate\nor State\n• Coverdell ESA\n6 Check if the recipient is \nnot the designated \nbeneficiary\nForm 1099-Q (Rev. 11-2019)\nwww.irs.gov/Form1099Q\n",
"Instructions for Payer/Trustee\nTo complete Form 1099-Q, use: \n• The current General Instructions for Certain \nInformation Returns, and \n• The current Instructions for Form 1099-Q.\nTo order these instructions and additional forms, go \nto www.irs.gov/Form1099Q.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220. \nNeed help? If you have questions about reporting on \nForm 1099-Q, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free).\n"
] |
f1099sa.pdf
|
1119 Form 1099-SA (PDF)
|
https://www.irs.gov/pub/irs-pdf/f1099sa.pdf
|
[
" \nForm 1099-SA\n(Rev. November 2019)\nCat. No. 38471D\nDistributions \nFrom an HSA, \nArcher MSA, or \nMedicare Advantage \nMSA\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nFile with Form 1096. \nOMB No. 1545-1517\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nFor calendar year \n20\n9494\nVOID\nCORRECTED\nTRUSTEE'S/PAYER’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone number\nPAYER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings on excess cont.\n$\n3 Distribution code\n4 FMV on date of death\n$\n5 HSA\nArcher \nMSA\nMA \nMSA\nForm 1099-SA (Rev. 11-2019)\nwww.irs.gov/Form1099SA\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-SA\n(Rev. November 2019)\nDistributions \nFrom an HSA, \nArcher MSA, or \nMedicare Advantage \nMSA\nCopy B\nFor \nRecipient\nDepartment of the Treasury - Internal Revenue Service\nThis information \nis being furnished \nto the IRS.\nOMB No. 1545-1517\nFor calendar year \n20\nCORRECTED (if checked)\nTRUSTEE’S/PAYER’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone number\nPAYER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings on excess cont.\n$\n3 Distribution code\n4 FMV on date of death\n$\n5 HSA\nArcher \nMSA\nMA \nMSA\nForm 1099-SA (Rev. 11-2019)\n(keep for your records)\nwww.irs.gov/Form1099SA\n",
"Instructions for Recipient\nDistributions from a health savings account (HSA), Archer medical savings \naccount (MSA), or Medicare Advantage (MA) MSA are reported to you on \nForm 1099-SA. File Form 8853 or Form 8889 with your Form 1040 or 1040-SR \nto report a distribution from these accounts even if the distribution isn’t taxable. \nThe payer isn’t required to compute the taxable amount of any distribution.\nAn HSA or Archer MSA distribution isn’t taxable if you used it to pay qualified medical \nexpenses of the account holder or eligible family member or you rolled it over. An HSA \nmay be rolled over to another HSA; an Archer MSA may be rolled over to another Archer \nMSA or an HSA. An MA MSA isn’t taxable if you used it to pay qualified medical \nexpenses of the account holder only. If you didn’t use the distribution from an HSA, \nArcher MSA, or MA MSA to pay for qualified medical expenses, or in the case of an HSA \nor Archer MSA, you didn’t roll it over, you must include the distribution in your income \n(see Form 8853 or Form 8889). Also, you may owe a penalty.\nYou may repay a mistaken distribution from an HSA no later than April 15 \nfollowing the first year you knew or should have known the distribution was a \nmistake, providing the trustee allows the repayment.\nFor more information, see the Instructions for Form 8853 and the Instructions \nfor Form 8889. Also see Pub. 969.\nRecipient’s taxpayer identification number (TIN). For your protection, this form \nmay show only the last four digits of your TIN (SSN, ITIN, ATIN, or EIN). However, \nthe issuer has reported your complete identification number to the IRS.\nSpouse beneficiary. If you inherited an Archer MSA or MA MSA because of the death of \nyour spouse, special rules apply. See the Instructions for Form 8853. If you inherited an \nHSA because of the death of your spouse, see the Instructions for Form 8889.\nEstate beneficiary. If the HSA, Archer MSA, or MA MSA account holder dies \nand the estate is the beneficiary, the fair market value (FMV) of the account on \nthe date of death is includible in the account holder’s gross income. Report the \namount on the account holder’s final income tax return.\nNonspouse beneficiary. If you inherited the HSA, Archer MSA, or MA MSA \nfrom someone who wasn’t your spouse, you must report as income on your tax \nreturn the FMV of the account as of the date of death. Report the FMV on your \ntax return for the year the account owner died even if you received the \ndistribution from the account in a later year. See the Instructions for Form 8853 \nor the Instructions for Form 8889. Any earnings on the account after the date of \ndeath (box 1 minus box 4 of Form 1099-SA) are taxable. Include the earnings on \nthe “Other income” line of your tax return.\nAccount number. May show an account or other unique number the payer \nassigned to distinguish your account.\nBox 1. Shows the amount received this year. The amount may have been a \ndirect payment to the medical service provider or distributed to you.\nBox 2. Shows the earnings on any excess contributions you withdrew from an HSA \nor Archer MSA by the due date of your income tax return. If you withdrew the \nexcess, plus any earnings, by the due date of your income tax return, you must \ninclude the earnings in your income in the year you received the distribution even if \nyou used it to pay qualified medical expenses. This amount is included in box 1. \nInclude the earnings on the “Other income” line of your tax return. An excise tax of \n6% for each tax year is imposed on you for excess individual and employer \ncontributions that remain in the account. See Form 5329, Additional Taxes on \nQualified Plans (Including IRAs) and Other Tax-Favored Accounts.\nBox 3. These codes identify the distribution you received: 1—Normal \ndistribution; 2—Excess contributions; 3—Disability; 4—Death distribution other \nthan code 6; 5—Prohibited transaction; 6—Death distribution after year of death \nto a nonspouse beneficiary.\nBox 4. If the account holder died, shows the FMV of the account on the date of death.\nBox 5. Shows the type of account that is reported on this Form 1099-SA.\nFuture developments. For the latest information about developments related to \nForm 1099-SA and its instructions, such as legislation enacted after they were \npublished, go to www.irs.gov/Form1099SA.\n",
" \nForm 1099-SA\n(Rev. November 2019)\nDistributions \nFrom an HSA, \nArcher MSA, or \nMedicare Advantage \nMSA\nCopy C\nFor \nTrustee/Payer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1517\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nFor calendar year \n20\nVOID\nCORRECTED\nTRUSTEE’S/PAYER’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone number\nPAYER’S TIN\nRECIPIENT’S TIN\nRECIPIENT’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross distribution\n$\n2 Earnings on excess cont.\n$\n3 Distribution code\n4 FMV on date of death\n$\n5 HSA\nArcher \nMSA\nMA \nMSA\nForm 1099-SA (Rev. 11-2019)\nwww.irs.gov/Form1099SA\n",
"Instructions for Trustee/Payer\nTo complete Form 1099-SA, use:\n• The current General Instructions for Certain Information \nReturns, and \n• The current Instructions for Forms 1099-SA and 5498-SA.\nTo get or to order these instructions, go to \nwww.irs.gov/Form1099SA.\nFiling and furnishing. For filing and furnishing instructions, \nincluding due dates, and to request filing or furnishing \nextensions, see the current General Instructions for Certain \nInformation Returns.\nTo file electronically, you must have software that generates \na file according to the specifications in Pub. 1220.\nNeed help? If you have questions about reporting on Form \n1099-SA, call the information reporting customer service site \ntoll free at 866-455-7438 or 304-263-8700 (not toll free). \nPersons with a hearing or speech disability with access to \nTTY/TDD equipment can call 304-579-4827 (not toll free). \n"
] |
p3869.pdf
|
1118 Publ 3869 (PDF)
|
https://www.irs.gov/pub/irs-pdf/p3869.pdf
|
[
" \nAT A GLANCE: \nU.S. Code Statutes \nFor Which \nIRS Criminal \n \nInvestigation Has\nJurisdiction \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTitle 26 USC § 7201. \nAttempt to evade or defeat tax \nAny person who willfully attempts in any \nmanner to evade or defeat any tax imposed \nby this title or the payment thereof shall, in \naddition to other penalties provided by law, \nbe guilty of a felony and, upon conviction \nthereof: \n• \nshall be imprisoned not more than 5 years \n• \nor fined not more than $250,000 for \n \nindividuals ($500,000 for corporations [1] \n \n• or both, together with the costs of prosecution. \nTitle 26 USC § 7202. \nWillful failure to collect or pay over tax \nAny person required under this title to \ncollect, account for, and pay over any tax \nimposed by this title who willfully fails to \ncollect or truthfully account for and pay \nover such tax shall, in addition to other \npenalties provided by law, be guilty of a \nfelony and, upon conviction thereof: \n• shall be imprisoned not more than 5 years \n• \nor fined not more than $250,000 for \n \nindividuals ($500,000 for corporations)[1] \n• or both, together with the costs of prosecution. \nTitle 26 USC § 7203. \nWillful failure to file return, supply\ninformation, or pay tax \nAny person required under this title to \npay any estimated tax or tax, or required \nby this title or by regulations made under \nauthority thereof to make a return, keep any \nrecords, or supply any information, who \nwillfully fails to pay such estimated tax or \ntax, make such return, keep such records, \nor supply such information, at the time or \ntimes required by law or regulations, shall, \nin addition to other penalties provided by \nlaw, be guilty of a misdemeanor and, upon \nconviction thereof: \n• shall be imprisoned not more than 1 year \n \n2 \n",
" \n \n \n \n \n \n \n \n \n \n• \nor fined not more than $100,000 for \n \nindividuals ($200,000 for corporations)[1] \n \n• \nor both, together with the costs \n \nof prosecution. \n \nTitle 26 USC § 7205. \nFraudulent withholding exemption certificate or\nfailure to supply information \nWithholding on wages. – Any individual \n \nrequired to supply information to his \n \nemployer under Section 3402 who willfully \n \nsupplies false or fraudulent information, or \n \nwho willfully fails to supply information \n \nthereunder which would require an increase \n \nin the tax to be withheld under Section 3402, \n \nshall, in addition to any other penalty provided \n \nby law, upon conviction thereof: \n• \n \nshall be imprisoned not more than 1 year \n• or fined not more than $100,000[1] \n• or both. \nTitle 26 USC § 7206(1). \nFraud and false statements \nAny person who... \n(1) Declaration under penalties of perjury. \n \n– Willfully makes and subscribes any return, \n \nstatement, or other document, which contains \n \nor is verified by a written declaration that it \n \nis made under the penalties of perjury, and \n \nwhich he does not believe to be true and correct \n \nas to every material matter; shall be guilty of a \n \nfelony and, upon conviction thereof: \n• shall be imprisoned not more than 3 years \n• \nor fined not more than $250,000 for individuals \n \n($500,000 for corporations)[1] \n• or both, together with the costs of prosecution. \nTitle 26 USC § 7206(2). \nFraud and false statements \nAny person who... \n(2) Aid or assistance. – Willfully aids or assists in, \nor procures, counsels, or advises the preparation \nor presentation under, or in connection with any \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \nmatter arising under, the Internal Revenue laws, \nof a return, affidavit, claim, or other document, \nwhich is fraudulent or is false as to any material \nmatter, whether or not such falsity or fraud is \nwith the knowledge or consent of the person \nauthorized or required to present such return, \naffidavit, claim, or document; shall be guilty of a \nfelony and, upon conviction thereof: \n• \nshall be imprisoned not more than 3 years \n• \nor fined not more than $250,000 for \n \nindividuals ($500,000 for corporations)[1] \n• or both, together with the costs of prosecution. \nTitle 26 USC § 7212A. \nAttempts to interfere with administration of\nInternal Revenue laws \nWhoever corruptly or by force endeavors to \nintimidate or impede any officer or employee of \nthe United States acting in an official capacity \nunder this title, or in any other way corruptly or \nby force obstructs or impedes, or endeavors to \nobstruct or impede, the due administration of \nthis title, upon conviction: \n• \nshall be imprisoned not more than 3 years \n• or fined not more than $250,000 for \nindividuals ($500,000 for corporations)[1] \n• or both. \nTitle 18 USC § 287. \nFalse, fictitious, or fraudulent claims \nWhoever makes or presents to any person or \nofficer in the civil, military, or naval service of \nthe United States, or to any department or agency \nthereof, any claim upon or against the United \nStates, or any department or agency thereof, \nknowing such claim to be false, fictitious, \nor fraudulent: \n• shall be imprisoned not more than 5 years \n• or fined not more than $250,000 ($500,000 \n \nfor corporations) \n \n• or both. \n4 \n",
" \n \n \n \n \n \n \n \n \n \nTitle 18 USC § 286. \nConspiracy to defraud the Government with\nrespect to claims \nWhoever enters into any agreement, combination, \nor conspiracy to defraud the United States, or any \ndepartment or agency thereof, by obtaining or \naiding to obtain the payment or allowance of any \nfalse, fictitious, or fraudulent claim: \n• shall be imprisoned not more than 10 years \n• \n or fined not more than $250,000 for individuals \n \n($500,000 for corporations) \n• or both. \nTitle 18 USC § 371. \nConspiracy to commit offense or to defraud the\nUnited States \nIf two or more persons conspire either to commit \nany offense against the United States, or to \ndefraud the United States, or any agency thereof \nin any manner or for any purpose, and one or \nmore of such persons do any act to effect the \nobject of the conspiracy, each: \n• shall be imprisoned not more than 5 years \n• or fined not more than $250,000 \nfor individuals ($500,000 for corporations) \n• or both. \nTitle 18 USC §510. \nForging Endorsements on Treasury Checks or \nBonds or Securities of the United States \nWhoever, with intent to defraud: \n- falsely makes or forges any endorsement or \n signature on a Treasury check or bond or \n security of the United States; or \n- passes, utters, or publishes, or attempts to pass, \n utter, or publish, any Treasury check or bond or \n \n security of the United States bearing a falsely \n made or forged endorsement or signature: \n• \n \nshall be fined under this title or imprisoned \nnot more than ten years, or both. \nWhoever, with knowledge that such Treasury \n5 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \ncheck or bond or security of the United States is \nstolen or bears a falsely made or forged endorsement \nor signature buys, sells, exchanges, receives, delivers, \nretains, or conceals any such Treasury check or \nbond or security of the United States: \n• \n \nshall be fined under this title or imprisoned \nnot more than ten years, or both. \nIf the face value of the Treasury check or bond or \nsecurity of the United States or the aggregate face \nvalue, if more than one Treasury check or bond \nor security of the United States, does not exceed \n$1,000, in any of the above-mentioned offenses, \nthe penalty shall be a fine under this title or \nimprisonment for not more than one year, or both. \nTitle 18 USC § 514. \nFictitious obligations \n [2] \nWhoever, with the intent to defraud \n- draws, prints, processes, produces, publishes, \nor otherwise makes, or attempts or causes the \nsame, within the United States; \n- passes, utters, presents, offers, brokers, issues, \nsells, or attempts or causes the same, or with like \nintent possesses, within the United States; or \n- utilizes interstate or foreign commerce, \nincluding the use of the mails or wire, radio, \nor other electronic communication, to transmit, \ntransport, ship, move, transfer, or attempts \nor causes the same, to, from, or through the \nUnited States, any false or fictitious instrument, \ndocument, or other item appearing, representing, \nsecurity or other financial instrument issued \nunder the authority of the United States, a \nforeign government, a State or other political \nsubdivision of the United States, or an organization: \n• \n shall be imprisoned not more than 25 years. \nTitle 18 USC § 641.\nPublic money, property or records \nWhoever embezzles, steals, purloins, or knowingly \nconverts to his use or the use of another, or \nwithout authority, sells, conveys or disposes of \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nany record, voucher, money, or thing of value of \nthe United States or of any department or agency \nthereof, or any property made or being made \nunder contract for the United States or any \ndepartment or agency thereof; or \nWhoever receives, conceals, or retains the same \nwith intent to convert it to his use or gain, knowing \nit to have been embezzled, stolen, purloined \nor converted: \n• \n \nshall be fined under this title or imprisoned \nnot more than ten years, or both; but if the \nvalue of such property in the aggregate, \ncombining amounts from all the counts for \nwhich the defendant is convicted in a single \ncase, does not exceed the sum of $1,000, he \nshall be fined under this title or imprisoned \nnot more than one year, or both. \nTitle 18 USC § 1001. \nStatements or entries generally \nWhoever, in any matter within the jurisdiction \nof any department or agency of the United \nStates knowingly and willfully falsifies, \nconceals, or covers up by any trick, scheme, \nor device a material fact, or makes any false, \nfictitious, or fraudulent statements or \nrepresentations, or makes or uses any false \nwriting or document knowing the same to \ncontain any materially false, fictitious, or \nfraudulent statement or entry: \n• shall be imprisoned not more than 5 years \n• \n \nor fined not more than $250,000 for individuals \n \n($500,000 for corporations) \n• or both. \nTitle 18 USC § 1028.\nFraud and related activity in connection with\nidentification documents and information \nWhoever knowingly transfers or uses, without \nlawful authority, a means of identification \nof another person with the intent to commit, \nor to aid or abet, any unlawful activity that \nconstitutes a violation of Federal law, or that \n7 \n",
" \n \n \n \n \nconstitutes a felony under any applicable State \nor local law: \n• shall be imprisoned not more than 15 years \n• or fined not more than $250,000 \n• or both. \n \nTitle 18 USC §1028A. \nAggravated Identity Theft \nWhoever, during and in relation to a felony \nviolation, knowingly transfers, possesses, or uses, \nwithout lawful authority, a means of identification \nof another person shall, in addition to the \npunishment provided for such felony: \n• \n shall be sentenced to a term of imprisonment \n of 2 years. \nTitle 18 USC §1029. \nFraud and related activity in connection with \naccess devices \nWhoever knowingly and with intent to defraud: \n- traffics in or uses one or more unauthorized \n access devices during any one-year period, and \n by such conduct obtains anything of value \n aggregating $1,000 or more during that period; \n- possesses fifteen or more devices which are \n counterfeit or unauthorized access devices: \n• \nshall be imprisoned for not more than 10 \nyears and fined. \nWhoever knowingly and with intent to defraud \neffects transactions, with 1 or more access devices \nissued to another person or persons, to receive \npayment or any other thing of value during any \n1-year period the aggregate value of which is \nequal to or greater than $1,000: \n• shall be imprisoned for not more than 15 \n years and fined. \n8 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTitle 18 USC § 1956. \nLaundering of monetary instruments \nWhoever, knowing that the property involved \nin a financial transaction represents the \nproceeds of some form of unlawful activity, \nconducts, or attempts to conduct such a \nfinancial transaction which in fact involves \nthe proceeds of specified unlawful activity: \n(A) \n(1) with the intent to promote the carrying \non of specified unlawful activity; or \n(2) with intent to engage in conduct \nconstituting a violation of section \n7201 or 7206 of the Internal Revenue \nCode of 1986; or \n(B) knowing that the transaction is designed \nin whole or in part \n(1) to conceal or disguise the nature, the \nlocation, the source, the ownership, or \nthe control of the proceeds of specified \nunlawful activity; or \n(2) to avoid a transaction reporting \nrequirement under State or \nFederal law: \n• \n \nshall be imprisoned not more than 20 years \n• or fined not more than $500,000 or twice \n \nthe value of the property involved in the \n \ntransaction, which ever is greater \n• or both. \nTitle 18 USC § 1957. \nEngaging in monetary transactions in property\nderived from specified unlawful activity \nWhoever knowingly engages or attempts \nto engage in a monetary transaction in \ncriminally derived property of a value \ngreater than $10,000 and is derived from \nspecified unlawful activity: \n• \nshall be imprisoned not more than 10 years \n• \nor fined not more than twice the amount \n \nof the criminally derived property involved \n \nin the transaction \n• or both. \n9 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTitle 18 USC § 1960. \nProhibition of Unlicensed Money\nTransmitting Businesses \nWhoever knowingly conducts, controls, manages, \nsupervises, directs, or owns all or parts of an \nunlicensed money transmitting business: \n• \n \nshall be imprisoned not more than 5 years \n \n• \nor fined in accordance with this title \n \n• or both. \nTitle 31 USC § 5324. \nStructuring transactions to evade reporting\nrequirement prohibited \n(A) Whoever shall for the purpose of evading \nthe reporting requirements:\n (1) cause or attempt to cause a domestic \nfinancial institution to fail to file a \nreport required; or\n (2) cause or attempt to cause a domestic \nfinancial institution to file a report that \ncontains a material omission or misstatement \nof fact; or\n (3) structure or assist in structuring, or attempt \nto structure or assist instructuring, any \ntransaction with one or more domestic \nfinancial institutions: \n• \nshall \n be \n imprisoned not more than 5 years \n• \n \nor fined not more than $250,000 ($500,000 for \n \ncorporations) \n• or both. \nTitle 31 USC § 5332. \nBulk Cash Smuggling Into or Out of the \nUnited States \nWhoever, with the intent to evade a currency \nreporting requirement under section 5316, \nknowlingly conceals more than $10,000 in \ncurrency or other monetary instruments on \nthe person of such individual or in any \nconveyance, article of luggage, merchandise, or \nother container, and transports or transfers or \nattempts to transport or transfer such currency or \nmonetary instruments from a place within the \n10 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nUnited States to a place outside of the United \nStates, or from a place outside the United \nStates to a place within the United States, shall \nbe gulity of a currency smuggling offense and \nsubject to punishment of: \n• Imprisonment of not more than 5 years \n• Forfeiture to the United States, any property, \nreal or personal, involved in the offense, and \nany property traceable to such property or if \nthe property subject to forfeiture is unavaliable, \nand the defendant has insufficient substitute \nproperty that may be forfeited, the court shall \nenter a personal money judgement against \nthe defendant for the amount that would be \nsubject to forfeiture. \nTitle 18 USC § 981. \nCivil Forfeiture Statute \nTitle 18 USC § 982. \nCriminal Forfeiture Statute \n[1] The Criminal Fine Enforcement Act of 1984 \nenacted 18 USC § 3571, which increased the \nmaximum permissible fines for both misdemeanors \nand felonies. The fine amounts provided in this \nguide reflect the impact of 18 USC § 3571. \n \n[2] Title 18 USC § 514 is only used when the \ncriminal activity involves violations relating to \nTitle 26. \n11 \n",
" \n \n \n \n \n \n \n \n \n I R S logo\n \n \n \n \n \nCriminal Investigation Mission \nCriminal Investigation serves the American\npublic by investigating potential criminal\nviolations of the Internal Revenue Code \nand related financial crimes in a manner \nthat fosters confidence in the tax system\nand compliance with the law. \nThis guide describes the most frequently\nused federal statutes for which IRS \nCriminal Investigation has investigative\nauthority. These statutes primarily\nconcern tax and financial-related crimes. \nThis booklet is not all inclusive of the \nstatutes for which IRS Criminal \nInvestigation has jurisdiction. \nAll criminal investigations are conducted\nin adherence to Internal Revenue Code \n(IRC) §6103 with regard to the\nconfidentiality and disclosure of returns\nand return information. \nPublication 3869 (Rev. 11-2018) Catalog Number 32376X \nDepartment of the Treasury Internal Revenue Service \nwww.irs.gov \n"
] |
f1099ltc.pdf
|
1019 Form 1099-LTC (PDF)
|
https://www.irs.gov/pub/irs-pdf/f1099ltc.pdf
|
[
" \nForm 1099-LTC\n(Rev. October 2019)\nCat. No. 23021Z\nLong-Term Care and \nAccelerated Death \nBenefits\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nFile with Form 1096. \nOMB No. 1545-1519\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nFor calendar year\n20\n9393\nVOID\nCORRECTED\nwww.irs.gov/Form1099LTC\nPAYER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPAYER’S TIN\nPOLICYHOLDER’S TIN\nPOLICYHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross long-term care \nbenefits paid\n$\n2 Accelerated death benefits \npaid\n$\n3 Check one:\nPer \ndiem\nReimbursed \namount\nINSURED’S TIN \nINSURED’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n4 Qualified contract \n(optional)\n5 Check, if applicable \n(optional):\nChronically ill\nTerminally ill\nDate certified\nForm 1099-LTC (Rev. 10-2019)\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-LTC\n(Rev. October 2019)\nLong-Term Care and \nAccelerated Death \nBenefits\nCopy B\nFor Policyholder\nDepartment of the Treasury - Internal Revenue Service\nThis is important tax \ninformation and is being \nfurnished to the IRS. If \nyou are required to file a \n return, a negligence \npenalty or other \nsanction may be \nimposed on you if this \nitem is required to be \nreported and the IRS \ndetermines that it has \nnot been reported.\nOMB No. 1545-1519\nFor calendar year\n20\nCORRECTED (if checked)\nPAYER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPAYER’S TIN\nPOLICYHOLDER’S TIN\nPOLICYHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross long-term care \nbenefits paid\n$\n2 Accelerated death benefits \npaid\n$\n3\nPer \ndiem\nReimbursed \namount\nINSURED’S TIN\nINSURED’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n4 Qualified contract \n(optional)\n5 (optional)\nChronically ill\nTerminally ill\nDate certified\nForm 1099-LTC (Rev. 10-2019)\n(keep for your records)\nwww.irs.gov/Form1099LTC\n",
"Instructions for Policyholder\nA payer, such as an insurance company or a viatical settlement provider, must \ngive this form to you for payments made under a long-term care insurance \ncontract or for accelerated death benefits. Payments include those made \ndirectly to you (or to the insured) and those made to third parties.\nA long-term care insurance contract provides coverage of expenses for long-\nterm care services for an individual who has been certified by a licensed health \ncare practitioner as chronically ill. A life insurance company or viatical settlement \nprovider may pay accelerated death benefits if the insured has been certified \neither by a physician as terminally ill or by a licensed health care practitioner as \nchronically ill.\nLong-term care insurance contract. Generally, amounts received under a \nqualified long-term care insurance contract are excluded from your income. \nHowever, if payments are made on a per diem basis, the amount you may \nexclude is limited. The per diem exclusion limit must be allocated among all \npolicyholders who own qualified long-term care insurance contracts for the \nsame insured. See Pub. 525 and Form 8853 and its instructions for more \ninformation.\nPer diem basis. This means the payments were made on any periodic basis \nwithout regard to the actual expenses incurred during the period to which the \npayments relate.\nAccelerated death benefits. Amounts paid as accelerated death benefits are \nfully excludable from your income if the insured has been certified by a \nphysician as terminally ill. Accelerated death benefits paid on behalf of \nindividuals who are certified as chronically ill are excludable from income to the \nsame extent they would be if paid under a qualified long-term care insurance \ncontract.\nPolicyholder’s taxpayer identification number (TIN). For your protection, this \nform may show only the last four digits of your TIN (social security number \n(SSN), individual taxpayer identification number (ITIN), adoption taxpayer \nidentification number (ATIN), or employer identification number (EIN)). However, \nthe issuer has reported your complete TIN to the IRS.\nAccount number. May show an account or other unique number the payer \nassigned to distinguish your account.\nBox 1. Shows the gross benefits paid under a long-term care insurance contract \nduring the year.\nBox 2. Shows the gross accelerated death benefits paid during the year.\nBox 3. Shows if the amount in box 1 or 2 was paid on a per diem basis or was \nreimbursement of actual long-term care expenses. If the insured was terminally \nill, this box may not be checked.\nBox 4. May show if the benefits were from a qualified long-term care insurance \ncontract. \nBox 5. May show if the insured was certified chronically ill or terminally ill and \nthe latest date certified.\nFuture developments. For the latest developments related to Form 1099-LTC \nand its instructions, such as legislation enacted after they were published, go to \nwww.irs.gov/Form1099LTC. \n",
" \nForm 1099-LTC\n(Rev. October 2019)\nLong-Term Care and \nAccelerated Death \nBenefits\nCopy C\nFor Insured\nDepartment of the Treasury - Internal Revenue Service\nCopy C is \nprovided to you \nfor information \nonly. Only the \npolicyholder is \nrequired to \nreport this \ninformation on \na tax return.\nOMB No. 1545-1519\nFor calendar year\n20\nCORRECTED (if checked)\nPAYER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPAYER’S TIN\nPOLICYHOLDER’S TIN\nPOLICYHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross long-term care \nbenefits paid\n$\n2 Accelerated death benefits \npaid\n$\n3\nPer \ndiem\nReimbursed \namount\nINSURED’S TIN\nINSURED’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n4 Qualified contract \n(optional)\n5 (optional)\nChronically ill\nTerminally ill\nDate certified\nForm 1099-LTC (Rev. 10-2019)\n(keep for your records)\nwww.irs.gov/Form1099LTC\n",
"Instructions for Insured\nA payer, such as an insurance company or a viatical \nsettlement provider, must give this form to you and to the \npolicyholder for payments made under a long-term care \ninsurance contract or for accelerated death benefits. \nPayments include both benefits you received directly and \nexpenses paid on your behalf to third parties.\nIf you are the insured but are not the policyholder, Copy \nC is provided to you for information only because these \npayments are not taxable to you. If you are also the \npolicyholder, you should receive Copy B.\nInsured’s taxpayer identification number (TIN). For your \nprotection, this form may show only the last four digits of \nyour TIN (social security number (SSN), individual taxpayer \nidentification number (ITIN), adoption taxpayer \nidentification number (ATIN), or employer identification \nnumber (EIN)). However, the issuer has reported your \ncomplete TIN to the IRS.\nAccount number. May show an account or other unique \nnumber the payer assigned to distinguish your account.\nBox 1. Shows the gross benefits paid under a long-term \ncare insurance contract during the year.\nBox 2. Shows the gross accelerated death benefits paid \nduring the year.\nBox 3. Shows if the amount in box 1 or 2 was paid on a \nper diem basis or was reimbursement of actual long-term \ncare expenses. If you are terminally ill this box may not be \nchecked.\nBox 4. May show if the benefits were from a qualified long-\nterm care insurance contract.\nBox 5. May show if you were certified chronically ill or \nterminally ill and the latest date certified.\nFuture developments. For the latest developments related \nto Form 1099-LTC and its instructions, such as legislation \nenacted after they were published, go to www.irs.gov/\nForm1099LTC. \n",
" \nForm 1099-LTC\n(Rev. October 2019)\nLong-Term Care and \nAccelerated Death \nBenefits\nCopy D\nFor Payer\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1519\nFor calendar year\n20\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain \nInformation \nReturns.\nVOID\nCORRECTED\nPAYER’S name, street address, city or town, state or province, country, ZIP \nor foreign postal code, and telephone no.\nPAYER’S TIN\nPOLICYHOLDER’S TIN\nPOLICYHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Gross long-term care \nbenefits paid\n$\n2 Accelerated death benefits \npaid\n$\n3\nPer \ndiem\nReimbursed \namount\nINSURED’S TIN\nINSURED’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\n4 Qualified contract \n(optional)\n5 Check, if applicable \n(optional):\nChronically ill\nTerminally ill\nDate certified\nForm 1099-LTC (Rev. 10-2019)\nwww.irs.gov/Form1099LTC\n",
"Instructions for Payer\nTo complete Form 1099-LTC, use:\n• The current General Instructions for Certain \nInformation Returns, and\n• The current Instructions for Form 1099-LTC.\nTo get or to order these instructions, go to \nwww.irs.gov/Form1099LTC.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220. \nNeed help? If you have questions about reporting on \nForm 1099-LTC, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
f1098ma.pdf
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0919 Form 1098-MA (PDF)
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https://www.irs.gov/pub/irs-pdf/f1098ma.pdf
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[
" \nForm 1098-MA\n(Rev. September 2019)\nCat. No. 58017D\nMortgage \nAssistance \nPayments\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service \nOMB No. 1545-2221\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see \nthe current General \nInstructions for \nCertain Information \nReturns.\nFor calendar year \n20\nVOID \nCORRECTED \nFILER’S name, street address, city, state, ZIP code, and telephone no. \nFILER’S TIN\nHOMEOWNER’S TIN\nHOMEOWNER’S name \nStreet address (including apt. no.) (optional) \nCity, state, and ZIP code (optional) \nAccount number (optional)\n1. Total State HFA and homeowner mortgage payments\n$ \n2. State HFA mortgage assistance payments\n$ \n3. Homeowner mortgage payments \n$ \nForm 1098-MA (Rev. 9-2019)\n www.irs.gov/Form1098MA\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1098-MA\n(Rev. September 2019)\nMortgage \nAssistance \nPayments\nCopy B\nFor Homeowner\nDepartment of the Treasury - Internal Revenue Service \nThis is important \ntax information \nand is being \nfurnished to the IRS.\nOMB No. 1545-2221\nFor calendar year \n20\nCORRECTED (if checked)\nFILER’S name, street address, city, state, ZIP code, and telephone no. \nFILER’S TIN\nHOMEOWNER’S TIN\nHOMEOWNER’S name \nStreet address (including apt. no.) (optional) \nCity, state, and ZIP code (optional) \nAccount number (optional)\n1. Total State HFA and homeowner mortgage payments\n$ \n2. State HFA mortgage assistance payments\n$ \n3. Homeowner mortgage payments \n$ \nForm 1098-MA (Rev. 9-2019)\n(keep for your records)\n www.irs.gov/Form1098MA\n",
"Instructions for Homeowner\nForm 1098-MA. The information on this statement is submitted to \nthe IRS by State Housing Finance Agencies (HFAs) to report \n(1) payments made by a State HFA under the Housing Finance \nAgency Innovation Fund for the Hardest Hit Housing Markets \n(HFA Hardest Hit Fund) (State HFA mortgage assistance \npayments), and (2) payments made by you (homeowner mortgage \npayments) under this program.\nHomeowner’s taxpayer identification number (TIN). For your \nprotection, this form may show only the last four digits of your TIN \n(social security number (SSN) or individual taxpayer identification \nnumber (ITIN)). However, the filer has reported your complete TIN \nto the IRS.\nSafe-harbor deduction computation. You may use a safe-\nharbor method to compute your deduction for mortgage interest, \nmortgage insurance premiums (MIP) (if deductible, see Schedule \nA (Form 1040 or 1040-SR)), and real property taxes on your main \nhome if you meet two tests. First, you meet the rules to deduct all \nof the mortgage interest on your loan, all of your MIP, and all of \nthe real property taxes on your main home. Second, you \nparticipated in an HFA Hardest Hit Fund program in which \nprogram payments could be used to pay mortgage interest. If you \nmeet these tests, then you may deduct an amount equal to the \nsum of all payments you actually made during the year to your\nmortgage servicer or the State HFA. However, the amount you \nmay deduct cannot exceed the sum of the amounts shown on \nyour Form 1098 in box 1 (Mortgage interest received from payer\n(s)/borrower(s)), any deductible MIP reported in box 5, and real \nestate taxes reported in box 10. However, you are not required to \nuse this safe-harbor method to compute your deduction for \nmortgage interest and real property taxes on your main home. \nAccount number (optional). May show an account number the \nfiler has assigned to distinguish your account. \nBox 1. Shows the total amount of State HFA mortgage assistance \npayments and homeowner mortgage payments.\nBox 2. Shows the amount of State HFA mortgage assistance \npayments.\nBox 3. Shows the amount of homeowner mortgage payments you \npaid to the State HFA.\nFuture developments. For the latest information about \ndevelopments related to Form 1098-MA and its instructions, such \nas legislation enacted after they were published, go to \nwww.irs.gov/Form1098MA.\n",
" \nForm 1098-MA\n(Rev. September 2019)\nMortgage \nAssistance \nPayments\nCopy C\nFor Filer\nDepartment of the Treasury - Internal Revenue Service \nOMB No. 1545-2221\nFor Privacy Act \nand Paperwork \nReduction Act \nNotice, see \nthe current General \nInstructions for \nCertain Information \nReturns.\nFor calendar year \n20\nVOID \nCORRECTED \nForm 1098-MA (Rev. 9-2019)\nFILER’S name, street address, city, state, ZIP code, and telephone no. \nFILER’S TIN\nHOMEOWNER’S TIN\nHOMEOWNER’S name \nStreet address (including apt. no.) (optional) \nCity, state, and ZIP code (optional) \nAccount number (optional) \n1. Total State HFA and homeowner mortgage payments\n$ \n2. State HFA mortgage assistance payments\n$ \n3. Homeowner mortgage payments \n$ \n www.irs.gov/Form1098MA\n",
"Instructions for Filer\nGeneral instructions for this form are provided in the current General \nInstructions for Certain Information Returns. To order instructions and \nadditional forms, go to www.irs.gov.\nThis form is used to provide information to the IRS and to \nhomeowners regarding mortgage payments made by the homeowners \nand mortgage assistance payments made with funds allocated from \nthe Housing Finance Agency Innovation Fund for the Hardest Hit \nHousing Markets (HFA Hardest Hit Fund).\nFurnish to homeowner. Furnish Copy B of this form or a substitute \nstatement in lieu of Copy B to each recipient homeowner. If you \nfurnish a statement to each recipient homeowner in lieu of Copy B, it \nmust contain that homeowner’s name and taxpayer identification \nnumber (TIN), and the corresponding reportable amounts in boxes 1, \n2, and 3 for that homeowner. \nFile with IRS. File Copy A or a paper single statement in lieu of Copy \nA with the IRS at the following address.\nDepartment of Treasury \nInternal Revenue Service Center \nStop 6728AUSC \nAustin, TX 73301 \nIf you file the paper single statement, it must contain each \nhomeowner’s name and TIN, and corresponding reportable amounts \nin boxes 1, 2, and 3 for each homeowner. \nFiling and furnishing. For filing and furnishing instructions, including \ndue dates, and to request filing or furnishing extensions, see the \ncurrent General Instructions for Certain Information Returns.\n▲\n!\nCAUTION\nForm 1098-MA may not be filed electronically with the IRS. \nForm 1098-MA is not scanned during processing at the \nIRS. Therefore, you may file Copy A that you print from \nwww.irs.gov. \nNeed help? If you have questions about reporting on Form 1098-MA, \ncall the information reporting customer service site toll free at \n866-455-7438 or 304-263-8700 (not toll free). Persons with a hearing \nor speech disability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free).\n"
] |
f706sr1.pdf
|
0919 Form 706 (Schedule R-1) (PDF)
|
https://www.irs.gov/pub/irs-pdf/f706sr1.pdf
|
[
"SCHEDULE R-1 \n(Form 706)\n(September 2019)\nDepartment of the Treasury \nInternal Revenue Service\nGeneration-Skipping Transfer Tax\nDirect Skips From a Trust Payment Voucher \n▶ Go to www.irs.gov/Form706 for instructions and the latest information.\nOMB No. 1545-0015\nExecutor: File one copy with Form 706 and send two copies to the fiduciary. Do not pay the tax shown. See instructions for details.\nFiduciary: See the Instructions for the Trustee, later, for details. Pay the tax shown on line 6.\nName of trust\nTrust’s EIN\nName and title of fiduciary\nName of decedent\nAddress of fiduciary (number and street)\nDecedent’s SSN\nService Center where Form 706 was filed\nCity, state, and ZIP or postal code\nName of executor\nAddress of executor (number and street)\nCity, state, and ZIP or postal code\nDate of decedent’s death\nFiling due date of Schedule R, Form 706 (with extensions)\nPart 1. Computation of the GST Tax on the Direct Skip\nDescription of property interests subject to the direct skip\nEstate tax value\n1 Total estate tax value of all property interests listed above \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2 Estate taxes, state death taxes, and other charges borne by the property interests listed above .\n.\n2\n3 Tentative maximum direct skip from trust (subtract line 2 from line 1) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4 GST exemption allocated .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5 Subtract line 4 from line 3 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6 GST tax due from fiduciary (divide line 5 by 3.5). (See the Instructions for Form 706 if property \nwill not bear the GST tax.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\nUnder penalties of perjury, I declare that I have examined this document, including accompanying schedules and statements, and to the best of my knowledge and belief, it \nis true, correct, and complete.\nSignature(s) of executor(s)\nDate\nDate\nSignature of fiduciary or officer representing fiduciary\nDate\nFor Paperwork Reduction Act Notice, see the Instructions for Form 706.\nCat. No. 71683P\nSchedule R-1 (Form 706) (9-2019)\n",
"Schedule R-1 (Form 706) (9-2019)\nPage 2\nInstructions for the Trustee\nIntroduction\nSchedule R-1 (Form 706) serves as a payment voucher for the Generation-Skipping Transfer \n(GST) tax imposed on a direct skip from a trust, which you, the trustee of the trust, must pay. \nThe executor completes the Schedule R-1 (Form 706) and gives you two copies. File one copy \nand keep one for your records.\nHow to pay\nYou can pay by check or money order or by electronic funds transfer.\nTo pay by check or money order:\n• Make it payable to “United States Treasury.”\n• The amount of the check or money order should be the amount on line 6 of Schedule R-1.\n• Write “GST Tax” and the trust’s EIN on the check or money order.\nTo pay by electronic funds transfer:\n• Funds must be submitted through the Electronic Federal Tax Payment System (EFTPS).\n• Establish an EFTPS account by visiting www.eftps.gov or calling 1-800-555-4477.\n• To be considered timely, payments made through EFTPS must be completed no later than \n8 p.m. Eastern time the day before the due date.\nSignature\nYou must sign the Schedule R-1 in the space provided.\nWhat to mail\nMail your check or money order, if applicable, and the copy of Schedule R-1 that you signed.\nWhere to mail\nMail to the Department of the Treasury, Internal Revenue Service Center, Kansas City, MO \n64999.\nWhen to pay\nThe GST tax is due and payable 9 months after the decedent’s date of death (shown on the \nSchedule R-1). You will owe interest on any GST tax not paid by that date.\nAutomatic \nextension\nYou have an automatic extension of time to file Schedule R-1 and pay the GST tax. The \nautomatic extension allows you to file and pay by 2 months after the due date (with extensions) \nfor filing the decedent’s Schedule R (shown on the Schedule R-1). \nIf you pay the GST tax under the automatic extension, you will be charged interest (but no \npenalties).\nAdditional \ninformation\nFor more information on how to complete Schedule R-1, see section 2603(a)(2) and the \nInstructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.\n"
] |
f6497.pdf
|
0819 Form 6497 (PDF)
|
https://www.irs.gov/pub/irs-pdf/f6497.pdf
|
[
"Form 6497\n(Rev. August 2019) \nDepartment of the Treasury \nInternal Revenue Service \nInformation Return of Nontaxable Energy \nGrants or Subsidized Energy Financing \n▶ Go to www.irs.gov/Form6497 for the latest information. \nFor calendar year \nOMB No. 1545-0232 \nType \nor Print \n1 Payer’s name \n2a Number and street and apt. or suite no. (Include P.O. box, if applicable.) \nb City or town, state or province, country, and ZIP or foreign postal code\n3 Payer’s employer identification number \n4 Payer is agent for \n5 Program name or number \n6(a) Recipient’s name, address, and \nZIP code \nComplete 6(b) or 6(c) \n6(d) Total \namount of grant \n6(e) Total amount \nof financing \n \n6(b) Recipient’s \nsocial security number \n6(c) Recipient’s \nemployer identification \nnumber \n \n \nFor Paperwork Reduction Act Notice, see back of form. \nCat. No. 24535C \nForm 6497 (Rev. 8-2019) \n",
"Form 6497 (Rev. 8-2019) \nPage 2 \nInstructions \nSection references are to the Internal Revenue \nCode. \nFuture Developments \nFor the latest information about developments \nrelated to Form 6497 and its instructions, \nsuch as legislation enacted after they were \npublished, go to www.irs.gov/Form6497.\nWhat’s New \nNew Where-To-File address. See Where To \nFile, later, for the current address for filing \nForm 6497. \nPurpose of Form \nUse Form 6497 to report nontaxable energy \ngrants or subsidized energy financing made \nunder government programs whose principal \npurpose is to conserve or produce energy. \nThis reporting is required only for recipients \nthat are businesses (including sole \nproprietors). \nForm 6497 lists the information to be \nfurnished about the nontaxable energy grants \nor subsidized energy financing, and about the \nrecipients. Only one program should be \nreported on each form. This form should also \nbe used to report funds received from the \nproceeds of tax-exempt bonds that have \nbeen used to finance energy conservation or \nproduction property. \nGrants are always taxable to recipients \nunless specifically exempted by the federal \nstatute authorizing the grants. The originator \nof the grant or subsidy program should \nadvise all disbursing agents whether the \nprogram is taxable or nontaxable. Taxable \ngrants are reported on Form 1099-G, Certain \nGovernment Payments. For details, see the \nInstructions for Form 1099-G. \nWho Must File \nAny person (including an Indian tribal \ngovernment) who administers a government \nprogram for a federal, state, or local \ngovernmental entity or agent of that entity \nthat provides nontaxable energy grants or \nsubsidized energy financing for energy \nproperty to business recipients under \nprograms whose principal purpose is energy \nproduction or conservation must file Form \n6497. If a federal agency is providing the \nfunds to a state agency, and the state turns \nthe funds over to a bank or similar disburser \nto act as its agent in disbursing the money for \nthe above purposes, only the bank, or \ndisburser, must file Form 6497 to show the \nactual recipient information. \nGenerally, reporting on Form 6497 is \nrequired only for nontaxable energy grants or \nsubsidized energy financing made for energy \nproperty (as defined in section 48 and the \nregulations under section 48). \nWhen To File \nFile Form 6497 for the calendar year by the \nlast day of February following the year of the \npayment. \nWhere To File \nLB&I Central Compliance Practice Area \n1919 Smith St., M/S 1000-HOU \nHouston, TX 77002 \nDefinitions \nEnergy grant. An energy grant is a payment \ngiven outright for property designed to \nconserve or produce energy, with no \nrequirement to repay the money. \nSubsidized energy financing. Subsidized \nenergy financing is financing (for example, a \nloan) made directly or indirectly under a \nfederal, state, or local government program, \nwhose principal purpose is to provide \nsubsidized financing for projects designed to \nconserve or produce energy. Subsidized \nenergy financing can also include financing \nunder a federal, state, or local program \nhaving two or more principal purposes, but (a) \nonly if one of the principal purposes is to \nprovide subsidized financing for energy \nconservation or production projects, and (b) \nonly if the financing is to be used for energy \nproduction or conservation purposes (the \n“use test”) or is provided out of funds \ndesignated specifically for energy production \nor conservation. Loan proceeds meet the use \ntest only if any loan-related documents \nindicate that the funds are intended for that \nuse. \nFinancing is made when funds for \nsubsidized energy financing are disbursed. \nThe source of the funds for a program is not \na factor in determining whether the financing \nis subsidized. Financing is subsidized if the \nterms of the financing provided to the \nrecipient in connection with the program or \nused to raise funds for the program are more \nfavorable than terms generally available \ncommercially. In addition, financing is \nsubsidized if the principal obligation of the \nfinancing provided to the recipient is reduced \nby funds provided under the program. \nPayer. A payer is any person (including an \nIndian tribal government) who administers a \nfederal, state, or local government program \nthat provides nontaxable grants or subsidized \nfinancing under programs whose principal \npurpose is the production or conservation of \nenergy. It includes agents (such as a bank) \nthat administer federal, state, or local \ngovernment programs and actually make the \npayments to the recipient. \nRecipient. A recipient is the business entity \n(including a sole proprietor) that received the \ngrant or financing. \nSpecific Instructions \nLine 1. Generally, this will be the name of the \nfederal, state, or local governmental entity \nthat makes the nontaxable energy grants or \nprovides the subsidized energy financing. If \nan entity (such as a bank) is administering a \nprogram as the designated agent of one of \nthe above governmental entities, enter the \nname of the agent and be sure to fill in line 4. \nLines 2a and 2b. Enter the address where \nany IRS questions about Form 6497 can be \ndirected. \nLine 3. Use the employer identification \nnumber (EIN) for the payer shown on line 1. \nDo not use the social security number of an \nofficer or employee. \nLine 4. If line 1 shows the name of an agent, \nuse line 4 to show the federal, state, or local \ngovernmental entity for which the agent is \nadministering the program. \nLine 5. Enter the program name or number \nthat authorizes the payment. \nLine 6. Make an entry in columns 6(a) \nthrough 6(e) for each recipient of a \nnontaxable energy grant or subsidized energy \nfinancing. If you need more space, attach \nadditional Forms 6497. \nColumn 6(a). Show the name and address \nof the entity that received the nontaxable \nenergy grant or subsidized energy financing. \nDo not show the name of an officer, \nemployee, etc. \nColumn 6(b). Complete this column for \nsole proprietors without EINs. \nColumn 6(c). Complete this column if no \nentry was made in column 6(b). \nColumn 6(d). Enter the total amount of \nnontaxable energy grants provided to the \nrecipient during the calendar year under the \nprogram shown on line 5. \nColumn 6(e). Enter the total amount of \nsubsidized energy financing provided to the \nrecipient during the calendar year under the \nprogram shown on line 5. The amount of \nsubsidized energy financing may be different \nfrom the actual amount of money expended. \nExample. If a government agency spent \n$1,000 to permit a $5,000 loan to be made \nwith an interest rate lower than it would have \nbeen otherwise, the amount of subsidized \nenergy financing is $5,000. \nPaperwork Reduction Act Notice \nWe ask for the information on this form to \ncarry out the Internal Revenue laws of the \nUnited States. You are required to give us the \ninformation. We need it to ensure that you are \ncomplying with these laws and to allow us to \nfigure and collect the right amount of tax. \nYou are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB control \nnumber. Books or records relating to a form \nor its instructions must be retained as long as \ntheir contents may become material in the \nadministration of any Internal Revenue law. \nGenerally, tax returns and return information \nare confidential, as required by section 6103. \nThe time needed to complete and file this \nform will vary depending on individual \ncircumstances. The estimated average time \nis: \nRecordkeeping \n.\n.\n.\n.\n 2 hr., 23 min. \nLearning about the law \nor the form .\n.\n.\n.\n.\n.\n.\n. 24 min. \nPreparing, copying, and \nsending the form to the IRS \n.\n. 27 min. \nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form simpler, we \nwould be happy to hear from you. You can \nsend us comments through www.irs.gov/\nFormComments. Or you can write to the \nInternal Revenue Service, Tax Forms and \nPublications Division, 1111 Constitution Ave. \nNW, IR-6526, Washington, DC 20224. Do not \nsend this form to this address. Instead, see \nWhere To File on this page. \n"
] |
fw7.pdf
|
0819 Form W-7 (PDF)
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https://www.irs.gov/pub/irs-pdf/fw7.pdf
|
[
"Form W-7\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service \nApplication for IRS Individual \nTaxpayer Identification Number\n▶ For use by individuals who are not U.S. citizens or permanent residents. \n▶ See separate instructions.\nOMB No. 1545-0074\nAn IRS individual taxpayer identification number (ITIN) is for U.S. federal tax purposes only.\nBefore you begin:\n• Don’t submit this form if you have, or are eligible to get, a U.S. social security number (SSN).\nApplication type (check one box):\nApply for a new ITIN\nRenew an existing ITIN\nReason you’re submitting Form W-7. Read the instructions for the box you check. Caution: If you check box b, c, d, e, f, or g, you \nmust file a U.S. federal tax return with Form W-7 unless you meet one of the exceptions (see instructions).\na\nNonresident alien required to get an ITIN to claim tax treaty benefit\nb\nNonresident alien filing a U.S. federal tax return\nc\nU.S. resident alien (based on days present in the United States) filing a U.S. federal tax return\nd\nDependent of U.S. citizen/resident alien\ne\nSpouse of U.S. citizen/resident alien }\nIf d, enter relationship to U.S. citizen/resident alien (see instructions) ▶\nIf d or e, enter name and SSN/ITIN of U.S. citizen/resident alien (see instructions) ▶\nf\nNonresident alien student, professor, or researcher filing a U.S. federal tax return or claiming an exception\ng\nDependent/spouse of a nonresident alien holding a U.S. visa\nh\nOther (see instructions) ▶\nAdditional information for a and f: Enter treaty country ▶\nand treaty article number ▶\nName \n(see instructions)\nName at birth if \ndifferent .\n. ▶\n1a First name\nMiddle name\nLast name\n1b First name\nMiddle name\nLast name\nApplicant’s \nMailing \nAddress\n2 Street address, apartment number, or rural route number. If you have a P.O. box, see separate instructions.\n City or town, state or province, and country. Include ZIP code or postal code where appropriate.\nForeign (non- \nU.S.) Address \n(see instructions)\n3 Street address, apartment number, or rural route number. Don’t use a P.O. box number.\n City or town, state or province, and country. Include postal code where appropriate.\nBirth \nInformation\n4\nDate of birth (month / day / year)\n/ /\nCountry of birth\nCity and state or province (optional)\n5\nMale\nFemale\nOther \nInformation\n6a Country(ies) of citizenship\n6b Foreign tax I.D. number (if any)\n6c Type of U.S. visa (if any), number, and expiration date\n6d Identification document(s) submitted (see instructions)\nPassport\nDriver’s license/State I.D.\nUSCIS documentation\nOther\nIssued by:\nNo.:\nExp. date:\n/ \n/\nDate of entry into \nthe United States \n(MM/DD/YYYY):\n / \n /\n6e Have you previously received an ITIN or an Internal Revenue Service Number (IRSN)?\nNo/Don’t know. Skip line 6f.\nYes. Complete line 6f. If more than one, list on a sheet and attach to this form (see instructions).\n6f Enter ITIN and/or IRSN ▶\nITIN\n—\n—\nIRSN\n—\n—\nand\nname under which it was issued ▶\nFirst name\nMiddle name\nLast name\n6g Name of college/university or company (see instructions) ▶\nCity and state ▶ \nLength of stay ▶\nSign \nHere\nKeep a copy for \nyour records.\nUnder penalties of perjury, I (applicant/delegate/acceptance agent) declare that I have examined this application, including accompanying \ndocumentation and statements, and to the best of my knowledge and belief, it is true, correct, and complete. I authorize the IRS to share \ninformation with my acceptance agent in order to perfect this Form W-7, Application for IRS Individual Taxpayer Identification Number. \n▲\nSignature of applicant (if delegate, see instructions)\nDate (month / day / year)\n/ \n/\nPhone number\n▲\nName of delegate, if applicable (type or print)\nDelegate’s relationship \nto applicant\n▲\nParent\nCourt-appointed guardian\nPower of attorney\nAcceptance \nAgent’s \nUse ONLY\n▲\nSignature\nDate (month / day / year)\n/ \n/\nPhone \nFax\n▲\nName and title (type or print)\nName of company\nEIN\nPTIN\nOffice code\nFor Paperwork Reduction Act Notice, see separate instructions.\nCat. No. 10229L\nForm W-7 (Rev. 8-2019) \n"
] |
p5343.pdf
|
0819 Publ 5343 (PDF)
|
https://www.irs.gov/pub/irs-pdf/p5343.pdf
|
[
"Tax Exempt and Government Entities\nINDIAN TRIBAL GOVERNMENTS\nHelpful Hints \nfor Indian \nTribes \nand \nTribal Entities \nto Avoid Penalties \non Federal Tax \nDeposits and \nInformation Returns\nPublication 5343 (8-2019) Catalog Number 72762X \nDepartment of the Treasury Internal Revenue Service www.irs.gov\n",
"1\nTable of Contents\nReceiving a Notice from the IRS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2\nSSA and IRS Reconciliation Processes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3\nThe Basics of Federal Tax Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5\nHow to Avoid an “Averaged” Failure-to-Deposit Penalty.. . . . . . . . . . . . . . . 9\nHow to Respond to Notices and Avoid Information Return Penalties. . . . 12\nThis guide is designed to assist tribal entities in understanding federal tax deposit laws \nto avoid or minimize potential penalties. It is not all inclusive, and your local Indian Tribal \nGovernments (ITG) specialist is available to answer your questions.\n",
"2\nReceiving a Notice From the IRS\nTribal governments or tribal entities occasionally receive notices from the Internal \nRevenue Service (IRS) for reasons including failure to deposit payroll taxes timely and \nlate filing or non-filing of returns. If you receive a notice from the IRS, the two most \nimportant things to do are:\nn Review your records to determine if the notice is correct, and \nn Respond to the notice by the due date.\nIf you don’t respond timely, you can be subject to penalties and interest. If you don’t \nreview your records to ensure that the notice is correct, you may make unnecessary \npayments. If you determine the notice is correct and you owe additional tax, penalties, \nand interest, make the payment within the time frame shown in the notice.\nITG specialists and other IRS personnel are ready to assist you in understanding \nthe notices, determining their accuracy, and resolving issues. You can also contact \nCustomer Account Services toll-free at 877-829-5500. The call center is open \nMonday through Friday, 8:00 a.m. to 5:00 p.m. local time.\nReceive\nReview\nRespond\n",
"3\nContact \n \nSSA and IRS Reconciliation Processes\nThe Social Security Administration (SSA) maintains a record of total Social Security and Medicare \nwages and tips paid by each employer to its employees and provides this information to the IRS. \nThe IRS compares these amounts to the amounts of wages and tips the employer reports to the IRS \n \non Forms 941, Employer’s Quarterly Federal Tax Return. If the reports are inconsistent, the IRS and \nthe SSA may contact employers for an explanation of the discrepancy and request additional wage \nevidence.\nn The IRS contacts employers who reported more wages to the SSA than to the IRS.\nn The SSA contacts employers who reported more wages to the IRS than to the SSA.\nIf these discrepancies are not resolved, the IRS may assess penalties for filing incorrect reports.\nWhen more wages are reported to the IRS than to the SSA, the SSA is concerned that employees’ \nearnings are not correctly reflected in SSA records. The SSA examines some of these cases and tries \nto resolve the difference without contacting the employer.\nIf the SSA can’t resolve the difference, they will send the employer a notice and a questionnaire \nrequesting additional earnings data. If the employer doesn’t respond within 120 days, the SSA \nsends a second notice. If the employer doesn’t respond to the second notice, the IRS will contact \nthe employer and possibly impose penalties.\nComparing Forms 941 to Form W-3 \nYou should compare all your Form 941 reports to your Form W-3, Transmittal of Wage and Tax \nStatements, for the year. If these amounts do not match, recheck records and identify necessary \nadjustments. This will help you identify and resolve errors in your records to avoid filing erroneous \nreports. \nIdentify any over or underreporting of income or wages and adjust any overpayment or underpay\nment of taxes on the Form 941 for the erroneous quarter. For example, a reporting error discovered \nduring a subsequent quarter would be corrected on Form 941-X, Adjusted Employer’s Quarterly \nFederal Tax Return or Claim for Refund. \nUse the following worksheet to assist you with this reconciliation.\nCorrect\nCompare\n",
"4\nForms 941, W-2 and W-3 Reconciliation\nn Annual amounts from payroll records should match the total amounts reported on all Forms 941\nfor the year.\nn Total amounts reported on all Forms 941 for the year should match the sum of the same data \nfields shown in the W-3 totals.\nn For more information, see “Reconciling Forms W-2, W-3, and 941 or 944” in section 12 of \nPublication 15, (Circular E) Employer’s Tax Guide.\nn If these amounts do not match, recheck the records and identify necessary adjustments.\ncolumn a \ncolumn b \ncolumn c \ncolumn d \ncolumn e \ncolumn f \ncolumn g\n \n \nForm 941 \n \nW-2s \n \nDifference \nComparison \n941 \n(all 4 \nW-2, W-3 \n(total of \nAmount \n(col c minus \nArea \nLine # \nquarters) \nBox # \nall forms) \non W-3 \ncolumn e)\nCompensation \nLine 2 \n \nBox 1\nFederal income tax \nLine 3 \n \nBox 2\nSocial Security wages \nLine 5a \n \nBox 3 \n \nColumn 1\nSocial Security tips \nLine 5b \n \nBox 7 \n \nColumn 1\nSocial Security tax \nLine 5a + 5b \n \nColumn 2 \nSocial Security tax \nLine 5a + 5b \n \nBox 4 \ncomparison \n (Column 2) \n \ncomputation \ndivided by 2\nMedicare wages \nLine 5c \n \nBox 5 \n \nColumn 1 \nMedicare tax \nLine 5c \n \nColumn 2 \nMedicare tax \nLine 5c \n \nBox 6 \ncomparison \n(Column 2) \ncomputation \ndivided by 2\n",
"5\nThe Basics of Federal Tax Deposits\nWhen you pay your employees, you do not pay them all the money they earned. As their employer, \nyou have the added responsibility of withholding taxes from their paychecks. The income tax and \nemployees’ share of Social Security and Medicare taxes that you withhold from your employees’ \npaychecks are part of their wages you pay to the U.S. Treasury instead of to your employees. \nThese are commonly called trust fund taxes.\nThrough this withholding, your employees pay their contributions toward Social Security and \nMedicare benefits and the income taxes withheld reported on their tax returns. Your employees’ \ntrust fund taxes, along with your matching share of Social Security and Medicare taxes, are paid \nto the Treasury through the Electronic Federal Tax Payment System (EFTPS). \nCongress has established large penalties for delays in turning over your employment taxes to the \nTreasury. For more information, refer to Publication 15, (Circular E), Employer’s Tax Guide.\nTo illustrate the cost of making \nyour federal tax deposits late, \nreview the bar chart. This \nexample shows how quickly a \nfailure to deposit penalty on a \n$3,000 deposit grows. \n FTD Penalty on $3,000 Deposit\nPenalty Amount\nThe failure to deposit (FTD) \npenalty is computed by multi-\nplying the amount of underpaid \ndeposit by a penalty percentage \nrate based on how many days \nthe deposit is late. The penalty \nrates are shown in this table.\n Failure to Deposit Penalty Percentage Rates\n\t\nPenalty \nCause for Penalty\t\nPercentage Rate\nDeposits made 1-5 days late\t\n2%\nDeposits made 6-15 days late\t\n5%\nDeposits made 16 + days late\t\n10%\nTaxes unpaid after the 10th day following the first IRS bill\t\n15%\nAmounts subject to electronic deposit requirements \nbut not deposited via EFTPS\t\n10%\n$500\n$400\n$300\n$200\n$100\n$450\n$300\n\t\n1 to 5\t\n6 to 15\t\n16+\t\nTaxes unpaid \n\t\n\t\n\t\n\t\n10 days after bill\n$150\n$60\nDays past due date\n",
"6\nIn addition to deposit penalties, you \nwill also be subject to penalties if \nyou file your Form 941 after the due \ndate, generally the last day of the \nmonth that follows the end of the \nquarter, or don’t pay the amount \nshown as tax on the return.\n Other Penalties\n\t\nRate\t\nMaximum\nLate filed return\t\n5% per month \n\t\nof unpaid tax\t\n25%\nLate paid tax\t\n½% per month of\n\t\nunpaid tax, then 1% after\n\t\nNotice of Intent to Levy\t\n25%\nReview your payroll procedures to determine if you’re making timely deposits. \nWho Must Make Deposits?\nDeposits are required if you file Form 941 and report $2,500 or more in taxes per quarter.\nWhat Taxes Must You Deposit?\nn Income tax withheld from your employees.\nn FICA (Social Security and Medicare) tax withheld from your employees – the employee’s share.\nn FICA (Social Security and Medicare) tax – the employer’s share.\nImportant Difference\nn Making deposits and filing employer returns with payments are not the same.\nn Taxes are reported by filing a return (such as a Form 941) and paid by depositing the money \nwith the Treasury.\nWhen Should You Make Form 941 Tax Deposits?\nn If your total taxes for the quarter are less than $2,500, you can pay them with the return or \ndeposit them by the return due date.\nn If your total taxes on Form 941 are $2,500 or more, you’ll need to determine which deposit \nschedule to follow (monthly or semiweekly).\nn To ensure that you don’t file and pay late, make a deposit the same day you make payroll or \nno later than the deposit due date.\nFor further explanation of when to make a deposit, see Publication 15.\n",
"7\nDeposit Schedule Exceptions\nBusiness Days\nn If your deposit is due on a federal or state bank holiday, Saturday or Sunday, make it by the close \nof the next business day.\n$100,000 Next-Day Deposit Rule\nn If your tax liability is $100,000 or more on any day during a deposit period, you must deposit \nthe tax by the NEXT business day, whether you are a monthly or semiweekly schedule depositor.\nn Once you meet the $100,000 next-day rule, you must follow the semiweekly schedule for all \ndeposits less than $100,000. You are a semiweekly schedule depositor for the rest of the current \nand next calendar year.\nn Since banks usually need 24 hours to make the deposit, you should request the deposit the \nsame day you accumulate the liability (before close of the business day). \nn Attach Schedule B to the Form 941 when filed.\nFor purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of \na deposit period. For example, if a semiweekly schedule depositor has accumulated a liability of \n$95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 \nliability on Wednesday, the $100,000 next-day deposit rule does not apply. Thus, $95,000 must be \ndeposited by Friday and $10,000 must be deposited by the following Wednesday.\nHowever, once you accumulate at least $100,000 in a deposit period, stop accumulating at the \nend of that day and begin to accumulate anew on the next day. \nExample: Fir Co. is a semiweekly schedule depositor. On Monday, Fir Co. accumulates taxes of \n$110,000 and must deposit this amount on Tuesday, the next business day. On Tuesday, Fir Co. \naccumulates additional taxes of $30,000. Because the $30,000 is not added to the previous $110,000 \nand is less than $100,000, Fir Co. must deposit the $30,000 by Friday (following the semiweekly \ndeposit schedule).\nExample: Elm, Inc., started its business on April 1. On April 11, it paid wages for the first time and \naccumulated a tax liability of $40,000. On Friday, April 18, Elm paid wages and accumulated a liability \nof $60,000, bringing its accumulated tax liability to $100,000. Because this was the first year of its \nbusiness, the tax liability for its lookback period is considered to be zero, and it would be a monthly \nschedule depositor based on the lookback rules. However, since Elm accumulated a $100,000 liability \non April 18, it became a semiweekly schedule depositor on April 19. It will be a semiweekly schedule \ndepositor for the remainder of the year and the next year. Elm must deposit the $100,000 by Monday, \nApril 21, the next business day. For an explanation of the lookback period see Publication 3151-A, \nResource Guide for Understanding Federal Tax Deposits, or Publication 15.\n",
"8\nAvoid Failure to Deposit Penalties\nMake deposits on or before the deposit due date.\nn Make your deposit any time on or after the date the liability is incurred and on or before the \ndeposit due date.\nn You are not required to wait until the due date nor will you receive a penalty for making deposits \nprior to the due date.\nn For deposits made by EFTPS, you must initiate the transaction by 8 p.m. Eastern time \none business day before the date the deposit is due.\nn For accumulated tax liabilities of $100,000 or more on any day during a deposit period, \ndeposit the tax by the NEXT business day.\nInclude a summary of your tax liability with Form 941.\nn Monthly depositors use Part 2 of Form 941.\nn Semiweekly depositors use Schedule B, Employer’s Record of Federal Tax Liability.\n",
"9\nPenalty\nPercent\nPeriod\nHow to Avoid an “Averaged” \nFailure-to-Deposit Penalty\nIRS may assess an “averaged” failure-to-deposit (FTD) penalty of 2% to 10% if you are a monthly \nschedule depositor and did not properly complete the monthly liability section (Part 2) of Form 941 \nwhen your total adjusted tax liability shown on Form 941 equaled or exceeded $2,500.\nIRS may also assess an “averaged” FTD penalty of 2% to 10% if you are a semiweekly schedule \ndepositor and your total adjusted tax liability shown on Form 941 equaled or exceeded $2,500 \nand you:\nn Complete the monthly liability section (Part 2) of Form 941 instead of Schedule B on Form 941,\nn Fail to attach a properly completed Schedule B, or\nn Improperly complete Schedule B (for example, by entering tax deposits instead of tax liabilities in \nthe numbered spaces).\nThe “averaged” FTD penalty is computed by taking your total adjusted tax liability shown on Form \n941 and distributing it equally throughout the tax period. As a result, your deposits and payments \nmay not be counted as timely because the actual dates of your tax liabilities cannot be accurately \ndetermined.\nYou can avoid an “averaged” FTD penalty by reviewing your return prior to filing it. Follow these \nsteps before submitting your Form 941:\nn If you’re a monthly schedule depositor, report your tax liabilities (not your deposits) in the \nmonthly liability section (Part 2) of Form 941. Verify that your total liability for the quarter on Part 2 \nequals your taxes after adjustments and credits shown on the front of Form 941.\nn If you’re a semiweekly schedule depositor, report your tax liabilities (not your deposits) on \nSchedule B (Form 941) in the lines that represent the dates you paid your employees. Verify that \nyour total liability on the bottom of Schedule B equals your taxes after adjustments and credits \nshown on the front of Form 941.\nn Do not show negative amounts in the monthly liability section of Schedule B (Form 941). \nn For prior period errors, don’t adjust your tax liabilities reported on Form 941 or on Schedule B \nwith your current period return. Instead, file an adjusted return (Form 941-X or 944-X) if you’re \nalso adjusting your tax liability. If you’re only adjusting your deposits in response to an FTD \npenalty notice, see the Instructions for Schedule B (Form 941).\n",
"10\nSchedule B (Form 941) Penalties\nThe IRS uses Schedule B (Form 941) to determine if you deposited your federal employment \ntax liabilities on time. If you do not properly complete and file your Schedule B with Form 941, IRS \nmay propose an “averaged” failure-to-deposit penalty. See “Deposit Penalties” in section 11 of \nPublication 15 for more information.\nWho Must File Schedule B?\nFile Schedule B if you are a:\nn Semiweekly schedule depositor, or\nn Monthly schedule depositor who accumulated a tax liability of $100,000 or more on any given \nday in the reporting period.\nCompleting the Schedule B Correctly\nOn Schedule B (Form 941), list your tax liability for each payroll date, including:\nn The federal income tax you withheld from your employees’ payroll, and\nn Both employee and employer share of Medicare and Social Security taxes.\nThe Most Common Errors and Reasons for Schedule B Penalties Are\nn Failure to include a Schedule B when required.\nn Reporting the date and amount of the deposits on Schedule B rather than the amount of the \ntax liability on the date the liability was incurred.\nn The total tax after adjustments and credits on the front of Form 941 does not match the \ntotal liability for the quarter reported on Schedule B.\nThe example on the following page shows the Schedule B (Form 941) for XYZ Tribe, a semiweekly \ndepositor, for the last quarter of 2018. The $100,000 deposit rule applies to XYZ Tribe for all deposits \nfor this quarter. Therefore, XYZ Tribe must make all deposits by the next business day.\n",
"11\nSchedule B (Form 941):\nReport of Tax Liability for Semiweekly Schedule Depositors\n(Rev. January 2017)\nDepartment of the Treasury — Internal Revenue Service\n960311\nOMB No. 1545-0029\n \nEmployer identification number \n(EIN)\n—\nName (not your trade name)\nCalendar year\n(Also check quarter)\nReport for this Quarter... \n(Check one.)\n1: January, February, March\n2: April, May, June\n3: July, August, September\n4: October, November, December\nUse this schedule to show your TAX LIABILITY for the quarter; don't use it to show your deposits. When you file this form with Form 941 or \nForm 941-SS, don't change your tax liability by adjustments reported on any Forms 941-X or 944-X. You must fill out this form and attach it to \nForm 941 or Form 941-SS if you're a semiweekly schedule depositor or became one because your accumulated tax liability on any day was \n$100,000 or more. Write your daily tax liability on the numbered space that corresponds to the date wages were paid. See Section 11 in \nPub. 15 for details.\nMonth 1\n1\n.\n2\n.\n3\n.\n4\n.\n5\n.\n6\n.\n7\n.\n8\n.\n9\n.\n10\n.\n11\n.\n12\n.\n13\n.\n14\n.\n15\n.\n16\n.\n17\n.\n18\n.\n19\n.\n20\n.\n21\n.\n22\n.\n23\n.\n24\n.\n25\n.\n26\n.\n27\n.\n28\n.\n29\n.\n30\n.\n31\n.\nTax liability for Month 1\n.\nMonth 2\n1\n.\n2\n.\n3\n.\n4\n.\n5\n.\n6\n.\n7\n.\n8\n.\n9\n.\n10\n.\n11\n.\n12\n.\n13\n.\n14\n.\n15\n.\n16\n.\n17\n.\n18\n.\n19\n.\n20\n.\n21\n.\n22\n.\n23\n.\n24\n.\n25\n.\n26\n.\n27\n.\n28\n.\n29\n.\n30\n.\n31\n.\nTax liability for Month 2\n.\nMonth 3\n1\n.\n2\n.\n3\n.\n4\n.\n5\n.\n6\n.\n7\n.\n8\n.\n9\n.\n10\n.\n11\n.\n12\n.\n13\n.\n14\n.\n15\n.\n16\n.\n17\n.\n18\n.\n19\n.\n20\n.\n21\n.\n22\n.\n23\n.\n24\n.\n25\n.\n26\n.\n27\n.\n28\n.\n29\n.\n30\n.\n31\n.\nTax liability for Month 3\n.\nTotal must equal line 12 on Form 941 or Form 941-SS. \nFill in your total liability for the quarter (Month 1 + Month 2 + Month 3) ▶\nTotal liability for the quarter\n.\nFor Paperwork Reduction Act Notice, see separate instructions.\nIRS.gov/form941\nCat. No. 11967Q\nSchedule B (Form 941) (Rev. 1-2017)\n1\n2\n3\n4\n5\n6\n7\n8\n9\nXYZ Tribe\n2\n0\n1\n8\n✖\n145,054\n89\n134,987\n78\n165,397\n43\n445,440\n10\n176,654\n43\n165,987\n98\n342,642\n41\n187,678\n87\n166,987\n90\n354,666\n77\n1,142,749\n28\nForm 941 for 2018:\n(Rev. January 2018)\nEmployer’s QUARTERLY Federal Tax Return\nDepartment of the Treasury — Internal Revenue Service\n950117\nOMB No. 1545-0029\nEmployer identification number (EIN)\n—\nName (not your trade name)\nTrade name (if any)\nAddress\nNumber Street Suite or room number\nCity\nState\nZIP code\nForeign country name\nForeign province/county\nForeign postal code\nReport for this Quarter of 2018 \n(Check one.)\n1: January, February, March\n2: April, May, June\n3: July, August, September\n4: October, November, December\nGo to www.irs.gov/Form941 for \ninstructions and the latest information.\nRead the separate instructions before you complete Form 941. Type or print within the boxes.\nPart 1:\nAnswer these questions for this quarter.\n1 \nNumber of employees who received wages, tips, or other compensation for the pay period \nincluding: Mar. 12 (Quarter 1), June 12 (Quarter 2), Sept. 12 (Quarter 3), or Dec. 12 (Quarter 4)\n1\n2\nWages, tips, and other compensation \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n.\n3\nFederal income tax withheld from wages, tips, and other compensation .\n.\n.\n.\n.\n.\n3\n.\n4\nIf no wages, tips, and other compensation are subject to social security or Medicare tax\nCheck and go to line 6.\nColumn 1\nColumn 2\n5a\nTaxable social security wages .\n.\n.\n× 0.124 =\n.\n5b\nTaxable social security tips .\n.\n.\n.\n× 0.124 =\n.\n5c\nTaxable Medicare wages & tips.\n.\n.\n× 0.029 =\n.\n5d\nTaxable wages & tips subject to \nAdditional Medicare Tax withholding \n.\n× 0.009 =\n.\n5e\nAdd Column 2 from lines 5a, 5b, 5c, and 5d \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5e\n.\n5f\nSection 3121(q) Notice and Demand—Tax due on unreported tips (see instructions) \n.\n.\n5f\n.\n6\nTotal taxes before adjustments. Add lines 3, 5e, and 5f .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n.\n7\nCurrent quarter’s adjustment for fractions of cents .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n.\n8\nCurrent quarter’s adjustment for sick pay .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n.\n9\nCurrent quarter’s adjustments for tips and group-term life insurance \n.\n.\n.\n.\n.\n.\n.\n9\n.\n10\nTotal taxes after adjustments. Combine lines 6 through 9 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10\n.\n11\nQualified small business payroll tax credit for increasing research activities. Attach Form 8974 \n11\n.\n12\nTotal taxes after adjustments and credits. Subtract line 11 from line 10 .\n.\n.\n.\n.\n.\n.\n12\n.\n13\nTotal deposits for this quarter, including overpayment applied from a prior quarter and \noverpayments applied from Form 941-X, 941-X (PR), 944-X, or 944-X (SP) filed in the current quarter \n13\n.\n14\nBalance due. If line 12 is more than line 13, enter the difference and see instructions\n.\n.\n.\n14\n.\n15\nOverpayment. If line 13 is more than line 12, enter the difference\n.\nCheck one:\nApply to next return.\nSend a refund.\n▶ You MUST complete both pages of Form 941 and SIGN it.\nNext ■▶\nFor Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher.\nCat. No. 17001Z\nForm 941 (Rev. 1-2018)\n1,142,749\n28\n1,142,749\n28\n1,186,749\n70\n44,000\n42\n✖\nTotal \nmust equal \nline 12 \nof 941!\n",
"Name\n12\nNotices\nNumber\nHow to Respond to Notices and \nAvoid Information Return Penalties\nThe IRS will send a Notice 972CG, Notice of Proposed Civil Penalty, if you file a Form 1099 or W-2G \nwith a missing or incorrect name and taxpayer identification number (TIN) combination. A name and \nTIN combination is incorrect when it doesn’t match or can’t be found on the IRS Social Security and \nemployer identification numbers files. Notice 972G proposes a penalty of $270 (adjusted annually for \ninflation) for each return you did not file correctly. Compare the list with your records to determine:\nn If you took appropriate action to meet the requirements for reasonable cause, and\nn If you must make an annual solicitation in the current year to avoid penalties in \nfuture years.\nFor more information on Notice 972CG and annual solicitations, see Publication 1586, Reasonable \nCause Regulations & Requirements for Missing and Incorrect Name/TINs. Refer to Treasury Regulation \n\nSection 301.6724-1 for reasonable cause guidelines.\nOne way to get the necessary information and avoid penalties is to use a Form W-9, Request for \nTaxpayer Identification Number and Certification, or an acceptable substitute, to get the payee’s \ncorrect name and TIN. If a payee’s TIN is not on record at the time a reportable payment is made, \nbackup withholding is generally required.\nThe payee may use the Form W-9 to certify that the payee’s TIN is correct and that the payee is a \nU.S. person. The payee may also provide information about the type of business entity it is, which will \nhelp you determine if you are required to file an information return. The payee signs the form under \npenalty of perjury. Payees may be liable for penalties for failure to furnish the TIN or for providing \nfalse information. \nA payee who is an individual should generally include a Social Security number (SSN) on the Form \nW-9. An individual payee must furnish the name shown on his or her personal income tax return, \neven though the individual may also provide a business name.\nA payee who is not an individual (such as a corporation) should enter its business name as shown on \nfederal tax documents on line 1 on the Form W-9. If the payee entity has a “doing business as” (dba) \nname, it may be listed on the second line. The entity should include its EIN in part 1 of Form W-9. \nA name/TIN combination is unique. It is considered incorrect when it doesn’t match or can’t be found \non IRS files that contain names and TINs. Partnerships and corporations must use an EIN. A limited \nliability company (LLC) may be treated for tax purposes as a disregarded entity, a partnership or a \ncorporation. A single-member LLC that is disregarded as an entity separate from its owner, must \n",
"13\nprovide the SSN (or EIN, if the owner has one). Do not enter the EIN of the disregarded entity. \nRefer to Form W-9 and its instructions for additional information on the proper name and number \ncombinations to complete the form.\nU.S. resident aliens who are not eligible to receive an SSN must apply for an individual tax identi\nfication number (ITIN) on Form W-7, Application for IRS Individual Taxpayer Identification Number. \nIndividuals who have an ITIN may also use Form W-9. \nThe IRS will issue a CP2100 or CP2100A Notice if the payee’s name and TIN on the information \nreturn filed does not match IRS records. \nThis notice is informing you as the payer, that you may be responsible for beginning backup with\nholding, if you haven’t already done so. Backup withholding should begin immediately if the payee \nrefuses or fails to provide a TIN, or if the TIN provided is obviously incorrect (not 9 digits or contains \nsomething other than a number). The CP2100/2100A Notice is accompanied by a listing of missing, \nincorrect or not currently issued payee TINs. Publication 1281, Backup Withholding on Missing and \nIncorrect Name/TIN(s), provides additional information on backup withholding.\nBackup Withholding Will Apply If\n1) The payee fails to furnish their SSN or TIN, or\n2) The IRS notifies you to impose backup withholding because the payee furnished an incorrect TIN.\nTips for Getting “Good” TINs\nn Always secure a contractor’s TIN before paying for services.\nn Avoid abbreviating company names.\nn If possible, use the same name as it appeared on the original application for an EIN (Form SS-4) or \nSocial Security card.\nn If you know a company has changed its name, ask if they informed the IRS. The IRS and SSA must \nbe informed of any name changes.\nn When filing Form 1099-MISC for a sole proprietor, always put the individual’s name first, followed \nby the business name. For example, Joe’s Garage should be reported as Joseph Johnson, DBA \nJoe’s Garage. \nn The best tool to help you gather information on contractors and vendors, including the payee’s \nnames, TINs and exempt status, is Form W-9.\nYou can find more information on backup withholding in Publication 1281, Backup Withholding for \nMissing and Incorrect Name/TIN(s). For additional information on how to fill out a Form W-9, see the \nForm W-9 instructions. Keep the Forms W-9 in your files in the event the IRS requests verification of \nthe name/TIN listed on a Form 1099.\n",
"14\nIf you have questions about withholding, information reporting, Forms 1099, or the CP2100 or \nCP2100A Notices and listings, you may call your local ITG specialist or Martinsburg Computing \nCenter Information Reporting Program Customer Service section at 866-455-7438 (toll-free). The \ntelecommunication device for the deaf number is 304-267-3367 (not a toll-free number). The phones \nare open 8:30 a.m. to 4:30 p.m. Monday through Friday, Eastern time. In addition, you may email \nyour question to [email protected].\nWhat Should You Do if You Receive a CP2100 or CP2100A \n(Backup Withholding) Notice?\nCompare the listing with your records. \nFor missing TINs: If you haven’t started backup withholding, begin to do so immediately and \ncontinue until you receive a TIN. You must make up to three solicitations for the TIN (initial, first \nannual, second annual) to avoid a penalty for failing to include a TIN on the information return. \nFor incorrect TINs: Compare the accounts on the listing with your business records. See \nPublication 1281 for the solicitation requirements to avoid a penalty for failure to include the correct \nTIN on an information return. If they agree, send the appropriate “B” Notice to the payee. If an \naccount doesn’t agree, it could be the result of a recent update to SSA records, an error in the \ninformation you submitted, or an IRS processing error. If this type of error occurred, the only thing \nyou should do is correct or update your records, if necessary.\nA “B” Notice is a backup withholding notice. There are two “B” Notices – the First “B” Notice and \nthe Second “B” Notice. You must send the First “B” Notice and a Form W-9 to a payee after you \nreceive the first CP2100 or CP2100A Notice with respect to this account for soliciting a correct \nname/TIN combination. You must send the Second “B” Notice to a payee after you receive a second \nCP2100 or CP2100A Notice within a three-calendar year period. The text of the Second “B” Notice \ntells the payee to contact the IRS or SSA to obtain the correct name/TIN combination. The mailing \nof the second notice should not include a Form W-9. See Publication 1281 for additional information \non the First and Second “B” Notices. \nThe table on the following page is a quick reference should you receive a CP2100 or CP2100A \nNotice on backup withholding.\n",
"What’s the \nproblem?\nCompare the IRS listing \nto your records and...\nThen...\nMissing TINs\nBegin or continue backup \nwithholding immediately.\nSolicit TIN from Payee:\n1. Initially (when payment was made).\n2. First annual solicitation by December 31 of \nthe year payment is made.\n3. Second annual solicitation by December 31 \nof the following year.\nIncorrect TINs\n▼\nIf they agree (the TIN/name combinatio\non the list match the W-9, W-2G, or \nother documents in your records).\nn \nSend the First or Second “B” Notice to the Payee:\n1. You have 15 business days to send a “B” Notice \nto a payee; include a Form W-9.\n2. Backup withhold from any reportable payments if \nthe payee certification is not returned to you with-\nin 30 days after you receive the CP2100/2100A.\n3. Do not backup withhold if the payee furnishes the \nrequired certification within 30 days of the date \nyou received the notice of the missing or incor-\nrect TIN. (Form W-9 in response to the First “B” \nnotice; or a copy of a Social Security card with \na name and SSN combination that differs from \nthe name and SSN combination on the Second \n“B” Notice, a Social Security card with a date \nthat is no earlier than six months prior to the date \nof the Second “B” Notice, or IRS letter 147C in \nresponse to the Second “B” Notice).\n4. Keep these documents on file to show you met \nthe requirements for reasonable cause when the \nproposed missing or mismatch penalty notices \nare sent.\n5. The Second “B” Notice should be sent to the pay-\nee if this is the second CP2100/2100A Notice you \nreceived within three calendar years for this payee.\n▼\nIf they do not agree, it could be because:\n1. You put the incorrect information on \nthe return.\n2. The information changed after you \nfiled it.\n3. IRS misprinted the information \nin processing.\n1. Correct and update your records.\n2. Use the correct TIN/name information for future \nfilings.\n3. Make a note of the error in your records.\nFollowing and documenting these procedures is very important to establishing \n“reasonable cause,” which is a defense when IRS assesses information return \npenalties for missing and incorrect TINs. \n15\n"
] |
p4929.pdf
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0919 Publ 4929 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4929.pdf
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[
"Publication 4929 (Rev. 9-2019) Catalog Number 57593A Department of the Treasury Internal Revenue Service www.irs.gov \nIs Your Refund or Tax Bill Too Big?\nFind out how to change your withholding at www.irs.gov. Here’s why you want to check it out.\nA big refund or tax bill usually means you have too much or not enough tax withheld throughout the year. If you \nwork for someone, or have more than one job, you most likely have your employer withhold taxes from your \npaycheck. If you don’t have enough tax withheld, you’ll owe money at the end of the year and may have to pay \ninterest and a penalty. If you have too much tax withheld, you lose the use of that money until you get your \nrefund.\nChanges in your life could mean you need to change your withholding. Are you getting married or divorced, \nhaving or adopting a child, buying a house? How about working more than one job, getting extra money from \nself-employment, or retiring? Check your withholding and adjust it if you need to when your life or financial \nsituation changes.\nThe Tax Withholding Estimator at www.irs.gov helps you figure your withholding so it comes closer to \nmatching what you should actually pay in taxes during the year.\nFor more information worth knowing, search for “tax withholding estimator” at www.irs.gov.\n"
] |
p5303.pdf
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0919 Publ 5303 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5303.pdf
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[
"Everyone should check their withholding. It’s especially important \nto check now if you:\n•\n•\n•\n•\n•\n•\n•\n•\nHad a large tax refund or tax bill the last time you filed\nAre a two-income family\nHave two or more jobs at the same time\nWork a seasonal job or only work part of the year\nClaim the child tax credit\nHave dependents age 17 or older\nPreviously itemized your deductions\nHave high income or a complex tax return\nUse the IRS Tax Withholding Estimator to do a Paycheck Checkup\n•\n•\n•\n \nThe IRS Tax Withholding Estimator helps figure out if you should submit a new Form \nW-4 to your employer or make estimated tax payments to the IRS before the end of \nthe year.\nHave your most recent pay stub and federal tax return on hand.\nThe estimator’s results are only as accurate as the information you enter.\n•\nFind the IRS estimator at IRS.gov/withholding.\nPaycheck Checkup \nCan Prevent a\nTax-Time Surprise\nIt’s important to check your federal \nincome tax withholding now to avoid \nan unexpected tax bill or penalty \nwith next year’s return. The IRS Tax \nWithholding Estimator can help. \nPublication 5303 (Rev. 9-2019) Catalog Number 71606C Department of the Treasury Internal Revenue Service www.irs.gov \n"
] |
p4077.pdf
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0919 Publ 4077 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4077.pdf
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[
"Tax-Exempt Bonds for 501(c)(3) \nCharitable Organizations\nTax Exempt & \nGovernment Entitites\nPublication 4077 (Rev. 9-2019) Catalog Number 34661V \nDepartment of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \n \n \n \n \n \nContents \nIntroduction .............................................................................................................................1 \nBackground .............................................................................................................................2 \nTax-Exempt Bonds for 501(c)(3) Charitable Organizations...................................................2 \nPost-Issuance Compliance Monitoring..................................................................................8 \nWhat To Do When You Discover a Violation – TEB Voluntary Closing \nAgreement Program .............................................................................................................10 \nMore Information ..................................................................................................................10 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \nIntroduction \nThis publication provides an overview of the special federal tax law rules that apply to municipal \nfinancing arrangements commonly known as “qualified 501(c)(3) bonds” under Section 145 of \nthe Internal Revenue Code (IRC). It is intended to help issuers and 501(c)(3) organizations meet \nfederal tax law requirements to ensure that interest earned by bondholders is exempt from \ntaxation under IRC Section 103. \nThis publication is an overview of the rules; it isn’t official guidance that you may rely on for \nplanning purposes. It refers to various IRC sections, Income Tax Regulations (Treas. Reg.), \nrevenue procedures and other official guidance. Please refer to the official guidance for the rules \nthat apply to qualified 501(c)(3) bonds. \nFor publications that discuss the general rules that apply to governmental bonds and private \nactivity bonds, see IRS Publication 4079, Tax-Exempt Governmental Bonds, and IRS \nPublication 4078, Tax-Exempt Private Activity Bonds. For an overview of the responsibilities \nof an issuer of tax-exempt bonds in a conduit financing arrangement, see IRS Publication \n5005, Your Responsibilities as a Conduit Issuer of Tax-Exempt Bonds. IRS also provides \nmore detailed information at www.irs.gov/bonds. See also More Information, at the end of this \npublication. \n1 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nBackground \nState and local governments receive direct and indirect tax benefits under the IRC that lower \nborrowing costs on their valid debt obligations. Because interest paid to bondholders on these \nobligations is not includable in their gross income for federal income tax purposes, bondholders \nare willing to accept a lower interest rate than they would accept if the interest was taxable. \nThese benefits apply to many different types of municipal debt financing arrangements including \nbonds, notes, loans, lease purchase contracts, lines of credit and commercial paper (collectively \nreferred to as “bonds” in this publication). \nTo receive these benefits, issuers must ensure that the requirements under the IRC are met, \ngenerally for as long as the bonds remain outstanding. These requirements include, but are not \nlimited to, information filing and other requirements related to issuance, the proper and timely \nuse of bond proceeds and bond-financed property, and limitations on how bond proceeds \nmay be invested. Special additional rules apply to bonds that are private activity bonds for \nthose bonds to be tax-exempt qualified private activity bonds. This publication describes rules \nthat apply to a particular type of qualified private activity bonds: qualified 501(c)(3) bonds. \nInformation on the requirements that apply to other types of qualified private activity bonds are \nbeyond the scope of this publication. For information about these unique requirements, visit \nIRS.gov/bonds. For information on the general rules that apply to all types of qualified private \nactivity bonds, see IRS Publication 4078, Tax-Exempt Private Activity Bonds. \nThis publication also addresses practices and steps an issuer or 501(c)(3) organization can \ntake to protect the tax-exempt status of qualified 501(c)(3) bonds. For example, because \nrequirements and limitations generally apply at the time the bonds are issued and throughout \nthe term of the bonds, this publication encourages issuers and beneficiaries of tax-exempt \nbonds to create procedures for monitoring compliance throughout the life of the bonds. For \nmore information, see the discussion in Post-Issuance Compliance Monitoring. \nTax-Exempt Bonds for 501(c)(3) Charitable Organizations \nGenerally interest on a private activity bond is not tax-exempt; however, the interest may be \nexcludable from tax if the issuer meets additional requirements that apply to private activity \nbonds, making the bonds qualified private activity bonds. A qualified 501(c)(3) bond is a type \nof qualified private activity bond. In this section, we briefly discuss the tests for determining \nwhether a bond is a private activity bond. This section also describes the rules an issuer must \nmeet for a bond to be a qualified 501(c)(3) bond. \nWhen applicable, these discussions include any special remedial action provision that applies \nto the particular requirement. If a deliberate action that results in a violation of any of the federal \ntax requirements cannot be corrected under these special remedial action provisions, issuers \nmay be able to enter into a closing agreement under the Tax-Exempt Bonds (TEB) Voluntary \nClosing Agreement Program (TEB VCAP) described in Notice 2008-31, 2008-11 I.R.B. 592 (see \nWhat To Do When You Discover a Violation - TEB Voluntary Closing Agreement Program. \n2 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTesting for Private Activity Bonds \nA state or local bond will be a private activity bond if as of the issue date of the bonds or at any \ntime while the bonds are outstanding, the bond issue exceeds the limits set forth in either of the \nprivate activity bond tests: \n the private business tests of IRC Section 141(b), which consists of the private use test and the \nprivate security and payment test, or \n the private loan financing test of IRC Section 141(c). \nFor a description of the private business test under Section 141(b) and the private loan test \nunder Section 141(c), see Publication 4079, Tax-Exempt Governmental Bonds. \nQualified 501(c)(3) Bonds are Private Activity Bonds \nPrivate activity bonds are subject to general rules that apply to all tax-exempt bonds, such \nas the arbitrage rules, rules against hedge bonds or abusive tax transactions and record \nretention rules, and to special rules that apply to all private activity bonds, such as rules that \nlimit maturities on the bonds and public approval requirements. For a description of these rules, \nsee Publication 4078, Tax-Exempt Private Activity Bonds. This publication addresses only \nadditional special rules that apply to qualified 501(c)(3) bonds under IRC Section 145. \nQualified Use Tests—Ownership and Modified Private Business Tests \nTo be qualified 501(c)(3) bonds, the bonds must meet the requirements of IRC Section 145. \nSection 145(a) contains two tests for determining whether a bond is a qualified 501(c)(3) bond: \n the ownership test, and \n the modified private business tests. \nBoth tests are applied to determine if the bond is a qualified 501(c)(3) bond, but the requirements \nwork differently. For the bond to be a qualified 501(c)(3) bond, the bond-financed property must \nmeet the ownership test and the bond must not exceed the limits set forth in the modified \nprivate business tests. Bonds issued for a 501(c)(3) organization that exceed the modified private \nbusiness test limits or fail to meet the ownership test are private activity bonds that are not tax-\nexempt. \nOwnership Test. IRC Section 145(a)(1) provides that all property financed by the net proceeds \nof a qualified 501(c)(3) bond issue must be owned by either an organization described in Section \n501(c)(3) (a 501(c)(3) organization) or a state or local governmental unit. Even if the financed \nproperty is owned by a 501(c)(3) organization or a state or local government, the modified private \nbusiness tests must still be applied to determine if the bond is qualified under Section 145(a). \nModified Private Business Tests. Bonds are not qualified 501(c)(3) bonds if they exceed the \nlimits set forth in the modified private business tests. A bond exceeds these limits if both the \nprivate business use test limits and the private security or payment test limits of IRC Section \n141(b), as modified under Section 145, are exceeded. In other words, the tests that were used to \ndetermine if the bond is a private activity bond are modified and reapplied to determine whether \na private activity bond is a qualified 501(c)(3) bond. For a description of the private business \ntests under Section 141(b), see Publication 4079, Tax-Exempt Governmental Bonds. \nUnder the modified private business tests, the portion of the financed property used by a 501(c)(3) \norganization in an activity related to its charitable purposes is treated as though it were used \nby a governmental unit. This portion must be tested to determine how much, if any, is used for \na private business use for which there are private payments or security. Any amount of private \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nbusiness use for which there is a private payment or security must be added to the amount of \ncontinued private use of the financed facility arising from any unrelated trade or business use \nof the financed property. Stated differently, under the modified tests, private business use by \nsomeone other than a 501(c)(3) organization of that portion of the bond-financed facility that \notherwise would be treated as governmental use with respect to the 501(c)(3) organization \nthat owns the facility must be aggregated with unrelated trade or business use of the financed \nfacility by the 501(c)(3) organization to see if the modified private business use limit is exceeded. \nGenerally, issuance costs financed with bond proceeds are treated as private business use when \napplying the modified private business test. \nUnder IRC Section 145(a)(2), the private business tests are modified (1) to apply to the net \nproceeds of the bonds (the proceeds of a bond issue reduced by amounts allocated to a \nreasonably required reserve or replacement fund) and (2) so that no more than 5% of private \nbusiness use and no more than 5% of private security or payments are permitted (in contrast, \nIRC Section 141(b) generally uses 10% limits). For example, if the aggregate of private business \nuse exceeds 5% of the net proceeds and the aggregate of private payments exceeds the 5% \nof the net proceeds, the bonds meet the modified private business tests and therefore are not \nqualified 501(c)(3) bonds. Also, Treas. Reg. Section 1.145-2 limits certain of the general private \nactivity exceptions available under Section 141 so they do not apply to qualified 501(c)(3) bonds. \nUnrelated Trade or Business. Under IRC Section 145(a)(2), a 501(c)(3) organization is not treated \nas a governmental unit with respect to its activities that constitute unrelated trade or business \nactivities. Thus, the activities continue to be treated as private business activities. Under IRC \nSection 513(a), the term “unrelated trade or business” means any trade or business the conduct \nof which is not substantially related (aside from the need of the organization for income or funds \nor the use it makes of the profits derived) to the exercise or performance by the organization of \nits charitable, educational, or other purpose or function constituting the basis for its exemption \nunder IRC Section 501. See IRC Section 513(a) for three narrow situations where certain activities \nare not treated as unrelated trade or business. \nQualified 501(c)(3) Organization \nGenerally a 501(c)(3) organization must be organized and operated exclusively for educational, \nreligious, or charitable purposes, and no part of the organization’s net earnings may inure to or \nfor the benefit of any private shareholders or individuals. To qualify as a 501(c)(3) organization, the \norganization must have received a determination letter from the IRS stating that it is an exempt \norganization described in IRC Section 501(c)(3). For information about filing an application for \nexemption under Section 501(c)(3), see IRS Publication 4220, Applying for 501(c)(3) Tax-Exempt \nStatus, and IRS Publication 557, Tax-Exempt Status for Your Organization. \nIn addition, the 501(c)(3) organization must maintain its 501(c)(3) tax-exempt status throughout the \nentire term that the bonds are outstanding. Organizations described in IRC Section 501(c)(3) must \nmeet certain requirements to maintain their exempt status. These requirements are generally \nbeyond the scope of this publication, however, the requirement to file a Schedule K to the Form \n990, Return of Organization Exempt From Income Tax, is a special filing requirement related to \ntax-exempt financing for 501(c)(3) organizations. \n4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nSpecial Filing Requirements to Retain 501(c)(3) Status; Schedule K (Form 990). Most \nexempt organizations must file returns and reports at some time during (or following the close \nof) their accounting period. If an organization fails to meet its annual reporting requirement for \nthree consecutive years, it will automatically lose its tax-exempt status. To regain its exempt \nstatus, an organization will have to reapply for recognition as a tax-exempt organization or seek \nrelief under special procedures. If the exempt status is not reinstated retroactive to the date of \nautomatic revocation, there will exist a time during which the organization will not be a 501(c)(3) \norganization. This could cause bonds benefiting the organization to fail the requirements for tax \nexemption under IRC Section 145(a). \nSection 501(c)(3) organizations benefiting from tax-exempt bond obligations that are required \nto file Form 990, or choose to do so, must also complete and attach Schedule K (Form 990), \nSupplemental Information on Tax-Exempt Bonds. On Schedule K (Form 990), the 501(c)(3) \norganization will provide required information for each outstanding tax-exempt bond issue \n(including refunding bonds) that (1) had an outstanding principal amount of more than $100,000 \nas of the last day of the tax year and (2) was issued after December 31, 2002. The required \ninformation includes information concerning the use of bond proceeds, any private business use \nof bond-financed property, arbitrage requirements and post-issuance compliance. For additional \ninformation, see Publication 557, Tax-Exempt Status for Your Organization. \nApplication of the Ownership Test and the Modified Private Business Tests \nThe ownership test and the modified private business tests are applied at issuance to determine \nwhether any arrangement with respect to the bond-financed facility will cause the bonds to fail \nto meet the requirements of IRC Section 145(a). Even if the requirements of Section 145(a) are \nmet at issuance, however, a deliberate action taken after issuance may cause the bonds to fail to \nmeet the requirements of Section 145(a). A qualified 501(c)(3) bond issue can lose its tax-exempt \nstatus if the issuer or another user of the financed facilities takes a “deliberate action” after \nthe issue date that causes the issue to fail the ownership test of Section 145(a)(1) or satisfy the \nmodified private business tests of Section 145(a)(2). A deliberate action is any action taken by the \nissuer or 501(c)(3) organization that is within its control. Intent to violate the ownership test, the \nprivate business use test or the private security or payment tests is not necessary for an action \nto be deliberate. A deliberate action occurs on the date the issuer or 501(c)(3) organization enters \ninto a binding contract (that is not subject to any material contingencies) with a nonqualified \nperson for use of the bond-financed property. \nMany types of arrangements can result in the modified private business tests under Section \n145 being met at issuance or later, including management and service contracts and research \nagreements. \nManagement and Service Contracts. Contracts for a private entity to manage a bond-financed \nfacility may cause the modified private business tests to be met. For example, a management \ncontract between a 501(c)(3) organization and a for-profit entity under which the for-profit entity \nreceives compensation for services provided with respect to bond-financed property may result \nin the bonds meeting the modified private business tests. The IRS has provided safe harbors \nprotecting against private use for management and service contracts when the service is \nprovided in connection with bond-financed property. Those safe harbors apply to the modified \nprivate business tests. For more information, see Revenue Procedure 2017-13. Contracts that \nfail the safe harbor do not automatically meet the modified private business tests; all facts and \ncircumstances are considered to determine whether the contract meets the tests. \n5 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nResearch Agreements. Research agreements may also cause the modified private business \ntests under Section 145 to be met. For example, when for-profit entities or the federal \ngovernment sponsor research at a facility owned by a 501(c)(3) organization that financed the \nfacility with tax-exempt bonds, the research agreements may result in a violation of the modified \nprivate business tests. However, the IRS has provided safe harbors that apply to these research \nagreements. For more information, see Revenue Procedure 2007-47, 2007-29 I.R.B. 108. As \nwith the management contracts, failure to meet the safe harbors does not automatically cause \nthe modified private business tests to be met. \nRemedial Actions for Nonqualified Use. The regulations provide that an issuer or borrower \nthat engages in a deliberate action causing the ownership requirement to be failed, or the \nmodified private activity bond tests to be met, may, in certain cases, cure that deliberate action \nusing one of the prescribed remedial actions. Treas. Reg. 1.145-2(a) and Revenue Procedure \n2018-26 provide that an issuer may take remedial actions to cure a deliberate action that would \notherwise cause the 501(c)(3) bonds to lose their tax-exempt status. The remedial actions can \ninclude redemption or defeasance of nonqualified bonds, alternative use of disposition proceeds \nand alternative use of bond-financed property. \nExample: A 501(c)(3) organization sells a building financed with tax-exempt qualified 501(c)(3) \nbond proceeds to a for-profit corporation for the fair market value of the building. This change in \nownership, and the change in the use of the property from a qualified use to a private business \nuse, is a deliberate action that causes the issue to fail the ownership test and causes the bonds \nto exceed the limits under the modified private business tests. However, the issuer of the bonds \nmay remediate the deliberate action by redeeming the nonqualified bonds within 90 days of the \naction. \nOther Requirements Under Section 145 for Qualified 501(c)(3) Bonds \nIRC Section 145 imposes other requirements on certain qualified 501(c)(3) bonds. These are a \nvolume limit on non-hospital bonds and limits on proceeds used for residential rental housing. \nVolume Limitation on Non-Hospital Bonds. IRC Section 145(b) limits the amount of qualified \n501(c)(3) bonds that may be issued to benefit a 501(c)(3) organization. This rule does not apply \nto qualified hospital bonds, which is any bond issue for which at least 95% of the proceeds are \nused for a hospital. This rule also does not apply to bonds issued after August 5, 1997, except \nthose from which less than 95% of the net proceeds will be used to finance capital expenditures. \nGenerally, if Section 145(b) applies, the aggregate authorized face amount of a qualified 501(c)(3) \nbond issue allocated to a 501(c)(3) organization, when increased by the amount of outstanding \ntax-exempt non-hospital bonds allocated to the organization, may not exceed $150 million. \nCertain outstanding qualified 501(c)(3) bonds are not counted in the allocation. The aggregation \nrules exclude qualified hospital bonds in their entirety, and exclude the portion of other \noutstanding bonds that financed a hospital. They also exclude any issue not subject to the Tax \nReform Act of 1986, if at least 90% of the net proceeds of the issue were used with respect to \na hospital. Finally, the rules exclude outstanding bonds that are to be currently refunded by the \nnew issue. \nBonds are allocable to a 501(c)(3) organization under a set of “test period beneficiary” rules that \nbring in bond issues benefitting certain related entities, and another rule that treats organizations \nunder common management or control as one entity. These rules may result in the Section \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n145(b) limit being exceeded well after the issue date for a bond issue in the event of a merger or \nother transaction that brings additional bond issues into the analysis. \nExample: A 501(c)(3) organization occupied all the educational facilities financed with a prior \n$145 million issue of qualified 501(c)(3) bonds during the three-year test period. On the date of \nissuance of new qualified 501(c)(3) bonds to finance an educational facility for the organization, \n$95 million of the prior bonds are still outstanding. If less than 95% of the net proceeds of the \nnew bond issue will be used to finance capital expenditures, the authorized face amount of the \nnew issue would be limited to $55 million. \nProceeds Used for Residential Rental Housing for Family Units. Under IRC Section 145(d), \nif a 501(c)(3) organization uses proceeds of qualified 501(c)(3) bonds to finance housing units, \nadditional restrictions apply. Generally, under IRC Section 145(d)(2), if any portion of the net \nproceeds of a qualified 501(c)(3) bond issue are used to finance residential rental housing for \nfamily units, that portion must be used to provide one of the following: \n residential rental property for family housing where the first use of the property is pursuant to \nthe bond issue \n qualified residential rental projects satisfying the requirements under IRC Section 142(d), \nincluding the minimum occupancy thresholds for low-income tenants \n property that is to be substantially rehabilitated beginning within a two-year period ending one \nyear after the date of the acquisition of the property \nFor determining whether use is the first use, Section 145(d)(3) provides special rules. First, if the \nfirst use of property is pursuant to taxable financing, and there was a reasonable expectation \nwhen the taxable financing was provided that it would be replaced with tax-exempt financing, \nand the taxable financing is replaced within a reasonable period with tax-exempt financing, the \nfirst use will be treated as being under the tax-exempt financing. Second, if at the time of the \nfirst use there was no operating state or local program for tax-exempt financing of the property, \nthe first use will be treated as under the first tax-exempt financing of the property. \nFor determining whether a rehabilitation is substantial, Section 145(d)(4) looks to the rules for \nrehabilitation credits in IRC Section 47 with certain adjustments to that section’s definition of \n“substantially rehabilitated.” \nElection to Apply Other Qualified Private Activity Bond Rules \nIRC Section 145(e) permits an issuer to elect out of applying Section 145 if the bond issue would \notherwise qualify as an exempt facility bond or a qualified redevelopment bond to which the \nvolume cap limitations of Section 146 apply. \nSpecial Maturity Limitation Rule \nGenerally, private activity bonds are subject to limits on the maturity of the bonds. Those rules \nare described in Publication 4078, Tax-Exempt Private Activity Bonds. A special rule exists \nfor certain qualified 501(c)(3) bonds. IRC Section 147(b)(4) provides that the issuer may elect \na special exception to the general maturity limitation rule with respect to pooled financings of \n501(c)(3) organizations. \n7 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \nRefunding of Qualified 501(c)(3) Bonds \nQualified 501(c)(3) bonds may be currently refunded. The Tax Cuts and Jobs Act (2017) repealed \nthe exclusion from gross income for interest on bonds issued to advance refund another bond. \nThe repeal applies to advance refunding bonds issued after December 31, 2017. A bond is \nclassified as an advance refunding if it is issued more than 90 days before the redemption of the \nrefunded bonds. For rules describing what is a refunding bond issue, see Publication 4078, Tax-\nExempt Private Activity Bonds. \nPost-Issuance Compliance Monitoring \nThis section supplements the information about compliance monitoring procedures for private \nactivity bonds, in Publication 4078, Tax-Exempt Private Activity Bonds. For information on \nprocedures and other options to assist issuers in their tax compliance responsibilities, see \nPublication 5005, Your Responsibilities as a Conduit Issuer of Tax-Exempt Bonds. \nSteps to Better Monitoring of Qualified 501(c)(3) Bonds. In formulating procedures, issuers \nand 501(c)(3) organizations may consider: \n designating one or more officials to assist in post-issuance compliance, including completion \nof Schedule K (Form 990); \n providing training or other technical support to designated officials; \n designating time intervals within which compliance monitoring activities will be completed; \nand \n timely completing remedial actions (including requests under TEB VCAP) to correct or \notherwise resolve identified noncompliance. \n8 \n",
" \n \n \n \n \n-\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nThe chart below identifies particular areas for compliance monitoring procedures that are relevant \nto qualified 501(c)(3) bonds. Publication 4078, Tax-Exempt Private Activity Bonds, contains \nadditional information on other compliance monitoring areas that apply to all private activity bonds, \nincluding some of the items in this chart. \nCompliance Procedures \nType of Procedures \nDescription of Procedures \nfor Post Closing Matters \nWhere Responsibility is Discussed in \nthis Publication \n501(c)(3) Status \nProcedures to ensure \nexemption \nTax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations – Qualified 501(c)(3) \nOrganization \nProprietary Use of \nProceeds or Bond-\nFinanced Property \nProcedures to timely identify \nand remediate deliberate \nactions \nTax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations – Application of the \nOwnership Test and the Modified Private \nBusiness Tests \n$150 Million Limit \nProcedures during mergers \nand acquisitions to ensure \nthat a limit is not exceeded \nTax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations – Other Requirements Under \nSection 145 for Qualified 501(c)(3) Bonds – \nVolume Limitation on Non-Hospital Bonds \nSchedule K (Form 990) \nProcedures for the timely \ncompletion and filing of Form \n990, including Schedule K \nTax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations – Qualified 501(c)(3) \nOrganization – Special Filing Requirements \nto Retain 501(c)(3) Status; Schedule K \n(Form 990) \nReissuance \nProcedures to satisfy \ntax requirements when a \nmodification in terms results \nin a reissuance for federal \nincome tax purposes \nPublication 4078, Tax-Exempt Private \nActivity Bonds: Tax-Exempt Private \nActivity Bonds – What Happens When \nthe Terms of a Private Activity Bond are \nModified? \nArbitrage Compliance \nProcedures for the timely \ncomputation and payment \nof arbitrage rebate and yield \nreduction payments \nPublication 4078, Tax-Exempt Private \nActivity Bonds: Tax-Exempt Private \nActivity Bonds – Requirements That \nApply at Issuance and Throughout the \nLife of the Bonds – Proceeds are Subject \nto Investment Restrictions: the Arbitrage \nYield Restriction and Arbitrage Rebate \nRequirements \nRecord Retention \nProcedures for the \nmaintenance of records \nPublication 4078, Tax-Exempt Private \nActivity Bonds: Tax-Exempt Private \nActivity Bonds – Issuers Must Retain \nRecords to Show that Requirements are \nSatisfied \nIRS Contacts \nProcedures concerning \ncontacts from the IRS \nPublication 4078, Tax-Exempt Private \nActivity Bonds: Post-Issuance Compliance \nMonitoring – Steps to Better Monitoring \nSee Post-Issuance Compliance for more information. \n9 \n",
" \n \n \n \n \n \n \n \nWhat To Do When You Discover a Violation – TEB Voluntary Closing \nAgreement Program \nIRS is committed to resolving federal tax violations with the issuer. The TEB Voluntary Closing \nAgreement Program provides remedies for issuers of tax-exempt bonds, tax credit bonds and \ndirect pay bonds that voluntarily come forward to resolve a violation that cannot be corrected \nunder self-correction programs described in the Regulations or other published guidance. \nPublication 4078, Tax-Exempt Private Activity Bonds describes TEB VCAP in more detail. \nMore Information \nYou can find information about the tax laws that apply to municipal finance arrangements, \nincluding tax forms and instructions, revenue procedures and notices, and TEB publications at \nIRS.gov/bonds. \nIf you have account specific questions, call 877-829-5500. \n10 \n"
] |
f1099cap.pdf
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0919 Form 1099-CAP (PDF)
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https://www.irs.gov/pub/irs-pdf/f1099cap.pdf
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[
" \nForm 1099-CAP\n(Rev. September 2019)\nCat. No. 35115M\nChanges in \nCorporate \nControl and \nCapital Structure\nCopy A\nFor \nInternal Revenue \nService Center\nDepartment of the Treasury - Internal Revenue Service\nFile with Form 1096. \nOMB No. 1545-1814\nFor Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\n7373\nFor calendar year \n20\nVOID\nCORRECTED\nCORPORATION’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nCORPORATION’S TIN\nSHAREHOLDER’S TIN\nSHAREHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Date of sale or exchange\n2 Aggregate amount rec’d*\n$\n3 No. of shares exchanged\n4 Classes of stock exchanged\n5\n* The shareholder cannot claim a loss based on the \namount in box 2.\nForm 1099-CAP (Rev. 9-2019)\nwww.irs.gov/Form1099CAP\nDo Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page\n",
" \nForm 1099-CAP\n(Rev. September 2019)\nChanges in \nCorporate \nControl and \nCapital Structure\nCopy B\nFor Shareholder\nDepartment of the Treasury - Internal Revenue Service\nThis is important tax \ninformation and is being \nfurnished to the IRS. If \nyou are required to file a \nreturn, a negligence \npenalty or other \nsanction may be \nimposed on you if \ntaxable income results \nfrom this transaction \nand the IRS determines \nthat it has not been \nreported.\nOMB No. 1545-1814\nFor calendar year \n20\nCORRECTED (if checked)\nCORPORATION’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nCORPORATION’S TIN\nSHAREHOLDER’S TIN\nSHAREHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Date of sale or exchange\n2 Aggregate amount rec’d*\n$\n3 No. of shares exchanged\n4 Classes of stock exchanged\n5\n* You cannot claim a loss based on the amount in box 2.\nForm 1099-CAP (Rev. 9-2019)\n(keep for your records)\nwww.irs.gov/Form1099CAP\n",
"Instructions for Shareholder\nA corporation in which you own stock that has had a \nchange in control or a substantial change in capital \nstructure must send you this statement by January 31 of \nthe year following the calendar year of the change. You \nhave received this statement because the corporation \nhas reasonably determined that you may be required to \nrecognize gain from the receipt of cash, stock, or other \nproperty that was exchanged for the corporation’s \nstock. Report any gain from the exchange on Form \n8949. However, you cannot claim a (loss) on Form 8949 \nas a result of this exchange. See chapter 4 of Pub. 550 \nfor additional information.\nShareholder’s taxpayer identification number (TIN). \nFor your protection, this form may show only the last \nfour digits of your TIN (social security number (SSN), \nindividual taxpayer identification number (ITIN), adoption \ntaxpayer identification number (ATIN), or employer \nidentification number (EIN)). However, the issuer has \nreported your complete TIN to the IRS.\nAccount number. May show an account or other \nunique number the payer corporation assigned to \ndistinguish your account.\nBox 1. Shows the date the stock was exchanged for \ncash, stock, or other property.\nBox 2. Shows the aggregate amount of any cash and \nthe fair market value of any stock or other property \nreceived by you in the exchange for the stock you held.\nBox 3. Shows the number of shares of the corporation’s \nstock that you held which were exchanged in the \ntransaction.\nBox 4. Shows the class or classes of stock that were \nexchanged.\nFuture developments. For the latest information about \ndevelopments related to Form 1099-CAP and its \ninstructions, such as legislation enacted after they were \npublished, go to www.irs.gov/Form1099CAP.\n",
" \nForm 1099-CAP\n(Rev. September 2019)\nChanges in \nCorporate \nControl and \nCapital Structure\nCopy C\nFor Corporation\nDepartment of the Treasury - Internal Revenue Service\nOMB No. 1545-1814\nFor Paperwork \nReduction Act \nNotice, see the \ncurrent General \nInstructions for \nCertain Information \nReturns.\nFor calendar year \n20\nVOID\nCORRECTED\nCORPORATION’S name, street address, city or town, state or province, \ncountry, ZIP or foreign postal code, and telephone no.\nCORPORATION’S TIN\nSHAREHOLDER’S TIN\nSHAREHOLDER’S name\nStreet address (including apt. no.)\nCity or town, state or province, country, and ZIP or foreign postal code\nAccount number (see instructions)\n1 Date of sale or exchange\n2 Aggregate amount rec’d*\n$\n3 No. of shares exchanged\n4 Classes of stock exchanged\n5\n* The shareholder cannot claim a loss based on the \namount in box 2.\nForm 1099-CAP (Rev. 9-2019)\nwww.irs.gov/Form1099CAP\n",
"Instructions for Corporation\nTo complete Form 1099-CAP, use:\n• The current General Instructions for Certain \nInformation Returns, and \n• The current Instructions for Form 1099-CAP.\nTo get or to order these instructions, go to \nwww.irs.gov/Form1099CAP.\nFiling and furnishing. For filing and furnishing \ninstructions, including due dates, and to request filing or \nfurnishing extensions, see the current General \nInstructions for Certain Information Returns.\nTo file electronically, you must have software that \ngenerates a file according to the specifications in Pub. \n1220.\nNeed help? If you have questions about reporting on \nForm 1099-CAP, call the information reporting customer \nservice site toll free at 866-455-7438 or 304-263-8700 \n(not toll free). Persons with a hearing or speech \ndisability with access to TTY/TDD equipment can call \n304-579-4827 (not toll free). \n"
] |
p4079.pdf
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0919 Publ 4079 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4079.pdf
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[
" \n \nTax Exempt & \nGovernment Entitites \nTax-Exempt Governmental Bonds building iconinfracstructure icon money icon education cost iconhome icon\nPublication 4079 (Rev. 9-2019) Catalog Number 34663R \n \nDepartment of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \n \n \n \n \n \n \nContents \nIntroduction .............................................................................................................................1 \nBackground .............................................................................................................................2 \nTax-Exempt Governmental Bonds .........................................................................................2 \nOther Governmental Bond Requirements .............................................................................6 \nPost-Issuance Compliance Monitoring................................................................................14 \nWhat To Do When You Discover a Violation — \nTEB Voluntary Closing Ageement Program .......................................................................16 \nMore Information...................................................................................................................16 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nIntroduction \nThis publication provides an overview of the federal tax law rules that apply to municipal \nfinancing arrangements commonly known as “governmental bonds.” It is intended to help \nissuers meet federal tax law requirements to ensure that interest earned by bondholders is \nexempt from taxation under Internal Revenue Code (IRC) Section 103. \nThis publication is an overview of the rules; it isn’t official guidance that you may rely on for \nplanning purposes. It refers to IRC sections, Income Tax Regulations (Treas. Regs.), revenue \nprocedures and other official guidance. Please refer to the official guidance for the rules that \napply to governmental bonds. Unless otherwise indicated, references in this publication to \nsection numbers are references to sections of the IRC. \nFor publications that discuss the general rules that apply to qualified 501(c)(3) bonds or other \nqualified private activity bonds, see IRS Publication 4077, Tax-Exempt Bonds for 501(c)(3) \nCharitable Organizations, and IRS Publication 4078, Tax-Exempt Private Activity Bonds. \nFor an overview of an issuer’s responsibilities in a conduit financing arrangement, see IRS \nPublication 5005, Your Responsibilities as a Conduit Issuer of Tax-Exempt Bonds. For an \noverview of an issuer’s responsibilities with respect to arbitrage, See IRS Publication 5271, \nComplying with Arbitrage Requirements: A Guide for Issuers of Tax-Exempt Bonds. The IRS \nalso provides more detailed information at IRS.gov/bonds. See also More Information, at the \nend of this publication. \n1 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nBackground \nState and local governments receive direct and indirect tax benefits under the IRC that lower \nborrowing costs on their valid debt obligations. Because interest paid to bondholders on these \nobligations is not includable in their gross income for federal income tax purposes, bondholders \nare willing to accept a lower interest rate than they would accept if the interest was taxable. \nThese benefits apply to many different types of municipal debt financing arrangements including \nbonds, notes, loans, lease purchase contracts, lines of credit and commercial paper (collectively \nreferred to as “bonds” in this publication). \nTo receive these benefits, issuers must ensure that the requirements under the IRC are met, \ngenerally for as long as the bonds remain outstanding. These requirements include, but are not \nlimited to, information filing and other requirements related to issuance, the proper and timely \nuse of bond-financed property, and limitations on how bond proceeds (funds derived from \nthe sale of bonds) may be invested. This publication describes these rules as they relate to \ngovernmental bonds. \nThis publication also addresses practices and steps the issuer can take to protect the tax-\nexempt status of the bonds. For example, because the requirements and limitations generally \napply at the time the bonds are issued and throughout the term of the bonds, this publication \nencourages issuers and beneficiaries of tax-exempt bonds to create procedures for monitoring \ncompliance throughout the life of the bonds. For more information, see Post-Issuance \nCompliance Monitoring. \nTax-Exempt Governmental Bonds \nGovernmental bonds are bonds that do not meet the private activity bond tests. Proceeds \nof these bonds may be used to finance activities of, or facilities owned, operated or used \nby, the issuer for its purpose or another state or local government for its own purposes. This \ncan include financing the construction, maintenance or repair of public infrastructure such as \nhighways, schools, fire stations, libraries or other types of municipal facilities. To be tax-exempt, \ngovernmental bonds must comply with the requirements that define governmental bonds and \nrequirements that apply to tax-exempt bonds generally. \nIn this section, we discuss the tests for determining whether a bond is a governmental bond \nor a private activity bond. These tests apply at issuance and after the bonds are issued. This \ndiscussion includes remedial action provisions that apply when a deliberate action causes \ngovernmental bonds to become private activity bonds. If a deliberate action that results in a \nviolation of any of the federal tax requirements cannot be corrected under the remedial action \nprovisions, issuers may be able to enter into a closing agreement under the TEB Voluntary \nClosing Agreement Program (TEB VCAP) described in Notice 2008-31, 2008-11 I.R.B. 592 (see \nWhat To Do When You Discover a Violation — TEB Voluntary Closing Ageement Program). \n2 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTesting for Governmental Bonds: The Private Activity Bond Tests \nIRC Section 141 sets forth tests to determine if a bond is a private activity bond. These tests \nidentify arrangements that actually, or are reasonably expected to, transfer benefits of tax-\nexempt financing to a nongovernmental person. A “nongovernmental person” is a person \nother than a governmental person. A governmental person means a state or local government \nas defined in Treas. Reg. Section 1.103-1 or any instrumentality of such entity. Governmental \npersons do not include the United States or any agency or instrumentality of the United States. \nA state or local bond will be a private activity bond if, as of the issue date of the bonds or at any \ntime while the bonds are outstanding, the bond issue exceeds the limits set forth in either: \n• the private business tests of Section 141(b), which consist of the private use test and the \nprivate security and payment test, and certain special private business rules (see Special \nPrivate Business Test Rules and Special Rules for Certain Utility Financings, below), or \n the private loan financing test of Section 141(c). \nThe bond issue exceeds the private activity bond tests limits as of the issue date if the issuer \nor a conduit borrower of the bond proceeds reasonably expects that the issue will exceed the \nlimits while the bonds are outstanding. A bond issue also exceeds the private activity bond tests \nlimits after the issue date if a deliberate action is taken that causes those limits to be exceeded. \nIf a bond is a private activity bond, interest on the bond may still be excludable from federal \nincome tax if the bond issue meets the additional requirements that apply to qualified private \nactivity bonds. For a discussion of these additional requirements, see Publication 4078, Tax-\nExempt Private Activity Bonds. \nPrivate Business Tests \nUnder IRC Section 141(b), a bond issue exceeds the limits of the private business tests, and \ntherefore does not qualify as a governmental bond issue, if the issue exceeds the limit of the \nprivate business use test and also exceeds the limit of the private security or payment test. \nPrivate Business Use Test. A state or local bond issue exceeds the limit of the private business \nuse test if more than 10% of the proceeds of an issue are to be used for any private business \nuse. Use of bond proceeds or bond-financed property by a nongovernmental person (individual \nor entity) in furtherance of a trade or business activity is considered private business use for tax-\nexempt bond purposes. For this purpose, any trade or business activity of a natural person is \ntreated as a trade or business, and any activity carried on by a person (including a governmental \nentity or corporation) other than a natural person is treated as a trade or business. \nIndirect uses of proceeds must also be considered in determining whether more than 10% of the \nproceeds of an issue will be used in a private business use. For example, property is treated as \nbeing used for a private business use if it is leased to a nongovernmental person and then sub\nleased to a governmental person if the nongovernmental person’s use is in a trade or business. \nMany types of arrangements can result in private business use under IRC Section 141 at \nissuance or later, including management and service contracts and research agreements. \nManagement and Service Contracts. Contracts for a private entity to manage a bond-financed \nfacility may cause the private business use test to be met. For example, a management \ncontract between a governmental entity and a nongovernmental person under which the \nnongovernmental person receives compensation for services provided with respect to bond-\nfinanced property may result in the bonds meeting the private business use test. \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nThe IRS has provided safe harbors protecting against private business use for management \nand service contracts between a private entity and a governmental entity when the service \nis provided in connection with bond-financed property. For more information, see Revenue \nProcedure 2017-13. Contracts that fail the safe harbor do not automatically meet the private \nbusiness use test; all facts and circumstances are considered to determine whether the contract \nmeets the test. \nResearch Agreements. Research agreements may also cause the private business use test \nto be met. For example, when private entities or the federal government sponsor research at \na facility financed with tax-exempt bonds, the research agreements may result in the bonds \nmeeting the private business use test. However, the IRS has provided safe harbors for research \nagreements. For more information, see Revenue Procedure 2007-47, 2007-29 I.R.B. 108. As \nwith management contracts, failure to meet the safe harbors does not automatically cause the \nprivate business use test to be met. \nNOTE: If an issuer determines that its bonds meet the private business use test, the bonds have \nnot met the private business tests unless the bonds also meet the private payment or security \ntest. \nPrivate Security or Payment Test. A state or local bond exceeds the limit of the private \nsecurity or payment test if more than 10% of the proceeds of the bond issue is (under the terms \nof the issue or any underlying arrangement) directly or indirectly (1) secured by any interest in \nproperty used or to be used for a private business use or payments in respect of the property, or \n(2) to be derived from payments (whether or not to the issuer) in respect of property, or borrowed \nmoney, used or to be used for a private business use. For example, lease payments made by \nprivate businesses to a city for the lease of property in a blighted area that was rehabilitated with \nproceeds of the city’s bonds would be treated as private payments. \nNOTE: If an issuer determines that its bonds meet the private security or payment test, the \nbonds have not met the private business tests unless the bonds also meet the private business \nuse test. \nSpecial Private Business Test Rules. Additional limits on private business activity apply \nwhen private business use is unrelated to the governmental use, when private business use is \ndisproportionate to the governmental use, and when the “nonqualified amount” exceeds $15 \nmillion. \nUnrelated and Disproportionate Use. IRC Section 141(b)(3) provides an additional limit for \nunrelated and disproportionate business use, which is lower than the limits in Sections 141(b)(1) \nand 141(b)(2). In particular, it limits unrelated or disproportionate private use of assets financed \nwith governmental bonds to 5% of the proceeds of the bonds. The rule also reduces the private \nsecurity or payment test limit to 5%. For this purpose, only payments, property and borrowed \nmoney with respect to the unrelated or disproportionate use are taken into account. \nUnrelated use is private use that isn’t related to the governmental use of the issue. Whether \na private business use is related to a government use financed with the proceeds of an issue \nis determined on a case-by-case basis, emphasizing the operational relationship between the \ngovernment use and the private business use. In general, a facility that is used for a related \nprivate business use must be located within, or adjacent to, the governmentally-used facility. \nExample: A county issues bonds with proceeds of $20 million and uses $18.1 million of \nthe proceeds for construction of a new school building and $1.9 million of the proceeds for \n4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nconstruction of a privately operated cafeteria in its administrative office building, which is \nlocated at a remote site. The bonds are secured, in part, by the cafeteria. The $1.9 million of \nproceeds is unrelated to the governmental use (that is, school construction) financed with \nthe bonds and exceeds 5% of $20 million. Thus, the issue exceeds the limit under the private \nbusiness tests. \nA private business use is disproportionate to a related government use only to the extent that \nthe amount of proceeds used for that private business exceeds the amount of proceeds of \nthe issue used for the related government use. For example, a private use of $100 million of \nproceeds that is related to a government use of $70 million of proceeds results in $30 million of \ndisproportionate use. \nWhen unrelated use and disproportionate use occur in the same bond issue, the two uses are \naggregated to test against the 5% limit. Additional examples of the unrelated or disproportionate \nprivate use limits may be found in Treas. Reg. Section 1.141-9(e). \nRemedial Actions for Unrelated or Disproportionate Use. A deliberate action that occurs after \nthe issue date does not result in unrelated or disproportionate use if the issue meets the \nremedial action provisions in Treas. Regs. Section 1.141-12(a), discussed in Remedial Actions for \nNonqualified Use. \nThe $15 Million Limit on the Nonqualified Amount. An additional limit may apply even though \nthe “nonqualified amount” of proceeds does not exceed 10% of the proceeds of the bonds (or \na lesser amount of unrelated or disproportionate use of proceeds), and therefore the private \nactivity limits discussed above have not been exceeded. The nonqualified amount is the lesser \nof the amount of proceeds used in private business use or the amount of proceeds with respect \nto which there are private payments or security. Section 141(b)(5) provides that an issue of \nbonds will be private activity bonds if the nonqualified amount exceeds $15 million, unless the \nissuer applies state volume cap under Section 146 to the excess of the nonqualified amount \nover $15 million. For additional information on the state volume cap limit under Section 146, see \nPublication 4078, Tax-Exempt Private Activity Bonds. \nSpecial Rules for Certain Utility Financings. There are two additional limits that issuers of \nbonds for utility projects should consider. The first limit, under Section 141(b)(4), applies if 5% or \nmore of the proceeds of the issue are to be used to finance any “output facility,” as defined in the \nregulations (other than a facility for the furnishing of water). Section 141(b)(4) limits the nonqualified \namount of proceeds of a governmental bond issued to finance the output facilities to $15 \nmillion. This rule applies in addition to the tests under Section 141(b)(1) and (2). In applying this \nlimit, issuers must include the nonqualified amounts on any prior outstanding tax-exempt bond \nissues for which 5% or more of the proceeds of the prior issue are or will be used for either the \nsame output facility or another output facility that is part of the same project. If the nonqualified \namount exceeds $15 million, the bonds are private activity bonds. \nUnder the second limit, bonds will be private activity bonds if the amount of the proceeds of \nthe issue that are to be used (directly or indirectly) for the acquisition by a governmental unit \nof nongovernmental output property exceeds the lesser of 5% of the proceeds or $5 million. \n“Nongovernmental output property” means any property (or interest therein) which before the \nacquisition was used (or held for use) by a person other than a governmental unit in connection \nwith an output facility (other than a facility for the furnishing of water). The rule has several \nexceptions, which are beyond the scope of this publication. \n5 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPrivate Loan Financing Test \nA state or local bond exceeds the limit of the private loan financing test if the amount of \nproceeds of the issue which is to be used (directly or indirectly) to make or finance loans to \npersons other than governmental entities exceeds the lesser of 5% of the proceeds or $5 million. \nA bond that exceeds the private loan financing test limit is a private activity bond, even if it does \nnot also meet the private business tests. \nExceeding the Private Activity Bond Tests Limits after Issuance \nEven if the bonds comply with the limits of the private activity bond tests at issuance, a \ngovernmental bond issue can lose its tax-exempt status (from the time of issuance) if the issuer \nor a conduit borrower of the bond proceeds takes a “deliberate action” after the issue date \nthat causes the issue to exceed those limits. A deliberate action is any action taken by the \nissuer or conduit borrower that is within its control; intent to exceed the limits is not necessary \nfor an action to be deliberate. A deliberate action occurs on the date the issuer or conduit \nborrower enters into a binding contract (that is not subject to any material contingencies) with \na nongovernmental person for use of the bond-financed property in a manner that causes the \nlimits of the private activity tests to be exceeded. \nRemedial Actions for Nonqualified Use. The regulations provide that an issuer and, in \nconduit financings, a conduit borrower that engages in a deliberate action causing the limits \nof the private activity bond tests to be exceeded may, in certain cases, cure that deliberate \naction. Treas. Reg. Section 1.141-12 provides that an issuer may take remedial actions to cure \na deliberate action that would otherwise cause the bonds to lose their tax-exempt status. The \nremedial actions include redemption or defeasance of nonqualified bonds, alternative use of \ndisposition proceeds and alternative use of bond-financed property. \nExample: A city enters into an agreement through which it sells a building financed with \ngovernmental bond proceeds to a corporation and leases the same building back from that \ncorporation, with the result that the corporation owns the building for federal income tax \npurposes. This change in ownership of the property results in private business use and is a \ndeliberate action. However, the city may remediate the deliberate action by redeeming the \nnonqualified bonds within 90 days of the action. \nOther Governmental Bond Requirements \nOther rules an issuer must meet for a governmental bond to be tax-exempt include: \n• rules a governmental bond must meet for interest to be excluded from federal income tax, \nincluding rules that relate to issuance of the bonds (including elections that need to be made \nwhen the bonds are issued) and rules that apply at issuance and throughout the life of the \nbonds; \n• rules that apply when modifications are made to bond terms; and \n• recordkeeping requirements. \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nRequirements Related to Issuance \nThe following is an overview of several general rules related to the issuance of governmental \nbonds. \nIssuers Must File an Information Return. Issuers of governmental bonds must comply with \ncertain information filing requirements under IRC Section 149(e). The size of the issuance \ndictates which information return an issuer must file. The chart below describes what form \nis required and when it must be filed. The IRS Forms listed below are available on the TEB \nwebsite. \nInformation Reporting Under Section 149(e) \nInformation Return \nDue Date \nWhere to File \nForm 8038-G, Information \nReturn for Tax-Exempt \nGovernmental Bonds, \nfor a governmental bond \nissue with an issue price of \n$100,000 or greater. \nForm 8038-GC, Information \nReturn for Small Tax-Exempt \nGovernmental Bond Issues, \nLeases, and Installment \nSales, for a governmental \nbond issue with an issue \nprice of less than $100,000. \nMay be filed for a single \nissue or on a consolidated \nbasis for all “small” issues in \na calendar year. \nGenerally, both returns are due on or \nbefore the 15th day of the 2nd calendar \nmonth after the close of the calendar \nquarter in which the bonds were \nissued. \nExample: The due date of the return \nfor bonds issued on February 1 is May \n15. \nAlternatively, Form 8038-GC may \nbe filed annually on a consolidated \nbasis for all bond issues of less than \n$100,000 that are not reported on \na separate Form 8038-GC and that \nare not construction issues electing \nto pay a penalty in lieu of rebate. \nConsolidated returns are due on or \nbefore February 15 following the \ncalendar year in which the bonds were \nissued. \nExample: An issuer issues three \ngovernmental bond issues with issue \nprices and dates as follows: $50,000 \nIssue A - March 1, 2018; $75,000 Issue \nB - June 15, 2018; and $30,000 Issue \nC - October 5, 2018. This issuer can \nfile one consolidated Form 8038-GC \nby February 15, 2019 for all three bond \nissues. \nFile Form 8038-G and Form \n8038-GC information returns \nat: \nDepartment of the Treasury \nInternal Revenue Service \nCenter \nOgden, UT 84201 \nAn issuer may request an extension of time to file Forms 8038-G or 8038-GC if the failure to file \nthe return on time wasn’t due to willful neglect. To request an extension, the issuer must follow \nRevenue Procedure 2002-48, 2002-37 I.R.B. 531. These procedures generally require that the \nissuer: (1) attach a letter to the Form 8038-G or Form 8038-GC briefly explaining when the return \nwas required to be filed, why the return was not timely submitted, and whether the bond issue is \nunder examination; (2) enter on top of the letter “Request for Relief under section 3 of Rev. Proc. \n2002-48” and (3) file the letter and return at the Internal Revenue Service Center, Ogden, UT \n84201. \nBonds Must Be in Registered Form. IRC Section 149(a) generally provides that any tax-exempt \nbond, including governmental bonds, must be issued “in registered form” unless the bond is not \nof a type offered to the public or has, at the date of issue, a maturity of not more than one year. \n7 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nThe regulations describe what it means to be in “registered form.” Treas. Reg. Section 5f.103\n1(c)(1) provides that an obligation issued after January 20, 1987, pursuant to a binding contract \nentered into after January 20, 1987, is in registered form if: \n• the obligation is registered as to both principal and any stated interest with the issuer (or \nits agent) and that the transfer of the obligation to a new holder may be effected only by \nsurrender of the old instrument and the issuer must either reissue the old instrument or issue a \nnew instrument to the new holder, or \n• the right to the principal of, and stated interest on, the obligation may be transferred only \nthrough a book-entry system maintained by the issuer (or its agent); or \n• the obligation is registered as to both principal and any stated interest with the issuer (or its \nagent) and may be transferred through both the above methods. \nIssuers Must Make Certain Elections at Issuance. When an issuer considers actions it must \ntake when it issues bonds, it should consider whether it wants to make any elections. Various \nprovisions of the IRC and regulations require that the issuer make certain elections in writing and \nretain elections as part of the bond documents. Many elections have to be made on or before \nthe issue date of the bonds. Some elections may be made by either the issuer or a conduit \nborrower. Others must be made by the actual issuer of the bonds. The IRS frequently observes \nthat issuers make the written elections in the arbitrage certificate prepared pursuant to Treas. \nReg. Section 1.148-2. Once made, elections cannot be revoked without IRS permission. \nExamples of elections include: \n• waiving the right to treat a purpose investment as a program investment \n• waiving the right to invest in higher yielding investments during any temporary period \n• the issuer of a pooled financing issue electing to apply rebate spending exceptions separately \nto each conduit loan \n• applying actual facts rather than reasonable expectations for certain provisions under the two-\nyear spending exception from rebate \n• excluding the earnings on a reasonably required reserve fund from available construction \nproceeds under the two-year spending exception from rebate \n• treating a portion of an issue as a separate construction issue under the two-year spending \nexception from rebate \n• electing to pay 1.5% penalty in lieu of arbitrage rebate \n• electing to treat portions of a bond issue as separate issues \nRequirements that Apply at Issuance and Throughout the Life of the Bonds \nProceeds Must Be Timely Allocated to Expenditures. Issuers and conduit borrowers must \nfollow the rules for allocating bond proceeds. The issuer or other entity controlling expenditure \nof the proceeds of a governmental bond issue must allocate those proceeds among the various \nexpenditures or other purposes of the issue in a manner demonstrating that the private activity \nbond tests are not met. These allocations must generally be consistent with the allocations \nmade for determining compliance with the arbitrage yield restriction and rebate requirements, \nas well as other federal tax filings. See Proceeds are Subject to Investment Restrictions: the \nArbitrage Yield Restriction and Arbitrage Rebate Requirements for an overview of those rules. \n8 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAn issuer must allocate proceeds to expenditures not later than 18 months after the later of \nthe date each expenditure is paid or the date the project, if any, that is financed by the issue is \nplaced in service. This allocation must be made in any event by the date 60 days after the fifth \nanniversary of the issue date or the date 60 days after the retirement of the issue, if earlier. \nProceeds are Subject to Investment Restrictions: the Arbitrage Yield Restriction and \nArbitrage Rebate Requirements. Issuers of tax-exempt bonds, including governmental bonds, \nare generally subject to investment or arbitrage limitations under IRC Section 148. Failure to \ncomply with those arbitrage limitations will result in the bonds being arbitrage bonds and interest \non the bonds being taxable. \nIn general, arbitrage is earned when the gross proceeds of an issue are used to acquire \ninvestments that earn a yield that is materially higher than the yield on the bonds of the issue. \nEarning arbitrage is permitted in certain circumstances. In some circumstances arbitrage may \nbe earned but must be paid, or rebated to the U.S. Department of the Treasury. In some cases, \nan issuer may be able to reduce the yield on an investment for arbitrage purposes and thereby \navoid an arbitrage violation by making a yield reduction payment to the U.S. Treasury. See \nWhere and When to File Arbitrage Rebate Yield Reduction Payments, for information on how \nto make yield reduction payments. \nAn issuer must comply with two general sets of arbitrage rules: (1) the yield restriction \nrequirements of Section 148(a) and (2) the rebate requirements of Section 148(f). An issuer may \nmeet one of these rules but still have arbitrage bonds because it failed to meet the other. Even \nthough interconnected, both sets of rules have their own distinct requirements. The following \nis an overview of the basic requirements of these two general rules. Additional requirements or \nexceptions, beyond the scope of this publication, may apply in certain instances. \nAn issuer’s reasonable expectations on the issue date regarding the amount and use of gross \nproceeds of the issue are used to determine whether an issue consists of arbitrage bonds. In \naddition, if an issuer or any person acting for the issuer takes a deliberate, intentional action to \nearn arbitrage after the issue date, that action will cause the bonds of an issue to be arbitrage \nbonds if that action, had it been reasonably expected on the issue date, would have caused the \nbonds to be arbitrage bonds. Intent to violate the requirements of Section 148 is not necessary \nfor an action to be intentional. \nYield Restriction Requirements. The yield restriction rules of IRC Section 148(a) generally provide \nthat the direct or indirect investment of the gross proceeds of bonds in investments earning a \nyield materially higher than the yield of the bond issue causes the bonds to be arbitrage bonds. The \nchart below describes when the yield on particular investments will be “materially higher” (the \nchart shows the permitted yield spread between the yield on the bond issue and the yield on the \nparticular investment; any spread beyond that stated is materially higher): \n9 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n“Materially Higher” Limits \nType of Investments \nMaterially Higher \nGeneral rule (when other rules below don’t apply) \n1/8 of one percentage point \nInvestments in a refunding escrow \n1/1000 of one percentage point \nInvestments allocable to replacement proceeds \n1/1000 of one percentage point \nProgram investments \n1.5 percentage points \nInvestments in tax-exempt bonds that are not \nsubject to the alternative minimum income tax \nNo yield limitation \nCertain exceptions are available under the yield restriction rules. The investment of proceeds \nin materially higher yielding investments does not cause the bonds of an issue to be arbitrage \nbonds: (1) during a temporary period (for example, three-year temporary period for capital \nprojects and 13 months for restricted working capital expenditures); (2) as part of a reasonably \nrequired reserve or replacement fund; and (3) as part of a minor portion (an amount not \nexceeding the lesser of 5% of the sale proceeds of the issue or $100,000). Whether the arbitrage \nyield restrictions rules apply, issuers should consider whether the rebate requirements apply. \nRebate Requirements. The rebate requirements of IRC Section 148(f) generally provide that, \nunless certain earnings on “nonpurpose investments” allocable to the gross proceeds of an \nissue are rebated to the U.S. Treasury, the bonds in the issue will be arbitrage bonds. Generally, \nnonpurpose investments are investment securities such as Treasury bonds, bank deposits or \nguaranteed investment contracts, and so on, and do not include “purpose investments.” A \npurpose investment is an investment that the issuer acquires to carry out the governmental \npurpose of an issue. An example of a purpose investment is the loan obligation created when an \nissuer loans bond proceeds to another governmental unit, such as in a pooled or “bond bank” \nfinancing. \nThe arbitrage that must be rebated is based on the excess (if any) of the amount actually earned \non nonpurpose investments over the amount that would have been earned if those investments \nhad a yield equal to the yield on the issue, plus any income attributable to the excess. Under \nTreas. Reg. Section 1.148-3(b), the future values (as of the computation date) of all earnings \nreceived and payments actually or constructively made on nonpurpose investments are included \nin determining the amount of rebate due. \nSee Where and When to File Arbitrage Rebate Yield Reduction Payments for information on \nhow to make rebate payments. \nThere are, however, two types of exceptions to the general rebate requirements that apply to \ngovernmental bonds: the small issuer exception and the spending exceptions. \nSmall Issuer Exception. This exception provides that governmental bonds issued by small \ngovernmental issuers with general taxing powers are treated as meeting the arbitrage rebate \nrequirement. A governmental entity has general taxing powers if it has the power to impose \ntaxes of general applicability which, when collected, may be used for its general purposes. \n10 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAn issue (other than a refunding issue, for which other rules apply) qualifies for the small issuer \nexception only if the issuer reasonably expects as of the issue date to issue, or in fact issues, \n$5 million or less in tax-exempt governmental bonds during the calendar year. The aggregation \nrules of Section 148(f)(4)(D) should be considered when determining whether this exception \napplies. The $5 million limit is increased by the aggregate face amount of bonds attributable to \nfinancing the construction of public school facilities, up to an additional $10 million. For example, \nthe small issuer exception could apply if the qualifying issuer issued $5 million in tax-exempt \ngovernmental bonds for street improvements and $5 million in tax-exempt bonds to finance \nconstruction of public school facilities in the same calendar year. \nAn issue meeting the small issuer requirements is exempt from rebate for all gross proceeds. \nHowever, the small issuer exception is an exception from rebate and not from the arbitrage rules \naltogether. The yield restriction rules still apply. Therefore, an issuer qualifying for this exception \nneeds to establish a temporary period for project fund investments and needs to establish that \nany reserve fund is reasonably required. \nSpending Exceptions. There are three spending exceptions to the rebate requirements. Whether \nthese exceptions apply depends on the timing of expenditures of required amounts of proceeds, \nas follows: \nSpending Exceptions \nSpending \nPeriod \nSpending Exception \n6 months \nTreas. Reg. Section 1.148-7(c) provides an exception to rebate if the gross proceeds \nof the bond issue are allocated to expenditures for governmental or qualified \npurposes that are incurred within 6 months after the issue date. \n18 months \nTreas. Reg. Section 1.148-7(d) provides an exception to rebate if the gross proceeds \nof the bond issue are allocated to expenditures for governmental or qualified \npurposes which are incurred within: (1) at least 15% within 6 months after the issue \ndate; (2) at least 60% within 12 months after the issue date; and (3) 100% within 18 \nmonths after the issue date. \n2 years \nTreas. Reg. Section 1.148-7(e) provides an exception to rebate for construction issues \nfinancing property to be owned by a governmental entity or 501(c)(3) organization \nwhen certain available construction proceeds are allocated to expenditures: (1) at \nleast 10% within 6 months after the issue date; (2) at least 45% within 12 months \nafter the issue date; (3) at least 75% within 18 months after the issue date; and (4) \n100% within 24 months after the issue date. \nNote: Issuers may still owe rebate on amounts earned on nonpurpose investments allocable to proceeds \nnot covered by one of the spending exceptions, which may include earnings in a reasonably required \nreserve or replacement fund. \n11 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nWhere and When To File Arbitrage Rebate and Yield Reduction Payments. Issuers of tax-exempt \nbonds file Form 8038-T, Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage \nRebate, to make: \n• yield reduction payments \n• arbitrage rebate payments \n• payments of a penalty in lieu of rebate \n• payment in connection with the termination of the election to pay a penalty in lieu of arbitrage \nrebate \n• payment of the penalty for failure to pay arbitrage rebate on time \nA yield reduction payment or arbitrage rebate installment payment is required to be paid no \nlater than 60 days after the “computation date” to which the payment relates. An issuer of a \nfixed yield issue may treat any date as a computation date. An issuer of a variable yield issue \nmay treat the last day of any bond year ending on or before the latest date for making the first \nrebate payment (generally not later than five years after the issue date) as a computation date. \nThereafter, the issuer must consistently treat either the end of each bond year of the end of each \nfifth bond year as a computation date. Generally, a “bond year” is a one-year period that ends \non the date that the issuer selects. If the issuer does not make a timely selection, the bond years \nfor the issue end on each anniversary of the issue date and on the final maturity date. \nRecovering an Overpayment of Rebate. If an issuer pays more than the required rebate, it may \nask to recover the overpayment. In general, an issuer may request an overpayment of arbitrage \nrebate when it can establish that an overpayment occurred. An overpayment is the excess of \nthe amount paid to the U.S. Treasury for an issue under IRC Section 148 over the sum of the \nrebate amount for the issue as of the most recent computation date and all amounts that are \notherwise required to be paid under Section 148 as of the date the recovery is requested. The \nrequest can be made with the IRS by completing and filing Form 8038-R, Request for Recovery \nof Overpayments Under Arbitrage Rebate Provisions. An issuer must file a Form 8038-R no \nlater than the date that is two years after the final computation date for the issue. For more \ninformation, see Treas. Reg. Section 1.148-3(i). \nSpecial Remedial Action for Failure to Timely Pay Arbitrage Rebate. An issuer that fails to timely \npay arbitrage rebate will be excused from having its bonds be arbitrage bonds if the failure isn’t \ndue to willful neglect and the issuer submits a Form 8038-T with a payment of the rebate amount \nowed, plus penalty and interest. The penalty may be waived under certain circumstances. For \nmore information, see Treas. Reg. Section 1.148-3(i)(3) and Revenue Procedure 2005-40, 2005\n28 I.R.B. 83. \nBonds May Not Be Federally Guaranteed. IRC Section 149(b) provides that any tax-exempt \nbond, including a governmental bond, will not be treated as tax-exempt if the payment of \nprincipal or interest is directly or indirectly guaranteed by the federal government or any agency \nor instrumentality of the federal government. Exceptions to this general rule include guarantees \nby certain quasi-governmental entities administering federal insurance programs, and federal \nguarantees for qualified residential rental projects, home mortgages and student loans. Additional \nexceptions apply for the investment of bond proceeds that are invested in U.S. Treasury securities \nor held in a bona fide debt service fund, a reasonably required reserve or replacement fund or a \nrefunding escrow, and investments during a permitted initial temporary period. \n12 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nA Bond May Not Be a Hedge Bond. IRC Section 149(g) states that hedge bonds will not be \ntax-exempt unless certain requirements, described below, are satisfied. A “hedge bond” is any \nbond that is part of a bond issue that fails either of the following requirements: \n• The issuer must reasonably expect that 85% of the spendable proceeds of the issue will be \nused to carry out the qualified purpose within the three-year period beginning on the date the \nbonds are issued (“spendable proceeds” means proceeds from the sale of the issue, less the \nportion invested in a reasonably required reserve or replacement fund or as part of a permitted \n“minor portion”). \n• Not more than 50% of the proceeds of the issue are invested in nonpurpose investments \nhaving a substantially guaranteed yield for four or more years. \nSection 149(g)(3)(B) provides an exception to the general definition of a hedge bond if at least \n95% of the net proceeds of the issue are invested in tax-exempt bonds that are not subject \nto the alternative minimum tax. For this purpose, amounts held either: (1) in a bona fide debt \nservice fund, or (2) for 30 days or less pending either reinvestment of the proceeds or bond \nredemption, are treated as invested in tax-exempt bonds not subject to the alternative minimum \ntax. Additionally, a refunding bond issue does not generally consist of hedge bonds if the prior \nissue met the requirements for tax-exempt status and issuance of the refunding bonds furthers a \nsignificant governmental purpose (for example, realize debt service savings, but not to otherwise \nhedge against future increases in interest rates). \nEven if an issue otherwise meets the definition of a hedge bond, it will generally still be tax-\nexempt if two requirements are satisfied. First, at least 95% of the reasonably expected legal \nand underwriting costs associated with issuing the bonds must be paid within 180 days after \nthe issue date and the payment of such costs must not be contingent upon the disbursement of \nthe bond proceeds. Second, on the date of issuance the issuer must reasonably expect that the \nspendable proceeds of the issue will be allocated to expenditures for governmental or qualified \npurposes within the following schedule: \n• 10% within 1 year after the date of issuance; \n• 30% within 2 years after the date of issuance; \n• 60% within 3 years after the date of issuance; and \n• 85% within 5 years after the date of issuance. \nLimitations on Refunding Governmental Bonds. Governmental bonds may be currently \nrefunded. The Tax Cuts and Jobs Act (2017) repealed the exclusion from gross income for \ninterest on bonds issued to advance refund another bond. The repeal applies to advance \nrefunding bonds issued after December 31, 2017. A bond is classified as an advance refunding if \nit is issued more than 90 days before the redemption of the refunded bonds. Under Treas. Reg. \nSection 1.150-1(d)(1), a refunding bond issue is an issue the proceeds of which are used to pay \nprincipal, interest, or redemption price on another issue (a prior issue), as well as the issuance \ncost, accrued interest, capitalized interest on the refunding issue, a reserve or replacement fund, \nor any similar cost properly allocable to that refunding issue. \nRefunding issues generally derive their tax-exempt status from the prior issue they refund; if the \nprior issue was not tax-exempt, the refunding bonds generally cannot be tax exempt. \n13 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nBonds May Not Be Used for Abusive Tax Transactions \nThe IRS, is engaged in extensive efforts to curb abusive tax shelter schemes and transactions. \nWhat Happens When the Terms of a Bond are Modified? \nIf the terms of a governmental bond are sufficiently modified, the bond will be treated as \nreissued. When bonds are reissued, either actually or in a deemed reissuance, the new bonds \nmust be retested as of the date of the reissuance to determine if all the federal tax requirements \nare met for the “new” issue. These include the requirements that apply when bonds are issued, \nsuch as timely filing of the Form 8038-G or 8038-GC. See Requirements Related to Issuance – \nIssuers Must File an Information Return. \nA deemed reissuance may arise if sufficient changes are made to the bond terms, such as when \na bondholder and issuer agree, directly or indirectly, to a significant modification of the terms of \nany bonds. See Reissuance of Tax-Exempt Obligations: Some Basic Concepts for examples \nof significant modifications. If deemed reissued, the modified bonds are deemed exchanged \nfor the original bonds. In general, the date the issuer and bondholder enter into the agreement \nto modify the terms of the bonds is treated as the date of issuance of the new bonds, even if \nthe modification is not immediately effective. At reissuance, the modified bond must meet any \ntax law requirements that apply upon its early retirement in connection with the reissuance, \nincluding the acceleration of any arbitrage rebate or yield reduction payment that is due. See \nWhere and When To File Arbitrage Rebate and Yield Reduction Payments. \nIssuers Must Retain Records to Show that Requirements are Satisfied \nIRC Section 6001 and Treas. Reg. Section 1.6001-1(a) generally provide that any person subject \nto income tax, or any person required to file a return of information with respect to income (for \nexample, the issuer filing information returns relating to its bond issues), must keep any books \nand records as are sufficient to establish the amount of gross income, deductions, credits \nor other matters required to be shown by that person in any return. See Frequently Asked \nQuestions for more information. \nPost-Issuance Compliance Monitoring \nIn this section, we discuss the importance of issuers monitoring compliance with the IRC \nrequirements and suggest steps an issuer may take to monitor its bond issues. \nProtecting Against Post-Issuance Violations \nIssuers may be concerned with how they can further protect the tax-exempt status of their \nbonds. Reliance solely on bond documents and tax certificates provided when the bonds are \nissued will not likely provide the assurance an issuer desires. To gain greater confidence that \nbonds are in compliance with federal tax laws, an issuer may adopt post-issuance monitoring \nprocedures. Issuers that establish and follow comprehensive written monitoring procedures \nto promote post-issuance compliance generally are less likely to violate the federal tax \nrequirements related to its bonds, and are more likely to find any violations earlier, than those \nwithout procedures. Early discovery of a violation is a factor IRS considers in determining the \nappropriate resolution under its TEB VCAP. \n14 \n",
" \n \n \n \n \n \n \n \n-\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nSteps to Better Monitoring \nIn formulating its procedures, an issuer may consider: \n• designating one or more officials to assist in post-issuance compliance; \n• designating one or more officials to assist with and respond to examinations of the bond issue; \n• providing training or other technical support to designated officials; \n• designating time intervals within which compliance monitoring activities will be completed; and \n• timely completing remedial actions (including requests under TEB VCAP) to correct or \notherwise resolve identified noncompliance. \nThe chart below identifies particular areas for compliance monitoring procedures. \nCompliance Procedures \nType of \nProcedures \nDescription of Procedures for \nPost Closing Matters \nWhere Responsibility Is \nDiscussed in this Publication \nInformation \nReturn Filing \nProcedures to ensure timely filing \nof information returns, including \nprocedures concerning amended \nand late filed returns \nOther Governmental Bond Requirements – \nRequirements Related to Issuance – Issuers \nMust File an Information Return \nPrivate Use of \nProceeds or \nBond-Financed \nProperty \nProcedures to timely identify and \nremediate deliberate actions \nTax-Exempt Governmental Bonds – Testing for \nGovernmental Bonds: The Private Activity Bond \nTests \nReissuance \nProcedures to satisfy tax \nrequirements when a significant \nmodification in terms results in a \nreissuance for federal income tax \npurposes \nOther Governmental Bond Requirements – \nWhat Happens When the Terms of a Bond Are \nModified? \nElections \nProcedures for timely federal \nincome tax elections \nOther Governmental Bond Requirements – \nRequirements Related to Issuance – Issuers \nMust Make Certain Elections at Issuance \nAllocation of \nProceeds \nProcedures for the timely \nexpenditure and accounting \nfor use and investment of bond \nproceeds \nOther Governmental Bond Requirements – \nRequirements that Apply at Issuance and \nThroughout the Life of the Bonds – Proceeds \nMust be Timely Allocated to Expenditures \nArbitrage \nCompliance \nProcedures for the timely \ncomputation and payment \nof arbitrage rebate and yield \nreduction payments \nOther Governmental Bond Requirements – \nRequirements that Apply at Issuance and \nThroughout the Life of the Bonds – Proceeds \nare Subject to Investment Restrictions: the \nArbitrage Yield Restriction and Arbitrage Rebate \nRequirements \nRecord \nRetention \nProcedures for the maintenance \nof records \nOther Governmental Bond Requirements – \nIssuers Must Retain Records to Show that \nRequirements are Satisfied \nIRS Contacts \nProcedures concerning contacts \nfrom the IRS \nPost-Issuance Compliance Monitoring – Steps to \nBetter Monitoring \nSee Post-Issuance Compliance for additional information. \n15 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nWhat To Do When You Discover a Violation — TEB Voluntary Closing Ageement \nProgram \nThe IRS is committed to resolving federal tax violations with the issuer. The TEB Voluntary Closing \nAgreement Program (TEB VCAP) provides remedies for issuers of tax-exempt bonds, tax credit \nbonds, and direct pay bonds that voluntarily come forward to resolve a violation that cannot be \ncorrected under self-correction programs described in the regulations or other published guidance. \nNotice 2008-31, 2008-11 I.R.B 592, provides information and general guidance about TEB VCAP. \nInternal Revenue Manual (IRM) section 7.2.3 provides general procedures under which TEB will enter \ninto closing agreements. Closing agreement terms and amounts may vary according to the degree of \nthe violation as well as the facts and circumstances surrounding it. \nIssuers must use IRS Form 14429, Tax Exempt Bonds Voluntary Closing Agreement Program \nRequest, to submit a request and provide the required information. See IRM section 7.2.3.2.1 \nabout completing the March 2013 version of the form. \nFor more information about this program, including request submission requirements, case \nprocessing procedures, and resolutions standards, see IRM section 7.2.3. See Voluntary \nCompliance (for more information on TEB VCAP administrative procedures and resolution \nstandards). \nMore Information \nYou can find information about the tax laws that apply to municipal finance arrangements, \nincluding tax forms and instructions, revenue procedures and notices, and publications at \nIRS.gov/bonds. \nIf you have account specific questions, call Customer Account Services toll-free at 877-829-5500. \n16 \n"
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p4078.pdf
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0919 Publ 4078 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4078.pdf
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[
" \n I R S logo\nTax Exempt & \nGovernment Entitites \nTax-Exempt Private Activity Bonds building iconinfracstructure icon money icon education cost iconhome icon\nPublication 4078 (Rev. 9-2019) Catalog Number 34662G \n \nDepartment of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \n \n \n \n \n \nContents \nIntroduction .............................................................................................................................1 \nBackground .............................................................................................................................1 \nTax-Exempt Private Activity Bonds........................................................................................2 \nPost-Issuance Compliance Monitoring................................................................................14 \nWhat To Do When You Discover a Violation — TEB Voluntary Closing \nAgreement Program..............................................................................................................16 \nMore Information...................................................................................................................16 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nIntroduction \nThis publication provides state and local governments that issue tax-exempt bonds and \nborrowers or other users of bond proceeds (funds derived from the sale of bonds) an overview \nof the general federal tax law rules that apply to municipal financing arrangements commonly \nknown as “qualified private activity bonds.” Certain exceptions or additional requirements to \nthese rules, which are beyond the scope of this publication, may apply to particular financing \narrangements. This publication is intended to help issuers meet federal tax law requirements \nto ensure that interest earned by bondholders is exempt from taxation under Internal Revenue \nCode (IRC) Section 103. \nThis publication is an overview of the rules; it isn’t official guidance that you may rely on for \nplanning purposes. It refers to IRC sections, Income Tax Regulations (Treas. Reg.), revenue \nprocedures and other official guidance. Please refer to the official guidance for the rules \nthat apply to qualified private activity bonds. Unless otherwise indicated, references in this \npublication to section numbers are references to sections of the IRC. \nFor publications that discuss the general rules that apply to governmental bonds or qualified \n501(c)(3) bonds, see IRS Publication 4079, Tax-Exempt Governmental Bonds, IRS Publication \n4077, Tax-Exempt Bonds for 501(c)(3) Charitable Organizations and IRS Publication 5271, \nComplying with Arbitrage Requirements: A Guide for Issuers of Tax-Exempt Bonds. For an \noverview of an issuer’s responsibilities in a conduit financing arrangement, see IRS Publication \n5005,Your Responsibilities as a Conduit Issuer of Tax-Exempt Bonds. The IRS also provides \ndetailed information at IRS.gov/bonds. \nSee also More Information, at the end of this publication. \nBackground \nState and local governments receive direct and indirect tax benefits under the IRC that lower \nborrowing costs on their valid debt obligations. Because interest paid to bondholders on these \nobligations is not includable in their gross income for federal income tax purposes, bondholders \nare willing to accept a lower interest rate than they would accept if the interest was taxable. \nThese benefits apply to many different types of municipal debt financing arrangements including \nbonds, notes, loans, lease purchase contracts, lines of credit and commercial paper (collectively \nreferred to as “bonds” in this publication). \nTo receive these benefits, issuers must ensure that the requirements under the IRC are met, \ngenerally for as long as the bonds remain outstanding. These requirements include, but are not \nlimited to, information filing and other requirements related to issuance, the proper and timely \nuse of bond proceeds and bond-financed property, and limitations on how bond proceeds may \nbe invested. Special additional rules apply to bonds that are private activity bonds for those \nbonds to be tax-exempt qualified private activity bonds. This publication describes rules that \napply generally to all qualified private activity bonds. Requirements that apply to particular types \nof qualified private activity bonds are beyond the scope of this publication. For information about \nthese unique requirements, visit IRS.gov/bonds. For information specific to the use requirements \nfor qualified 501(c)(3) bonds, see Publication 4077, Tax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations. \nThis publication also addresses practices and steps an issuer and others using bond proceeds \ncan take to protect the tax-exempt status of qualified private activity bonds. For example, \n1 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nbecause the requirements and limitations generally apply at the time the bonds are issued and \nthroughout the term of the bonds, this publication encourages issuers and beneficiaries of tax-\nexempt bonds to create procedures for monitoring compliance throughout the life of the bonds. \nFor more information, see Post-Isuance Compliance Monitoring. \nTax-Exempt Private Activity Bonds \nInterest on a private activity bond is taxable unless the bond is a qualified private activity bond \nand meets other requirements, some of which apply to governmental bonds as well. In this \nsection, we briefly discuss the tests for determining whether a bond is a private activity bond. \nThis section also describes: \n rules an issuer must meet for interest on a private activity bond to be excluded from federal \nincome tax, by describing rules that apply at issuance (including elections that need to be \nmade when the bonds are issued) and rules that apply both at issuance and throughout the \nlife of the bonds; \n rules that apply when modifications are made to bond terms; \n recordkeeping requirements; and \n rules that prevent certain bondholders from excluding interest even if all the other \nrequirements for tax exemption are met. \nThese discussions include any special remedial action provision that applies to the particular \nrequirement. If a deliberate action that results in a violation of any of the federal tax requirements \ncannot be corrected under these special remedial action provisions, issuers may be able to \nenter into a closing agreement under the Tax Exempt Bonds (TEB) Voluntary Closing Agreement \nProgram (TEB VCAP) described in Notice 2008-31, 2008-11 I.R.B. 592 (see What To Do When \nYou Discover a Violation). \nTesting for Private Activity Bonds \nA state or local bond will be a private activity bond if, as of the bond issue date or at any time \nwhile the bonds are outstanding, the bond issue exceeds the limits set forth in either: \n the private business tests of IRC Section 141(b), which consist of the private use test and \nprivate security and payment test, or \n the private loan financing test of IRC Section 141(c). \nFor a further description of the private business tests under Section 141(b) and the private loan \ntest under Section 141(c), see Publication 4079, Tax-Exempt Governmental Bonds. \nRequirements Related to Issuance \nSome Private Activity Bonds Need to Obtain Volume Cap Under Section 146. The IRC \nlimits the amount of private activity bonds that may be issued. The volume cap limit of Section \n146 restricts the amount of certain qualified private activity bonds that all issuers within a state \nmay issue during a calendar year. Generally, a state allocates that limit or volume cap among \nissuers in the state. Within certain restrictions, state law determines how those allocations are \nmade. If, during a given year, an issuing authority issues more qualified private activity bonds \nthan its allocable volume cap, the tax-exempt status of those excess bonds is jeopardized. Not \nall private activity bonds are subject to the volume cap limitation. The following chart describes \nwhich qualified private activity bonds are subject to volume cap under Section 146. Certain other \ntypes of bonds are subject to volume limits under other IRC provisions. \n2 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nVolume Cap Under Section 146 \nType of Private Activity Bonds \nSubject to Volume Cap? \nPrivate activity bonds financing exempt facilities (Section 142): \n• airports \nNo \n• docks and wharves \nNo \n• mass commuting facilities \nYes \n• facilities for the furnishing of water \nYes \n• sewage facilities \nYes \n• governmentally owned solid waste disposal facilities \nNo \n• privately owned solid waste disposal facilities \nYes \n• qualified residential rental projects \nYes \n• facilities for the local furnishing of electric energy or gas \nYes \n• local district heating or cooling facilities \nYes \n• qualified hazardous waste facilities \nYes \n• governmentally owned high-speed intercity rail facilities \nNo \n• privately owned high-speed intercity rail facilities \nYes1 \n• environmental enhancements of hydro-electric generating facilities \nNo \n• qualified public educational facilities \nNo \n• qualified green building and sustainable design projects \nNo \n• qualified highway or surface freight transfer facilities \nNo \n• qualified enterprise zone facilities \nYes \n• new empowerment zone facilities \nNo \nQualified mortgage bonds (Section 143) \nYes2 \nQualified small issue bonds (Section 144(a)) \nYes \nQualified student loan bonds (Section 144(b)) \nYes \nQualified redevelopment bonds (Section 144(c)) \nYes \nQualified veterans’ mortgage revenue bonds \nNo \nQualified 501(c)(3) bonds \nNo \nCurrent refunding bonds3 that do not exceed the outstanding amount of the \nrefunded bonds \nNo4 \nCurrent refunding bonds in excess of the outstanding amount of the refunded \nbonds \nYes \n1Volume cap required for only 25% of the bonds. \n2The amount of volume cap allocated to an issuer is reduced when it establishes a mortgage credit certificate program under IRC Section 25. \n3See the subsection below, Requirements That Apply at Issuance and Throughout the Life of the Bonds - Limitations on Refunding Private Activity Bonds \nfor a definition of “current refunding.” \n4Maturity limitations apply for refundings of qualified mortgage revenue bonds and qualified student loan bonds. \nCarryforward of Unused Section 146 Volume Cap. Subject to state law requirements, an issuer may \nelect to carry forward any unused volume cap allocation it received in a calendar year for three \ncalendar years. This election may be made for each of the qualified private activity bond purposes \nsubject to volume cap except for the purpose of issuing qualified small issue bonds. This election is \nmade by filing IRS Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap, \nby the earlier of (1) February 15 following the year in which the unused amount arises, or (2) the date of \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nissue of bonds pursuant to the carryforward election. Once Form 8328 is filed, the issuer may \nnot revoke the carryforward election or amend the carryforward amounts shown on the form. \nPrivate Activity Bonds Need to Meet the Public Approval Requirements. IRC Section 147(f) \ngenerally provides that, prior to issuance, qualified private activity bonds must be approved \nby (1) the governmental entity issuing the bonds or on behalf of which the bonds were issued \nand (2) each governmental entity having jurisdiction over the area in which the bond-financed \nfacility is to be located (although for bonds financing certain airport and high-speed intercity \nrail facilities, only the entity issuing the bonds must approve them). However, if more than one \ngovernmental unit within a state has jurisdiction over the entire area within the state in which \nthe facility is located, only one unit need approve the issue. Current refunding bonds that meet \ncertain maturity and principal amount limits are exempted from the public approval requirement \n(see Limitations on Refunding Private Activity Bonds, for the definition of current refunding \nbonds). \nApproval may be accomplished by either voter referendum or by an elected representative of the \ngovernmental entity approving the issue after a public hearing following reasonable notice to the \npublic. IRC 147(f) and Treas. Reg. Section 1.147(f)-1 define the specific rules for this requirement. \nSpecial Remedial Action for Failure to Meet Public Approval Requirements. If an issuer fails to \ncomply with the public approval requirements, the issuer may be able to cure the defect. Treas. \nReg. Section 1.147-2 provides that issuers may use the remedial action rules under Treas. Reg. \nSection 1.142-2 (available to correct nonqualified uses of proceeds) to cure noncompliance with \nthe public approval requirement (see Special Remedial Actions for Nonqualified Use). \nIssuers Must File Form 8038, Information Return for Tax-Exempt Private Activity Bond \nIssues. Issuers of qualified private activity bonds must comply with certain information filing \nrequirements under IRC Section 149(e) by filing IRS Form 8038 by the 15th day of the second \ncalendar month following the quarter in which the bonds were issued. For example, the due date \nof the return for bonds issued on February 1 is May 15. Issuers must file Form 8038 at Internal \nRevenue Service Center, Ogden UT 84201. \nAn issuer may request an extension of time to file Form 8038 if the failure to file the return on \ntime wasn’t due to willful neglect. To request an extension, the issuer must follow Revenue \nProcedure 2002-48, 2002-37 I.R.B. 531. These procedures generally require that the issuer: (1) \nattach a letter to the Form 8038 briefly explaining when the return was required to be filed, why \nthe return was not timely submitted, and whether the bond issue is under examination; (2) enter \non top of the letter “Request for Relief under section 3 of Rev. Proc. 2002-48”; and (3) file the \nletter and return at the Internal Revenue Service Center, Ogden UT 84201. \nPrivate Activity Bonds Must Be in Registered Form. IRC Section 149(a) generally provides \nthat any tax-exempt bond, including a qualified private activity bond, must be issued “in \nregistered form” unless the obligation is of a type not offered to the public or has, at the date \nof issue, a maturity date of not more than one year. The regulations describe what it means \nto be in “registered form.” Treas. Reg. Section 5f.103-1(c)(1) provides that an obligation issued \n4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nafter January 20, 1987, pursuant to a binding contract entered into after January 20, 1987, is in \nregistered form if: \n the obligation is registered as to both principal and any stated interest with the issuer (or \nits agent) and that the transfer of the obligation to a new holder may be effected only by \nsurrender of the old instrument and the issuer must either reissue the old instrument or issue a \nnew instrument to the new holder; or \n the right to the principal of, and stated interest on, the obligation may be transferred only \nthrough a book-entry system maintained by the issuer (or its agent); or \n the obligation is registered as to both principal and any stated interest with the issuer (or its \nagent) and may be transferred through both above methods. \nOnly a Limited Amount of Private Activity Bond Proceeds May Be Used to Pay Issuance \nCosts. The IRC limits the amount of proceeds that may be used to finance issuance costs. \nUnder IRC Section 147(g), a private activity bond is not a qualified bond if the issuance costs \nfinanced by the issue (of which the bond is a part) exceed 2%. Requirements of the proceeds \nof the issue. In the case of an issue of qualified mortgage revenue bonds or qualified veterans’ \nmortgage revenue bonds, where the proceeds of the issue do not exceed $20 million, the \nissuance costs limitation is 3.5% of the proceeds of the issue. Issuers and borrowers of bond \nproceeds may finance issuance costs with funds other than the proceeds of the bond issue. \nUnder the regulations, “issuance costs” means costs incurred in connection with, and allocable \nto, the issuance of an issue. For example, “issuance costs” include the following costs, but only \nto the extent incurred in connection with, and allocable to, the borrowing: \n underwriters’ spread \n counsel fees \n financial advisory fees \n fees paid to an organization to evaluate the credit quality of an issue \n trustee fees \n paying agent fees \n bond registrar, certification and authentication fees \n accounting fees \n printing costs for bonds and offering documents \n public approval process costs \n engineering and feasibility study costs \n guarantee fees other than for “qualified guarantees” \n costs similar to those above \nIssuers Must Make Certain Elections at Issuance. When an issuer considers actions it must \ntake when it issues bonds, it should consider whether it wants to make any elections. Various \nprovisions of the IRC and regulations require that the issuer make certain elections in writing and \nretain elections as part of the bond documents. Many elections have to be made on or before \nthe issue date of the bonds. Some elections may be made by either the issuer or a conduit \nborrower. Others must be made by the actual issuer of the bonds. The IRS frequently observes \nthat issuers make the written elections in the arbitrage certificate prepared pursuant to Treas. \nReg. Section 1.148-2. Once made, elections cannot be revoked without IRS permission. \nExamples of elections include: \n waiving the right to treat a purpose investment as a program investment \n waiving the right to invest in higher yielding investments during any temporary period \n the issuer of a pooled financing issue electing to apply rebate spending exceptions separately \nto each conduit loan \n5 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n applying actual facts rather than reasonable expectations for certain provisions under the two-\nyear spending exception from rebate \n excluding the earnings on a reasonably required reserve fund from available construction \nproceeds under the two-year spending exception from rebate \n treating a portion of an issue as a separate construction issue under the two-year spending \nexception from rebate \n electing to pay 1.5% penalty in lieu of arbitrage rebate \n electing to treat portions of a bond issue as separate issues \nRequirements That Apply at Issuance and Throughout the Life of the Bonds \nProceeds Must Be Used for Qualified Purposes. Private activity bonds are used for a \nqualified purpose if 95% or more of the net bond proceeds are to be used for one or more \ndefined qualified purposes. The qualified purposes are described in IRC Sections 142 through \n145 and 1394. For purposes of the 95% requirement, issuance costs financed with bond \nproceeds are generally treated as not being used for a qualified purpose. For a description of \nissuance costs, see Only a Limited Amount of Private Activity Bond Proceeds May Be Used to \nPay Issuance Costs. Qualified purposes and the relevant IRC Section are: \n Section 142 – exempt facilities, such as: \ny airports \ny docks and wharves \ny mass commuting facilities \ny facilities for the furnishing of water \ny sewage facilities \ny solid waste disposal facilities \ny qualified residential rental projects \ny facilities for the furnishing of local electric energy or gas \ny local district heating or cooling facilities \ny qualified hazardous waste facilities \ny high-speed intercity rail facilities \ny environmental enhancements of hydro-electric generating facilities \ny qualified public educational facilities \ny qualified green building and sustainable design projects \ny qualified highway or surface freight transfer facilities \n Section 143 – qualified mortgages and qualified veterans’ mortgages \n Section 144 – qualified small issue manufacturing facilities, qualified small issue farm property, \nqualified student loans and qualified redevelopment projects \n Section 1394 – qualified enterprise zone and empowerment zone facilities \n Section 145 – qualifed 501(c)(3) bonds. (The special rules that generally apply to qualified \nprivate activity bonds financing 501(c)(3) exempt purposes are covered in Publication 4077, \nTax-Exempt Bonds for 501(c)(3) Charitable Organizations. \nA qualified private activity bond issue can lose its tax-exempt status as of the issue date if, after \nthe issue date, sufficient nonqualified use occurs to cause the issue to fail the use requirements. \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nSo, the issue becomes a taxable private activity bond issue. Generally, nonqualified use occurs \nwhen the issuer or other entity controlling expenditure or use of the proceeds or financed property \ntakes an action that results in insufficient bond proceeds being allocated to the qualified purpose \nfor which the bonds were issued. However, with respect to unspent proceeds, a failure to properly \nuse those proceeds may occur as early as the date on which the issuer or other entity controlling \nexpenditure of the proceeds reasonably expects that the bond proceeds won't be expended on the \nqualified purpose for which the bonds were issued. \nSpecial Remedial Actions for Nonqualified Use. The Treas. Reg. provide that an issuer that fails \nto use proceeds for a qualified purpose may, in certain cases, cure that failure using one of the \nprescribed remedial actions. Generally, these remedial actions consist of the redemption or \ndefeasance of bonds. Additionally, if bond-financed personal property is disposed of exclusively \nfor cash, remedial action may include the alternative use of the disposition proceeds to acquire \nreplacement property within six months of the disposition date. Other remedial actions may be \navailable to the issuer of qualified 501(c)(3) bonds. \nThe following regulations provide remedial actions available for certain qualified private activity \nbonds: \n Section 1.142-2 – exempt facility bonds \n Section 1.144-2 – qualified small issue bonds and qualified redevelopment bonds \n Section 1.145-2 – qualified 501(c)(3) bonds \n Section 1.1394-1(m)(4) – qualified enterprise zone facility bonds, qualified empowerment zone \nfacility bonds and District of Columbia enterprise zone facility bonds \nThese regulations can be accessed through the IRS website under Tax Code, Regulations and \nOfficial Guidance. \nProceeds May Not Be Used to Acquire Land or Other Existing Property. The IRC prohibits \nthe use of proceeds of certain types of qualified private activity bonds for certain expenditures, \neven if those expenditures are associated with a qualified purpose. Under IRC Section 147(c), a \nprivate activity bond is not a qualified bond if (1) 25% or more of the net proceeds of the bond \nissue are to be used (directly or indirectly) for the acquisition of land (or an interest therein), or (2) \nany portion of the proceeds of the issue is to be used (directly or indirectly) for the acquisition of \nland (or an interest therein) to be used for farming purposes. \nHowever, certain exceptions to this rule are available for first-time farmers (up to a specified \ninflation-adjusted amount), and for land acquired for certain environmental purposes in \nconnection with an airport, mass commuting facility, high-speed intercity rail facility, dock or \nwharf. Also, the restriction on land financing does not apply to any qualified mortgage bond, \nqualified veterans’ mortgage bond, qualified student loan bond, qualified 501(c)(3) bond or any \nexempt facility bond financing qualified public education facilities. \nIn addition to the restriction on financing land, generally, a qualified private activity bond won't \nbe tax-exempt if any amount of the net proceeds is used for the acquisition of existing property \nunless the purpose of the acquisition is the first use of that property. This rule doesn’t apply \nto qualified mortgage revenue bonds, qualified veterans’ mortgage revenue bonds or qualified \n501(c)(3) bonds. Additionally, IRC Section 147(d)(2) provides an exception to this prohibition when \ncertain rehabilitation expenditures are made. \n7 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAlso, under IRC Section 147(e), no proceeds of private activity bonds may be used to finance \nany: \n airplane (other than aircraft equipped for, and exclusively dedicated to providing, acute care \nemergency medical services) \n skybox or other private luxury box \n health club facility (under an exception, qualified 501(c)(3) bonds may finance health club \nfacilities) \n facility primarily used for gambling \n store the principal business of which is the sale of alcoholic beverages for consumption off \npremises \nSpecial Remedial Action Rule. An issuer may be able to cure a prohibited expenditure that \ndoes not meet the exceptions noted above. Treas. Reg. Section 1.147-2 provides that issuers \nmay use the remedial action rules under Treas. Reg. Section 1.142-2 to cure noncompliance for \nrehabilitation expenditures, acquiring property for environmental purposes and certain prohibited \nfinancings. See Special Remedial Actions for Nonqualified Use. \nProceeds Must Be Timely Allocated to Expenditures. Issuers and conduit borrowers are \nrequired to follow the rules for allocating bond proceeds. The issuer or other entity controlling \nexpenditure of the proceeds of a qualified private activity bond issue must allocate those \nproceeds among the project expenditures in a manner demonstrating compliance with the \nqualified use requirements. These allocations must generally be consistent with allocations made \nfor determining compliance with the arbitrage yield restriction and rebate requirements, as well \nas other federal tax filings. See Proceeds are Subject to Investment Restrictions: the Arbitrage \nYield Restriction and Arbitrage Rebate Requirements, below, for an overview of those rules. \nAn issuer must account for the allocation of proceeds to an expenditure not later than 18 months \nafter the later of the date the expenditure is paid or the date the project, if any, financed by the \nissue is placed in service. This allocation must be made in any event by the date 60 days after \nthe fifth anniversary of the issue date or the date 60 days after the retirement of the issue, if \nearlier. \nProceeds are Subject to Investment Restrictions: the Arbitrage Yield Restriction and \nArbitrage Rebate Requirements. Issuers of tax-exempt bonds, including qualified private \nactivity bonds, are generally subject to investment, or arbitrage, limitations under IRC Section \n148. Failure to comply with those arbitrage limitations will result in the bonds being arbitrage \nbonds and interest on the bonds being taxable. \nIn general, arbitrage is earned when the gross proceeds of an issue are used to acquire \ninvestments that earn a yield that is materially higher than the yield on the bonds of the issue. \nEarning arbitrage is permitted in certain circumstances, including those where arbitrage may be \nearned but must be paid, or rebated, to the U.S. Department of the Treasury. In some cases, \nan issuer may be able to reduce the yield on an investment for arbitrage purposes and thereby \navoid an arbitrage violation by making a yield reduction payment to the U.S. Department of the \nTreasury. See Where and When To File Arbitrage Rebate and Yield Reduction Payments, for \ninformation on how to make yield reduction payments. \nAn issuer must comply with two general sets of arbitrage rules: (1) the yield restriction \nrequirements of Section 148(a) and (2) the rebate requirements of Section 148(f). An issuer may \nmeet one of these sets of rules, but still have arbitrage bonds because it failed the other. Even \nthough interconnected, both sets of rules have their own distinct requirements. The following \n8 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nis an overview of the basic requirements of these two general rules. Additional requirements or \nexceptions, beyond the scope of this publication, may apply in certain instances. \nAn issuer’s reasonable expectations on the issue date regarding the amount and use of gross \nproceeds of the issue are used to determine whether an issue consists of arbitrage bonds. In \naddition, if an issuer or any person acting for the issuer takes a deliberate, intentional action to \nearn arbitrage after the issue date, that action will cause the bonds of an issue to be arbitrage \nbonds if that action, had it been reasonably expected on the issue date, would have caused \nthe bonds to be arbitrage bonds. Intent to violate the requirements of IRC Section 148 is not \nnecessary for an action to be intentional. \nYield Restriction Requirements. The yield restriction rules of IRC Section 148(a) generally provide \nthat the direct or indirect investment of the gross proceeds of bonds in investments earning a \nyield materially higher than the yield of the bond issue causes the bonds to become arbitrage \nbonds. The chart below describes when the yield on particular investments will be “materially \nhigher” (the chart shows the permitted yield spread between the yield on the bond issue and the \nyield on the particular investment; any spread beyond that stated is materially higher): \n“Materially Higher” Limits \nType of Investments \nMaterially Higher When Spread Exceeds \nGeneral rule (when other rules below don’t apply) \n1/8 of one percentage point \nInvestments in a refunding escrow \n1/1000 of one percentage point \nInvestments allocable to replacement proceeds \n1/1000 of one percentage point \nProgram investments (other than qualified \nmortgage loans or qualified student loans) \n1.5 percentage points \nStudent loans \n2 percentage points \nMortgage loans \n1.125 percentage points, calculated as required \nunder IRC Section 143(g) \nInvestments in tax-exempt bonds \nGenerally, no yield limitation (but for qualified \n501(c)(3) bonds, tax-exempt bond investments \nmust not be subject to the alternate minimum \nincome tax) \nCertain exceptions are available under the yield restriction rules. The investment of proceeds \nin materially higher yielding investments does not cause the bonds of an issue to be arbitrage \nbonds: (1) during a temporary period (for example, three-year temporary period for capital \nprojects and 13 months for restricted working capital expenditures); (2) as part of a reasonably \nrequired reserve or replacement fund; and (3) as part of a minor portion (an amount not \nexceeding the lesser of 5% of the sale proceeds of the issue or $100,000). Whether or not the \narbitrage yield restrictions rules apply, issuer should consider whether the rebate requirements \napply. \nRebate Requirements. The rebate requirements of IRC Section 148(f) generally provide that, \nunless certain earnings on “nonpurpose investments” allocable to the gross proceeds of an \nissue are rebated to the U.S. Department of the Treasury, the bonds in the issue will be arbitrage \nbonds. Generally, nonpurpose investments are investment securities such as Treasury bonds, \n9 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nbank deposits or guaranteed investment contracts, and so on, and do not include “purpose \ninvestments.” A purpose investment is an investment that the issuer acquires to carry out the \ngovernmental purpose of an issue. Examples of purpose investments include the payment \nobligations created when an issuer loans proceeds of a qualified 501(c)(3) bond to a 501(c)(3) \nhospital or leases a manufacturing facility financed with proceeds of a qualified small issue bond \nto a private corporation. \nThe arbitrage that must be rebated is based on the excess (if any) of the amount actually earned \non nonpurpose investments over the amount that would have been earned if those investments \nhad a yield equal to the yield on the issue, plus any income attributable to the excess. Under \nTreas. Reg. Section 1.148-3(b), the future values (as of the computation date) of all earnings \nreceived and payments actually or constructively made on nonpurpose investments are included \nin determining the amount of rebate due. See Where and When to File Arbitrage Rebate and \nYield Reduction Payments, below, for information on how to make rebate payments. \nThere are, however, spending exceptions to the general rebate requirements that apply to \nqualified private activity bonds. Whether these exceptions apply depends on the timing of \nexpenditure of required amounts of proceeds, as follows: \nSpending Exceptions \nSpending \nPeriod \nSpending Exception \nSix months \nTreas. Reg. Section 1.148-7(c) provides an exception to rebate if the gross proceeds \nof the bond issue are allocated to expenditures for governmental or qualified \npurposes that are incurred within six months after the issue date. \n18 months \nTreas. Reg. Section 1.148-7(d) provides an exception to rebate if the gross proceeds \nof the bond issue are allocated to expenditures for governmental or qualified \npurposes which are incurred within: (1) at least 15% within 6 months after the issue \ndate; (2) at least 60% within 12 months after the issue date; and (3) 100% within 18 \nmonths after the issue date. \nTwo years \nTreas. Reg. Section 1.148-7(e) provides an exception to rebate for construction issues \nfinancing property to be owned by a governmental entity or 501(c)(3) organization \nwhen certain available construction proceeds are allocated to expenditure: (1) at \nleast 10% within 6 months after the issue date; (2) at least 45% within 12 months \nafter the issue date; (3) at least 75% within 18 months after the issue date; and (4) \n100% within 24 months after the issue date. \nNote: Issuers may still owe rebate on amounts earned on nonpurpose investments allocable to proceeds \nnot covered by one of the spending exceptions, which may include earnings in a reasonably required \nreserve or replacement fund. \nWhere and When to File Arbitrage Rebate and Yield Reduction Payments. Issuers of tax-\nexempt bonds file IRS Form 8038-T, Arbitrage Rebate, Yield Reduction and Penalty in Lieu of \nArbitrage Rebate, to make: \n yield reduction payments \n arbitrage rebate payments \n payments of a penalty in lieu of rebate \n payment in connection with the termination of the election to pay a penalty in lieu of arbitrage \nrebate \n payment of the penalty for failure to pay arbitrage rebate on time \n10 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nA yield reduction payment and/or arbitrage rebate installment payment is required to be paid \nno later than 60 days after the “computation date” to which the payment relates. An issuer of a \nfixed yield issue may treat any date as a computation date. An issuer of a variable yield issue \nmay treat the last day of any bond year ending on or before the latest date for making the first \nrebate payment (generally not later than five years after the issue date) as a computation date. \nThereafter, the issuer must consistently treat either the end of each bond year or the end of each \nfifth bond year as a computation date. Generally, a “bond year” is a one-year period that ends \non the date that the issuer selects. If the issuer does not make a timely selection, the bond years \nfor the issue end on each anniversary of the issue date and on the final maturity date. \nRecovering an Overpayment of Rebate. If an issuer pays more than the required rebate, it \nmay ask to recover the overpayment. In general, a request for recovery of overpayment of \narbitrage rebate may be made when the issuer can establish that an overpayment occurred. An \noverpayment is the excess of the amount paid to the U.S. Department of the Treasury for an \nissue over the sum of the rebate amount for the issue as of the most recent computation date \nand all amounts that are otherwise required to be paid under Section 148 as of the date the \nrecovery is requested. The request can be made with the IRS by completing and filing IRS Form \n8038-R, Request for Recovery of Overpayments Under Arbitrage Rebate Provisions. An issuer \nmust file a Form 8038-R no later than the date that is two years after the final computation date \nfor the issue. For more information, see Treas. Reg. 1.148-3(i). \nSpecial Remedial Action for Failure to Timely Pay Arbitrage Rebate. An issuer that fails to timely \npay arbitrage rebate will be excused from having its bonds be arbitrage bonds if the failure isn’t \ndue to willful neglect and the issuer submits a Form 8038-T with a payment of the rebate amount \nowed, plus penalty and interest. The penalty may be waived under certain circumstances. For \nmore information, see Treas. Reg. Section 1.148-3(i)(3) and Revenue Procedure 2005-40, 2005\n28 I.R.B. 83. \nPrivate Activity Bonds are Subject to Maturity Limitations. IRC Section 147(b) places limits \non the maturity of qualified private activity bonds. A private activity bond is not a qualified bond \n(and therefore will not be tax exempt) if the average maturity of the bond issue exceeds 120% \nof the average reasonably expected economic life of the facilities being financed with the issue. \nThis requirement doesn’t apply to qualified mortgage bonds, qualified veterans’ mortgage bonds \nor qualified student loan bonds. Working capital expenditures are ignored when determining the \neconomic life of facilities. \nPrivate Activity Bonds May Not Be Federally Guaranteed. IRC Section 149(b) provides \nthat any tax-exempt bond, including a qualified private activity bond, will not be treated as tax \nexempt if the payment of principal or interest is directly or indirectly guaranteed by the federal \ngovernment or any agency or instrumentality of the federal government. Exceptions to this \ngeneral rule include guarantees by certain quasi-governmental entities administering federal \ninsurance programs, and federal guarantees for qualified residential rental projects, home \nmortgages and student loans. Additional exceptions apply to bond proceeds that are invested in \nU.S. Treasury securities or held in a bona fide debt service fund, a reasonably required reserve \nor replacement fund or a refunding escrow, and investments during a permitted initial temporary \nperiod. \n11 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nA Private Activity Bond May Not Be a Hedge Bond. IRC Section 149(g) states that \nhedge bonds will not be tax-exempt unless certain requirements, described below, are \nsatisfied. A “hedge bond” is any bond that is part of a bond issue that fails either of the \nfollowing requirements: \n The issuer must reasonably expect that 85% of the spendable proceeds of the issue will be \nused to carry out the qualified purpose within the three-year period beginning on the date the \nbonds are issued (“spendable proceeds” means proceeds from the sale of the issue, less the \nportion invested in a reasonably required reserve or replacement fund or as part of a permitted \n“minor portion”). \n Not more than 50% of the proceeds of the issue are invested in nonpurpose investments \nhaving a substantially guaranteed yield for four or more years. \nSection 149(g)(3)(B) provides an exception to the general definition of a hedge bond if at least \n95% of the net proceeds of the issue are invested in tax-exempt bonds that are not subject \nto the alternative minimum tax. For this purpose, amounts held either: (1) in a bona fide debt \nservice fund or (2) for 30 days or less pending either reinvestment of the proceeds or bond \nredemption, are treated as invested in tax-exempt bonds not subject to the alternative minimum \ntax. Additionally, a refunding bond issue does not generally consist of hedge bonds if the prior \nissue met the requirements for tax-exempt status and issuance of the refunding bonds furthers a \nsignificant governmental purpose (for example, realize debt service savings, but not to otherwise \nhedge against future increases in interest rates). \nEven if an issue otherwise meets the definition of a hedge bond, it will generally still be tax-\nexempt if two requirements are satisfied. First, at least 95% of the reasonably expected legal \nand underwriting costs associated with issuing the bonds must be paid within 180 days after \nthe issue date and the payment of such costs must not be contingent on the disbursement of \nthe bond proceeds. Second, on the date of issuance the issuer must reasonably expect that the \nspendable proceeds of the issue will be allocated to expenditures for governmental or qualified \npurposes within the following schedule: \n 10% within one year after the date of issuance, \n 30% within two years after the date of issuance, \n 60% within three years after the date of issuance, and \n 85% within five years after the date of issuance. \nLimitations on Refunding Private Activity Bonds. Qualified private activity bonds may be \ncurrently refunded. The Tax Cuts and Jobs Act (2017) repealed the exclusion from gross income \nfor interest on bonds issued to advance refund another bond. The repeal applies to advance \nrefunding bonds issued after December 31, 2017. A bond is classified as an advance refunding if \nit is issued more than 90 days before the redemption of the refunded bonds. Under Treas. Reg. \nSection 1.150-1(d)(1), a refunding bond issue is an issue the proceeds of which are used to pay \nprincipal, interest, or redemption price on another issue (a prior issue), as well as the issuance \ncost, accrued interest, or capitalized interest on the refunding issue, a reserve or replacement \nfund, or any similar costs properly allocable to that refunding issue. \n12 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nRefunding bond issues generally derive their tax-exempt status from the prior issue they refund; \nif the prior issue was not tax-exempt, the refunding bonds generally cannot be tax-exempt. \nPrivate Activity Bonds May Not Be Used for Abusive Tax Transactions \nThe IRS is engaged in extensive efforts to curb abusive tax shelter schemes and transactions. \nWhat Happens When the Terms of a Private Activity Bond are Modified? \nIf the terms of a private activity bond are sufficiently modified, the bond will be treated as \nreissued. When qualified private activity bonds are reissued, either actually or in a deemed \nreissuance, the new bonds must be retested as of the date of the reissuance to determine if all \nthe federal tax requirements are met for the “new” issue. These include the requirements that \napply when bonds are issued, such as timely filing of the Form 8038. See Issuers Must File \nForm 8038, Information Return for Tax-Exempt Private Activity Bond Issues. \nA deemed reissuance may arise if sufficient changes are made to the bond terms, such as when \na bondholder and issuer agree, directly or indirectly, to a significant modification of the terms of \nany bonds. See Reissuance of Tax-Exempt Obligations: Some Basic Concepts for examples of \nsignificant modifications. If deemed reissued, the modified bonds are deemed exchanged for the \noriginal bonds. In general, the date the issuer and bondholder enter into the agreement to modify \nthe bond terms is treated as the date of issuance of the new bonds, even if the modification is \nnot immediately effective. At reissuance, the modified bond must meet any tax law requirements \nthat apply upon its early retirement in connection with the reissuance, including the acceleration \nof any arbitrage rebate or yield reduction payment that is due. See Proceeds Are Subject to \nInvestment Restrictions: the Arbitrage Yield Restriction and Arbitrage Rebate Requirements. \nSee also Where and When to File Arbitrage Rebate and Yield Reduction Payments. For more \ninformation on the reissuance rules, see Reissuance of Tax-Exempt Obligations: Some Basic \nConcepts. \nIssuers Must Retain Records to Show That Requirements are Satisfied \nIRC Section 6001 and Treas. Reg. Section 1.6001-1(a) generally provide that any person subject \nto income tax, or any person required to file a return of information with respect to income (for \nexample, the issuer filing information returns relating to its bond issues), must keep books and \nrecords that are sufficient to establish the amount of gross income, deductions, credits or other \nmatters required to be shown by that person in any return. See Frequently Asked Questions for \nmore information. \nCertain Holders May Not Exclude Interest on Qualified Private Activity Bonds from \nTaxable Income \nEven if a private activity bond meets all other requirements for tax exemption, the IRC may \nprohibit certain holders from excluding interest income from tax. Generally, the entity that \nbenefits from qualified private activity bonds may not also receive an exclusion from tax for \ninterest that it receives while holding those bonds. Specifically, IRC Section 147(a) provides that \na private activity bond is not a qualified bond (and therefore will not be tax exempt) during any \nperiod it is held by a person who is a substantial user of the facilities financed with the bond or \nby a person “related” to a substantial user. Generally, a substantial user of a facility includes any \nnonexempt person who regularly uses a part of the facility in a trade or business. See Treas. \n13 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nReg. Section 1.103-11(b) for the rules to determine whether a person is a substantial user. IRC \nSection 147(a)(2) governs whether a person is treated as a “related person” to a substantial user. \nThe substantial user prohibition of Section 147(a) does not apply to qualified mortgage bonds, \nqualified veterans’ mortgage bonds, qualified student loan bonds or qualified 501(c)(3) bonds. \nPost-Issuance Compliance Monitoring \nIn this section, we discuss the importance of issuers and other parties monitoring compliance \nwith the IRC requirements and suggest steps an issuer and others may take to monitor bond \nissues. \nProtecting Against Post-Issuance Violations \nIssuers and users of bond proceeds may be concerned with how they can further protect the \ntax-exempt status of their qualified private activity bonds. Reliance solely on bond documents \nand tax certificates provided when the bonds are issued will not likely provide the assurance an \nissuer desires. To gain greater confidence that bonds are in compliance with federal tax laws, \nan issuer may adopt, or ask the entity borrowing bond proceeds or controlling the financed \nproperty to adopt, post-issuance monitoring procedures. Issuers and other users of bond \nproceeds that establish and follow comprehensive written monitoring procedures to promote \npost-issuance compliance generally are less likely to violate the federal tax requirements related \nto their bonds, and are more likely to find any violations earlier, than those issuers and other \nusers without procedures. Early discovery of a violation is a factor IRS considers in determining \nthe appropriate resolution under its TEB VCAP. For information on procedures and other options \nto assist issuers and other users of bond proceeds in their tax compliance responsibilities, see \nPublication 5005, Your Responsibilities as a Conduit Issuer of Tax-Exempt Bonds. \nSteps to Better Monitoring \nIn formulating procedures, issuers and other users of bond proceeds may consider: \n designating one or more officials to assist in post-issuance compliance, \n designating one or more officials to assist with examinations of the bond issue, \n providing training or other technical support to designated official, \n designating time intervals within which compliance monitoring activities will be completed, \nand \n timely completing remedial actions (including requests under TEB VCAP) to correct or \notherwise resolve identified noncompliance. \n14 \n",
" \n \n \n-\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nThe following chart identifies particular areas for compliance monitoring procedures. \nCompliance Procedures \nType of \nProcedures \nDescription of Procedures for \nPost Closing Matters \nWhere Responsibility is \nDiscussed in this Publication \nInformation \nReturn Filing \nProcedures to ensure timely filing \nof information returns, including \nprocedures concerning amended and \nlate filed returns \nTax-Exempt Private Activity Bonds \n– Requirements Related to Issuance – \nIssuers Must File Form 8038, Information \nReturn for Tax-Exempt Private Activity \nBond Issues \nChange in Use of \nProceeds or Bond-\nFinanced Property \nProcedures to timely identify and \nremediate deliberate actions \nTax-Exempt Private Activity Bonds – \nRequirements That Apply at Issuance \nand Throughout the Life of the Bonds \n– Proceeds Must Be Used for Qualified \nPurposes \nReissuance \nProcedures to satisfy tax \nrequirements when a modification \nin terms results in a reissuance for \nfederal income tax purposes \nTax-Exempt Private Activity Bonds – \nWhat Happens When the Terms of a \nPrivate Activity Bond are Modified? \nElections \nProcedures for timely federal income \ntax elections \nTax-Exempt Private Activity Bonds \n– Requirements Related to Issuance – \nIssuers Must Make Certain Elections at \nIssuance \nAllocation of \nProceeds \nProcedures for the timely expenditure \nand accounting for use and \ninvestment of bond proceeds \nTax-Exempt Private Activity Bonds – \nRequirements That Apply at Issuance \nand Throughout the Life of the Bonds – \nProceeds Must Be Timely Allocated to \nExpenditures \nArbitrage \nCompliance \nProcedures for the timely computation \nand payment of arbitrage rebate and \nyield reduction payments \nTax-Exempt Private Activity Bonds – \nRequirements That Apply at Issuance \nand Throughout the Life of the Bonds \n– Proceeds Are Subject to Investment \nRestrictions: the Arbitrage Yield \nRestriction and Arbitrage Rebate \nRequirements \nRecord Retention \nProcedures for the maintenance of \nrecords \nTax-Exempt Private Activity Bonds – \nIssuers Must Retain Records to Show \nThat Requirements are Satisfied \nIRS Contacts \nProcedures concerning contacts from \nthe IRS \nPost-Issuance Compliance Monitoring – \nSteps to Better Monitoring \nSee TEB Post-Issuance Compliance: Some Basic Concepts for more information. \n15 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nWhat To Do When You Discover a Violation — TEB Voluntary Closing \nAgreement Program \nIRS is committed to resolving federal tax violations with the issuer. The TEB Voluntary Closing \nAgreement Program provides remedies for issuers of tax-exempt bonds, tax credit bonds, and \ndirect pay bonds that voluntarily come forward to resolve a violation of the IRC that cannot \nbe corrected under self-correction programs described in the Treas. Reg. or other published \nguidance. Notice 2008-31, 2008-11 I.R.B 592, provides information and general guidance \nabout TEB VCAP. Internal Revenue Manual section 7.2.3 provides general procedures under \nwhich TEB will enter into closing agreements. Closing agreement terms and amounts may vary \naccording to the degree of the violation as well as the facts and circumstances surrounding it. \nIssuers must use IRS Form 14429, Tax Exempt Bonds Voluntary Closing Agreement Program \nRequest, to submit a request and provide the required information. See IRM section 7.2.3.2.1 \nabout completing the March 2013 version of the form. While the IRS generally enters into closing \nagreements with the issuer of the bonds, in certain cases other parties to the bond transaction \n(including an entity borrowing the bond proceeds) may also participate in the negotiations and \njointly execute the agreement. \nFor more information about this program, including requirements for submitting a request, case \nprocessing procedures, and resolutions standards, see IRM section 7.2.3. See Tax Exempt \nBonds Voluntary Compliance for more information on TEB VCAP administrative procedures and \nresolution standards. \nMore Information \nYou can find information about the tax laws that apply to municipal finance arrangements, \nincluding tax forms and instructions, revenue procedures and notices, and TEB Publications at \nIRS.gov/bonds. \nIf you have account-specific questions, call Customer Account Services toll-free at 877-829-5000. \n16 \n"
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p5271.pdf
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0919 Publ 5271 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5271.pdf
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[
" \n \nand \nConduit Borrowers\n I R S logo\nComplying with Arbitrage \nRequirements: \nA Guide for Issuers of Tax-Exempt Bonds Map of the world with stock market numbers\nPublication 5271 (Rev. 9-2019) Catalog Number 69338P \n \nDepartment of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nContents \nIntroduction .............................................................................................................................1 \nYield Restriction and Rebate Requirements .........................................................................2 \nPart I \nBasic Concepts and Definitions that Apply for the Arbitrage Requirements ....................4 \nPart II \nYield Restriction Requirements and Exceptions...................................................................7 \nPart III \nRebate Requirements and Exceptions ................................................................................11 \nPart IV \nRebate Amounts and Payments...........................................................................................16 \nPart V \nAccounting for Expenditures and Allocations.....................................................................18 \nPart VI \nExample of Calculation of Rebate Amount and Yield Restriction Analysis ......................19 \nPart VII \nInformation and Services......................................................................................................25 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nIntroduction \nThis publication is a basic guide to the yield restriction and rebate requirements (arbitrage \nrequirements) of Internal Revenue Code (IRC) Section 148 and related Treasury Regulations \n(Treas. Reg.).\n1 Understanding the arbitrage requirements can help issuers and conduit borrowers \ncomply with their obligations and prevent violations of the arbitrage requirements. The IRS \nprovides information on specific provisions of tax-exempt bond law in IRS publications and on \nIRS.gov/bonds. Additional resources are listed at the end of this publication. \nThis publication has seven parts. \n Part I provides basic concepts and definitions that apply to the arbitrage requirements. \n Parts II and III describe the yield restriction and arbitrage rebate requirements, and detail the \nexceptions to those requirements. \n Part IV provides information on how and when an issuer computes rebate amounts and pays \nrebate to the U.S. Treasury. \n Part V provides information on accounting for expenditures and allocations. \n Part VI presents a basic example of rebate amount and yield reduction payment calculations. \n Part VII provides additional information on available resources, services and programs to \nfacilitate compliance with the arbitrage requirements. \nThe publication is not formal guidance and is not intended as an authoritative source. It \noutlines the general arbitrage rules. It does not address all questions or issues that may arise in \ncomplying with the arbitrage requirements, including, for example, special rules that may apply \nto bond pools, direct pay bonds, tax credit bonds and certain private activity bonds other than \nqualified 501(c)(3) bonds. This document does not provide details on how to apply the arbitrage \nrequirements to computations. Issuers should review IRC Sections 103 and 148, the related \nTreas. Reg. and other official guidance on complying with the arbitrage requirements, and \nconsult their legal counsel in appropriate circumstances. \nThis publication does not address other federal tax requirements that must be met for \nbonds to be tax-exempt, including those that apply before the bonds are issued and after \nissuance. Publication 4078, Tax-Exempt Private Activity Bonds, Publication 4079, Tax-Exempt \nGovernmental Bonds, and Publication 4077, Tax-Exempt Bonds for 501(c)(3) Charitable \nOrganizations, provide overviews of federal tax rules that apply post-issuance to tax-exempt \nprivate activity bonds, governmental bonds and qualified 501(c)(3) bonds, respectively. Not \nmeeting the federal tax law requirements during the life of tax-exempt bonds may jeopardize \ntheir tax-exempt status. \n1 Although conduit issuers may require conduit borrowers to contractually assume responsibility for complying with requirements of the \nIRC, failure of a bond issue to comply with the requirements may result in the loss of the tax-exempt status of the bonds regardless of \nany agreement between the parties about compliance responsibilities. Publication 5005, Your Responsibilities as a Conduit Issuer of \nTax-Exempt Bonds, includes information for issuers of conduit bonds. \n1 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nYield Restriction and Rebate Requirements \nState and local governments receive benefits under the IRC that typically lower borrowing costs \non their valid tax-exempt debt obligations. For example, because interest paid to bondholders on \ntax-exempt obligations is not includable in their gross income for federal income tax purposes, \nbondholders are willing to accept a lower interest rate than they would if the interest were \ntaxable. These benefits apply to many types of municipal debt financing arrangements including \nbonds, notes, loans, lease purchase contracts, lines of credit and commercial paper (collectively \nreferred to as “bonds” in this publication). To receive these benefits, issuers must ensure \nthat they meet IRC and Treas. Reg. requirements, generally for as long as the bonds remain \noutstanding. This means that it’s important that issuers and any users of the bond proceeds \nregularly monitor how the bond proceeds are being used to ensure continued compliance. \nSome of the requirements relate to how bond proceeds are invested. Generally, bonds lose their \ntax-exempt status if they are arbitrage bonds under IRC Section 148. To be an arbitrage bond, \ncertain monies associated with the bonds are used to acquire investments with a yield above \nthe bond yield. When the investment yield is higher than the bond yield, the excess is called \n“arbitrage earnings.” But having arbitrage earnings does not automatically mean that the bonds \nare arbitrage bonds. Bonds must be tested under two independent sets of arbitrage rules to \ndetermine if they are arbitrage bonds. If the bonds are arbitrage bonds under either set of rules, \nthey are arbitrage bonds even if they are not arbitrage bonds under the other set. \nThe two sets of rules that apply to determine whether bonds are arbitrage bonds are: \n The yield restriction rules under IRC Section 148(a), and \n The rebate rules under IRC Section 148(f). \nYield Restriction Rules - The yield restriction rules limit the investment yield that may be \nearned on bond proceeds. Bonds are arbitrage bonds if the issuer expects to invest or actually \ndoes invest all or part of the bond proceeds at a yield materially higher than the bond yield. \nIssuers are permitted to invest in higher yielding investments under certain exceptions. But if \nno exception applies, the issuer must limit the yield on its investment of bond proceeds to a \nyield that is not materially higher than the yield on the bonds (yield restrict the investments) or, \nif permitted, make a yield reduction payment to the U.S. Treasury to prevent its bonds from \nviolating the yield restriction rules. Part II of this publication will describe and list: \n1) \nWhich monies are bond proceeds that must be yield restricted, \n2) \nWhich investments must be yield restricted, \n3) \nWhat is a materially higher yield on an investment, \n4) \nWhen the issuer may reduce the yield on the investment by making “yield reduction \npayments” to the U.S. Treasury, and \n5) \nExceptions to the yield restriction rules. \nRebate Rules - The arbitrage rebate rules provide that certain arbitrage earnings must be \npaid, or “rebated,” to the U.S. Treasury. This means that even if an issuer is permitted to invest \nin higher yielding investments under the yield restriction rules, it may have to rebate those \narbitrage earnings to the U.S. Treasury. The yield restriction rules may allow the issuer to earn \nthe arbitrage, but the rebate rules may not allow the issuer to keep the arbitrage. If an issuer is \nrequired to pay rebate under these rules, but does not, the bonds are “arbitrage bonds.” The \nrebate rules include exceptions. Part III of this publication will describe and list: \n2 \n",
"1) Which monies are proceeds subject to rebate, \n2) Which investments are subject to rebate, \n3) Certain rules for computing and paying rebate, and \n4) Exceptions to the rebate rules. \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart I \nBasic Concepts and Definitions that Apply for the Arbitrage Requirements \nBefore exploring the yield restriction and rebate rules, we’ll explain some basic concepts that \napply for the arbitrage requirements. \nDefinitions \nGross Proceeds - Gross proceeds of a bond issue include proceeds and replacement \nproceeds. \nProceeds2 include sale proceeds, investment proceeds and transferred proceeds. \nSale proceeds are amounts the issuer receives from the sale of the bond issue, including \namounts used to pay underwriters’ discount and certain accrued interest on the bonds. \nInvestment proceeds are amounts received from investing proceeds of an issue. For \nexample, if the issuer invests sale proceeds and earns interest, that interest is considered \ninvestment proceeds. \nTransferred proceeds may result when an issuer issues tax-exempt bonds (the refunding \nbonds) to refund an outstanding issue of tax-exempt bonds (the refunded bonds). Unspent \nproceeds of the refunded bonds may transfer to and become proceeds of the refunding \nbonds, and are no longer considered proceeds of the refunded bonds. \nReplacement proceeds3 are monies that would have been used to finance the project if \nthe bonds had not been issued. Replacement proceeds may also include amounts expected \nto pay debt service on the bonds, including sinking funds (such as a debt service fund, \nredemption fund, reserve fund or a replacement fund) and pledged funds (generally meaning \nany amount pledged to pay principal of or interest on the bonds). \nInvestment Property4 includes any security (for example, a share of stock in a corporation), any \nobligation (for example, debt obligations such as U.S. Treasury obligations and agency bonds), \nany annuity contract and any other kind of investment-type property (for example, guaranteed \ninvestment contracts). Cash is not investment property. For issues of governmental and \nqualified 501(c)(3) bonds, investments in other tax-exempt governmental bonds and tax-exempt \nqualified 501(c)(3) bonds (bonds not subject to the Alternative Minimum Tax) are not investment \nproperty under IRC Section 148(b)(3). For issues of other types of bonds, no tax-exempt bond \nis investment property. Consequently, investments in these tax-exempt bonds are not subject \nto the arbitrage requirements, and earnings received from these bonds are not subject to the \nyield restriction or rebate requirements.5 Investment property can be a purpose or nonpurpose \ninvestment.6 \nA purpose investment is one acquired for the governmental purpose of an issue. For \nexample, if an issuer issued bonds to make a loan to a 501(c)(3) organization or to fund \nstudent loans, the loans the issuer makes to the 501(c)(3) or students are investments but \nbecause the bonds were issued for this purpose, these loans are “purpose investments.” \n2 Treas. Reg. Section 1.148-1(b). \n3 Treas. Reg. Section 1.148-1(c). \n4 IRC Section 148(b)(2). \n5 Treas. Reg. Section 1.148-2(d)(2)(v). Generally, investments in bonds subject to the Alternative Minimum Tax (AMT bonds) made \n \nwith non-AMT bond proceeds are subject to yield restriction, but investment in AMT bonds made with AMT bond proceeds are not. \n \nSimilarly, investments in non-AMT bonds made with non-AMT bond proceeds are not subject to yield restriction. See IRC Section \n \n148(b)(3). \n6 Treas. Reg. Section 1.148-1(b). \n4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nA nonpurpose investment is an investment that is not a purpose investment. For example, \nif the issuer sells bonds to build a school but invests some of those proceeds while \nconstruction is ongoing, the investments are not acquired for the governmental purpose of \nthe issue (construction of the school) so they are nonpurpose investments. Examples of a \nnonpurpose investment include buying U.S. Treasury notes during the construction period \nas a temporary investment until the funds are spent on the project, or buying federal agency \nbonds to hold in a debt service reserve fund. \nFunds and Accounts Descriptions - Issuers and conduit borrowers create funds and accounts \nin connection with a bond issue in which bond proceeds are deposited. Below is a description \nof certain funds and accounts commonly used in tax-exempt bond financings and the typical \nuse of proceeds deposited in each type of fund or account. Frequently, there will be more than \none type of fund for a bond issue, and for each type, there may be more than one account. \nFor example, there could be several construction accounts for separate projects within a \nconstruction fund. \nConstruction fund or project fund - An issuer or conduit borrower might establish a \nconstruction or project fund into which it will deposit bond proceeds to be used to pay costs \nof the project. This fund might also include proceeds to pay capitalized interest and costs of \nissuing the bonds (or proceeds for these costs may be held in separate funds or accounts). \nDebt service fund and bona fide debt service fund - An issuer or conduit borrower might \nestablish a debt service fund to hold revenues or other monies to pay upcoming debt service \npayments on the bonds. A bona fide debt service fund is used for proper matching of annual \nrevenues and debt service. Revenues are deposited into the fund until needed to pay debt \nservice. The fund generally must be depleted at least once each bond year to qualify as a \nbona fide debt service fund.7 \nReserve fund and reasonably required reserve or replacement fund - Reserve funds \nsecure payment of debt service on the bonds in the event the issuer is unable to pay debt \nservice. A reasonably required reserve or replacement fund is a fund in which gross proceeds \ndo not exceed the lesser of: \n 10% of the principal amount of the issue, \n Maximum annual debt service on the bonds, or \n 125% of the average annual debt service on the bonds.8 \nRefunding escrow fund - An issuer might establish a refunding escrow fund to hold monies \nto be used to pay principal, interest and premium, if any, on one or more prior bond issues \n(the refunded bonds). These funds might contain proceeds of a refunding issue and possibly \nother amounts, such as tax receipts or other revenues pledged to pay off the refunded bonds. \nA refunding escrow may be associated with a current refunding or an advance refunding bond \nissue. \nA current refunding bond refunds bonds that are redeemed within 90 days of the \nrefunding bonds being issued.9 \n7 Treas. Reg. Section 1.148-1(b). Generally, “bond year” means each one-year period that ends on the day selected by the issuer. The \n \nrequirements for depletion appear in the definition of “bona fide debt service fund.” \n8 Treas. Reg. Section 1.148-2(f)(2)(ii). For a refunding issue, a reserve is reasonably required for purposes of this exception only if the \n \naggregate amount invested in higher yielding investments for both the refunding issue and the refunded issue does not exceed these \n \nlimits by reference only to the refunding issue (whether or not the proceeds of the refunded issue have become transferred proceeds). \n \nTreas. Reg. Section 1.148-9(e). \n9 Treas. Reg. Section 1.150-1(d)(3). \n5 \n",
" \n \n \n \n \n \n \n \nAn advance refunding bond refunds bonds that are redeemed more than 90 days after \nthe refunding bonds are issued.10 \nCost of issuance fund - An issuer or conduit borrower might establish a cost of issuance \nfund to deposit bond proceeds to be used to pay various costs of issuing bonds. These \ncosts include, but are not limited to, payment for the services of bond counsel, underwriter’s \ncounsel, financial advisor, verification agent, rating agencies and fees for printing offering \ndocuments. \n10 The Tax Cuts and Jobs Act (Public Law No. 115-97, 131 Stat. 2054 (2017)) repealed the exclusion from gross income for interest on \nbonds issued to advance refund another bond. The repeal applies to advance refunding bonds issued after December 31, 2017. A bond \nis classified as an advance refunding if it is issued more than 90 days before the redemption of the refunded bonds. \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart II \nYield Restriction Requirements and Exceptions \nThe yield restriction rules provide that bonds are arbitrage bonds if the issuer expects to \ninvest or actually invests all or part of the gross proceeds in investment property having a yield \nmaterially higher than the bond yield. The yield restriction rules apply both to purpose and \nnonpurpose investments. The yield restriction rules provide special treatment when proceeds are \nused for: \n Certain general uses of the bonds, for example, construction or refunding purposes (some of \nwhich may have special exceptions); \n Certain types of investments depending on how the invested funds are intended to be used, \nfor example, a construction or escrow fund may be subject to different definitions of materially \nhigher yield; and \n Certain classes of investments (yield is computed separately for purpose and nonpurpose \ninvestments). \nTo follow the yield restriction requirements, the issuer or conduit borrower must correctly treat all \ninvestments based on the general uses of the bonds and the type and class of the investment. \nMaterially Higher Yield \nThe yield restriction rules limit investment yield on gross proceeds. Gross proceeds invested \nat a yield materially higher than the bond yield will result in the bonds being arbitrage bonds.11 \nGenerally, an investment yield is materially higher if it exceeds the bond yield by more than 1/8 \nof 1%;12 however, the definition of materially higher can differ depending on the type and class of \ninvestment and the general uses of the bonds.13 \nCases in which a different definition of \n“materially higher” applies \nInvestment yield is materially higher if it \nexceeds the bond yield by more than \nProceeds held in an advance refunding escrow \n1/1000 of 1%\n14 \nReplacement proceeds \n1/1000 of 1%\n15 \nFor example, if a fixed-yield bond issue has a yield of 5%, the investment yield on an advance \nrefunding escrow or on replacement proceeds is not materially higher if the yield of the \ninvestments is not greater than 5.001%. \nYield Reduction Payments \nIn certain cases, an issuer can make a payment to the U.S. Treasury to reduce the yield on \nan investment (a yield reduction payment). In this case, an issuer may invest proceeds at \na materially higher yield, but by paying the yield reduction payment, the issuer causes the \ninvestment yield to be treated within the permitted yield. Yield reduction payments may only \nbe made for certain types of investments and certain types of proceeds.\n16 Generally, a yield \nreduction payment is made at the same time and in the same manner as a rebate payment by \n11 IRC Section 148(a) and Treas. Reg. Section 1.148-2(a). \n12 Treas. Reg. Section 1.148-2(d)(2)(i). \n13 Treas. Reg. Section 1.148-2(d)(1). If yield-restricted investments in the same class are subject to different definitions of materially \n \nhigher, the definition of materially higher that produces the lowest permitted yield applies to all the investments in the class. \n14 Treas. Reg. Section 1.148-2(d)(2)(ii). \n15 Treas. Reg. Section 1.148-2(d)(2)(ii). \n16 Treas. Reg. Section 1.148-5(c)(3). \n7 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nfiling Form 8038-T, Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate, \nwith the IRS.\n17 \nYield Computation Done for Entire Class of Investments \nIn figuring whether investments acquired with gross proceeds have a materially higher yield, \ncombine similar investments into three classes18 and compute the yield for each class. Class \nA includes all purpose investments that are subject to certain yield restriction limits. Class B \nincludes the nonpurpose investments subject to yield restriction after the temporary period. \nClass C consists of all other nonpurpose investments. \nIllustration of classes of investments and their arbitrage requirements \nNote that nonpurpose investments not subject to yield restriction are subject to the rebate \nrequirements. This means that during the temporary period Class B investments are subject to \nrebate requirements, even though they aren’t subject to yield restriction requirements until a later \ndate. In this illustration, the Class B investments could be a construction fund while the Class C \ninvestments could be a reasonably required reserve fund. \nExceptions to Yield Restriction Rules \nThe exceptions to the yield restriction requirement are for gross proceeds: \n Held during “temporary periods,”19 \n Held in a “reasonably required reserve or replacement fund,”20 or \n Representing a “minor portion.”21 \nRemember, if an exception applies, the issuer may invest the bond proceeds covered by \nthe exception at an unrestricted yield, but those proceeds might be subject to the rebate \nrequirements. For example, bond proceeds deposited in a reasonably required reserve or \nreplacement fund are subject to rebate requirements even though an issuer can invest those \nproceeds at an unrestricted yield under a specific exception to the yield restriction requirements. \nThis is an example of how an issuer may earn arbitrage, but may not keep it. \n17 Treas. Reg. Section 1.148-5(c)(2). \n18 Treas. Reg. Section 1.148-5(b)(2)(ii). \n19 IRC Section 148(c). \n20 IRC Section 148(d). \n21 IRC Section 148(e). \n8 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTemporary Period Exceptions - Exceptions Subject to a Time Limit \nDuring a “temporary period,” the issuer may invest bond proceeds at an unrestricted yield \nwithout causing the bonds to be arbitrage bonds under the yield restriction rules. The length of \nthe “temporary period” depends on the purpose (use) for which the bonds are issued and the \ntype of investment (or fund) that holds the proceeds. \n3-Year Temporary Period for Capital Projects \nA 3-year temporary period is available for bond proceeds deposited in a construction or project \nfund when those proceeds are expected to be allocated to acquisition or construction costs of \na capital project.22 The temporary period begins on the date the bonds are issued and ends 3 \nyears later. The 3-year temporary period may be extended another 2 years for a total of 5 years \nif the issuer and a licensed architect or engineer certify that more than 3 years are necessary \nto complete the capital project. This fund is made up of the net sale proceeds23 and investment \nproceeds. \nThe 3-year temporary period applies as long as the issuer reasonably expects as of the issue \ndate to: \n Allocate at least 85% of the bond’s net sale proceeds for expenditures on the capital project \nwithin three years of the bond’s issue date, \n Have a binding obligation to a third party within six months of the bond’s issue date to allocate \nat least 5% of the net sale proceeds to expenditures for the capital project, and \n Proceed toward completing the project and allocating the net sale proceeds to expenditures \nwith due diligence.24 \nOther Temporary Periods \nOther temporary period exceptions to the yield restriction requirements include: \n1) \n13-month temporary period exceptions for bona fide debt service funds and working capital \nexpenditures.25 The 13-month temporary period may be extended to the maturity date for \nissues that are tax and revenue anticipation notes (TRANs)26 if certain requirements are met. \n2) \n1-year temporary period for investment proceeds. 27 \n3) \n90-day temporary period for certain current refundings. The temporary period for current \nrefunding proceeds, other than transferred proceeds, is generally 90 days.28 \n4) \n30-day temporary periods for replacement proceeds, advance refunding proceeds and other \nproceeds. Replacement proceeds qualify for a 30-day temporary period. The temporary \nperiod for proceeds (other than transferred proceeds) of an advance refunding issue is \ngenerally 30 days.29 Gross proceeds not qualifying for any other special temporary period \nexception qualify for a 30-day temporary period exception from date of receipt.30 \n22 See Part V for a discussion of what it means to allocate to expenditures. \n23 “Net sale proceeds” of a bond issue are the sale proceeds reduced by those sale proceeds deposited in a “reasonably required \n \nreserve or replacement fund” and proceeds invested as part of a “minor portion.” Treas. Reg. Section 1.148-1(b). \n24 Treas. Reg. Section 1.148-2(e)(2). \n25 Treas. Reg. Section 1.148-2(e)(5)(ii) and Treas. Reg. Section 1.148-2(e)(3)(i). \n26 Treas. Reg. Section 1.148-2(e)(3)(ii). \n27 Treas. Reg. Section 1.148-2(e)(6). \n28 Treas. Reg. Section 1.148-9(d)(2)(ii)(A) and (B). \n29 Treas. Reg. Section 1.148-9(d)(2)(i). This 30-day temporary period ends 30 days after the date the advance refunding bonds are \n \nissued. \n \n30 Treas. Reg. Section 1.148-2(e)(7). \n9 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nStart of Temporary Period \nMost temporary periods begin on the bond’s issue date. Other temporary periods begin after the \nissue date, such as when proceeds are received or earned (for example, investment earnings), \nallocated to the bonds (for example, replacement proceeds deposited in a sinking fund) or first \ntreated as replacement proceeds.31 Certain temporary periods for repayments of loans made \nwith proceeds begin on the date of the repayment. \nTemporary Periods and Refunding Bonds \nFor proceeds that are transferred proceeds of a refunding issue, the temporary period generally \nbegins on the date of transfer of the proceeds and ends when it would have otherwise ended \nif the proceeds had remained proceeds of the refunded bonds.32 However, in an advance \nrefunding, for example, the 3 or 5-year temporary period for capital projects or the 13-month \ntemporary period for working capital for the proceeds of the prior issue ends on the issue date \nof the advance refunding issue.33 \nYield Restriction Exceptions Having No Time Limit \nThe following exceptions to the yield restriction rules apply throughout the life of the bond issue. \nIf one of these exceptions applies, the yield restriction limitations do not apply to the proceeds \nor funds described in the exception. \n1) \nReasonably required reserve or replacement fund. 34 \n2) \nMinor portion exception - This exception applies to proceeds in an amount which is the lesser \nof $100,000 or 5% of the sale proceeds of the issue.35 \n31 Treas. Reg. Section 1.148-2(e)(5). \n32 Treas. Reg. Section 1.148-9(d)(2)(iii)(A). \n33 Treas. Reg. Section 1.148-9(d)(2)(iii)(B). \n34 Treas. Reg. Section 1.148-2(f)(2)(i). \n35 Treas. Reg. Section 1.148-2(g). \n10 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart III \nRebate Requirements and Exceptions \nUnder IRC Section 148(f), bonds are arbitrage bonds if an issuer does not make rebate \npayments to the U.S. Treasury in the amounts and at the times required. The issuer must rebate \nthe amount by which the yield on investment property acquired with proceeds of the issue \nexceeds the yield on the bonds. The rebate requirements apply only to nonpurpose investments. \nPurpose investments are not subject to the rebate rules. \nThe rebate rules generally provide that issuers must periodically calculate arbitrage earnings \nand, unless an exception applies, pay those earnings to the U.S. Treasury within 60 days after \nthe computation date for the period. While issuers have flexibility in determining the computation \nperiods, an issuer must compute and pay any required rebate at least once every five years. \nPayments must be made by filing Form 8038-T, Arbitrage Rebate, Yield Reduction and Penalty \nin Lieu of Arbitrage Rebate. Parts IV and VI include more information about the rebate calculation \nand examples of this calculation. \nExceptions to the Rebate Requirements \nExceptions to the rebate requirements may apply based on how quickly the issuer spends the \nbond proceeds, the size of the issuer and the category of proceeds being invested. Some of \nthese exceptions apply only to certain types of bonds (for example, governmental bonds) and \nsome of these exceptions apply only to proceeds in certain funds. For exceptions applying \nto specific types of funds, the issuer’s allocation of proceeds to these funds is important to \ndetermine whether a particular exception’s requirements are met. The purposes and uses of the \nproceeds in a fund and the purpose of the bond issue control whether an exception applies, \nregardless of the label of the fund. \nThe two general exception categories to the rebate requirements are the spending exceptions \nand the special exceptions. \nThe following chart illustrates certain funds and exceptions that may be available for proceeds \nheld in those funds. \nGeneric Types of Accounts (Funds) and Available Exceptions to Rebate \nExceptions \nType of Fund Containing Bond Proceeds \nRefunding \nConstruction or \nCosts of \nReserve \nDebt Service \nEscrow Fund \nProject Funda \nIssuance Fundb \nFundc \nFund (DSF) \nLimited \n6-Month \n18-Month \n2-Year \nBona Fide DSF \nWorking Capital \nSmall Issuer \na Or Working Capital Fund \nb Proceeds used for issuance costs are eligible for the 2-year spending exception if they meet the \nrequirements under Treas. Reg. Section 1.148-7(i)(4). \nc A reasonably required reserve or replacement fund can only be excluded from the rebate requirement under \nthe two-year spending exception through the earlier of the close of the two year period or the date the \nconstruction is substantially completed under IRC Section 148(f)(4)(C)(vi)(II). \n11 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nSpending Exceptions \nThe three spending exceptions are the: \n 6-month spending exception, \n 18-month spending exception, and \n 2-year spending exception. \nIf an issuer satisfies a spending exception, proceeds in the eligible funds will be exempt from the \nrebate requirements. \nThe spending exceptions depend on an issuer allocating certain proceeds to expenditures within \nspecified time periods. To determine whether these exceptions apply, it is necessary to identify: \n Which proceeds the issuer allocated to expenditures, and \n When the issuer allocated those proceeds. \nPart V provides information on accounting for expenditures and allocations. \n6-Month Spending Exception \nIf the requirements of the 6-month spending exception are met, the issue is treated as satisfying \nthe rebate requirements for the proceeds meeting that exception. This means that earnings on \ninvestments of certain gross proceeds of the issue that exceed the yield on the issue don’t need \nto be paid as rebate to the U.S. Treasury. Generally, the issuer must meet both the following \nrequirements: \n1) \nThe issuer must allocate the gross proceeds to expenditures for the governmental purposes \nof the issue within the 6-month period beginning on the issue date. For this purpose, gross \nproceeds do not include gross proceeds: \na) Held in a bona fide debt service fund or a reasonably required reserve or replacement \nfund, \nb) Not previously anticipated to become gross proceeds but that become gross proceeds \nafter the end of the 6-month spending period, \nc) That are proceeds derived from any purpose investment of the issue, and \nd) That are repayments of certain grants financed by the issue. \nIf the issue is a governmental bond issue other than TRANs or if the issue is qualified \n501(c)(3) bonds, the 6-month time period is extended to one year for a limited amount of \ngross proceeds. \n2) \nThe issuer meets the rebate requirements for the issue’s proceeds (excluding earnings on \namounts in any bona fide debt service fund) not covered by the 6-month exception. \nWhen an issuer satisfies the requirements for the 6-month spending exception, it may retain \nearnings on only the gross proceeds specifically described by the exception. The 6-month \nspending exception does not create an exception for amounts in a reasonably required reserve \nor replacement fund or for unanticipated gross proceeds that appear after the 6-month period. \nTRANs are treated as meeting the 6-month spending exception for the issue’s net proceeds36 \nand any investment earnings on those net proceeds if the issuer meets certain IRC \nrequirements.37 \n36 IRC Section 150(a)(3). \n37 IRC Section 148(f)(4)(B)(iii). \n12 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n18-Month Spending Exception \nAn issuer satisfying the requirements of the 18-month spending exception may retain certain \ninvestment earnings during that 18-month period starting on the issue date. The three \nrequirements are: \n1) \nThe issuer must allocate gross proceeds to expenditures for a governmental purpose of the \nbonds under the following schedule, with the periods starting on the issue date of the bonds: \na) At least 15% of the proceeds are allocated within 6 months, \nb) At least 60% within 12 months, and \nc) 100% within 18 months. \nThe spending requirement for the third period allows for a limited amount of unspent \nproceeds in connection with reasonable retainage38 (retention to ensure compliance with \na construction contract), if the reasonable retainage is allocated to expenditures within 30 \nmonths of the issue date. An issuer’s failure to meet the spending requirements will be \ndisregarded if the issuer exercised due diligence to complete the financed project and the \namount of the proceeds that didn’t meet the schedule doesn’t exceed the lesser of 3% of the \nbond’s issue price or $250,000.39 As with the 6-month spending exception, gross proceeds \nhas a special definition for applying the spending schedule.40 \n2) \nThe issuer must meet the rebate requirement for all proceeds not required to be spent within \nthe 18-month spending period (excluding earnings on a bona fide debt service fund). \n3) \nAll the bond’s gross proceeds, as defined for the 18-month spending exception, must also \nqualify for the 3-year temporary period available under the yield restriction requirements. \nAs is the case for the 6-month spending exception, the 18-month spending exception does not \ncreate an exception for amounts in a reasonably required reserve or replacement fund. The \n18-month spending exception also doesn’t apply to a bond issue any portion of which is treated \nas meeting the rebate requirement under the 2-year construction spending exception.41 \n2-Year Spending Exception \nThe 2-year spending exception applies only to non-refunding construction issues that finance \nproperty owned by a governmental unit or a 501(c)(3) organization. To qualify as a construction \nissue, the issuer must reasonably expect, as of the issue date, that at least 75% of the “available \nconstruction proceeds”42 of the issue will be allocated to construction expenditures.43 If the \nissue meets the requirements of the 2-year construction spending exception, then the issue is \ntreated as meeting the rebate requirements for available construction proceeds—with the result \nthat arbitrage earnings on investments of those proceeds are not required to be paid to the U.S. \nTreasury. \n38 Treas. Reg. Section 1.148-7(d)(2) and Treas. Reg. Section 1.148-7(h). \n39 Treas. Reg. Section 1.148-7(b)(4). \n40 Treas. Reg. Section 1.148-7(d)(3)(i). \n41 Treas. Reg. Section 1.148-7(d)(4). \n42 The term “available construction proceeds” is defined in IRC Section 148(f)(4)(C)(vi) and Treas. Reg. Section 1.148-7(i). \n43 Treas. Reg. Section 1.148-7(g). \n13 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nGenerally, an issuer meets the requirements of the 2-year spending exception if it allocates \navailable construction proceeds to expenditures for governmental purposes of the issue \naccording to the following schedule (with periods starting on the issue date): \n1) \nAt least 10% of the proceeds are allocated within 6 months, \n2) \nAt least 45% within 1 year, \n3) \nAt least 75% within 18 months, and \n4) \n100% within 2 years. \nThe spending requirement for this fourth and final period allows limited unspent proceeds for \nreasonable retainage44 (retention to ensure compliance with a construction contract), if the \nreasonable retainage is allocated to expenditures within 3 years of the issue date. If the issuer \ndoesn’t meet the requirements of the final spending period, there is an exception if: \n1) \nThe unspent proceeds do not exceed the lesser of 3% of the issue price or $250,000, and \n2) \nThe issuer exercises due diligence to complete the project. 45 \nAn issuer of a construction issue may elect by the issue date to pay a “penalty in lieu of rebate” \nunder the 2-year construction spending exception.46 \nSpecial Exceptions \nTwo additional exceptions to the rebate requirement are the small issuer exception for \ngovernmental bonds and the bona fide debt service fund exception. \nSmall Issuer Exception \nA governmental unit that does not expect to issue more than $5 million of tax-exempt \ngovernmental bonds in a calendar year might be eligible for an exception from the rebate \nrequirements for proceeds of a governmental bond issue issued during that calendar year.47 \nThe limit is increased to $15 million for bonds issued to finance construction of public school \nfacilities.48 To determine the amount of bonds that will be issued, the issuer must include certain \nadditional tax-exempt governmental bonds issued by any: \n Entity (other than political subdivisions) that issues bonds on behalf of the issuer; and \n Subordinate entity (for example, an entity that is directly or indirectly controlled by the issuer, \nper Treas. Reg. Section 1.150-1(e)). \nThe issuer must also include any bonds issued by an entity formed or otherwise used to avoid \nthe amount limitation.49 An issuer may exclude certain refunding bonds when computing the \nlimit.50 \nIn addition to the limit on the amount of governmental bonds that an issuer expects to issue, an \nissue must meet these requirements to qualify for the small issuer exception: \n1) \nThe issue is issued by a governmental unit with general taxing powers, 51 and \n2) \n95% or more of the proceeds of the issue (other than those in a reasonably required reserve \nor replacement fund) are to be used for the issuer’s local governmental activities. \n44 IRC Section 148(f)(4)(C)(iii), Treas. Reg. Section 1.148-7(e)(2) and Treas. Reg. Section 1.148-7(h). \n45 Treas. Reg. Section 1.148-7(b)(4). \n46 IRC Section 148(f)(4)(C)(vii) and Treas. Reg. Section 1.148-7(k). \n47 IRC Section 148(f)(4)(D). All proceeds are excepted, including proceeds in a reasonably required reserve or replacement fund, if any. \n48 IRC Section 148(f)(4)(D)(vii). \n49 Treas. Reg. Section 1.148-8(c)(2)(iii). \n50 IRC Section 148(f)(4)(D)(v). \n51 An issuer does not have general taxing power if the issuer’s ability to tax is contingent on approval by another governmental unit. \n \nTreas. Reg. Section 1.148-8(b). See also, IRC Section 148(f)(4)(D)(iv). \n14 \n",
" \nBona Fide Debt Service Fund Exception \nCertain earnings on bona fide debt service funds are exempt from the rebate requirement52 if the \nissue meets either of the following criteria: \n1) The gross earnings on the fund for a bond year are less than $100,000. The issue meets this \n \nrequirement if the issue has an average annual debt service not greater than $2,500,000.53 \n2) The issue consists of governmental bonds, the issue has an average maturity of at least five \nyears, and the bonds bear interest at a fixed rate.54 \n52 IRC Section 148(f)(4)(A)(ii). \n53 Treas. Reg. Section 1.148-3(k). \n54 IRC Section 148(f)(4)(A). \n15 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart IV \nRebate Amounts and Payments \nThe rebate rules require that certain arbitrage earnings (rebate) be paid to the U.S. Treasury. \nGenerally, an issuer must compute and pay rebate owed at least once every five years over the \nlife of the bond issue.55 Within that five-year period, issuers have some flexibility choosing the \ndate they use to compute rebate. The final computation date, however, is the date the bond issue \nis fully discharged. \nOn a computation date, if the issuer determines that it owes rebate, it files a Form 8038-T, \nArbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate, with the IRS and pays \nthe required rebate amount generally within 60 days of the computation date. For computation \ndates other than the final computation date, the issuer must pay at least 90% of the rebate owed, \ntaking into account previous rebate payments. The final payment for the final computation date \nmust be 100% of the rebate amount less previous payments. \nComputation of Rebate Amounts \nThe rebate payment is based on the “rebate amount” on the computation date. The rebate \namount reflects the investment yield earned on nonpurpose investments in excess of the amount \nthese would have earned if invested at the bond yield. Because payments for, and receipts on, an \ninvestment can happen at different times, an issuer must future value the receipts and payments \nto a single date in making a rebate computation. The rebate amount as of each computation \ndate reflects a snapshot of actual and allowable investment earnings as of those computation \ndates over the life of the bonds. The past receipts on, and payments for, the investments are \nfuture valued at the bond yield to give their value as of the computation date, using the same \ncompounding interval and financial conventions used to compute the yield on the issue.56 The \nrebate amount is the amount by which the value of all the receipts exceeds the value of all the \npayments on the computation date.57 The rebate payment is determined by reducing the rebate \namount by any previous rebate the issuer paid, which is also future valued to that computation \ndate. Amounts the issuer pays as yield reduction payments on nonpurpose investments are \ntreated as payments for the investment that are considered in computing rebate. Other payments \nthat are considered in computing the rebate amount include: \n Amounts paid to acquire a nonpurpose investment; \n The value of a previously acquired investment that becomes allocated to an issue; and \n A computation credit on the last day of each bond year during which there are nonpurpose \ninvestments subject to the rebate requirements and on the final maturity date.58 \nReceipts include: \n Amounts received from a nonpurpose investment, such as earnings and return of principal; \n The value of a nonpurpose investment that is no longer allocated to an issue, or is no longer \nsubject to the rebate requirement, before its disposition or redemption date; and \n The value of a nonpurpose investment held at the end of a computation period. \n55 IRC Section 148(f)(3) and Treas. Reg. Section 1.148-3(f)(1). \n56 Treas. Reg. Section 1.148-3(c). \n57 Treas. Reg. Section 1.148-3(b). \n58 Treas. Reg. Section 1.148-3(d)(1)(iv) and Treas. Reg. Section 1.148-3(d)(4). These regulations provide a computation credit of $1,400 \nfor bond years ending in 2007, with annual adjustments for inflation thereafter, for bonds sold on or after October 17, 2016. An issuer \nmay also apply these regulations to bonds sold before October 17, 2016, with the increased computation credit applying to bond years \nending on or after July 18, 2016. A similar credit is available for bond years ending on or after September 26, 2007, under proposed \nregulations issued in 2007. REG-106143-07, 72 FR 54606, 54611, 2007-43 IRB 881, 887. \n16 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \nRecovering an Overpayment of Rebate \nBecause rebate is computed by looking at receipts and payments from issuance to the \ncomputation date, it’s possible that an issuer pays rebate for a computation date (because \nthe value of the receipts exceeded the value of the payments as of that date), but finds that \non a subsequent computation date, the value of the payments exceeds the value of the \nreceipts so that the rebate amount is reduced or eliminated. In this case, the issuer’s earlier \nrebate payment exceeds the rebate amount as of the subsequent computation date because \nof investment results after the earlier computation date. An issuer can get a refund of the \noverpayment in certain circumstances. The issuer determines the amount of overpayment by \nusing the future value method to calculate rebate amount (excluding any rebate payments). The \noverpayment is the excess of the amount of rebate the issuer paid over the sum of the rebate \namount for the issue as of the most recent computation date and all amounts that the issuer \nis otherwise required to pay under IRC Section 148, as of the date the recovery is requested.59 \nAn issuer requests a refund by completing and filing Form 8038-R, Request for Recovery of \nOverpayments Under Arbitrage Rebate Provisions. An issuer must file the form no later than two \nyears after the final computation date for the issue.60 \n59 Treas. Reg. Section 1.148-3(i). \n60 Treas. Reg. Section 1.148-3(i)(3)(i). \n17 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart V \nAccounting for Expenditures and Allocations \nProceeds are no longer subject to the arbitrage requirements when they are properly allocated \nto an appropriate expenditure. To make these allocations, issuers must follow special rules and \nmaintain adequate records. If an issuer improperly treats bond proceeds as allocated to an \nexpenditure, it may miscalculate the rebate amount, fail to adequately restrict investment yield, \nor fail to satisfy the requirements for a spending exception or temporary period. By properly \nrecording, monitoring and tracking allocations of bond proceeds, issuers can stay in compliance \nwith the arbitrage requirements. \nGenerally, proceeds are no longer proceeds of an issue when they are allocated to an \nexpenditure for a governmental purpose or are deallocated from the bond issue because of \nthe transferred proceeds or universal cap rules.61 Proceeds may be allocated to an expenditure \nusing any reasonable, consistently applied accounting method for an issue’s gross proceeds, \ninvestments and expenditures. \nThere are special rules and time limits for making allocations, but in general, to allocate gross \nproceeds to an expenditure, an issuer must reasonably expect an outlay of cash not later \nthan five banking days after it allocates gross proceeds to that expenditure.62 Payment of \ngross proceeds of an issue to a related party of the payor is not an expenditure of those gross \nproceeds. An issuer must make its allocations no later than 18 months after the later of the date \nwhen the expenditure is paid or the project is placed in service, and in any event no later than \nthe date the first rebate payment would be due (that is, the earlier of (i) 60 days after the fifth \nanniversary of the date the bonds were issued or (ii) 60 days after the date the issue is retired).63 \nIf the project is funded with tax-exempt bond proceeds and another source of funds, there may \nbe questions about which sources of funds were used for which expenditures. Here again, the \nissuer may use any reasonable, consistently applied accounting method for gross proceeds and \nother funds. Examples of reasonable accounting methods64 an issuer may use include: \n1) Specific tracing - bond proceeds are allocated to the specific expenditures actually paid \nwith the proceeds. \n2) Gross proceeds spent first - bond proceeds are allocated to the earliest expenditures. \n3) First-in, first-out - the source allocated to the expenditure is based on the order in which \neach source becomes available. \n4) Ratable allocation - funds from each source are allocated to each of the expenditures \nratably. \nIf an issuer doesn’t have sufficient books and records to establish an accounting method for \na bond issue and allocation of proceeds of that issue, specific tracing applies for the yield \nrestriction and rebate rules.65 \nSpecific rules apply for accounting for purpose investments, certain working capital (“proceeds \nspent last” method), grants, reimbursements and commingled funds. \n61 Treas. Reg. Section 1.148-6(b)(1). For more information on the universal cap rules, see Treas. Reg. Section 1.148-6(b)(2). \n62 Treas. Reg. Section 1.148-6(d)(1)(ii). \n63 Treas. Reg. Section 1.148-6(d)(1)(iii). \n64 Treas. Reg. Section 1.148-6(d)(1)(i). \n65 Treas. Reg. Section 1.148-6(a)(3). \n18 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart VI \nExample of Calculation of Rebate Amount and Yield Restriction Analysis \nThe following is an example to demonstrate the application of basic concepts of the yield \nrestriction and rebate requirements. \nFacts: $49,000,000 variable yield bond issue with an issue date of January 1, 1994. The bond \nissue’s first interim computation date is January 1, 1999.66 The bond yield calculated for the first \ncomputation period is 7.00%. \nIn this example, the issuer received $49,000,000 in gross proceeds from the sale of bonds, \nand on the issue date applied $41,000,000 to purchase a U.S. Treasury note investment with \nan annual coupon yield of 7.53% and $8,000,000 to purchase a U.S. Treasury money fund \ninvestment bearing an annual interest rate of 4.97%.67 In this example, receipts from investments, \nunless reinvested, are disbursed immediately for the governmental purpose of the bonds. \nThe investment transactions used in this example are categorized as either payments or \nreceipts. The general types of investment transactions, and their treatment, appear in the \nfollowing chart. Within a typical computation of the rebate amount (or yield reduction payment), \npayments are represented by a negative number (monies going out) and receipts by a positive \nnumber (monies coming in). \nPayments \nReceipts \n(Purchase) \n(Accrued interest) \n(Premium)* \nDiscount* \n(Value at initial allocation) \n(Prior period value) \n(Prior period rebate amount, if \nnegative) \n(Computation credit)** \n(Yield reduction payment) \nMaturity \nSale \nAccrued interest \nGain* \n(Loss)* \nInterest \nDividends \nValue at end of allocation \nEnd of period value \nPrior period rebate amount, if positive \n*These are only used as adjustments if the par value of an investment is used to represent the purchase, maturity or sale of an investment. \n**Excluded from payments for purposes of computing yield reduction payments. \n66 See the discussion of computation dates in Part IV. \n67 For ease of illustration, all transactions (purchases and sales) of the note and the fund are at par and interest payments on the fund \n \nonly occur on dates when there are purchases or sales. Transaction totals are rounded to whole dollar amounts. \n19 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nThe accounting entries for payments and receipts on the note investment are shown in Table 1. \nThe note purchase is shown as a $41,000,000 payment on January 1, 1994. The semiannual \ninterest payments received on the note on each January 1 and July 1 are reflected as receipts. \nSales of portions of the note occur periodically on January 1, 1995, September 1, 1995, and \nMarch 1, 1996, and are also reflected as receipts. \nTable 1 \nU.S. Treasury Note \n7.530% \nDate \nBuy \nPayment (-) \nSell \nReceipt (+) \nInterest \nReceipt (+) \nInvestment \nBalance \n01/01/94 \n(41,000,000) \n41,000,000 \n02/01/94 \n41,000,000 \n05/01/94 \n41,000,000 \n07/01/94 \n1,543,650 \n41,000,000 \n01/01/95 \n1,780,000 \n1,543,650 \n39,220,000 \n07/01/95 \n1,476,633 \n39,220,000 \n09/01/95 \n18,275,000 \n231,844 \n20,945,000 \n01/01/96 \n788,579 \n20,945,000 \n03/01/96 \n20,945,000 \n259,971 \n0 \n(41,000,000) \n41,000,000 \n5,844,328 \nTable 2 illustrates the accounting entries for payments and receipts on the fund investment. The \npurchase of the initial investment in the fund is shown as an $8,000,000 payment on January 1, \n1994. Purchases of subsequent investments in the fund (representing immediate reinvestment \nin the fund of all receipts from interest earnings on the note and the fund on each date) are \nreflected as additional payments on July 1, 1994, July 1, 1995, and January 1, 1996. The periodic \ninterest payments received on the fund are reflected as receipts. Sales of portions of the fund \noccur on February 1, 1994, May 1, 1994, January 1, 1995, September 1, 1995, and March 1, \n1996, which are also reflected as receipts. \nTable 2 \nU.S. Treasury Money Fund \n4.970% \nDate \nBuy \nPayment (-) \nSell \nReceipt (+) \nInterest \nReceipt (+) \nInvestment \nBalance \n01/01/94 \n(8,000,000) \n8,000,000 \n02/01/94 \n2,966,230 \n33,770 \n5,033,770 \n05/01/94 \n4,938,996 \n61,004 \n94,774 \n07/01/94 \n(1,544,437) \n787 \n1,639,212 \n01/01/95 \n1,635,279 \n41,071 \n3,932 \n07/01/95 \n(1,476,730) \n97 \n1,480,662 \n09/01/95 \n1,480,655 \n12,500 \n7 \n01/01/96 \n(788,579) \n0 \n788,586 \n03/01/96 \n788,586 \n6,443 \n0 \n(11,809,746) \n11,809,746 \n155,672 \n20 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTable 3 combines the amounts of payments and receipts for each date from Table 1 and Table 2 \nto summarize the payments and receipts included in the computation of rebate amount and the \ncomputation of yield on investment. The total payments column represents the sum of payments \nfor purchases of the note and the fund, represented as negative amounts. The total receipts \ncolumn represents the sum of receipts from investment earnings on and sales of the note and \nthe fund, represented as positive amounts. The net payments and receipts column is the sum of \nthe payments and receipts columns. \nTable 3 \nTotal \nTotal \nNet Payments \nDate \nPayments (-) \nReceipts (+) \nand Receipts \n01/01/94 \n(49,000,000) \n0 \n(49,000,000) \n02/01/94 \n0 \n3,000,000 \n3,000,000 \n05/01/94 \n0 \n5,000,000 \n5,000,000 \n07/01/94 \n(1,544,437) \n1,544,437 \n0 \n01/01/95 \n0 \n5,000,000 \n5,000,000 \n07/01/95 \n(1,476,730) \n1,476,730 \n0 \n09/01/95 \n0 \n20,000,000 \n20,000,000 \n01/01/96 \n(788,579) \n788,579 \n0 \n03/01/96 \n0 \n22,000,000 \n22,000,000 \n(52,809,746) \n58,809,746 \n6,000,000 \nGenerally, on dates when investments mature or are sold, or interest earnings are received, a \nreceipt is included in the calculation of rebate amount. On dates when investments roll over or \nare purchased, or interest earnings are reinvested, a payment is included in the calculation of \nrebate amount. The payments and receipts on a corresponding date offset each other and the \ndaily net total is included in the calculation of rebate amount. \nRebate Amount Calculation \nTable 4 illustrates the calculation of rebate amount for the January 1, 1999, computation date \nbased on the net payments and receipts column from Table 3 and the permitted computation \ncredit on the last day of each bond year during which there are amounts allocated to gross \nproceeds of an issue subject to the rebate requirement. The rebate amount for the computation \ndate is calculated as the sum of the future values of each payment, receipt and computation \ncredit68 as of the computation date using the bond yield (7.00% per year) as the rate of return in \nthe future value computation. The rebate amount as of January 1, 1999, is $452,432. \n68 Prior to 2007, the amount of the computation credit available under Treas. Reg. Section 1.148-3(d)(1)(iv) was $1,000. See also \n \nfootnote 58 for more information on the increase in the computation credit. \n21 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTable 4 \nDate \nNet Payments \nand Receipts \nFuture Value \nat Bond Yield \n01/01/94 \n(49,000,000) \n(69,119,339) \n02/01/94 \n3,000,000 \n4,207,602 \n05/01/94 \n5,000,000 \n6,893,079 \n07/01/94 \n0 \n0 \n01/01/95 \n5,000,000 \n6,584,045 \n01/01/95 \n(1,000) \n(1,317) \n07/01/95 \n0 \n0 \n09/01/95 \n20,000,000 \n25,155,464 \n01/01/96 \n0 \n0 \n01/01/96 \n(1,000) \n(1,229) \n03/01/96 \n22,000,000 \n26,735,275 \n01/01/97 \n(1,000) \n(1,148) \n452,432 \nTable 4 demonstrates that the rebate amount is $452,432 as of the January 1, 1999, computation \ndate. The issuer must submit a rebate payment of at least 90% of this amount within 60 days \nof this interim computation date by filing Form 8038-T and including the required payment. If \nJanuary 1, 1999 was the final computation date, the issuer must submit 100% of the rebate \namount. \nYield Restriction Analysis \nAn issuer determines whether it has complied with the yield restriction requirements by \ncomparing the yield on investment with the maximum yield that is not materially higher than the \nyield on the bond issue. The issuer should include all unconditionally payable receipts and all \nunconditionally payable payments. \nComputation of Yield Reduction Payments \nFor certain investments, an issuer can make yield reduction payments (including rebate \npayments) to the U.S. Treasury that reduce the yield on the investments for the yield restriction \nrequirements. For an eligible investment class, an issuer must pay the amount that will result in \nthe yield on that class not being materially higher than the bond yield. \nThe example below assumes that the bond issue is entitled to the general 30-day temporary \nperiod and the general 1/8th of 1% materially higher yield limit. \nTable 5 shows the payments for and receipts from investments in the note and the fund. \nThe amounts entered for January 31, 1994 (the first day after the end of the general 30-day \ntemporary period) are the values of the investments as of that date for the note and the fund, \noriginally purchased on January 1, 1994. As permitted under the arbitrage requirements, the \nissuer values the note at present value and the fund at fair market value (essentially par plus \naccrued interest). The yield restriction requirements provide for certain temporary periods during \nwhich yield restriction does not apply. Consequently, the initial temporary period is not included \nin the determination of yield on investment. The result is that instead of the calculation starting \non the issue date, it starts when the temporary period ends. \n22 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTable 5 \nU.S. Treasury Note \n7.530% \nU.S. Treasury Money Fund \n4.970% \n01/01/94 \nN/A \nN/A \n01/31/94 \n(41,245,085) \n(8,032,681) \n02/01/94 \n2,966,230 \n33,770 \n05/01/94 \n4,938,996 \n61,004 \n07/01/94 \n1,543,650 \n(1,544,437) \n787 \n01/01/95 \n1,780,000 \n1,543,650 \n1,635,279 \n41,071 \n07/01/95 \n1,476,633 \n(1,476,730) \n97 \n09/01/95 \n18,275,000 \n231,844 \n1,480,655 \n12,500 \n01/01/96 \n788,579 \n(788,579) \n0 \n03/01/96 \n20,945,000 \n259,971 \n788,586 \n6,443 \nDate \nValue \nPayment (-) \nSell \nReceipt (+) \nInterest \nReceipt (+) \nValue/Buy \nPayment (-) \nSell \nReceipt (+) \nInterest \nReceipt (+) \n(41,245,085) \n41,000,000 \n5,844,328 \n(11,842,427) \n11,809,746 \n155,672 \nTable 6 summarizes the payments and receipts from Table 5 included in the computation of \nyield on investment. The total payments column represents the sum of payments from the value \nof investments (as of January 31, 1994) and purchases of the fund. The total receipts column \nrepresents the sum of receipts from investment earnings on and sales of the note and the fund. \nUnder the yield restriction requirements, the yield on investments cannot be materially higher \nthan the yield on the bonds. The yield on an investment allocated to an issue is the discount rate \nthat, when used in computing the present value as of the date the investment is first allocated \nto the issue of all unconditionally payable receipts from the investment, produces an amount \nequal to the present value of all unconditionally payable payments for the investment. When the \nnet receipts and payments in Table 6 are present valued to January 31, 1994, that discount rate \n(which is the yield on investment) is 7.451%, exceeds the materially higher yield limit of 7.125%. \nTable 6 \nDate \nTotal \nPayments (-) \nTotal \nReceipts (+) \nNet Payments \nand Receipts \n01/01/94 \n0 \n01/31/94 \n(49,277,766) \n0 \n(49,277,766) \n02/01/94 \n0 \n3,000,000 \n3,000,000 \n05/01/94 \n0 \n5,000,000 \n5,000,000 \n07/01/94 \n(1,544,437) \n1,544,437 \n0 \n01/01/95 \n0 \n5,000,000 \n5,000,000 \n07/01/95 \n(1,476,730) \n1,476,730 \n0 \n09/01/95 \n0 \n20,000,000 \n20,000,000 \n01/01/96 \n(788,579) \n788,579 \n0 \n03/01/96 \n0 \n22,000,000 \n22,000,000 \n(53,087,512) \n58,809,746 \n5,722,234 \nTable 7 illustrates a method of calculating the excess arbitrage earnings equaling the amount \n \n23 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nof a yield reduction payment necessary to reduce the yield on investment to the maximum \npermitted yield of 7.125%, which is not materially higher than the bond yield. The yield reduction \npayment is calculated using the sum of the future values of each payment and each receipt as of \nthe relevant computation date (January 1, 1999) using the bond yield adjusted to the materially \nhigher yield (7.125% per year) as the interest rate in the future value computation. \nTable 7 \nNet Payments \nFuture Value to \nDate \nand Receipts \nYield Restriction Limit \n01/01/94 \n0 \n0 \n01/31/94 \n(49,277,766) \n(69,538,765) \n02/01/94 \n3,000,000 \n4,232,654 \n05/01/94 \n5,000,000 \n6,932,027 \n07/01/94 \n0 \n0 \n01/01/95 \n5,000,000 \n6,615,919 \n07/01/95 \n0 \n0 \n09/01/95 \n20,000,000 \n25,256,907 \n01/01/96 \n0 \n0 \n03/01/96 \n22,000,000 \n26,826,890 \n5,722,234 \n325,632 \nTable 7 demonstrates that the yield on investments exceeds the bond yield increased to the \nmaterially higher limit by $325,632, which, unless reduced, would cause the bonds to be \narbitrage bonds. In this example, the issuer can make a yield reduction payment because this is \na variable yield bond. The yield reduction payment necessary to reduce the yield on investment \nto the allowable materially higher limit (that is, 7.125%) is $325,632. The issuer must submit a \nyield reduction payment within 60 days of the interim computation date by filing Form 8038-T \ntogether with the required payment, but need not submit a payment more than once every five \nyears. \nIn this example, the issuer’s arbitrage liability to the U.S. Treasury, as of the January 1, 1999 \ncomputation date, would include a yield reduction payment of $325,632 and rebate of $126,800 \n($452,432 minus $325,632), because the yield reduction payment is treated as a payment in \nthe determination of rebate amount under Treas. Reg. Section 1.148-3(d)(1)(v). The issuer would \nreport this arbitrage liability and submit payment using Form 8038-T. Because January 1, 1999 \nis an interim computation date, the issuer need only make a payment equal to at least 90% of \nthe rebate amount as of that date to satisfy the rebate requirements.69 For the final computation \ndate, an issuer must pay 100% of the rebate amount. \n69 Treas. Reg. Section 1.148-3(f)(1). \n24 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPart VII \nInformation and Services \nYou can find information about the tax laws that apply to tax-exempt bonds and other municipal \nfinancing arrangements at IRS.gov/bonds, including: \n Published guidance about the tax laws that apply to municipal financing arrangements, \nincluding revenue rulings, revenue procedures, notices and announcements. \n Tax forms, instructions and publications related to tax-exempt bonds. \n Additional educational resources on Voluntary Compliance. \nIf you have account specific questions, call Customer Account Services toll-free at 877-829-5500. \nWhat to do if you discover a violation - The TEB Voluntary Closing Agreement \nProgram \nThe IRS is committed to resolving federal tax violations with the issuer. The TEB Voluntary \nClosing Agreement Program (TEB VCAP) provides remedies for issuers of tax-exempt bonds, \ntax credit bonds, and direct pay bonds that voluntarily come forward to resolve a violation that \ncannot be corrected under self-correction programs found in the Treas. Reg. or other published \nguidance. Notice 2008-31 provides information and general guidance about TEB VCAP. Internal \nRevenue Manual (IRM) Section 7.2.3 provides general procedures under which the IRS will \nenter into closing agreements. Closing agreement terms and amounts vary by the degree of the \nviolation as well as the facts and circumstances. \nTEB VCAP offers standardized methods for resolving certain types of noncompliance, \nreferred to as resolution standards. For example, TEB VCAP offers a resolution standard for \ncircumstances in which a failure of an escrow agent or trustee to perform obligations under an \nescrow agreement to purchase U.S. Treasury Securities – State and Local Government Series \nnecessary to maintain compliance with yield restriction requirements results in a yield restriction \nviolation. TEB VCAP is also available to resolve other violations of the yield restriction and rebate \nrequirements. \nAn issuer must use Form 14429, Tax Exempt Bonds Voluntary Closing Agreement Program \nRequest, to submit a request and provide the required information. While the IRS generally \nenters into closing agreements with the issuer of the bonds, in certain cases other parties to the \nbond transaction (including an entity borrowing the bond proceeds) may also participate in the \nnegotiations and jointly execute the agreement. \nFor more information about this program, including request submission requirements, case \nprocessing procedures and resolutions standards, see IRM Section 7.2.3. \n25 \n"
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p5005.pdf
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0919 Publ 5005 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5005.pdf
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[
" \n \nTax Exempt & \nGovernment Entitites \nYour Responsibilities as a Conduit \nIssuer of Tax-Exempt Bonds \nPublication 5005 (Rev. 9-2019) Catalog Number 59471F \nDepartment of the Treasury Internal Revenue Service www.irs.gov \n",
" \n \n \n \n \n \n \n \n \nContents \nIntroduction .............................................................................................................................1 \nBackground .............................................................................................................................1 \nTax-Exempt Conduit Bonds ...................................................................................................1 \nParties to Conduit Bond Issue ...............................................................................................2 \nBonds Supported by Leases..................................................................................................2 \nExamples of the Tax Compliance Responsibilities of Conduit Issuers ..............................2 \nCertain Procedural Considerations for Conduit Issuers .....................................................8 \nCertain Tax Credit Bonds .....................................................................................................10 \nMore Information...................................................................................................................11 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nIntroduction \nMunicipal bonds provide tax-exempt financing for certain qualified purposes including the \nconstruction of hospitals, residential rental housing, solid waste facilities, colleges and \nuniversities and cultural institutions. Tax-exempt financing also is available for the furtherance of \ngovernmental purposes. \nThis publication provides an overview for state and local governments of the responsibilities of \nthe conduit issuer on tax compliance in municipal financing arrangements commonly known \nas conduit financings. The term “conduit issuer” refers to an issuer of tax-exempt bonds in \na conduit financing. A conduit financing is generally a situation where tax-exempt bonds are \nissued by a state or local government and the proceeds are used for a defined qualified purpose \nby an entity other than the government issuing the bonds (the conduit borrower). For tax-exempt \nbonds, all applicable federal tax law requirements must be met to ensure that interest earned \nby bondholders is exempt from taxation under Internal Revenue Code (IRC) Section 103. For \ninformation about the more specific rules that apply to qualified 501(c)(3) bonds, other qualified \nprivate activity bonds and governmental bonds, see IRS Publications 4077, Tax-Exempt Bonds \nfor 501(c)(3) Charitable Organizations, 4078, Tax-Exempt Private Activity Bonds, and 4079, \nTax-Exempt Governmental Bonds. IRS provides additional information at irs.gov/bonds. \nBackground \nTax-exempt bonds are valid debt obligations of state and local governments, commonly referred \nto as “issuers”— the interest on which is tax-exempt. This means that the interest paid to \nbondholders is not includable in their gross income for federal income tax purposes. This tax-\nexempt status continues throughout the life of the bonds provided that all applicable federal tax \nlaws are satisfied. Various requirements apply under the IRC and Income Tax Regulations (Treas. \nReg.) including, but not limited to, information filing and other requirements related to issuance, \nthe proper and timely use of bond-financed property, and arbitrage yield restriction and rebate \nrequirements. The benefits of tax-exempt bond financing can apply to the many types of \nmunicipal debt financing arrangements through which government issuers obligate themselves, \nincluding notes, loans, lease purchase contracts, lines of credit and commercial paper. \nTax-Exempt Conduit Bonds \nBonds issued to make loans to entities other than state or local governments are known as \n“conduit bonds” or “conduit issues” and state or local governments that issue these bonds are \nknown as “conduit issuers.” Generally, to be tax-exempt, bonds issued by conduit issuers must \nbe either governmental bonds or qualified bonds defined in IRC section 141(e) (for example, \nexempt facility bonds, qualified small issue bonds or qualified 501(c)(3) bonds) that are not \narbitrage bonds under IRC Section 148 and meet the requirements of IRC Section 149. \nThe federal tax compliance rules covered in this publication are those that are the responsibility \nof the conduit issuer. To meet these requirements, conduit issuers must ensure that certain \nrules are met at the time the bonds are issued and throughout the term of the bonds. The IRS \nencourages conduit issuers and borrowers to implement written tax compliance procedures that \nwill enable them to timely identify and correct violations that might result in the loss of the tax-\nexempt status of their bonds. \n1 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nParties to Conduit Bond Issue \nA conduit issuer in a conduit bond financing typically issues the bonds and loans the bond \nproceeds to a conduit borrower. A conduit borrower is generally responsible for the payment \nof debt service on the conduit bond issue and is usually contractually obligated to maintain \nthe tax-exempt status of the bonds. The conduit issuer is treated as a “taxpayer” for federal \ntax purposes and is the party generally responsible for tax compliance. However, the bond \ndocuments usually provide for delegation of certain responsibilities to the conduit borrower. \nThe bondholders rely on both the conduit issuer and the conduit borrower to maintain the tax-\nexempt status of the bonds. \nBonds Supported by Leases \nCertain bonds issued by state or local governments are not used to make loans to other entities. \nNevertheless, these issues (for example, certain airport bonds) may be used to finance facilities \nleased to another entity for the entire term of the bonds. While these issues are not conduit \nbonds, the lessee of the facilities often is primarily responsible for many of the compliance \nrequirements and the bonds may be treated as conduit bonds for many purposes. \nExamples of the Tax Compliance Responsibilities of Conduit Issuers \nThe following are examples of the tax compliance responsibilities of the conduit issuer in the \nfinancing of conduit bonds where conduit issuers must take specific actions. The responsibilities \nare not all inclusive and additional actions may be required for certain types of financings or in \ncertain circumstances. \nInformation Filing Requirements: Conduit issuers must file certain information returns under \nIRC Section 149(e). The information return that a conduit issuer must file is determined by the \nsize and type of conduit issuance. However, most conduit issuers are required to file Form 8038, \nInformation Return for Tax-Exempt Private Activity Bond Issues. \n2 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nInformation Return \nDue Date \nWhere to File \nForm 8038, Information Return \nfor Tax-Exempt Private Activity \nBond Issues. \nGenerally, this return must \nbe filed by the 15th day of the \nsecond month following the \nquarter in which the bonds \nwere issued. For example, the \ndue date of the return for bonds \nissued on February 1 is May 15. \nFile these returns with the IRS: \nInternal Revenue Service Center \nOgden, UT 84201 \nForm 8038-G, Information \nReturn for Tax-Exempt \nGovernmental Bonds, for \ngovernmental bonds with an \nissue price of $100,000 or \ngreater. \nForm 8038-GC, Information \nReturn for Small Tax-Exempt \nGovernmental Bond Issues, \nLeases, and Installment Sales, \nfor governmental bonds with \nan issue price of less than \n$100,000. \nGenerally, both these returns \nmust to be filed by the 15th day \nof the second month following \nthe quarter in which the bonds \nwere issued. For example, the \ndue date of the return for bonds \nissued on February 15 is May 15. \nForm 8038-GC may also be \nfiled on a consolidated basis \nfor bond issues of less than \n$100,000 each. \nConsolidated returns are due \nby February 15 following the \ncalendar year in which the \nbonds were issued. \nExample: An issuer issues three \ngovernmental bond issues: \nIssue A on March 1, 2018, for \n$50,000; Issue B on June 15, \n2018, for $75,000; and Issue \nC on October 5, 2018, for \n$30,000. The issuer can file one \nconsolidated return by February \n15, 2019, for all three bond \nissues. \nFile these returns with the IRS: \nInternal Revenue Service Center \nOgden, UT 8420 \nLate Filing of Information Returns: A conduit issuer may request an extension of time to file \nForms 8038, 8038-G, or 8038-GC, so long as the failure to file the return on time was not due to \nwillful neglect. To request an extension, the conduit issuer must follow the procedures outlined in \nRevenue Procedure 2002-48, 2002-37 I.R.B. 531. These procedures require the conduit issuer \nto: 1) attach a letter to the return filed (Form 8038, 8038-G, 8038-GC) explaining when the return \nwas due, why it wasn’t filed timely, and whether the bond issue is under IRS examination; 2) \nenter on top of the return “Request for Relief under section 3 of Revenue Procedure 2002-48” \nand 3) file the letter and return with the IRS at the Ogden Submission Processing Center. \nVolume Cap Limit: The volume cap limit for certain qualified private activity bonds, under IRC \nSection 146, limits an issuer to a maximum amount of tax-exempt bonds that can be issued \nto finance a particular qualified purpose during a calendar year. If, during a given year, an \nissuing authority issues qualified private activity bonds in excess of its volume cap limit, the \ntax-exempt status of those bonds is jeopardized. A conduit issuer must monitor volume cap \nallocations to properly file information returns and make carryforward elections. Certain types of \n3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nqualified private activity bonds do not require volume cap allocations. In addition, certain current \nrefunding bonds do not require volume cap allocations to the extent the amount of refunding \nbonds does not exceed the outstanding amount of the refunded bonds. \nCarryforward of Unused Volume Cap: A conduit issuer may elect to carry any unused \nvolume cap of a calendar year forward for three years. This election can be made for each of \nthe carryforward purposes described IRC Section 146. This generally includes qualified private \nactivity bond purposes subject to volume cap except for the purpose of issuing qualified small \nissue bonds. This election is made by filing IRS Form 8328, Carryforward Election of Unused \nPrivate Activity Bond Volume Cap, by the earlier of February 15 following the year in which the \nunused amount arises or the date of issue of any bonds pursuant to the carryforward election. \nOnce Form 8328 is filed, the issuer may not revoke the carryforward election or amend the \ncarryforward amounts shown on the form. Errors on this form cannot be corrected through an \namended filing. The conduit issuer may file a TEB Voluntary Closing Agreement Program request \nto correct mathematical, typographical and similar errors. See Notice 2008-31, 2008-11 I.R.B. \n592, and Tax Exempt Bonds Voluntary Compliance. \nPublic Approval Requirement: Generally, prior to issuance, qualified private activity bonds \n(including qualified 501(c)(3) bonds) must be approved by an elected representative for the \ngovernmental entity issuing the bonds and, in some cases, for each governmental entity having \njurisdiction over the area in which the bond-financed facility is to be located. The public approval \nmust occur after the holding of a public hearing following reasonable public notice before the \npublic hearing and must be completed within a prescribed period. As such, the conduit issuer \nis involved in certain aspects of the public approval process. Public approval by a governmental \nunit may also be by voter referendum. IRC Section 147(f) and Treas. Reg. Section 1.147(f)-1 \ndefine the rules for this requirement. \nLimitations on Fees Charged by the Conduit Issuer: Conduit issuers may charge fees \npayable either out of the bond proceeds or by the conduit borrower. The conduit issuer may use \nthese fees to offset all or part of the conduit issuer’s costs and may also be used to raise funds \nfor governmental purposes of the conduit issuer. The fees may increase the effective yield of \nthe conduit loan when viewed by the conduit issuer as a purpose investment. IRC Section 148 \ngenerally limits the yield on purpose investments to the yield on the bonds plus a spread. This \nlimitation effectively limits the size of the fees that the conduit issuer may charge regardless of \nwhether paid periodically or up front. Conduit issuers generally must ensure that the yield on \nthe conduit loan does not exceed the yield on the bonds by more than the permitted spread to \nprevent the bonds from becoming arbitrage bonds. \nCertification on Expectations for Use and Investment of Proceeds: Treas. Reg. Section \n1.148-2(b)(2)(i) provides that an officer of the issuer responsible for issuing the bonds must, in \ngood faith, certify the issuer’s reasonable expectations as of the issue date. The certification \nmust state the facts and estimates that form the basis of the issuer’s expectations. The \ncertification is evidence of the issuer’s expectations, but does not establish any conclusions of \nlaw or any presumptions about either the issuer’s actual expectations or their reasonableness. \nThis certification is not required if the conduit issuer reasonably expects, as of the issue date, \nthat there will be no unspent gross proceeds after the issue date, other than gross proceeds in a \nbona fide debt service fund or the issue price of the bond issue does not exceed $1,000,000. \n4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nReimbursement Declarations of Official Intent: Under Treas. Reg. Section 1.150-2, a conduit \nissuer or conduit borrower is permitted to use bond proceeds to reimburse certain expenditures \npaid before the date of issuance subject to certain requirements. One requirement is that the \nconduit issuer must adopt a declaration of official intent to reimburse expenditures not later than \n60 days after the reimbursed expenditure is paid. In the case of qualified 501(c)(3) bonds only, a \nconduit borrower may also adopt a declaration of official intent. Accordingly, for all other types \nof qualified private activity bonds the conduit issuer must act to adopt declarations of official \nintent to permit reimbursement financing. \nQualified Hedge: A conduit issuer pursuant to Treas. Reg. Section 1.148-4(h) must identify a \nqualified hedge on its books and records maintained for the hedged bonds not later than 15 \ncalendar days after the date on which the conduit issuer (or conduit borrower) and the hedge \nprovider enter into a hedge contract. \nDeliberate Actions: Bonds issued by a conduit issuer can lose their tax-exempt status if the \nconduit issuer or conduit borrower takes a deliberate action, after the issue date, that causes the \nissue to fail to meet the federal tax requirements for the bonds. A deliberate action is any action \ntaken by the conduit issuer or conduit borrower that is within its control. Intent to violate the \nrequirements of the IRC is not necessary for an action to be deliberate. \nRemedial Actions: A conduit issuer, often with the involvement of the conduit borrower, may \ntake a remedial action under Treas. Reg. Section 1.141-12 and Revenue Procedure 2018-26, \n2018-10 I.R.B. 546 to cure a deliberate action that would otherwise cause a governmental bond \nissue or qualified 501(c)(3) bond to become a nonqualified private activity bond issue. If the \nremedial action requires providing a notice of defeasance to the IRS, the conduit issuer must \nprovide the notice. Remedial actions include redemption or defeasance of bonds, alternative use \nof disposition proceeds and alternative use of bond-financed facilities. Additionally, if the bonds \nare treated as “reissued” under the Treas. Reg., the conduit issuer must test the reissued bonds \nto determine if the interest on the bonds remains exempt from gross income for federal tax \npurposes (see Bond Modifications section below). \nRedemption or defeasance of bonds are remedial actions prescribed in Treas. Reg. Section \n1.142-2 for certain failures to properly use the proceeds of exempt facility bonds. The conduit \nissuer in this case also must provide a notice of defeasance to the IRS. Similar rules apply to \nqualified small issue bonds and qualified redevelopment bonds. \nBond Modifications: An agreement between a bondholder and a conduit issuer (or conduit \nborrower) to modify the terms of any bonds, whether direct or indirect, may cause the modified \nbonds to be treated as new bonds for federal income tax purposes (that is, to be “reissued”). \nIf the conduit bond is considered reissued under IRC Section 1001, then the conduit bond \nmust be tested to determine if the interest on the bonds remains exempt from gross income \nfor federal tax purposes. Revenue Ruling 81-281, 1981-2 C.B. 18, provides that interest on tax-\nexempt conduit bonds is not excludable from gross income after the terms of the bonds are \nsubstantially altered without action by the state or local government issuer. A conduit issuer may \ngenerally meet this requirement to approve reissued bonds by adopting a formal resolution of \nthe governing body of the conduit issuer approving the modification of the terms. In addition, the \nconduit issuer must satisfy all federal tax requirements including timely filing Form 8038, 8038-G \nor 8038-GC, treating the date of the modification as the date of issuance of the modified bonds. \n5 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nElections: The Treas. Reg. on private activity bonds generally require that the conduit issuer \nmake elections in writing and retain them as part of the bond documents. Elections cannot be \nrevoked without permission of the IRS Commissioner. Many elections have to be made on or \nbefore the issue date of the bonds. \nExamples of Elections Include the Election: \n To waive the right to treat a purpose investment as a program investment; \n To waive the right to invest in higher yielding investments during any temporary period; \n Of the issuer of a pooled financing issue to apply rebate spending exceptions separately to \neach conduit loan; \n For purposes of the two-year spending exception from rebate to apply certain provisions \nbased on actual facts rather than reasonable expectations; \n For purposes of the two-year spending exception from rebate to exclude from available \nconstruction proceeds the earnings on a reasonably required reserve fund; \n For purposes of the two-year spending exception to treat a portion of an issue as a separate \nconstruction issue from rebate; \n To pay 1.5% penalty in lieu of arbitrage rebate; and \n• \nArbitrage Rebate Requirements/Yield Reduction Payments: In certain circumstances, Treas. \n \nReg. Section 1.148-5(c) permits the conduit issuer to make payments to the U.S. Department of \n \nthe Treasury in lieu of restricting the yield on investments made with bond proceeds at the end \n \nof a temporary period. \nConduit issuers of tax-exempt bonds file Form 8038-T, Arbitrage Rebate, Yield Reduction and \nPenalty in Lieu of Arbitrage Rebate, to make: \n1. Yield reduction payments; \n2. Arbitrage rebate payments; \n3. Penalty in lieu of rebate payments; \n4. The termination of the election to pay a penalty in lieu of rebate; and \n5. Payments for penalty for failure to pay arbitrage rebate on time. \n \nA yield reduction payment or arbitrage rebate installment payment must be paid by conduit \n \nissuers no later than 60 days after the end of every 5th bond year throughout the term of a bond \n \nissue. The payment must be equal to at least 90% of the amount due as of the end of that 5th \n \nbond year. Upon redemption or final maturity of a bond issue, a payment of 100% of the amount \n \ndue must be paid no later than 60 days after the discharge date. \nA failure to timely pay arbitrage rebate will be treated as not having occurred if the failure is \nnot due to willful neglect and the conduit issuer submits a Form 8038-T with a payment of \nthe rebate amount owed, plus penalty and interest. The penalty may be waived under certain \ncircumstances. For more information, see Treas. Reg. Section 1.148-3(h)(3) and Revenue \nProcedure 2005-40, 2005-28 I.R.B. 83. \nIn general, a request for recovery of overpayment of arbitrage rebate can be made when the \nconduit issuer can establish that an overpayment occurred. An overpayment is the excess of \n6 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nthe amount paid to the U.S. Department of the Treasury for an issue under IRC Section 148 \nover the sum of the rebate amount for the issue as of the most recent computation date and all \namounts that are otherwise required to be paid under Section 148 as of the date the recovery is \nrequested. The request can be made by the conduit issuer completing and filing Form 8038-R, \nRequest for Recovery of Overpayments Under Arbitrage Rebate Provisions, with the IRS. \nRecord Retention Requirements: IRC Section 6001 and Treas. Reg. Section 1.6001-1(a) \ngenerally provide that any person subject to income tax, or any person required to file a return \nof information with respect to income, must keep books and records sufficient to establish the \namount of gross income, deductions, credits or other matters that must be shown on a return. \nThis includes Form 8038 series and other returns filed by the conduit issuer with respect to a \nbond issue. \nIRS Examination of Conduit Issues: The the conduit issuer, and not the conduit borrower, is \ntreated as the “taxpayer” in IRS examinations of tax-exempt bonds, including conduit bonds. \nThis means that the conduit issuer will receive the letter initiating the examination and must be \na party to any closing agreement resolving an IRS examination. IRS procedures generally define \nthe “issuer” as “the state or political subdivision or entity that issues bonds on behalf of a state \nor local government.” \nRequesting Voluntary Closing Agreements: The TEB Voluntary Closing Agreement Program \n(TEB VCAP) is described in Notice 2008-31, 2008-11 I.R.B. 592. This program provides \nremedies for issuers, including conduit issuers, who voluntarily come forward to resolve a \nviolation that cannot be self-corrected under programs described in the Treas. Regs. or other \npublished guidance. Closing agreement terms and amounts may vary according to the degree \nof violation as well as the facts and circumstances surrounding the violation. This notice and \nInternal Revenue Manual (IRM) Section 7.2.3 provide that the conduit issuer must request and \nexecute a voluntary closing agreement. \nRequesting Private Letter Rulings: Revenue Procedure 2019-1 (updated annually) and \nRevenue Procedure 96-16 provide procedures under which an issuer of tax-exempt bonds can \nrequest a private letter ruling. Revenue Procedure 96-16 has procedures for “reviewable” private \nletter ruling requests that under IRC Section 7478 may be reviewed by the U.S. Tax Court and \nfor “nonreviewable” private letter ruling requests that cannot be reviewed by the U.S. Tax Court. \nUnder Section 7478, a conduit issuer may appeal the denial of a reviewable private letter ruling \nto the U.S. Tax Court. The revenue procedure generally requires that, in the case of a conduit \nissue, the private letter ruling request must be submitted by the conduit issuer, rather than the \nconduit borrower. \n7 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nCertain Procedural Considerations for Conduit Issuers \nConduit issuers may adopt procedures and other options for its conduit bond program to assist \nthem in their tax compliance responsibilities. \nA “one size fits all” approach is not workable, due to the various organizational structures of \nconduit issuers as well as the unique features of different financings. The options below are \nmeant to help conduit issuers develop adequate written procedures to assist them in fulfilling \ntheir tax responsibilities for their conduit financings. \nProcedures for Closing and Pre-Closing Matters: The chart below identifies certain types \nof monitoring procedures a conduit issuer may adopt to ensure compliance with the federal tax \nrules that must be satisfied at or prior to the closing of the bond transaction. \nProcedure \nDescription of Procedures\nfor Closing and Pre-Closing\nMatters \nResponsibilities \nDescribed Above \nVolume Cap \nProcedures to monitor use \nof volume cap, including \ncarryforward elections \nVolume Cap Limit \nCarryforward of Unused Volume \nCap \nPublic Approval \nProcedures on public hearings \nconducted by the issuer and any \napprovals by the issuer \nPublic Approval Requirement \nIssuer Fees \nProcedures to ensure that issuer \nfees do not exceed IRC and \nTreas. Reg. limits \nLimitations on Fees Charged by \nthe Conduit Issuer \nClosing Certifications \nDue diligence procedures to \nensure that certifications are \nreasonable \nCertification on Expectations for \nUse and Investment of Proceeds \nOfficial Intent \nProcedures to ensure that \nreimbursement resolutions meet \nthe Treas. Reg. requirements \nReimbursement Declarations of \nOfficial Intent \nQualified Hedge \nProcedures to timely identify \nqualified hedges \nQualified Hedge \nElections \nProcedures for federal income \ntax elections \nElections \nDesignation of Officials to Assist with Certain Actions: Other than the statutory requirement \nthat an “applicable elected representative” must provide public approval, the provisions of \nthe IRC, Treas. Reg. or other guidance do not specifically provide that particular officials of a \nconduit issuer have specific tax compliance responsibilities. However, as discussed in the first \npart of this publication, the Treas. Reg. and other guidance require that a conduit issuer must be \ninvolved in a number of different actions including: (1) responding to an IRS examination of the \nbond issue; (2) submitting a voluntary closing agreement request to the IRS; (3) implementing \na “remedial action” upon the change of use of bond-financed property, including, where \nnecessary, filing a Form 8038 and filing a notice of defeasance; and (4) executing a “hedge \nidentification” permitting an interest rate swap or other interest rate hedge to be taken into \naccount in determining bond yield. \n8 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nA conduit issuer should consider whether to designate one or more officials, to be responsible \nfor assisting in these actions. Conduit issuers may also consider requiring a conduit borrower to \nidentify a particular official or officials to assist the conduit issuer in these actions. \nPost-Issuance Compliance Monitoring: A conduit issuer may adopt written post-issuance \nmonitoring procedures to ensure the continuous compliance of its bond issues with federal tax \nrequirements. In formulating its procedures a conduit issuer may consider: \n Designating conduit issuer officials to assist in post-issuance compliance; \n Requiring conduit borrowers to identify officials responsible for assisting the issuer with post-\nissuance compliance monitoring; \n Providing training or other technical support to designated officials of the conduit issuer and \nthe conduit borrower; \n Requiring the conduit borrower to demonstrate that it has adopted written post-issuance \ncompliance monitoring procedures before the approval of a bond issue; \n Designating time intervals within which the conduit issuer and conduit borrower will complete \ncompliance monitoring activities; \n Timely completing remedial actions to correct (including VCAP requests) or otherwise resolve \nidentified noncompliance; and \n Requiring conduit borrowers to notify the conduit issuer of the completion of post-issuance \ncompliance monitoring activities. \nRecord Retention: A conduit issuer may adopt written procedures to maintain adequate \nrecords to support the tax compliance of its bond issues. In formulating its procedures, a \nconduit issuer may consider: \n Designating which types of records the conduit issuer must retain and which types of records, \nif any, the conduit borrower will retain; and \n Designating the manner in which the records will be retained, including back-ups of any \nelectronic records. \nProcedures for Post-Closing Matters: The chart below identifies certain types of compliance \nmonitoring and record retention procedures a conduit issuer may adopt to ensure compliance \nwith the federal tax rules required to be satisfied after the issuance of the bonds. \n9 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nProcedure \nDescription of Procedures\nfor Closing and Post-\nClosing Matters \nResponsibilities \nDescribed Above \nInformation Return Filing \nProcedures to ensure timely \nfiling of information returns, \nincluding procedures for \namended and late filed returns \nInformation Filing Requirements \nLate Filing of Information Returns \nChange in Use of Proceeds or \nFinanced Facilities \nProcedures to timely identify and \nremediate deliberate actions \nDeliberate Actions \nRemedial Actions \nReissuance \nProcedures to satisfy \ntax requirements when a \nmodification in terms results in \na reissuance for federal income \ntax purposes \nBond Modifications \nElections \nProcedures for timely federal \nincome tax elections \nElections \nArbitrage Compliance \nProcedures for the timely \ncomputation and payment \nof arbitrage rebate and yield \nreduction payments \nArbitrage Rebate Requirements/ \nYield Reduction Payments \nRecord Retention \nProcedures for the maintenance \nof records. \nRecord Retention Requirements \nIRS Contacts \nProcedures for compliance \ncheck questionnaires, \nexaminations, VCAP and private \nletter rulings. \nIRS Examination of Conduit \nIssues \nRequesting Voluntary Closing \nAgreements \nRequesting Private Letter \nRulings \nDesignation of Officials to Assist \nwith Certain Actions \nCertain Tax Credit Bonds \nThe tax compliance responsibilities discussed above generally apply to conduit issuers of \ncertain other types of tax-advantaged obligations including tax credit bonds issued under IRC \nSection 54A. The Tax Cuts and Jobs Act (2017) repealed the authority to issue tax-credit bonds. \nThe repeal applies to the authority to issue new clean renewable energy bonds, qualified energy \nconservation bonds, qualified zone academy bonds and qualified school construction bonds \nafter December 31, 2017. Conduit issuers of tax credit bonds issued prior to January 1, 2018, \nwere required to file Form 8038-TC, Information Return for Tax Credit Bonds and Specified \nTax Credit Bonds. As such, given the similarity of applicable tax requirements, conduit \nissuers of tax credit bonds should also consider adoption of written post-issuance monitoring \nprocedures to assist them in their tax compliance responsibilities. \n10 \n",
" \n \n \nMore Information \nYou can find information about the tax laws that apply to municipal financing arrangements, \nincluding tax forms and instructions, revenue procedures and notices, and publications at \nwww.irs.gov/bonds. If you have account-specific questions, you can call Customer Account \nServices toll-free at 877-829-5500. \n11 \n"
] |
f8453x.pdf
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0819 Form 8453-X (PDF)
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https://www.irs.gov/pub/irs-pdf/f8453x.pdf
|
[
"Form 8453-X\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service \nPolitical Organization Declaration for Electronic Filing \nof Notice of Section 527 Status\n▶ Go to www.irs.gov/Form8453X for instructions and the latest information.\nOMB No. 1545-0047\nPart I \nNotice Information \n1 Name of organization \nEmployer identification number \n2 Mailing address (P.O. box or number, street, and room or suite number) \nCity or town, state, and ZIP code \n3 Confirmation number \n4a Date Form 8871 filed \n4b Time Form 8871 filed \nPart II \nDeclaration \nSign \nHere \nUnder penalties of perjury, I declare that the organization named in Part I is to be treated as a tax-exempt organization described in \nsection 527 of the Internal Revenue Code, that it has filed the electronic Form 8871 referenced above, and that I have examined that \nnotice, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and \ncomplete. \n▲\nSignature of authorized official \n▲\nDate \nInstructions \nAfter electronically submitting Form 8871, an \nauthorized official must sign, date, and send Form \n8453-X to: \nDepartment of the Treasury \nInternal Revenue Service \nOgden, UT 84201 \nUpon receipt of this form, the Internal Revenue Service \nwill send the organization a username and password that \nmust be used to file an amended or final Form 8871 or to \nelectronically file Form 8872, Political Organization \nReport of Contributions and Expenditures. \nFor Paperwork Reduction Act Notice, see separate Instructions for Form 8871. \nCat. No. 36512T \nForm 8453-X (Rev. 8-2019) \n"
] |
f673.pdf
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0819 Form 673 (PDF)
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https://www.irs.gov/pub/irs-pdf/f673.pdf
|
[
"Form 673\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service \nStatement for Claiming Exemption From Withholding \non Foreign Earned Income Eligible for the Exclusion(s) \nProvided by Section 911\n▶ Go to www.irs.gov/Form673 for the latest information.\nOMB No. 1545-0074 \nThe following statement, when completed and furnished by a citizen of the United States to his or her employer, permits the employer \nto exclude from income tax withholding all or a part of the wages paid for services performed outside the United States. \nYour first name and initial\nLast name\nYour social security number \nPart I \nQualification Information for Foreign Earned Income Exclusion \nI expect to qualify for the foreign earned income exclusion under either the bona fide residence or physical presence test for \ncalendar year \nor other tax year beginning \nand ending \n. \nPlease check applicable box: \nBona Fide Residence Test \nI am a citizen of the United States. I have been a bona fide resident of and my tax home has been located in \n(foreign country or countries) for an uninterrupted \nperiod which includes an entire tax year that began on \n(date) \n, 20 \n. \nI expect to remain a bona fide resident and retain my tax home in a foreign country (or countries) until the end of the tax year for \nwhich this statement is made. Or, if not that period, from the date of this statement until \n(date within tax year) \n, 20 \n. \nI have not submitted a statement to the authorities of any foreign country named above that I am not a resident of that country. \nOr, if I made such a statement, the authorities of that country thereafter made a determination to the effect that I am a resident of \nthat country. \nBased on the facts in my case, I have good reason to believe that for this period of foreign residence I will satisfy the tax home \nand the bona fide foreign resident requirements prescribed by section 911(d)(1)(A) of the Internal Revenue Code and qualify for the \nexclusion Code section 911(a) allows. \nPhysical Presence Test \nI am a citizen of the United States. Except for occasional absences that will not disqualify me for the benefit of section \n911(a) of the Internal Revenue Code, I expect to be present in and maintain my tax home in \n(foreign country or countries) for a 12-month \nperiod that includes the entire tax year \n. Or, if not the entire year, for the part of the tax year beginning \non \n, 20 \n, and ending on \n, 20 \n. \nBased on the facts in my case, I have good reason to believe that for this period of presence in a foreign country or \ncountries, I will satisfy the tax home and the 330 full-day requirements within a 12-month period under section 911(d)(1)(B). \nPart II \nEstimated Housing Cost Amount for Foreign Housing Exclusion (see instructions) \n1 \nRent \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1 \n2 \nUtilities (other than telephone charges) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2 \n3 \nReal and personal property insurance \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \n4 \nOccupancy tax not deductible under section 164 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \n5 \nNonrefundable fees paid for securing a leasehold \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \n6 \nHousehold repairs .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n7 \nEstimated qualified housing expenses. Add lines 1 through 6 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n8 \nEstimated base housing amount for qualifying period \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nSubtract line 8 from line 7. This is your estimated housing cost amount \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \nPart III \nCertification \nUnder penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and \nbelief it is true, correct, and complete. I further certify under penalties of perjury that: \n• The estimated housing cost amount entered in Part II, plus the amount reported on any other statements outstanding with other \nemployers, is not more than my total estimated housing cost amount. \n• If I become disqualified for the exclusions, I will immediately notify my employer and advise what part, if any, of the period for \nwhich I am qualified. \nI understand that any exemption from income tax withholding permitted by reason of furnishing this statement is not a \ndetermination by the Internal Revenue Service that any amount paid to me for any services performed during the tax year is \nexcludable from gross income under the provisions of Code section 911(a). \nYour Signature \nDate \nFor Paperwork Reduction Act Notice, see instructions. \nCat. No. 10183Y \nForm 673 (Rev. 8-2019) \n",
"Form 673 (Rev. 8-2019) \nPage 2 \nInstructions \nFuture Developments\nFor the latest information about developments related to Form \n673 and its instructions, such as legislation enacted after they \nwere published, go to www.irs.gov/Form673. \nWhat’s New\nService performed in a combat zone. For tax years beginning \nafter December 31, 2017, new rules regarding the tax home test \napply for certain individuals serving in a combat zone in support \nof the U.S. Armed Forces. For more information, see the \nInstructions for Form 2555.\nForm 2555-EZ. After tax year 2018, the Form 2555-EZ won’t be \navailable to make the election to exclude foreign earned income \nand the foreign housing cost amount. Beginning with tax year \n2019, all taxpayers will be required to use the Form 2555 to \nclaim the foreign earned income exclusion.\nInformation for Employee \nGive Form 673 to your U.S. employer to claim an exemption \nfrom U.S. income tax withholding on wages earned abroad to \nthe extent of the foreign earned income exclusion and foreign \nhousing exclusion. Your employer will then withhold the correct \namount of federal income tax from your pay. \nIf you qualify for the foreign earned income exclusion or the \nforeign housing exclusion or deduction, complete Form 2555. \nYou must attach the completed Form 2555 to your Form 1040 \nor Form 1040-SR to claim your exclusion or deduction.\nEstimated housing cost amount. The amount of qualified \nhousing expenses eligible for the housing exclusion is limited \ndepending on the location of your foreign tax home. See Pub. \n54 and the Instructions for Form 2555 for more details. \nInformation for Employer \nOnce you have received Form 673 completed by the employee, \nyou may discontinue withholding of U.S. income tax on those \nwages that qualify for the exclusion(s). If for any reason you \nbelieve the employee will not qualify for the exclusion(s), you \nshould disregard Form 673. \nNote: If you have questions about the exclusion(s), see \nPub. 54. \nPaperwork Reduction Act Notice \nWe ask for the information on this form to carry out the Internal \nRevenue laws of the United States. If you want to claim an \nexemption from withholding, you’re required to give this form (or \nsimilar statement) to your employer. \nYou aren’t required to provide the information requested on a \nform that is subject to the Paperwork Reduction Act unless the \nform displays a valid OMB control number. Books or records \nrelating to a form or its instructions must be retained as long as \ntheir contents may become material in the administration of any \nInternal Revenue law. Generally, tax returns and return \ninformation are confidential, as required by Code section 6103. \nThe average time and expenses required to complete and file \nthis form will vary depending on individual circumstances. For \nthe estimated averages, see the instructions for your income tax \nreturn. \nIf you have suggestions for making this form simpler, we \nwould be happy to hear from you. See the instructions for your \nincome tax return. \n"
] |
f4563.pdf
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0819 Form 4563 (PDF)
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https://www.irs.gov/pub/irs-pdf/f4563.pdf
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[
"Form 4563 \n(Rev. August 2019) \nExclusion of Income for Bona Fide Residents \nof American Samoa \nDepartment of the Treasury \nInternal Revenue Service \n▶ Attach to Form 1040 or 1040-SR. \n▶ Go to www.irs.gov/Form4563 for the latest information. \nOMB No. 1545-0074\nAttachment \nSequence No. 563\nName(s) shown on Form 1040 or 1040-SR\nYour social security number\nPart I \nGeneral Information\n1 \nDate bona fide residence began ▶\n, and ended ▶\n2 \n \nType of living quarters in \nAmerican Samoa\n▲\nRented room\nRented house or apartment\nQuarters furnished by employer\nPurchased home\n3 \na\nDid any of your family live with you in American Samoa during any part of the tax year? .\n.\n.\n.\n.\n.\n.\nYes\nNo\nb\nIf “Yes,” who and for what period? ▶\n4 \na\nDid you maintain any home(s) outside American Samoa? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nb \n \nIf “Yes,” show address of your home(s), whether it was rented, the name of each occupant, and his or her relationship to \nyou. ▶\n5 \nName and address of employer (state if self-employed) ▶\n6 \nComplete columns (a) through (d) below for days absent from American Samoa during the tax year. \n(a) Date left \n(b) Date \nreturned \n(c) Number of \ndays absent \n(d) Reason for absence \nPart II \nFigure Your Exclusion. Include only income that qualifies for the exclusion. See instructions. \n7 \nWages, salaries, tips, etc. \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n8 \nTaxable interest .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nOrdinary dividends .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \n10 \nBusiness income\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10 \n11 \nCapital gain\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \n12 \nRental real estate, royalties, etc.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \n13 \nFarm income .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13 \n14 \nOther income. List type and amount ▶\n14 \n15 \nAdd lines 7 through 14. This is the amount you may exclude from your gross income this tax year ▶\n15 \nSection references are to the Internal Revenue Code unless \notherwise noted. \nInstructions \nPurpose of form. Use Form 4563 to figure the amount of \nincome from American Samoa you may exclude from your \ngross income. \nWho qualifies. You generally qualify for the exclusion if you \nwere a bona fide resident of American Samoa for the entire tax \nyear and your income was:\n• From sources within American Samoa, or \n• Effectively connected with the conduct of a trade or business \nin American Samoa. \nEmployees of the United States. You may not exclude \namounts paid to you for services you performed as an employee \nof the U.S. Government or any of its agencies. This applies to \nboth civilian and military employees, but does not include \nemployees of the American Samoa government. \nWhere to file. If you are not enclosing a check or money order, \nfile your Form 1040 or 1040-SR (including Form 4563) with the\nDepartment of the Treasury, Internal Revenue Service, Austin, \nTX 73301-0215 USA.\nIf you are including a check or money order, file your return \nwith the Internal Revenue Service, P.O. Box 1303, Charlotte, NC \n28201-1303 USA. \nNote: If you do not qualify for the exclusion, follow the \nInstructions for Forms 1040 and 1040-SR. Report all your \ntaxable income, including income from U.S., foreign, and \npossession sources. Send your return to the address shown in \nthe Instructions for Forms 1040 and 1040-SR. \nAdditional information. Pub. 570 has more information and an \nexample of how to complete Form 4563. To get Pub. 570, see \nHow To Get Tax Help in the Instructions for Forms 1040 and \n1040-SR. \nPart II—Figure Your Exclusion \nOn lines 7 through 14 include only income that is from sources \nwithin American Samoa or effectively connected with the \nconduct of a trade or business in American Samoa. For details \non how to determine the source of income, see Source of \nincome next. \nFor Paperwork Reduction Act Notice, see instructions. \nCat. No. 12909U\nForm 4563 (Rev. 8-2019) \n",
"Form 4563 (Rev. 8-2019)\nPage 2 \nSource of income. The rules for determining the source of \nincome are explained in sections 861 through 865 and section \n937, Regulations section 1.937-2, and chapter 2 of Pub. 570. \nSome general rules are the following.\n• The source of wages, salaries, or tips is generally where the \nservices are performed. If you worked both in and outside \nAmerican Samoa, include on line 7 only wages, salaries, or tips \nearned while you were in American Samoa. \nDe minimis exception. This is an exception to the general \nrule for determining the source of income earned in American \nSamoa. Generally, income from American Samoa does not \ninclude compensation for services performed in American \nSamoa if during 2019 you:\n• Were a U.S. citizen or resident;\n• Were not a bona fide resident of American Samoa;\n• Were not employed by or under contract with an individual, \npartnership, or corporation that is engaged in a trade or \nbusiness in American Samoa;\n• Temporarily performed services in American Samoa for 90 \ndays or less; and \n• Earned $3,000 or less from such services.\nActive duty U.S. Armed Forces. If you are a bona fide \nresident of American Samoa and are stationed outside that \nterritory, your military compensation will be sourced in American \nSamoa under the Servicemembers Civil Relief Act (SCRA). If you \nare not a bona fide resident of American Samoa but perform \nservices in the territory, however, your military compensation \nwill not be sourced there. For further details, see Pub. 570.\nMilitary spouses. If you are the civilian spouse of a member \nof the U.S. Armed Forces, work in American Samoa, and retain \na residence or domicile in one of the 50 states or the District of \nColumbia under the Military Spouses Residency Relief Act \n(MSRRA), your wages, salaries, tips, and self-employment \nincome will not be considered income from American Samoa. \nUnder MSRRA, the military spouse must be in American Samoa \nsolely to be with his/her service member spouse who is serving \nin compliance with military orders. For details on MSRRA, see \nPub. 570.\n• The source of interest income is generally where the payer is \nlocated. For example, American Samoan source income \nincludes interest from a certificate of deposit issued by a bank \nor branch of a U.S. bank in American Samoa. \n• Generally, dividends are sourced where the paying \ncorporation is created or organized. \n• Alimony received from a person who is a bona fide resident of \nAmerican Samoa is sourced in American Samoa. \n• Except as provided in regulations, income from sources within \nthe United States or effectively connected with the conduct of a \ntrade or business in the United States is not income from \nAmerican Samoa. \n• The source of gains, profits, or income from the sale or \ndisposition of real property (and any interest in real property) is \ngenerally where the real property is located. \nPersonal property. The source of income from the sale of \nnondepreciable personal property is generally the seller’s \nresidence. For example, if you are a bona fide resident of \nAmerican Samoa, gain from the sale or disposition of personal \nproperty is generally from sources within American Samoa. \nIncome from the sale of inventory is generally sourced where \nthe title to the property passes. See section 865 for details. \n▲\n!\nCAUTION\nSpecial rules may apply to bona fide residents of U.S. \nterritories who have gain from dispositions of certain \ninvestment property within the 10-year period \nbeginning when they became a bona fide resident. \nFor details, see Special Rules for Gains From Dispositions of \nCertain Property in chapter 2 of Pub. 570, Regulations section \n1.937-2(f)(1), and Examples 1 and 2 of section 1.937-2(k). \nFiling Form 1040 or 1040-SR\nTo exclude your qualifying income from American Samoa, \ncomplete Form 4563 and attach it to your Form 1040 or \n1040-SR. \nIncome you must report on Form 1040 or 1040-SR. You must \nreport on Form 1040 or 1040-SR your worldwide income for the \ntax year that does not qualify for the exclusion. The source of \nthat income does not matter. \nDeductions and credits you cannot take on Form 1040 or \n1040-SR. If you claim the exclusion, you cannot take any \ndeduction or credit on Form 1040 or 1040-SR that is definitely \nrelated to the excluded income. \nDeductions and credits that are not definitely related to a \nparticular type of income must be allocated between your \nexcluded income and your other income to find the amount you \ncan take on Form 1040 or 1040-SR. Examples of deductions \nthat are not definitely related to a particular type of income are: \n• The standard deduction; and \n• Certain itemized deductions such as medical and dental \nexpenses, gifts to charity, and real estate taxes and mortgage \ninterest on your personal residence. \nFor more details, including how to figure the amount allocable \nto the excluded income, see chapter 4 of Pub. 570. \n▲\n!\nCAUTION\nIf you were a bona fide resident of American Samoa \nfor the entire tax year, or were considered a bona fide \nresident of American Samoa for the entire tax year \nunder the special rules for the year of a move (see \nchapter 1 of Pub. 570), but not a U.S. citizen or resident, certain \ncredits and deductions may not be available to you. See \nNonresident alien under Bona Fide Resident of American Samoa \nin chapter 3 of Pub. 570 for specific information. \nSelf-employed individuals. If you were self-employed and \nyour net earnings from self-employment were $400 or more, \ngenerally you will have to pay self-employment tax on those \nearnings even though you can exclude the earnings from your \ngross income. Use Schedule SE (Form 1040 or 1040-SR) to \nfigure any self-employment tax due. \nPenalty for Failure To Furnish Information \nIf you became or ceased to be a bona fide resident of a U.S. \npossession, you may be required to file Form 8898. If you fail to \nprovide the required information, you may have to pay a $1,000 \npenalty for each failure unless you can show the failure was due \nto reasonable cause and not willful neglect. This penalty is in \naddition to any criminal penalty provided by law. For details, see \nthe Instructions for Form 8898. \nPaperwork Reduction Act Notice. We ask for the information \non this form to carry out the Internal Revenue laws of the United \nStates. You are required to give us the information. We need it \nto ensure that you are complying with these laws and to allow \nus to figure and collect the right amount of tax. \nYou are not required to provide the information requested on \na form that is subject to the Paperwork Reduction Act unless \nthe form displays a valid OMB control number. Books or \nrecords relating to a form or its instructions must be retained as \nlong as their contents may become material in the \nadministration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by \nsection 6103. \nThe average time and expenses required to complete and file \nthis form will vary depending on individual circumstances. For \nthe estimated averages, see the instructions for your income tax \nreturn. \nIf you have suggestions for making this form simpler, we \nwould be happy to hear from you. See the instructions for your \nincome tax return. \n"
] |
f706ce.pdf
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1019 Form 706-CE (PDF)
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https://www.irs.gov/pub/irs-pdf/f706ce.pdf
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[
"▶ For Paperwork Reduction Act Notice, see instructions.\nForm 706-CE\nDepartment of the Treasury \nInternal Revenue Service \n(Rev. October 2019)\nCertificate of Payment of Foreign Death Tax\n▶ Go to www.irs.gov/Form706CE for the latest information.\nOMB No. 1545-0260\nDecedent’s first name and middle initial \nDecedent’s last name \nSocial security number \nCountry of citizenship at time of death \nCountry of legal residence (domicile) at time of death \nDate of death \nLast address (number and street; city, town, or post office; state or province; country; and ZIP or foreign postal code) \nName of executor, administrator, etc. \nAddress (number and street; apt. or suite no.; city, town, or post office; state or province; country; and ZIP or foreign postal code) \n1 \nName of foreign government imposing the tax \n2 \nDeath tax finally determined by that government. Do not include any interest \nor penalty. Show amount in foreign currency. \n3 \nWas the amount on line 2 figured under the provisions of a death tax convention? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\n4 \nList amount(s) of death tax paid (other than interest and penalties) and the date(s) of payment. Show amount(s) in foreign currency.\n5 \nThe description, location, and value (as established and accepted by the death tax officials of the government named above) of the property \nsubjected to the death tax are as follows: \nItem \nNumber \nDescription and location \nValue \n(show in \nforeign currency) \n1 \n(If necessary, attach additional sheets and follow the same format.) \nCat. No. 10149C \nForm 706-CE (Rev. 10-2019) \n",
"Form 706-CE (Rev. 10-2019) \nPage 2 \n6 \nHas any refund of part or all of the death tax on line 2 been claimed or allowed? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nIf “Yes,” check the statement below that applies. \nRefund was allowed (show amount in foreign currency). ▶ \nClaim was rejected in full. \nConsideration is pending. \n7 \nExplain below if (a) any credit against or reduction of the death tax shown on line 2 is pending or was allowed, (b) property was taxed at more \nthan one rate, or (c) more than one inheritance was taxed. If you need more space, attach additional sheets. \n8 \nWill you claim a refund or credit (except as shown on line 6) for any of the amount shown on line 2? \n.\n.\n.\n.\n.\n.\nYes\nNo\nUnder penalties of perjury, I declare that I have examined this statement, including any attached sheets, and to the best of my knowledge and \nbelief, it is true, correct, and complete. \n(Signature of executor, administrator, etc.) \n(Date) \n(Signature of executor, administrator, etc.) \n(Date) \nCertification \n(For use of authorized tax official of the foreign government imposing the death tax) \nThe information contained on lines 1 through 7 above, including any attached statements, \nis certified to be correct in my attached statement. \nwithout exception (or) \nexcept as indicated \n(Signature) \n(Title) \n(Government) \n(Date) \nForward a certified copy to the Internal Revenue Service as shown on the next page. \nForm 706-CE (Rev. 10-2019) \n",
"Form 706-CE (Rev. 10-2019) \nPage 3 \nFuture developments. For the latest information about \ndevelopments related to Form 706-CE and its instructions, such \nas legislation enacted after they were published, go to \nwww.irs.gov/Form706CE.\nGeneral Instructions \nSection references are to the Internal Revenue Code unless \notherwise noted. \nThe executor of the decedent’s estate must file Form 706-CE \nbefore the IRS can allow a credit for foreign death taxes claimed \non Form 706, United States Estate (and Generation-Skipping \nTransfer) Tax Return. As explained in the instructions for \nSchedule P of Form 706, the credit for foreign death taxes is \nauthorized either by statute or treaty. See the instructions for \nSchedule P of Form 706, section 2014, and the related \nregulations for more information on the credit for foreign death \ntaxes and its application in cases involving a death tax treaty, \nincluding how to figure the amount of the credit.\nPrepare three copies of Form 706-CE for each foreign \ncountry’s death tax for which you are claiming credit. Send the \noriginal form and one copy to the foreign government to whom \nyou paid the tax. Ask that office to certify the form and send it to \nthe Internal Revenue Service Center listed below. Keep the third \ncopy for your records. \nIf the foreign government refuses to certify Form 706-CE, the \nexecutor must file it directly with the Internal Revenue Service \nCenter listed in the Where to file section of these instructions. \nComplete the entire form, except the certification. Attach a \nstatement under penalties of perjury to explain why the foreign \ngovernment did not certify it. In addition, attach a copy of the \nforeign death tax return and a copy of the receipt or canceled \ncheck for the payment of the foreign death tax. \nIf you or any other person receives a refund of any of the \nforeign death tax for which you are claiming this credit, you or \nthe person receiving the refund must notify the Internal Revenue \nService Center listed in the Where to file section of these \ninstructions within 30 days of receiving any refund. Regulations \nsection 20.2016-1 describes what information to include in this \nnotice. The persons who received the refund must pay any \nadditional federal estate tax due. \nWhere to file. File Form 706-CE and amended Form 706-CE at \nthe following address.\nInternal Revenue Service Center \nAttn: E&G, Stop 824G \n7940 Kentucky Drive \nFlorence, KY 41042-2915\nIf you choose to use a private delivery service (PDS), send Form \n706-CE to this address. Go to www.irs.gov/PDS for the current \nlist of designated services.\nInternal Revenue Service Center \nAttn: E&G, Stop 824G \n7940 Kentucky Drive \nFlorence, KY 41042-2915\nPaperwork Reduction Act Notice. We ask for the information \non this form to carry out the Internal Revenue laws of the United \nStates. You are required to give us the information. We need it \nto ensure that you are complying with these laws and to allow \nus to figure and collect the right amount of tax. \nYou are not required to provide the information requested on \na form that is subject to the Paperwork Reduction Act unless \nthe form displays a valid OMB control number. Books or \nrecords relating to a form or its instructions must be retained as \nlong as their contents may become material in the \nadministration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by \nsection 6103. \nThe time needed to complete and file this form will vary \ndepending on individual circumstances. The estimated average \ntime is: \nRecordkeeping .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. 45 min. \nLearning about the law or the form .\n.\n.\n.\n.\n.\n.\n4 min.\nPreparing the form\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. 25 min.\nCopying, assembling, and sending \nthe form to the IRS \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. 27 min. \nIf you have comments concerning the accuracy of these time \nestimates or suggestions for making this form simpler, we would \nbe happy to hear from you. You can send us comments from \nwww.irs.gov/FormComments. Or you can write to the Internal \nRevenue Service, Tax Forms and Publications Division, 1111 \nConstitution Ave. NW, IR-6526, Washington, DC 20224. Do not \nsend the tax form to this address. Instead, see Where to file, \nearlier.\n"
] |
i706a.pdf
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0819 Inst 706-A (PDF)
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https://www.irs.gov/pub/irs-pdf/i706a.pdf
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[
"Instructions for Form 706-A\n(Rev. August 2019)\nUnited States Additional Estate Tax Return\n(For use with Form 706-A (Rev. August 2019))\nTo report dispositions or cessations of qualified use under section 2032A of the Internal Revenue Code\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal Revenue \nCode unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Form 706-A \nand its instructions, such as legislation \nenacted after they were published, go to \nIRS.gov/Form706A.\nWhat’s New\nNew mailing address. Effective \nJanuary 1, 2019, Form 706-A will be \nfiled in Kansas City, Missouri. See \nWhere To File, later.\nGeneral Instructions\nPurpose of Form\nAn heir must use Form 706-A to report \nthe additional estate tax imposed by \nsection 2032A(c) for an early disposition \nof specially valued property or for an \nearly cessation of a qualified use of \nspecially valued property.\nThe recapture tax is limited to the tax \nsavings attributable to the property \nactually disposed of (or for which \nqualified use ceased) rather than to the \ntax savings attributable to all the \nspecially valued property received by \nthe heir.\nWho Must File\nThe qualified heir must file Form 706-A \nif there was any taxable event (see \nTaxable Events, later) with respect to \nthe specially valued property even if no \ntax is ultimately due. Further, the \nqualified heir must file Form 706-A if \nthere was any involuntary conversion or \nexchange of the specially valued \nproperty even if the conversion or \nexchange is nontaxable.\nWhen To File and Pay\nFile Form 706-A and pay any additional \ntaxes due within 6 months after the \ntaxable disposition or cessation of the \nqualified use unless an extension of \ntime has been granted.\nUse Form 4768, Application for \nExtension of Time To File a Return \nand/or Pay U.S. Estate (and \nGeneration-Skipping Transfer) Taxes, to \napply for an automatic extension of time \nto file. Check the “Form 706-A” box in \nPart II of Form 4768.\nMake the check or money order \npayable to “United States Treasury” and \nwrite “Form 706-A” and the qualified \nheir's social security number on the \ncheck or money order.\nIf you are making an election to \nincrease basis, see Basis, later, for \ninformation on paying interest.\nPrivate delivery services (PDSs). \nYou can use certain PDSs designated \nby the IRS to meet the \"timely mailing as \ntimely filing/paying\" rule for tax returns \nand payments. Go to IRS.gov/PDS.\nThe PDS can tell you how to get \nwritten proof of the mailing date.\nFor the IRS mailing address to use if \nyou're using a PDS, go to IRS.gov/\nPDSStreetAddresses.\nPDSs can't deliver items to P.O. \nboxes. You must use the U.S. \nPostal Service to mail any item \nto an IRS P.O. box address.\nWhere To File\nEffective January 1, 2019, file Form \n706-A at the following address.\nDepartment of the Treasury\nInternal Revenue Service Center\nKansas City, MO 64999\nIf using a PDS, use this address.\nInternal Revenue Submission \nProcessing Center\n333 W. Pershing Rd.\nKansas City, MO 64108\nStatute of Limitations\nThe additional estate tax may be \nassessed until 3 years after the IRS \nreceives notice that the qualified heir \ndisposed of the specially valued \nproperty or ceased to use it for the \nqualified use.\nHowever, if the property was \ndisposed of in an involuntary conversion \nor in an exchange, the tax may be \nCAUTION\n!\nassessed up to 3 years after the IRS \nreceives notice that the property was \nreplaced or will not be replaced. See \nsection 2032A(f) for details.\nLien\nIf the estate elected special-use \nvaluation, section 6324B establishes a \nspecial lien against the specially valued \nproperty equal to the adjusted tax \ndifference attributable to the special-use \nvaluation.\nPenalties\nReturn preparer. Estate tax return \npreparers who prepare any return or \nclaim for refund which reflects an \nunderstatement of tax liability due to an \nunreasonable position are subject to a \npenalty equal to the greater of $1,000 or \n50% of the income earned (or to be \nearned) for the preparation of each such \nreturn. Estate tax return preparers who \nprepare any return or claim for refund \nwhich reflects an understatement of tax \nliability due to willful or reckless conduct \nare subject to a penalty of $5,000 or \n75% of the income derived (or income \nto be derived), whichever is greater, for \nthe preparation of each such return. See \nsection 6694, the related regulations, \nand Ann. 2009-15, 2009-11 I.R.B. 687, \navailable at Announcement 2009-15, for \nmore information.\nDefinitions\nSpecially valued property. The term \n“specially valued property” means farm \nor closely held business property that \nthe executor elected to value at actual \nuse rather than fair market value (FMV) \n(defined on page 3). The executor \nmakes the election on Form 706, United \nStates Estate (and Generation-Skipping \nTransfer) Tax Return, filed for the \ndecedent. Specially valued property \nrefers to the qualified real property \ndescribed in section 2032A and \nincludes qualified real property owned \nindirectly, such as interests in certain \npartnerships, corporations, and trusts as \ndescribed in section 2032A.\nIf special valuation was elected on \nForm 706, each qualified heir consented \nin writing to his or her personal liability \nAugust 27, 2019\nCat. No. 10142D\n",
"for the additional estate tax attributable \nto his or her interest in the specially \nvalued property.\nQualified heir. The term “qualified \nheir” means, for any property, a member \nof the decedent's family who acquired \nthe property (or to whom the property \npasses) from the decedent. If a qualified \nheir disposes of any interest in qualified \nreal property to any member of his or \nher family, that member shall thereafter \nbe treated as the qualified heir for the \ninterest.\nTaxable Events\nThe qualified heir causes a taxable \nevent by disposing of any interest in the \nspecially valued property or ceasing to \nuse the specially valued property for its \nqualified use if:\n• The disposition or cessation of \nqualified use was before the death of \nthe qualified heir, and\n• The disposition or cessation was \nwithin 10 years after the decedent's \ndeath. (But see Two-Year Grace \nPeriod—Commencement Date, later.)\nOnly one additional estate tax will be \nimposed with respect to any one part of \nspecially valued property. For example, \nif additional estate tax is imposed for \nearly cessation of a qualified use, a \nsecond additional estate tax will not be \nimposed for a subsequent early \ndisposition of the same part of the \nspecially valued property.\nDisposition to family member. A \ndisposition of an interest in property to a \nfamily member of the qualified heir is a \ntaxable event that must be reported on \nForm 706-A. If the transferee enters into \nan agreement to be personally liable for \nany additional tax under section \n2032A(c), the disposition is nontaxable \nand you should enter it on Schedule C.\nIf the family member does not enter \ninto the agreement, the disposition is \ntaxable and you should enter it on \nSchedule A.\nDisposition of timber. If the executor \nmade a qualified woodlands election \n(section 2032A(e)(13)(A)), the \ndisposition or severing of timber from \nthe woodland is a disposition of a \nportion of the interest in the property. \nThe disposition of a right to sever is \ntreated as a disposition of the standing \ntimber.\nThe additional estate tax on this \ndisposition is the amount equal to the \nlesser of:\n• The amount realized on the \ndisposition (or, if other than a sale or \nexchange at arm's length, the FMV of \nthe interest disposed of); or\n• The amount of additional estate tax \nthat would have been imposed if the \nentire interest of the qualified heir in the \nqualified woodland had been disposed \nof, minus any additional estate tax \nimposed on all earlier transactions \ninvolving the woodland.\nCessation of qualified use. The \nspecially valued real property must be \nused as a farm for farming purposes, or \nused in a trade or business other than \nthe trade or business of farming. For \nmore details, see the Instructions for \nForm 706.\nThe qualified use ceases if the \nspecially valued real property is not \nused for the qualified use described \nearlier. Use of the property as a farm or \nother business is also considered to \ncease if, during any 8-year period that \nends after the decedent's death, there \nwere periods totaling more than 3 years \nduring which:\n1. Neither the decedent nor any \nmember of the decedent's family \nmaterially participated in the operation \nof the farm or other business (while the \ndecedent held the property), and\n2. Neither the qualified heir nor any \nmember of the qualified heir's family \nmaterially participated in the operation \nof the farm or other business (while the \nheir held the property).\nIf the decedent was retired or \ndisabled before death, there are special \nrules for applying the 8-year period to \nparagraph (1) above. See section \n2032A(b)(4) and the Instructions for \nForm 706.\nMember of family. The term “member \nof the family” includes only:\n• An ancestor (parent, grandparent, \netc.) of the individual (where individual \nrefers to either the decedent or a \nqualified heir);\n• The spouse of the individual;\n• A lineal descendant (child, stepchild, \ngrandchild, etc.) of the individual, the \nindividual's spouse, or a parent of the \nindividual; or\n• The spouse, widow, or widower of \nany lineal descendant described above.\nA legally adopted child of an \nindividual is treated as a child of that \nindividual by blood.\nPeriod of material participation. \nTo determine whether the material \nparticipation requirement is satisfied, \ninclude periods during which the \ndecedent's estate held the property.\nIf a qualified heir dies before the \nrequired period has passed, any \nmaterial participation requirement ends \nfor that heir's portion of the property, \nprovided the heir received a separate or \nother undivided interest from the \ndecedent.\nIf qualified heirs receive successive \ninterests in specially valued property \n(for example, a life estate and \nremainder interests), the material \nparticipation requirement does not end \nfor any part of the property until the later \nof the expiration of the recapture period \nor the death of the last qualified heir.\nIn determining whether the required \nparticipation has occurred, disregard \nbrief periods (30 days or less) during \nwhich there was no material \nparticipation. But you may disregard \nthese periods only if they were both \npreceded and followed by substantial \nperiods (more than 120 days) in which \nthere was uninterrupted material \nparticipation.\nRequired activities for material par-\nticipation. See the Instructions for \nForm 706.\nBasis\nSee section 1014(a) for the basis of \nproperty acquired from a decedent.\nElection to increase basis. A \nqualified heir may elect to increase the \nbasis of specially valued property when \na taxable event (as defined earlier) \noccurs. If this election is made, the \nbasis of the property shall increase to \nthe excess of the FMV amount on the \ndecedent's date of death (or alternate \nvaluation date, if applicable) over the \nvalue amount determined under section \n2032A. Once the election is made, it is \nirrevocable.\nTo make the election, the qualified \nheir must:\n• Check the box on line 7 of Part I;\n• Enter on line 20 of Part II the amount \nof interest being paid on the additional \nestate tax due; and\n• File with Form 706-A, a statement \nthat:\n \na. Contains the name, address, and \ntaxpayer identification number of the \nqualified heir and of the estate;\n \nb. Identifies the election as the \nelection under section 1016(c); and\n \nc. Specifies the property with \nrespect to which the election is \nmade.\nA qualified heir who makes this \nelection must pay interest on the \nadditional estate tax calculated from the \ndate that is 9 months after the date of \n-2-\n",
"the decedent's death to the date of the \npayment of the additional estate tax.\nTwo-Year Grace \nPeriod—Commencement \nDate\nFor the 2 years immediately following \nthe date of the decedent's death, the \nfailure by the qualified heir to begin \nusing the property in a qualified use will \nnot be considered a cessation of \nqualified use and therefore will not \ntrigger the additional estate tax. The \ndate on which the qualified heir begins \nto use the property in a qualified use is \nthe commencement date.\nThe 10-year recapture period is \nextended by the period after the \ndecedent's death and before the \ncommencement date.\nFor example, if the decedent died \nFebruary 28, 2019, and the \ncommencement date is August 1, 2020, \nthe recapture period would begin \nAugust 1, 2020, and end July 31, 2030.\nHow To Complete Form \n706-A\nYou may file Form 706-A for only one \nqualified heir. If a disposition, cessation, \ninvoluntary conversion, or exchange \ninvolves more than one qualified heir, \neach heir must file a separate Form \n706-A.\nComplete Form 706-A in this order.\n1. Part I.\n2. Schedules A and B.\n3. Part II.\n4. Schedule C.\nNote. The qualified heir must sign the \nreturn.\nSpecific Instructions\nValuation\nWhen computing the amounts to enter \non Form 706-A, use the same values \nand estate tax that the executor \nreported on the Form 706 filed for the \ndecedent. However, if the IRS has \ncompleted the audit of the estate tax \nreturn, use the agreed values and tax \nrather than the reported values and tax.\nSchedule A. Disposition of \nSpecially Valued Property \nor Cessation of Qualified \nUse\nOn Schedule A, list every specially \nvalued property interest that the \nqualified heir disposed of or \ndiscontinued use of since the date of the \ndecedent's death and for which a Form \n706-A has not been previously filed. Do \nnot list any interests that have already \nbeen reported on Schedule A or B of a \npreviously filed Form 706-A. In general, \ndo not list property interests disposed of \nto family members of the qualified heir. \nThese interests should be listed on \nSchedule C.\nColumn A. Number and list the \nproperty interests in chronological order \nof disposition or cessation.\nColumn B. Use the same description in \ncolumn B that the executor used for the \nspecially valued property on the Form \n706 filed for the decedent. Please \ninclude in column B the schedule and \nitem number where the specially valued \nproperty was reported on the Form 706 \nfiled for the decedent's estate.\nColumn C. Report in column C the \ndate that the qualified heir disposed of \nthe specially valued property or \ndiscontinued the qualified use.\nColumn D. If the qualified heir \ndisposed of the specially valued \nproperty in an arm's length transaction, \nreport in column D the amount realized.\nArm's length transaction. An arm's \nlength transaction is a transaction where \nthere is no bargain or gift element for \naffection or other reasons.\nAmount realized. The amount \nrealized is the sum of the money \nreceived plus the FMV of property (other \nthan money) received. For the real \nproperty taxes that must be taken into \naccount, see section 1001(b).\nIf the qualified heir owned only a part \nof the specially valued property, report \nin column D the pro rata share of the \namount realized that is allocable to the \npart owned by the qualified heir.\nIf the specially valued property is \ndisposed of by the qualified heir in other \nthan an arm's length transaction, or if \nthe qualified use is discontinued by the \nqualified heir, report in column D the \nFMV of the specially valued property as \nof the date of disposition or cessation of \nqualified use.\nFMV. FMV is the price at which the \nproperty would change hands between \na willing buyer and a willing seller, \nneither being under any compulsion to \nbuy or to sell and both having \nreasonable knowledge of relevant facts.\nFor additional information and \nexamples, see Regulations section \n20.2031-1(b). If the qualified heir owned \nonly a part of the specially valued \nproperty, report in column D the pro rata \nshare of the FMV allocable to the part \nowned by the qualified heir.\nColumn E. Report in column E the \nspecial-use value at the date of the \ndecedent's death (or alternate valuation \ndate) of the specially valued property \nthat passed from the decedent to the \nqualified heir who disposed of the \nproperty or discontinued the qualified \nuse. Use the same special-use value \nthat the executor reported on the Form \n706 filed for the decedent's estate. If the \nIRS has completed the audit of the \nestate tax return, use the agreed value \nrather than the reported value. If the \nqualified heir owned only a part of the \nspecially valued property, report in \ncolumn E the pro rata share of the \nspecial-use value allocable to the part \nowned by the qualified heir.\nSchedule B. Involuntary \nConversions or \nExchanges\nInvoluntary conversions of qualified real \nproperty (under the rules of section \n1033) and exchanges of qualified real \nproperty (under the rules of section \n1031) are treated similarly when figuring \nthe additional estate tax on Form 706-A.\nThe rules later apply to all qualified \nheirs, whether or not they made an \nelection, for involuntary conversions and \nexchanges occurring after 1981.\nIf you are reporting an involuntary \nconversion or exchange, you may not \nuse the same Form 706-A to report any \ncessations or other dispositions that are \nnot involuntary conversions or \nexchanges. Use a separate Form 706-A \nfor the cessations or other dispositions.\nYou may report conversions and \nexchanges together on the same return.\nNontaxable Involuntary \nConversions or Exchanges\nIf the qualified heir reinvests all of the \ninvoluntary conversion proceeds in \nqualified replacement property or if the \nqualified heir exchanges qualified real \nproperty solely for qualified exchange \nproperty, then there is no additional \nestate tax.\nYou should complete Form 706-A, \neven though there is no tax, to notify the \nIRS that the involuntary conversion or \nexchange took place. However, you \nmust complete only Part I, Schedule B, \nand Schedule A. Write “nontaxable” on \nline 19 of Part II.\n-3-\n",
"Partially Taxable Involuntary \nConversions or Exchanges\nIf the cost of the qualified replacement \nproperty is less than the amount \nrealized in the involuntary conversion or \nif other property in addition to qualified \nexchange property is received in the \nexchange, the conversion or exchange \nis partially taxable. You should complete \nall of Form 706-A and determine the tax \nusing Part II.\nList on Schedule A all specially \nvalued property that the qualified heir \ndisposed of or discontinued use of, \nregardless of whether he or she \nreceived replacement or exchange \nproperty for it. List on Schedule B only \nthe replacement or exchange property \nthe qualified heir actually received.\nQualified Replacement or \nExchange Property\nQualified replacement property means \nany real property that is to be used for \nthe qualified use and that:\n• Was acquired in an exchange that \nqualified under section 1031,\n• Was purchased by the qualified heir \nwithin the time specified by section \n1033 to replace the qualified property, \nor\n• Is real property into which the \nqualified real property has been \nconverted.\nQualified exchange property means \nany real property that is to be used for \nthe same qualified use that the property \nfor which it was exchanged was used.\nThe period of the decedent's or \nfamily member's ownership, qualified \nuse, or material participation with \nrespect to replaced or exchanged \nproperty is treated as the period of \nownership, qualified use, or material \nparticipation with respect to the qualified \nreplacement or exchange property. This \napplies only to that part of the FMV of \nthe replacement or exchange property \n(at the date of acquisition) that does not \nexceed the FMV of the replaced or \nexchanged property (at the date of \ndisposition).\nNote. The 10-year recapture period is \nextended under certain circumstances. \nSee Two-Year Grace \nPeriod—Commencement Date, earlier.\nHow To Complete\nSchedule B\nColumn A. Make one entry for each \nitem of qualified replacement or \nexchange property.\nColumn B. Describe the qualified \nreplacement property with enough detail \nso that the IRS can locate and value it. \nFor more information, see the \ninstructions to Schedule A of Form 706.\nColumn C. For an involuntary \nconversion, enter the cost of the \nreplacement property. For an exchange, \nenter the FMV of the replacement \nproperty.\nPart II—Tax Computation\nLine 2\nEnter the total value at the estate tax \nvaluation date of all specially valued \nproperty that the executor elected, on \nthe Form 706 filed for the decedent's \nestate, to value at actual use rather than \nFMV.\nLine 3a\nEnter the amount of the estate tax for \nthe decedent's estate that is \nrecomputed using FMV at the estate tax \nvaluation date rather than actual use \nvalue. Attach a schedule showing the \nrecomputed estate tax.\nSchedule C. Dispositions \nto Family Members of the \nQualified Heir\nAgreement by transferee. You may \nenter a disposition to a family member \nof the qualified heir on Schedule C only \nif you file this Form 706-A on time \n(including extensions) and attach an \nagreement by the transferee to be \npersonally liable for any additional \nestate tax under section 2032A(c) on \nthe interest received. For a format of the \nagreement, see Form 706,\nSchedule A-1.\nIf you are not filing this Form 706-A \non time, or if the transferee does not \nenter into the agreement, you must \nenter the disposition(s) on Schedule A \ninstead of Schedule C.\nHow To Complete\nSchedule C\nSee the instructions for completing \ncolumns A, B, and C of Schedule A \nunder Schedule A. Disposition of \nSpecially Valued Property or Cessation \nof Qualified Use, earlier.\nSignature(s)\nForm 706-A must be signed. The \ntaxpayer (or person filing on his or her \nbehalf) must verify and sign the \ndeclaration on page 1 under penalties of \nperjury. The taxpayer may use Form \n2848, Power of Attorney and \nDeclaration of Representative, to \nauthorize another person to act for him \nor her before the IRS.\nGenerally, anyone who is paid to \nprepare the return must sign the return \nin the space provided and fill in the Paid \nPreparer's Use Only area. See section \n7701(a)(36)(B) for exceptions.\nIn addition to signing and completing \nthe required information, the paid \npreparer must give a copy of the \ncompleted return to the taxpayer.\nNote. A paid preparer may sign original \nor amended returns by rubber stamp, \nmechanical device, or computer \nsoftware program.\nPaid Preparer \nAuthorization\nIf you want to allow the IRS to discuss \nthe tax return with the paid preparer who \nsigned it, check the “Yes” box in the \nsignature area of the return. This \nauthorization applies only to the \nindividual whose signature appears in \nthe Paid Preparer Use Only section of \nthe return. It does not apply to the firm, if \nany, shown in that section. If the “Yes” \nbox is checked, you are authorizing the \nIRS to call the paid preparer to answer \nany questions that may arise during the \nprocessing of its return. You are also \nauthorizing the paid preparer to:\n• Give the IRS any information that is \nmissing from your return;\n• Call the IRS for information about the \nprocessing of your return or the status of \nany refund or payment(s); and\n• Respond to certain IRS notices that \nyou may have shared with the preparer \nabout math errors, offsets, and return \npreparation.\nThe notices will not be sent to the \npreparer. You are not authorizing the \npaid preparer to receive any refund \ncheck, bind you to anything (including \nany additional tax liability), or otherwise \nrepresent you before the IRS. If you \nwant to expand the paid preparer’s \nauthorization, see Pub. 947, Practice \nBefore the IRS and Power of Attorney. \nHowever, the authorization will \nautomatically end no later than the due \ndate (excluding extensions) for filing the \ntax return. If you want to revoke the \nauthorization before it ends, see Pub. \n947.\nPrivacy Act and Paperwork Reduc-\ntion Act Notice. We ask for the \ninformation on this form to carry out the \nInternal Revenue laws of the United \nStates. We need it to figure and collect \nthe right amount of tax. Subtitle B, \n-4-\n",
"Estate and Gift Taxes, of the Internal \nRevenue Code, imposes a tax in some \ncases on qualified heirs who dispose of \nproperty valued under special valuation \nrules. This form is used to determine the \namount of the taxes that you owe. \nSection 6011 requires you to provide \nthe requested information if the tax is \napplicable to you. Section 6109 requires \nyou to provide your identifying number.\nGenerally, tax returns and return \ninformation are confidential, as required \nby section 6103. However, section 6103 \nallows or requires the IRS to disclose or \ngive the information shown on your tax \nreturn to others described in the Code. \nFor example, we may disclose your tax \ninformation to the Department of Justice \nfor civil and criminal litigation, and to \ncities, states, the District of Columbia, \nand U.S. commonwealths and \npossessions for use in administering \ntheir tax laws. We may also disclose this \ninformation to other countries under a \ntax treaty, to federal and state agencies \nto enforce federal nontax criminal laws, \nor to federal law enforcement and \nintelligence agencies to combat \nterrorism. If you fail to provide this \ninformation in a timely manner, you may \nbe subject to penalties and interest.\nYou are not required to provide the \ninformation requested on a form that is \nsubject to the Paperwork Reduction Act \nunless the form displays a valid OMB \ncontrol number. Books or records \nrelating to a form or its instructions must \nbe retained as long as their contents \nmay become material in the \nadministration of any Internal Revenue \nlaw.\nThe time needed to complete and file \nthis form will vary depending on \nindividual circumstances. The estimated \naverage time is:\nRecordkeeping . . . . . . .\n3 hr., 17 min.\nLearning about the law \nor the form . . . . . . . .\n2 hr., 11 min.\nPreparing the form . . . .\n1 hr., 39 min.\nCopying, assembling, \nand sending the form \nto the IRS . . . . . . . . .\n1 hr., 3 min.\nIf you have comments concerning the \naccuracy of these time estimates or \nsuggestions for making this form \nsimpler, we would be happy to hear \nfrom you. You can send us comments \nfrom IRS.gov/FormComments. Or you \ncan write to the Internal Revenue \nService, Tax Forms and Publications \nDivision, 1111 Constitution Ave. NW, \nIR-6526, Washington, DC 20224. Do \nnot send the tax form to this address. \nInstead, see Where To File, earlier.\n-5-\n"
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f706.pdf
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0819 Form 706 (PDF)
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https://www.irs.gov/pub/irs-pdf/f706.pdf
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"Form 706\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service\nUnited States Estate (and Generation-Skipping Transfer) \nTax Return\n▶ Estate of a citizen or resident of the United States (see instructions). To be filed for \ndecedents dying after December 31, 2018. \n▶ Go to www.irs.gov/Form706 for instructions and the latest information.\nOMB No. 1545-0015\nPart 1—Decedent and Executor\n1a\nDecedent’s first name and middle initial (and maiden name, if any)\n1b Decedent’s last name\n2 Decedent’s social security no.\n3a\nCity, town, or post office; county; state or province; country; and ZIP \nor foreign postal code\n3b Year domicile established\n4 Date of birth\n5 Date of death\n6a\nName of executor (see instructions)\n6b Executor’s address (number and street including apartment or suite no.; city, town, \nor post office; state or province; country; and ZIP or foreign postal code) and \nphone no.\nPhone no.\n6c\nExecutor’s social security number (see instructions)\n6d If there are multiple executors, check here\nand attach a list showing the names, addresses, telephone numbers, and SSNs of the additional executors. \n7a\nName and location of court where will was probated or estate administered\n7b Case number\n8\nIf decedent died testate, check here ▶\nand attach a certified copy of the will.\n9 If you extended the time to file this Form 706, check here ▶\n10\nIf Schedule R-1 is attached, check here ▶\n11\nIf you are estimating the value of assets included in the gross estate on line 1 pursuant to the special rule of Reg. section 20.2010-2(a)(7)(ii), check here ▶\nPart 2—Tax Computation\n1\nTotal gross estate less exclusion (from Part 5—Recapitulation, item 13) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n \n1\n2\nTentative total allowable deductions (from Part 5—Recapitulation, item 24) .\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3a\nTentative taxable estate (subtract line 2 from line 1) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3a\nb\nState death tax deduction .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3b\nc\nTaxable estate (subtract line 3b from line 3a) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3c\n4\nAdjusted taxable gifts (see instructions)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5\nAdd lines 3c and 4 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6\nTentative tax on the amount on line 5 from Table A in the instructions \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nTotal gift tax paid or payable (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8\nGross estate tax (subtract line 7 from line 6) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9a\nBasic exclusion amount .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9a\nb \n \nDeceased spousal unused exclusion (DSUE) amount from predeceased spouse(s), \nif any (from Section D, Part 6—Portability of Deceased Spousal Unused Exclusion) \n9b\nc\nRestored exclusion amount (see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n9c\nd\nApplicable exclusion amount (add lines 9a, 9b, and 9c) \n.\n.\n.\n.\n.\n9d\ne \n \nApplicable credit amount (tentative tax on the amount in line 9d from \nTable A in the instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9e\n10 \nAdjustment to applicable credit amount (May not exceed $6,000. See \ninstructions.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10\n11\nAllowable applicable credit amount (subtract line 10 from line 9e) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11\n12\nSubtract line 11 from line 8 (but do not enter less than zero) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12\n13\nCredit for foreign death taxes (from Schedule P). (Attach Form(s) 706-CE.)\n13\n14\nCredit for tax on prior transfers (from Schedule Q) .\n.\n.\n.\n.\n.\n.\n14\n15\nTotal credits (add lines 13 and 14) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15\n16\nNet estate tax (subtract line 15 from line 12) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16\n17\nGeneration-skipping transfer (GST) taxes payable (from Schedule R, Part 2, line 10) .\n.\n.\n.\n.\n.\n17\n18\nTotal transfer taxes (add lines 16 and 17) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18\n19\nPrior payments (explain in an attached statement) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n19\n20\nBalance due (or overpayment) (subtract line 19 from line 18) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n20\nUnder penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and \nbelief, it is true, correct, and complete. Declaration of preparer (other than the executor) is based on all information of which preparer has any knowledge.\nSign \nHere\n▲\nSignature of executor\n▲\nDate\n▲\nSignature of executor\n▲\nDate\nPaid \nPreparer \nUse Only\nPrint/Type preparer’s name\nPreparer’s signature\nDate\nCheck if \nself-employed \nPTIN\nFirm’s name ▶\nFirm’s address ▶\nFirm’s EIN ▶\nPhone no. \nFor Privacy Act and Paperwork Reduction Act Notice, see instructions.\nCat. No. 20548R\nForm 706 (Rev. 8-2019)\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 3—Elections by the Executor\nNote: For information on electing portability of the decedent’s DSUE amount, including how to opt out of the election, see Part 6— \nPortability of Deceased Spousal Unused Exclusion. \nNote: Some of the following elections may require the posting of bonds or liens. \nYes\nNo\nPlease check “Yes” or “No” for each question. See instructions.\n1\nDo you elect alternate valuation? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nDo you elect special-use valuation? If “Yes,” you must complete and attach Schedule A-1 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3 \n \n \nDo you elect to pay the taxes in installments as described in section 6166? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \nIf “Yes,” you must attach the additional information described in the instructions. \nNote: By electing section 6166 installment payments, you may be required to provide security for estate tax deferred \nunder section 6166 and interest in the form of a surety bond or a section 6324A lien.\n3\n4\nDo you elect to postpone the part of the taxes due to a reversionary or remainder interest as described in section 6163? \n.\n4\nPart 4—General Information\nNote: Please attach the necessary supplemental documents. You must attach the death certificate. See instructions.\nAuthorization to receive confidential tax information under Reg. section 601.504(b)(2)(i); to act as the estate’s representative before the IRS; and to \nmake written or oral presentations on behalf of the estate:\nName of representative (print or type)\nState\nAddress (number, street, and room or suite no., city, state, and ZIP code)\nI declare that I am the\n attorney/\n certified public accountant/\nenrolled agent (check the applicable box) for the executor. I am not under\nsuspension or disbarment from practice before the Internal Revenue Service and am qualified to practice in the state shown above.\nSignature\nCAF number\nDate\nTelephone number\n1\nDeath certificate number and issuing authority (attach a copy of the death certificate to this return).\n2\nDecedent’s business or occupation. If retired, check here ▶\nand state decedent’s former business or occupation.\n3a\nMarital status of the decedent at time of death:\nMarried\nWidow/widower\nSingle\nLegally separated\nDivorced\n3 \n \nb \n \nFor all prior marriages, list the name and SSN of the former spouse, the date the marriage ended, and whether the marriage ended by \nannulment, divorce, or death. Attach additional statements of the same size if necessary. \n4a\nSurviving spouse’s name\n4b Social security number\n4c Amount received (see instructions)\n5 \n \nIndividuals (other than the surviving spouse), trusts, or other estates who receive benefits from the estate (do not include charitable \nbeneficiaries shown in Schedule O) (see instructions).\nName of individual, trust, or estate receiving $5,000 or more\nIdentifying number\nRelationship to decedent\nAmount (see instructions)\nAll unascertainable beneficiaries and those who receive less than $5,000 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nTotal .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf you answer “Yes” to any of the following questions, you must attach additional information as described. \nYes\nNo\n6 \nIs the estate filing a protective claim for refund? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n \nIf “Yes,” complete and attach two copies of Schedule PC for each claim.\n7 \nDoes the gross estate contain any section 2044 property (qualified terminable interest property (QTIP) from a prior gift or estate)? \nSee instructions \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \na \nHave federal gift tax returns ever been filed? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \nIf “Yes,” attach copies of the returns, if available, and furnish the following information.\nb \nPeriod(s) covered\nc Internal Revenue office(s) where filed\n9a\nWas there any insurance on the decedent’s life that is not included on the return as part of the gross estate? .\n.\n.\n.\n.\n.\nb\nDid the decedent own any insurance on the life of another that is not included in the gross estate? .\n.\n.\n.\n.\n.\n.\n.\n.\nPage 2\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 4—General Information (continued)\nIf you answer “Yes” to any of the following questions, you must attach additional information as described.\nYes\nNo\n10 \n \nDid the decedent at the time of death own any property as a joint tenant with right of survivorship in which (a) one or more of the \nother joint tenants was someone other than the decedent’s spouse, and (b) less than the full value of the property is included on \nthe return as part of the gross estate? If “Yes,” you must complete and attach Schedule E \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \na \nDid the decedent, at the time of death, own any interest in a partnership (for example, a family limited partnership), an \nunincorporated business, or a limited liability company; or own any stock in an inactive or closely held corporation? .\n.\n.\n.\nb \nIf “Yes,” was the value of any interest owned (from above) discounted on this estate tax return? If “Yes,” see the instructions on \nreporting the total accumulated or effective discounts taken on Schedule F or G \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \nDid the decedent make any transfer described in sections 2035, 2036, 2037, or 2038? See instructions. If “Yes,” you must \ncomplete and attach Schedule G\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13a\nWere there in existence at the time of the decedent’s death any trusts created by the decedent during his or her lifetime? .\n.\nb \nWere there in existence at the time of the decedent’s death any trusts not created by the decedent under which the decedent \npossessed any power, beneficial interest, or trusteeship? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nc \nWas the decedent receiving income from a trust created after October 22, 1986, by a parent or grandparent? .\n.\n.\n.\n.\n.\nIf “Yes,” was there a GST taxable termination (under section 2612) on the death of the decedent? .\n.\n.\n.\n.\n.\n.\n.\n.\nd \nIf there was a GST taxable termination (under section 2612), attach a statement to explain. Provide a copy of the trust or will \ncreating the trust, and give the name, address, and phone number of the current trustee(s).\ne \n \nDid the decedent at any time during his or her lifetime transfer or sell an interest in a partnership, limited liability company, or \nclosely held corporation to a trust described in line 13a or 13b? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” provide the EIN for this transferred/sold item. ▶\n14\nDid the decedent ever possess, exercise, or release any general power of appointment? If “Yes,” you must complete and attach Schedule H\n15 \nDid the decedent have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank \naccount, securities account, or other financial account? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 \nWas the decedent, immediately before death, receiving an annuity described in the “General” paragraph of the instructions for \nSchedule I or a private annuity? If “Yes,” you must complete and attach Schedule I \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17 \nWas the decedent ever the beneficiary of a trust for which a deduction was claimed by the estate of a predeceased spouse \nunder section 2056(b)(7) and which is not reported on this return? If “Yes,” attach an explanation \n.\n.\n.\n.\n.\n.\n.\n.\n.\nPart 5—Recapitulation. Note: If estimating the value of one or more assets pursuant to the special rule of Reg. section 20.2010-2(a)(7)(ii), enter \non both lines 10 and 23 the amount noted in the instructions for the corresponding range of values. See instructions for details.\nItem no.\nGross estate\nAlternate value\nValue at date of death\n1\nSchedule A—Real Estate \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nSchedule B—Stocks and Bonds .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3\nSchedule C—Mortgages, Notes, and Cash .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4\nSchedule D—Insurance on the Decedent’s Life (attach Form(s) 712) .\n.\n.\n.\n4\n5\nSchedule E—Jointly Owned Property (attach Form(s) 712 for life insurance) \n.\n5\n6\nSchedule F—Other Miscellaneous Property (attach Form(s) 712 for life insurance) \n6\n7\nSchedule G—Transfers During Decedent’s Life (att. Form(s) 712 for life insurance)\n7\n8\nSchedule H—Powers of Appointment \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nSchedule I—Annuities\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10\nEstimated value of assets subject to the special rule of Reg. section 20.2010-2(a)(7)(ii)\n10\n11\nTotal gross estate (add items 1 through 10) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11\n12\nSchedule U—Qualified Conservation Easement Exclusion \n.\n.\n.\n.\n.\n.\n12\n13 \n \nTotal gross estate less exclusion (subtract item 12 from item 11). Enter here and \non line 1 of Part 2—Tax Computation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13\nItem no.\nDeductions\nAmount\n14\nSchedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims \n.\n.\n14\n15\nSchedule K—Debts of the Decedent .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15\n16\nSchedule K—Mortgages and Liens \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16\n17\nTotal of items 14 through 16 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17\n18\nAllowable amount of deductions from item 17 (see the instructions for item 18 of the Recapitulation) .\n.\n18\n19\nSchedule L—Net Losses During Administration .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n19\n20\nSchedule L—Expenses Incurred in Administering Property Not Subject to Claims .\n.\n.\n.\n.\n.\n.\n.\n20\n21\nSchedule M—Bequests, etc., to Surviving Spouse .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n21\n22\nSchedule O—Charitable, Public, and Similar Gifts and Bequests .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n22\n23\nEstimated value of deductible assets subject to the special rule of Reg. section 20.2010-2(a)(7)(ii) .\n.\n.\n23\n24\nTentative total allowable deductions (add items 18 through 23). Enter here and on line 2 of the Tax Computation\n24\nPage 3\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 6—Portability of Deceased Spousal Unused Exclusion (DSUE)\nPortability Election\nA decedent with a surviving spouse elects portability of the DSUE amount, if any, by completing and timely filing this return. No further action is \nrequired to elect portability of the DSUE amount to allow the surviving spouse to use the decedent’s DSUE amount.\nSection A. Opting Out of Portability\nThe estate of a decedent with a surviving spouse may opt out of electing portability of the DSUE amount. Check here and do not complete Sections B \nand C of Part 6 only if the estate opts NOT to elect portability of the DSUE amount.\nSection B. Qualified Domestic Trust (QDOT)\nYes\nNo\nAre any assets of the estate being transferred to a QDOT?\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” the DSUE amount portable to a surviving spouse (calculated in Section C, below) is preliminary and shall be redetermined at the time of the \nfinal distribution or other taxable event imposing estate tax under section 2056A. See instructions for more details.\nSection C. DSUE Amount Portable to the Surviving Spouse (To be completed by the estate of a decedent making a portability election.)\nComplete the following calculation to determine the DSUE amount that can be transferred to the surviving spouse.\n1\nEnter the amount from line 9d, Part 2—Tax Computation \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nReserved\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3\nEnter the value of the cumulative lifetime gifts on which tax was paid or payable. See instructions \n.\n.\n.\n3\n4\nAdd lines 1 and 3 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5\nEnter amount from line 10, Part 2—Tax Computation\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6\nDivide amount on line 5 by 40% (0.40) (do not enter less than zero)\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nSubtract line 6 from line 4 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8\nEnter the amount from line 5, Part 2—Tax Computation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nSubtract line 8 from line 7 (do not enter less than zero) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10\nDSUE amount portable to surviving spouse (Enter lesser of line 9 or line 9a, Part 2—Tax Computation) .\n.\n10\nSection D. DSUE Amount Received From Predeceased Spouse(s) (To be completed by the estate of a deceased surviving spouse \nwith DSUE amount from predeceased spouse(s))\nProvide the following information to determine the DSUE amount received from deceased spouses.\nPart 1 — DSUE RECEIVED FROM LAST DECEASED SPOUSE\nA \nName of Deceased Spouse \n(dates of death after \nDecember 31, 2010, only)\nB \nDate of Death \n(enter as mm/dd/yy)\nC \nPortability \nElection \nMade?\nYes\nNo\nD \nIf “Yes,” DSUE \nAmount Received \nFrom Spouse\nE \nDSUE Amount \nApplied by \nDecedent to \nLifetime Gifts\nF \nYear of Form 709 \nReporting Use of DSUE \nAmount Listed in col. E\nG \nRemaining DSUE \nAmount, if any \n(subtract col. E \nfrom col. D)\n \n \n \n \n \n \n \n \nPart 2 — DSUE RECEIVED FROM OTHER PREDECEASED SPOUSE(S) AND USED BY DECEDENT\n \n \n \n \n \n \n \n \nTotal (for all DSUE amounts from predeceased spouse(s) applied) \n.\n.\nAdd the amount from Part 1, column D, and the total from Part 2, column E. Enter the result on line 9b, Part 2—Tax \nComputation \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nPage 4\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE A—Real Estate\n• For jointly owned property that must be disclosed on Schedule E, see instructions.\n• Real estate that is part of a sole proprietorship should be shown on Schedule F.\n• Real estate that is included in the gross estate under sections 2035, 2036, 2037, or 2038 should be shown on Schedule G.\n• Real estate that is included in the gross estate under section 2041 should be shown on Schedule H.\n• If you elect section 2032A valuation, you must complete Schedule A and Schedule A-1.\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription\nAlternate \nvaluation date\nAlternate value\nValue at date of death\n1\nTotal from continuation schedules or additional statements attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 1.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule A—Page 5\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE A-1—Section 2032A Valuation\nPart 1. Type of Election (Before making an election, see the checklist in the instructions):\nProtective election (Reg. section 20.2032A-8(b)). Complete Part 2, line 1, and column A of lines 3 and 4. See instructions.\nRegular election. Complete all of Part 2 (including line 11, if applicable) and Part 3. See instructions.\nBefore completing Schedule A-1, see the instructions for the information and documents that must be included to make a valid \nelection.\nThe election is not valid unless the agreement (that is, Part 3. Agreement to Special Valuation Under Section 2032A):\n• Is signed by each qualified heir with an interest in the specially valued property, and\n• Is attached to this return when it is filed.\nPart 2. Notice of Election (Reg. section 20.2032A-8(a)(3))\nNote: All real property entered on lines 2 and 3 must also be entered on Schedules A, E, F, G, or H, as applicable.\n1\nQualified use—check one ▶\nFarm used for farming, or\nTrade or business other than farming\n2\nReal property used in a qualified use, passing to qualified heirs, and to be specially valued on this Form 706.\nA \nSchedule and item number \nfrom Form 706\nB \nFull value \n(without section 2032A(b)(3)(B) \nadjustment)\nC \nAdjusted value \n(with section 2032A(b)(3)(B) \nadjustment)\nD \nValue based on qualified use \n(without section 2032A(b)(3)(B) \nadjustment)\nTotals .\n.\n.\n.\n.\n.\n.\n.\n.\n.\nAttach a legal description of all property listed on line 2.\nAttach copies of appraisals showing the column B values for all property listed on line 2.\n3\nReal property used in a qualified use, passing to qualified heirs, but not specially valued on this Form 706.\nA \nSchedule and item number \nfrom Form 706\nB \nFull value \n(without section 2032A(b)(3)(B) \nadjustment)\nC \nAdjusted value \n(with section 2032A(b)(3)(B) \nadjustment)\nD \nValue based on qualified use \n(without section 2032A(b)(3)(B) \nadjustment)\nTotals .\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf you checked “Regular election,” you must attach copies of appraisals showing the column B values for all property listed on line 3. \n(continued on next page)\nSchedule A-1—Page 6\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\n4\nPersonal property used in a qualified use and passing to qualified heirs.\nA \nSchedule and item \nnumber from Form 706\nB \nAdjusted value (with section \n2032A(b)(3)(B) adjustment)\nSubtotal \n.\n.\n.\n.\n.\n.\n.\nA (continued) \nSchedule and item \nnumber from Form 706\nB (continued) \nAdjusted value (with section \n2032A(b)(3)(B) adjustment)\n“Subtotal” from col. B, below left\nTotal adjusted value .\n.\n.\n5\nEnter the value of the total gross estate as adjusted under section 2032A(b)(3)(A). ▶\n6\nAttach a description of the method used to determine the special value based on qualified use.\nYes\nNo\n7 \nDid the decedent and/or a member of his or her family own all property listed on line 2 for at least 5 of the 8 years \nimmediately preceding the date of the decedent’s death? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \nWere there any periods during the 8-year period preceding the date of the decedent’s death during which the\ndecedent or a member of his or her family:\na\nDid not own the property listed on line 2? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nb\nDid not use the property listed on line 2 in a qualified use? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nc\nDid not materially participate in the operation of the farm or other business within the meaning of section 2032A(e)(6)? \nIf you answered “Yes” to any of the above, attach a statement listing the periods. If applicable, describe whether \nthe exceptions of sections 2032A(b)(4) or (5) are met.\n9 \nAttach affidavits describing the activities constituting material participation and the identity and relationship to the \ndecedent of the material participants.\n10 \n \nPersons holding interests. Enter the requested information for each party who received any interest in the specially valued \nproperty. (Each of the qualified heirs receiving an interest in the property must sign the agreement, to be found on Part \n3 of this Schedule A-1, and the agreement must be filed with this return.)\nName\nAddress\nA\nB\nC\nD\nE\nF\nG\nH\nIdentifying number\nRelationship to decedent\nFair market value\nSpecial-use value\nA\nB\nC\nD\nE\nF\nG\nH\nYou must attach a computation of the GST tax savings attributable to direct skips for each person listed above who is a skip person. See instructions.\n11\nWoodlands election. Check here ▶\nif you wish to make a Woodlands election as described in section 2032A(e)(13). Enter \nthe schedule and item numbers from Form 706 of the property for which you are making this election ▶\nAttach a statement explaining why you are entitled to make this election. The IRS may issue regulations that require more \ninformation to substantiate this election. You will be notified by the IRS if you must supply further information.\nSchedule A-1—Page 7\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 3. Agreement to Special Valuation Under Section 2032A\nThere cannot be a valid election unless:\n• The agreement is executed by each one of the qualified heirs, and\n• The agreement is included with the estate tax return when the estate tax return is filed.\nWe (list all qualified heirs) \n,\nbeing all the qualified heirs and (list all other persons having an interest in the property required to sign this agreement)\n,\nbeing all other parties having interests in the property, which is qualified real property and which is valued under section 2032A, do\nhereby approve of the election made by\n,\nExecutor/Administrator of the estate of\n,\npursuant to section 2032A to value said property on the basis of the qualified use to which the property is devoted and do hereby \nenter into this agreement pursuant to section 2032A(d).\nThe undersigned agree and consent to the application of subsection (c) of section 2032A with respect to all the property described on \nForm 706, Schedule A-1, Part 2, line 2, attached to this agreement. More specifically, the undersigned heirs expressly agree and \nconsent to personal liability under subsection (c) of 2032A for the additional estate and GST taxes imposed by that subsection with \nrespect to their respective interests in the above-described property in the event of certain early dispositions of the property or early \ncessation of the qualified use of the property. It is understood that if a qualified heir disposes of any interest in qualified real property \nto any member of his or her family, such member may thereafter be treated as the qualified heir with respect to such interest upon \nfiling a Form 706-A, United States Additional Estate Tax Return, and a new agreement.\nThe undersigned interested parties who are not qualified heirs consent to the collection of any additional estate and GST taxes \nimposed under section 2032A(c) from the specially valued property.\nIf there is a disposition of any interest which passes, or has passed to him or her, or if there is a cessation of the qualified use of any \nspecially valued property which passes or passed to him or her, each of the undersigned heirs agrees to file a Form 706-A, and pay \nany additional estate and GST taxes due within 6 months of the disposition or cessation.\nIt is understood by all interested parties that this agreement is a condition precedent to the election of special-use valuation under \nsection 2032A and must be executed by every interested party even though that person may not have received the estate (or GST) tax \nbenefits or be in possession of such property.\nEach of the undersigned understands that by making this election, a lien will be created and recorded pursuant to section 6324B on \nthe property referred to in this agreement for the adjusted tax differences with respect to the estate as defined in section 2032A(c)(2)\n(C).\nAs the interested parties, the undersigned designate the following individual as their agent for all dealings with the Internal Revenue \nService concerning the continued qualification of the specially valued property under section 2032A and on all issues regarding the \nspecial lien under section 6324B. The agent is authorized to act for the parties with respect to all dealings with the Internal Revenue \nService on matters affecting the qualified real property described earlier. This includes the authorization:\n• To receive confidential information on all matters relating to continued qualification under section 2032A of the specially valued real \nproperty and on all matters relating to the special lien arising under section 6324B;\n• To furnish the Internal Revenue Service with any requested information concerning the property;\n• To notify the Internal Revenue Service of any disposition or cessation of qualified use of any part of the property;\n• To receive, but not to endorse and collect, checks in payment of any refund of Internal Revenue taxes, penalties, or interest;\n• To execute waivers (including offers of waivers) of restrictions on assessment or collection of deficiencies in tax and waivers of \nnotice of disallowance of a claim for credit or refund; and\n• To execute closing agreements under section 7121.\n(continued on next page)\nSchedule A-1—Page 8\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 3. Agreement to Special Valuation Under Section 2032A (continued)\n• Other acts (specify) ▶\nBy signing this agreement, the agent agrees to provide the Internal Revenue Service with any requested information concerning this property \nand to notify the Internal Revenue Service of any disposition or cessation of the qualified use of any part of this property.\nName of Agent\nSignature\nAddress\nThe property to which this agreement relates is listed in Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and in \nthe Notice of Election, along with its fair market value according to section 2031 and its special-use value according to section 2032A. The \nname, address, social security number, and interest (including the value) of each of the undersigned in this property are as set forth in the \nattached Notice of Election.\nIN WITNESS WHEREOF, the undersigned have hereunto set their hands at\n,\nthis\nday of\n.\nSIGNATURES OF EACH OF THE QUALIFIED HEIRS:\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignature of qualified heir\nSignatures of other interested parties\nSignatures of other interested parties\nSchedule A-1—Page 9\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE B—Stocks and Bonds\n(For jointly owned property that must be disclosed on Schedule E, see instructions.)\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last four columns.\nItem \nnumber\nDescription, including face amount of bonds or number of shares \nand par value for identification. Give CUSIP number. \nIf trust, partnership, or closely held entity, give EIN.\nUnit value\nAlternate \nvaluation date\nAlternate value\nValue at \ndate of death\n \n \nCUSIP number or EIN, \nwhere applicable\n \n \n \n \n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 2.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule B—Page 10\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE C—Mortgages, Notes, and Cash\n(For jointly owned property that must be disclosed on Schedule E, see instructions.)\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription\nAlternate \nvaluation date\nAlternate value\nValue at \ndate of death\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 3.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule C—Page 11\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE D—Insurance on the Decedent’s Life\nYou must list all policies on the life of the decedent and attach a Form 712 for each policy.\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription\nAlternate \nvaluation date\nAlternate value\nValue at \ndate of death\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 4.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule D—Page 12\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE E—Jointly Owned Property \n(If you elect section 2032A valuation, you must complete Schedule E and Schedule A-1.)\nPART 1. Qualified Joint Interests—Interests Held by the Decedent and His or Her Spouse as the Only Joint \nTenants (Section 2040(b)(2))\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription. For securities, give CUSIP number. If trust, partnership, or closely held entity, \ngive EIN.\nAlternate valuation \ndate\nAlternate value\nValue at \ndate of death\n \n \nCUSIP number or \nEIN, where \napplicable\n \n \n \n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n1a\nTotals .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1a\nb\nAmounts included in gross estate (one-half of line 1a) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1b\nPART 2. All Other Joint Interests\n2a \nState the name and address of each surviving co-tenant. If there are more than three surviving co-tenants, list the additional co-tenants on an \nattached statement.\nName\nAddress (number and street, city, state, and ZIP code)\nA.\nB.\nC.\nItem \nnumber\nEnter \nletter for \nco-tenant\nDescription (including alternate valuation date, if any). For securities, give CUSIP \nnumber. If trust, partnership, or closely held entity, give EIN\nPercentage includible\nIncludible alternate \nvalue\nIncludible value at \ndate of death\n \n \n \nCUSIP number or \nEIN, where \napplicable\n \n \n \n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\nb \nTotal other joint interests \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2b\n3 \nTotal includible joint interests (add lines 1b and 2b). Also enter on Part 5—Recapitulation, page \n3, at item 5 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule E—Page 13\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE F—Other Miscellaneous Property Not Reportable Under Any Other Schedule \n(For jointly owned property that must be disclosed on Schedule E, see instructions.) \n(If you elect section 2032A valuation, you must complete Schedule F and Schedule A-1.)\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\n1 Did the decedent own any works of art, items, or any collections whose artistic or collectible value at date of death\nexceeded $3,000? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nIf “Yes,” submit full details on this schedule and attach appraisals.\n2 Has the decedent’s estate, spouse, or any other person received (or will receive) any bonus or award as a result of\nthe decedent’s employment or death? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” submit full details on this schedule.\n3 Did the decedent at the time of death have, or have access to, a safe deposit box? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf ‘‘Yes,’’ state location, and if held jointly by decedent and another, state name and relationship of joint depositor.\nIf any of the contents of the safe deposit box are omitted from the schedules in this return, explain fully why omitted.\nItem \nnumber\nDescription. For securities, give CUSIP number. If trust, partnership, or closely held entity, \ngive EIN\nAlternate valuation \ndate\nAlternate value\nValue at \ndate of death\n \n \nCUSIP number or \nEIN, where \napplicable\n \n \n \n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 6.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule F—Page 14\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE G—Transfers During Decedent’s Life\n(If you elect section 2032A valuation, you must complete Schedule G and Schedule A-1.)\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription. For securities, give CUSIP number. If trust, \npartnership, or closely held entity, give EIN\nAlternate \nvaluation date\nAlternate value\nValue at \ndate of death\nA. \n \nGift tax paid or payable by the decedent or the estate for all gifts \nmade by the decedent or his or her spouse within 3 years before the\ndecedent’s death (section 2035(b)) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nX X X X X\nB.\nTransfers includible under sections 2035(a), 2036, 2037, or 2038:\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 7.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nSCHEDULE H—Powers of Appointment \n(Include “5 and 5 lapsing” powers (section 2041(b)(2)) held by the decedent.) \n(If you elect section 2032A valuation, you must complete Schedule H and Schedule A-1.)\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entries in the last three columns.\nItem \nnumber\nDescription\nAlternate valuation \ndate\nAlternate value\nValue at \ndate of death\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 8.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedules G and H—Page 15\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE I—Annuities\nNote: Generally, no exclusion is allowed for the estates of decedents dying after December 31, 1984. See instructions.\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and \nForm 706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to \nreport the value of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If \nyou are not required to report the value of an asset, identify the property but make no entries in the last three columns.\nA \nAre you excluding from the decedent’s gross estate the value of a lump-sum distribution described in section 2039(f)(2) \n(as in effect before its repeal by the Deficit Reduction Act of 1984)? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nIf “Yes,” you must attach the information required by the instructions.\nItem \nnumber\nDescription. \nShow the entire value of the annuity before any exclusions\nAlternate valuation \ndate\nIncludible alternate \nvalue\nIncludible value at \ndate of death\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 9.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule I—Page 16\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims \n▶ Use Schedule PC to make a protective claim for refund due to an expense not currently deductible. \nFor such a claim, report the expense on Schedule J but without a value in the last column.\nNote: Do not list expenses of administering property not subject to claims on this schedule. To report those expenses, see instructions.\nIf executors’ commissions, attorney fees, etc., are claimed and allowed as a deduction for estate tax purposes, they are not \nallowable as a deduction in computing the taxable income of the estate for federal income tax purposes. They are allowable as an \nincome tax deduction on Form 1041, U.S. Income Tax Return for Estates and Trusts, if a waiver is filed to forgo the deduction on \nForm 706. See the Instructions for Form 1041.\nAre you aware of any actual or potential reimbursement to the estate for any expense claimed as a deduction on this\nschedule? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nIf “Yes,” attach a statement describing the expense(s) subject to potential reimbursement. See instructions.\nItem \nnumber\nDescription\nExpense amount\nTotal amount\nA. Funeral expenses:\n1\nTotal funeral expenses .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nB. Administration expenses:\n1 Executors’ commissions—amount estimated/agreed upon/paid. (Strike out the words that do not \napply.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2 Attorney fees—amount estimated/agreed upon/paid. (Strike out the words that do not apply.) .\n.\n.\n3 Accountant fees—amount estimated/agreed upon/paid. (Strike out the words that do not apply.) .\n.\n \n4 Miscellaneous expenses:\nExpense amount\n \nTotal miscellaneous expenses from continuation schedules (or additional statements) \nattached to this schedule .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nTotal miscellaneous expenses \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 14.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n▶\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule J—Page 17\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE K—Debts of the Decedent, and Mortgages and Liens \n▶ Use Schedule PC to make a protective claim for refund due to a claim not currently deductible. \nFor such a claim, report the expense on Schedule K but without a value in the last column.\nYes\nNo\nAre you aware of any actual or potential reimbursement to the estate for any debt of the decedent, mortgage, or lien\nclaimed as a deduction on this schedule? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” attach a statement describing the items subject to potential reimbursement. See instructions.\nAre any of the items on this schedule deductible under Reg. section 20.2053-4(b) and Reg. section 20.2053-4(c)? \n.\n.\nIf “Yes,” attach a statement indicating the applicable provision and documenting the value of the claim.\nItem \nnumber\nDebts of the Decedent—Creditor and nature of debt, and \nallowable death taxes\nAmount \n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 15.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nItem \nnumber\nMortgages and Liens—Description\nAmount\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 16.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule K—Page 18\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE L—Net Losses During Administration and \nExpenses Incurred in Administering Property Not Subject to Claims \n▶ Use Schedule PC to make a protective claim for refund due to an expense not currently deductible. \nFor such expenses, report the expense on Schedule L but without a value in the last column. \nItem \nnumber\nNet losses during administration \n(Note: Do not deduct losses claimed on a federal income tax return.)\nAmount\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 19.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nItem \nnumber\nExpenses incurred in administering property not subject to claims. \n(Indicate whether estimated, agreed upon, or paid.)\nAmount\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\nTOTAL (Also enter on Part 5—Recapitulation, page 3, at item 20.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule L—Page 19\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE M—Bequests, etc., to Surviving Spouse\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entry in the last column.\nYes\nNo\n1\nDid any property pass to the surviving spouse as a result of a qualified disclaimer? \n.\n.\n.\n.\n.\n.\n.\n.\n1\nIf ‘‘Yes,’’ attach a copy of the written disclaimer required by section 2518(b).\n2a\nIn what country was the surviving spouse born?\nb\nWhat is the surviving spouse’s date of birth?\nc\nIs the surviving spouse a U.S. citizen? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2c\nd\nIf the surviving spouse is a naturalized citizen, when and where did the surviving spouse acquire citizenship?\ne\nIf the surviving spouse is not a U.S. citizen, of what country is the surviving spouse a citizen?\n3 \n \nElection Out of QTIP Treatment of Annuities. Do you elect under section 2056(b)(7)(C)(ii) not to treat as \nqualified terminable interest property any joint and survivor annuities that are included in the gross estate and \nwould otherwise be treated as qualified terminable interest property under section 2056(b)(7)(C)? See instructions\n3\nItem \nnumber\nDescription of property interests passing to surviving spouse. \nFor securities, give CUSIP number. If trust, partnership, or closely held entity, give EIN\nAmount\n QTIP property: \nA1\n All other property: \nB1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\n.\n4\nTotal amount of property interests listed on Schedule M .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5a\nFederal estate taxes payable out of property interests listed on Schedule M .\n5a\nb\nOther death taxes payable out of property interests listed on Schedule M .\n.\n5b\nc\nFederal and state GST taxes payable out of property interests listed on Schedule M\n5c\nd\nAdd items 5a, 5b, and 5c \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5d\n6 \nNet amount of property interests listed on Schedule M (subtract item 5d from item 4). Also enter on\nPart 5—Recapitulation, page 3, at item 21 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule M—Page 20\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE O—Charitable, Public, and Similar Gifts and Bequests\nNote: If the value of the gross estate, together with the amount of adjusted taxable gifts, is less than the basic exclusion amount and Form \n706 is being filed solely to elect portability of the DSUE amount, consideration should be given as to whether you are required to report the \nvalue of assets eligible for the marital or charitable deduction on this schedule. See the instructions for more information. If you are not \nrequired to report the value of an asset, identify the property but make no entry in the last column.\nYes\nNo\n1 \na If the transfer was made by will, has any action been instituted to contest or have interpreted any of its provisions\naffecting the charitable deductions claimed in this schedule? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf ‘‘Yes,’’ full details must be submitted with this schedule.\nb\nAccording to the information and belief of the person or persons filing this return, is any such action planned? \n.\nIf ‘‘Yes,’’ full details must be submitted with this schedule.\n2\nDid any property pass to charity as the result of a qualified disclaimer? \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf ‘‘Yes,’’ attach a copy of the written disclaimer required by section 2518(b).\nItem \nnumber\nName and address of beneficiary\nCharacter of institution\nAmount\n1\nTotal from continuation schedules (or additional statements) attached to this schedule .\n.\n.\n.\n.\n.\n.\n3\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4a\nFederal estate tax payable out of property interests listed above .\n.\n.\n.\n.\n4a\nb\nOther death taxes payable out of property interests listed above .\n.\n.\n.\n.\n4b\nc\nFederal and state GST taxes payable out of property interests listed above .\n4c\nd\nAdd items 4a, 4b, and 4c \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4d\n5 \n \nNet value of property interests listed above (subtract item 4d from item 3). Also enter on Part 5—\nRecapitulation, page 3, at item 22 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n(If more space is needed, attach the continuation schedule from the end of this package or additional statements of the same size.)\nSchedule O—Page 21\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE P—Credit for Foreign Death Taxes\nList all foreign countries to which death taxes have been paid and for which a credit is claimed on this return.\nIf a credit is claimed for death taxes paid to more than one foreign country, compute the credit for taxes paid to one country on \nthis sheet and attach a separate copy of Schedule P for each of the other countries.\nThe credit computed on this sheet is for the\n(Name of death tax or taxes)\nimposed in\n(Name of country)\nCredit is computed under the\n(Insert title of treaty or statute)\nCitizenship (nationality) of decedent at time of death\n(All amounts and values must be entered in U.S. money.)\n1 Total of estate, inheritance, legacy, and succession taxes imposed in the country named above attributable to \nproperty situated in that country, subjected to these taxes, and included in the gross estate (as defined by statute) .\n1\n2\nValue of the gross estate (adjusted, if necessary, according to the instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3 Value of property situated in that country, subjected to death taxes imposed in that country, and included in the \ngross estate (adjusted, if necessary, according to the instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4\nTax imposed by section 2001 reduced by the total credits claimed under sections 2010 and 2012 (see instructions) \n4\n5 Amount of federal estate tax attributable to property specified at item 3. (Divide item 3 by item 2 and multiply the \nresult by item 4.) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\nCredit for death taxes imposed in the country named above (the smaller of item 1 or item 5). Also enter on line 13 of \nPart 2—Tax Computation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n6\nSCHEDULE Q—Credit for Tax on Prior Transfers\nPart 1. Transferor Information\nName of transferor\nSocial security number\nIRS office where estate \ntax return was filed\nDate of death\nA\nB\nC\nCheck here ▶\nif section 2013(f) (special valuation of farm, etc., real property) adjustments to the computation of the credit were made. See instructions.\nPart 2. Computation of Credit (see instructions)\nItem\nTransferor\nTotal \nA, B, and C\n \nA\nB\nC\n \n1 Transferee’s tax as apportioned (from worksheet, \n(line 7 ÷ line 8) × line 35 for each column) \n.\n.\n.\n2 Transferor’s tax (from each column of worksheet, \nline 20) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \n \nMaximum amount before percentage requirement \n(for each column, enter amount from line 1 or line 2, \nwhichever is smaller) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\nPercentage allowed (each column) (see instructions)\n%\n%\n%\n5\nCredit allowable (line 3 × line 4 for each column) \n.\n6 \n \nTOTAL credit allowable (add columns A, B, and C of \nline 5). Enter here and on line 14 of Part 2—Tax \nComputation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nSchedules P and Q—Page 22\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE R—Generation-Skipping Transfer Tax\nNote: To avoid application of the deemed allocation rules, Form 706 and Schedule R should be filed to allocate the GST exemption to \ntrusts that may later have taxable terminations or distributions under section 2612 even if the form is not required to be filed to report \nestate or GST tax.\nThe GST tax is imposed on taxable transfers of interests in property located outside the United States as well as property located \ninside the United States. See instructions.\nPart 1. GST Exemption Reconciliation (Section 2631) and Special QTIP Election (Section 2652(a)(3)) \nYou no longer need to check a box to make a section 2652(a)(3) (special QTIP) election. If you list \nqualifying property in Part 1, line 9, below, you will be considered to have made this election. See \ninstructions for details.\n1\nMaximum allowable GST exemption .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nTotal GST exemption allocated by the decedent against decedent’s lifetime transfers .\n.\n.\n.\n.\n2\n3 \nTotal GST exemption allocated by the executor, using Form 709, against decedent’s lifetime\ntransfers .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4\nGST exemption allocated on line 6 of Schedule R, Part 2 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5\nGST exemption allocated on line 6 of Schedule R, Part 3 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6\nTotal GST exemption allocated on line 4 of Schedule(s) R-1 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nTotal GST exemption allocated to inter vivos transfers and direct skips (add lines 2–6) \n.\n.\n.\n.\n7\n8 \nGST exemption available to allocate to trusts and section 2032A interests (subtract line 7 from\nline 1) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nAllocation of GST exemption to trusts (as defined for GST tax purposes):\nA \nName of trust\nB \nTrust’s \nEIN (if any)\nC \nGST exemption allocated \non lines 2–6 above \n(see instructions)\nD \nAdditional GST \nexemption allocated \n(see instructions)\nE \nTrust’s inclusion \nratio (optional) \n(see instructions)\n9D\nTotal. May not exceed line 8 above .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9D\n10 \nGST exemption available to allocate to section 2032A interests received by individual beneficiaries \n(subtract line 9D from line 8). You must attach special-use allocation statement. See instructions .\n10\nSchedule R—Page 23\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 2. Direct Skips Where the Property Interests Transferred Bear the GST Tax on the \nDirect Skips\nName of skip person\nDescription of property interest transferred\nEstate tax value\n1 Total estate tax values of all property interests listed above .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2 Estate taxes, state death taxes, and other charges borne by the property interests listed above .\n.\n2\n3 GST taxes borne by the property interests listed above but imposed on direct skips other than those \nshown on this Part 2 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4 Total fixed taxes and other charges (add lines 2 and 3) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5 Total tentative maximum direct skips (subtract line 4 from line 1) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6 GST exemption allocated .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7 Subtract line 6 from line 5 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8 GST tax due (divide line 7 by 3.5) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9 Enter the amount from line 8 of Schedule R, Part 3 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 Total GST taxes payable by the estate (add lines 8 and 9). Enter here and on line 17 of Part 2—\nTax Computation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10\nSchedule R—Page 24\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nPart 3. Direct Skips Where the Property Interests Transferred Do Not Bear the GST Tax on the \nDirect Skips\nName of skip person\nDescription of property interest transferred\nEstate tax value\n1 Total estate tax values of all property interests listed above .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2 Estate taxes, state death taxes, and other charges borne by the property interests listed above .\n.\n2\n3 GST taxes borne by the property interests listed above but imposed on direct skips other than those \nshown on this Part 3 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4 Total fixed taxes and other charges (add lines 2 and 3) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5 Total tentative maximum direct skips (subtract line 4 from line 1) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6 GST exemption allocated .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7 Subtract line 6 from line 5 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8 GST tax due (multiply line 7 by 0.40). Enter here and on Schedule R, Part 2, line 9 \n.\n.\n.\n.\n.\n.\n8\nSchedule R—Page 25\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nSCHEDULE U—Qualified Conservation Easement Exclusion\nPart 1. Election\nNote: The executor is deemed to have made the election under section 2031(c)(6) if he or she files Schedule U and excludes any \nqualifying conservation easements from the gross estate.\nPart 2. General Qualifications\n1\nDescribe the land subject to the qualified conservation easement. See instructions\n2 \nDid the decedent or a member of the decedent’s family own the land described above during the 3-year \nperiod ending on the date of the decedent’s death? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\n3\nDescribe the conservation easement with regard to which the exclusion is being claimed. See instructions.\nPart 3. Computation of Exclusion\n4\nEstate tax value of the land subject to the qualified conservation easement (see instructions) .\n4\n5 \nDate of death value of any easements granted prior to decedent’s \ndeath and included on line 10 below (see instructions) .\n.\n.\n.\n5\n6\nAdd lines 4 and 5 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nValue of retained development rights on the land (see instructions)\n7\n8\nSubtract line 7 from line 6 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nMultiply line 8 by 30% (0.30) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nValue of qualified conservation easement for which the exclusion is \nbeing claimed (see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10\nNote: If line 10 is less than line 9, continue with line 11. If line 10 is \nequal to or more than line 9, skip lines 11 through 13, enter “0.40”\non line 14, and complete the schedule.\n11 \nDivide line 10 by line 8. Figure to 3 decimal places (for example,\n“0.123”) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11\nNote: If line 11 is equal to or less than 0.100, stop here; the estate \ndoes not qualify for the conservation easement exclusion.\n12 \n \nSubtract line 11 from 0.300. Enter the answer in hundredths by \nrounding any thousandths up to the next higher hundredth (that is, \n0.030 = 0.03, but 0.031 = 0.04) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12\n13\nMultiply line 12 by 2.0 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13\n14\nSubtract line 13 from 0.40 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14\n15 \nDeduction under section 2055(f) for the conservation easement (see \ninstructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15\n16\nAmount of indebtedness on the land (see instructions) .\n.\n.\n.\n16\n17\nTotal reductions in value (add lines 7, 15, and 16) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n17\n18\nNet value of land (subtract line 17 from line 4) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18\n19\nMultiply line 18 by line 14 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n19\n20 \nEnter the smaller of line 19 or the exclusion limitation. See instructions. Also enter this amount \non item 12, Part 5—Recapitulation, page 3 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n20\nSchedule U—Page 26\n",
"Schedule PC \n(Rev. August 2019) \nDepartment of the Treasury \nInternal Revenue Service \nProtective Claim for Refund \n▶ To be used for decedents dying after December 31, 2011. File 2 copies of this schedule with \nForm 706 for each pending claim or expense under section 2053.\nOMB No. 1545-0015\n• Timely filing a protective claim for refund preserves the estate’s right to claim a refund based on the amount of an unresolved claim \nor expense that may not become deductible under section 2053 until after the limitation period ends.\n• Schedule PC can be used to file a protective claim for refund and, once the claim or expense becomes deductible, Schedule PC can \nbe used to notify the IRS that a refund is being claimed.\n• Schedule PC can be used by the estate of a decedent dying after 2011.\n• Schedule PC must be filed with Form 706 and cannot be filed separately. (To file a protective claim for refund or notify the IRS that a \nrefund is being claimed in a form separate from the Form 706, instead use Form 843, Claim for Refund and Request for Abatement.)\n• Each separate claim or expense requires a separate Schedule PC (or Form 843, if not filed with Form 706).\n• Schedule PC must be filed in duplicate (two copies) for each separate claim or expense.\nPart 1. General Information\n1. Name of decedent\n2. Decedent’s social security no.\n3. Name of fiduciary\n4. Date of death \n5a. Address (number, street, and room or suite no.)\n5b. Room or suite no.\n5c. City or town, state, and ZIP or postal code\n6. Daytime telephone number \n7. Number of Claims. Enter number of Schedules PC being filed with Form 706. \nIf the number is greater than one OR if another Schedule PC or Form 843 was previously filed by or on behalf of the estate, complete \nPart 3 of this Schedule PC.\n8. Fiduciary\nCheck here if this Schedule PC is being filed with the original Form 706 or is being filed by the same fiduciary who \nfiled the original Form 706 for decedent’s estate. If a different fiduciary is filing this Schedule PC, see instructions for \nestablishing the legal authority to pursue the claim for refund on behalf of the estate.\nPart 2. Claim Information\nCheck the box that applies to this claim for refund.\na.\nProtective claim for refund made for unresolved claim or expense.\nAmount in contest: \nb. \n \nPartial refund claimed: partial resolution and/or satisfaction of claim or expense for which a protective claim for refund has\nbeen filed previously.\nDate protective claim for refund filed for this claim or expense: \nAmount of claim or expense partially resolved and/or satisfied and presently claimed as a deduction under section 2053 (do \nnot include amounts previously deducted): \nc. \n \nFull and final refund claimed for this claim or expense: resolution and/or satisfaction of claim or expense for which a protective \nclaim for refund has been filed previously.\nDate protective claim for refund filed for this claim or expense: \nAmount of claim or expense finally resolved and/or satisfied and presently claimed as a deduction under section 2053 (do not \ninclude amounts previously deducted): \nSchedule PC—Page 27\n",
"Form 706 (Rev. 8-2019)\nEstate of:\nDecedent’s social security number\nA \nForm 706 \nSchedule \nand Item \nnumber\nB \nIdentification of the claim \n• Name or names of the claimant(s) \n• Basis of the claim or other description of the pending claim or \nexpense \n• Reasons and contingencies delaying resolution \n• Status of contested matters \n• Attach copies of relevant pleadings or other documents \nC \nAmount, if any, \ndeducted under \nTreas. Reg. sections \n20.2053-1(d)(4) or \n20.2053-4(b) or (c) \nfor the identified \nclaim or expense \nD \nAmount presently \nclaimed as a \ndeduction under \nsection 2053 for the \nidentified claim\nE \nAncillary expenses \nestimated/ \nagreed upon/paid \n(Please indicate)\nF \nAmount of tax \nto be refunded\nPart 3. Other Schedules PC and Forms 843 Filed by Estate\nIf a Schedule PC or Form 843 was previously filed by the estate, complete Part 3 to identify each claim for refund reported.\nA \nDate of death\nB \nInternal Revenue office where filed\nC \nDate filed\nD \nIndicate whether \n(1) Protective Claim \nfor Refund, \n(2) Partial Claim \nfor Refund, or \n(3) Full and Final Claim \nfor Refund\nE \nAmount in Contest \n1\nTo inquire about the receipt and/or processing of the protective claim for refund, please call 866-699-4083.\nSchedule PC—Page 28\n",
"Form 706 (Rev. 8-2019)\n(Make copies of this schedule before completing it if you will need more than one schedule.)\nEstate of:\nDecedent’s social security number\nCONTINUATION SCHEDULE\nContinuation of Schedule\n(Enter letter of schedule you are continuing.)\nItem \nnumber\nDescription. \nFor securities, give CUSIP number. \nIf trust, partnership, or closely held entity, give EIN.\nUnit value \n(Sch. B, E, or \nG only)\nAlternate \nvaluation date\nAlternate value\nValue at date of \ndeath or amount \ndeductible\nTOTAL (Carry forward to main schedule.) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nContinuation Schedule—Page 29\n"
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f706a.pdf
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0819 Form 706-A (PDF)
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https://www.irs.gov/pub/irs-pdf/f706a.pdf
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[
"Form 706-A\n(Rev. August 2019)\nDepartment of the Treasury \nInternal Revenue Service \nUnited States Additional Estate Tax Return\nTo report dispositions or cessations of qualified use under \nsection 2032A of the Internal Revenue Code. \n▶ Go to www.irs.gov/Form706A for instructions and the latest information.\nOMB No. 1545-0016\nPart I \nGeneral Information \n1a Name of qualified heir \n1b Address of qualified heir (number and street, including apt. no., or P.O. box) \n1c City, town or post office, state, and ZIP code \n2 Heir’s social security number \n3 Commencement date (see instructions) \n4 Decedent’s name reported on Form 706 \n5 Decedent’s social security number 6 Date of death \n7 Check here if you are making an election under section 1016(c) to increase the basis of specially valued property. Attach the statement described\non page 2 of the instructions \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart II \nTax Computation (First complete Schedules A and B. See instructions.) \n1 \nValue at date of death (or alternate valuation date) of all specially valued property that passed from \ndecedent to qualified heir: \na Without section 2032A election \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1a \nb With section 2032A election .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1b \nc Balance. Subtract line 1b from line 1a \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1c \n2 \nValue at date of death (or alternate valuation date) of all specially valued property in decedent’s estate: \na Without section 2032A election \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2a \nb With section 2032A election .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2b \nc Balance. Subtract line 2b from line 2a \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2c \n3 \nDecedent’s estate tax: \na Recomputed without section 2032A election (attach computation) .\n.\n3a \nb Reported on Form 706 with section 2032A election .\n.\n.\n.\n.\n.\n.\n3b \nc Balance. Subtract line 3b from line 3a \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3c \n4 \nDivide line 1c by line 2c and enter the result as a percentage .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \n% \n5 \nTotal estate tax saved. Multiply line 3c by percentage on line 4 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \n6 \nValue, without section 2032A election, at date of death (or alternate \nvaluation date) of specially valued property shown on Schedule A of\nthis Form 706-A .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n7 \nDivide line 6 by line 1a and enter the result as a percentage .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7 \n% \n8 \nMultiply line 5 by percentage on line 7 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nTotal estate tax recaptured on previous Form(s) 706-A (attach copies of 706-A) .\n.\n.\n.\n.\n.\n.\n9 \n10 \nRemaining estate tax savings. Subtract line 9 from line 5. Do not enter less than zero .\n.\n.\n.\n.\n10 \n11 \nEnter the lesser of line 8 or line 10 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \n12 \nEnter the total of column D, Schedule A .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \n13 \nEnter the total of column E, Schedule A .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13 \n14 \nBalance. Subtract line 13 from line 12 (but enter the line 12 amount in the case of a disposition of \nstanding timber on qualified woodland) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \n15 \nEnter the lesser of line 11 or line 14 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15 \nIf you completed Schedule B, complete lines 16–19. If you did not complete Schedule B, skip lines 16–18 and enter the amount from line 15 on line 19. \n16 \nEnter the total cost (or fair market value (FMV)) from Schedule B .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 \n17 \nDivide line 16 by line 12 and enter the result as a percentage. Do not enter more than 100% \n.\n.\n17 \n% \n18 \nMultiply line 15 by percentage on line 17 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n18 \n19 \nAdditional estate tax. Subtract line 18 from line 15. Do not enter less than zero \n.\n.\n.\n.\n.\n.\n19 \n20 \nEnter section 1016(c) interest (where applicable) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n20 \nUnder penalties of perjury, I declare that I have examined this return, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer \n(other than taxpayer) is based on all information of which preparer has any knowledge. \nSign \nHere\n▲\nSignature of executor\n▲\nDate\n▲\nSignature of executor\nMay the IRS discuss this return with the preparer shown \nbelow? See instructions. Yes\nNo\nPaid \nPreparer \nUse Only\nPrint/Type preparer’s name\nPreparer’s signature\nDate\nCheck if \nself-employed \nPTIN\nFirm’s name ▶\nFirm’s address ▶\nFirm’s EIN ▶\nPhone no. \nFor Privacy Act and Paperwork Reduction Act Notice, see the separate instructions. \nCat. No. 10141S \nForm 706-A (Rev. 8-2019) \n",
"Form 706-A (Rev. 8-2019) \nPage 2 \nSchedule A. Disposition of Specially Valued Property or Cessation of Qualified Use \nNote: List property in chronological order of disposition or cessation. \nA \nItem \nnumber\nB \nDescription of specially valued property and schedule and item \nnumber where reported on the decedent’s Form 706 \nC \nDate of disposition \n(or date qualified \nuse ceased) \nD \nAmount received (or FMV, if \napplicable) (see instructions) \nE \nSpecial use value \n(see instructions) \nForm 706, Schedule \n, Item \nDescription: \nTotals. Enter total of column D on Part II, Tax Computation, line 12, and \ntotal of column E on Part II, Tax Computation, line 13 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \nForm 706-A (Rev. 8-2019) \n",
"Form 706-A (Rev. 8-2019) \nPage 3 \nSchedule B. Involuntary Conversions or Exchanges \nCheck if for: \nInvoluntary Conversion\nExchange\nQualified replacement (or exchange) property \nA \nItem \nB \nDescription of qualified replacement (or exchange) property \nC \nCost (or FMV) \nTotal cost (or FMV). Enter here and on line 16 of Part II, Tax Computation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nForm 706-A (Rev. 8-2019) \n",
"Form 706-A (Rev. 8-2019) \nPage 4 \nSchedule C. Dispositions to Family Members of the Qualified Heir \nEach transferee must enter into an agreement to be personally liable for any additional taxes imposed by section 2032A(c) and \nthe agreement must be attached to this Form 706-A. See instructions. \nTransferee #1: \nLast name \nFirst name \nMiddle initial \nSocial security number \nRelationship to the qualified heir\nDescription of property transferred \nA \nItem \nnumber \nB \nDescription of specially valued property and schedule and item \nnumber where reported on the decedent’s Form 706 \nC \nDate of \ndisposition \nForm 706, Schedule \n, Item \nDescription: \nTransferee #2: \nLast name \nFirst name \nMiddle initial \nSocial security number \nRelationship to the qualified heir \nDescription of property transferred \nA \nItem \nnumber \nB \nDescription of specially valued property and schedule and item \nnumber where reported on the decedent’s Form 706 \nC \nDate of \ndisposition \nForm 706, Schedule \n, Item \nDescription: \nIf there are more than two transferees, attach additional sheets using the same format. \nForm 706-A (Rev. 8-2019) \n"
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p4054d.pdf
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0619 Publ 4054-D (PDF)
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https://www.irs.gov/pub/irs-pdf/p4054d.pdf
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[
"Special Report to Congress\nNATIONAL TAXPAYER ADVOCATE\nwww.TaxpayerAdvocate.irs.gov/ObjectivesReport2020\nVolume 3\nMaking the EITC Work for Taxpayers and the Government\nImproving Administration and Protecting Taxpayer Rights\nEARNED INCOME TAX CREDIT\n",
"",
"This report is dedicated to\nthe amazing \nTaxpayer Advocate Service employees\nwho, for eighteen years,\nhave tirelessly given of their time and energy\nto enable us to submit our Reports to Congress. \nAs a group of people dedicated to the rights of taxpayers\nand to achieving systemic solutions,\nthey have no peer\n & \nIn memoriam,\nto Scott Rutz,\nour friend and colleague,\nwho is truly missed.\n",
"This page intentionally left blank.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \niii\nTable of Contents\nContents\n\t\nEXECUTIVE SUMMARY OF RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v\n\t\nPREFACE: Introductory Remarks by the National Taxpayer Advocate: Making \nthe EITC Work for Taxpayers and the Government: Improving Administration and \nProtecting Taxpayer Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii\nI.\t\nINTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1\nStructure of Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4\nPrinciples and General Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4\nThe IRS Mission Statement: The IRS Must Explicitly Acknowledge Its Role As a Benefits \nAdministrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4\nCongress Must Consider Administrability in Furtherance of Other Policy Goals . . . . . . . . . . . . . . . . . 7\nCongress Must Provide Effective Oversight of the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9\nII.\t RESTRUCTURE THE EITC AS TWO CREDITS: A WORKER CREDIT AND A CHILD \nBENEFIT, AND MODERNIZE THE DEFINITION OF A QUALIFYING CHILD . . . . . . . . . . . . . . . . . . . 10\nPresent Law and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10\nReasons for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11\nRecommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13\nRecommendation 1.1: Replace the EITC With a Per-Worker Credit Based on Earned \nIncome and a Universal Per-Child Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13\nThe Worker Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13\nThe Child Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16\nRecommendation 1.2: Redefine and Modernize the Definition of a Qualifying Child that \nReflects the Experiences of Primary Carers and Their Children . . . . . . . . . . . . . . . . . . . . . . . . . . 17\nPaying Out the Child Benefit When There Are Multiple Claims . . . . . . . . . . . . . . . . . . . . . . . . 19\nHolding Income Tax Returns Until the Vast Majority Have Been Filed . . . . . . . 19\nProcessing Multiple Claims of the Child Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 21\nIII.\t ESTABLISH GREATER IRS OVERSIGHT OF TAX PREPARERS AND TAX PREPARATION \nSOFTWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23\nPresent Law and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23\nReasons for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26\nPaid Preparer Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26\n",
"iv\nTable of Contents\n \n \nTable of Contents\nRecommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30\nRecommendation 2.1: Authorize the Secretary to Establish Standards for Return Preparers . . . . . . . . 30\nRecommendation 2.2: Authorize the Secretary to Establish Standards for Tax Return \nSoftware Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30\nRecommendation 2.3: Require Disclosure and Reporting of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31\nIV.\t ENSURE LOW INCOME TAXPAYERS HAVE DUE PROCESS PROTECTIONS \nCOMPARABLE TO PROTECTIONS OF OTHER TAXPAYERS BY LIMITING THE USE OF \nSUMMARY ASSESSMENT AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32\nPresent Law and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32\nAudits and Summary Assessment Authority: A Comparison of Determining Taxpayer \nCompliance With the EITC Qualifying Child Residency Requirement . . . . . . . . . . . . . . . . . . . . 34\nPre-Refund Audit (Deficiency Procedures) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34\nSummary Assessment Authority (aka “Math Error” Authority) . . . . . . . . . . . . . . . . . . . . . . . . . 36\nReason for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37\nRecommendation 3.1: Limit SAA Use to Appropriate Cases Based on Clear Criteria . . . . . . . . . . . . . 42\nRecommendation 3.2: Update and Modernize the SAA Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42\nV.\t ENSURE LOW INCOME TAXPAYERS HAVE DUE PROCESS PROTECTIONS \nCOMPARABLE TO PROTECTIONS OF OTHER TAXPAYERS: THE BAN UNDER IRC § 32(K) . . 44\nPresent Law and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44\nReasons for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46\nRecommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48\nRecommendation 3.3: Develop a Structure for Ban Determination That Protects Taxpayer Rights . . 48\nRecommendation 3.4: Clarify and Improve Court Review of Ban Determinations . . . . . . . . . . . . . . . 48\n\t\nAPPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49\nEITC Databook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49\nWorks Cited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75\nEITC Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82\nPublished TAS Works on EITC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93\n",
"v\nExecutive Summary of Recommendations\nWe are pleased to present this special report on the Earned Income Tax Credit (EITC). The EITC is a refundable tax \ncredit that provides substantial financial assistance to many low income working families. Research indicates the credit \nsubstantially reduces poverty and encourages many individuals to enter the workforce. While the EITC has historically \nhad bipartisan support, it has also been criticized for being overly complex, difficult to administer, and prone to high \nerror rates.\nIn this report we present proposals to improve the EITC and its administration so that the credit better achieves \npolicymakers’ objectives (i.e., increasing labor force participation and reducing poverty) while being less burdensome on \nboth the IRS and taxpayers. Specifically, we recommend the following EITC reforms:\n1.\t Redesign the credit and modernize its eligibility criteria. \n■\n■Recommendation 1.1: Replace the EITC with a per-worker credit based on earned income and a \nuniversal per-child benefit. \n■\n■Recommendation 1.2: Redefine and modernize the definition of a qualifying child that reflects the \nexperiences of primary carers and their children.\n2.\t Establish greater IRS oversight of tax preparation intermediaries such as return preparers and software providers. \n■\n■Recommendation 2.1: Authorize the Secretary to establish standards for return preparers.\n■\n■Recommendation 2.2: Authorize the Secretary to establish standards for tax return software \nproviders.\n■\n■Recommendation 2.3: Require disclosure and reporting of fees.\n3.\t Ensure EITC compliance procedures are consistent with due process norms and fundamental taxpayer rights.\n■\n■Recommendation 3.1: Limit summary assessment authority (SAA) use to appropriate cases based on \nclear criteria.\n■\n■Recommendation 3.2: Update and modernize the SAA process.\n■\n■Recommendation 3.3: Develop a structure for ban determination that protects taxpayer rights.\n■\n■Recommendation 3.4: Clarify and improve court review of ban determinations.\nIn providing our specific recommendations related to the EITC, we also identify several general recommendations that \ncan guide policymakers who seek to use the tax system effectively to deliver social benefits.\nGeneral recommendation #1: The IRS must acknowledge its role as a benefits administrator and change its practices \nand processes to reflect this role. Congress must also provide additional funding so that the IRS can succeed in this role. \nInstead of acting purely as an enforcement agency, the IRS should strive to ensure that low income taxpayers are treated \nwith respect and fairness and ensure that taxpayers receive the benefits they are eligible for.\nGeneral recommendation #2: Congress must consider the administrability of tax provisions, especially family and child-\nrelated provisions, whose eligibility criteria may be difficult if not impossible for the IRS to verify. When a tax provision \nis difficult for the IRS to administer, it can be more prone to improper payments, and ultimately subject certain taxpayers \nto additional scrutiny. This additional scrutiny can be particularly burdensome for low income taxpayers.\n",
"vi\n \n \nGeneral recommendation #3: Congress should conduct regular oversight hearings of the IRS on a permanent basis. \nThese hearings would provide an opportunity for the IRS to identify challenges and successes with all the tax laws it \nadministers. In the case of low income tax benefits, these hearings would provide a forum for Congress to hear directly \nfrom outside experts, including Low Income Taxpayer Clinics, return preparers, and others with particular insights into \nthe lives and challenges facing low income taxpayers and their families.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \nvii\nPreface\nPREFACE: Introductory Remarks by the National Taxpayer Advocate: \nMaking the EITC Work for Taxpayers and the Government: Improving \nAdministration and Protecting Taxpayer Rights\nIn 1975, the year the Earned Income Tax Credit (EITC) was enacted, I “hung out my shingle” as a tax \nreturn preparer for the first time. Thus, the EITC and I have been sisters-in-arms throughout my entire \ncareer in tax. In fact, as a young, newly divorced mother struggling to pay bills, I myself received the \nEITC. From both a professional and personal perspective, I have witnessed the significant, positive \nimpact the EITC can have on people’s lives.\nBack in 1975, I certainly did not expect that much of my life’s work would involve the EITC. But as \nmy work evolved to include legal practice and tax controversy, I saw how vulnerable populations could \nlose the much-needed safety net of the EITC merely because they did not understand the IRS’s audit \nprocesses or could not afford to take time off from work during business hours to gather documentation \nor sit on the phone trying to get through to the IRS. If they took time off, their pay would be docked. \nThey might even lose their jobs. So they didn’t respond, the IRS assumed they were not entitled to the \ncredit, and the taxpayer (and her family) lost out on hundreds or thousands of dollars in much-needed \nbenefits for which she was, in fact, eligible.\nI saw this sequence of events played out time after time after I founded and directed The Community \nTax Law Project, the first independent low income taxpayer clinic (LITC) in the country. I also saw \ntaxpayers who had no idea what the EITC eligibility criteria were and were completely dependent on a \nnew breed of return preparers—ones who had no training in tax law but who simply relied on software \nand viewed tax preparation as a way to lure vulnerable taxpayers into expensive refund anticipation \nloans.\nI found this heartbreaking because what I saw, almost every day of my working life, first at the LITC \nand later as the National Taxpayer Advocate, was the substantial, life-supporting difference the EITC \nmade in the lives of tens of millions of taxpayers. Yes, the EITC is a complicated statute. Yes, the EITC \nis undermined by overclaims—both inadvertent and fraudulent. And yes, the EITC requires the IRS \nto play a different role than merely revenue collector. But it is important to keep in mind that the EITC is \na low-cost, effective, and efficient method of delivering tens of billions of dollars in assistance to families and \nindividuals who are working in low-paying jobs.\nAs the National Taxpayer Advocate, I have spent much of the last 18 years thinking about how to \nimprove the administration of the EITC. How should the IRS change its approach and processes? \nHow should the IRS and others increase the participation rate? And how can the IRS minimize \nnoncompliance while respecting taxpayer rights and not deterring participation by eligible taxpayers? \nI have attempted to seek answers and make recommendations with respect to these questions. I and \nTaxpayer Advocate Service (TAS) employees have conducted research studies, served on Treasury \nand IRS taskforces, conducted training sessions for IRS and TAS employees, and made scores of \nadministrative and legislative recommendations about the EITC.1 \n1\t\nIn fact, in my first Annual Report as National Taxpayer Advocate, I proposed an overhaul of the six definitions of a child \nin the family status provisions of the Internal Revenue Code (IRC)—dependency exemption, head of household status, \nchild and dependent care credit, child tax credit, earned income tax credit, and the definition of “not married” under \nIRC § 7703(b). National Taxpayer Advocate 2001 Annual Report to Congress 76-127. In 2004, Congress incorporated \nsignificant portions of my recommendation into the Uniform Definition of a Qualifying Child, Pub. L. No. 108-311, although \nthere is still much more work to be done in this area. See National Taxpayer Advocate 2016 Annual Report to Congress \n325-357.\n",
"viii\nPreface\n \n \nPreface\nIt is fitting, then, in my last Report to Congress before I retire as National Taxpayer Advocate on July 31, \n2019, that we should publish this extraordinary document, Making the EITC Work for Taxpayers and the \nGovernment: Improving Administration and Protecting Taxpayer Rights. This report, with its discussions, \nanalyses, and recommendations, will serve as a reference for future work. The EITC Databook and \nLiterature Review in the appendices provide valuable information for future tax administration studies.\nBut this report is not just a research document. It is a call to action. As we show throughout this report, \nthe way the EITC is structured and the way the IRS is administering it often harms the very taxpayers it \nis intended to serve. We have made specific, common sense recommendations to mitigate that harm and \nreform the administration of the EITC. All our recommendations are actionable and supported by data \nand research.\nFinally, what is so remarkable about this report is that it is the result of a unique and collaborative \neffort between academia and the executive and legislative branches of the federal government. The \nstars aligned in March 2019, when TAS was able to bring on Professor Leslie Book of the Villanova \nUniversity School of Law as a Professor-in-Residence, and Margot Crandall-Hollick on detail from the \nCongressional Research Service. Les and Margot led a small and dedicated team of TAS employees that \nincluded attorney advisors, research and technical analysts, and a Local Taxpayer Advocate. Several \nteam members had represented taxpayers in EITC audits and Tax Court cases during their earlier \ncareers as LITC attorneys; thus, they brought to this project their “real world” experience with EITC \nadministration. The team conducted extensive interviews with internal and external stakeholders, and \nit compiled and reviewed reams of documents, studies, and data about the EITC, as well as other benefit \nprograms and tax credits of other countries.\nThe bottom line is that this report reflects intimate knowledge of the EITC from many different \nperspectives. I am enormously proud of—and grateful to—the team that prepared it, and I am \nhopeful that it will lead to a serious conversation about how to advance the twin goals of increasing the \nparticipation rate of eligible taxpayers and reducing overclaims by ineligible taxpayers. This conversation \nneeds to be framed by the fundamental realization that the IRS is no longer just a tax collector but is \nalso a benefits administrator. Unless the IRS embraces that role and organizes itself accordingly, we \nwill continue to have problems with the EITC, and vulnerable taxpayers will continue to be denied the \nassistance they dearly need.\nRespectfully submitted,\nNina E. Olson \nNational Taxpayer Advocate \n30 June 2019 \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n1\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nIntroduction\n2\nThe Earned Income Tax Credit (EITC) is a refundable credit for low and moderate income working \nfamilies. In tax year (TY) 2017, 26.2 million workers and families received about $64.5 billion in \nEITC.3 Decades of research indicate that the EITC is an effective tool in reducing poverty, encouraging \nwork, and improving health and education outcomes among low income Americans.4 Despite these \npositive outcomes, relatively high participation rates5 and low direct administrative costs,6 the credit has \nbeen plagued by a stubbornly high rate of improper payments.7 Improper payments increase the cost \nof the program, making it and similar low income refundable tax credits subject to intense scrutiny. \nImproper payments also lead the IRS to audit a disproportionately high share of low income taxpayers.8 \nIn fiscal year (FY) 2018, 43 percent of all individual returns selected for audit included an EITC claim \nand 37 percent of all audited individual returns were selected because they included an EITC claim.9 This \nis despite the fact that EITC returns account for approximately 18 percent of all individual returns filed \n2\t\nThe principal authors of this report are Leslie Book, Margot Crandall-Hollick, Laura Baek, Susan Morgenstern, Amy Ibbotson, \nJeff Wilson, Zachary Bend, and Katrina Leifeld. The authors would like to thank Jill MacNabb, Eric Lopresti, and Francis \nCappelletti for their assistance in drafting this report. This report would not have been possible without Nina Olson’s \nleadership and determination. During her 18-year tenure as National Taxpayer Advocate, Nina Olson has championed the \nrights of all taxpayers, especially the most vulnerable. Nowhere is this dedication more apparent than in her work on the \nEarned Income Tax Credit (EITC). Nina Olson has written extensively on the issues discussed in this report. Many of the \nideas and recommendations in this report directly reflect those past writings. \n3\t\nIRS, Compliance Data Warehouse (CDW), Individual Returns Transaction File (IRTF), tax year (TY) 2017 returns processed \nthrough cycle 13 of 2019 (May 2019).\n4\t\nFor an excellent summary of the research surrounding the effects of the EITC, see Austin Nichols & Jesse Rothstein, The \nEarned Income Tax Credit, in Economics of Means-Tested Transfer Programs in the United States (2016), https://www.nber.org/\nchapters/c13484.pdf. For summaries of specific aspects of the EITC, see pages 180-181 (impact on poverty); pages 187-\n198 (impact on labor); pages 181-182 (impact on health outcomes); and pages 185-187 (impact on education outcomes).\n5\t\nId. at 174-176 (looking at take up rates for taxpayers at different positions on the EITC schedule and favorably comparing \nEITC take up to other transfer programs).\n6\t\nThe IRS estimates costs for administering the EITC are less than one percent of benefits delivered; administrative costs for \nnon-tax benefits programs can range as high as 37 percent of program expenditures. See Appendix 1, EITC Databook. As \ndiscussed below, other data shows that administrative costs for non-tax benefits programs as a percent of total program \ncosts may be even higher.\n7\t\nSince 2010, EITC estimated improper payment rates have fluctuated between a low of 22.8 percent in 2012 and a high \nof 27.2 percent in 2014. National Taxpayer Advocate 2018 Annual Report to Congress 91, 95 (Most Serious Problem: \nImproper Earned Income Tax Credit Payments: Measures the IRS Takes to Reduce Improper Earned Income Tax Credit \nPayments Are Not Sufficiently Proactive and May Unnecessarily Burden Taxpayers).\n8\t\nIRS, 2018 Data Book, table 9a (May 2019).\n9\t\nId.\n",
"2\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Introduction\nin calendar year 2017.10 While EITC misreporting represents a small portion of the tax gap11 there has \nbeen a persistent emphasis on reducing the EITC improper payment rate.12\nAs a result of that scrutiny and a narrow internal view of how the IRS considers its responsibilities, \nall too often the IRS takes an enforcement-oriented approach to administering the EITC, leading to \nrelatively high audit rates for low income taxpayers. This approach can deter or altogether block eligible \ntaxpayers from claiming the credit, prevent ineligible taxpayers from understanding what they did \nwrong, and squander opportunities to educate taxpayers to encourage future voluntary tax compliance.13 \nThe enforcement-oriented approach is problematic because the population of taxpayers who rely on the \nEITC often share a common set of characteristics, such as limited education and high transiency, which \ncreate challenges for taxpayer compliance.14 All of this unduly burdens some of the most vulnerable \npopulations—kids and families struggling to make ends meet. And it has subjected the IRS to criticism \nfor unfair audit coverage of low income taxpayers at the expense of other taxpayers.15\nYet, in spite of these challenges, Congress continues to view refundable credits for the working poor \nas a desirable way to help low income working Americans. Congress has proposed various bills to \nexpand the EITC and related family credits like the Child Tax Credit to boost wages, increase labor \nforce participation, reduce poverty, and support families.16 Given these competing forces of wanting \nto provide more social benefits through the tax code while also reducing existing administrative and \ncompliance challenges, this report provides policymakers a framework to achieve both goals. \n10\t IRS, 2018 Data Book, table 9a (May 2019).\n11\t The most recent estimate of the gross tax gap, based on data for TYs 2008-2010, is $458 billion. Of that amount, $264 \nbillion, or 58 percent, is attributable to income misreporting by individual taxpayers. IRS Pub. 1415, Federal Tax Compliance \nResearch: Tax Gap Estimates for Tax Year 2008-2010 1 (May 2016). The EITC represents approximately six percent of the \ngross tax gap and ten percent of the tax gap attributable to income misreporting by individuals. Department of the Treasury, \nAgency Financial Report Fiscal Year 2018 146 (2018). National Taxpayer Advocate 2018 Annual Report to Congress 98 \n(Most Serious Problem: Improper Earned Income Tax Credit Payments: Measures the IRS Takes to Reduce Improper Earned \nIncome Tax Credit Payments Are Not Sufficiently Proactive and May Unnecessarily Burden Taxpayers). The largest component \nof the tax gap attributable to individual income misreporting is business income misreporting, which amounts to $125 \nbillion, or approximately 47 percent of the tax gap attributable to income misreporting. For further discussion on the relative \nsignificance of the EITC and the underreporting tax gap, see National Taxpayer Advocate 2018 Annual Report to Congress \n98-100.\n12\t See, e.g., Treasury Inspector General for Tax Administration (TIGTA), Ref. No. 2018-40-032, The Internal Revenue Service \nis Not in Compliance With Improper Payment Requirements (Apr. 2018). Money is fungible and in theory one more dollar \nimproperly claimed as a credit has an equal impact budgetarily as one fewer dollar collected in taxes. What accounts for \nthe additional scrutiny on low income taxpayers? Professor Larry Zelenak explains that an underpayment of tax allows the \ntaxpayer to keep more of his or her pretax income, and that there is a persistent sense that the government’s right to tax \npretax income “was dubious to begin with.” Larry Zelenak, The Myth of Pretax Income 101 Mich. L. Rev. 2261, 2263-2264 \n(2003).\n13\t National Taxpayer Advocate 2018 Annual Report to Congress 91-104 (Most Serious Problem: Improper Earned Income \nTax Credit Payments: Measures the IRS Takes to Reduce Improper Earned Income Tax Credit Payments Are Not Sufficiently \nProactive and May Unnecessarily Burden Taxpayers); National Taxpayer Advocate 2017 Annual Report to Congress 141-\n150 (Most Serious Problem: Earned Income Tax Credit: The IRS Continues to Make Progress to Improve Its Administration \nof the EITC, But It Has Not Adequately Incorporated Research Findings That Show Positive Impacts of Taxpayer Education on \nCompliance).\n14\t National Taxpayer Advocate 2015 Annual Report to Congress 235-239 (Introduction: The IRS Can Do More to Improve Its \nAdministration of the Earned Income Tax Credit and Increase Future Compliance Without Unduly Burdening Taxpayers and \nUndermining Taxpayer Rights).\n15\t Paul Kiel, It’s Getting Worse: The IRS Now Audits Poor Americans at About the Same Rate as the Top 1%, Pro Publica \n(May 30, 2019), https://www.propublica.org/article/irs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-\npercent.\n16\t Isabel Sawhill & Christopher Pulliam, Lots of plans to boost tax credits: which is best?, Brookings Inst. (Jan. 15, 2019), \nhttps://www.brookings.edu/research/lots-of-plans-to-boost-tax-credits-which-is-best/.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n3\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE 1, EITC Participation Rates and Program Costs Compared to Other Benefits \nPrograms17 \nPlacing the EITC in the tax system has many benefits relative to other programs including fewer direct \nadministrative costs, higher participation rates, and less stigma for recipients. The absence of upfront \neligibility screening associated with other programs contributes to less direct administrative costs for \nthe IRS but also generally means that there are higher error rates, both intentional and unintentional. \nAs this figure shows, however, the EITC’s combined costs, taking into account errors and administrative \ncost, is similar to many other programs. (See the EITC Databook appendix for additional data). And \nrecent research shows that the behavioral responses to the EITC—including how it reduces public \nassistance to households and increases taxes that those households pay—suggests that the true \ncosts of the EITC are lower than many have thought.18 \nMedicaid\n68%\nEITC Participation Rates Compared to Other Means-Tested Programs\nEITC Overhead Costs and Improper Payments Compared to Other Means-Tested Programs\nOverhead Costs Improper Payments \nEITC Overhead Costs \nEITC Improper Payments\nCHIP\n93%\nSchool\nLunch\n85%\nSNAP\n85%\nEITC\n78%\nSSI\n58%\nWIC\n55%\nTANF\n28%\nHUD\n32%\nTANF\n9%\n10%\nSSI\n9%\n8%\nMedicaid\n10%\n13%\nSNAP\n7%\n7%\nSchool\nLunch\n10%\n10%\nCHIP\n7%\n18%\nHUD\n7%\n4%\nWIC\n37%\n4%\nEITC\n25%\n1%\n17\t\nSee Appendix 1, EITC Databook Figure A.9, infra.\n18\t Jacob Bastian & Maggie Jones, Do EITC Expansions Pay For Themselves? Effects on Tax Revenue and Public Assistance \nSpending (2019).\n",
"4\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Introduction\nSTRUCTURE OF REPORT\nThis report proposes three major areas of reforms to the EITC that can improve the credit’s \nadministrability and efficacy, reduce taxpayer burden, and reduce erroneous payments. These proposals \ninclude:\n■\n■Redesigning the credit and modernizing its eligibility criteria; \n■\n■Establishing greater IRS oversight of tax preparation intermediaries such as return preparers and \nsoftware providers; and \n■\n■Ensuring EITC compliance procedures are consistent with due process norms and fundamental \ntaxpayer rights.\nEach proposal includes a discussion of the current practice or law, reasons for change, and specific \nreform recommendations. In presenting these proposals, we are mindful of the significant research and \nbackground relating to the EITC in general and the specific issues we discuss. For readers interested \nin further detail, the appendices provide additional data relating to the EITC, summaries of the \nsignificant work that the Taxpayer Advocate Service (TAS) has done on the EITC, including prior Most \nSerious Problems, Legislative Recommendations, and research studies, as well as a Literature Review of \nimportant EITC studies and articles.\nThese proposals and their associated recommendations are not intended to be exhaustive, nor address \nevery policy goal. Instead, they are meant to guide policymakers interested in modifying the EITC or \nother refundable credits (or developing new ones) so that their proposals are effective at achieving their \nobjectives. By considering our proposals in light of the foundational principles, the report also provides \na framework for improving the administration of tax benefits more broadly. \nPRINCIPLES AND GENERAL RECOMMENDATIONS\nUnderlying the proposals and specific recommendations in this report are three foundational principles \nand more general recommendations that we believe should inform policymakers as they consider using \nthe tax system to deliver social benefits in the form of refundable credits. \nThe IRS Mission Statement: The IRS Must Explicitly Acknowledge Its Role As a Benefits \nAdministrator\nHow the IRS publicly identifies its role and mission matters. It matters in terms of how employees view \ntheir role in interacting with taxpayers, it matters in terms of what type of employee the IRS hires, and \nit matters in terms of how the IRS dedicates resources to particular responsibilities. In the Internal \nRevenue Service Restructuring and Reform Act of 1998 (RRA 98), Congress directed the IRS to restate \nits mission statement with an emphasis on taxpayer service.19 The IRS soon adopted the following \nmission statement: “Provide America’s taxpayers top quality service by helping them understand and \nmeet their tax responsibilities and by applying the tax law with integrity and fairness to all.”20 In 2009, \nwithout any public notice or discussion, the IRS changed the statement to read “Provide America’s \ntaxpayers top quality service by helping them understand and meet their tax responsibilities and enforce \nthe tax law with integrity and fairness to all.”21\n19\t Pub. L. No. 105-206, § 1002, 112 Stat. 685 (1998).\n20\t https://www.irs.gov/pub/irs-news/ir-98-59.pdf.\n21\t IRM 1.1.1.2, IRS Mission (June 2, 2015).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n5\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nThe EITC has grown in importance since its inception in 1975 and has grown significantly since RRA \n98.22 Despite this growth in the EITC and other credits, the current mission statement fails to recognize \nthe IRS’s dual lines of business—revenue collector and benefits administrator. If an agency views its \nprimary mission as enforcing the tax laws and fails to even identify its role in delivering benefits, it will \ndesign its procedures and apply its resources with a focus that will likely not meet Congress’s desire \nthat the IRS “restate its mission to place a greater emphasis on serving the public and meeting taxpayer \nneeds.”23 \nThe IRS mission statement sends a clear message about the IRS’s priorities. The IRS has continued to \nemploy an approach to administering the EITC that is primarily based on enforcement. To successfully \nmeet the needs of the low and moderate income taxpayers that benefit from the EITC, the IRS should \nhire employees whose education, skills, and background are suited for the work of delivering benefits.24 \nThat could include, for example, employees with skills that are drawn from social work. By explicitly \nstating the IRS’s benefits administration role as a separate agency mission in the context of service \nand non-coercive compliance, the IRS would be required to align its procedures, goals, and measures \nwith those of other agencies serving similar situations. That would in turn build taxpayer trust and \nconfidence, leading to improved compliance and an environment that reflects the essential dignity of all \ntaxpayers.\nOne example of the IRS’s failure as a benefits administrator is the agency’s continued refusal to reform \nEITC audits so that one IRS employee is assigned to work the audit if the taxpayer calls or writes the \nIRS in response to an IRS audit notice.25 Family matters are inherently personal and private. A single \nIRS employee can gain familiarity with the taxpayer’s issues and be able to suggest alternate sources \nof documentation given that familiarity, as well as reassure the taxpayer who may be anxious about \nsharing personal information. The employee may also play a key role if the taxpayer is not entitled to \nthe EITC and help educate the taxpayer so he or she understands how the rules apply to their specific \ncircumstances.26 Such education is particularly important since the population eligible to claim the \n22\t See Austin Nichols & Jesse Rothstein, The Earned Income Tax Credit, in Economics of Means-Tested Transfer Programs in the \nUnited States (2016), https://www.nber.org/chapters/c13484.pdf.\n23\t Pub. L. No. 105-206, § 1002 112 Stat. 685 (1998).\n24\t National Taxpayer Advocate 2016 Annual Report to Congress 1, 15-16 (Special Focus: IRS Future State: The National \nTaxpayer Advocate’s Vision for a Taxpayer-Centric 21st Century Tax Administration).\n25\t See National Taxpayer Advocate 2014 Annual Report to Congress 134-144 (Most Serious Problem: Correspondence \nExamination: The IRS Has Overlooked the Congressional Mandate to Assign a Specific Employee to Correspondence \nExamination Cases, Thereby Harming Taxpayers).\n26\t See National Taxpayer Advocate 2015 Annual Report to Congress 248, 252-253 (Most Serious Problem: Earned Income \nTax Credit (EITC): The IRS is Not Adequately Using the EITC Examination Process as an Educational Tool and is not Auditing \nReturns With the Greatest Indirect Potential for Improving EITC Compliance). TAS has conducted research that has focused \non educating EITC taxpayers in a manner tailored to their specific circumstances and the results reflected a statistically \nsignificant improvement in compliance for taxpayers who broke relationship and residency Dependent Database (DDb) \nrules. The DDb is a rule-based system incorporating data from within the IRS and information from external sources such \nas the Department of Health and Human Services and the Social Security Administration. TIGTA, Ref. No. 2018-40-024, \nSome Tax Returns Selected for Fraud Screening Did Not Have Refunds Held and Required Notifications Were Not Always Sent \nto Taxpayers 1 (Mar. 27, 2018). For more on the TAS research studies, which tested whether sending educational letters \nto taxpayers who erroneously claimed EITC in a previous tax year improved future compliance, see National Taxpayer \nAdvocate 2017 Annual Report to Congress vol. 2 14-40 (Research Study: Study of Subsequent Filing Behavior of Taxpayers \nWho Claimed Earned Income Tax Credits (EITC) Apparently In Error and Were Not Audited But Were Sent an Educational Letter \nFrom the Taxpayer Advocate Service, Part 2: Validation of Prior Findings and the Effect of an Extra Help Phone Number and a \nReminder of Childless-Worker EITC); National Taxpayer Advocate 2016 Annual Report to Congress vol. 2 32-52 (Research \nStudy: Study of Subsequent Filing Behavior of Taxpayers Who Claimed Earned Income Tax Credits (EITC) Apparently in Error and \nWere Sent an Educational Letter From the National Taxpayer Advocate).\n",
"6\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Introduction\nEITC is constantly churning, with approximately one-third of the eligible population changing every \nyear.27 \nAssigning a single IRS employee would also likely increase the percentage of audited EITC taxpayers \nthat fully engage with the IRS during an audit. Almost all EITC audits are correspondence audits \n(i.e., conducted via the mail). For FY 2018, less than a third (31 percent) of EITC claimants who were \naudited had a complete interaction with the IRS that led to some resolution of their EITC claim, as \nillustrated in Figure 2. \nFIGURE 228\nEITC Claimants’ Audit Interactions With the IRS in FY 2018\n43% never responded \nto an audit notice\n26% started \nresponding but then \nstopped and did not \npetition the Tax Court\n31% had a \ncomplete interaction \nwith the IRS\nIn contrast, in FY 2018, 43 percent of audited EITC claimants were denied the credit because they never \nresponded to the audit notice (i.e., the “non-response rate” was 43 percent); while 26 percent responded \nto some IRS notices, but the EITC was denied because the taxpayer stopped responding and did not \npetition the Tax Court or sign an agreement with the IRS (i.e., the “default assessment rate” was 26 \npercent).29 Personal engagement between EITC claimants and IRS employees helps to build trust in \n27\t IRS, EITC Fast Facts, https://www.eitc.irs.gov/partner-toolkit/basic-marketing-communication-materials/eitc-fast-facts/eitc-\nfast-facts (last visited May 17, 2019). \n28\t IRS, CDW, Audit Information Management System (AIMS) Closed Case Database for EITC audits closed in FY 2018 (May \n2019).\n29\t For comparison, among the field and office audits of non-EITC returns that were closed in FY 2018, the non-response rate \nwas five percent and the default assessment rate (the taxpayer stopped responding) was ten percent. (Because virtually \nall audits of EITC returns are correspondence audits, it is not possible to compare these statistics to field and office audits \nof EITC returns.) These statistics do not include correspondence audits on non-EITC returns. IRS, CDW, AIMS Closed Case \nDatabase for EITC audits closed in FY 2018 (May 2019).\nFor fiscal year 2018, less than a third (31 percent) of EITC claimants who were audited \nhad a complete interaction with the IRS that led to some resolution of their EITC claim, \nas illustrated in Figure 2. \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n7\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nthe tax system. An impersonal correspondence-based process without the personal engagement with a \nspecific IRS employee will likely negatively affect taxpayers’ perception of the agency.30 \nGeneral recommendation #1: The IRS must acknowledge its role as a benefits \nadministrator and change its practices and processes to reflect this role. Congress must \nalso provide additional funding so that the IRS can succeed in this role. Instead of acting \npurely as an enforcement agency, the IRS should strive to ensure that low income taxpayers \nare treated with respect and fairness and ensure that taxpayers receive the benefits they are \neligible for.\nCongress Must Consider Administrability in Furtherance of Other Policy Goals\nWhile the IRS must embrace its role as a benefits administrator, Congress should directly consider issues \nof administrability when it enacts or amends provisions like the EITC. Policymakers understandably \nfocus on other aspects of a proposal—how many people will the policy lift out of poverty, how will the \npolicy affect decisions about working, how will it affect children—and too often gloss over whether \nthe IRS can administer the provision so that it achieves its intended goals. If a tax provision cannot \nbe effectively administered by the IRS, it can dampen or lessen the provision’s effectiveness, increase \ntaxpayer burden, cost the federal government money, and subject the benefit (and its recipients) to \nincreased scrutiny. For example, when the IRS is unable to verify or authenticate data relating to EITC \neligibility, or the EITC’s complexity means that taxpayers and preparers cannot understand how the law \napplies,31 it makes the EITC more vulnerable to opposition and increases pressure on the IRS to audit \nEITC claimants. That then leads to a cycle where the IRS is criticized for disproportionately auditing \nlow income taxpayers32 while still being unable to reduce stubbornly high improper payment rates.33 \n30\t One TAS Research study found that “taxpayers who experienced a correspondence audit report relatively low perceived \nlevels of procedural, informational, interpersonal, and distributive justice.” For more information, see National Taxpayer \nAdvocate 2017 Annual Report to Congress vol. 2 148, 167 (Research Study: Audits, Identity Theft Investigations, and \nTaxpayer Attitudes: Evidence from a National Survey).\n31\t Government Accountability Office (GAO), Refundable Tax Credits: Comprehensive Compliance Strategy and Expanded Use \nof Data Could Strengthen IRS’s Efforts to Address Noncompliance 21 (2016) (“[T]he complexity of eligibility requirements, \nbesides being a major driver of noncompliance and complicating IRS’s ability to administer these credits, are also a major \nsource of taxpayer burden.”), https://www.gao.gov/assets/680/677548.pdf. \n32\t See, e.g., Paul Kiel & Hannah Fresques, Where in the U.S. Are You Most Likely to Be Audited By the IRS, Pro Publica, (Apr. 1, \n2019), https://projects.propublica.org/graphics/eitc-audit.\n33\t See, e.g., Kyle Pomerlau, Earned Income Tax Credit Still Plagued with High Error Rate, Tax Foundation (May 14, 2014), \nhttps://taxfoundation.org/earned-income-tax-credit-still-plagued-high-error-rate (suggesting that wage subsidies in the tax \ncode may be predisposed to high error rates that may make any reform efforts “futile”).\nIf a tax provision cannot be effectively administered by the IRS, it can dampen \nor lessen the provision’s effectiveness, increase taxpayer burden, cost the federal \ngovernment money, and subject the benefit (and its recipients) to increased scrutiny. \n",
"8\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Introduction\nEITC Complexity and Family Life\nMany observers have noted that the EITC is a complex provision. The combination of family complexity and \nstrict eligibility requirements contributes to many families struggling to determine eligibility. Consider three \nfamily scenarios from a 2016 Government Accountability Office (GAO) report34 that includes examples of \ncomplications that can arise when applying EITC Eligibility Rules:\nScenario 1: \nA woman separated from and stopped living with her husband in January of last year, but they are still \nmarried. She has custody of their children. She is likely eligible for the EITC because she can file using the \nhead of household status.\nHowever … If the couple separated in November, she is likely NOT eligible for the EITC because she was \nnot living apart from her husband for the last six months of the year and therefore cannot claim the head of \nhousehold filing status. \nScenario 2: \nAn 18-year-old woman and her daughter moved home to her parents’ house in November of last year. She is \nlikely eligible for the EITC because she was supporting herself and her child.\nHowever … If she always lived at her parents’ house, she is likely NOT eligible35 for the EITC because she \nwas a dependent of her parents for the full tax year and therefore cannot claim the EITC on her own behalf.\nScenario 3:\nA young man lives with and supports his girlfriend and her two kids. He and the mom used to be married, \ngot divorced, and are now back together. He is likely eligible for the EITC because the children are his \nstepchildren and therefore meet the relationship requirement.\nHowever … If he and the mom were never married, he is likely NOT eligible for the EITC because the \nchildren are not related to him.\nWhether Congress redesigns the credit entirely or only modernizes certain eligibility criteria to reflect \nthe reality of Americans’ lives, the changes should reflect the changing dynamics of the American family \nwhile ensuring appropriate administrative tools are available to the IRS. \nBy understanding the dynamics of the EITC population, Congress can design an expanded, more \ninclusive EITC that furthers its original goal of supporting low income working taxpayers and their \nfamilies. In so doing, Congress will reaffirm the IRS’s dual roles as revenue collector and benefits \nadministrator, and explicitly affirm taxpayer rights as a guiding principle for tax administration.36 \n34\t GAO, Refundable Tax Credits: Comprehensive Compliance Strategy and Expanded Use of Data Could Strengthen IRS’s Efforts to \nAddress Noncompliance 21 (2016).\n35\t Crucially, these are stylized examples of the likely eligibility of the taxpayer given the limited information provided. The \nactual eligibility of a taxpayer in this situation may differ, especially in light of additional information not provided in these \nexamples. For example, in scenario 2, if the 18-year old woman was paying rent to her parents, buying her own food, and \ngenerally supporting herself and her child, she likely would qualify for the credit. The applicability of general rules to very \nspecific circumstances highlights some of the complexity in administering family and child related tax benefits like the EITC.\n36\t We note that this foundational principle is consistent with Congress’ directive in The IRS Reform and Restructuring Act \nof 1998 (RRA 98) that IRS front-line technical experts should advise Congress about the administrability of pending tax \nlegislation. Pub. L. No. 105-206, § 4021, 112 Stat. 685 (1998). This has not been followed. See National Taxpayer \nAdvocate 2014 Annual Report to Congress 108-111 (Most Serious Problem: Complexity: The IRS Has No Process to Ensure \nFront-Line Technical Experts Discuss Legislation with the Tax Writing Committees, as Requested by Congress).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n9\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nWhen Congress considers legislation with tax administration in mind, the legislation is likely to be \nsimpler and less burdensome. \nGeneral recommendation #2: Congress must consider the administrability of tax \nprovisions, especially family and child related provisions, whose eligibility criteria may be \ndifficult if not impossible for the IRS to verify. When a tax provision is difficult for the \nIRS to administer, it can be more prone to improper payments, and ultimately subject \ncertain taxpayers to additional scrutiny. This additional scrutiny can be particularly \nburdensome for low income taxpayers.\nCongress Must Provide Effective Oversight of the IRS\nThe IRS has faced significant budget constraints in recent years.37 As the National Taxpayer Advocate \nhas stated before, however, the support that the IRS needs is not just financial.38 The IRS needs an \nengaged Congress that provides appropriate oversight over IRS policies and initiatives. That oversight \nwill lead to greater transparency and public trust in the tax system. It will provide Congress with \ninformation on how legislation is meeting the goals that Congress has identified and the challenges that \nboth the IRS and taxpayers face.\nWe note that there is precedent for this type of legislative engagement. As part of the agency’s \nreorganization mandated by RRA 98, Congress held joint annual meetings, over five years, to review the \nIRS strategic plan.39 The hearing participants included three members (two from the majority and one \nfrom the minority) from each of the congressional committees with jurisdiction over the IRS: Senate \nFinance, Appropriations, and Government Affairs, and House Ways and Means, Appropriations, and \nGovernment Reform and Oversight. \nGeneral recommendation #3: Congress should conduct regular oversight hearings of the \nIRS on a permanent basis.40 These hearings would provide an opportunity for the IRS \nto identify challenges and successes with all the tax laws that the IRS administers. In the \ncase of low income tax benefits, these hearings would provide a forum for Congress to hear \ndirectly from outside experts, including Low Income Taxpayer Clinics, return preparers, \nand others with particular insights into the lives and challenges facing low income \ntaxpayers and their families.\nWith these principles and general recommendations in mind, we now turn to the EITC reform \nproposals and specific recommendations. \n37\t In inflation-adjusted dollars, the IRS budget has declined from $12.1 billion in 2010 to $10.1 billion in 2018. Department \nof the Treasury, FY 2012 Budget in Brief 1 (Feb. 2012), https://home.treasury.gov/about/budget-performance/budget-in-\nbreif/Documents/FY2012_BIB_Complete_508.pdf. Department of the Treasury, FY 2020 Budget in Brief 1 (March 2019), \nhttps://home.treasury.gov/system/files/266/FY2020BIB.pdf.\n38\t National Taxpayer Advocate 2016 Annual Report to Congress 6-11 (Special Focus: IRS Future State: The National Taxpayer \nAdvocate’s Vision for a Taxpayer-Centric 21st Century Tax Administration).\n39\t Pub. L. No. 105-206, § 4001, enacting Internal Revenue Code (IRC) § 8021(f), & § 4002, amending IRC § 8022, 112 Stat. \n685, 783-84 (1998).\n40\t This oversight would include issues beyond refundable credits (like the IRS modernization progress), but the EITC is a \nparticularly important provision that could benefit from systematic Congressional review and information and suggestions \nfrom the IRS and external stakeholders. \n",
"10\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\nRestructure the EITC As Two Credits: A Worker Credit and a Child Benefit, \nand Modernize the Definition of a Qualifying Child\nPRESENT LAW AND PRACTICE\nEligibility for the EITC and the amount of EITC a taxpayer is entitled to are based on a variety of \nfactors including the presence and number of qualifying children, the taxpayer’s earned income, adjusted \ngross income (AGI), investment income, and marital status.41 \nThere are eight different EITC formulas as illustrated in Figure 3 (see EITC Databook appendix for the \nTY 2018 credit parameters), although all follow the same general structure: the EITC increases in value \nover a range of earned income (between $0 and the “earned income amount”), reaches its maximum \nlevel (when earned income is between the “earned income amount” and the “phase out amount \nthreshold”), and then begins to phase out to zero (when earned income (or AGI, whichever is greater) \nexceeds the “phase out amount threshold”). The income level at which the credit begins to phase out \nis higher for married couples than unmarried recipients (this is often referred to as “marriage penalty \nrelief”). \nFIGURE 342\nEarned Income Credit Amount\nEITC Amounts by Earned Income, Marital Status, \nand Qualifying Children for Tax Year 2018\nEarned Income\n$60,000\n$40,000\n$6,500\n$3,250\n$6,431\n$5,716\n$3,461\n$519\n$20,000\nSingle, 1 child\nMarried, 1 child\nSingle, 2 children\nMarried, 2 children\nSingle, 3 children\nMarried, 3 children\nSingle, no children\nMarried, no children\n41\t See IRC § 32. For a comprehensive list of EITC eligibility requirements and how to calculate the credit, see Gene Falk & \nMargot Crandall-Hollick, Cong. Research Serv., R43805, The Earned Income Tax Credit (EITC): An Overview (2018). See \nalso National Taxpayer Advocate 2016 Annual Report to Congress 325, 330-331 (Legislative Recommendation: Tax Reform: \nRestructure the Earned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer \nBurden).\n42\t See IRC § 32 and IRS Revenue Procedure 2018-18. EITC phases out based on the taxpayer’s earned income or adjusted \ngross income whichever is greater.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n11\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nThe size of the credit varies substantially depending on the number of qualifying children the taxpayer \nhas, as illustrated in Figure 3. An individual must meet three primary requirements to be a “qualifying \nchild.” First, the individual must have a specific relationship to the tax filer (son, daughter, adopted \nchild, step child, foster child, brother, sister, half-brother, half-sister, step brother, step sister, or \ndescendent of such a relative such as a grandchild, niece, or nephew). Second, the individual must share \na residence with the taxpayer for more than half the year in the United States. Third, the individual \nmust be under the age of 19 (or age 24, if a full-time student) or be permanently and totally disabled.43 \nREASONS FOR CHANGE\nThe current credit design may not be the most effective means of increasing labor force participation and \nreducing poverty among all low income taxpayers. The current credit is also complicated for taxpayers \nto comply with, difficult for the IRS to administer, and is associated with a high improper payment rate, \nespecially among taxpayers with qualifying children.44 \nWhen the credit was first enacted, its purpose was to encourage work and reduce dependence on cash \nwelfare among single mothers.45 Economic research has consistently shown that the credit has been \neffective at increasing the labor force participation of this population.46 Of note, when the EITC was \noriginally created, a credit for childless workers did not exist. \nDuring the 1990s, Congress enacted the EITC for workers without qualifying children, often referred \nto as the “childless EITC.” The main rationale for the childless EITC was to offset a gasoline tax \nincrease.47 The credit was and remains small in comparison to the credit for those with children. In \n2018, an individual without any qualifying children working full time at a minimum wage job would \nreceive an EITC of about $60.48 Research indicates that while the EITC has had a significant impact on \nreducing poverty among recipients with children, it has little poverty reduction impact among childless \n43\t The individual must also have a Social Security number that is valid for employment. IRC §§ 32(c)(3)(D), (m).\n44\t An improper payment is defined as “any payment that should not have been made or that was made in an incorrect amount \n(including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable \nrequirements” and ‘‘any payment to an ineligible recipient.” Improper Payments Elimination and Recovery Act of 2010, Pub. \nL. No. 111–204, § 2(e), 124 Stat. 2224 (2010) amending Improper Payments Information Act of 2002, Pub. L. No. 107-\n300, 116 Stat. 2350 (2002) (striking § 2(f) and adding (f)(2)). The IRS estimates that for FY 2018, 25 percent of the total \nEITC program payments were improper. Department of the Treasury, Agency Financial Report Fiscal Year 2018 42-43 (2018). \n45\t Margot Crandall-Hollick, Cong. Research Serv., R44825, The Earned Income Tax Credit (EITC): A Brief Legislative History 7 \n(2018).\n46\t Nada Eissa & Hilary Hoynes, Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply, 20 Tax Pol’y & Econ. 73 \n(2006). For a review, see Margot Crandall-Hollick & Joseph Hughes, Cong. Research Serv., R44057, The Earned Income Tax \nCredit (EITC): An Economic Analysis (2018). \n47\t See Margot Crandall-Hollick, Cong. Research Serv., R44825, The Earned Income Tax Credit (EITC): A Brief Legislative History \n7 (2018).\n48\t This assumes a federal minimum wage of $7.25 received by a worker who works 40 hours per week for 50 weeks per year \nequaling an annual pre-tax earned income of $14,500.\n",
"12\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\nindividuals.49 And given the relatively small benefit (and lower participation rate)50 it is unlikely to have \nany labor supply increasing effect among low income childless adults. \nConcerns about the size and limited effect on poverty and labor force participation of the childless \nEITC have become more relevant in light of research showing decreased labor force participation of \nsome childless adults and stagnant wage growth among many workers, especially the poorest workers.51 \nIndeed, a recent proposal by Leonard Burman to create a substantially larger and near universal per-\nworker EITC is partially conceived as a way to encourage work and mitigate wage stagnation for both \nlow and middle income workers.52 \nIn addition, TAS, the IRS, and other organizations have repeatedly documented how the EITC’s \ncomplex structure burdens taxpayers and is difficult for the IRS to administer.53 Much of the \ncomplexity, administrative issues difficulty, and taxpayer burden associated with the credit center around \nthe qualifying child rules. \nFirst, the IRS cannot independently verify that a child meets all the current EITC qualifying child \nrules, especially the residency requirement, during filing season. There is no national, authoritative, and \ntimely database that indicates where and with whom a child lives during a calendar year for the purposes \nof administering this tax benefit, making accurate verification of this requirement difficult. Nor do we \nbelieve U.S. taxpayers would tolerate the government creating such a database. Failure of a taxpayer \n49\t Chuck Marr et al., Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty 6 (2016), \nhttps://www.cbpp.org/research/federal-tax/strengthening-the-eitc-for-childless-workers-would-promote-work-and-reduce. \nIn addition, analysis by the Congressional Research Service indicates that the EITC reduces the proportion of unmarried \nchildless workers in poverty from 19.9 percent to 19.6 percent (a 1.5 percent reduction). In comparison, the EITC reduces \nthe proportion of unmarried households with three children in poverty from 40.5 percent to 32.3 percent (a 20.2 percent \nreduction). Margot Crandall-Hollick & Joseph Hughes, Cong. Research Serv., R44057, The Earned Income Tax Credit (EITC): \nAn Economic Analysis (2018).\n50\t For TY 2016, an estimated 65 percent of eligible childless workers claimed the EITC, compared to an estimated 86 percent \nparticipation for those with one child, 85 percent participation for those with two children, and 82 percent participation for \nthose with three children. For more information, see the EITC Databook appendix, infra.\n51\t See Figure 4 in Chuck Marr et al., Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty 6 \n(2016), https://www.cbpp.org/research/federal-tax/strengthening-the-eitc-for-childless-workers-would-promote-work-and-\nreduce; Isabel V. Sawhill & Christopher Pulliam, Lots of plans to boost tax credits: which is best?, Brookings Inst. (Jan. 15, \n2019), https://www.brookings.edu/research/lots-of-plans-to-boost-tax-credits-which-is-best/. See also, Dylan Matthews, \nSenate Democrats have coalesced around a big plan to expand tax credits, Vox (April 10, 2019), https://www.vox.com/future-\nperfect/2019/4/10/18302183/tax-cut-democrats-earned-income-tax-credit-child-allowance; Peter S. Goodman & Jonathan \nSoble, Global Economy’s Stubborn Reality: Plenty of Work, Not Enough Pay, N.Y. Times, Oct. 7, 2017, https://www.nytimes.\ncom/2017/10/07/business/unemployment-wages-economy.html; Jay Shambaugh et. al., Thirteen Facts about Wage Growth \n(2017); Matthew Desmond, Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not, N.Y. Times, Sept. 11, \n2018, https://www.nytimes.com/2018/09/11/magazine/americans-jobs-poverty-homeless.html.\n52\t Leonard E. Burman, A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, and Supporting Families \n(2019).\n53\t See National Taxpayer Advocate 2016 Annual Report to Congress 325-340 (Legislative Recommendation: Tax Reform: \nRestructure the Earned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer \nBurden); National Taxpayer Advocate Fiscal Year 2017 Objectives Report to Congress 113-118 (Area of Focus: Earned \nIncome Tax Credit Reform Could Reduce the EITC Improper Payment Rate Without Reducing Participation by Eligible Taxpayers); \nMargot Crandall-Hollick, Cong. Research Serv., R43873, The Earned Income Tax Credit (EITC): Administrative and Compliance \nChallenges (2018); IRS Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns \n(Aug. 2014); Jason J. Fichtner, William G. Gale & Jeff Trinca, Tax Administration: Compliance, Complexity, and Capacity \n(2019); Elaine Maag, Simplicity: Considerations in Designing a Unified Child Credit, 63 Nat’l Tax J. 765 (2010). In addition, in \nits most recent Annual Financial Report, the Treasury Department stated “Treasury and IRS analyses, as well as audits by \nthe Government Accountability Office (GAO) and Treasury Inspector General for Tax Administration (TIGTA), have consistently \nfound that payment errors for EITC and other tax credit programs are largely attributable to the statutory design and \ncomplexity of the credits within the tax system, and not rooted in internal control weaknesses, financial management or \nfinancial reporting deficiencies.” Department of the Treasury, Agency Financial Report Fiscal Year 2018 150 (2018).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n13\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nto meet the residency requirement results in the greatest amount of erroneous claims of the credit in \ndollar terms.54 It is also difficult for the IRS to verify that children meet the relationship requirement. \nWhile the IRS does have data on a child’s age and data that links him or her to at least one biological \nparent, the IRS does not have data that links the child to other family members (like aunts, siblings, or \ngrandparents). \nSecond, the qualifying child rules often do not reflect the real-life connections between children \nand adults in low income families. A 2016 study by the Tax Policy Center found that the number \nof households made up of “traditional families” (married parents with only biological children) have \ndeclined while alternative family types, such as families led by a single parent or cohabitating parents, \nhave increased.55 Only 51.6 percent of children living in families with income at or below 200 percent of \nthe federal poverty level (FPL) were in families headed by married couples. Low income children were \nmore likely to live with either a single parent, in a multigenerational household, a cohabiting household, \nor in a family with at least one non-biological child in comparison to their higher income peers.56 \nRefundable credits intended to support low income working families should be designed to benefit their \ntarget population.\nRECOMMENDATIONS\nRecommendation 1.1: Replace the EITC With a Per-Worker Credit Based on Earned \nIncome and a Universal Per-Child Benefit \nTAS recommends restructuring the EITC into (1) a refundable worker credit based on each individual \nworker’s earned income irrespective of the presence of a qualifying child, and (2) a refundable child \nbenefit that would reflect the costs of caring for a child. This child benefit would also replace the child \ntax credit and the dependent exemption which is scheduled to be reinstated beginning in 2026.57 TAS \nhas proposed a similar restructuring of the EITC and other child and family related tax benefits in the \npast.58\nThe Worker Credit\nMuch like the current EITC, the worker credit would be structured to phase-in as a percentage of earned \nincome, reach a plateau, and then phase out.59 Unlike the current EITC, however, the benefit would \nbe uniform for each worker at a given income level and not vary depending on the number of children \nthe worker has or, if the worker is married, the couple’s combined income. This structure would target \nthe benefit to the lowest income taxpayers and help ensure that workers in low-wage jobs receive enough \n54\t IRS, Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns (Aug. 2014).\n55\t Elaine Maag, H. Elizabeth Peters & Sarah Edelstein, Increasing Family Complexity and Volatility: The Difficulty in Determining \nChild Tax Benefits 10 (2016). See also National Taxpayer Advocate 2016 Annual Report to Congress 334 (Legislative \nRecommendation: Tax Reform: Restructure the Earned Income Tax Credit and Related Family Status Provisions to Improve \nCompliance and Minimize Taxpayer Burden).\n56\t Id. \n57\t Under § 11041 of Pub. L. No. 115-97, personal exemptions equal $0 for TYs 2018-2025.\n58\t See National Taxpayer Advocate 2016 Annual Report to Congress 325-340 (Legislative Recommendation: Tax Reform: \nRestructure the Earned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer \nBurden).\n59\t For examples on how to structure a per-worker credit, see Elaine Maag, Investing in Work by Reforming the Earned Income \nTax Credit (2015). \n",
"14\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\nmoney to meet their basic needs.60 In order to prevent wealthy taxpayers with relatively low levels of \nearned income from claiming the credit, the credit could phase out based on AGI (a broader measure of \nincome that includes unearned income like capitals gains, dividends, rents and royalties) and/or retain \nthe EITC provision that denies the credit to taxpayers with excessive investment income.61 The exact \nparameters could be adjusted to meet policymakers’ distributional, anti-poverty, and budgetary goals.62 \nSeveral proposals have already been put forth that expand the EITC for childless workers, providing a \nframework for how to design a worker credit.63 \nSince the credit would be based on earned income and not on the presence of qualifying children, \nthe dollar amounts of improper payments of the worker credit would likely fall in comparison to \ncurrent EITC improper payments. Most EITC recipients have at least some Form W-2, Wage and Tax \nStatement, wage income, and errors associated with this type of income are relatively small in dollar \nterms. In TY 2017, about 15 percent of EITC recipients had both self-employment and W-2 income, \nwhile about 11 percent had only self-employment income (see the EITC Databook appendix for \nadditional data).64 \nIn addition, as a result of changes made by the Protecting Americans from Tax Hikes (PATH) Act, the \nIRS has more timely data it can use to detect and prevent any overclaims of the worker credit based \non W-2 income.65 The PATH Act requires employers to submit W-2s (and information returns for \nnonemployee compensation like Form 1099-MISC, Miscellaneous Income) by January 31 and requires \nthe IRS to hold refunds until February 15 if the taxpayer claims EITC or the refundable portion of \nthe child tax credit. These legislative changes were made in part to prevent “refund fraud related to \nfabricated wages and withholdings.”66 Data indicate that more Forms W-2, Wage and Tax Statement, \nwere submitted to the IRS earlier in the 2019 filing season compared with the 2018 filing season.67 The \nIRS received 219 million Forms W-2 as of February 4, 2019, compared with 101 million for the same \n60\t Some experts caution that without a minimum wage, employers would reduce and capture the benefit of an increased EITC. \nSee Austin Nichols & Jesse Rothstein, The Earned Income Tax Credit, in Economics of Means-Tested Transfer Programs in the \nUnited States Vol. 1 137 (Robert A. Moffitt ed., 2016). Therefore, many proposals couple an increased childless EITC or \nworker credit with an increased minimum wage. See Isabel V. Sawhill & Quentin Karpilow, Raising the Minimum Wage and \nRedesigning the EITC, Brookings Inst. (Jan. 30, 2014), https://www.brookings.edu/research/raising-the-minimum-wage-and-\nredesigning-the-eitc/. \n61\t IRC § 32(i).\n62\t For more information about how changing different parameters of the credit can affects taxpayers, see Elaine Maag, Donald \nMarron & Erin Hoffer, Redesigning the EITC: Issues in Design, Eligibility, Delivery, and Administration (2019). \n63\t See, e.g., Leonard E. Burman, A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, and Supporting \nFamilies (2019). For a summary of other recent proposals to modify the EITC and child tax credit, see Isabel V. Sawhill & \nChristopher Pulliam, Lots of plans to boost tax credits: which is best?, Brookings Inst. (Jan. 15, 2019), https://www.brookings.\nedu/research/lots-of-plans-to-boost-tax-credits-which-is-best/. \n64\t IRS, CDW, IRTF and Information Returns Master File (IRMF), TY 2017 returns processed through cycle 13 of 2019 (May \n2019).\n65\t See Pub. L. No. 114-113, Division Q, Title II, § 201 (a) and (b), 129 Stat. 2242, 3076 (2015) codified at IRC §§ 6071(c) \nand 6402 (m).\n66\t IRS, New Federal Tax Law May Affect Some Refunds Filed in Early 2017; IRS to Share Details Widely with Taxpayers Starting \nThis Summer, https://www.irs.gov/tax-professionals/new-federal-tax-law-may-affect-some-refunds-filed-in-early-2017 (last \nvisited June 10, 2018).\n67\t For more information about the 2019 Filing Season, see National Taxpayer Advocate FY 2020 Objectives Report to Congress \n(Review of the 2019 Filing Season), supra.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n15\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nperiod last filing season—an increase of about 117 percent.68 Assuming payouts of the worker credit \nwere also held till February 15, this additional data would minimize improper payments of the credit \nassociated with W-2 income, although improper payments associated with self-employment income \nwould still exist.\nThe 2006-2008 EITC Compliance Study indicates that income reporting errors account for \napproximately one-quarter of credit dollars erroneously claimed, with most of those errors attributed \nto self-employment income.69 While manipulation of self-employment income to maximize the credit \ncould still occur, it would likely be relatively small in dollar terms in comparison to the tax gap that \nresults from misreporting of self-employment income, as illustrated in Figure 4.\nFIGURE 470\nComparison of the Tax Gap and EITC Overclaim Estimates \nAttributable to Misreported Self-Employment Income\nEITC Overclaims\nTax Gap\n$65 Billion Per Year\nSelf-Employment Tax\n$125 Billion Per Year\nIndividual Income Tax\nUnderreporting of \nself-employment income \ncosts the federal \ngovernment an estimated \n$190 billion a year: \n$65 billion in unpaid \nself-employment taxes and \n$125 billion in unpaid \nindividual income taxes\nMisreporting of \nself-employment income \nresulted in $3.2 to 3.8 billion \nof EITC overclaims\nAccording to IRS data, the cost of the misreporting of self-employment income in terms of EITC \noverclaims is between $3.2 and $3.8 billion per year while the foregone tax revenue attributable to \nunderreporting of self-employment income costs is approximately $190 billion per year, nearly fifty \ntimes more. \nIn addition, by making the benefit per worker, the total amount of the credit would no longer fall when \ntaxpayers married, as often happens currently (because their combined incomes exceed the phase out \namount threshold). This would eliminate the main driver of the marriage penalty among low income \n68\t IRS Identity Theft (IDT) and Integrity Verification Operations (IVO) Modeling Analysis - MAIN Performance Report, slide 10 (Feb. \n6, 2019). See IRC § 6402(m), which prevents the IRS from issuing certain refunds before Feb. 15 each year. The increase \nin timely received Form W-2 data, in conjunction with two other changes, likely resulted in more returns being released \nearlier in the process this year compared to last year. One change is the newly adopted systemic release feature which \nallows returns to be released back into normal processing systemically rather than waiting for an IRS employee to manually \nrelease the refund. The other is the availability of third-party documentation daily rather than weekly.\n69\t See Table 5 in IRS Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns (Aug. \n2014).\n70\t IRS Pub. 1415, Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2008-2010 7 (May 2016) & Table 5 in IRS \nPub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns (Aug. 2014).\n",
"16\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\ntaxpayers. It would also reduce the incentive for taxpayers to misreport their marital status, which is a \nfactor, although a comparatively small one in dollar terms, in erroneous claims of the EITC.71 Finally, \na per-worker structure would not discourage work among secondary earners in a married couple, a \nphenomenon that research suggests does occur with the current EITC.72 \nThe Child Benefit\nThe child benefit would be designed as a fixed amount per child, without a phase in or phase out, and \nwould replace the current EITC and child credit (and potentially other child related benefits, including \nthe “suspended” dependent exemption). The current child tax credit (a smaller but similar benefit as \nthe EITC) is available to married taxpayers with up to $400,000 of income. The additional child tax \ncredit—the refundable portion of the child tax credit—currently phases in as earned income increases, \nlimiting the benefit for the lowest income taxpayers.73\nProviding a fixed, nearly universal child benefit irrespective of income would acknowledge that families \nat all income levels need a minimum amount of resources to adequately care for children. Additionally, \nas some commentators have explained:\n[p]roviding a universal child benefit is a material and symbolic expression of our common \ninterest in [childrens’] welfare. Local and state governments in the United States \nrecognized this common interest by leading the world throughout most of the nineteenth \nand twentieth centuries in the public provision of universal elementary and secondary \neducation.74\nA fixed benefit would be more transparent and easier for low income taxpayers to understand. As \nwith Social Security benefits,75 policymakers could implicitly target this universal benefit to lower \nincome taxpayers by including part of the benefit amount in the gross income of wealthier taxpayers.76 \n(Alternatively, policymakers could retain the current income phase out level of the child tax credit.) \nOne key objective for policymakers would be to design these new credits so that no current taxpayers \nwould be worse off. The two credits’ structures and amounts should be designed so that the \nhypothetical amount of the new credits for a given family would not be less than the current levels of the \ntax benefits they would replace, at least for low and moderate income taxpayers. \n71\t In a 2001 report, the J. Comm. on Tax’n identified the structure of the EITC as one of the primary causes of marriage \npenalties among low income taxpayers. The other major factor they identified was the size of the standard deduction \nfor married taxpayers compared to single taxpayers. J. Comm. on Tax’n, JCX-8-01, Overview of Present Law and Economic \nAnalysis Relating to the Marriage Tax Penalty, the Child Tax Credit, and the Alternative Minimum Tax 3 (2001). At the time, the \nstandard deduction for married filers was less than double the amount for single filers. The standard deduction for married \nfilers is currently double the amount for single filers, implying that the structure of the EITC is now the primary cause of \nmarriage penalties among low income taxpayers. \n72\t Elaine Maag, Simplicity: Considerations in Designing a Unified Child Credit, 63 Nat’l Tax J. 765 (2010).\n73\t See Cong. Research Serv., R41873, The Child Tax Credit: Current Law (May 15, 2018).\n74\t\nH. Luke Shaefer et al., A Universal Child Allowance: A Plan to Reduce Poverty and Income Instability Among Children in the \nUnited States, 4 Russell Sage Found. J. Soc. Sci. 22 (2018).\n75\t Social Security benefits include monthly retirement, survivor, and disability benefits. They don’t include Supplemental \nSecurity Income (SSI) payments, which aren’t taxable. For more information see IRS Pub. 915, Social Security and \nEquivalent Railroad Retirement Benefits (Jan. 2019).\n76\t For a longer discussion of targeting benefits within a universal program, see Theda Skocpol, Targeting within Universalism: \nPolitically Viable Policies to Combat Poverty in the United States, in The Urban Underclass 441 (Christopher Jencks & Paul E. \nPeterson eds., 1991).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n17\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nWithout modifying the current qualifying child rules or other administrative aspects of the credit, a \nchild benefit could still be subject to improper payments associated with complex qualifying children \nrules. Therefore, simplifying these rules to reflect actual family circumstances could reduce taxpayer \nburden and make this benefit easier for the IRS to administer. \nRecommendation 1.2: Redefine and Modernize the Definition of a Qualifying Child that \nReflects the Experiences of Primary Carers and Their Children\nTAS recommends that Congress develop a “primary carer” definition that best reflects the variety of \nexperiences of primary carers and their children. TAS believes that this recommendation would be most \neffective if it were applied to a child benefit, although it could also provide a framework for restructuring \nthe current qualifying child rules for the EITC and other child related benefits (like the child tax credit \nand currently suspended dependent exemption).\nAdults provide care for children in a variety of ways that may better designate them as the child’s carer \nthan a relationship or residency test. A child’s primary carer may not be their biological parent but \nmay instead be an aunt who takes the child to the doctor, prepares the child’s meals, reads to the child \nevery night, and provides most of the child’s financial support. 77 In Canada, the recipient of their child \nbenefit is defined as the individual who is “primarily responsible for the care and upbringing of a child” \nmeaning the individual is “responsible for such things as supervising the child’s daily activities and \nneeds, making sure the child’s medical needs are met, and arranging for child care when necessary.” 78\nAny approach to administering this more realistic definition would be imperfect. There is simply \nno data—nor would many Americans tolerate the government having this information—on some \nof the most personal aspects of a family. Family life is often complicated and defining a family with \nrigid bright line requirements that cannot be verified during filing season is counterproductive and \nburdensome. Instead, Congress should seek a definition that is “good enough” to achieve its policy \ngoals. And the IRS, embracing its role as a benefits administrator, should administer this definition in \nsuch a way that minimizes taxpayer burden and compliance risks.\nOne approach to administering a child benefit is to simply pay out the benefit to the taxpayer who \nattests with his or her income tax return that the taxpayer is the primary carer of the child (as long as the \nchild exists, fulfills any age requirements, and is not being claimed by another taxpayer, all of which is \nverifiable during filing season using existing databases). \nCongress could require that taxpayers include with their income tax return up front information \nabout their relationship with eligible children. Taxpayers could provide this information in the form \nof a taxpayer checklist like the one that paid tax preparers must currently complete (Form 8867, Paid \nPreparer’s Due Diligence Checklist) or a form similar to the one used to claim the Canadian Child Benefit \n77\t In the past, TAS has suggested that the credit be claimed by the primary carer. As TAS has previously discussed, and as \ndiscussed below, in Australia, the primary carer is, in situations where a child has multiple carers, the individual with the \ngreater responsibility for the child. This is determined by identifying who has major daily responsibility for the child, looks \nafter the child’s needs (such as dressing and clothing), makes appointments for the child, is the primary contact for daycare \nor school, and transports the child to and from school. National Taxpayer Advocate 2016 Annual Report to Congress 339 \n(Legislative Recommendation: Tax Reform: Restructure the Earned Income Tax Credit and Related Family Status Provisions to \nImprove Compliance and Minimize Taxpayer Burden).\n78\t According to the instructions for the Canada Child Benefit (CCB), “If there is a female parent who lives with the child, we \nusually consider her to be this person.” See Canada Revenue Agency, RC66, Canada Child Benefits Application (June 30, \n2017).\n",
"18\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\n(CCB).79 This document could ask the taxpayer several questions that would identify various aspects of \nhis or her caregiving relationship with the child, as well as ask whether the taxpayer could substantiate \nthese claims and explain the documentation that would be needed (like school or medical records) \nif audited. This should be drafted in plain language with the assistance of benefits providers, social \nworkers, low income caregivers and tax practitioners who work with low income populations. Taxpayers \ncould also be required to sign a statement at the beginning of this form attesting to the veracity of their \nanswers (i.e., a jurat). As scholars have noted, “[r]equiring taxpayers to sign the jurat at the start of the \nreturn means that they have “pre-committed” to honesty … [and] may make it more difficult for them \nto subsequently lie about whether they qualify for the tax break.”80 Any taxpayer who completes the \nchecklist would generally be eligible to receive the credit.\nOne concern with this flexible definition is that since the IRS cannot accurately verify information on a \nchecklist during filing season and is instead relying on the honesty of the taxpayer, a significant number \nof duplicate claims (both fraudulent and those that are honest mistakes) could occur. While some \ntaxpayers may rush to claim a child before the eligible taxpayer, there is limited evidence of how often \nthis would happen under a more flexible definition. Indeed, under current EITC eligibility criteria, \nqualifying children are already defined in such a way that multiple taxpayers may be eligible to claim \nthe child in a given year (often children who live in multigeneration households).81 Yet, data indicate \n152,893 of the 32.9 million children claimed for the EITC—less than 0.5 percent of EITC qualifying \nchildren—were claimed more than once in TY 2017.82 This resulted in a total of 306,148 returns \nclaiming at least one duplicative EITC child. In other words, about 1.2 percent of returns claiming the \nEITC included a duplicate claim of an EITC qualifying child.83 And there is no data that indicates that \nEITC claimants are any more dishonest than any other taxpayers—like the self-employed—who are not \ncurrently required to provide documentation during filing season to substantiate claims made on their \n79\t Canada Revenue Agency, RC66, Canada Child Benefits Application (June 30, 2017).\n80\t Leslie Book, David Williams & Krista Holub, Insights From Behavioral Economics Can Improve Administration of the EITC, 37 \nVa. Tax Rev. 177, 237 (2018).\n81\t See Elaine Maag, H. Elizabeth Peters & Sarah Edelstein, Increasing Family Complexity and Volatility: The Difficulty in \nDetermining Child Tax Benefits (2016) (finding that in 2008, almost one-fifth of children living with a single parent also lived \nin a multi-generational household). See also National Taxpayer Advocate 2016 Annual Report to Congress 335 (Legislative \nRecommendation: Tax Reform: Restructure the Earned Income Tax Credit and Related Family Status Provisions to Improve \nCompliance and Minimize Taxpayer Burden).\n82\t Data show that in TY 2017, among EITC claimants, 32,758,373 dependents were claimed once, 152,568 dependents were \nclaimed twice, 305 dependents were claimed three times, and 20 dependents were claimed four or more times. IRS, CDW, \nIRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n83\t The data is for returns claiming the EITC after the IRS exercises its summary assessment authority (SAA), discussed below. \nIRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\nThere is simply no data—nor would many Americans tolerate the government having \nthis information—on some of the most personal aspects of a family. Family life is \noften complicated and defining a family with rigid bright line requirements that cannot \nbe verified during filing season is counterproductive and burdensome.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n19\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\ntax returns.84 However, even if the extent of this problem is unknown, addressing this issue upfront will \nincrease public support for the program, limit erroneous claims, and mitigate taxpayer burden.\nPaying Out the Child Benefit When There Are Multiple Claims\nIn cases in which more than one individual claimed the child, Congress should work with the IRS \nand advocates for low income taxpayers to develop effective and fair rules that balance the need for an \naccurate determination with the need for a timely one.85 Below is one proposal on how to administer \nthe child benefit that balances these competing interests. The costs and benefits of this proposal can \ninform policymakers seeking to accurately administer child related tax benefits. The proposal has two \nmain components: holding of the returns for a longer period of time, and processing multiple claims for \na child when they arise.\nHolding Income Tax Returns Until the Vast Majority Have Been Filed \nAbsent a longer holding and verification period, ineligible taxpayers have an incentive to file a return \nearly and claim the child benefit. Providing the IRS with additional time to process returns claiming \nthe benefit can discourage this behavior, by allowing the IRS to screen for multiple claims before paying \nout the benefit. \nData from the 2018 filing season of TY 2017 returns indicate that by March 22 almost three quarters \nof EITC returns had been filed, while nearly half of non-EITC returns had been filed. (For more \ninformation see the EITC Databook appendix.) By April 19, almost nine in ten EITC returns had been \nfiled, while almost eight in ten non-EITC returns had been filed.\n84\t Underreporting of income is the largest source of the tax gap. One study found that the “ratio of aggregate misreported \nincome to true income generally increases with income… Much of the distributional pattern of noncompliance is associated \nwith the fact that on average high-income taxpayers receive their income in forms that have higher noncompliance rates.” \nAndrew Johns & Joel Slemrod, The Distribution of Income Tax Noncompliance, 63 Nat’l Tax J. 397, 397 (2010). Most \nunderreported income is from individual income tax returns, and most of this underreported income is from business and \nself-employment income. See IRS, Pub. 1415, Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2008-2010 \n7 (May 2016). A study of EITC claimants found that for every 24 cents of the EITC that go to ineligible taxpayers, roughly \n11 cents are “responding to the EITC incentive to wrongly claim children and 13 cents to taxpayers who would wrongly claim \nchildren even in the absence of the EITC (and who would be making inadvertent errors).” Jeffrey B. Liebman, The EITC \nCompliance Problem, 2 Poverty Res. News 10 (1998). \n85\t Under current EITC tie-breaker rules, the child is generally treated as a qualifying child of: (1) the parents if they file a joint \nreturn; (2) the parent if only one of the persons is the child’s parent; (3) the parent with whom the child lived the longest \nduring the tax year if two of the persons are the child’s parent and they do not file a joint return together; (4) the parent \nwith the highest AGI [adjusted gross income] if the child lived with each parent for the same amount of time during the tax \nyear, and they do not file a joint return together; (5) the person with the highest AGI if no parent can claim the child as a \nqualifying child; or (6) a person with higher AGI than any parent who can also claim the child as a qualifying child but does \nnot. See IRS, Qualifying Child of More Than One Person, https://www.irs.gov/credits-deductions/individuals/earned-income-\ntax-credit/qualifying-child-of-more-than-one-person (last visited May 13, 2019). \n",
"20\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\nFIGURE 586\nPercent of Tax Year 2017 Individual Income Tax Returns \nFiled by Type of Return and Filing Date\nEITC\nNon-EITC\nAll Returns\n42%\n88%\n47%\n52%\n18%\n72%\n1/25\n2/22\n3/22\n4/19\n5/17\n6/14\n7/12\n8/15\n79%\n81%\nWeek Ending\n100%\n50%\n22%\nRefunds from returns \nwith child-related tax \nbenefits frozen until \n2/15 by the PATH Act\nCongress could choose to hold returns until mid-March, a month later than returns claiming the EITC \nor refundable portion of the child tax credit are currently held for income verification purposes. By that \ndate, if only one taxpayer had claimed a given child for the child benefit (using the previously mentioned \nchecklist or application form), the credit would be paid out promptly to the taxpayer. \nAny proposal that holds returns for longer periods of time could burden the lowest income taxpayers. \nA study by the Tax Policy Center found that almost 80 percent of taxpayers who claimed the EITC or \nchild tax credit reported a financial hardship.87 It may also drive more of the working poor to refund \nanticipation products that, if unregulated, would erode the value of the child benefit. The receipt of \nthe worker credit, if paid out promptly, could reduce this hardship, especially in the first year the child \nbenefit is administered when the delay will be particularly burdensome. Data indicate that most poor \nchildren (approximately two-thirds) live in families with at least one worker.88 \nAlternatively, taxpayers could be required to pre-certify eligibility to claim the child benefit for a \nparticular child (e.g., returning a checklist to the IRS before filing season) which might reduce some \nof the burden on taxpayers as well as the IRS.89 Under this scenario, taxpayers who did not pre-certify \n86\t IRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n87\t Elaine Maag, Stephen Roll & Jane Oliphant, Delaying Tax Refund for Earned Income Tax Credit and Additional Child Tax Credit \nClaimants 4 (2016).\n88\t Joseph Dalaker, Maggie McCarty & Gene Falk, Cong. Research Serv., R44698, Demographic and Social Characteristics of \nPersons in Poverty: 2015 (2016). \n89\t A 2005 IRS report to Congress about its EITC Certification Initiative found that “[t]axpayers also appear not to object to the \nconcept of proving eligibility prior to receiving the EITC. About 64 percent of the test group and 59 percent of the control \ngroup taxpayers thought that taxpayers should be required to prove they meet the EITC requirements before they received \nthe EITC. About 30 percent of the test group answered no to this question, as did 36 percent of the control group.” IRS, \nIRS Earned Income Tax Credit (EITC) Initiative, Final Report to Congress 43 (October 2005).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n21\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nwould have their child benefit held beyond February 15 to give the IRS more time to verify eligibility \nand reduce improper payments of the benefit.90\nRegardless of the approach, Congress should weigh the benefit of a process intended to reduce improper \npayments (e.g., holding returns for a longer period of time or pre-certification) against the burden \nthat process places on low income taxpayers with children when determining the appropriate way to \nadminister a child benefit. \nProcessing Multiple Claims of the Child Benefit\nIn cases where there are multiple claims of the child benefit for a given child, there should be clear \ncriteria for paying out the credit. Congress could decide that in cases where there are multiple claims, \nno benefit would be paid out until the IRS verified which taxpayer best satisfied the primary caregiver \nrequirements. (Taxpayers would still get their worker credit, minimizing the impact of the delay.) The \nIRS would then request via audit additional documentation described in the primary caregiver checklist. \n \nThis approach could, however, be financially burdensome to many low income Americans, especially \nduring the first year of the credit or if IRS eligibility determinations took months to complete. One TAS \nstudy found that it took, on average, 241 days for the IRS to complete an EITC correspondence audit.91 \nAs previously mentioned, 152,893 of the 32.9 million children claimed for the EITC were claimed \nmore than once in TY 2017, corresponding to a total of 306,148 duplicative returns—1.2 percent of \nEITC returns—including a duplicate EITC qualifying child.92 More broadly, when examining all \ndependents—not just dependents claimed for the EITC—on EITC returns, about 1.3 percent of these \nreturns had at least one duplicate dependent.93\nAmong non-EITC returns, 124,685 different dependents were claimed more than once in TY \n2017 representing 261,112 returns claiming at least one duplicate child (about 0.2 percent of the \n106,756,327 non-EITC returns with dependents).94 Even if the IRS audited all of these 567,260 returns \n90\t If taxpayers did submit pre-certification documentation, but the IRS found that another taxpayer had claimed the same \nbenefit for the same child (i.e., they had also submitted pre-certification documentation), the IRS would have additional time \nunder this process to determine the valid claim, although both returns could be held past February 15.\n91\t IRS, CDW, AIMS Closed Case Database for EITC audits closed in FY 2018 (May 2019). We note that IRS has recently \nreleased a six-year plan to update and modernize the agency’s information technology and improve digital experiences \nfor taxpayers. See IRS, Pub. 5336, Integrated Modernization Business Plan (Apr. 2019), https://www.irs.gov/pub/irs-utl/\nirs_2019_integrated_modernization_business_plan.pdf. While improvements in technology alone cannot address the needs \nof low income taxpayers, we note that advances in technology may improve the audit process and allow for taxpayers and \nthe IRS to communicate in more of a real-time environment. Video technology allowing for virtual face-to-face meetings \non cell phones or tablets may be particularly helpful to this population. See also National Taxpayer Advocate FY 2020 \nObjectives Report to Congress 108-112 (Area of Focus: Facilitate Digital Interaction Between the IRS and Taxpayers While \nStill Maintaining Strict Security of Taxpayer Information); National Taxpayer Advocate 2015 Annual Report to Congress vol. 2 \n101-110 (Research Study: Understanding the Hispanic Underserved Population). \n92\t The data is for returns claiming the EITC after the IRS exercises its SAA. IRS, CDW, IRTF, TY 2017 returns processed \nthrough cycle 13 of 2019 (May 2019).\n93\t A total of 277,578 dependent children were claimed on more than one return in TY 2017, representing 567,260 returns \nclaiming at least one duplicate dependent (about two percent of the returns where EITC was present of the return after the \nIRS exercised its SAA). After eliminating returns claiming duplicate dependents almost certainly attributable to fraud (a few \ndependents were claimed on about 20,000 returns each), 1.3 percent of the EITC returns included at least one duplicative \ndependent. IRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019). \n94\t IRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019). Returns not claiming the EITC after the \nIRS used its SAA.\n",
"22\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Restructure the EITC As Two Credits\nwith duplicate dependent claims, these audit numbers would still be less than the 892,187 of individual \nincome tax returns audited in FY 2018.95 \nThis approach however fails to recognize that in many cases a child may be cared for by multiple \nindividuals. Congress could explore the possibility of allowing the child benefit to be divided—based \non income, how long the child lived with the caregiver, or other data provided on the checklist—or \nsimply equally—between two caregivers. If neither of the two taxpayers disputed the other’s claim, the \ncredit would be split and paid out. TAS has previously written about how Australia pays out multiple \nclaims of its child benefit, providing a potential model for this approach.96 In cases where there is a \ndispute between the two taxpayers, or more than two claims for a child, the determination could be \nmade as part of the audit process. Assuming some of the duplicate claims were split between two carers, \nthe number of audits related to this benefit would likely be less than the number of audits when only \none taxpayer could claim the benefit (and hence also less than the current number of audits of EITC \nrecipients). \nThis proposal is one approach to administering a nearly universal child benefit that is intended to reduce \nimproper payments of the credit while ensuring caregivers receive a benefit that helps them with the \ncost of raising a child. However, if a definition is unworkable for the IRS or is poorly targeted to the \npopulation policymakers are seeking to help, then Congress could, as part of its oversight authority, \ncontinue to work with the IRS and outside experts to refine the definition of a qualifying child. \nAnd ultimately, if a revised qualifying child definition remains unworkable for the IRS to administer, \nCongress may consider whether another agency would be a more effective administrator of a child \nbenefit.97 For example, Congress may want to examine whether the Social Security Administration—\nwhich currently provides survivor benefits to children if a parent dies—would more effectively \nadminister a child benefit or other family tax benefits.98 If the IRS continues to operate with the \nmindset of collecting revenue and not administering benefits, Congress may want to reconsider \ncontinuing to provide substantial amounts of financial assistance for children through the tax code.\n95\t In FY 2018, the IRS audited a total of 382,203 individual income tax returns which included an EITC claim. Of those \nreturns, about 330,000 were selected for audit on the basis of an EITC claim. IRS, FY 2018 Data Book (table 9a).\n96\t National Taxpayer Advocate 2016 Annual Report to Congress 339 (Legislative Recommendation: Tax Reform: Restructure the \nEarned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer Burden).\n97\t Unlike the proposed child benefit, the proposed worker credit would still be administered by the IRS givens its access to \naccurate and timely income data, as described previously in this chapter.\n98\t Social Security Administration, Benefits Planner: Survivors/If You Are The Survivor, https://www.ssa.gov/planners/survivors/\nifyou.html (last visited May 17, 2019).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n23\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nEstablish Greater IRS Oversight of Tax Preparers and Tax Preparation \nSoftware\nPRESENT LAW AND PRACTICE\nPrivate third-party intermediaries—paid preparers and software platforms—have a significant role in \nthe administration of the EITC.99 The application process for social benefit programs administered \noutside the tax system typically includes government-provided assistance. 100 Unlike those other \nprograms, the IRS has essentially outsourced significant functions in the EITC claim and distribution \nprocess to the private sector. (A small proportion—about two percent in TY 2017—of EITC returns \nare prepared by IRS trained volunteers, such as those with Volunteer Income Tax Assistance (VITA) \nand Tax Counseling for the Elderly (TCE) programs.)101 Specifically, the following private third-party \nintermediaries are instrumental in the administration of this credit:\n■\n■Paid preparers, which include:\n■\n■Unenrolled tax return preparers;\n■\n■Attorneys; \n■\n■CPAs; and\n■\n■Enrolled agents;\n■\n■Commercial tax return preparation and filing software providers, including Free File and Free \nFile Fillable Forms programs; and \n■\n■Ancillary product and service providers, including those who sell or facilitate access to refund \nproducts.\nOverall, most paid preparers are non-credentialed and hence are not required to pass any competency \ntests or take any educational courses on tax return preparation.102 EITC returns generally also follow \nthis pattern, with most prepared by non-credentialed preparers. The following figure details the various \nmethods used to prepare and file EITC returns in TY 2017.\n99\t See the EITC Databook appendix, for detail on the low overhead costs to administer the EITC as compared to other social \nbenefit programs, infra. \n100\tFor more information on the various different social benefit programs, see Government Benefits, https://www.usa.gov/\nbenefits (last visited May 15, 2019). \n101\t IRS, CDW, IRTF and Return Preparers Program Database, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n102\t As of May 1, 2019, the IRS has issued over 750,000 Preparer Tax Identification Numbers (PTINs), of which approximately \n29,000 are attorneys, 209,000 are Certified Public Accountants (CPAs), 200 are enrolled actuaries, 55,000 are enrolled \nagents, 670 are enrolled retirement plan agents, and 60,000 are Annual Filing Season Program (AFSP) Record of \nCompletion Holders, a program discussed below. Thus, at least 400,000 preparers are uncredentialed (some preparers \nhave multiple designations). IRS, Return Preparer Office Federal Tax Return Preparer Statistics (last visited May 21, 2019) \n(data current as of May 1, 2019).\n",
"24\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Establish Greater IRS Oversight\nFIGURE 6, Methods of Preparation of TY 2017 EITC Returns103\nPreparation Method\nPercentage of TY 2017 EITC Returns\nElectronically Filed\n94%\nPaid Preparer\n55%\nPaid Preparer: Unenrolled or Unknown Type\n39%\nPaid Preparer: CPAs\n5%\nPaid Preparer: Enrolled Agents\n4%\nPaid Preparer: Attorney\n0%104\nSelf-Prepared Using Commercial Software\n41%\nFree File\n2%\nFiled Using Refund Product\n34%\nPrior Efforts to Regulate Unenrolled Preparers \nIn 2009, the IRS Commissioner concluded that the IRS had the authority to impose minimum standards \non all paid tax preparers. The IRS initiated an extensive series of hearings and discussions with stakeholder \ngroups to receive comments and develop a system within which all parties believed they could operate.105 \nThe IRS began to implement the program in 2011, but it was terminated after a U.S. district court held that \nthe IRS does not have the authority to impose preparer standards without statutory authorization.106 Since \nthat time, members of the House and Senate have introduced legislation that would provide the IRS with the \nstatutory authorization to establish and enforce minimum standards.107\nThe current state of oversight differs depending on the intermediary. There are no mandatory \ncompetency or licensing requirements for unenrolled tax return preparers of federal income tax \nreturns.108 Attorneys, CPAs, and enrolled agents have to pass competency examinations and satisfy \ncontinuing education requirements. In addition, the IRS requires volunteer preparers to pass \ncompetency examinations as part of the VITA and TCE programs.109 \n103\tThese categories are not mutually exclusive, so the percentages sum to more than 100 percent. IRS, CDW, IRTF, Return \nPreparers Program Database, and Electronic Tax Administration Database, TY 2017 returns processed through cycle 13 of \n2019 (May 2019). Only select paid preparer types are shown.\n104\tThis percent is equal to 0.2 percent and rounds to zero percent. IRS, CDW, IRTF, Return Preparers Program Database, and \nElectronic Tax Administration Database, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n105\t See IRS, Pub. 4832, Return Preparer Review (Dec. 2009).\n106\tLoving v. IRS, 917 F. Supp. 2d 67 (D.D.C. 2013), aff’d, 742 F.3d 1013 (D.C. Cir. 2014).\n107\t Protecting Taxpayers Act, S. 3278, 115th Cong. § 202 (2018); Taxpayer Protection and Preparer Proficiency Act, S. 137, \n114th Cong. (2015); Joint Comm. on Tax’n, JCX-108-15, Description of the Chairman’s Mark of a Bill to Prevent Identity Theft and \nTax Refund Fraud 16-21 (2015); Tax Return Preparer Competency Act, H.R. 4141, 114th Cong. § 2 (2015) (Cong. Black); \nTaxpayer Rights Act of 2015, H.R. 4128, 114th Cong. § 202 (2015) (Cong. Becerra).\n108\tReturn preparers are subject to various penalties. For example, IRC § 6695(g) imposes due diligence requirements on \npreparers of returns claiming EITC, the child tax credit, or the American Opportunity Tax Credit. IRC § 6695(g) provides \nfor a penalty, currently $500, for each failure to satisfy the due diligence requirements for one of the above-mentioned tax \nbenefits claimed on a return. Thus, there could be several violations associated with one return.\n109\tIRS, Pub. 5166, IRS Volunteer Quality Site Requirements 5 (Oct. 2018); IRS, Pub. 5101, Intake/Interview & Quality Review \nTraining, 2019 Filing Season (Oct. 2018); IRS, Pub. 4961, VITA/TCE Volunteer Standards of Conduct – Ethics Training, 2018 \nReturns (Oct. 2018).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n25\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nThe IRS currently administers a voluntary “certification” program for return preparers called the Annual \nFiling Season Program (AFSP), which has continuing education requirements; one of the required \nannual courses includes a test.110 As a sweetener to participate in the program, return preparers who \nsatisfy the requirements receive a Record of Completion and have the ability to represent taxpayers \nbefore the IRS during an examination of a tax return or claim for refund they prepared.111 In addition, \nAFSP Record of Completion holders are included in a public database of return preparers on the IRS \nwebsite.112 However, the participation in this voluntary program is low. As of May 1, 2019, the IRS \nissued approximately 60,000 AFSP Records of Completion.113\nIRS oversight of commercial return preparation and filing software providers is minimal. The IRS \nimposes requirements on all software providers as detailed in section seven of Revenue Procedure \n2007-40.114 In addition, the IRS has a contractual relationship with Free File, Inc. Only about 2.7 \nmillion returns filed during the 2019 filing season (about two percent of all individual income tax \nreturns) were filed using Free File.115 Further, the IRS does not test any commercial software, including \nFree File software that is accessible through its own website, to determine if the program accurately \nprepares returns and provides clear prompts for the user.116 \nThe IRS does not have meaningful oversight of the providers of ancillary products, such as refund \nproducts or audit protection insurance.117 In addition, the United States GAO recently reported on \nthe limitations of IRS data on refund products sold to taxpayers during the tax preparation and filing \nprocess.118 GAO found that the data is unreliable because the IRS provides insufficient and limited \noptions for the preparers to accurately report usage of all available refund products. The IRS has also \nfailed to inform preparers of changes made to the way preparers should report usage of these products. \n110\t Rev. Proc. 2014–42, 2014-29 I.R.B.; IRS, Requirements for Annual Filing Season Program Record of Completion, \nhttps://www.irs.gov/tax-professionals/general-requirements-for-the-annual-filing-season-program-record-of-completion (last \nvisited May 21, 2019). The voluntary program requires preparers to renew their PTIN for the upcoming year and consent to \nadhere to the obligations in Circular 230, Subpart B and section 10.51.\n111\tTo receive the record of completion, the preparer must consent to be subject to the duties and restrictions relating to \npractice before the IRS in § 10.51 of Circular 230 for the entire period covered by the record of completion. Rev. Proc. \n2014-42, 2014-29 I.R.B.\n112\tThe Directory of Federal Tax Return Preparers with Credentials and Select Qualifications includes the name, city, state, ZIP \nCode, and credentials of all attorneys, CPAs, enrolled agents, enrolled retirement plan agents, and enrolled actuaries with a \nvalid PTIN, as well as all AFSP Record of Completion holders. IRS, Directory of Federal Tax Return Preparers with Credentials \nand Select Qualifications, https://irs.treasury.gov/rpo/rpo.jsf (last visited Apr. 25, 2019).\n113\tIRS Return Preparer Office, Return Preparer Office Federal Tax Return Preparer Statistics (May 1, 2019). \n114\t 2007-26 I.R.B (June 25, 2007). These requirements are further detailed in IRS Pub. 1345, Handbook for Authorized IRS \ne-file Providers of Individual Income Tax Returns (Feb. 2019).\n115\tEligible taxpayers with AGI of less than $66,000 can use the Free File software of one of the listed programs to self-prepare \ntheir returns at no charge. See IRS, Free File: Do Your Federal Taxes For Free, https://www.irs.gov/filing/free-file-do-your-\nfederal-taxes-for-free (last visited May 15, 2019). Pursuant to an agreement between the IRS and Free File, Inc., the last \nrenewal of which is dated Oct. 31, 2018, Free File programs and Free File Fillable Forms are accessible through the IRS \nwebsite. IRS, Daily E-File at a Glance: U.S. Totals for Individual Returns (May 14, 2019).\n116\t For a more detailed discussion of Free File, see National Taxpayer Advocate 2018 Annual Report to Congress 65-78 \n(Most Serious Problem: Free File: The IRS’s Free Offerings Are Underutilized, and the IRS Has Failed to Set Standards for \nImprovement).\n117\t The IRS has the authority to impose civil or criminal penalties for the unauthorized use or disclosure of tax return \ninformation during the marketing and sale of these products. IRC §§ 7216, 6713. The National Consumer Law Center \n(NCLC), in its most recent report of refund products, found that the products continue to evolve with a resurgence of \ninterest-bearing refund anticipation loans (RALs) during FS 2019 (in addition to the no-fee RALs that were prevalent in \n2017). Mandi Matlock & Chi Chi Wu, National Consumer Law Center, 2019 Tax Season: The Return of the Interest-Bearing \nRefund Anticipation Loan and Other Perils Faced by Consumers 13-23 (2019). \n118\tGAO, GAO-19-269, Tax Refund Products: Product Mix Has Evolved and IRS Should Improve Data Quality (2019).\n",
"26\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Establish Greater IRS Oversight\nFinally, there are currently no meaningful federal requirements for return preparers, software programs, \nor ancillary product providers to provide a detailed breakdown of all fees charged during the return \npreparation and filing process.119 If the IRS had the ability to track all fees charged in the preparation \nand filing process, including ancillary fees, it could better understand preparer and taxpayer behavior \nand tailor its consumer protection communications accordingly. Tracking of fees would enable the \nIRS to identify potentially unscrupulous preparation practices, especially those questionable practices \ntargeting EITC recipients. An example of such practices includes charging exorbitant fees for ancillary \nrefund products. The IRS could provide tips on how to avoid scams and educate taxpayers about the \nvarious refund delivery options available, including the advantages and disadvantages of each, and what \nquestions to ask the preparer at the beginning of the engagement.120\nREASONS FOR CHANGE\nThere is strong evidence that some private intermediaries are not acting in the best interest of taxpayers \nand tax administration. \nPaid Preparer Oversight\nThe evolution of the commercial tax return preparation and filing industry has made it easier for \ninexperienced and untrained preparers to enter the business. An individual wishing to enter the business \ncan now easily do so without having any knowledge of tax law. All it takes is a tax return preparation \nsoftware package and perhaps an arrangement with a settlement service provider who works with \na financial institution to accept and process refund products.121 Figure 7 provides information on \nTY 2017 EITC returns prepared by unenrolled preparers a well as the amount of credit paid.\nFIGURE 7, Tax Year 2017 EITC Returns Prepared by Unenrolled Preparers and Amounts of \nEITC Paid Out122\nTotal EITC paid ($ billions)\n$63.8\nNumber of EITC Returns (millions)\n26.2\nEITC Returns by Paid Preparer (millions)\n14.3\nEITC Returns by Unenrolled Paid Preparer (%)\n71.5\nPercent of EITC Paid by Unenrolled Preparer (%)\n78.5\n119\tIRS, Pub. 1345, Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns 35 (Feb. 2019). Pub. 1345 \nprovides that all authorized e-file providers should “[a]dvise taxpayers of all fees and other known deductions to be paid \nfrom their refund and the remaining amount the taxpayers will receive.” However, this language is located in the refund \nproducts section of the publication and only seems to apply to returns claiming refunds. Further, it is unclear whether the \nIRS actually enforces this provision in its administrative guidance. In 2017, the National Taxpayer Advocate recommended \nthat the IRS require all electronic return originators (EROs) to prepare a “truth-in-lending” statement if they offered a \nRAL. National Taxpayer Advocate 2017 Annual Report to Congress 233 (Most Serious Problem: Refund Anticipation Loans: \nIncreased Demand for Refund Anticipation Loans Coincides with Delays in the Issuance of Refunds).\n120\tLeslie Book, U.S. Refundable Credits: The Taxing Realities of Being Poor, 4 J. Tax Admin. 71 (2018).\n121\tFor a detailed discussion of the participants in the tax preparation and refund product industry, see GAO, GAO-19-269, Tax \nRefund Products: Product Mix Has Evolved and IRS Should Improve Data Quality 4-9 (2019).\n122\tFor the purposes of this table unenrolled preparers are those preparers that have not self-identified as a specific type of \npaid preparer on Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal. IRS, CDW, IRTF and \nReturn Preparers Program Database, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n27\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nIn addition, studies have found that non-credentialed tax return preparers routinely prepare inaccurate \nreturns, which has the effect of harming both taxpayers and tax administration.123 Some of those studies \nhave shown non-credentialed preparers have higher error rates than other preparers. For example, the \nIRS conducted a study to estimate compliance with the EITC during the 2006 to 2008 period. That \nstudy found that unaffiliated unenrolled preparers (i.e., non-credentialed preparers who are not affiliated \nwith a national tax return preparation firm) were responsible for “the highest frequency and percentage \nof EITC overclaims.”124 The study also found that about half of the EITC returns prepared by \nunaffiliated unenrolled preparers contained overclaims, and the overclaim averaged between 33 percent \nand 40 percent.125 More recent IRS data also indicate that unenrolled preparers have on average higher \nDependent Database (DDb) scores than other types of paid preparers.126 A higher DDb score indicates \na higher probability of an error on the return. \nSince 2002, the National Taxpayer Advocate has recommended that Congress authorize the IRS to \nconduct preparer oversight. Her proposals included a program to register, test, and certify unenrolled \npreparers, as well as increase preparer penalties and improve due diligence requirements. The National \nTaxpayer Advocate has also recommended that the IRS mount a comprehensive education campaign \nto inform taxpayers how to choose a competent preparer and remind them to obtain a copy of the tax \nreturn with the preparer’s signature.127 Such proposed oversight has received widespread support from \nvarious practitioner groups and members of Congress.128 \n123\tGAO, GAO-06-563T, Paid Tax Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors (2006) (statement \nof Michael Bostik, Director - Strategic Issues, Before the Committee on Finance, U.S. Senate); GAO, GAO-14-467T, Paid Tax \nReturn Preparers: In a Limited Study, Preparers Made Significant Errors (2014) (statement of James R. McTigue, Jr., Director - \nStrategic Issues, Before the Committee on Finance, U.S. Senate); TIGTA, Ref. No. 2008-40-171, Most Tax Returns Prepared \nby a Limited Sample of Unenrolled Preparers Contained Significant Errors (Sept. 2008); Statement of Jamie Woodward, Acting \nCommissioner, New York Dept. of Taxation and Finance, before IRS Tax Return Preparer Review Public Forum (Sept. 2, \n2009); Tom Herman, New York Sting Nabs Tax Preparers, Wall St. J. (Nov. 26, 2008). For example, the average DDb score \nof a preparer type unknown was more than twice the score of a CPA. A higher DDb score is associated with a greater risk or \nerror or noncompliance. IRS, CDW, IRTF, DDb, TY 2017 returns processed through cycle 13 of 2019 (May 2019); See EITC \nDatabook appendix, Preparer Type and Average DDB Score - Tax Year 2017, infra.\n124\tIRS, Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns 24-26 (Aug. 2014).\n125\tId.\n126\tFor more information, see the EITC Databook appendix, infra.\n127\tNational Taxpayer Advocate 2013 Annual Report to Congress 61-74; National Taxpayer Advocate 2009 Annual Report to \nCongress 41-69; National Taxpayer Advocate 2008 Annual Report to Congress 503-512; National Taxpayer Advocate 2006 \nAnnual Report to Congress 197-221; National Taxpayer Advocate 2005 Annual Report to Congress 223-237; National \nTaxpayer Advocate 2004 Annual Report to Congress 67-88; National Taxpayer Advocate 2003 Annual Report to Congress \n270-301; National Taxpayer Advocate 2002 Annual Report to Congress 216-230; Fraud in Income Tax Return Preparation: \nHearing Before the H. Subcomm. on Oversight of the H. Comm. on Ways and Means, 109th Cong. (2005) (statement of Nina \nE. Olson, National Taxpayer Advocate).\n128\tTax Administration Good Government Act, H.R. 1528 (incorporating Tax Administration Good Government Act, S. 882), 108th \nCong. § 141 (2004); Telephone Excise Tax Repeal Act, S. 1321 (incorporating Taxpayer Protection and Assistance Act, S. \n832), 109th Cong. § 203 (2006); Tax Administration Good Government Act, H.R. 1528 (incorporating Tax Administration \nGood Government Act, S. 882), 108th Cong. § 141 (2004). The organizations supporting oversight included the American \nBar Association, the American Institute of Certified Public Accountants (AICPA), the National Association of Enrolled Agents, \nthe National Society of Accountants, and the National Association of Tax Professionals. See Fraud in Income Tax Return \nPreparation: Hearing Before the H. Subcomm. on Oversight of the H. Comm. on Ways & Means, 109th Cong. (2005).\n",
"28\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Establish Greater IRS Oversight\nTax Software Oversight\nAbout 90 percent of all federal individual income tax returns are electronically prepared and filed using \nsome type of software product. Further, 94 percent of EITC returns are e-filed using commercial \nsoftware, including Free File.129 Even though preparation software providers play a crucial role in the \nadministration of the EITC, the IRS has very limited authority over them. The IRS also does not even \nconduct testing for calculations or reporting accuracy. The complexity of the tax laws puts the taxpayers \nat a disadvantage in spotting errors or omissions in the software. Since 2006, the National Taxpayer \nAdvocate has recommended that the IRS test software programs for completeness and accuracy.130 \nHowever, to date, the IRS has failed to develop adequate testing procedures.\nIn addition to testing for accuracy, there may be an important role for the IRS to play in regulating \nthe format of tax software. For example, research has shown that the format of software, such as the \npresence of a pre-completion refund status bar, may encourage taxpayers to take aggressive positions.131 \nThis may be especially relevant in the context of EITC when the answer to a prompt may involve \ninformation that is not subject to verification and may mean the difference between a sizeable refund \nand a balance due. At a minimum, the IRS should have input into not only ensuring that the content \nof software is accurate but that its format minimizes the risk of unintentional errors and encourages \ntaxpayers to be honest.132 \nWould Preparer Regulation Be Too Costly? \nOpponents of preparer regulation have raised the concern that taxpayers and the government will bear \nthe costs of such regulation. However, the GAO addressed this issue in a 2008 report evaluating the costs \nand effectiveness of state return preparer regulatory programs in California and Oregon. GAO found that \nTY 2001 federal individual income tax returns prepared under the Oregon program, which is similar to \nthe one implemented by the IRS in 2011 and enjoined by the D.C. Circuit Court in Loving in 2014, were \nsignificantly more accurate than returns prepared in the rest of the country.133 The additional tax revenue \nassociated with the increased accuracy far outweighed the government’s cost to administer the Oregon \nprogram. Further, the costs of compliance incurred by the preparers were spread out among all of the \npreparers’ clients. Moreover, clients will also avoid all the downstream consequences (i.e., enforcement \ntreatments, including penalties and interest) resulting from return inaccuracy or, even worse, being victimized \nby unscrupulous preparers. \n129\tIRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019).\n130\tSee Tax Return Preparation Options for Taxpayers: Hearing Before the S. Finance Comm., 109th Cong. (2006) (transcript of \ntestimony); National Taxpayer Advocate 2015 Annual Report to Congress 167, 170 n.20 (Most Serious Problem: Affordable \nCare Act (ACA) – Individuals: The IRS Is Compromising Taxpayer Rights as It Continues to Administer the Premium Tax Credit and \nIndividual Shared Responsibility Payment Provisions).\n131\t See Jay A. Soled & Kathleen D. Thomas, Regulating Tax Return Preparation, 58 B.C.L. Rev. 151, 180-181, 200-201 (2017).\n132\tJay A. Soled & Kathleen D. Thomas, Regulating Tax Return Preparation, 58 B.C.L. Rev. 178-183 & 200-201 (2017).\n133\tGAO, GAO-08-781, Tax Preparers: Oregon’s Regulatory Regime May Lead to Improved Federal Tax Return Accuracy and \nProvides a Possible Model for National Regulation (2008).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n29\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFree File\nThe argument for government oversight of software providers is even stronger for Free File programs. \nBecause it is in the best interest of both taxpayers and the government that EITC claimants have access \nto free and accurate filing software, government oversight of Free File is important. \nWhile the IRS has entered into a partnership with Free File, Inc. and both parties negotiated and are \nbound by the terms of the agreement, the IRS currently has very limited oversight authority over the \nprogram. The software industry understandably has a profit motive and the IRS is limited in what it \ncan require of the participants. The appropriate level of oversight is subject to differing opinion but \ngiven the issues in the news at the time of drafting, it is clear that stronger oversight is necessary.134 \nSuch oversight should cover access to the programs, tax forms included, accuracy of calculations, and \nclarity of software prompts and guidance. The need to regulate Free File was recently illustrated when \nthe program was subject to allegations that some program participants used code to prevent consumers \nfrom accessing their Free File option through an internet search. As a result, the IRS engaged an \noutside contractor to review the program and some congressional members called on the Federal Trade \nCommission to investigate the allegations.135 \nFee Transparency and Disclosure\nWhile the IRS does not have the authority to regulate the financial institutions that offer refund \nproducts, it is in the best interest of tax administration to maintain a degree of oversight over the \nmarketing and use of these products by return preparers and software providers. The fees charged for \nthese products reduce the amount of the EITC ultimately received by taxpayers.136 Further, the IRS \nneeds to have a clear understanding of the demand for these products so that it can provide informative \ncommunications to both taxpayers and preparers. Finally, quality data will enable the IRS, other \nregulators, consumer advocacy groups, and researchers to report on tax policy and consumer protection \nissues.137\n134\tSee, e.g., Justin Elliott & Kengo Tsutsumi, The TurboTax Trap: TurboTax Uses A “Military Discount” to Trick Troops Into Paying to \nFile Their Taxes, ProPublica (May 23, 2019). Developed in response to a directive in H.R. Rep. No. 114-194, at 21-22 (2016) \nby the House of Representatives’ Committee on Appropriations, the IRS-Treasury Tax Software Field Experiment is a study \nconducted in partnership with tax preparation software providers. The study tested ways to improve self-preparers’ abilities \nto assess their own eligibility for the EITC by embedding additional questions in the tax preparation software. Department \nof the Treasury, Report to Congress on Strengthening Earned Income Tax Credit Compliance through Data Driven Analysis \n12-14 (July 5, 2016).\n135\tNaomi Jagoda, IRS Bringing in Outside Contractor on Review of ‘Free File’ Program, The Hill (May 15, 2019, 3:13 PM), \nhttps://thehill.com/policy/finance/443883-irs-working-with-outside-contractor-on-review-of-free-file-program; Jad \nChamseddine, IRS to Review Charges that Free File Members Hid Services, Tax Notes Today (May 13, 2019), https://www.\ntaxnotes.com/tax-notes/legislation-and-lawmaking/irs-review-charges-free-file-members-hid-services/2019/05/13/29gh4. \nIn addition, Senators Elizabeth Warren and Jeanne Shaheen and Congressman Brad Sherman are introducing the Tax \nFiling Simplification Act of 2019, which is a revised version of S. 912, 115th Cong. (2017). The bill prevents the IRS \nfrom entering into an agreement restricting its ability to provide tax preparation or filing software. It also directs the IRS \nto develop a free, online tax preparation and filing service that would allow all taxpayers to prepare and file their taxes \ndirectly with the federal government. See Press Release, Elizabeth Warren, Senator, Senator Warren Leads Colleagues in \nReintroducing Legislation to Simplify and Decrease the Costs of Tax Preparation and Filing (Apr. 12, 2019), https://www.\nwarren.senate.gov/newsroom/press-releases/senator-warren-leads-colleagues-in-reintroducing-legislation-to-simplify-and-\ndecrease-the-costs-of-tax-preparation-and-filing.\n136\tNational Taxpayer Advocate 2017 Annual Report to Congress 227-234 (Most Serious Problem: Refund Anticipation Loans: \nIncreased Demand for Refund Anticipation Loans Coincides with Delays in the Issuance of Refunds).\n137\t GAO, GAO-19-269, Tax Refund Products: Product Mix Has Evolved and IRS Should Improve Data Quality 41 (2019).\n",
"30\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Establish Greater IRS Oversight\nRECOMMENDATIONS \nTAS recommends that Congress provide the IRS with the authority to establish minimum competency \nand other standards for paid preparers and software providers. TAS recommends that the IRS work \nwith TAS to establish effective standards that protect the most vulnerable taxpayers.\nRecommendation 2.1: Authorize the Secretary to Establish Standards for Return \nPreparers\nCongress should amend Title 31, section 330 of the U.S. Code to authorize the Secretary to establish \nminimum competency standards, including education and testing, for federal tax return preparers.138 \nIn addition to the standards applicable to preparers of all returns, the legislation should authorize the \nSecretary to create a voluntary EITC-specific designation with EITC-specific minimum competency \nstandards. The voluntary program could have incentives such as releasing refunds for prepared returns \nmore quickly or, similar to the AFSP, allowing participants to represent taxpayers on EITC audits of \nreturns they prepare.\nRecommendation 2.2: Authorize the Secretary to Establish Standards for Tax Return \nSoftware Providers\nCongress should authorize the Secretary to establish minimum standards for commercial return \npreparation software providers, including participants in Free File, Inc., by promulgating regulations \nsetting forth requirements for software providers and imposing appropriate sanctions for negligent or \nwillful violations of such requirements.139 The Secretary should initially propose the requirements \nin a notice of proposed rulemaking to give the industry, taxpayers, representatives, and consumer \nadvocates an opportunity to provide comments. The proposed requirements should include access to \nfree software,140 accuracy of calculations in preparation, coverage of forms enumerated periodically \nby the IRS, marketing of ancillary products, and disclosure of all associated fees. Because the line \nbetween preparers and software is blurring as software providers are increasingly including consultations \nwith preparers as part of their software offerings, such regulation should also provide that any error \ncaused by individual preparer advice that is virtually incorporated into a software program, such as \nthrough a virtual chat feature, is treated the same as if the error were programmed into the software.141 \nIn addition, the regulation should include a provision requiring the IRS, in collaboration with the \nNational Taxpayer Advocate or a third-party contractor, to perform routine tests of return preparation \nsoftware for accuracy and completeness before the start of the filing season with a particular focus on \nthe accuracy of EITC calculations. The testing should also cover whether the software prompts and \ndescriptions are clear and easy to understand. \n138\tFor legislative language generally consistent with this recommendation, see Taxpayer Protection and Preparer Proficiency \nAct, S.137, 114th Cong. (2015) and other bills cited herein.\n139\tCongress can add this authority to 31 U.S.C. § 330(a) as proposed by Jay A. Soled and Kathleen DeLaney Thomas, \nRegulating Tax Return Preparation, 58 B.C.L. Rev. 151, 193-194 (2017). In addition, Congress could amend 31 \nU.S.C. § 330(c) to authorize the IRS to impose sanctions such as suspension, expulsion, censure, or monetary penalties on \nsoftware providers.\n140\tAccess to free software includes prohibitions on misleading practices, including attempts by software providers to lure \nfree software customers to their fee-based versions. Jay A. Soled and Kathleen DeLaney Thomas, Regulating Tax Return \nPreparation, 58 B.C.L. Rev. 151, 193-194 (2017).\n141\t Regulating the software provider rather than the individual preparer seems more appropriate due to the difficulty in \nadministrating such oversight on the individual preparers who may only provide advice on a minor component of the return. \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n31\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nRecommendation 2.3: Require Disclosure and Reporting of Fees\nCongress should require all paid return preparers to provide a fee disclosure statement to the taxpayer \nprior to providing tax preparation and filing services. The law should also require preparers to keep \na copy of such statements, so the IRS can conduct random audits or visits to verify compliance. The \nstatement could take the form of a “truth-in-preparation fees” statement similar in nature to a “truth-in-\nlending” statement.142 Alternatively, the statement could take a form similar to the National Consumer \nLaw Center (NCLC) standard fee disclosure table as detailed in its Model Individual Tax Preparer \nAct.143 Regardless of the model used to develop the fee disclosure form, the law should require the IRS \nto work with the industry and consumer advocates to incorporate clear language and design to help the \ntaxpayer better understand all direct and indirect fees and eliminate the ability of preparers to hide fees. \nTo address the shortcomings identified by GAO, Congress could mandate the Secretary partner with \nthe commercial return preparation and filing industry and consumer protection groups to identify the \ngaps and limitations in its current ancillary tax refund product reporting structure. For example, the \ndiscussions should cover methods to improve IRS data on tax-time financial products to accurately \nreflect product use; updating refund product indicators (currently the IRS only provides three: no \nproduct, RAL, and refund anticipation check); and necessary refund product reporting guidance for tax \npreparers. Ultimately, such discussions would result in recommendations to address identified reporting \nissues as well as improve data collection and analysis. The Secretary should report to Congress on the \nresults of these discussions and provide an implementation timeline for such recommendations.\n142\t Since October 3, 2015, Truth-in-Lending disclosures are now termed “Loan Estimates.” The Loan Estimate provides the \napplicant with important information about estimated interest rate, monthly payments, and total closing costs for the loan. \nIt also informs the applicant about estimated tax and insurance costs, any anticipated changes in interest rate, penalties, \nand a negative amortization feature, if applicable. Consumer Financial Protection Bureau, What is a Loan Estimate? \n(Sept. 12, 2017), https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/.\n143\tChi Chi Wu, Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and What States Can Do \n(2014). The National Consumer Law Center disclosure provision is based on a similar Maryland provision, Md. Code \n§§ 21-101 to 21-502.\n",
"32\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\nEnsure Low Income Taxpayers Have Due Process Protections Comparable \nto Protections of Other Taxpayers by Limiting the Use of Summary \nAssessment Authority\nPRESENT LAW AND PRACTICE\nThe IRS has a variety of mechanisms intended to ensure taxpayer compliance with income tax \nprovisions, including the EITC. Enforcement procedures undertaken before a refund is issued to the \ntaxpayer are generally referred to as “pre-refund compliance” measures. From the standpoint of the \nIRS as a revenue collector, pre-refund compliance measures are a better way to ensure the IRS protects \nrevenue than post-refund compliance measures that seek to claw back money that has already been \npaid out. In addition, some have argued that pre-refund compliance measures are less burdensome to \ntaxpayers than post-refund measures.144 Two of the most common “pre-refund compliance measures” \nare pre-refund audits and summary assessment authority (SAA—commonly known as “math error” \nauthority, or MEA).145 \nWhat Is “Summary Assessment” Authority Anyway? \nIn certain circumstances, the IRS has special authority to “summarily assess” tax without first sending the \ntaxpayer a “notice of deficiency.” A notice of deficiency generally gives the taxpayer at least 90 days to petition \nthe Tax Court before being required to pay. Thus, summary assessments bypass important procedural \nprotections. When “summary assessment authority” was first enacted in 1926, the IRS could only use \nit to address math errors—generally arithmetic mistakes that could be detected on the face of the return \n(e.g., 2+2=5).146 For this reason it is generally referred to as “math error authority,” but that terminology is no \nlonger accurate. \nIn 1976, Congress expanded the IRS’s summary assessment authority to cover “clerical errors” (e.g., \ninconsistent entries on the face of the return, certain omissions, and credit claims in excess of statutory \nmaximums),147 and then later expanded it to cover other circumstances such as where a taxpayer omits a \nrequired Taxpayer Identification Number or uses a Social Security number that does not match the one in the \nSocial Security Administration’s Numident database.148 \n144\tSee, e.g., Charles P. Rettig, Commissioner, IRS, Testimony Before the Senate Appropriations Committee Subcommittee on \nFinancial Services and General Government on the IRS Budget and Current Operations (May 15, 2019), where he discusses \na proposal to “Lower Employer Threshold for Mandatory Electronic Reporting of W-2 data.” See also GAO, GAO 18-544, Tax \nFraud and Noncompliance: IRS Could Further Leverage the Return Review Program to Strengthen Tax Enforcement (2018).\n145\tAlthough the IRS generally makes summary assessments (e.g., to correct math errors) when processing returns, and thus \nbefore it pays any refunds, it believes it has the authority to make summary assessments after it has processed the return \nand paid any refunds. See Program Manager Technical Advice (PMTA) 2018-17 (Apr. 10, 2018), https://www.irs.gov/pub/\nlanoa/pmta_2018_17.pdf. TAS is concerned about post-refund SAA and has written extensively on this topic. See National \nTaxpayer Advocate Fiscal Year 2019 Objectives Report to Congress 114-118 (Area of Focus: The IRS Has Expanded Its Math \nError Authority, Reducing Due Process for Vulnerable Taxpayers, Without Legislation and Without Seeking Public Comments); \nNational Taxpayer Advocate 2018 Annual Report to Congress 164-169 (Most Serious Problem: Post-Processing Math Error \nAuthority: The IRS Has Failed to Exercise Self-Restraint in Its Use of Math Error Authority, Thereby Harming Taxpayers).\n146\tH.R. Rep. No. 69 1, at 10-11 (1926).\n147\t Pub. L. No. 94-455, § 1206(b), 90 Stat. 1520, 1704 (1976). The IRS had interpreted “math errors” broadly, but some \ncourts had limited it to arithmetic errors; thus the 1976 legislation formally expanded the IRS’s authority to encompass \n“clerical” errors, while also “restricting” its use. See H.R. Rep. No. 94-658, at 289 (1976).\n148\tThe IRS was not expressly authorized to use the summary assessment procedures to address the omission of a \ndependent’s taxpayer identification number on a return until 1996. See Small Business Job Protection Act of 1996, Pub. L. \nNo 104-188, § 1615, 110 Stat. 1853 (1996); H.R. Rep. No. 104–737, at 319-20 (1996). \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n33\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nCrucially, summary assessment authority was intended by Congress to be used to correct an error when it “will \nbe apparent, and the correct answer will be obvious.”149 Congress only granted the IRS summary assessment \nauthority to address the specific types of errors described in Internal Revenue Code (IRC) Sections 6213(b) \nand (g). The IRS cannot summarily assess tax anytime it believes a return might contain an error.\nIn FY 2018, approximately 330,000 EITC returns were audited.150 Most of these audits—about 75 \npercent—were conducted before the refund was issued to the taxpayer.151 As a result of these pre-refund \naudits, the IRS was able to prevent what it believed were to be over $800 million in improperly claimed \nEITC from being paid out.152 \nRecent media reports have highlighted the human toll of audits on low income taxpayers, many of \nwhom are EITC claimants.153 In addition, research suggests EITC audits also discourage participation \nin the program.154 On numerous occasions, TAS has highlighted the need to reform the audit process, \nespecially with respect to low income taxpayers, and has provided many recommendations on how to do \nso, although few of these proposals have been implemented by the IRS. Despite serious concerns with \nthe EITC audits, the current audit process—imperfect as it is—does include numerous provisions that \nsafeguard taxpayer rights, and if significantly improved, the National Taxpayer Advocate believes the \naudit process could improve long-term voluntary compliance.155 \nSAA allows the IRS, often after cross-checking taxpayer information on the income tax return with \nthird-party or government databases, to correct what the IRS determines is an error and notify the \ntaxpayer of the corrected tax owed/refund amount. Of the 26.2 million EITC returns in TY 2017, \nall were screened for a so-called math error, and slightly over 197,000—less than one percent—were \ndetermined to include one.156 (A wide range of discrepancies involving the EITC can trigger summary \nassessments; see the EITC Databook appendix for the types of SAA and associated IRS notices.) As \n149\t H.R. Rep. No. 94-658, at 290 (1976).\n150\tIRS, CDW, AIMS Closed Case Database for EITC audits closed in FY 2018 (June 2019).\n151\t IRS, CDW, AIMS audits closed in FY 2018 and the Individual Master File (IMF) through cycle 13 of 2019 (June 2019).\n152\t IRS, CDW, AIMS Closed Case Database for EITC audits closed in FY 2018 and IMF through cycle 13 of 2019 (June 2019). \nThe IRS reversed the EITC claim before any moneys were disbursed (during a pre-refund audit).\n153\tSee Paul Kiel, It’s Getting Worse: The IRS Now Audits Poor Americans at About the Same Rate as the Top 1%, Pro Publica \n(May 30, 2019), https://www.propublica.org/article/irs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-\npercent and Paul Kiel & Jesse Eisinger, Who’s More Likely to Be Audited: A Person Making $20,000 — or $400,000, Pro \nPublica (Dec. 12, 2018, 5 AM), https://www.propublica.org/article/earned-income-tax-credit-irs-audit-working-poor.\n154\tSee John Guyton et. al., The Effects of EITC Correspondence Audits on Low-Income Earners (NBER, Working Paper No. 24465, \n2019).\n155\tSee National Taxpayer Advocate 2018 Annual Report to Congress 91-104 (Most Serious Problem: Improper Earned Income \nTax Credit Payments: Measures the IRS Takes to Reduce Improper Earned Income Tax Credit Payments Are Not Sufficiently \nProactive and May Unnecessarily Burden Taxpayers); National Taxpayer Advocate 2015 Annual Report to Congress 248-260 \n(Most Serious Problem: Earned Income Tax Credit (EITC): The IRS Is Not Adequately Using the EITC Examination Process As \nan Educational Tool and Is Not Auditing Returns With the Greatest Indirect Potential for Improving EITC Compliance); National \nTaxpayer Advocate 2015 Annual Report to Congress 261-283 (Most Serious Problem: Earned Income Tax Credit (EITC): The \nIRS’s EITC Return Preparer Strategy Does Not Adequately Address the Role of Preparers in EITC Noncompliance); National \nTaxpayer Advocate 2005 Annual Report to Congress 94-122 (Most Serious Problem: Earned Income Tax Credit Exam Issues); \nNational Taxpayer Advocate 2002 Annual Report to Congress 75-80 (Most Serious Problem: The Length of EITC Audits \nContributes to Taxpayer Concerns).\n156\tIRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019). The EITC Databook in the appendix \ncontains a listing of math errors related to EITC; however, other math errors changes to the tax return may automatically \nreduce EITC, infra. \n",
"34\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\na result of SAA, the IRS was able to prevent what it believed was nearly $350 million in improperly \nclaimed EITC from being paid.157\nFrom the IRS’s viewpoint, SAA is a cheaper alternative to the audit process. According to the Treasury \nInspector General for Tax Administration (TIGTA), it costs $1.50 to resolve an erroneous EITC claim \nusing automated SAA compared to $278 for an audit.158 From the taxpayer’s point of view, SAA and \npre-refund audits both result in the taxpayer having to prove eligibility before he or she can receive the \ncredit. However, in comparison to the audit process, the way in which a taxpayer can contest a “math \nerror” is not only more limited in time, but is also significantly more confusing and burdensome, with \nfewer protections.\nAudits and Summary Assessment Authority: A Comparison of Determining Taxpayer \nCompliance With the EITC Qualifying Child Residency Requirement\nUnderstanding the key distinctions of a pre-refund audit and SAA can be illustrated by comparing \nhow both processes would be used to try to determine whether a taxpayer was non-compliant with the \nEITC’s qualifying child residency requirement. As previously discussed, a qualifying child for the EITC \nmust live with the taxpayer for more than half the year, in addition to satisfying other requirements. \nFor the purposes of this example, we will assume a child’s parents are divorced, that the father pays the \nmother child support for the child and is considered the non-custodial parent of the child, the mother \nis the custodial parent, and that the child lived for more than half the year with his or her father. The \nfather claims EITC with respect to the child. While it is often assumed that the child lives for more \nthan half the year with the custodial parent, that may not always be the case. For example, a custodial \nparent may be unable to care for the child in a given year due to many reasons, including job loss or \nillness. The taxpayer is assumed to fulfill all the other eligibility criteria for the credit and for simplicity \nis assumed to have no other non-EITC errors on his or her income tax return. \nPre-Refund Audit (Deficiency Procedures)\nIn the pre-refund audit process, the IRS validates the information on the taxpayer’s return with \ninformation in the DDb database, assigning the tax return a score that indicates the probability that \nthe taxpayer is not in compliance with EITC eligibility requirements, in this case the qualifying child \nresidency requirement. In the case of this particular taxpayer, data from Federal Case Registry of Child \nSupport Orders (FCR)—a database that identifies the custodial and non-custodial parents of the child \nfor the purposes of the administration and enforcement of child support laws159—would indicate that \nthe taxpayer claiming the credit was the non-custodial parent. \n157\t IRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019). Some SAA adjustments are later \nreversed.\n158\tTIGTA, Ref. No. 2014-40-093, Existing Compliance Processes Will Not Reduce the Billions of Dollars in Improper Earned \nIncome Tax Credit and Additional Child Tax Credit Payments 16 (Sept. 2014). \n159\tThe Federal Case Registry (FCR) is a national database maintained by the Department of Health and Human Services (HHS). \nThe FCR aids the administration and enforcement of child support laws. Court ordered enforcement actions generally stem \nfrom the non-custodial parent’s failure to pay child support. The FCR data consist of records that identify children, custodial \nparties, non-custodial parents, and putative (alleged) parents, along with other relevant information. See Appendix A of IRS, \nFederal Case Registry Final Report, Project 5-02-12-3-005 (CR-39) (Sep. 2003), (on file with TAS). \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n35\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nHence, if a non-custodial parent claims a child for the EITC, the IRS will assign his return a higher \nprobability of having an error (i.e., a higher DDb score), even if the claim is accurate. A subsample of \ntax returns with a high DDb score will then be selected for pre-refund audits. Of the approximately \n6.6 million EITC returns that are flagged during the DDb process, about five percent were selected for \npre-refund audit in TY 2017.160 \nIf a taxpayer is selected for a pre-refund audit, the IRS then holds the amount of the refund associated \nwith that potential error (in this case the qualifying child error) and issues a letter to the taxpayer \nexplaining the items that the IRS believes are in error and the IRS’s proposed adjustment of the \ntaxpayer’s tax bill or refund. (If the taxpayer owes additional tax or is due a smaller refund, the \ndifference between the taxpayer and IRS’s calculation is referred to as a “deficiency.”) The taxpayer \nthen has 30 days to respond to this letter and can either accept the proposed adjustment or request an \nadministrative appeal.161 If the taxpayer does not respond to this 30-day letter (or their appeal is not \nsuccessful), the IRS will then issue a “statutory notice of deficiency” (SNOD).162 The SNOD informs \nthe taxpayer of the right to dispute the deficiency in U.S. Tax Court—before paying any additional tax \nthe IRS claims is due—and prohibits the IRS from assessing and collecting additional tax during the \n90-day period beginning from the date of the letter. SNODs are often referred to as 90-day letters or \n“tickets to Tax Court.”\nIf the taxpayer does not timely file a petition with the U.S. Tax Court, the IRS’s proposed deficiency \n(either the taxpayer paid too little tax or received too large a refund) will often stand (although the \ntaxpayer could still take their case to district court or the Court of Federal Claims).163 If the taxpayer \ndoes file a timely petition, the IRS is prevented from assessing and collecting additional tax while the \ncase is pending.\n160\tIRS, CDW, DDb, AIMS Closed Case Database, and the IMF for TY 2017 returns processed by cycle 13 of 2019 (May 2019). \n161\t In some cases, the IRS sends the taxpayer the 30-day letter at the initiation of the audit, where the IRS combines the \ninitial contact letter and the preliminary report into a “combo letter.” This practice can undercut the protections of the \naudit process and confuse the taxpayer. See National Taxpayer Advocate 2018 Annual Report to Congress 126, 141 (Most \nSerious Problem: Correspondence Examination: The IRS’s Correspondence Examination Procedures Burden Taxpayers and Are \nNot Effective in Educating the Taxpayer and Promoting Future Voluntary Compliance) (recommending that IRS end the practice \nof using combo letters).\n162\t IRC § 6212(a).\n163\tIn Flora v. United States, the Supreme Court held that taxpayers must fully pay a liability before bringing a refund suit in \neither a federal district court or the Court of Federal Claims. See Flora v. United States, 357 U.S. 63 (1958), reaff’d, Flora \nv. United States, 362 U.S. 145 (1960). To allow greater opportunity for pre-payment judicial review, TAS has recommended \nrepealing what is commonly known as the Flora rule. See National Taxpayer Advocate 2018 Annual Report to Congress \n364-386 (Legislative Recommendation: Fix the Flora Rule: Give Taxpayers Who Cannot Pay the Same Access to Judicial \nReview as Those Who Can). See also Nina E. Olson, Why We Should Repeal the Flora Rule or Find Another Way to Give \nTaxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can (Part 1 of 3), NTA Blog (May 29, 2019), \nhttps://taxpayeradvocate.irs.gov/news/nta-blog-Why-We-Should-Repeal-the-Flora-Rule-Part-1-of-3; Nina E. Olson, Why We \nShould Repeal the Flora Rule or Find Another Way to Give Taxpayers Who Cannot Pay the Same Access to Judicial Review \nas Those Who Can (Part 2 of 3), NTA Blog (June 5, 2019), https://taxpayeradvocate.irs.gov/news/nta-blog-Why-We-\nShould-Repeal-the-Flora-Rule-Part-2-of-3?category=Tax News; Nina E. Olson, Why We Should Repeal the Flora Rule or Find \nAnother Way to Give Taxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can (Part 3 of 3), NTA \nBlog (June 12, 2019), https://taxpayeradvocate.irs.gov/news/nta-blog-Why-We-Should-Repeal-the-Flora-Rule-Part-3-of-\n3?category=Tax News.\n",
"36\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\nWhat Benefit Does a Statutory Notice of Deficiency Provide a Low Income Taxpayer in \nComparison to Summary Assessment Authority?\nWhile TAS has written extensively on the flaws with the current EITC audit process, some of the aspects of \nthis process—including the statutory notice of deficiency (SNOD)—can protect low income taxpayers from \nadditional financial burden. A stylized example can illustrate this point.\nAssume a taxpayer had a $500 income tax liability and claimed a $1,500 EITC, resulting in an expected \n$1,000 refund from the IRS.\nIf, as a result of a pre-refund audit, the IRS determined that the taxpayer was ineligible for the entire EITC, \nthe IRS would not pay out the taxpayer’s $1,000 refund. Instead the IRS would propose that the taxpayer \nowe the IRS $500. As part of this audit, the IRS would typically send the taxpayer a SNOD, which informs \na taxpayer of this proposed change. The SNOD also provides the taxpayer with a right to challenge the \nproposed denial of the EITC in Tax Court without first paying the $500 tax. During the 90-day period and \nuntil the case is resolved, the IRS could not collect the $500. Thus, the SNOD is the taxpayer’s ticket to Tax \nCourt and pre-payment court review.\nIn contrast, if, as a result of SAA, the IRS determined the taxpayer was ineligible for the entire credit, the \ntaxpayer would not only be denied her refund, but she would need to request that the summary assessment \nbe canceled (or abated) within 60 days. If she did not make that request, the taxpayer would have to pay the \n$500 balance to the IRS or face possible IRS collection action. Only after she fully paid the $500 balance, \ncould the taxpayer get court review in federal district court or the Court of Federal Claims in a refund case. \nGiven that low income taxpayers may be unable to pay the proposed additional tax, and that the Tax Court is \na more user-friendly court than most other courts, the receipt of a SNOD is a valuable taxpayer right.\nThese “deficiency” or “exam” procedures (as audit processes are often referred to) provide taxpayers with \nthe right to automatically petition the Tax Court and resolve their issues, without having to first pay any \nadditional tax the IRS claims is owed. Nonetheless, there are still many concerns with the current audit \nprocess, especially considering many barriers low income taxpayers may have in navigating it. Indeed, \nin FY 2018, virtually all EITC audits (99.9 percent) were done via mail (referred to as correspondence \naudits). Approximately 43 percent of audited EITC taxpayers did not respond to audits and of those, \nthey waited an average of 207 days to have the dispute resolved (see the EITC Databook appendix for \nadditional information).164 \nSummary Assessment Authority (aka “Math Error” Authority)\nIf the qualifying child residency error was adjusted using summary assessment authority, the same \ntaxpayer’s return would again be compared to the data in the FCR (and other databases). However, \nunder SAA, if a non-custodial parent claimed the EITC for that child, the IRS would assume the \ntaxpayer was incorrectly claiming the child. (Importantly, while the IRS does have the authority to use \nthe FCR for summary assessment based on mismatches, the IRS has adopted the National Taxpayer \nAdvocate’s recommendation not to do this because of the inaccuracy of this database. For a further \ndiscussion, see below.) Hence what was once a factor in assigning a probability that a taxpayer had \nmade a mistake, would now be used to definitively identify a taxpayer who made a mistake. By way of \ncomparison, while approximately five percent of EITC returns flagged by the DDb are currently audited, \n164\tIRS, CDW, AIMS Closed Database for EITC audits closed in FY 2018 (May 2019).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n37\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\napproximately nine percent break the DDb residency rule.165 The portion of the refund associated with \nthis error would be denied by the IRS. As part of these “summary assessment” procedures, the IRS \nwould send the taxpayer in our example a letter documenting the change it actually made to his EITC \nand informing him that he has 60 days to contact the IRS to request the IRS change its determination \nif he believes the IRS’s correction was in fact a mistake (this is often referred to as requesting an \n“abatement”). If the taxpayer did not request abatement within the 60 days, the summary assessment \neffectively would stand (although the taxpayer could still go to a U.S. District Court or the Court of \nFederal Claims in a refund proceeding, if he could afford to pay any additional tax in full), and the \nchange could not be appealed to the U.S. Tax Court. If the taxpayer did request abatement within the \n60-day window, the IRS would abate the assessment and follow formal “deficiency procedures” used in \nthe audit process, as previously described.\nREASON FOR CHANGE\nIn cases where a determination is not factually simple or cannot be accurately verified using a database, \nSAA often leads the IRS to incorrectly classify inconsistencies on tax returns. For example, the IRS \nhas the authority to summarily adjust EITC returns that are inconsistent with the FCR database—\nwhere a person listed as a noncustodial parent in the FCR database claims the child.166 However, the \nIRS has not done so because a study, which Congress mandated be undertaken with the National \nTaxpayer Advocate, showed that the FCR was not sufficiently reliable for purposes of verifying a child’s \nresidence.167 The study found that up to 40 percent of the cases selected solely based on FCR data were \nincorrect.168 Thus, while the FCR is useful for identifying questionable returns and selecting them for \naudit, it is not appropriate as a basis for summarily denying a credit or exemption. \n165\tOf the 6.7 million TY 2017 returns scored by the DDb—indicating they may include an error, virtually all of them—6.6 \nmillion—were returns that included a claim for the EITC. Of these 6.6 million returns, about 605,000 (or nine percent) \nwere flagged as potentially breaking the EITC qualifying residency rule (of those 312,000 broke only the residency rule, with \nthe remainder breaking the residency rule in combination with another rule). The approximately 6.6 million EITC returns \nclaimed approximately $25 billion of the EITC, and those that were flagged as potentially breaking the residency rule claimed \n$1.9 billion of the credit. Amounts are calculated after summary assessment. Just because an EITC dependent breaks a \nresidency rule, the entire amount of EITC may not be affected (for example there may be another EITC child claimed on the \nreturn who did not break a residency rule). IRS, CDW, DDb (June 2019).\n166\tIRC § 6213(g)(2)(M).\n167\t See IRS, Federal Case Registry Final Report, Project 5-02-12-3-005 (CR-39) (Sept. 2003). In 2001, Congress authorized \nthe IRS to use summary assessment procedures to deny EITC, beginning in 2004, where data from the FCR of Child \nSupport Orders indicates the taxpayer claiming a child is actually the noncustodial parent. Economic Growth and Tax Relief \nReconciliation Act of 2001, Pub. L. No. 107-16, § 303(g), 115 Stat. 38 (2001) (codified at IRC § 6213(g)(2)(M)). The House \nConference Report requested a study of the FCR database by the Department of Treasury, in consultation with the National \nTaxpayer Advocate, of the accuracy and timeliness of the data in the FCR; the efficacy of using math error authority in this \ninstance in reducing costs due to erroneous or fraudulent claims; and the implications of using math error authority in this \ninstance, given the findings on the accuracy and timeliness of the data. H.R. Rep. No. 107-84, at 147 (2001) (Conf. Rep.). \n168\tIRS, Federal Case Registry Final Report, Project 5-02-12-3-005 (CR-39) (Sept. 2003), (on file with TAS). \nApproximately 43 percent of audited EITC taxpayers did not respond to audits and of \nthose, they waited an average of 207 days to have the dispute resolved (see the EITC \nDatabook appendix for additional information).\n",
"38\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\nDue Process and the Tax System\nBased on the 5th and 14th Amendments of the U.S. Constitution, procedural due process (PDP) analysis \nidentifies what interests are protected and what process is due. In the field of taxation, courts have reasoned \nthat for taxpayers, PDP does not require the right to petition a court before paying taxes. This conclusion is \nbased on the reasoning that “taxes are the lifeblood of government” and if taxes can be contested before they \nare paid, the government will be deprived of revenue and severely impaired. \nCongress, however, has provided taxpayers more procedural protections than the courts. For example, \nCongress established the predecessor to the Tax Court in 1924. The Tax Court allows taxpayers to have their \ncases heard before they have to pay any proposed tax deficiency. \nThe mid-20th century saw major constitutional law developments in PDP including the 1970’s Supreme \nCourt case, Goldberg v Kelly. In this case, the Supreme Court held that the government must provide notice \nand hearing before the government deprives welfare recipients of their benefits. Subsequent cases have cut \nback on some of the protections of Goldberg v. Kelly. \nIn spite of these late 20th century legal developments and the changing function of the tax system from an \nexclusive collector of revenue to a social benefits provider, courts still rely on the “taxes are the lifeblood of \ngovernment” rationale and apply a tax exceptionalist approach when considering taxpayers’ PDP protections. \nAs the National Taxpayer Advocate has previously explained, this rationale and approach is no longer \npersuasive.169\nA 2011 TAS study echoed this finding more broadly for verifying eligibility of all child-related tax \nprovisions. TAS studied a statistically valid sample of TY 2009 accounts in which the IRS reversed all \nor part of its dependent TIN math error corrections. The IRS ended up abating all or part of the math \nerror in 56 percent of the returns in which it originally assessed additional tax.170 Likewise, applying data \ncollected for nontax purposes to tax claims is akin to relying on the addresses shown in a telephone \ndirectory to deny the home mortgage interest deduction. Even if virtually all the entries in a directory \nwere accurate, they were compiled for a different purpose, do not disprove eligibility under the tax law, \nwere compiled at a prior date and may not be current. SAA is simply not appropriate for determining \neligibility for many of the complex aspects of the EITC (and other family status tax benefits). \n169\t See, e.g., National Taxpayer Advocate 2018 Annual Report to Congress 364-386 (Legislative Recommendation: Fix the \nFlora Rule: Give Taxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can); Nina E. Olson, Why We \nShould Repeal the Flora Rule or Find Another Way to Give Taxpayers Who Cannot Pay the Same Access to Judicial Review \nas Those Who Can (Part 1 of 3), NTA Blog (May 29, 2019), https://taxpayeradvocate.irs.gov/news/nta-blog-Why-We-\nShould-Repeal-the-Flora-Rule-Part-1-of-3; Nina E. Olson, Why We Should Repeal the Flora Rule or Find Another Way to Give \nTaxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can (Part 2 of 3), NTA Blog (June 5, 2019), \nhttps://taxpayeradvocate.irs.gov/news/nta-blog-Why-We-Should-Repeal-the-Flora-Rule-Part-2-of-3?category=Tax News; \nNina E. Olson, Why We Should Repeal the Flora Rule or Find Another Way to Give Taxpayers Who Cannot Pay the Same Access \nto Judicial Review as Those Who Can (Part 3 of 3), NTA Blog (June 12, 2019), https://taxpayeradvocate.irs.gov/news/nta-\nblog-Why-We-Should-Repeal-the-Flora-Rule-Part-3-of-3?category=Tax News; Nina E. Olson, 2010 Erwin N. Griswold Lecture \nBefore the American College of Tax Counsel, Taking the Bull by Its Horns: Some Thoughts on Constitutional Due Process in Tax \nCollection, 63 Tax Law. 227 (2010).\n170\t National Taxpayer Advocate 2011 Annual Report to Congress vol. 2 114, 117 (Research Study: Math Errors Committed on \nIndividual Tax Returns: A Review of Math Errors Issued for Claimed Dependents). For taxpayer Notice Code 743 (dealing with \nonly EITC qualifying children), the IRS ended up abating all or part of the math error in 55 percent of the returns in which it \noriginally assessed additional tax. Other taxpayer notice codes may apply to EITC or other child related tax benefits such as \nthe child tax credit.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n39\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nHowever, TAS has acknowledged that SAA is appropriate in certain circumstances, specifically cases \nwhere the error is unambiguous and factually simple or in cases where the IRS has access to databases \nthat are timely, reliable, and accurate to verify compliance with income tax law. For example, if the \ntaxpayer claims a child that does not meet the age requirements of the EITC, and data from the Social \nSecurity Administration’s (SSA’s) Numident database confirms the child is not eligible based on his \nor her age, summary assessment authority may be an appropriate way to correct this error and protect \nrevenues while minimizing taxpayer burden.\nAs currently applied, SAA and the associated notices from the IRS limit a taxpayer’s right to contest \nthe IRS’s determination, first by providing less information to the taxpayer about their rights and by \nshortening the time the taxpayer has to challenge the IRS and be heard, as well as making access to \njudicial review for taxpayers more difficult. Low income taxpayers are some of the most vulnerable \ntaxpayers, with limited English skills, limited computer access, low literacy rates, low education levels, \nand disabilities. In light of the IRS’s role as a benefits administrator and the way other means-tested \nbenefits are administered, the IRS should be providing EITC claimants subject to summary assessment \na clear understanding of the error, the taxpayer’s rights when the IRS believes that there is an error, \nand how to contest a determination that the taxpayer disagrees with. And yet, as TAS has repeatedly \ndocumented and discussed below, the IRS’s math and clerical error notices consistently fail on all these \nfronts. \nIn the National Taxpayer Advocate’s 2014 Annual Report to Congress, TAS reviewed math and clerical \nerror notices and found that their lack of clarity made it hard for taxpayers to decide whether to accept \nthe determination or request abatement. For example, one notice sent out for an inconsistent number of \ndependents claimed on the return simply stated:\nWe changed your total exemption amount on page 2 of your tax return because there was \nan error in the number of exemption provided on lines 6a, 6d and/or computation of your \ntotal exemption amount.171\nWe suggest the notice explain explicitly what is at issue on the return, inform the taxpayers of the steps \nhe or she may take to remedy or contest the issue, and provide the consequences if he or she fails to take \nthose steps. For example, 17,408 taxpayers in TY 2017172 received a summary assessment notice from \nthe IRS with this paragraph: \n171\t IRS, Document 6209 (2014) (TPNC 200). See also National Taxpayer Advocate 2014 Annual Report to Congress 168 (Most \nSerious Problem: Math Error Notices: The IRS Does Not Clearly Explain Math Error Adjustments, Making It Difficult for Taxpayer \nto Understand and Exercise Their Rights).\n172\t IRS, CDW, IRTF, TY 2017 returns processed through cycle 13 of 2019 (May 2019). Taxpayer Notice Code 810.\nLikewise, applying data collected for nontax purposes to tax claims is akin to relying \non the addresses shown in a telephone directory to deny the home mortgage interest \ndeduction. Even if virtually all the entries in a directory were accurate, they were \ncompiled for a different purpose, do not disprove eligibility under the tax law, were \ncompiled at a prior date and may not be current. \n",
"40\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\nYou, your spouse, or one or more of your dependents claimed on your return didn’t have \nan assigned taxpayer identification number by the due date of the tax return. As a result, \nwe disallowed certain credits claimed on your return. This change may affect any of \nthe following credits: American opportunity credit, child tax credit, additional child tax \ncredit, earned income credit. \nThis notice leaves a taxpayer with more questions than answers: Which dependent? Which credit? The \nalternative notice we suggest would reflect the taxpayer’s right to be informed by stating at the outset \nwhich individual might have caused the problem on the return and which credit is being disallowed. \nInstead, the language could read: \nWe reviewed your tax year 2018 return. You claimed exemptions, the child tax credit, \nand the earned income credit for your three dependents. However, we find that your \ndependent named [insert name] may not have had a Social Security number when you \nfiled your return. The consequence is that we are not allowing the child tax credit and the \nearned income credit for that child. The dollar value of this adjustment is $xxx.\nThe letter could then explain to the taxpayer how to contest the adjustment within 60 days to preserve \nany subsequent rights to adjudicate the issue.173\nAs discussed above, the unique characteristics of low income taxpayers make them more vulnerable \nto confusion associated with math and clerical error notices. Vague and confusing explanations of \nsummary assessments compromise the taxpayer’s right to challenge the IRS’s position and be heard because \nthe taxpayer may be unable to effectively raise objections and provide additional documentation in \nresponse to an IRS proposed adjustment. (Unclear explanations may also undermine the taxpayer’s right \nto be informed, which includes the ability to know what is required to comply with tax laws.)174 \nEven when the notices include an explanation of the 60-day deadline and the possible loss of prepayment \njudicial review, this information is often on the second page of the notice (where taxpayers are less \nlikely to see it), in a dense block of text taxpayers may skip over. In an effort to clarify any confusion, \ntaxpayers may want to go to an IRS Taxpayer Assistance Center.175 However, a recent report from \nTIGTA indicates that many of these centers are located far from low income populations that are likely \nto receive IRS notices.176 Taxpayers may also try to call the IRS. However, reaching an employee might \ntake days. Data from the IRS indicate that the IRS provided less than a 67 percent Level of Service \n173\t This approach is consistent with Congress’s vision of summary assessment authority and its hope that IRS would explain \nthe circumstances that justified the summary assessment. S. Rep. No. 94-938(I), at 375 (1976).\n174\t See National Taxpayer Advocate 2014 Annual Report to Congress 168-169 (Most Serious Problem: Math Error Notices: The \nIRS Does Not Clearly Explain Math Error Adjustments, Making It Difficult for Taxpayer to Understand and Exercise Their Rights).\n175\t Generally, taxpayers must make an appointment to receive service at a Taxpayer Assistance Center. See National Taxpayer \nAdvocate 2017 Annual Report to Congress 117-127 (Most Serious Problem: Taxpayer Assistance Centers (TACs): Cuts to IRS \nWalk-In sites Have Left the IRS With a Substantially Reduced Community Presence and Have Impaired the Ability of Taxpayers \nto Receive In-Person Assistance).\n176\t TIGTA, Ref. No. 2019-40-029, The Internal Revenue Service Did Not Follow Congressional Directives Before Closing Taxpayer \nAssistance Centers; a Data-Driven Model Should Be Used to Optimize Locations 10 (May 2019). \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n41\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n(the IRS’s narrow benchmark measure) for incoming calls during the 2019 filing season.177 If taxpayers \ncannot reach a human being to help them understand notices in a timely fashion, they may ultimately \nexceed the 60-day requirement to contact the IRS, and lose not only the credit, but their right to judicial \nreview in Tax Court. Indeed, when Congress expanded SAA in 1976, Congress explicitly instructed the \nIRS to explain the math or clerical error adjustment, requiring that “[e]ach notice under this paragraph \nshall set forth the error alleged and explanation thereof.”178 And, in its explanation of errors involving \ninconsistent entries for personal exemptions, the committee stated that it: \nexpects that the Service will so phrase its notification to the taxpayer as to include \nquestions designed to show whether the taxpayer indeed is entitled to a greater number of \nexemptions indicated on line 46 rather than the lesser number of exemptions indicated on \nline 7.179\nAnd yet current notices fall far short of the congressional intent. \nDespite the flaws with the current SAA, both the Obama and Trump administrations proposed to \nfurther expand SAA, including provisions that give almost unfettered discretion to the IRS to exercise \nSAA.180 This is particularly concerning, because unlike audits which are performed on a subsample \nof EITC returns, all returns are subject to inspection for math and clerical errors, and a vastly larger \npopulation of the poorest taxpayers could have their EITC withheld, exacerbating current compliance \nburdens on low income taxpayers.\n177\t IRS, Joint Operations Center (JOC), Snapshot Reports: Enterprise Snapshot (week ending April 20, 2019). The National \nTaxpayer Advocate has previously expressed concerns that the IRS Level of Service (LOS) benchmark measure masks \nproblems that taxpayers experience when attempting to contact the IRS by telephone. For example, the LOS benchmark \ndoes not include calls directed to IRS compliance functions or automated response lines, and only includes calls to its \nAccounts Management lines. The metric also does not provide information on the qualitative information the assistor \nprovides to taxpayers. See National Taxpayer Advocate Hearing on the Tax Filing Season Before the H. Subcomm. On \nOversight of the H. Comm. On Ways and Means, 116th Cong. 6-11 (2019) (statement of Nina E. Olson, National Taxpayer \nAdvocate). For more on concerns with LOS, see Nina E. Olson, Measuring the Taxpayer Experience – The IRS’s Level of \nService Measure Fails to Adequately Show the Experience of Taxpayers Seeking Assistance Over the Phone (Part 1 of 2), NTA \nBlog (Sept. 26, 2018), https://taxpayeradvocate.irs.gov/news/nta-blog-measuring-the-taxpayer-experience-part-1; Nina E. \nOlson, Measuring the Taxpayer Experience – The IRS’s Level of Service Measure Fails to Adequately Show the Experience of \nTaxpayers Seeking Assistance Over the Phone (Part 2 of 2), NTA Blog (Oct. 3, 2018), https://taxpayeradvocate.irs.gov/news/\nnta-blog-measuring-the-taxpayer-experience-part-2.\n178\t S. Rep. No. 94-938(I), at 375 (1976).\n179\t H.R. Rep. No. 94-658, at 291 (1976).\n180\tFor a discussion of these proposals, see National Taxpayer Advocate 2015 Annual Report to Congress 329-339 (Legislative \nRecommendation: Math Error Authority: Authorize the IRS to Summarily Assess Math and “Correctable” Errors Only in \nAppropriate Circumstances); Nina E. Olson, Why Correctible Error Authority Raises Significant Taxpayer Rights Concerns \n– Part 1, NTA Blog (Aug. 9, 2017), https://taxpayeradvocate.irs.gov/news/why-correctible-authority-error-raises-significant-\ntaxpayer-rights-concerns-part-1; Nina E. Olson, Correctible Error Authority Part 2: Why Correctible Error Authority Creates More \nProblems Than It Resolves, NTA Blog (Aug. 16, 2017), https://taxpayeradvocate.irs.gov/news/correctible-error-authority-part-\n2-why-correctible-error-authority-creates-more-problems-than-it-resolves?category=Tax News.\n",
"42\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Limit the Use of Summary Assessment Authority\nSummary Assessment Authority and the Two-Year Ban on Claiming the EITC\nUnder current law, taxpayers that the IRS determines have claimed the EITC with “reckless disregard for the \nrules” are banned from claiming the EITC for two years (see the final section of this report discussing the \nban, Ensure Low Income Taxpayers Have Due Process Protections Comparable to Protections of Other Taxpayers: \nThe Ban Under IRC § 32(k)). As discussed below, the procedures for making this determination are flawed \nand harm vulnerable taxpayers.\nThe ban status is currently subject to SAA, meaning that when taxpayers claim the credit when they are \nbanned from doing so, the IRS has the authority to use SAA procedures; taxpayers will receive the 60-day \nletter and have fewer due process rights than under normal “deficiency” or audit procedures. \nAs the IRS can enforce the ban using SAA, it is important that there is a deliberate and transparent process for \ndetermining whether a taxpayer’s conduct justifies imposing the ban. \nIn the next section, we offer specific recommendations to ensure that the IRS’s administration of the ban is \nconsistent with fundamental taxpayer rights and due process.\nRECOMMENDATIONS\nRecommendation 3.1: Limit SAA Use to Appropriate Cases Based on Clear Criteria\nCongress should limit the IRS’s authority to use SAA for EITC compliance to appropriate aspects of \nthe EITC that are not factually complex and that can be accurately verified using reliable third-party \nor government databases and to situations with low abatement rates. Congress should also require, that \nwhere appropriate, the IRS verify a potential error against historical return data before determining that \nthere is indeed an error.\nFor provisions that are currently subject to SAA, going forward, TAS will include in its Annual \nReport to Congress data documenting the number of tax returns subject to summary assessments for \neach category of error, the abatement rate of each (i.e., what percentage of taxpayers dispute the IRS’s \ndetermination), an estimate on the number of “false positives” determined under current summary \nassessment procedures, and other relevant statistics indicative of SAA accuracy and taxpayer burden. \nThis will not only help Congress in its oversight role but will also provide lawmakers with a clearer \nunderstanding of the complexity of certain tax provisions. \nIn cases where the IRS seeks expanded SAA, IRS, in consultation with TAS, should provide Congress \nan estimate of the number of taxpayers that would be affected and the accuracy of proposed databases \nin correctly determining errors. Since inaccurate SAA determinations harm low income taxpayers, \nCongress should only expand SAA to provisions of the EITC (and other tax benefits) where it \ndetermines taxpayer burden would be sufficiently low. \nRecommendation 3.2: Update and Modernize the SAA Process\nWhen SAA is used, it is imperative that SAA notices clearly outline the problem, how to contest the \ndetermination, and the taxpayer’s rights when contesting the determination. The IRS must follow \ncongressional guidance and legislative history of Congress in creating clear and understandable notices \nthat inform taxpayers of the exact errors, and their rights in contesting this determination.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n43\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nTo be consistent with the math or clerical error notice examples provided in the legislative history and \nthe statutory requirement,181 the IRS should cite the specific issues and correspondence it is referring \nto in its notices, along with line numbers from tax forms, descriptions of what was adjusted, and the \namount of increase or decrease in taxable income and tax due. Notices must be clearer and more \nspecific, so that taxpayers can understand what error(s) the IRS has determined they have made and \nwhat they can do in response to correct it.\nAs TAS has noted in the past, SAA can be appropriate and beneficial to taxpayers in cases that are \nnot factually complex and where information can be accurately verified using reliable and accurate \ngovernment or third-party databases. \nIn fact, if the IRS viewed itself and acted as a benefits administrator, it could use SAA to provide the \nchildless EITC proactively to eligible workers.182 If a per-worker credit was enacted, as recommended \nin this report, SAA would be appropriate to verify that the amount of earned income used to claim the \ncredit matched data on Forms W-2, Tax and Wage Statement. \n181\tSee IRC § 6213(b)(1), which directs the IRS to provide an explanation of the math or clerical error notice to the taxpayer. \nSee Malone v. Comm’r, T.C. Summ. Op. 2011-24 (holding portion of summary assessment invalid because Service letter did \nnot notify taxpayers that adjustment was “based on a mathematical error, did not set forth the specific error alleged, and \ndid not adequately explain such error” where letter simply states “[the IRS has] processed your Amended Return.”). \n182\tCurrently, if the taxpayer asks the IRS to calculate his or her EITC, the IRS can do so. The IRS issues a Taxpayer Notice \ncode 284. But the IRS does not, unless requested, pay out the credit to taxpayers who otherwise appear to be eligible, \nalthough the IRS will issue a notice of potential EITC eligibility to the taxpayer.\n",
"44\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Ensure Low Income Taxpayers Have Comparable Due Process Protections\nEnsure Low Income Taxpayers Have Due Process Protections Comparable \nto Protections of Other Taxpayers: The Ban Under IRC § 32(k)\nPRESENT LAW AND PRACTICE \nUnder current law, the IRS can ban a taxpayer from claiming the EITC for two tax years (even if \notherwise eligible in those years) if it determines the taxpayer has engaged in reckless or intentional \ndisregard of the EITC’s rules.183 This standard requires more than mere negligence on the part of the \ntaxpayer;184 instead it requires understanding the taxpayer’s state of mind when he or she makes an \nincorrect claim for the credit. Audits of taxpayers’ TY 2016 returns resulted in about 2,900 two-year or \nten-year bans (for more ban data by year see the EITC Databook appendix).185\nIRS employees—referred to as correspondence exam technicians (CETs)—consider the appropriateness \nof asserting the ban on all EITC claims they are examining.186 In order to make a ban assertion \ndetermination, a CET auditor assesses the taxpayer’s case against three “if/then” formulations that \ndescribe scenarios when the IRS examiner should impose the ban.187 Only one of these “if/then” scenarios \npresumes the CET has actually spoken with the taxpayer and gathered enough information to ascertain \nthe taxpayer’s state of mind—which is crucial in making the ban determination accurately.188 In \naddition to determining the appropriateness, the CET generally also makes the ban determination, for \nwhich the IRS requires that the CET receive managerial approval. \nAs previously discussed, if a taxpayer is subject to the ban and claims the credit during a ban year, the \nIRS will use its SAA to deny the taxpayer the credit for that year.189 The IRS is also authorized to use \n183\tIRC § 32(k)(1)(B)(ii) provides for a two-year “disallowance period” of “2 taxable years after the most recent taxable \nyear for which there was a final determination that the taxpayer’s claim of credit under this section was due to \nreckless or intentional disregard of rules and regulations.” The disallowance period is ten years in the case of fraud. \nIRC § 32(k)(1)(B)(i).\n184\tUnder IRC § 6662, “negligence” includes “any failure to make a reasonable attempt to comply with the provisions of this \ntitle” and is distinguished from a “disregard” which is “reckless” or “intentional.” IRC § 6662(c). \n185\tIRS, CDW, IMF and IRTF as of cycle 13 2019 (June 2019).\n186\tInternal Revenue Manual (IRM) 4.19.14.7.1, 2/10 Year Ban – Correspondence Guidelines for Examination Technicians (CET) \n(May 8, 2018). The IRM directs consideration of the ban not just on EITC cases, but also in regard to other refundable \ncredits including the child tax credit/additional child tax credit and the American Opportunity Act.\n187\t Id. \n188\tSee IRM 4.19.14.7.1(7), 2/10 Year Ban – Correspondence Guidelines for Examination Technicians (CET) (May 8, 2018). The \nfirst instance requires that the examiner speak with the taxpayer if the taxpayer responded to the exam notice. The second \ninstance requires the examiner to consider the taxpayer’s audit responses, including whether there have been any telephone \ncalls. It does not require telephone contact with the taxpayer. The third instance requires the examiner to consider the \ntaxpayer’s lack of understanding of the EITC rules but does not require the examiner to confirm that finding in a telephone \ncall with the taxpayer. While the IRS has updated its IRM since the National Taxpayer Advocate identified the bans as a \nMost Serious Problem. See National Taxpayer Advocate 2013 Annual Report to Congress 103-115 (Most Serious Problem: \nEarned Income Tax Credit: The IRS Inappropriately Bans Many Taxpayers from Claiming EITC), the IRS’s inquiry is still biased in \nfavor of imposing the ban.\n189\tIRC § 6213(g)(2)(K); IRM 4.19.14.7.1.1, Project Codes 0697 and 0698 – EITC Claimed Under the 2/10 Year Ban (Nov. 2, \n2017). Note that IRS issued statutory notices of deficiency prior to 2016 when asserting the ban. This provided far more \ndetailed notice and opportunity to participate in the ban assertion resolution than a singular summary assessment notice \nwould provide.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n45\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nsummary assessment authority to disallow EITC where the taxpayer failed to recertify eligibility for \nEITC as required.190\nLet’s consider this example to understand how the ban affects taxpayer claims for the EITC.191 Suppose \nthe IRS examines a taxpayer regarding her EITC claim. \nThe taxpayer participates in the audit, including a phone call with exam, but does not submit \nappropriate documentation, likely because she did not understand the exam letter,192 and thus does \nnot resolve the exam issue.193 Consequently, the taxpayer would be required to recertify for the EITC \nwhen she files the following year’s return due to the EITC disallowance. The taxpayer submits the \nrecertification form,194 and the IRS examines her again. As with the year before, the taxpayer responds \nbut does not resolve the EITC exam issue. Without a telephone conversation with the taxpayer, the IRS \nagain disallows the EITC. Again without a telephone conversation with the taxpayer, the IRS proposes \nto ban our taxpayer from claiming the EITC for the following two years even though the IRS did not \nascertain whether she engaged in reckless or intentional disregard of the EITC rules.195 \nOnce the IRS has banned our taxpayer from claiming the EITC, our taxpayer could either wait for the \ntwo banned years to expire or she could pursue an audit reconsideration for the year the two year ban \nwas proposed (the second year in our example) to ask the IRS to remove the ban. If the taxpayer pursues \nan audit reconsideration, the IRS would require our taxpayer to demonstrate that she was entitled to the \nEITC that year or that she did not engage in reckless or intentional disregard of the EITC rules.196 \nImportantly, the summary assessment notices the taxpayer receives if she claims EITC without the \nrequired recertification, or claims EITC while a ban is in effect advise her that she may seek abatement \n190\tSee IRC § 32(k)(2), providing that “[i]n the case of a taxpayer who is denied credit under this section for any taxable year \nas a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for \nany subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate \neligibility for such credit.” See also IRC § 6213(g)(2)(K), extending math error authority to “an omission of information \nrequired by section 32(k)(2) (relating to taxpayers making improper prior claims of earned income credit) or an entry on \nthe return claiming the credit under section 32 for a taxable year for which the credit is disallowed under subsection (k)(1) \nthereof.”\n191\t On occasion, multiple years may be at issue due to lag times between correspondence received and reviewed. A harrowing \nexperience is described in Bob Probasco, The EITC Ban – It’s Worse Than You Realized, Procedurally Taxing (Dec. 4, 2018), \nhttps://procedurallytaxing.com/the-eitc-ban-its-worse-than-you-realized/. \n192\tNational Taxpayer Advocate 2007 Annual Report to Congress vol. 2 94, 103 (Research Study: The IRS EIC Audit Process — A \nChallenge to Taxpayers) (more than 25 percent of taxpayers receiving an EITC audit notice did not understand that the IRS \nwas auditing their tax return).\n193\tNational Taxpayer Advocate 2007 Annual Report to Congress vol. 2 104 (Research Study: The IRS EIC Audit Process — A \nChallenge to Taxpayers) (less than one-third of EITC audited taxpayers thought the IRS audit notification letter was easy to \nunderstand, and only about half of the respondents felt that they knew what they needed to do in response to the audit \nletter).\n194\tTreas. Reg. § 1.32-3(c), designating Form 8862, Information To Claim Certain Credits After Disallowance, as the means of \nrecertifying eligibility for the credit.\n195\tSee IRM 4.19.14.7.1, 2/10 Year Ban – Correspondence Guidelines for Examination Technicians (CET) (May 8, 2018), which \nallows imposing a ban when the taxpayer fails to participate in an examination or communicate with the IRS. This is \ninconsistent with IRS guidance. See IRS, Service Center Advisory SCA 2002-45051 (Nov. 8, 2002), where the IRS opined \nthat a taxpayer’s failure to participate in an EITC audit “does not, in and of itself, constitute reckless or intentional disregard \nof the rules and regulations.” See National Taxpayer Advocate 2013 Annual Report to Congress 103, 112 n.56 (Most \nSerious Problem: Earned Income Tax Credit: The IRS Inappropriately Bans Many Taxpayers from Claiming EITC).\n196\tIRM 4.13.3.17 Audit Reconsiderations EITC 2/10 Year Ban (Dec. 17, 2015). \n",
"46\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Ensure Low Income Taxpayers Have Comparable Due Process Protections\nof the asserted tax, as discussed previously.197 However, the notices do not instruct the taxpayer that she \nalso can seek removal of the ban through the audit reconsideration process.198 \nThe processes described above are complicated for even seasoned tax lawyers much less unrepresented \nEITC recipients. The IRS path during the ban proposal and imposition period is marked by a series of \nnotices with limited explanation. No rules or notices pertaining to the effect on a taxpayer who files \njointly with a banned taxpayer exist, and there may be limited opportunities for audit reconsideration \nwhere a significant amount of time has passed since the ban was imposed. Adding to this confusion, \nthere is some uncertainty as to whether, and when, the Tax Court has jurisdiction to consider the ban.199\nREASONS FOR CHANGE\nPrevious TAS research suggests that the IRS may be imposing the ban on taxpayers whose conduct does \nnot justify the sanction.200 In 2013 TAS analyzed a representative sample of two-year ban cases and \nfound: \n■\n■In 19 percent of the cases, the IRS imposed the ban solely because of a prior year EITC’s \ndisallowance;\n■\n■In only ten percent of the cases did the taxpayers’ responses suggest the possibility of imposing \nthe ban; \n■\n■In 69 percent of the ban cases there was no managerial approval, despite the IRS requiring \napproval; and\n■\n■In almost 90 percent of the ban cases, there was no IRS documentation or correspondence \nexplaining why IRS imposed the ban.201\nThis evidence suggests that the current ban determination process can be improved to ensure that \ntaxpayers have greater opportunity to understand and exercise their rights in this process. In many \ncases, ban determinations are made without sufficient inquiry into the complicating factors that caused \n197\t There are three potential summary assessment notices, CP11A, CP12A, and CP13A, on which the taxpayer notice code \n(TPNC) 653 would be inserted. TPNC 653 states: “We didn’t allow the amount claimed as Earned Income Credit, Child Tax \nCredit, Additional Child Tax Credit, Credit for Other Dependents, and/or American Opportunity Credit on your tax return. We \nhave no record of receiving Form 8862. You must submit a completed Form 8862 to recertify your eligibility for any of the \ncredits claimed.” The CP11A is issued where there is a balance owed, the CP12A is issued where the refund is adjusted, \nand the CP13A is issued when the result is that there is neither a tax owed or a refund due.\n198\tMoreover, the letter the IRS issues to the taxpayer informing him or her that the ban is being imposed, the CP79A, also \ndoes not describe the taxpayer’s action that led to the IRS’s imposition of the ban so that the taxpayer could know what \nissues to dispute in her audit reconsideration request. The top of the letter’s bold heading is, “We denied one or more \nof the credits claimed on your tax return and applied a two-year ban.” By way of explanation, the letter continues, “We \ndetermined your claim was due to reckless or intentional disregard of the rules and regulations. As a result, the law doesn’t \nallow you to claim the credits shown below for the next two years,” and then states the next year the taxpayer may claim the \nrefundable credit at issue. The letter’s section, “What you need to do” responds with, “you don’t need to take any action at \nthis time,” and continues to advise the taxpayer to check the refundable credits’ rules. Further down the letter, the taxpayer \nis instructed to recertify for the credits once the ban expires. \n199\tSee Leslie Book, Tax Court Opinion in Ballard Highlights Fundamental Uncertainty of its Jurisdiction to Rule on the IRS Power \nto Ban Taxpayers From Claiming Refundable Credits, Procedurally Taxing (Feb. 19, 2016), https://procedurallytaxing.com/\ntax-court-opinion-in-ballard-highlights-fundamental-uncertainty-of-its-jurisdiction-to-rule-on-the-irs-power-to-ban-taxpayers-\nfrom-claiming-refundable-credits/. \n200\tSee National Taxpayer Advocate 2013 Annual Report to Congress 103-115 (Most Serious Problem: Earned Income Tax \nCredit: The IRS Inappropriately Bans Many Taxpayers from Claiming EITC).\n201\tTAS is currently updating its 2013 study and will report on its current findings in the National Taxpayer Advocate 2019 \nAnnual Report to Congress.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n47\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nthe credit to be disallowed in the first place.202 Such an inquiry is central to understanding why the \ntaxpayer erred, and where to place the taxpayer’s error on the spectrum of “reckless or intentional \ndisregard” of the rules to inability to understand the complexities of the statute.203 \nIn addition, the ban itself is excessively punitive and harms the welfare of many vulnerable taxpayers. \nTAS’s 2013 study found the average adjusted gross income of a taxpayer subject to the ban was \n$15,478 and the average amount of denied EITC was $3,731, or 24 percent of adjusted gross income \non average.204 And when the IRS imposes the ban on one taxpayer, it harms every member of the \nfamily, regardless of their actions or intent. For example, if a banned taxpayer subsequently marries \nand files jointly with an unbanned taxpayer, the IRS rules do not segregate the banned taxpayer from \nthe unbanned taxpayer.205 In contrast, the Supplemental Nutrition Assistance Program (SNAP) (food \nstamps) program, which has a similar ban for participants who violate its rules (called “intentional \nprogram violations”), would compute a family’s food stamp benefits as though the individual who \ncommitted the program violation were not a member of the household for benefit determination \npurposes. Thus, a family of four, with one disqualified individual, would receive benefits for a family of \nthree until the penalty period expired.206\nThe refundable credit bans are not only at times more punitive than punishments in other benefits \nprograms, they are also more punitive than most civil sanctions imposed on other taxpayers. When \nCongress added IRC § 32(k), it was unprecedented in the tax system.207 Other civil penalties in the \nInternal Revenue Code that derive from taxpayer misstatement are generally computed in proportion to \nthe underpaid tax attributable to the misconduct.208 In contrast, the ban applies to the entirety of the \ncredit and prevents an individual in future years from receiving many thousands of dollars in credits that \nhe or she would otherwise be entitled to receive. \n202\tAs described in the National Taxpayer Advocate 2018 Annual Report to Congress, in the improper payments context, \n“Treasury and IRS acknowledge a central cause of EITC improper payments is the complexity of the rules and the errors.” \nNational Taxpayer Advocate 2018 Annual Report to Congress 91, 97 (Most Serious Problem: Improper Earned Income \nTax Credit Payments: Measures the IRS Takes to Reduce Improper Earned Income Tax Credit Payments Are Not Sufficiently \nProactive and May Unnecessarily Burden Taxpayers). \n203\tEven the U.S. Tax Court grapples with this dilemma. In almost all of the cases where the IRS proposed the ban, the Court \ndid not impose the ban, attributing the incorrect claims on the return to the preparer.\n204\tNational Taxpayer Advocate 2013 Annual Report to Congress 106 (Most Serious Problem: Earned Income Tax Credit: The IRS \nInappropriately Bans Many Taxpayers from Claiming EITC).\n205\tAn unbanned married taxpayer cannot file a return with a filing status of married filing separately and claim the EITC. \nIRC § 32(d) (requiring married individuals to file a joint return to be eligible to claim the EITC).\n206\tSee 7 C.F.R. § 273.11(c)(1)(i).\n207\t Effective for tax years beginning after December 31, 2015, the IRS has the authority to impose the ban for the Child Tax \nCredit and the American Opportunity Tax Credit. See IRC §§ 24(g) & 25A(b)(4)(A). The principles discussed in this section \nwith regard to the administration of the EITC ban apply equally to the imposition under those refundable credits.\n208\tIRC § 6662(a), (b)(1).\n",
"48\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nEarned Income Tax Credit — Ensure Low Income Taxpayers Have Comparable Due Process Protections\nRECOMMENDATIONS\nRecommendation 3.3: Develop a Structure for Ban Determination That Protects \nTaxpayer Rights\nWhile it may be appropriate to impose the ban in the right circumstance, the decision to impose it must \nbe done within a framework respecting due process protections and proposed in a manner that is both \nconsistent with the administration of a public benefits program and sensitive to the population whom \nthe EITC is designed to benefit.\nThe IRS should develop a ban examination process independent from the audit process modelled on \nIntentional Program Violation (IPV) processes in other means-tested programs, like SNAP. Under the \nSNAP program,209 the IPV determination is separate from the benefits determination process, and the \ndetermination is made following a hearing in which the SNAP recipient is given clear opportunity to \nparticipate. The penalties for the program violations are successive in nature, where each subsequent \nviolation allows for a longer period of disqualification from the program. \nIn addition, the penalties for EITC program violations should be proportional to only the taxpayer \nsubject to the ban. For example, where a taxpayer subject to the ban subsequently files jointly with a \ntaxpayer on whom the IRS has not asserted the ban, the IRS could “carve out” that portion of the credit \nproportionally linked to the banned taxpayer’s income.\nA revised ban process should be designed in consultation with TAS, which the National Taxpayer \nAdvocate would assess in his or her annual report to Congress, including a review of due process \nprotections and the accuracy of bans. \nRecommendation 3.4: Clarify and Improve Court Review of Ban Determinations\nBecause the Tax Court is a court of limited jurisdiction, commentators have questioned whether and \nwhen the Tax Court can decide whether the IRS appropriately imposed the ban.210 In at least one bench \nopinion, the Tax Court has also expressed concern about its jurisdiction.211 To address that uncertainty \nCongress should provide an explicit grant of jurisdiction for Tax Court review of an IRC § 32(k) ban \ndetermination, either in a standalone proceeding (especially if there is a defined ban examination process \nas we recommend above) or as part of deficiency proceedings. In addition, as TAS has previously \nrecommended, in asserting a ban the IRS should have the burden to prove that the imposition of the \nban is appropriate.212 As with the administrative recommendations above, a clear path to court review is \nconsistent with those found in other benefits’ programs such as SNAP and is an essential way to ensure \nthat a person is afforded due process protections.\n209\t7 C.F.R. § 273.16.\n210\t William Schmidt, Tax Court Jurisdiction and the EITC Ban, Procedurally Taxing (Sept. 7, 2018), https://procedurallytaxing.com/\ntax-court-jurisdiction-and-the-eitc-ban/. \n211\tBallard v. Comm’r, No. 3843-15S (T.C. Feb. 12, 2016) (questioning jurisdiction to consider the ban given its effect on future \nyears), https://www.ustaxcourt.gov/InternetOrders/DocumentViewer.aspx?IndexSearchableOrdersID=191190. \n212\tNational Taxpayer Advocate 2013 Annual Report to Congress 311 (Legislative Recommendation: Allocate to the IRS the \nBurden of Proving it Properly Imposed the Two-Year Ban on Claiming the Earned Income Tax Credit).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n49\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nAPPENDIX 1:\t EITC Databook \nFIGURE A.1, EITC Parameters by Marital Status and Number of Qualifying Children for Tax Year 2018\nNumber of Qualifying Children\n0\n1\n2\n3 or more\nUnmarried Tax Filers (single and head of household filers)\nCredit rate\n7.65%\n34%\n40%\n45%\nEarned income amount\n$6,780 \n$10,180 \n$14,290 \n$14,290 \nMaximum credit amount\n$519 \n$3,461 \n$5,716 \n$6,431 \nPhase-out amount threshold\n$8,490 \n$18,660 \n$18,660 \n$18,660 \nPhase-out rate\n7.65%\n15.98%\n21.06%\n21.06%\nIncome where credit = 0 \n$15,270 \n$40,320 \n$45,802 \n$49,194 \nMarried Tax Filers (married filing jointly)\nCredit rate\n7.65%\n34%\n40%\n45%\nEarned income amount\n$6,780 \n$10,180 \n$14,290 \n$14,290 \nMaximum credit amount\n$519 \n$3,461 \n$5,716 \n$6,431 \nPhase-out amount threshold\n$14,170 \n$24,350 \n$24,350 \n$24,350 \nPhase-out rate\n7.65%\n15.98%\n21.06%\n21.06%\nIncome where credit = 0 \n$20,950 \n$46,010 \n$51,492 \n$54,884 \nSource: IRS Revenue Procedure 2018-18 and Internal Revenue Code (IRC) Section 32.\n",
"50\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.2, EITC Claims: Number of Returns, Amount Claimed, Average Credit TY 1996 \n– \nTY 2017\nTax Year\nCount of Returns Where EITC Claimed \n(millions) \nTotal EITC Claimed (billions) \nAverage EITC \n1996\n 19.4 \n 28.3 \n $1,461 \n1997\n 19.8 \n 30.1 \n $1,516 \n1998\n 19.4 \n 30.8 \n $1,588 \n1999\n 18.3 \n 30.0 \n $1,640 \n2000\n 19.2 \n 31.8 \n $1,657 \n2001\n 19.7 \n 33.2 \n $1,691 \n2002\n 21.6 \n 37.8 \n $1,750 \n2003\n 22.1 \n 39.2 \n $1,770 \n2004\n 22.4 \n 40.8 \n $1,817 \n2005\n 22.8 \n 42.8 \n $1,875 \n2006\n 23.2 \n 44.8 \n $1,932 \n2007\n 24.4 \n 48.3 \n $1,983 \n2008\n 24.9 \n 50.9 \n $2,045 \n2009\n 27.3 \n 59.8 \n $2,193 \n2010\n 27.5 \n 60.5 \n $2,203 \n2011\n 27.9 \n 62.8 \n $2,253 \n2012\n 27.8 \n 64.3 \n $2,312 \n2013\n 28.4 \n 67.2 \n $2,365 \n2014\n 28.2 \n 67.6 \n $2,402 \n2015\n 27.9 \n 67.9 \n $2,436 \n2016\n 27.2 \n 66.0 \n $2,428 \n2017\n 26.2 \n 64.5 \n $2,457 \nSource: IRS, Compliance Data Warehouse (CDW), Individual Returns Transaction File (IRTF) of Cycle 201913 (May 2019). EITC after math error \nprocessing.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n51\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.3, EITC Filings for Tax Year 2017 by Congressional District\nSource: IRS, CDW, IRTF as of Cycle 201913 (May 2019). EITC after math error processing.\nFIGURE A.4, Percent of EITC Filings Under the Federal Poverty Threshold for Tax Year 2017 by \nCongressional District\nSource: IRS, CDW, IRTF as of Cycle 201913 (May 2019). EITC after math error processing.\n",
"52\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.5, EITC Returns by Marital Status and Number of Children, Tax Year 2017\n# of \nChildren\nMarital Status\nNumber of EITC Returns \n(millions)\nEITC Amount \n(billions)\nAvg. EITC Amount\n0\nMarried\n0.9\n0.3\n$332 \n0\nSingle\n5.7\n1.7\n$293 \n1\nMarried\n1.7\n3.8\n$2,262 \n1\nSingle\n7.8\n18.9\n$2,411 \n2\nMarried\n1.8\n6.3\n$3,450 \n2\nSingle\n4.8\n19.1\n$3,953 \n3\nMarried\n1.4\n5.6\n$3,840 \n3\nSingle\n2.0\n8.9\n$4,504 \nSource: IRS, CDW, IRTF as of Cycle 201913 (May, 2019). \nEITC after math error processing. \nMarried = married filing joint. \nSingle = single, head of household, or qualifying widow(er) filing statuses. \nDue to rounding issues, the totals are slightly different from prior tables as a result of differing categories.\nFIGURE A.6, EITC Returns by Number of Duplicative EITC Qualifying Children, TY 2017\nNumber of Times Qualifying Children Claimed\nCount\n1\n 32,758,373 \n2\n 152,568 \n3\n 305 \n4\n 13 \n5\n 2 \n6\n 3 \n8\n 1 \n9\n 1 \nSource: IRS, CDW, IRTF as of Cycle 201913 (May, 2019). EITC after math error processing.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n53\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.7, EITC Participation Rates by Number of Qualifying Children, TY 2016\nQualifying Children\nEligibles\nParticpation Rate Estimate\nMargin of Error\n0\n 7,347,000 \n65%\n2%\n1\n 7,204,000 \n86%\n1%\n2\n 5,219,000 \n85%\n2%\n3\n 3,098,000 \n82%\n2%\nTotal\n 22,868,000 \n78%\n1%\nSource: TY 2016 EITC Participation-Census Report \nFIGURE A.8, EITC Returns by Type of Earned Income and Number of Forms W-2 Jobs, Tax Year 2017\t\nNumber of Returns \n (millions)\nNumber of Individuals \n (millions)\nEITC Dollars \n (billions)\nW-2 Income Only\n19.0\n22.6\n $44.1 \nOne W-2 Job\n10.7\n12.9\n $24.0 \n>1 W-2 Job\n8.2\n9.7\n $20.1 \nW-2 and Self Employment (SE) Income\n4.0\n5.4\n $11.7 \nOne W-2 Job + SE Income\n2.4\n3.3\n $6.8 \n>1 W-2 Job + SE Income\n1.6\n2.3\n $4.9 \nSelf Employment Income Only\n3.0\n3.8\n $7.9 \nOther earned Income Besides Sch. C or Sch. F.\n0.3\n0.4\n $0.8 \nTotal\n26.2\n32.4\n $64.5 \nSource: IRS, CDW, IRTF and Information Returns Master File for Tax Year 2017 as of cycle 201913 (June 2019). EITC after math error processing.\n",
"54\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.9, EITC Participation and Program Costs Compared to Other Means-Tested Programs\nProgram\nSNAP\nWIC\nSSI\nTANF\nHUD\nCHIP\nMedicaid\nSchool \nLunch\nEITC\nYear\nFY 2018\nFY 2018\nFY 2017\nFY 2015\nFY 2016\nFY 2017\nFY 2017\nFY 2017\nFY 2018\nNumber of Recipients\n40.3 M\n6.9 M\n9.1 M\n4.2 M\n5.1 M\n6.9 M\n72.4 M\n22.1 M\n26.3 M\nNumber of Eligible \nPersons\n47.4 M\n12.6 M\n15.7 M\n14.9 M\n15.9 M\n7.4 M\n106.5 M\n25.9 M\n33.7 M\nParticipation Rate \n(# of Recipients/ \n # of Eligible Persons)\n85%\n55%\n58%\n28%\n32%\n93%\n68%\n85%\n78%\nYear Participation Rate \nMeasured\n2016\n2016\n1998\n2014\n2016\n2015 \n2009 \n2006\n2016\nTotal Benefits Paid Out\n$60.6 B\n$5.4 B\n$54.5 B\n$14.0 B\n$41.0 B\n$ 16.3 B\n$357.6 B\n$12.3 B\n$65.3 B\nAverage Annual Benefit \nper Recipient\n$1,503 \n$491 \n$5,974 \n$3,357 \n$8,039 \n$2,362 \n$4,939 \n$557 \n$2,435 \nOverhead Costs\n$4.4 B\n$2.0 B\n$4.1 B\n$1.4 B\n $3.0 B \n$2.9 B\n$60.3 B\n$1.2 B\n$653 M\nOverhead Costs as % of \nTotal Benefits Paid Out\n7%\n37%\n8%\n10%\n7%\n18%\n13%\n10%\n1%\nImproper Payments\n$4.0 B\n$194 M\n$4.8 B\n$1.3 B\n$1.7 B\n$1.2 B\n$36.2 B\n$1.9 B\n$16.3 B\nImproper Payments as a \n% of Total Benefits Paid\n7%\n4%\n9%\n9%\n4%\n7%\n10%\n10%\n25%\nOverhead Costs + \nImproper Payments\n$8.4 B\n 2.2 B \n$8.9 B\n$2.7 B\n$4.7 B\n4.1B\n96.5 B\n$3.1 B\n$17.0 B\nOverhead Costs + \nimproper Payments as a \n% of Total\n14%\n40%\n16%\n19%\n11%\n25%\n22%\n25%\n26%\nSources: \nSNAP: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); Supplemental Nutrition Assistance Program Participation \nand Costs (March, 2019) USDA; USDA Reaching Those in Need: Estimates of State Supplemental Nutrition Assistance Program Participation \nRates in 2016 – Summary (Mar. 2019).\nWIC: Payment Accuracy.gov, https://paymentaccuracy.gov/, (last visited June 26, 2019); Program and Participation Costs (March 2019); USDA \nNational and State-Level Estimates of Special Supplemental Nutritional Program for Women, Infants, and Children (WIC) eligible and Program \nReach in 2016 (Summary) (Feb. 2019). \nSSI: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); Social Security Administration 2018 SSI report; \nUnderstanding Participation in SSI Kathleen McGarry University of California, Los Angeles and NBER and Robert F. Schoeni University of Michigan \nPrepared for the 16th Annual Joint Meeting of the Retirement Research Consortium August 7-8, 2014; Social Security SSI Report 2018 Table \nIV.E1.—Selected SSI Costs Fiscal Years 1978-2018; SSI Annual Statistical Report, 2017 Federal Benefit Rates, Total Annual Payments, and Total \nRecipients.\nTANF: Federal Safety Net http://federalsafetynet.com/welfare-fraud.html (last visited June 26, 2019); Temporary Assistance for Needy Families \n12th Report to Congress \nHUD: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); Center on Budget and Policy Priorities United States Fact \nSheet: Federal Rental Assistance; Public and Indian Housing Tenant Based Rental Assistance; Congressional Research Services Congressional \nResearch Service Department of Housing and Urban Development (HUD) FY 2017 Appropriations (June 2017). HUD overhead costs include \nCHIP: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); Medicaid and CHIP Payment and Access Commission \nMedicaid and CHIP Data Book (December, 2018); Kaiser Family Foundation FY 2017 Total CHIP Spending, https://www.kff.org/medicaid/state-\nindicator/total-chip-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D (last visited \nJuly 1, 2019; Medicaid/CHIP Participation Rates Rose among Children and Parents in 2015, last viewed at http://www.urban.org/sites/default/\nfiles/publication/90346/2001264-medicaid-chip-pariticipation-rates-rose-among-children-and-parents-in-2015_1.pdf.\nMedicaid: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); Medicaid Budget in Brief FY 2018; Medicaid and \nCHIP Payment and Access Commission Medicaid and CHIP Data Book (Dec. 2018); Understanding Participation Rates in Medicaid Implications for \nthe Affordable Care act (Mar. 2012) at https://aspe.hhs.gov/basic-report/understanding-participation-rates-medicaid-implications-affordable-care-\nact (last visited June 26, 2019).\nSchool Lunch: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); National School lunch Program Participation and \nLunches Served (Apr. 2019); Number and percentage of public school students eligible for free or reduced-price lunch, by state: Selected years, \n2000-01 through 2015-16 (Digest 2017: table 204.10); Federal Cost of School Food Programs (April, 2019); Nutrition Assistance Program Report \nSeries The Office of Research, Nutrition and Analysis Special Nutrition Programs School Lunch and Breakfast Cost Study – II Final Report (Report \nNo. CN-08-MCII) Apr. 2008).\nEITC: Payment Accuracy.gov, https://paymentaccuracy.gov/ (last visited June 26, 2019); last viewed June 26, 2019; IRS CDW IRTF FY 2018 \n(June 2018); GAO testimony on Tax Administration Earned Income Noncompliance (GAO/T-GGD-97-105 May 8, 1997); TY 2016 EITC Participation-\nCensus Report. We computed EITC improper payments by multiplying the EITC improper payment rate (25 percent) by the amount of EITC claimed \nafter math error processing.\nTotals may not add due to rounding.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n55\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.10, EITC TY 2017 Returns Filed by Week in 2018\n2018 Filing Season\n2017 Tax Year EITC Returns (thousands)\nWeek Ending \nNumber\nCumulative total\n% of Total Returns as of \n12/27/18 \nJanuary 25, 2018\n1,149\n1,149\n4%\nFebruary 1, 2018\n2,904\n4,053\n16%\nFebruary 8, 2018\n3,859\n7,912\n30%\nFebruary 15, 2018\n3,095\n11,007\n42%\nFebruary 22, 2018\n2,225\n13,232\n51%\nMarch 1, 2018\n1,824\n15,056\n58%\nMarch 8, 2018\n1,455\n16,511\n63%\nMarch 15, 2018\n1,218\n17,729\n68%\nMarch 22, 2018\n1,047\n18,776\n72%\nMarch 29, 2018\n933\n19,709\n76%\nApril 5, 2018\n855\n20,564\n79%\nApril 12, 2018\n996\n21,559\n83%\nApril 19, 2018\n1,420\n22,979\n88%\nApril 26, 2018\n882\n23,861\n91%\nMay 3, 2018\n360\n24,221\n93%\nMay 10, 2018\n195\n24,417\n94%\nMay 17, 2018\n169\n24,586\n94%\nMay 24, 2018\n148\n24,734\n95%\nMay 31, 2018\n114\n24,848\n95%\nJune 7, 2018\n103\n24,951\n96%\nJune 14, 2018\n102\n25,054\n96%\nJune 21, 2018\n90\n25,144\n96%\nJune 28, 2018\n89\n25,232\n97%\nJuly 5, 2018\n55\n25,288\n97%\nJuly 12, 2018\n45\n25,332\n97%\nJuly 19, 2018\n42\n25,374\n97%\nJuly 26, 2018\n37\n25,411\n97%\nAugust 2, 2018\n37\n25,448\n98%\nAugust 9, 2018\n32\n25,480\n98%\nAugust 16, 2018\n34\n25,514\n98%\nAugust 23, 2018\n31\n25,545\n98%\nAugust 30, 2018\n29\n25,574\n98%\nSeptember 6, 2018\n24\n25,598\n98%\nSeptember 13, 2018\n26\n25,624\n98%\nSeptember 20, 2018\n30\n25,654\n98%\nSeptember 27, 2018\n29\n25,683\n98%\nOctober 4, 2018\n32\n25,715\n99%\nOctober 11, 2018\n45\n25,760\n99%\nOctober 18, 2018\n152\n25,912\n99%\ncontinued\n",
"56\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n2018 Filing Season\n2017 Tax Year EITC Returns (thousands)\nWeek Ending \nNumber\nCumulative total\n% of Total Returns as of \n12/27/18 \nOctober 25, 2018\n63\n25,975\n100%\nNovember 1, 2018\n25\n26,000\n100%\nNovember 8, 2018\n20\n26,020\n100%\nNovember 15, 2018\n18\n26,038\n100%\nNovember 22, 2018\n13\n26,051\n100%\nNovember 29, 2018\n13\n26,064\n100%\nDecember 6, 2018\n9\n26,073\n100%\nDecember 13, 2018\n9\n26,082\n100%\nDecember 20, 2018\n10\n26,092\n100%\nDecember 27, 2018\n7\n26,099\n100%\nSource: IRS, CDW, IRTF as of Cycle 201913 (May, 2019). Numbers may differ slightly from the IRS Filing Season Reports. \nEITC after math error processing. \nDue to rounding issues, the cumulative totals may vary from the sum of the weekly returns filed.\n\t\n\t\n\t\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n57\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.11, Total and Non-EITC Tax Year 2017 Returns by Week Filed in 2018\t\n2017 Tax Year Returns\n2017 Tax Year Returns w/o EITC\n2018 Filing Season \nWeek Ending \nNumber of \nTax Year 2017 \nReturns (Overall) \n(millions) \n Cumulative \nTotal (millions) \n Percent \nof Total \nReturns as of \n12/27/18 \nNumber of \nTax Year 2017 \nReturns Without \nEITC (millions) \n Cumulative \nTotal (millions) \n Percent of \nNon-EITC \nReturns as of \n12/27/18 \nJanuary 25, 2018\n2.6\n2.6\n2%\n 1.4 \n 1.4 \n1%\nFebruary 1, 2018\n7.7\n10.2\n7%\n 4.7 \n 6.1 \n5%\nFebruary 8, 2018\n12.0\n22.2\n15%\n 8.1 \n 14.3 \n12%\nFebruary 15, 2018\n11.2\n33.4\n22%\n 8.1 \n 22.4 \n18%\nFebruary 22, 2018\n9.7\n43.1\n29%\n 7.5 \n 29.9 \n24%\nMarch 1, 2018\n9.3\n52.4\n35%\n 7.4 \n 37.3 \n30%\nMarch 8, 2018\n8.4\n60.8\n41%\n 7.0 \n 44.3 \n36%\nMarch 15, 2018\n8.0\n68.8\n46%\n 6.8 \n 51.1 \n42%\nMarch 22, 2018\n7.8\n76.7\n52%\n 6.8 \n 57.9 \n47%\nMarch 29, 2018\n8.0\n84.7\n57%\n 7.1 \n 65.0 \n53%\nApril 5, 2018\n8.4\n93.1\n63%\n 7.5 \n 72.6 \n59%\nApril 12, 2018\n11.0\n104.1\n70%\n 10.0 \n 82.5 \n67%\nApril 19, 2018\n16.3\n120.4\n81%\n 14.9 \n 97.4 \n79%\nApril 26, 2018\n7.3\n127.7\n86%\n 6.4 \n 103.8 \n85%\nMay 3, 2018\n2.4\n130.1\n87%\n 2.1 \n 105.9 \n86%\nMay 10, 2018\n1.5\n131.6\n89%\n 1.3 \n 107.2 \n87%\nMay 17, 2018\n1.3\n132.9\n89%\n 1.2 \n 108.4 \n88%\nMay 24, 2018\n1.2\n134.1\n90%\n 1.0 \n 109.4 \n89%\nMay 31, 2018\n0.9\n135.0\n91%\n 0.8 \n 110.2 \n90%\nJune 7, 2018\n1.0\n136.0\n91%\n 0.9 \n 111.1 \n91%\nJune 14, 2018\n1.1\n137.1\n92%\n 1.0 \n 112.1 \n91%\nJune 21, 2018\n1.0\n138.1\n93%\n 0.9 \n 113.0 \n92%\nJune 28, 2018\n0.8\n138.9\n93%\n 0.7 \n 113.7 \n93%\nJuly 5, 2018\n0.5\n139.4\n94%\n 0.4 \n 114.1 \n93%\nJuly 12, 2018\n0.4\n139.8\n94%\n 0.3 \n 114.4 \n93%\nJuly 19, 2018\n0.4\n140.1\n94%\n 0.3 \n 114.8 \n94%\nJuly 26, 2018\n0.3\n140.5\n94%\n 0.3 \n 115.0 \n94%\nAugust 2, 2018\n0.3\n140.8\n95%\n 0.3 \n 115.3 \n94%\nAugust 9, 2018\n0.3\n141.1\n95%\n 0.3 \n 115.6 \n94%\nAugust 16, 2018\n0.3\n141.4\n95%\n 0.3 \n 115.9 \n95%\nAugust 23, 2018\n0.3\n141.7\n95%\n 0.3 \n 116.1 \n95%\nAugust 30, 2018\n0.3\n141.9\n95%\n 0.2 \n 116.4 \n95%\nSeptember 6, 2018\n0.2\n142.2\n96%\n 0.2 \n 116.6 \n95%\nSeptember 13, 2018\n0.3\n142.5\n96%\n 0.3 \n 116.8 \n95%\nSeptember 20, 2018\n0.4\n142.8\n96%\n 0.3 \n 117.2 \n96%\nSeptember 27, 2018\n0.3\n143.1\n96%\n 0.3 \n 117.5 \n96%\nOctober 4, 2018\n0.4\n143.6\n97%\n 0.4 \n 117.8 \n96%\nOctober 11, 2018\n0.7\n144.2\n97%\n 0.6 \n 118.5 \n97%\ncontinued\n",
"58\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n2017 Tax Year Returns\n2017 Tax Year Returns w/o EITC\n2018 Filing Season \nWeek Ending \nNumber of \nTax Year 2017 \nReturns (Overall) \n(millions) \n Cumulative \nTotal (millions) \n Percent \nof Total \nReturns as of \n12/27/18 \nNumber of \nTax Year 2017 \nReturns Without \nEITC (millions) \n Cumulative \nTotal (millions) \n Percent of \nNon-EITC \nReturns as of \n12/27/18 \nOctober 18, 2018\n2.6\n146.8\n99%\n 2.4 \n 120.9 \n99%\nOctober 25, 2018\n0.7\n147.5\n99%\n 0.6 \n 121.5 \n99%\nNovember 1, 2018\n0.3\n147.8\n99%\n 0.2 \n 121.8 \n99%\nNovember 8, 2018\n0.2\n148.0\n100%\n 0.2 \n 122.0 \n100%\nNovember 15, 2018\n0.2\n148.2\n100%\n 0.2 \n 122.2 \n100%\nNovember 22, 2018\n0.1\n148.3\n100%\n 0.1 \n 122.3 \n100%\nNovember 29, 2018\n0.1\n148.4\n100%\n 0.1 \n 122.4 \n100%\nDecember 6, 2018\n0.1\n148.5\n100%\n 0.1 \n 122.4 \n100%\nDecember 13, 2018\n0.1\n148.6\n100%\n 0.1 \n 122.5 \n100%\nDecember 20, 2018\n0.1\n148.7\n100%\n 0.1 \n 122.6 \n100%\nDecember 27, 2018\n0.0\n148.7\n100%\n 0.0 \n 122.6 \n100%\nSource: IRS, CDW, IRTF as of Cycle 201913 (May, 2019). \nEITC after math error processing. \nNumbers may differ slightly from the IRS Filing Season Reports. \nDue to rounding issues, the cumulative totals may vary from the sum of the weekly returns filed.\nFIGURE A.12\t\nEstimated EITC Improper Payment Rates, 2010-2018\n2010\nbased on \naudits of \n2006 \nreturns\n2012\nbased on \naudits of \n2008 \nreturns\n2018\nbased on \naudits of \n2014 \nreturns\n2014\nbased on \naudits of \n2010 \nreturns\n2016\nbased on \naudits of \n2012 \nreturns\n2011\nbased on \naudits of \n2007 \nreturns\n2013\nbased on \naudits of \n2009\nreturns\n2015\nbased on \naudits of \n2011\nreturns\n2017\nbased on \naudits of \n2013\nreturns\n26.30\n22.80\n27.15\n24.05\n23.41\n23.85\n23.75\n24.00\n23.50\nSource: See U.S. Dept. of the Treas., AFRs, FYs 2010-2018, https://home.treasury.gov/about/budget-financial-reporting-\nplanningand-performance/agency-financial-report. Until FY 2010, the improper payment rate was expressed as a midpoint \nbetween upper and lower bounds. The upper and lower bounds reflected assumptions about whether taxpayers who did not \nparticipate in the NRP audits were actually entitled to EITC. Beginning with FY 2010, the rate was expressed as a single \nrate with confidence intervals, with nonparticipating taxpayers treated as being entitled to EITC at the same rate as those \nwho participated in the NRP audit. However, the AFR continued to report upper and lower bounds through 2014. Unlike prior \nimproper payment rate estimates, the Treasury FY 2018 estimated improper payment estimate does not subtract projected \nrecovered improper payments prior to calculating the rate. Figure A.12 depicts the midpoint value for the 2010-2014 and \nthe single point estimate thereafter. For purposes of consistency the FY 2018 value, 23.41 percent, is the one that takes \ninto account recovered amounts.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n59\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.13, EITC Returns and Total EITC Amount by Paid Preparer Type, TY 2017\nFilers (millions)\nEITC Computed (billions)\nAvg. DDB Score\nPrepared Type Unknown\n10.2\n$28.4 \n10.36\nPrepared Attorney\n0.1\n$0.1 \n5.52\nPrepared CPA\n1.3\n$2.5 \n4.15\nPrepared Enrolled Agent\n1.2\n$2.7 \n6.05\nPrepared State Regulated\n0.8\n$2.0 \n7.7\nPrepared Enrolled Retirement Planner\n0.0\n$0.0 \n17.27\nVolunteer Income Tax Assistance (VITA)\n0.6\n$1.0 \n4.41\nPrepared Enrolled Actuary\n0.0\n$0.0 \n10.74\nPrepared Certified Acceptance Agent\n0.1\n$0.3 \n8.43\nSelf\n11.9\n$27.5 \n8.89\nTotal\n26.2\n$64.5 \nSource: IRS, CDW, IRTF as of Cycle 201913, Return Preparers and Providers Database and Dependent Database (DDb) (May 2019). \nEITC after math error processing.\nFIGURE A.14, Percent of EITC Filings With a Paid Preparer for Tax Year 2017 by Congressional District\nSource: IRS, CDW, IRTF as of Cycle 201913 (May 2019). EITC after math error processing.\n",
"60\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.15, Math Errors by Paid Preparer Type, Tax Year 2017\nReturns with EITC Math \nError\nTotal Returns by Preparer \nType (millions)\nPercent\nPrepared Type Unknown\n41,493\n10.2\n0.41%\nPrepared Attorney\n503\n0.1\n0.90%\nPrepared CPA\n8,053\n1.3\n0.62%\nPrepared Enrolled Agent\n4,229\n1.2\n0.36%\nPrepared State Regulated\n3,944\n0.8\n0.50%\nPrepared Enrolled Retirement Planner\n*\n*\n*\nVITA \n1,887\n0.6\n0.30%\nPrepared Enrolled Actuary\n27\n0.0\n0.63%\nPrepared Certified Acceptance Agent\n793\n0.1\n0.64%\nSource: IRS, CDW, IRTF as of Cycle 201913 and Return Preparers and Providers Database (May 2019).\n* Sanitized to prevent inadvertant disclosure.\nFIGURE A.16, EITC Returns Subject to Audit by Audit Type in FY 2018\nType of Audit\nCount\nPercent\nAverage Cycle Days\nCorrespondence Audit\n327,791\n99.88%\n241\nField Audit\n94\n0.03%\n585\nOffice Audit\n297\n0.09%\n485\nTotal\n328,182\n100.00%\nSource: IRS, CDW, Audit Information Management System Closed Case Database for FY 2018 (May 2019).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n61\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.17, EITC Audits by Percentage of EITC Returns Filed and Congressional District\nSource: IRS, CDW, IRTF for returns filed in calendar year 2017 and Automated Information Management System (AIMS) for EITC audits closed in \nFY 2018 (June 2019). EITC after math error processing.\nFIGURE A.18, Dispositions for EITC Audit Closure, FY 2018\nAudit Closure\nCount\nPercent\nAverage Cycle Days\nNo Change\n 42,622 \n13%\n189\nAgreed\n 54,121 \n16%\n194\nDefault\n 85,264 \n26%\n320\nNon-response\n 141,790 \n43%\n228\nAppealed \n 22 \n0%\n283\nPetitioned\n 1,788 \n1%\n314\nOther\n 2,575 \n1%\n218\nTotal\n328,182\n100%\n \nSource: IRS, CDW, Audit Information Management System Closed Case Database for FY 2018 (May 2019).\n",
"62\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.19, EITC Summary Assessment Procedures Tax Year 2017\t\nSummary Assessment Procedure\nCount (TY 2017)\n1. Number of Notices\n197,154\na. \u0007\nEIC math error Issued (not including Taxpayer Notice Code 284 (IRS figured the EITC amount), \nbut no change from claimed to IRS computed EIC amt.\n16,391\nb. \u0007\nOnly Taxpayer Notice Code 284 issued (because IRS figured EITC amount)\n5,545\nc. \u0007\nEIC math error notice issued (Not including Taxpayer Notice 284),and IRS computed amt. of EITC \ndiffers from taxpayer amt.\n175,175\nd. Had both Taxpayer Notice Code 284 and another EITC math error\n43\n2. Number of Reversed Math Errored Tax Returns\n36,324\n3. Number of Returns Adjusted Subsequent to the 60 Day Abatement Period\n17,921\n4. Number of SNODs Issued*\n242\n5. Number of Petitions to Tax Court\n3\nSource: IRS, CDW, IRTF and Individual Master File (IMF) as of cycle 201913 (June 2019).\n* \u0007\nAn additional 124 taxpayers agreed to the audit results prior to the issuance of a SNOD and 27 agreed to the adjustment after the SNOD was \nissued.\n\t\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n63\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nFIGURE A.20, \u0007\nTypes of Notices Issued to EITC taxpayers Under Summary Assesment Authority, Tax Year 2017\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nA\nAn error in \naddition, \nsubtraction, \nmultiplication, or \ndivision shown on \nany return,\n284\nWe computed your Earned Income Credit for you.\nN (lack of \nspecificity)\n 5,588 \n 144 \n $235,854 \nA\n285\nWe changed the amount claimed as Earned Income \nCredit (EIC) on your tax return. The amount claimed as \nEIC was figured or entered incorrectly on your tax return.\nN (lack of \nspecificity)\n 60,573 \n 5,030 \n $5,939,267 \nA\n292\nWe computed your Earned Income Credit for you on your \ntax return. The child or children listed on your tax return \nmay qualify you for a larger credit. If they qualify, you \nmay complete a Schedule EIC, Earned Income Credit, \nand file it with a Form 1040X, Amended U.S. Individual \nIncome Tax Return.\nN (lack of \nspecificity)\n 96 \n 7 \n $22,734 \nB\nAn incorrect use of \nany table provided \nby the Internal \nRevenue Service \nwith respect to \nany return if such \nincorrect use is \napparent from the \nexistence of other \ninformation on the \nreturn,\n286\nWe didn’t allow the amount claimed as Earned Income \nCredit (EIC) on your tax return. You’re not eligible to \nclaim EIC because your filing status is Married Filing \nSeparately.\nN (should be Exam \nissue to provide \nthe taxpayer with \nopportunity to \nprove filing status)\n 500 \n 42 \n $130,151 \nB\n540\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return. Information on your tax return \nindicates that you don’t qualify for this credit.\nN (notice should \nexplain which \ninformation is \nmissing)\n 604 \n 50 \n $133,599 \nB\n751\nWe didn’t allow part or all the amount claimed \nas Earned Income Credit on your tax return. The \ninformation you provided on Schedule EIC, Earned \nIncome Credit, shows one or more of the qualifying \nchildren didn’t meet the relationship requirement for the \ncredit.\nN (should be \nan Exam issue \nto provide the \ntaxpayer with the \nopportunity to \nprove eligibility)\n 203 \n 38 \n $72,441 \nB\n291\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return because your investment \nincome was more than the amount allowed for this \ncredit.\nN (as reported on x \nline on the return)\n 2,979 \n 523 \n $1,367,490 \nC\nAn entry on a \nreturn of an \nitem which is \ninconsistent with \nanother entry \nof the same or \nanother item on \nsuch return,\n287\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return. Your earned income or \nadjusted gross income is more than the amount allowed \nto qualify for the credit. \nN (don’t know if \nconsequence of \nadjustment in \nincome)\n 4,995 \n 462 \n $776,045 \ncontinued\n",
"64\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nC\n(continued)\nAn entry on a \nreturn of an \nitem which is \ninconsistent with \nanother entry \nof the same or \nanother item on \nsuch return,\n290\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return because you indicated you \nwere claimed as a dependent on another person’s tax \nreturn.\nY\n 4,018 \n 161 \n $64,039 \nC\n539\nWe changed the amount claimed as Prior Year Earned \nIncome or Additional Child Tax Credit Prior Year Income \non your return. When you elect to use Prior Year Earned \nIncome to compute Earned Income Credit and Additional \nChild Tax Credit you must use that same amount for \nboth credits.\nN (need more \nexplanation as to \nwhat this means)\n 6 \n 1 \n $2,123 \nC\n586\nWe didn’t allow part or all the amount claimed as \nearned income credit on page 2 of your tax return \nbecause your Form(s) W-2 didn’t match the entry for \nwages.\nY\n 1,604 \n 195 \n $551,772 \nC\n750\nWe didn’t allow part or all the amount claimed \nfor Earned Income Credit on your tax return. The \ninformation you provided on Schedule EIC, Earned \nIncome Credit, shows one or more of the qualifying \nchildren didn’t meet the age requirement for the credit.\nN (lack of \nspecificity)\n 1,960 \n 423 \n $923,660 \ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n65\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nD\nAn omission \nof information \nwhich is required \nto be supplied \non the return to \nsubstantiate an \nentry on the return\n288\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return. You must report earned \nincome on your tax return to qualify for the credit.\nN\n 3,493 \n 478 \n $803,310 \nD\n585\nWe didn’t allow the amount claimed as earned income \ncredit on your tax return because Schedule EIC, Earned \nIncome Credit, was incomplete or not attached to your \ntax return.\nN (was it \nincomplete? How \nwas it incomplete? \nShould issue a \nseparate notice if \nnot attached)\n 10,795 \n 3,275 \n $10,379,362 \nD\n653\nWe didn’t allow the amount claimed as Earned \nIncome Credit, Child Tax Credit, Additional Child Tax \nCredit, Credit for Other Dependents, and/or American \nOpportunity Tax Credit on your tax return. We have no \nrecord of receiving Form 8862, Information to Claim \nCertain Credits After Disallowance. You must submit a \ncompleted Form 8862 to recertify your eligibility for any \nof the credits claimed.\nN \n 20,132 \n 5,330 \n $18,402,698 \nD\n760\nWe did not allow part or all the amount you claimed for \nthe Earned Income Credit. You didn’t provide support for \nthe statutory wages you reported and we didn’t consider \nthose wages in figuring the credit.\nY\n 203 \n 58 \n $213,555 \ncontinued\n",
"66\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nD, F\nSee above for (D) \nand below for (F)\n610\nWe didn’t allow the exemption for one or more of the \ndependents who have a missing Social Security Number \nthat are identified on your return as being born and died \nduring the tax period of the return. In order to claim a \ndependent as an exemption their must be proof of a \nlive birth shown on an official document such as a birth \ncertificate attached to the return.\nThis change may effect your taxable income, tax, or any \nof the following credits:\n♦\n♦Credit for Child and Dependent Care Expenses \n♦\n♦Child Tax Credit \n♦\n♦Additional Child Tax Credit \n♦\n♦Earned Income Credit \nNote: This change may also affect the Credit for Child \nand Dependent Care Expenses and Earned Income \nCredit regardless of whether an exemption was claimed \nfor that dependent. \nN (which \ndependent is the \nnotice referrring \nto?)\n 264 \n 29 \n $70,632 \nD, F\n707\nOne or more of the dependents listed on your tax \nreturn who have a missing Social Security number are \nidentified as being born and died during the tax period \nof the return. To claim a dependent as being born and \ndied there must be proof of a live birth shown on an \nofficial document such as a birth certificate attached \nto the return. As a result, we disallowed certain credits \nclaimed on your return. This change may affect any of \nthe following credits:\n♦\n♦Credit for child and dependent care expenses \n♦\n♦Child tax credit \n♦\n♦Credit for other dependents \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit \nN (lack of \nspecificity)\n 1 \n - \n $- \ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n67\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nF\nAn omission of a \ncorrect taxpayer \nidentification \nnumber required \nunder section 32 \n(relating to the \nearned income \ncredit) to be \nincluded on a \nreturn\n607\nWe didn’t allow the exemption for the primary taxpayer \nclaimed on your tax return. We compared the Social \nSecurity Number of the primary taxpayer shown on \nyour tax return with records from the Social Security \nAdministration. According to these records, the Social \nSecurity Number belongs to a deceased person. You \nmust contact the Social Security Administration if this \ninformation is incorrect. This change may affect your \ntaxable income, tax, or any of the following credits: \n♦\n♦Credit for Child and Dependent Care Expenses \n♦\n♦Child Tax Credit \n♦\n♦Additional Child Tax Credit \n♦\n♦Earned Income Credit \nY\n 113 \n 13 \n $20,001 \nF\n608\nWe didn’t allow the exemption for the spouse claimed \non your tax return. We compared the Social Security \nNumber of the spouse shown on your tax return \nwith records from the Social Security Administration. \nAccording to these records, the Social Security number \nbelongs to a deceased person. You must contact the \nSocial Security Administration if this information is \nincorrect. This change may affect your taxable income, \ntax, or any of the following credits: \n♦\n♦Credit for Child and Dependent Care Expenses \n♦\n♦Child Tax Credit \n♦\n♦Additional Child Tax Credit \n♦\n♦Earned Income Credit \nY\n 207 \n 8 \n $22,092 \ncontinued\n",
"68\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nF\n(continued)\nAn omission of a \ncorrect taxpayer \nidentification \nnumber required \nunder section 32 \n(relating to the \nearned income \ncredit) to be \nincluded on a \nreturn\n609\nWe didn’t allow the exemption for one or more of the \ndependents claimed on your tax return. We compared \nthe Social Security Number of each dependent \nclaimed on your tax return with records from the Social \nSecurity Administration. According to these records, \none or more of the dependents claimed on your tax \nreturn have a Social Security Number that matches a \ndeceased person. You must contact the Social Security \nAdministration if this information is incorrect. This \nchange may affect your taxable income, tax, or any of \nthe following credits: \n♦\n♦Credit for Child and Dependent Care Expenses \n♦\n♦Child Tax Credit \n♦\n♦Additional Child Tax Credit \n♦\n♦Earned Income Credit \nNote: This change may also affect the Credit for Child \nand Dependent Care Expenses and Earned Income \nCredit regardless of whether an exemption was claimed \nfor that dependent. \nN (which \ndependent is \nsupposedly dead?)\n 701 \n 30 \n $65,012 \nF\n701\nWe didn’t allow your spouse’s personal exemption \nand Earned Income Credit (EIC) on your tax return. \nYour spouse’s Social Security Number (SSN) was \nmissing or the last name provided doesn’t match our \nrecords or the records provided by the Social Security \nAdministration. Note: To be eligible for EIC, you, your \nspouse, and qualifying child or children must use a \ncorrect name and SSN issued by the Social Security \nAdministration. \nY\n 1,493 \n 227 \n $569,100 \nF\n702\nWe didn’t allow the amount claimed as Earned Income \nCredit (EIC) on your tax return. The individual taxpayer \nidentification number you gave us for yourself and/or \nspouse was issued by the Internal Revenue Service and \ndoes not qualify you for the credit. Note: To be eligible \nfor EIC, you, your spouse, and qualifying child or children \nmust use a correct name and SSN issued by the Social \nSecurity Administration.\nY\n 3,121 \n 145 \n $454,811 \ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n69\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nF\n(continued)\nAn omission of a \ncorrect taxpayer \nidentification \nnumber required \nunder section 32 \n(relating to the \nearned income \ncredit) to be \nincluded on a \nreturn\n704\nYour or your spouse’s Social Security number (SSN) \nor individual taxpayer identification number (ITIN) was \nmissing or the last name provided doesn’t match our \nrecords or the records provided by the Social Security \nAdministration. As a result, we disallowed certain \ncredits claimed on your return. This change may affect \nany of the following credits:\n♦\n♦Education credits \n♦\n♦Child tax credit \n♦\n♦Credit for other dependents \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit\nN (lack of \nspecificity)\n 34 \n - \n $- \nF\n705\nEach dependent listed on your tax return must have \na valid Social Security number (SSN) or individual \ntaxpayer identification number (ITIN). For one or more \nof your dependents, the SSN or ITIN was missing or the \nlast name provided doesn’t match our records or the \nrecords provided by the Social Security Administration. \nAs a result, we disallowed certain credits claimed on \nyour return. This change may affect any of the following \ncredits:\n♦\n♦Credit for child and dependent care expenses \n♦\n♦Education credits \n♦\n♦Child tax credit \n♦\n♦Credit for other dependents \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit \nN (lack of \nspecificity)\n 149 \n 7 \n $16,336 \nF\n706\nWe compared the Social Security numbers (SSN) shown \non your tax return with records from the Social Security \nAdministration. According to these records, the SSN \nshown on your tax return for you, your spouse, or one or \nmore of the dependents belongs to a deceased person. \nYou must contact the Social Security Administration if \nthis information is incorrect. As a result, we disallowed \ncertain credits claimed on your return. This change may \naffect any of the following credits:\n♦\n♦Credit for child and dependent care expenses \n♦\n♦Child tax credit \n♦\n♦Credit for other dependents \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit \n♦\n♦Education credits \nN (lack of \nspecificity)\n 1 \n - \n $- \ncontinued\n",
"70\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nF\n(continued)\nAn omission of a \ncorrect taxpayer \nidentification \nnumber required \nunder section 32 \n(relating to the \nearned income \ncredit) to be \nincluded on a \nreturn\n711\nYou, your spouse, or one or more of the dependents \nlisted on your return didn’t have an assigned taxpayer \nidentification number by the due date of the tax return. \nAs a result, we disallowed certain credits claimed on \nyour return. This change may affect any of the following \ncredits:\n♦\n♦Credit for other dependents \n♦\n♦Child tax credit \n♦\n♦Additional child tax credit \n♦\n♦American opportunity credit \n♦\n♦Earned income credit\nN (lack of \nspecificity)\n 898 \n 24 \n $62,713 \nF\n743\nWe didn’t allow part or all the amount claimed as \nEarned Income Credit (EIC) on your tax return. For one \nor more of the children listed on your Schedule EIC, \nEarned Income Credit: \n♦\n♦The Social Security Number was missing. \n♦\n♦The last name doesn’t match our records or \nthe records provided by the Social Security \nAdministration.\nN (lack of \nspecificity)\n 34,355 \n 17,953 \n $37,872,158 \nF\n745\nWe didn’t allow part or all the amount claimed as \nEarned Income Credit (EIC) on your tax return. The child \nor children listed on your Schedule EIC, Earned Income \nCredit, must have a valid Social Security Number issued \nby the Social Security Administration to qualify for the \ncredit. The Individual Taxpayer Identification Number you \nprovided for your child or children was issued by the \nInternal Revenue Service and doesn’t qualify you for EIC.\nN (lack of \nspecificity)\n 431 \n 41 \n $95,798 \nF\n748\nWe didn’t allow your personal exemption and Earned \nIncome Credit (EIC) on your tax return. Your Social \nSecurity Number (SSN) or last name doesn’t match our \nrecords or the records provided by the Social Security \nAdministration. Note: To be eligible for EIC, you, your \nspouse, and qualifying child or children must use a \ncorrect name and SSN issued by the Social Security \nAdministration.\nY\n 2,960 \n 463 \n $1,094,498 \ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n71\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nF\n(continued)\nAn omission of a \ncorrect taxpayer \nidentification \nnumber required \nunder section 32 \n(relating to the \nearned income \ncredit) to be \nincluded on a \nreturn\n810\nYou, your spouse, or one or more of your dependents \nclaimed on your return didn’t have an assigned taxpayer \nidentification number by the due date of the tax return. \nAs a result, we disallowed certain credits claimed on \nyour return. This change may affect any of the following \ncredits: \n♦\n♦American opportunity credit \n♦\n♦Child tax credit \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit\nN (lack of \nspecificity)\n 17,408 \n 322 \n $943,916 \nG\nAn entry on a \nreturn claiming \nthe credit under \nsection 32 with \nrespect to net \nearnings from \nself-employment \ndescribed in \nsection 32(c)(2)(A) \nto the extent the \ntax imposed by \nsection 1401 \n(relating to self-\nemployment \ntax) on such net \nearnings has not \nbeen paid\n580\nWe computed self-employment tax on your tax return \nfor the self-employment income you reported. Since \nyou included self-employment income in computing \nyour Earned Income Credit (EIC), you must pay self-\nemployment tax to receive EIC.\nY\n 1,271 \n 75 \n $48,931 \ncontinued\n",
"72\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nK\nAn omission \nof information \nrequired by section \n32(k)(2) (relating to \ntaxpayers making \nimproper prior \nclaims of earned \nincome credit) or \nan entry on the \nreturn claiming \nthe credit under \nsection 32 for a \ntaxable year for \nwhich the credit is \ndisallowed under \nsubsection (k)(1) \nthereof\n814\nWe disallowed the amount claimed as earned income \ncredit on your tax return. Our records indicate that we’ve \nbanned you from claiming earned income credit for two \ntax years.\nN (lack of \nspecificity)\n 224 \n 14 \n $52,795 \nK\n815\nWe disallowed the amount claimed as earned income \ncredit on your tax return. Our records indicate that we’ve \nbanned you from claiming earned income credit for this \ntax year.\nN (lack of \nspecificity)\n 745 \n 135 \n $325,056 \nK\n816\nWe disallowed the amount claimed as earned income \ncredit on your tax return. Our records indicate that we’ve \nbanned you from claiming earned income credit for ten \nyears.\nN (lack of \nspecificity)\n 27 \n 1 \n $4,090 \nL\nThe inclusion \non a return of a \nTIN required to \nbe included on \nthe return under \nsection 21, 24, or \n32 if— \n(i) such TIN is \nof an individual \nwhose age affects \nthe amount of the \ncredit under such \nsection, and \n(ii) the \ncomputation of \nthe credit on the \nreturn reflects \nthe treatment of \nsuch individual as \nbeing of an age \ndifferent from the \nindividual’s age \nbased on such TIN\n708\nOne or more of the dependents listed on your tax return \nwas born after December 31st of the tax year for the \nreturn you filed. As a result, we disallowed certain \ncredits claimed on your return. This change may affect \nany of the following credits:\n♦\n♦Credit for child and dependent care expenses \n♦\n♦Child tax credit \n♦\n♦Credit for other dependents \n♦\n♦Additional child tax credit \n♦\n♦Earned income credit \nN (lack of \nspecificity)\n 3 \n - \n $- \nL\n741\nWe didn’t allow part or all the amount claimed as \nEarned Income Credit (EIC) on your tax return. The date \nof birth shown on your Schedule EIC, Earned Income \nCredit, for your qualifying child or children doesn’t \nmatch the date or dates provided by the Social Security \nAdministration. Their records showed your child or \nchildren doesn’t meet the age requirement.\nN (lack of \nspecificity)\n 696 \n 183 \n $416,371 \nL\n783\nWe did not allow your Earned Income Credit on your tax \nreturn. We could not verify you or your spouse’s age \nand we could not determine the eligibility of any child \nclaimed for the credit. \nN (lack of \nspecificity)\n 7 \n 1 \n $2,287 \nL(i)\n293\nWe didn’t allow the amount claimed as Earned Income \nCredit on your tax return. You or your spouse must be at \nleast age 25, but less than age 65, on December 31st \nof the tax year for which the tax return is being filed.\nY\n 18,512 \n 766 \n $1,518,326 \ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n73\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n6213(g)(2) \nSection\nIRC Code Text: The \nterm “mathematical \nor clerical error” \nmeans— \nTaxpayer \nNotice \nCode\nContent of Corresponding Paragraph\nSufficient \nExplanation?\nNumber of \nTaxpayers \nReceiving this \nNotice\nNumber of \nTaxpayers \nwith \nAbatements\nTotal Amount \nAbated for \nthis Notice \nCode\nM\nThe entry on the \nreturn claiming \nthe credit under \nsection 32 with \nrespect to a child \nif, according to \nthe Federal Case \nRegistry of Child \nSupport Orders \nestablished under \nsection 453(h) of \nthe Social Security \nAct, the taxpayer \nis a noncustodial \nparent of such \nchild\n752\nWe didn’t allow part or all the amount claimed as \nEarned Income Credit on page 2 of your tax return. \nThe information you provided on Schedule EIC, Earned \nIncome Credit, shows one or more of the qualifying \nchildren didn’t live with you for more than half the year.\nN (should be an \nissue to allow the \ntaxpayer to prove \nthe child meets \nthe residency \nrequirement. FCR \ndata not accurate \nin determining \nresidency status \nfor the EITC.\n 365 \n 85 \n $213,344 \nSource: IRS, CDW, IRTF and IMF as of cycle 201913 (June 2019)\nEITC after math error processing.\n\t \t\n\t\n\t\n\t\n\t\n\t\n",
"74\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nFIGURE A.21, Number of Taxpayers Subject to a Two- or Ten-Year Ban by Year\t\nTax Year (TY)\nNumber of Taxpayers with 2 or 10 Year Bans\n2016\n 2,888 \n2015\n 3,536 \n2014\n 2,184 \n2013\n 2,867 \n2012\n 8,456 \nSource: IRS, CDW, IMF as of cycle 201913 and AIMS Closed Case Database (June 2019).\n\t\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n75\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nAPPENDIX 2:\t Works Cited (works are listed sequentially as they appear in the text)\nINTRODUCTION\nAustin Nichols & Jesse Rothstein, The Earned Income Tax Credit, in Economics of Means-Tested \nTransfer Programs in the United States (2016), https://www.nber.org/chapters/c13484.pdf.\nIRS, Pub. 1415, Federal Tax Compliance Research: Tax Gap Estimates for Tax Year 2008–2010 (May \n2016).\nDepartment of the Treasury, Agency Financial Report Fiscal Year 2018 (2018).\nTreasury Inspector General for Tax Administration, Ref. No. 2018-40-032, The Internal Revenue \nService is Not in Compliance With Improper Payment Requirements (Apr. 2018).\nLarry Zelenak, The Myth of Pretax Income, 101 Mich. L. Rev. 2261 (2003). \nPaul Kiel, It’s Getting Worse: The IRS Now Audits Poor Americans at About the Same Rate \nas the Top 1%, Pro Publica (May 30, 2019), https://www.propublica.org/article/\nirs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-percent.\nIsabel Sawhill & Christopher Pulliam, Lots of plans to boost tax credits: which is \nbest?, Brookings Inst. (Jan. 15, 2019), https://www.brookings.edu/research/\nlots-of-plans-to-boost-tax-credits-which-is-best/. \nJacob Bastian & Maggie Jones, Do EITC Expansions Pay For Themselves? Effects on Tax Revenue and \nPublic Assistance Spending (2019).\nTreasury Inspector General for Tax Administration, Ref. No. 2018-40-024, Some Tax Returns \nSelected for Fraud Screening Did Not Have Refunds Held and Required Notifications Were Not Always \nSent to Taxpayers (Mar. 27, 2018).\nIRS, EITC Fast Facts, https://www.eitc.irs.gov/partner-toolkit/basic-marketing-communication-\nmaterials/eitc-fast-facts/eitc-fast-facts (last visited May 17, 2019).\nGovernment Accountability Office, Refundable Tax Credits: Comprehensive Compliance Strategy \nand Expanded Use of Data Could Strengthen IRS’s Efforts to Address Noncompliance (2016), \nhttps://www.gao.gov/assets/680/677548.pdf.\nPaul Kiel & Hannah Fresques, Where in the U.S. Are You Most Likely to Be Audited By the IRS, Pro \nPublica, (Apr. 1, 2019), https://projects.propublica.org/graphics/eitc-audit.\nKyle Pomerlau, Earned Income Tax Credit Still Plagued with High Error Rate, Tax Foundation, \n(May 14, 2014), https://taxfoundation.org/earned-income-tax-credit-still-plagued-high-error-rate.\n",
"76\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nRESTRUCTURE THE EITC AS TWO CREDITS: A WORKER CREDIT AND A CHILD BENEFIT \nAND MODERNIZE THE DEFINITION OF A QUALIFYING CHILD\nGene Falk & Margot Crandall-Hollick, Cong. Research Serv., R43805, The Earned Income Tax Credit \n(EITC): An Overview (2018).\nDepartment of the Treasury, Agency Financial Report Fiscal Year 2018 (2018).\nMargot Crandall-Hollick, Cong. Research Serv., R44825, The Earned Income Tax Credit (EITC): A \nBrief Legislative History (2018).\nNada Eissa & Hilary Hoynes, Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply, \n20 Tax Pol’y & Econ. 73 (2006). \nMargot Crandall-Hollick & Joseph Hughes, Cong. Research Serv., R44057, The Earned Income Tax \nCredit (EITC): An Economic Analysis (2018). \nChuck Marr et al., Strengthening the EITC for Childless Workers Would Promote \nWork and Reduce Poverty (2016), https://www.cbpp.org/research/federal-tax/\nstrengthening-the-eitc-for-childless-workers-would-promote-work-and-reduce.\nIsabel V. Sawhill & Christopher Pulliam, Lots of plans to boost tax credits: which is best?, \nBrookings Inst. (Jan. 15, 2019), https://www.brookings.edu/research/\nlots-of-plans-to-boost-tax-credits-which-is-best/. \nDylan Matthews, Senate Democrats have coalesced around a big plan to expand tax credits, Vox \n(April 10, 2019, 8:05 AM), https://www.vox.com/future-perfect/2019/4/10/18302183/\ntax-cut-democrats-earned-income-tax-credit-child-allowance. \nPeter S. Goodman & Jonathan Soble, Global Economy’s Stubborn Reality: Plenty of Work, Not Enough \nPay, N.Y. Times, October 7, 2017, https://www.nytimes.com/2017/10/07/business/unemployment-\nwages-economy.html.\nJay Shambaugh et. al., Thirteen Facts about Wage Growth (2017).\nMatthew Desmond, Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not, N.Y. Times, \nSept. 11, 2018, https://www.nytimes.com/2018/09/11/magazine/americans-jobs-poverty-homeless.\nhtml. \nLeonard E. Burman, A Universal EITC: Sharing the Gains from Economic Growth, Encouraging Work, \nand Supporting Families (2019).\nMargot Crandall-Hollick, Cong. Research Serv., R43873, The Earned Income Tax Credit (EITC): \nAdministrative and Compliance Challenges (2018).\nIRS Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006–2008 Returns \n(Aug. 2014).\nJason J. Fichtner, William G. Gale & Jeff Trinca, Tax Administration: Compliance, Complexity, and \nCapacity (2019).\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n77\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nElaine Maag, Simplicity: Considerations in Designing a Unified Child Credit, 63 Nat’l Tax J. 765 (2010).\nElaine Maag, H. Elizabeth Peters & Sarah Edelstein, Increasing Family Complexity and Volatility: The \nDifficulty in Determining Child Tax Benefits (2016).\nElaine Maag, Investing in Work by Reforming the Earned Income Tax Credit (2015).\nAustin Nichols & Jesse Rothstein, The Earned Income Tax Credit, in Economics of Means-Tested \nTransfer Programs in the United States Vol. 1 (Robert A. Moffitt ed., 2016).\nIsabel V. Sawhill & Quentin Karpilow, Raising the Minimum Wage and Redesigning the EITC, \nBrookings Inst., (Jan. 30, 2014), https://www.brookings.edu/research/\nraising-the-minimum-wage-and-redesigning-the-eitc/.\nElaine Maag, Donald Marron & Erin Hoffer, Redesigning the EITC: Issues in design, eligibility, \ndelivery, and administration (2019).\nIRS, New Federal Tax Law May Affect Some Refunds Filed in Early 2017; IRS to Share Details Widely with \nTaxpayers Starting This Summer, https://www.irs.gov/tax-professionals/new-federal-tax-law-may-\naffect-some-refunds-filed-in-early-2017 (last visited June 10, 2018).\nIRS, Identity Theft (IDT) and Integrity Verification Operations (IVO) Modeling Analysis - MAIN \nPerformance Report, slide 10 (Feb. 6, 2019).\nIRS Pub. 1415, Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2008–2010 \n(May 2016).\nJ. Comm. on Tax’n, JCX-8-01, Overview of Present Law and Economic Analysis Relating to the Marriage \nTax Penalty, the Child Tax Credit, and the Alternative Minimum Tax (2001).\nH. Luke Shaefer et. al., A Universal Child Allowance: A Plan to Reduce Poverty and Income Instability \nAmong Children in the United States, 4 Russell Sage Found. J. Soc. Sci. 22 (2018).\nIRS Pub. 915, Social Security Equivalent Railroad Retirement Benefits (Jan. 2019).\nTheda Skocpol, Targeting within Universalism: Politically Viable Policies to Combat Poverty in the United \nStates, in The Urban Underclass (Christopher Jencks & Paul E. Peterson eds., 1991).\nCanada Revenue Agency, RC66, Canada Child Benefits Application (June 30, 2017).\nLeslie Book, David Williams & Krista Holub, Insights From Behavioral Economics Can Improve \nAdministration of the EITC, 37 Va. Tax Rev. 177 (2018).\nAndrew Johns & Joel Slemrod, The Distribution of Income Tax Noncompliance, 63 Nat’l Tax J. 397 \n(2010).\nJeffrey B. Liebman, The EITC Compliance Problem, 2 Poverty Res. News 10 (1998). \nIRS, Qualifying Child of More Than One Person, https://www.irs.gov/credits-deductions/individuals/\nearned-income-tax-credit/qualifying-child-of-more-than-one-person (last visited May 13, 2019).\n",
"78\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nElaine Maag, Stephen Roll & Jane Oliphant, Delaying Tax Refund for Earned Income Tax Credit and \nAdditional Child Tax Credit Claimants (2016).\nJoseph Dalaker, Maggie McCarty & Gene Falk, Cong. Research Serv., R44698, Demographic and \nSocial Characteristics of Persons in Poverty: 2015 (2016). \nIRS Pub. 5336, IRS Integrated Modernization Business Plan (Apr. 2019).\nSocial Security Administration, Benefits Planner: Survivors/If You Are The Survivor, \nhttps://www.ssa.gov/planners/survivors/ifyou.html (last visited May 17, 2019).\nESTABLISH GREATER IRS OVERSIGHT OF TAX PREPARERS AND TAX PREPARATION \nSOFTWARE\nGovernment Benefits, https://www.usa.gov/benefits (last visited May 15, 2019). \nIRS, Return Preparer Office Federal Tax Return Preparer Statistics, https://www.irs.gov/tax-professionals/\nreturn-preparer-office-federal-tax-return-preparer-statistics (last visited May 21, 2019).\nIRS Pub. 4832, Return Preparer Review (Dec. 2009).\nJ. Comm. on Tax’n, JCX-108-15, Description of the Chairman’s Mark of a Bill to Prevent Identity Theft \nand Tax Refund Fraud (2015).\nIRS Pub. 5166, IRS Volunteer Quality Site Requirements (Oct. 2018).\nIRS Pub. 5101, Intake/Interview & Quality Review Training, 2019 Filing Season (Oct. 2018).\nIRS Pub. 4961, VITA/TCE Volunteer Standards of Conduct – Ethics Training, 2018 Returns (Oct. 2018).\nIRS, Requirements for Annual Filing Season Program Record of Completion, https://www.irs.gov/tax-\nprofessionals/general-requirements-for-the-annual-filing-season-program-record-of-completion \n(last visited May 21, 2019).\nIRS, Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, \nhttps://irs.treasury.gov/rpo/rpo.jsf (last visited Apr. 25, 2019).\nIRS Return Preparer Office, Return Preparer Office Federal Tax Return Preparer Statistics (May 1, 2019). \n \nIRS Pub. 1345, Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns \n(Feb. 2019).\nIRS, Free File: Do Your Federal Taxes For Free, https://www.irs.gov/filing/free-file-do-your-federal-taxes-\nfor-free (last visited May 15, 2019).\nIRS, Daily E-File at a Glance: U.S. Totals for Individual Returns (May 14, 2019).\nMandi Matlock & Chi Chi Wu, National Consumer Law Center, 2019 Tax Season: The Return of \nthe Interest-Bearing Refund Anticipation Loan and Other Perils Faced by Consumers (2019). \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n79\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nGovernment Accountability Office, GAO-19-269, Tax Refund Products: Product Mix Has Evolved and \nIRS Should Improve Data Quality (2019).\nLeslie Book, U.S. Refundable Credits: The Taxing Realities of Being Poor, 4 J. Tax Admin. 71 (2018).\nGovernment Accountability Office, GAO-06-563T, Paid Tax Return Preparers: In a Limited Study, \nChain Preparers Made Serious Errors (2006).\nGovernment Accountability Office, GAO-14-467T, Paid Tax Return Preparers: In a Limited Study, \nPreparers Made Significant Errors (2014).\nTreasury Inspector General for Tax Administration, Ref. No. 2008-40-171, Most Tax Returns \nPrepared by a Limited Sample of Unenrolled Preparers Contained Significant Errors (Sept. 2008).\nTom Herman, New York Sting Nabs Tax Preparers, Wall St. J. (Nov. 26, 2008), \nhttps://www.wsj.com/articles/SB122765734841458181. \nIRS Pub. 5162, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006–2008 Returns \n(Aug. 2014).\nJay A. Soled & Kathleen D. Thomas, Regulating Tax Return Preparation, 58 B.C. L. Rev. 151 (2017).\nGovernment Accountability Office, GAO-08-781, Tax Preparers: Oregon’s Regulatory Regime May \nLead to Improved Federal Tax Return Accuracy and Provides a Possible Model for National Regulation \n(2008).\nJustin Elliott & Kengo Tsutsumi, The TurboTax Trap: TurboTax Uses A “Military Discount” to Trick \nTroops Into Paying to File Their Taxes, ProPublica (May 23, 2019).\nNaomi Jagoda, IRS Bringing in Outside Contractor on Review of ‘Free File’ Program, \nThe Hill (May 15, 2019, 3:13 PM), https://thehill.com/policy/\nfinance/443883-irs-working-with-outside-contractor-on-review-of-free-file-program. \nJad Chamseddine, IRS to Review Charges that Free File Members Hid Services, Tax Notes Today \n(May 13, 2019), https://www.taxnotes.com/tax-notes/legislation-and-lawmaking/\nirs-review-charges-free-file-members-hid-services/2019/05/13/29gh4.\nPress Release, Elizabeth Warren, Senator, Senator Warren Leads Colleagues in Reintroducing Legislation \nto Simplify and Decrease the Costs of Tax Preparation and Filing (Apr. 12, 2019), \nhttps://www.warren.senate.gov/newsroom/press-releases/senator-warren-leads-colleagues-in-\nreintroducing-legislation-to-simplify-and-decrease-the-costs-of-tax-preparation-and-filing.\nConsumer Financial Protection Bureau, What is a Loan Estimate? (Sept. 12, 2017), \nhttps://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/.\nChi Chi Wu, Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and \nWhat States Can Do (2014).\n",
"80\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nENSURE LOW INCOME TAXPAYERS HAVE DUE PROCESS PROTECTIONS COMPARABLE \nTO PROTECTIONS OF OTHER TAXPAYERS BY LIMITING THE USE OF SUMMARY \nASSESSMENT AUTHORITY\nCharles P. Rettig, Commissioner, IRS, Testimony before the Senate Appropriations Committee \nSubcommittee on Financial Services and General Government on the IRS Budget and Current \nOperations (May 15, 2019).\nGovernment Accountability Office, GAO 18-544, Tax Fraud and Noncompliance: IRS Could Further \nLeverage the Return Review Program to Strengthen Tax Enforcement (2018).\nPaul Kiel, It’s Getting Worse: The IRS Now Audits Poor Americans at About the Same Rate as the Top 1%, \nPro Publica (May 30, 2019), https://www.propublica.org/article/\nirs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-percent.\nPaul Kiel & Jesse Eisinger, Who’s More Likely to Be Audited: A Person Making $20,000 — or \n$400,000, Pro Publica (Dec. 12, 2018, 5 AM), https://www.propublica.org/article/\nearned-income-tax-credit-irs-audit-working-poor.\nJohn Guyton et. al., The Effects of EITC Correspondence Audits on Low-Income Earners (NBER, \nWorking Paper No. 24465, 2019).\nTreasury Inspector General for Tax Administration, Ref. No. 2014-40-093, Existing Compliance \nProcesses Will Not Reduce the Billions of Dollars in Improper Earned Income Tax Credit and Additional \nChild Tax Credit Payments (Sept. 2014). \nIRS, Federal Case Registry Final Report, Project 5-02-12-3-005 (CR-39) (Sept. 2003), (on file with TAS).\nNina E. Olson, 2010 Erwin N. Griswold Lecture Before the American College of Tax Counsel, Taking \nthe Bull by Its Horns: Some Thoughts on Constitutional Due Process in Tax Collection, 63 Tax Law. \n227 (2010).\nIRS, Document 6209 (2014).\nTreasury Inspector General for Tax Administration, Ref. No. 2019-40-029, The Internal Revenue \nService Did Not Follow Congressional Directives Before Closing Taxpayer Assistance Centers; a Data-\nDriven Model Should Be Used to Optimize Locations (May 2019). \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n81\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nENSURE LOW INCOME TAXPAYERS HAVE DUE PROCESS PROTECTIONS COMPARABLE \nTO PROTECTIONS OF OTHER TAXPAYERS: THE BAN UNDER IRC § 32(K)\nBob Probasco, The EITC Ban – It’s Worse Than You Realized, Procedurally Taxing (Dec. 4, 2018), \nhttps://procedurallytaxing.com/the-eitc-ban-its-worse-than-you-realized/.\nLeslie Book, Tax Court Opinion in Ballard Highlights Fundamental Uncertainty of its Jurisdiction \nto Rule on the IRS Power to Ban Taxpayers From Claiming Refundable Credits, \nProcedurally Taxing (Feb. 19, 2016), \nhttps://procedurallytaxing.com/tax-court-opinion-in-ballard-highlights-fundamental-uncertainty-\nof-its-jurisdiction-to-rule-on-the-irs-power-to-ban-taxpayers-from-claiming-refundable-credits/.\nWilliam Schmidt, Tax Court Jurisdiction and the EITC Ban, Procedurally Taxing (Sept. 7, 2018), \nhttps://procedurallytaxing.com/tax-court-jurisdiction-and-the-eitc-ban/.\n",
"82\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nAPPENDIX 3:\t EITC Literature Review \n1.\t Andrew T. Hayashi, The Effects of Refund Anticipation Loans on the Use of Paid Preparers and EITC \nTake-up (Va. L. & Econ., Research Paper No. 2016-9, 2016).\nAs the author notes in the article’s abstract, this paper discusses refund anticipation loans (RALs) \nand the effect that regulation on RALs has “on a variety of outcomes, including demand for paid tax \npreparation, EITC (Earned Income Tax Credit ) take-up, and demand for other financial products, to \nexplore the source of RAL demand and the relationship between RALs and tax compliance.” The paper \nfound that strict regulation of RALs reduced the demand for paid tax preparation, as well as EITC \ntake-up, while increasing the demand for alternative products. The author believes that this “suggests \nthat lack of access to the payment system may be an important driver of RAL demand and that even \npresent-biased individuals may benefit from RALs.” \n2.\t Anne L. Alstott, The Earned Income Tax Credit and the Limitations of Tax-Based Welfare Reform, 108 \nHarv. L. Rev. 533 (1995).\nThis article argues that the case for the EITC has been oversimplified in two main ways. 1) People \narguing for and against the EITC are overly concerned with whether it discourages work and marriage. \n2) The EITC is a tax-based program to transfer income, which creates certain difficulties and constraints \nthat do not exist in more traditional welfare programs. Reforms to the programs could improve them, \nbut would require major changes to our federal income tax system.\n3.\t Anne L. Alstott, Why the EITC Doesn’t Make Work Pay, 73 Law & Contemp. Probs. 285 (2010).\nThis paper explores whether the EITC actually “makes work pay.” The paper finds that the EITC only \nmodestly reduces poverty, and gaps in other welfare programs can harm low income taxpayers, especially \nwhen they have gaps in their employment and the EITC doesn’t pay them. This exposes low income \ntaxpayers to difficulties when they are involuntarily unemployed, which is common among many low \nincome workers.\n4.\t Austin Nichols & Jesse Rothstein, The Earned Income Tax Credit (EITC) (Nat’l Bureau of Econ. Res., \nWorking Paper No. 21211, 2015).\n“We review research on the Earned Income Tax Credit (EITC) … Recent work has confirmed earlier \nfindings that labor supply effects are positive for single mothers, smaller and negative for married \nmothers, and essentially nonexistent for men. Where earlier estimates indicated that all responses were \non the extensive margin, some recent studies find evidence of non-zero, but small, intensive margin \neffects. We also review research on the incidence of the credit, suggesting that employers capture some \nof the program benefits through lower wages; on the large impact of the program on poverty rates \nand on children’s outcomes; and on families’ apparent preferences for lump-sum refunds over smaller \npayments distributed throughout the year. We present new evidence regarding the accuracy of EITC \nimputations in the Current Population Survey. We discuss proposals for reform, including a more \ngenerous childless credit, and argue that the EITC may be complementary to the minimum wage, rather \nthan an alternative.”\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n83\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n5.\t Benjamin M. Leff, EITC for All: A Universal Basic Income Compromise Proposal, 25 Wash. & Lee J. Civ. \nRts. & Soc. Just. (forthcoming 2019).\nThis article considers Universal Basic Income (UBI) if it were comprised of a number of reforms to \nthe EITC. Reforms such as removing the EITC phaseout (no means testing), applying the EITC on \nan individual basis, and paying beneficiaries throughout the year, instead of in a lump sum tax refund \ncould demonstrate that a UBI-like program is possible. The biggest compromise would be the work-\nconditional nature of the EITC, whereas many UBI payment models are not conditional on working.\n6.\t Cass R. Sunstein, Sludge and Ordeals, 63 Duke L.J. 1843 (2019).\nPaperwork burdens that the U.S. government imposes on its people, which this article refers to as \n“sludge,” may lead people to not take up beneficial programs that are available to them. The costs \nof sludge may lead to the effective denial of the benefits available to people who need them. The \narticle briefly discusses EITC, including how, in the name of program integrity, agencies may \nimpose considerable burdens that may prevent some eligible people from receiving a benefit they are \nentitled to receive. The article suggests a careful review of sludge across programs and agencies. To that \nend, the article proposes that a deregulatory effort must be undertaken to reduce sludge (for example, \nthrough automatic enrollment, simpler forms, and reminders) balanced against the legitimate goals that \nit may promote (such as denying benefits to those who are not entitled to them).\n7.\t Danshera Cords, Paid Tax Preparers, Used Car Dealers, Refund Anticipation Loans, and the Earned \nIncome Tax Credit: The Need to Regulate Tax Return Preparers and Provide More Free Alternatives, 59 \nCase Wes. L. Rev. 351 (2009).\nMany taxpayers in the U.S. use paid return preparers to complete their tax returns. The vast majority \nof those claiming the EITC use paid preparers. Taxpayers pay billions a year for their returns to be \nprepared. However, the industry of return preparation is largely unregulated. As the title suggests, \nused car dealers and other nontax-related businesses can and do prepare tax returns for pay. Preparation \nbusinesses offer a host of financial products such as refund anticipation loans and checks. Many \npreparers are unenrolled and are not CPAs or attorneys. The article advocates for increased regulation \nand disclosure of tax return preparers as a way to improve compliance, and protect taxpayers.\n8.\t David A. Super, Privatization, Policy Paralysis, and the Poor, 96 Cal. L. Rev. 393, 403–405 (2008).\nWhile not an EITC paper, David Super’s article divides the function of delivering benefits into distinct \nactivities, including the following:\n■\n■Prospective claimants require some assistance in applying for the program;\n■\n■Someone must set eligibility criteria and procedures;\n■\n■Someone must determine whether each claimant meets those eligibility criteria \nand procedural requirements;\n■\n■Someone must keep records of those eligibility decisions;\n■\n■Someone must issue benefits to claimants found eligible;\n■\n■Someone must resolve disputes with claimants concerning eligibility and issuance;\n■\n■Someone must review performance at each of these steps to protect the program integrity.\n",
"84\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n9.\t David A. Weisbach & Jacob Nussim, The Integration of Tax and Spending Programs, 113 Yale L. Rev \n955 (2004).\nThe authors explain in the article’s abstract that “[t]his paper provides a theory for deciding when \na spending program should be implemented through the tax system.” While normally based on \nconsiderations of tax policy, this paper argues that the decision should be made based on organizational \ndesign, to group like activities together. This would produce better results. The paper then applies \nits theory to the tax and spending problem and analyzes Supplemental Nutrition Assistance Program \n(SNAP) and EITC through this lens, to determine if these programs would be better suited as part of \nthe tax system or not.\n10.\tDavid T. Ellwood, The Impact of the Earned Income Tax Credit and Social Policy Reforms on Work, \nMarriage, and Living Arrangements, 53 Nat’l Tax J. 1063 (2000).\n“This article examines the impact of the recent dramatic changes in the social policies, particularly \nthe expansion of the EITC and Welfare reform on labor supply, marriage, and cohabitation. Altered \npolicies have increased incentives to work or marry for some, diminished incentives for others. The \nresults strongly indicate expanded work by single mothers and reductions of work by married mothers \nin accordance with their changed incentives. By contrast, estimated impacts on marriage are small and \nambiguous, though modest changes in cohabitation in the predicted direction suggest that impact on \nfamily structure might become more apparent in the future.”\n11.\tDayanand S. Manoli & Nicholas Turner, Cash-on-Hand & College Enrollment: Evidence From \nPopulation Tax Data and Policy Nonlinearities (Nat’l Bureau of Econ. Res., Working Paper No. 19836, \n2014).\n“We estimate causal effects of cash-on-hand on college enrollment decisions of students from low-\nincome families. Using population-level, administrative data from United States income tax returns, we \nexploit variation in tax refunds received in the spring of the high school senior year. The variation in tax \nrefunds results from the kink point between the phase-in and maximum credit portions of the Earned \nIncome Tax Credit schedule. The results suggest tax refunds received in the spring of the high school \nsenior year have meaningful effects on college enrollment.”\n12.\tDennis J. Ventry, Jr., The Collision of Tax and Welfare Politics: The Political History of the Earned Income \nTax Credit, 1969–99, 53 Nat’l Tax J. 983 (2000).\n“This paper uses the political history and pre-history of the EITC to describe how the politics of welfare \nreform influence tax policies that function as social policy. It suggests that the economic tradeoffs \ninherent in the formulation of tax-transfer programs are also political tradeoffs. It examines policy \nchoices between costs and labor supply incentives, as well as those between ease of participation and \ncompliance rates. This paper concludes that although economic analysis influenced the creation and \ndevelopment of the EITC, political factors, not economics, animated the history of the program.” \n13.\tDonald Moynihan, Pamela Herd & Hope Harvey, Administrative Burden: Learning, Psychological, \nand Compliance Costs in Citizen-State Interactions, 25 J. Pub. Admin. Res. & Theory 43 (2014).\nThis article provides two theories about how citizens interact with the state. It considers that \nadministrative burden is “an important variable in understanding” citizen-state interactions. The article \nproposes that “[a]dministrative burden is conceptualized as a function of learning, psychological, and \ncompliance costs that citizens experience in their interactions with government.” Additionally, the \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n85\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\narticle theorizes that how much administrative burden the citizens suffer is often a deliberate political \ndecision.\n14.\tDorothy A. Brown, Race and Class Matters in Tax Policy, 107 Colum. L. Rev. 790 (2007).\nThis essay suggests that the EITC, at least in its current form, is disappearing. This is in part because \nof its high audit rate, caused by the EITC’s “welfare taint.” The author suggests that if the EITC is to \nsurvive, it, and the taxpayers that receive it, must be portrayed more sympathetically and positively, to \nmove beyond the welfare taint. The author suggests that this may be done by using the race and class \ninformation about the EITC (its beneficiaries are majority white) to its benefit, and package it in such a \nway as to prevent the EITC’s extinction.\n15.\tDorothy A. Brown, Tax Law: Implicit Bias and the Earned Income Tax Credit, in Implicit Racial Bias \nAcross the Law 164 (Justin D. Levison & Robert J. Smith eds., 2012).\nThis chapter examines the implicit racial bias present in the EITC, in how it may explain the high \nlevels of enforcement to achieve compliance, instead of focusing on simplifying the EITC filing process \nto reduce the error rate. The chapter explores some of the impacts of implicit racial bias on the EITC \nand the tax system. The idea of what EITC taxpayers look like and how they behave is misguided \n(the typical EITC claimant is white, not black, and many are very hard working, not lazy). Congress’s \nfocus on EITC improper payments led to other non-EITC taxpayers being able to commit actual fraud \nwithout fear of reprisal. And despite the efforts of Congress and the IRS, the error rate is mostly the \nsame.\n16.\tDorothy A. Brown, Stacey Dickert-Conlin & Scott Houser, The Undeserving Poor?: Welfare, Tax \nPolicy, and Political Discourse (Wash. & Lee Pub. L. & Legal Theory, Working Paper No. 04–02, 2004).\nThis article argues that certain perceptions surrounding low income taxpayers, that they are \ndisproportionately Black, make low income taxpayers and the credits that benefit them politically \nunpopular. However, this article provides that twice as many Whites are eligible for the EITC as Blacks. \n \nAdditionally, low income tax benefits disadvantage Black families compared to middle income tax \nbenefits. The article suggests tax reform to treat low income families like middle income families when \nit comes to tax benefits.\n17.\tElaine Magg, Earned Income Tax Credit in the United States, 22 J. Soc. Security L. 20 (2015).\n“In this article, the author explains the history, role and structure of the earned income tax credit \n(EITC) which is intended primarily to provide support for low income workers and their families, \nincluding its relationship with work incentives. The article offers critical analysis of the current system \nand proposals for future reform.”\n18.\tEmmanuel Saez, Do Taxpayers Bunch at Kink Points?, 2 Am. Econ. J. Econ. Pol’y 180 (2010).\n“This paper uses tax return data to analyze bunching at the kink points of the US income tax schedule. \nWe estimate the compensated elasticity of reported income with respect to (one minus) the marginal \ntax rate using bunching evidence. We find clear evidence of bunching around the first kink point of \nthe Earned Income Tax Credit but concentrated solely among the self-employed. A simple tax evasion \nmodel can account for those results. We find evidence of bunching at the threshold of the first income \ntax bracket where tax liability starts but no evidence of bunching at any other kink point.”\n",
"86\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n19.\tFrancine J. Lipman, The Working Poor Are Paying for Government Benefits: Fixing the Hole in the Anti-\nPoverty Purse, 2003 Wis. L. Rev 461 (2003).\nThis article analyzes a study that found that approximately $1.75 billion of the $30 billion in 1999 \nEITC was shifted from targeted individuals to paid tax preparers and affiliated national banks. This \ndemonstrates that low income taxpayers are paying for their tax benefits, and thus diminishing their \nintended benefit. The article provides several proposals to solve the problem and improve the EITC to \nbetter benefit its beneficiaries.\n20.\tHilary Hoynes, Doug Miller & David Simon, Income, the Earned Income Tax Credit, and Infant \nHealth, 7 Am. Econ. J. Econ. Pol’y 172 (2015).\n“This paper uses quasi-experimental variation from federal tax reform to evaluate the effect of the \nEITC on infant health outcomes. We find that the EITC reduces the incidence of low birth weight \nand increases mean birth weight: a $1,000 treatment-on-the-treated leads to a 2 to 3 percent decline in \nlow birth weight. Our results suggest that the candidate mechanisms include more prenatal care and \nless negative health behaviors (smoking). Additionally, we find a shift from public to private insurance \ncoverage, and for some a reduction in insurance overall, indicating a potential change in the quality and \nperhaps quantity of coverage.”\n21.\tJacob Goldin, Tax Benefit Complexity and Take-up: Lessons from the Earned Income Tax Credit, Tax L. \nRev. (forthcoming 2019).\nThe complexity of the tax benefits system may prevent millions of low income Americans from claiming \ntax benefits they are eligible for. This article considers what may increase take-up of tax benefits by \nlow income Americans. Some barriers to claiming tax benefits may be solved by using tax preparation \nsoftware or a return preparer. The author argues that the most relevant complexities are solved by use of \nthese assisted preparation methods. Other efforts to educate taxpayers about credits, like the EITC, or \nincrease awareness are likely to be less successful. Therefore, the most successful reforms to increasing \ntake-up may be those that appear to be unrelated to tax benefits.\n22.\tJanet Holtzblatt & Janet McCubbin, Issues Affecting Low-Income Filers, in The Crisis in Tax \nAdministration 148 (Henry J. Aaron & Joel Slemrod eds., 2004).\nThere is much complexity in the tax code that affects filers of all incomes. However, some issues are \nespecially felt by low income taxpayers. This book chapter takes an in-depth look at the many issues \naffecting these low income taxpayers. For example, compliance costs may especially burden low income \ntaxpayers, from increased audit frequency to paying tax return preparers. The authors also propose some \nsolutions for improving tax administration for low income filers, such as removing the EITC from the \nIncome Tax System, which could reduce some compliance issues, as well as simplifying the credit.\n23.\tJason DeBacker, Bradley T. Heim, Anh Tran & Alexander Yuskavage, The Effects of IRS Audits on \nEITC Claimants, 71 Nat’l Tax J. 451 (2018).\n“The Internal Revenue Service (IRS) devotes substantial resources to audit tax returns of Earned Income \nTax Credits (EITC) claimants, but little is known about the deterrence effect of these audits. Our \npaper examines the impact of this tax enforcement on subsequent individual taxpaying among those \nwho claimed an EITC. Studying randomized IRS audits during the 2006-2009 period, we find that \nEITC participants who are audited show much larger increases in reported income in subsequent years, \nboth compared to a control group of EITC filers, and compared to audited filers who were not EITC \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n87\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nclaimants. We find behavioral impacts on the extensive margin as well, with the probability of a filer \nclaiming an EITC dropping by over 6 percentage points within 4 years following the audit, as well as \nchanges in filing status and the number of dependents.”\n24.\tJay A. Soled & Kathleen DeLaney Thomas, Regulating Tax Return Preparation, 58 B.C. L. Rev. 151 \n(2017).\nTax return preparers and tax return software dominate the preparation and submission of Form \n1040. They are “vital intermediaries between the government and taxpayers.” However, there is very \nlittle congressional oversight of Tax return preparers and tax return software, despite the fact that the \nshortcomings of these two players (anyone can prepare returns for pay and few, if any, checks exist to \ntest the accuracy of software) lead to millions of incorrect tax returns each year. These incorrect returns \nreduce government revenue, and may prevent some taxpayers from receiving tax benefits they are eligible \nfor. This article proposes reforms to improve the current system.\n25.\tJennifer Bird-Pollan, Who’s Afraid of Redistribution? An Analysis of the Earned Income Tax Credit, 74 \nMo. L. Rev. 251 (2009).\nIn the article abstract, the author states, “Using the federal income tax system as a means of \nredistribution was a recurrent theme in last year’s presidential election. As part of his campaign, Barack \nObama pledged to expand the reach of the EITC, and that expansion has begun with the 2009 Stimulus \nBill. The thesis of my article is that the EITC, as currently administered through the United States \nfederal income tax, is not a perfect system, but is certainly worth maintaining, and even expanding, \nas Congress and the President have already begun to do. The article begins with a brief history of the \nEITC, and then works through the mechanics of the credit. I then turn to an examination of some of \nthe deepest criticisms of the EITC, and try to respond to those criticisms. My conclusion is that the \nEITC should remain as part of the federal income tax system, but that efforts must be made to ensure \nthat all who are entitled to the credit are able to claim it, and that taxpayers who claim the credit do not \nfall victim to the predatory lending often affiliated with so-called ‘Refund Anticipation Loans.’”\n26.\tJennifer Sykes et. al., Dignity and Dreams: What the Earned Income Tax Credit Means to Low Income \nFamilies, 80 Am. Soc. Rev. 243 (2015).\n“Money has meaning that shapes its uses and social significance, including the monies low-income \nfamilies draw on for survival: wages, welfare, and the Earned Income Tax Credit (EITC). This study, \nbased on in-depth interviews with 115 low-wage EITC recipients, reveals the EITC is an unusual type \nof government transfer. Recipients of the EITC say they value the debt relief this government benefit \nbrings. However, they also perceive it as a just reward for work, which legitimizes a temporary increase \nin consumption. Furthermore, unlike other means-tested government transfers, the credit is seen as a \nspringboard for upward mobility. Thus, by conferring dignity and spurring dreams, the EITC enhances \nfeelings of citizenship and social inclusion.”\n27.\tJonathan Barry Forman, Improving the Earned Income Credit: Transition to a Wage Subsidy Credit for \nthe Working Poor, 16 Fla. St. U. L. Rev. 41 (2017).\nAn early review of the history of the EITC and policy proposals to improve the EITC by focusing on \nmeasures to address the economic needs of low income workers and their families.\n",
"88\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\n28.\tJonathan P. Schneller, The Earned Income Tax Credit and the Administration of Tax Expenditures, 90 \nN.C. L. Rev. 719 (2012).\nAs the author notes in the article abstract, “This paper argues that in light of tax expenditures’ \npolitical popularity and consistent growth, tax expenditure analysis should shift its ambitions from \nthe elimination of tax expenditures to their reform. One particularly promising avenue for reform is \nadministrative, as the tax system provides a poor platform for the administration of complex programs \nwith policy objectives unrelated to revenue collection. This paper argues that scholars and policymakers \nshould borrow “hybrid” administrative practices from non-tax programs and apply them to tax \nexpenditures as necessary to advance a given tax expenditure’s non-tax policy objectives. It explores this \nidea via an in-depth case study of the Earned Income Tax Credit.”\n29.\tJonathan P. Schneller, Adam S. Chilton & Joshua L. Boehm, The Earned Income Tax Credit, Low-\nIncome Workers, and the Legal Aid Community, 3 Colum. J. Tax L. 177 (2012).\nThis article examines the popularity of the EITC politically because of its low administrative costs \nand incentive to work. However, the article contemplates many of the EITCs flaws and suggests how \nto improve the EITC through a variety of reforms. The credit is overly complex, and taxpayers need \nadditional advice and guidance to overcome that burden. The IRS can take certain actions to make the \ncredit more accessible and reduce the error rate. The article also suggests that there are ways that legal \naid can enhance its support of EITC recipients who are being audited or in Tax Court proceedings. The \nauthors argue that EITC assistance needs greater funding and Congress should place a higher priority on \nit because it is larger than other wealth transfer welfare programs.\n30.\tKarie Davis-Nozemack, Unequal Burdens in EITC Compliance, 31 Law & Ineq. 37 (2013).\n“Lower income means harsher treatment from the government for taxpayers who claim the Earned \nIncome Tax Credit (EITC). EITC claimants are audited more often than any taxpayers other than the \nvery wealthy. More concerning, however, is that the IRS audits EITC claimants by correspondence \nexamination in a manner that unduly burdens access to this refundable tax credit: a credit that often \nkeeps lower income workers out of poverty. \n“Improper payment law brings increased scrutiny to federal programs that issue erroneous payments. \nBecause the EITC is alleged to have substantial improper payments, it is subject to federal improper \npayment law, which adds administrative burdens in hopes of diminishing erroneous payments. While \nother scholars have noted the relationship between improper payment law and the EITC, this Article \ntakes the unique view that improper payment law, instead of burdening EITC administration, can \nprovide relief to the Service’s onerous EITC compliance methods.”\n31.\tKerry A. Ryan, EITC as Income (In)Stability?, 15 Fla. Tax Rev. 583 (2014).\nThe EITC was enacted in part to incentivize poor single mothers to work. However, the article shows \nhow the EITC may actually contribute to poverty in single-mother households during economic \ndownturns. The article reasons that “[l]ost EITC benefits exacerbate recession-induced earnings losses,” \nwhich the article refers to as income destabilization. This can have an unintended negative effect on \nsingle-mother households, despite those households being a target of the credit. The article proposes a \nstructural change to the EITC to prevent such income destabilization.\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n89\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\n32.\tLawrence Zelenak, Redesigning the Earned Income Tax Credit as a Family Size Adjustment to the \nMinimum Wage, 57 Tax L. Rev. 301 (2004).\nThis article provides the author’s view of what the EITC should be designed to accomplish. The article \nclaims that the EITC “should be revised to function as an adjustment to the minimum wage based on \nfamily size, designed to ensure that no family headed by a working parent lives in poverty, regardless of \nthe number of children in the family.” The article discusses how to redesign and restructure the credit \nto achieve that desired result.\n33.\tLawrence Zelenak, Tax or Welfare? The Administration of the Earned Income Tax Credit, 52 UCLA L. \nRev. 1867 (2005).\nThis article compares the enforcement of the EITC with other welfare programs, and finds that it is \nmore vigorously enforced than other welfare programs. The administration of the EITC also is unlike \nother welfare programs, and more in line with income tax (for example, eligibility is self-declared as \nopposed to determined prior to payment of the benefit). The article considers the reasons for these \ndifferences, and ultimately concludes that the administration of the EITC as tax-based makes it superior \nthan other welfare programs.\n34.\tLen Burman & Elaine Maag, The War on Poverty Moves to the Tax Code (2014).\nThis article briefly discusses how the benefits provided by anti-poverty programs have shifted slightly, \nwith the EITC now delivering more assistance than TANF (welfare) and SNAP (food stamps). The \narticle explains that refundable tax credits reduce poverty, and especially child poverty, more than \ntraditional welfare programs do. While less targeted than traditional benefits programs, the tax system \nnow provides some of the largest and most effective anti-poverty programs.\n35.\tLeslie Book, David Williams & Krista Holub, Insights From Behavioral Economics Can Improve \nAdministration of the EITC, 37 Va. Tax Rev. 177 (2018).\nThe EITC delivers many social benefits to low income workers. However, the high level of \nnoncompliance plagues the IRS. The authors propose that focusing on taxpayer characteristics may help \nto improve compliance. The authors suggest that the IRS could improve compliance by using insights \nfrom cognitive psychology research (for example, “that people may be more truthful when confronted \nwith increasing psychological costs and a higher perceived likelihood of detection”). The article \nprovides specific proposals in relation to these insights improving EITC compliance.\n36.\tLeslie Book, Preventing the Hybrid from Backfiring: Delivery of Benefits to the Working Poor through the \nTax System, 2006 Wis. L. Rev. 1103 (2006).\nThis article examines the tax system and the EITC, which has been increasingly used like a more \ntraditional welfare system to distribute wealth to the poor. It looks at the positives (cheaper and higher \nparticipation) and difficulties (higher rate of fraud and error) of administering a benefits system through \nthe tax system. The article provides a framework for improving the EITC to reduce errors and fraud.\n37.\tLeslie Book, The Poor and Tax Compliance: One Size Does Not Fit All, 51 Kan. L. Rev. 1145 (2003).\nThis article examines the compliance issues with low income taxpayers and the EITC, as well as the \nIRS’s efforts to reduce noncompliance surrounding the credit and low income taxpayers. The article \nfurther examines the possible reasons for the high level of noncompliance and its policy implications for \nlow income taxpayers. The author suggests that the government has not focused its resources properly \n",
"90\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nto identify intentional abuse, which has led to more correspondence examination instead of traditional \naudits. The current policies are inadequately targeted to low income taxpayers and insufficient by the \nIRS’s traditional deterrence measures.\n38.\tMichael B. Adamson, Earned Income Tax Credit: Path Dependence and the Blessing of Undertheorization, \n65 Duke L.J. 1439 (2016).\n“Some commentators have lamented that the Earned Income Tax Credit (EITC) is undertheorized—\nthat its purpose is unclear—and that its design is therefore suboptimal. This Note explores the credit’s \npath-dependent past, which has resulted in a present-day EITC that manifests a diverse, uncoordinated \nassortment of policy purposes. Although the EITC’s ambiguity of purpose may yield policy \ninefficiencies, this Note argues that it also produces significant political benefits that would-be reformers \nwho value the EITC’s many societal benefits should take into account before they attempt to enact any \nmajor overhaul.”\n39.\tMichelle Lyon Drumbl, Beyond polemics: Poverty, taxes, and noncompliance, 14 eJ. Tax Res. 253 (2016).\nDespite the many positive impacts, the EITC provides to children and families, it is hindered politically \nby its high improper payments rate. This article explains that improper payments are not the same \nas fraud (many improper payments may be due to unintentional mistakes). The article also critiques \nthe IRS’s administration and enforcement of the EITC. It provides a proposal to address these issues, \nand balance the IRS’s need for sufficient information and documentation to limit improper payments \nwithout unduly burdening low income taxpayers. As explained in the article’s abstract, the author \n“concludes that increasing due diligence requirements at the time of filing, coupled with slowing down \nthe refund process generally, is a reasonable way to improve administration of the EITC program \nwithout unduly burdening low-income taxpayers.”\n40.\tMichelle Lyon Drumbl, Tax Credits for the Working Poor: A Call for Reform (forthcoming 2019).\nThis book explores the EITC, its history, its present, and how to make it better. The author explains \nthe reasoning behind the EITC as a tax credit for the working poor and why the U.S. uses it to address \npoverty. The book further critiques the administration of the credit and reviews several case studies to \nexamine how other countries have designed and administer similar programs.\n41.\tMichelle Lyon Drumbl, Those Who Know, Those Who Don’t, and Those Who Know Better: Balancing \nComplexity, Sophistication, and Accuracy on Tax Returns, 11 Pitt. Tax Rev. 113 (2013). \n“By statute, taxpayers have the right to contest the accuracy-related penalty by demonstrating that \nthere was reasonable cause for the underlying error and the taxpayer acted in good faith. Treasury \nregulations provide that such a circumstance might include ‘an honest misunderstanding of fact or \nlaw that is reasonable in light of all the facts and circumstances, including the experience, knowledge, \nand education of the taxpayer.’ Yet for all of these reasons—lack of experience, lack of knowledge, and \nrelative lack of education—the taxpayer is unlikely to have the knowledge or resources to raise the very \ndefense that is meant to protect an unsophisticated taxpayer. \n“Drawing comparisons between refundable tax credits and social programs administered by other \nagencies, this article calls upon the IRS to better differentiate between inadvertent error (‘those who \ndon’t know’) and intentional or fraudulent error (‘those who know better’). The article argues that the \ncurrent accuracy-related penalty approach is unduly punitive. It concludes by proposing solutions that \n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n91\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nthe IRS might consider in light of Congress’s desire for the Service to administer these social benefits \nthrough the Internal Revenue Code.”\n42.\tNina E. Olson, Procedural Justice for All: A Taxpayer Rights Analysis of IRS Earned Income Credit \nCompliance Strategy, in Advances in Taxation 1-35 (John Hasseldine ed., 2015).\nThis article discusses the tax system as a vehicle for delivering benefits to low income families. It looks \nat the system from a taxpayer rights perspective. The article especially analyzes how the IRS handles its \nEITC compliance strategy in the context of taxpayer rights.\n43.\tRaj Chetty, John N. Friedman & Emmanuel Saez, Using Differences in Knowledge Across \nNeighborhoods to Uncover the Impacts of the EITC on Earnings, 103 Am. Econ. Rev. 2683 (2013).\n“We estimate the impacts of the Earned Income Tax Credit on labor supply using local variation in \nknowledge about the EITC schedule. We proxy for EITC knowledge in a Zip code with the fraction of \nindividuals who manipulate reported self-employment income to maximize their EITC refund. This \nmeasure varies significantly across areas. We exploit changes in EITC eligibility at the birth of a child \nto estimate labor supply effects. Individuals in high-knowledge areas change wage earnings sharply to \nobtain larger EITC refunds relative to those in low-knowledge areas. These responses come primarily \nfrom intensive-margin earnings increases in the phase-in region.”\n44.\tRaj Chetty, John N. Friedman & Jonah Rockoff, New Evidence of the Long-Term Impacts of Tax \nCredits 31 (2011).\nThis piece analyzes the long term impacts of tax credits on child test scores and the impacts of those \ntest scores on children’s future potential achievements. The authors found that “a $1,000 increase \nin tax credits raises students’ test scores by 6% of a standard deviation, using our most conservative \nspecification.” The higher scores on average increase children’s “probability of college attendance, \nraise earnings, reduce teenage birth rates, and improve the quality of the neighborhood in which their \nstudents live in adulthood.” The authors suggest that these gains may in part offset the cost of providing \ncertain tax credits.\n45.\tSagit Leviner, The Role Tax Preparers Play in Taxpayer Compliance: An Empirical Investigation with \nPolicy Implications, 60 Buff. L. Rev. 1079 (2009).\nThis article investigated compliance trends and patterns, using software to look at tax return \ncharacteristics and how the return was prepared. The article concluded that there was a severe lack of \ndata on preparers, and this has led to a system where decisions are made despite little information on \nthe strength and weaknesses of preparers and tax preparation services. The author suggests that IRS \nstandards and supervision of Enrolled Agents should be reexamined. The author found, however, that \nthe compliant filing results for large national chains may suggest that industry self-regulation or guild \nstandards may be a complimentary tool to ensure an enhanced preparation industry. Even so, external \nstandards are likely to be more effective if properly applied and monitored.\n46.\tSara Sternberg Greene, The Broken Safety Net: A Study of Earned Income Tax Credit Recipients and a \nProposal for Repair, 88 N.Y.U. L. Rev. 515 (2013).\nThis article examines the EITC, looking at EITC recipients through in-depth qualitative interviews. \nThe article explains that it fails to act as an effective safety net for low income families. It provides \na once-a-year payment, despite low income families being the most vulnerable to financial instability \n",
"92\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nwhich may not overlap with tax season. Many families who are eligible for the EITC nevertheless may \nfile for bankruptcy or become homeless. The article provides a suggestion for how to distribute the \nEITC to better serve low income families weathering financial instability.\n47.\tSteve Holt, Periodic Payment of the Earned Income Tax Credit Revisited (2015).\nThis report reviews the author’s original EITC periodic payment proposal, examines emerging \nalternatives and addresses issues like the administrative feasibility, benefits and demand for various ways \nto deliver benefits outside of an annual lump sum delivery.\n48.\tSteve Holt, The Role of the IRS as a Social Benefit Administrator (2016).\nThis report examines the opportunities and obstacles associated with tax-administered assistance to low \nincome families in the United States, with a particular focus on the EITC. It discusses compliance and \nadministration challenges in light of its hybrid nature as both tax and social welfare program.\n49.\tTaylor Cranor, Jacob Goldin & Sarah Kotb, Does Informing Employees About Tax Benefits Increase \nTake-Up? Evidence from EITC Notification Laws (Stan. L. & Econ., Olin Working Paper No. 530, 2019).\nThe authors explain in the article abstract that “Incomplete take-up of the Earned Income Tax Credit \n(EITC) is a source of persistent policy concern, with an estimated one-fifth of eligible households failing \nto claim the credit. To promote take-up, a growing number of jurisdictions require employers to provide \nEITC information to employees. We study the effect of these requirements, linking state and time \nvariation in the adoption of the notification laws to administrative tax data. Our preferred specification \nyields precise null effects on EITC take-up, filing behavior, and labor force participation. The results \ncast doubt on the effectiveness of the notice requirements as implemented and suggest further research \ninto other avenues for increasing tax benefit take-up.”\n50.\tW. Edward Afield, A Market for Tax Compliance, 62 Clev. St. L. Rev. 315 (2014).\n“This piece seeks to lay the framework for how such a voluntary compliance certification program would \nwork and to discuss the benefits of such a system that are currently not being realized through the IRS’s \ncurrent regulation of paid preparers. Part II summarizes in brief the current regulatory landscape for \npaid preparers and illustrates that the current environment falls short in providing a mechanism to allow \nthe government to better direct its enforcement resources and to incentivize a culture of compliance \namong tax preparers and their clients. Part III describes in general terms how a voluntary compliance \ncertification system should be structured in order to achieve these benefits. Part IV describes in \ngreater detail the compliance and related gains that can be achieved through a voluntary compliance \ncertification system.”\n51.\tWilliam N. Evans & Craig L. Garthwaite, Giving Mom a Break: The Impact of Higher EITC Payments \non Maternal Health, 6 Am. Econ. J. Econ. Pol’y 258 (2014).\n“The 1993 expansions of the Earned Income Tax Credit created the first meaningful separation in \nbenefits between families containing two or more children and those with only one child. If income \nis protective of health, we should see improvements over time in the health for mothers eligible for \nthese higher EITC benefits. Using data from the Behavioral Risk Factors Surveillance Survey, we find \nimprovements in self-reported health for affected mothers. Using data from the National Health and \nNutrition Examination Survey, we find reductions in the probability of having risky levels of biomarkers \nfor these same women.”\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n93\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nANNUAL REPORT TO CONGRESS (MOST SERIOUS PROBLEMS AND LEGISLATIVE RECOMMENDATIONS) \nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEITC Eligibility \nDetermination Can Be \nMade Less Burdensome\nNTA 2002 \nAnnual \nReport 47-54 \nX\nThe IRS needs a verification (examination) process to validate eligibility for the EITC and forms of documentation \nshould be required, as appropriate.\nThe IRS must understand and meet the needs of the increasingly diverse low income taxpayer community and \nadapt documentation requirements that assist eligible taxpayers in validating EITC claims.\nThe IRS should seek to train employees to take a common sense approach when applying the intent of the law \nand to make eligibility decisions accordingly.\nThe IRS should, during contacts, focus on educating low income taxpayers and their representatives.\nProcedures For \nExamining EITC Claims \nCause Hardship and \nInfringe on Appeal Rights\nNTA 2002 \nAnnual \nReport 55-63 \nX\nThe National Taxpayer Advocate strongly recommends that the IRS task force propose the release of the \nundisputed portion of the taxpayer refund during return processing and direct its efforts to immediate \nimplementation.\nThe IRS should devote additional resources to taxpayer outreach concerning the issue of taxpayers not \nresponding to EITC examinations.\nThe use of the “Combo” letter should be discontinued, and Publication 3498 should be rewritten to more clearly \ndescribe the appeals process.\nLack of Response During \nEITC Exams\nNTA 2002 \nAnnual \nReport 64-68 \nX\nWe suggest that the IRS take telephone numbers from taxpayers at any point in the examination process when \nthey wish to be contacted by the examiner.\nReviewing telephone activity reports in conjunction with local Quality Review staff assessments may help ensure \ncompliance with RRA98.\nMore emphasis should be placed on contacting third parties to validate EITC claims regarding eligibility \ndeterminations.\nIRS Oversight of EITC \nReturn Preparers Can Be \nImproved\nNTA 2002 \nAnnual \nReport 69-74\nX\nThe IRS can place more emphasis on enforcing the requirements of IRC § 6695(g).\nThe IRS must take the lead in assuring that paid preparers are adequately trained and updated on tax law \nchanges and that unscrupulous preparers are not allowed to continue their unethical, illegal practices.\nThe IRS must undertake a significant consumer education campaign so that low income taxpayers are able to \nmake informed choices between tax preparers and tax preparation products.\nThe National Taxpayer Advocate proposed a legislative certification scheme to establish standards and \nprocedures to regulate and certify tax return preparers.\nThe Length of EITC \nAudits Contributes to \nTaxpayer Concerns\nNTA 2002 \nAnnual \nReport 75-80\nX\nConduct research to better understand and address the reasons for a high “no response” rate in EITC audit \nprocess to increase taxpayer participation and improve audit results.\nIf the results of the Federal Case Registry Study (evaluating data used in the Dependent Database) show that \nthe states data is not reliable, the IRS should devise a backup plan that will reduce the timeframe for holding \nrefunds.\nThe National Taxpayer Advocate strongly supports the IRS implementing partial refund release during processing.\ncontinued\nAPPENDIX 4:\t Published TAS Works on EITC\n",
"94\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEITC Recertification \nCompounds Taxpayer \nBurden\nNTA 2002 \nAnnual \nReport 81-87\nX\nThe IRS Publication 596, Earned Income Credit, and the EITC instructions should contain a section entitled “What \nYou May Have to Furnish the IRS if Your EITC Eligibility is Questioned.”\nInclude Form 8862 in Form 1040 series tax packages for the particular taxpayers who are required to recertify, \nusing the recertification indicator as a trigger. Alternatively, target a mailing of the form to the appropriate \ntaxpayers.\nThe IRS should consider generating to all taxpayers whose accounts have recertification indicator “1” a letter \nexplaining the recertification process, including their right to appeal, and enclosing the blank Form 8862. The \nmailing should advise the taxpayer of the circumstances in which to attach the completed Form 8862 to the \nsubsequent year tax return.\nThe IRS should consider allowing the Service Center Error Resolution Function to correspond for missing Forms \n8862 rather than to immediately disallow the EITC using the math error procedures.\nThe IRS should require tax examiners to simultaneously address all open tax returns claiming EITC to prevent \ntaxpayers having to submit some of the same information numerous times to different employees and to prevent \nvarious determinations being made.\nRemoval of any expired or erroneous recertification indicators from a taxpayer’s account is critical to normal \nprocessing since failure to do so unnecessarily delays the refund. It is commendable that programming to \nalleviate the problem of erroneous indicators is scheduled for 2004. However, in the interim, we encourage the \nIRS to emphasize the importance of manually removing the indicators with IRS campuses based on monthly \nreports.\nEarned Income Tax \nCredit Exam Issues\nNTA 2005 \nAnnual \nReport \n94-122\nX\nContinue developing correspondence (including letters, publications, and document requests) that will lessen \ntaxpayer confusion and generate a greater response from taxpayers during the examination process.\nEnsure that procedures are in place so that taxpayer correspondence is timely processed and acknowledged.\nContinue to develop research initiatives and recommendations to improve the administration of the EITC program, \nincluding the TAS study to evaluate the impact of representation on the outcome of EITC audits and the study to \nidentify the most significant barriers taxpayers encounter during EITC audits.\nEnsure that all employees receive clear guidance and training on the application of the two and ten year EITC \nrecertification bans.\nContinue developing new processes (such as the use of alternative methods of documentation, the decision \nsupport tool, and encouraging examiners to use judgment) that will ease the burden taxpayers encounter when \ntrying to provide the IRS with the requested documentation during the exam process.\nContinue to train EITC examination employees, utilizing real case examples (including TAS cases), on the \nimportance of using judgment when deciding whether to allow or deny an EITC claim.\nUse “universal access” in EITC cases to enable any Exam employee to access a taxpayer’s case and take \nthe steps necessary to resolve the case, including consolidating all EITC issues pertaining to that taxpayer—\nexamination, audit reconsideration, and recertificatio —under one employee.\ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n95\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEITC Examinations and \nthe Impact of Taxpayer \nRepresentation\nNTA 2007 \nAnnual \nReport \n222-241\nX\nConduct additional testing on the use of affidavits in examinations.\nExpand the use of the affidavit to all EITC examinations.\nTest other potential methods of proof in IRS examinations to determine which methods are most accurate and \nbest suited for meeting IRS and taxpayer needs.\nProvide continual training to examiners on the topic of exercising “judgment” in taxpayer cases using real case \nexamples.\nMake additional attempts to obtain taxpayer telephone numbers for follow up contact in resolving cases.\nReplace boilerplate language in correspondence with taxpayer-specific information explaining what that specific \ntaxpayer needs to do to resolve his or her case.\nMake IRS correspondence, forms and publications available in languages besides English and Spanish.\nExpand the interpretation services available on the toll-free telephone lines.\nIncrease publicity about the Alternative Media Center and taxpayers’ ability to obtain Braille copies of forms and \npublications.\nGive taxpayers the option of specifying that they would like to receive correspondence in Braille, particularly in the \ncontext of IRS compliance activity.\nReexamine current guidance regarding the transfer of cases from the campus to field offices to ensure that in \ncases where a face-to-face meeting or local knowledge is helpful in resolving the case, taxpayer’s requests for a \ntransfer are not ignored due to resource and statute of limitations issues.\nIdentify additional publications and notices that would benefit from the inclusion of language related to the LITCs \nand TAS.\nWork with Field Assistance to determine when taxpayers should be referred to a TAC in cases where they may \nneed assistance in obtaining documentation necessary to resolve their cases.\nThe IRS Should \nReevaluate Earned \nIncome Tax Credit \nCompliance Measures \nand Take Steps to \nImprove Both Service \nand Compliance\nNTA 2011 \nAnnual \nReport \n296-312\nX\nPrepare and disclose a full report on its current and prior EITC noncompliance studies, similar to that reporting \non 1999. among other things, this report should disclose assumptions within the methodology as well as data for \ncontinued update of the EITC improper payment estimate, which needs to become transparent in light of policies \nit may generate.\nUtilize external data only as an indicator for the risk of noncompliance, so that taxpayers retain their right to have \nan opportunity to present his or her own facts, a right not subject to compromise by an IRS business decision.\nSend correspondence in plain language by implementing the revised initial contact letter (letter 566) and \nbeginning revision of the other high-volume letters used in correspondence examinations as discussed (in the \n2011 MSP) by January 2013.\ncontinued\n",
"96\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEarned Income Tax \nCredit: The IRS \nInappropriately Bans \nMany Taxpayers from \nClaiming EITC\nNTA 2013 \nAnnual \nReport \n103-115\nX\nImmediately suspend the application of IRM provisions (e.g., IRM 4.19.14.6.1.5) that permit automatic imposition \nof the two-year EITC ban or require the taxpayer to show why the ban should not be imposed.\nIn collaboration and consultation with the National Taxpayer Advocate, include on the Treasury Guidance Priority \nList regulations that explain when the IRS should impose EITC bans.\nRevise, in consultation with the National Taxpayer Advocate, the IRM provisions on the two year ban to take \ninto account what is reasonable to expect of taxpayers who claim EITC. At a minimum, before imposing the \ntwo-year ban, examiners should be required to: a. Attempt to speak with the taxpayer; b. Determine whether \nthe substantiation the taxpayer submitted is probative of the EITC claim or shows a sincere effort to prove \nthe elements of EITC, even if the documentation is not listed in the IRM as acceptable substantiation or the \ndocumentation is insufficient, and c. Consider the role, if any, of a paid preparer in claiming disallowed EITC.\nConduct quality reviews of every case in which the IRS proposes to impose the two-year ban. One hundred \npercent quality reviews should continue for at least three years and until the IRS’s failure to adhere to the terms \nof the statute and the IRM is corrected.\nAllocate to the IRS \nthe Burden of Proving \nit Properly Imposed \nthe Two-Year Ban on \nClaiming the Earned \nIncome Tax Credit\nNTA 2013 \nAnnual \nReport \n311-315\nX\nThe National Taxpayer Advocate recommends that Congress amend IRC § 32(k) to provide that the IRS has the \nburden of proof as to whether it is appropriate to impose the two-year ban on claiming EITC.\nEarned Income Tax \nCredit (EITC): The IRS \nDoes Not Do Enough \nTaxpayer Education \nin the Pre-filing \nEnvironment to Improve \nEITC Compliance and \nShould Establish a \nTelephone Helpline \nDedicated to Answering \nPre-filing Questions From \nLow Income Taxpayers \nAbout Their EITC \nEligibility\nNTA 2015 \nAnnual \nReport \n240-247\nX\nConduct a study along the lines of the UK experiment to determine how best to serve low income taxpayers. \nThis study should include interviews with taxpayers, nonprofit organizations, and IRS employees, to learn about \ntaxpayer needs and communication preferences.\nBased on the findings from the proposed study above, create a helpline dedicated to taxpayers who claim the \nEITC where taxpayers can call in and ask questions about their particular area of concern. This phone line should \nbe staffed by employees with excellent listening and communication skills who have completed training in social \nwork and who can answer specific questions related to EITC eligibility. The IRS should provide, in conjunction with \nTAS, special training on listening and communication.\ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n97\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEarned Income Tax \nCredit (EITC): The IRS \nIs Not Adequately Using \nthe EITC Examination \nProcess As an \nEducational Tool and \nIs Not Auditing Returns \nWith the Greatest \nIndirect Potential \nfor Improving EITC \nCompliance\nNTA 2015 \nAnnual \nReport \n248-260\nX\nConduct an EITC pilot with three different treatments: a regular correspondence examination, an office audit, and \na correspondence examination with one auditor assigned. The pilot should measure the following: direct time on \ncase, no response/drop-out rate, agreed to rate, audit reconsideration rate, and future compliance rate.\nWhen an EITC taxpayer calls the IRS with information in response to an audit, one employee should be assigned \nto the taxpayer’s case until it is resolved. If the taxpayer calls back, he or she could have the option to speak to \nthe next available employee or wait for the assigned employee to call back. The IRS should hire employees with a \nsocial work background or train existing auditors to conduct the audits.\nUse NRP data to design a formula for workload selection in addition to (or incorporated into) the DDb that will \nreach the audits with the most impact for taxpayer education and improvement to future compliance. This would \ninclude qualifying child errors that involve the residency test.\nRevise the IRM with the list of additional documentation listed in the TAS IGM, as well as IRM updates about \naccepting alternative EITC substantiating documentation.\nPublish and accept Form 8836, Third Party Affidavit, for purposes of substantiating the residency requirement for \na qualifying child.\nCollaborate with TAS to draft IRM guidance requiring correspondence examiners to adjust accounts for \nthe childless worker credit when the taxpayer is ineligible for the EITC with children. This should be done \nautomatically without requiring the taxpayer to request the credit.\nEarned Income Tax \nCredit (EITC): The IRS’s \nEITC Return Preparer \nStrategy Does Not \nAdequately Address the \nRole of Preparers in EITC \nNoncompliance\nNTA 2015 \nAnnual \nReport \n261-283\nX\nRelease the annual analysis for the EITC Return Preparer Strategy to the public, including the measures used to \nevaluate the effectiveness of the strategy.\nInclude TAS as a member of the EITC Return Preparer Strategy team.\nIn collaboration with TAS and other IRS functions, and based on this annual analysis, determine where to focus \nresources and how to measure success with a multiyear analysis.\nIncorporate preparer referrals, both from internal and external sources, and preparers who misuse PTINs, as a \nselection criterion for compliance treatment in the EITC Return Preparer Strategy.\nUse measures for evaluating the effectiveness of the strategy on an annual basis that are not limited to \nmeasuring protected dollars or return on investment, but also include a year-to-year analysis of the preparer’s \nbehavior following treatment.\nTailor outreach specifically to the unenrolled preparer population that addresses due diligence requirements and \nis presented where these preparers operate. This outreach should incorporate TV and radio, as well as social \nmedia.\nConduct a creative, geographic-based public education campaign in conjunction with other internal and external \nstakeholders including public service advertisements, videos, and tweets in order to educate taxpayers on how to \nselect a competent preparer, what the rules of due diligence require, and the consequences of using an unskilled \nor unscrupulous preparer, including identity theft. Different marketing approaches should be tested and studied to \ntrack EITC compliance over the years.\nEarned Income Tax \nCredit (EITC): The Future \nState’s Reliance on \nOnline Tools Will Harm \nEITC Taxpayers\nNTA 2016 \nAnnual \nReport \n138-150\nX\nAmend Internal Revenue Manual 4.19.14.5.4, EITC Qualifying Child, to allow an IRS employee to use a state \nagency’s determination that a taxpayer has qualified for Temporary Assistance for Needy Families, Section 8 or \ncomparable benefits, as substantiation for EITC with a qualifying child.\nHire or train employees with social work skillsets in order to meet the needs of taxpayers claiming the EITC.\nPostpone its planning of any EITC Future State technology until the TDC data is available. Instead, the IRS should \ninvest its resources into person-to-person communication for EITC taxpayers, including a dedicated “Extra Help” \nline for EITC taxpayers.\ncontinued\n",
"98\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nTax Reform: Restructure \nthe Earned Income \nTax Credit and Related \nFamily Status Provisions \nto Improve Compliance \nand Minimize Taxpayer \nBurden\nNTA 2016 \nAnnual \nReport \n325-357\nX\nRequire the IRS to revise its mission statement to re-emphasize a service-oriented, non-coercive approach to tax \nadministration, recognize the dual roles of revenue collector and benefits administrator, and explicitly affirm the \nrole of the Taxpayer Bill of Rights as the guiding principle for tax administration.\nConsolidate the numerous family status provisions into two: the refundable Family Credit, which would reflect the \ncost of maintaining a household and raising a family; and the refundable Earned Income Tax Credit, which would \nbe awarded per individual worker and provide a work incentive and subsidy for low income workers.\nRepeal the personal and dependency exemptions, Child Tax Credit/Additional Child Tax Credit, Head of Household \nfiling status, and the family-size differential of the EITC, all of which would be replaced by the Family Credit.\nMake the Family Credit available to all taxpayers regardless of income and refundable to low income taxpayers; \nthe Family Credit would consist of a Personal Credit (for taxpayer and spouse) and a Child Credit available to \neligible individuals claiming a “qualifying child” or “qualifying relative” (subject to tie-breaker rules).\nAmend the Qualifying Relative test of IRC § 152(d)(2)(H) to provide a child must share the same principal place \nof abode as the taxpayer and be a member of the taxpayer’s household for more than six months of the taxable \nyear.\nProvide for certain add-on credits under the Family Credit for child and dependent care, disabled taxpayers or \nfamily members, and consider providing for noncustodial parents of qualifying children who pay substantially all \nchild support legally due for that tax year.\nAmend IRC § 152(d)(1)(D) to provide the term “qualifying relative” includes an individual “who is not claimed as \na qualifying child of such taxpayer or any other taxpayer for any taxable year in the calendar year in which such \ntaxable year begins.”\nAmend IRC § 152(f ) to provide a definition of “support” that excludes any means-tested federal, state, or local \nbenefits paid on behalf of or for the benefit of the qualifying child or qualifying relative.\nExpand the eligibility age for the modified refundable EITC to include workers 18 years of age and older, with no \nage cap.\nAmend IRC § 7703(b) to permit taxpayers who have a legally binding separation agreement and who live apart on \nthe last day of the tax year to be considered “not married” for purposes of filing status.\nAmend IRC § 6402 to limit offsets of refunds attributable to the Family Credit and EITC to 25 percent of the \ntaxpayer’s refundable portion of these credits.\nAmend IRC § 6402 to authorize the IRS to calculate overpayments and make refunds with respect to the new per-\nworker EITC refundable credit, where the taxpayer’s reported income demonstrates eligibility and the taxpayer has \nnot claimed the credit on his or her return.\nMandate the IRS assign one employee to each audit involving a questionable Family Credit claim where the \ntaxpayer has responded (by phone or in writing) to an IRS audit notice.\nMandate the IRS establish a dedicated, year-round toll-free help line staffed by IRS personnel to respond to \nFamily Credit questions.\ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n99\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nAnnual Report to \nCongress Piece\nTAS \nPublication\nAdministrative\nLegislative\nTAS Recommendations\nEarned Income Tax \nCredit (EITC): The IRS \nContinues to Make \nProgress to Improve Its \nAdministration of the \nEITC, But It Has Not \nAdequately Incorporated \nResearch Findings That \nShow Positive Impacts \nof Taxpayer Education on \nCompliance\nNTA 2017 \nAnnual \nReport \n141-150\nX\nSend out pre-filing season letters to taxpayers who break certain return filters. These letters should be written in \nplain language and be tailored to the taxpayer’s particular needs.\nProvide a dedicated toll-free Help line for EITC taxpayers during the filing season.\nExpand the list of acceptable documentation under IRM 4.19.14-1 and train employees on the importance of this \nlist.\nContinue to expand the use of third-party affidavits, thereby making them available to all EITC taxpayers.\nImproper Earned Income \nTax Credit Payments: \nMeasures the IRS Takes \nto Reduce Improper \nEarned Income Tax \nCredit Payments Are Not \nSufficiently Proactive \nand May Unnecessarily \nBurden Taxpayers\nNTA 2018 \nAnnual \nReport \n91-104\nX\nSeek a permanent exemption from the requirement that the IRS include recovered EITC payments in the EITC \nimproper payment estimate.\nCollaborate with TAS to identify a method of identifying taxpayers who do not claim EITC but are eligible for the \nchildless worker EITC, and automatically award the childless worker credit to those taxpayers.\nCollaborate with TAS to identify the changes to Form 1040 that would be needed, and the data gathering \ntechniques that could be employed, to award EITC to taxpayers who are eligible for EITC with respect to a \nqualifying child but do not claim it on their returns.\nCollaborate with TAS Research in designing and conducting the planned study to compare prior EITC audit results \nto audit results of taxpayers who used affidavits to establish that they met the residency requirement.\nRevise soft notices that are sent to taxpayers advising them they may have claimed EITC in error to explain \nthe error the taxpayer appears to have made (e.g., not meeting the residency requirement or the relationship \nrequirement, misreporting income or deductions).\nEstablish a dedicated, year-round toll-free “help line” staffed by IRS personnel trained to respond to EITC and \nChild Tax Credit questions.\nIn soft notices to taxpayers advising them that they may have claimed EITC in error, include the dedicated \ntelephone “help line.”\n",
"100\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nVOLUME 2 STUDIES\nVolume 2 Study\nTAS \nPublication\nTAS Recommendations\nEarned Income Tax \nCredit (EITC) Audit \nReconsideration Study\nNTA 2004 \nAnnual Report \nvol. 2 1-82\nImprove communication with taxpayers during the initial audit.\nConsider increasing telephone usage throughout the audit process.\nProvide taxpayers with assistance in securing documentation.\nIRS Earned Income Credit \nAudits -- A Challenge to \nTaxpayers\nNTA 2007 \nAnnual Report \nvol. 2 94-116\nIncrease taxpayer awareness of the legal assistance available at LITCs.\nEnsure all correspondence during the EIC audit provides taxpayers with references for contacting a LITC.\nInform taxpayers of the closest LITC. Since these locations change annually, taxpayers could be instructed to call TAS if the LITC is no longer \nparticipating in the program.\nIf a taxpayer cannot provide all requested documentation to verify EIC eligibility, and the IRS has no information to dispute the EIC claim, allow \nthe taxpayer to provide an affidavit from an IRS approved source to prove EIC eligibility.\nAssign one worker to each EIC audit. Provide the worker’s name, phone number, and address in all correspondence with the taxpayer.\nCall taxpayers, whenever possible, to see if verbal communication can resolve any miscommunication.\nRevise EIC audit letters. Letters should be written to address the taxpayers’ personal tax return and should specifically state that the \ntaxpayers’ tax return is being audited. The letters should clearly list the specific issues of the audit and explain what the taxpayer must do to \nresolve each issue, and should also explain how the documentation relates to the issue in question.\nProvide timely acknowledgements to all documentation and materials received from the taxpayer.\nInform taxpayers of the right to a face-to-face audit and what steps must be taken to request the audit be changed to face-to-face.\nProvide a check sheet that taxpayers can use to guide them in securing the proper documents and steps needed to validate their eligibility.\nSimulating EITC Filing \nBehaviors: Validating Agent \nBased Simulation for \nIRS Analyses: The 2004 \nHartford Case Study\nNTA 2007 \nAnnual Report \nvol. 2 118-136\nN/A\nStudy of Tax Court Cases \nin Which the IRS Conceded \nthe Taxpayer Was Entitled \nto Earned Income Tax Credit \n(EITC)\nNTA 2012 \nAnnual Report \nvol. 2 72-104\nThe National Taxpayer Advocate recommends that the IRS revise the IRM, incorporate rules similar to the interim guidance issued to TAS \nemployees, and train Tax Examiners accordingly. Specifically, the IRS should train Tax Examiners to clearly explain to taxpayers why the \nIRS needs documents, to determine the type of records the taxpayer possesses that could corroborate the claim, and to consider whether \nalternative documentation might suffice when traditional records are not available.\nIn cases in which two taxpayers claim the same qualifying child, the IRS should train examiners to consider allowing taxpayers more time to \nsubmit documents before issuing the statutory notice of deficiency.\nThe National Taxpayer Advocate calls upon the IRS to recognize that the EITC is a very complex statute, such that its employees must be \ntrained in the law, not just “if-then” scenarios. Therefore, she recommends that the IRS use higher-graded employees with higher education \nrequirements to handle these cases.\ncontinued\n",
"Taxpayer Advocate Service — Special Report to Congress — Volume Three \n101\nIntroduction\nRestructure the \nEITC As Two Credits\nEstablish Greater \nIRS Oversight \nLimit Summary \nAssessment Authority\nEnsure Comparable \nProtections\nAppendices\nVolume 2 Study\nTAS \nPublication\nTAS Recommendations\nStudy of Subsequent Filing \nBehavior of Taxpayers Who \nClaimed Earned Income Tax \nCredits (EITC) in Error and \nWere Sent an Educational \nLetter From the National \nTaxpayer Advocate\nNTA 2016 \nAnnual Report \nvol. 2 32-52\nSend letters similar to the TAS letter to EITC claimants the IRS does not have current plans to audit, particularly where: \na. The EITC claimant does not appear to meet the relationship requirement for claiming EITC, because such a letter appears to prevent \ntaxpayers from repeating the error of not meeting the relationship test; or \nb. Another taxpayer claimed EITC with respect to the same qualifying child or children, because such a letter appears to prevent taxpayers \nfrom claiming EITC on a later return, thus averting noncompliance for those taxpayers and reducing the IRS’s potential audit inventory.\nConduct a study to determine why audits of taxpayers whose 2014 return appeared to contain a duplicate claim for EITC do not prevent \ntaxpayers from making different errors on a subsequent return.\nExplore how letters similar to the TAS letters can help educate taxpayers about the requirements for claiming EITC. For example, the National \nTaxpayer Advocate will continue to try and measure the educational effect of such letters by revising the TAS letters to include a telephone \nnumber taxpayers can call for assistance and repeating this study in future years.\nStudy of Subsequent Filing \nBehavior of Taxpayers Who \nClaimed Earned Income Tax \nCredits (EITC) Apparently \nIn Error and Were Not \nAudited But Were Sent an \nEducational Letter From the \nTaxpayer Advocate Service, \nPart 2: Validation of Prior \nFindings and the Effect \nof an Extra Help Phone \nNumber and a Reminder of \nChildless-Worker EITC\nNTA 2017 \nAnnual Report \nvol. 2 14-40\nThe IRS should send letters similar to the TAS letter (described in this TAS study) to EITC claimants the IRS does not have current plans to \naudit, to taxpayers who appear not to have met the residency test. Include in the letter an extra help phone number taxpayers can call to \nspeak directly with an IRS employee, because this year’s study shows that doing so resulted in more taxpayers claiming the childless-worker \nEITC (compared to the prior year’s TAS letter that did not mention the possibility of the childless worker EITC) and averted erroneous EITC \nclaims in this study, while an educational letter without the extra help number did not affect the rate at which these taxpayers claimed EITC in \nerror or the rate at which they claimed the childless-worker EITC.\nThe IRS should send letters similar to the TAS letter (described in this TAS study) to EITC claimants the IRS does not have current plans to \naudit, to taxpayers who appear not to have met the relationship test, because such a letter appears to prevent these taxpayers from claiming \nEITC in error.\nThe IRS should send letters similar to the TAS letter (described in this TAS study) to EITC claimants the IRS does not have current plans to \naudit, to taxpayers who appear to have claimed EITC with respect to the same qualifying child or children as another taxpayer. Include in the \nletter an extra help phone number because while it is unknown whether the extra help phone number would avert noncompliance, it is known \nthat an educational letter alone does not affect the rate at which these taxpayers claim EITC in error.\n",
"102\nAppendices\nAppendices\nEnsure Comparable \nProtections\nLimit Summary \nAssessment Authority\nEstablish Greater \nIRS Oversight \nRestructure the \nEITC As Two Credits\nIntroduction\nOBJECTIVES REPORT TO CONGRESS\nObjectives Report to Congress Piece\nTAS Publication\nAdvocacy Initiative: Earned Income Tax Credit\nNTA 2004 Objectives Report 6-9 \nTAS Research Initiative: Earned Income Tax Credit (EITC) Audit Effectiveness\nNTA 2011 Objectives Report 67-68\nArea of Focus: TAS’s Continued Advocacy Efforts to Improve the Earned Income Tax Credit Program\nNTA 2012 Objectives Report 7-9\nCase Advocacy: Improving Advocacy in TAS Earned Income Tax Credit Cases\nNTA 2012 Objectives Report 7-9\nTAS Research Initiative: Earned Income Tax Credit (EITC) Examination Effectiveness\nNTA 2013 Objectives Report 56-57\nArea of Focus: The Earned Income Tax Credit is an Effective Anti-Poverty Tool That Requires a Non-Traditional Compliance \nApproach by the IRS\nNTA 2015 Objectives Report 123-128\nArea of Focus: Earned Income Tax Credit Reform Could Reduce the EITC Improper Payment Rate Without Reducing \nParticipation by Eligible Taxpayers\nNTA 2017 Objectives Report 113-118\nArea of Focus: TAS Continues to Pursue Improvements to the IRS’s Administration of the Earned Income Tax Credit \n(EITC), Particularly With Recent Changes to the Law\nNTA 2018 Objectives Report 61-69\nEarned Income Tax Credit (EITC): The IRS Continues to Make Progress to Improve Its Administration of the EITC, But It \nHas Not Adequately Incorporated Research Findings That Show Positive Impacts of Taxpayer Education on Compliance\nNTA 2019 Objectives Report vol. 2 120-124\n",
"",
"Publication 4054-D (Rev. 6-2019) Catalog Number 72694G Department of the Treasury Internal Revenue Service www.irs.gov\nwww.TaxpayerAdvocate.irs.gov\n"
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p4054c.pdf
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0619 Publ 4054-C (PDF)
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https://www.irs.gov/pub/irs-pdf/p4054c.pdf
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"Objectives Report \nto Congress\nNATIONAL TAXPAYER ADVOCATE\nFiscal Year 2020\nwww.TaxpayerAdvocate.irs.gov/ObjectivesReport2020\nIRS Responses and National Taxpayer Advocate’s Comments Regarding \nMost Serious Problems Identified in the 2018 Annual Report to Congress\nVolume 2\n",
"",
"Table of Contents\nTable of Contents\nINTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1\nIRS AND TAS RESPONSES\nThe Prefiling Stage: Taxpayer Access to Information\n1.\t\nTAX LAW QUESTIONS: The IRS’s Failure to Answer the Right Tax Law Questions \nat the Right Time Harms Taxpayers, Erodes Taxpayer Rights, and Undermines \nConfidence in the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3\n2.\t\nTRANSPARENCY OF THE OFFICE OF CHIEF COUNSEL: Counsel Is Keeping \nMore of Its Analysis Secret, Just When Taxpayers Need Guidance More than Ever . . . . . . . . . . . . 7\n3.\t\nNAVIGATING THE IRS: Taxpayers Have Difficulty Navigating the IRS, Reaching \nthe Right Personnel to Resolve Their Tax Issues, and Holding IRS Employees Accountable . . . . 13\nThe Return Filing Process: Balancing Ease and Efficiency with Revenue Protection\n4.\t\nFREE FILE: The IRS’s Free File Offerings Are Underutilized, and the IRS Has \nFailed to Set Standards for Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18\n5.\t\nFALSE POSITIVE RATES: The IRS’s Fraud Detection Systems Are Marred by \nHigh False Positive Rates, Long Processing Times, and Unwieldy Processes Which \nContinue to Plague the IRS and Harm Legitimate Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26\n6.\t\nIMPROPER EARNED INCOME TAX CREDIT PAYMENTS: Measures the IRS \nTakes to Reduce Improper Earned Income Tax Credit Payments Are Not Sufficiently \nProactive and May Unnecessarily Burden Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32\n7.\t\nRETURN PREPARER OVERSIGHT: The IRS Lacks a Coordinated Approach \nto Its Oversight of Return Preparers and Does Not Analyze the Impact of Penalties \nImposed on Preparers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41\nThe Examination Process: Minimizing Taxpayer Burden in the Selection and Conduct \nof Audits\n8.\t\nCORRESPONDENCE EXAMINATION: The IRS’s Correspondence Examination \nProcedures Burden Taxpayers and Are Not Effective in Educating the Taxpayer and \nPromoting Future Voluntary Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47\n9.\t\nFIELD EXAMINATION: The IRS’s Field Examination Program Burdens Taxpayers \nand Yields High No Change Rates, Which Waste IRS Resources and May Discourage \nVoluntary Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55\n10.\t OFFICE EXAMINATION: The IRS Does Not Know Whether Its Office \nExamination Program Increases Voluntary Compliance or Educates the Audited \nTaxpayers About How to Comply in the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62\n11.\t POST-PROCESSING MATH ERROR AUTHORITY: The IRS Has Failed to \nExercise Self-Restraint in Its Use of Math Error Authority, Thereby Harming Taxpayers . . . . . . . 68\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\ni\n",
"Table of Contents\nThe Notice Function: IRS Written Communication with Taxpayers\n12.\t MATH ERROR NOTICES: Although the IRS Has Made Some Improvements, \nMath Error Notices Continue to Be Unclear and Confusing, Thereby Undermining \nTaxpayer Rights and Increasing Taxpayer Burden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73\n13.\t STATUTORY NOTICES OF DEFICIENCY: The IRS Fails to Clearly Convey \nCritical Information in Statutory Notices of Deficiency, Making It Difficult for \nTaxpayers to Understand and Exercise Their Rights, Thereby Diminishing Customer \nService Quality, Eroding Voluntary Compliance, and Impeding Case Resolution . . . . . . . . . . . . 80\n14.\t COLLECTION DUE PROCESS NOTICES: Despite Recent Changes to Collection \nDue Process Notices, Taxpayers Are Still at Risk for Not Understanding Important \nProcedures and Deadlines, Thereby Missing Their Right to an Independent Hearing \nand Tax Court Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87\nThe IRS Collection Function: Minimizing Taxpayer Burden and Addressing Taxpayers’ \nAbility to Pay\n15.\t ECONOMIC HARDSHIP: The IRS Does Not Proactively Use Internal Data to \nIdentify Taxpayers at Risk of Economic Hardship Throughout the Collection Process . . . . . . . . 92\n16.\t FIELD COLLECTION: The IRS Has Not Appropriately Staffed and Trained Its \nField Collection Function to Minimize Taxpayer Burden and Ensure Taxpayer Rights \nAre Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99\n17.\t IRS’S AUTOMATED COLLECTION SYSTEM (ACS): ACS Lacks a Taxpayer-\nCentered Approach, Resulting in a Challenging Taxpayer Experience and Generating \nLess Than Optimal Collection Outcomes for the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106\n18.\t OFFER IN COMPROMISE: Policy Changes Made by the IRS to the Offer in \nCompromise Program Make It More Difficult for Taxpayers to Submit Acceptable Offers . . . . 114\n19.\t PRIVATE DEBT COLLECTION: The IRS’s Expanding Private Debt Collection \nProgram Continues to Burden Taxpayers Who Are Likely Experiencing Economic \nHardship While Inactive Private Collection Agency Inventory Accumulates . . . . . . . . . . . . . . . 119\nThe Litigation Stage: Access to Representation\n20.\t PRE-TRIAL SETTLEMENTS IN THE U.S. TAX COURT: Insufficient Access \nto Available Pro Bono Assistance Resources Impedes Unrepresented Taxpayers From \nReaching a Pre-Trial Settlement and Achieving a Favorable Outcome . . . . . . . . . . . . . . . . . . . . . 125\nSection Two—IRS and TAS Responses\nii\n",
"IRS and TAS Responses\nIntroduction\nINTRODUCTION\nHonorable Members of Congress:\nInternal Revenue Code (IRC) § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to \nprepare an Annual Report to Congress that, among other things, contains a summary of the Most \nSerious Problems encountered by taxpayers. For 2018, the National Taxpayer Advocate identified, \nanalyzed, and offered recommendations to assist the IRS and Congress in resolving 20 such problems.1\nIn this volume, we are publishing the IRS’s responses to our recommendations.\nBy way of background, IRC § 7803(c)(2)(B)(iii) requires the National Taxpayer Advocate to submit \nher reports “directly” to the House Committee on Ways and Means and the Senate Committee on \nFinance “without any prior review or comment from the Commissioner, the Secretary of the Treasury, \nthe Oversight Board, any other officer or employee of the Department of the Treasury, or the Office \nof Management and Budget.” This provision protects the independence of the National Taxpayer \nAdvocate’s perspective. For that reason, the Office of the Taxpayer Advocate does not share its \nrecommendations to address identified problems before its reports are submitted to the tax-writing \ncommittees.\nHowever, we believe it is important that Members of Congress and the taxpaying public have an \nopportunity to read and assess the IRS’s perspective on these issues. IRC § 7803(c)(3) provides \nthat when the National Taxpayer Advocate submits recommendations to the Commissioner, “[t]he \nCommissioner shall establish procedures requiring a formal response … within 3 months.” I submitted \nall recommendations in the “Most Serious Problems” section of the National Taxpayer Advocate’s \nreport to the Commissioner shortly after publication, and the Commissioner has fulfilled his statutory \nresponsibility by providing written responses to these recommendations.\nIn this volume, we present the problems, recommendations, and responses in the following format:\n■\n■A problem statement for each Most Serious Problem from the 2018 Annual Report;\n■\n■A summary analysis of the problem;2\n■\n■The National Taxpayer Advocate’s recommendations to address the problem;\n■\n■The IRS’s narrative response;\n■\n■The National Taxpayer Advocate’s comments on the IRS’s narrative response; and\n■\n■A table showing the IRS’s responses and actions relating to each recommendation along with the \nNational Taxpayer Advocate’s response.\n1\t\nSee National Taxpayer Advocate 2018 Annual Report to Congress, https://taxpayeradvocate.irs.gov/2018annualreport. \n2\t\nThe complete analysis of the problem is available in the full text of the 2018 Annual Report to Congress, posted at \nhttp://www.irs.gov/Advocate/Reports-to-Congress.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n1\n",
"IRS and TAS Responses\nIntroduction\nI hope you find these additional perspectives useful in understanding the major problems taxpayers \nencounter in their dealings with the IRS and in fulfilling your oversight responsibilities.\nRespectfully submitted,\nRespectfully submitted,\nNina E. Olson \nNational Taxpayer Advocate \nJuly 31, 2019\n2\nSection One—Introduction\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#1\n\t\n\u0007\nTAX LAW QUESTIONS: The IRS’s Failure to Answer the Right \nTax Law Questions at the Right Time Harms Taxpayers, Erodes \nTaxpayer Rights, and Undermines Confidence in the IRS\nPROBLEM\nIn 2014, the IRS implemented a policy to only answer tax law questions during the filing season, \nroughly from January through mid-April of any year. It justified this abrupt change in policy as a cost-\nsavings effort in a time of budget constraints. This change does not comport with an agency charged \nwith administering the tax law and focused on the customer experience.\nTaxpayers have ever-changing tax situations year-round. People move, open a business, close a business, \nget married, get divorced, have children, and experience many other life changes that affect their tax \nobligations. Forcing taxpayers into a 3.5-month window to ask questions or making it necessary for \nthem to seek advice from a third-party source can be frustrating and costly to the taxpayer and result in \neroded trust and confidence in the IRS.\nANALYSIS\nThe IRS designates certain tax law topics as out-of-scope, meaning it does not provide answers to \ntaxpayers who call or visit the IRS inquiring about those issues. The IRS does not track what taxpayers \nask about if the topic is out-of-scope. Failing to do so limits the ability of the IRS to determine if there \nis sufficient demand for information about a topic to consider declaring the topic in-scope. Providing \ntaxpayers timely and accurate answers to their tax law questions is crucial to helping taxpayers \nunderstand and meet their tax obligations and is fundamental to the right to be informed. If a taxpayer \ncannot find answers from the IRS, it undermines all taxpayer rights. Testing by TAS in spring and fall \nof 2018 revealed inconsistent service by the IRS in answering tax law questions on the phone. Despite \nassurances from the IRS that it would answer Tax Cuts and Jobs Act questions year-round, TAS test \ncalls revealed that employees were not able to answer even basic questions about the new tax law. The \nIRS has many tools available to meet the needs of taxpayers and ensure that taxpayers can find the \nassistance they need promptly. By meeting taxpayers where they are, whether on the phone or online, \nmore taxpayers will be able to get answers to their tax law questions.\nTAS RECOMMENDATIONS\n[1-1] Answer in-scope tax law questions year-round.\n[1-2] \u0007\nDeem all questions related to the new tax law as in-scope for a reasonable period of at least two \nyears and evaluate taxpayer demand prior to declaring topics out of scope.\n[1-3] \u0007\nTrack calls and contacts about out-of-scope topics and develop Interactive Tax Law Assistant \n(ITLA) scripts for frequently asked questions or consider declaring topics in-scope.\n[1-4] \u0007\nDevelop a method to respond to uncommon or complex questions (i.e., those that are out-of- \nscope for the phones and TACs) via email or call back to the taxpayer, such as utilizing artificial \nintelligence and pattern recognition.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n3\n",
"IRS and TAS Responses\nIntroduction\nIRS RESPONSE\nCurrently, the IRS provides tax law guidance year-round to taxpayers through a variety of applications \nand tools on IRS.gov. Taxpayers can find tax law information 24 hours a day, 7 days a week, at IRS.\ngov. Through IRS.gov, taxpayers have access to numerous Publications, Tax Topics, Frequently Asked \nQuestions, and Tax Trails. Many taxpayers are also able to find answers to common tax law questions \nwhile using guided tax software when self-preparing their return. \nOne of the self-service options on IRS.gov is the Interactive Tax Assistant (ITA) application, in which \ntaxpayers can easily work through a series of questions to obtain responses to their tax law questions. \nCurrently, there are over 40 ITA topics available. Annually we assess whether the existing ITA topics are \nstill relevant to current tax law and whether additional topics should be added. \nIn March 2018, with the implementation of the Tax Cuts and Job Act (TCJA), we began answering tax \nlaw questions on our toll-free telephone line and at the Taxpayer Assistance Centers (TACs) for those \ntaxpayers who had questions regarding the tax law changes. Since the TCJA legislation is the most \nsweeping change regarding tax law in over 30 years, representatives trained in tax law will continue to \nanswer in-scope tax reform inquiries through the end of calendar year 2019. We are currently evaluating \nour future in-scope TCJA tax law service delivery. Additionally, we will monitor and analyze data and \nfeedback on this service to improve the overall taxpayer experience.\nIn addition to the IRS.gov online services and the telephone and TAC services mentioned above, the IRS \nprovides tax law assistance on the telephone year-round for several subject areas, including Affordable \nCare Act, International, Tax\nExempt/Government Entities, Business Master File (Employment Tax), and \nSpecial Services (Disaster, Combat Zone, etc.). \nBeginning with the filing season for tax year 2018 returns, taxpayers may refer to the new Publication \n5307, Tax Reform Basics for Individuals and Families, and Publication 5318, Tax Reform What’s New for \nYour Business, for all tax reform changes. These documents provide an overall summary of the new tax \nlaw and provide information to assist taxpayers with filing concerns and questions. These documents \nare readily available for download on IRS.gov.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nMeeting the needs of taxpayers requires continually reviewing and revising strategies for answering \ntaxpayer questions. The National Taxpayer Advocate is pleased the IRS has agreed to implement or \nstudy the feasibility of most of the recommendations from this Most Serious Problem.\nHowever, the National Taxpayer Advocate is concerned that the IRS has only committed to answering \nin-scope tax reform inquiries through the end of this calendar year. The National Taxpayer Advocate \nstrongly encourages the IRS to answer all questions related to tax reform at least through the end of \ncalendar year 2020, thereby allowing taxpayers two full years to receive live, year-round assistance with \ntax reform questions. \nSection Two—IRS and TAS Responses\n4\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[1-1] \u0007\nAnswer in-scope tax law questions year-round.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by September 15, 2019.\nIRS Action\nTax law assistance is provided on the telephone year-round for several subject areas, including \nAffordable Care Act, International, Tax-Exempt/Government Entities, Business Master File \n(Employment Tax), and Special Services (Disaster, Combat Zone, etc.). The IRS will also continue \nto answer in-scope tax law calls related to Tax Cuts and Job Act (TCJA) after the conclusion of the \nfiling season. The IRS agrees to study the feasibility of providing year-round assistance through \ntelephone and TAC service channels for all in-scope tax law topics.\nThe IRS also provides guidance to taxpayers through IRS.gov, including access to numerous \nPublications, Tax Topics, Frequently Asked Questions, Tax Trails, and the Interactive Tax Assistant \n(ITA) application.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased the IRS will study the feasibility of returning to the \nprevious practice of answering in-scope tax law questions year-round on the phones. In 2018, \nmore than 17 million individual income tax returns were filed after the April 18 filing deadline. \nTaxpayers require assistance with tax law questions year-round, and it is important for the IRS to \nprovide it to meet taxpayer needs.\nTAS \nRecommendation\n[1-2] \u0007\nDeem all questions related to the new tax law as in-scope for a reasonable period \nof at least two years and evaluate taxpayer demand prior to declaring topics out of \nscope.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nEach year we identify a number of new tax law topics as in scope and provide training to our \ntelephone and face-to-face assistors. In attempting to serve as many taxpayers as possible with \nour limited resources, we are not able to include every tax topic as in-\nscope and still offer the \nvariety of account-related services sought by our taxpayers. \nWe do offer other alternatives for obtaining information on topics that are not in-scope. Currently, \nthe IRS provides tax law guidance year-round to taxpayers through a variety of applications and \ntools on IRS.gov. Taxpayers can find tax law information 24 hours a day, 7 days a week, at IRS.gov, \nwhere numerous Publications, Tax Topics, Frequently Asked Questions, and Tax Trails are located. \nMany taxpayers are also able to find answers to common tax law questions while using guided tax \nsoftware when self-\npreparing their return. \nWe continue to analyze our telephone and face-to-face demand and staffing needs to improve our \nservice to taxpayers. We will continue to seek input in determining topics to provide as in scope as \nwell as to review the development of ITA topics.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n5\n",
"IRS and TAS Responses\nIntroduction\nTAS \nResponse\nThe National Taxpayer Advocates understands that declaring all tax law questions in-scope at all \ntimes may not be practical in light of its existing resources. However, this recommendation is \nnarrowly focused on topics related to the TCJA. The National Taxpayer Advocate urges the IRS to \nconsider all TCJA questions in-scope for at least two years and to evaluate topic demand before \ndeclaring any TCJA topics out of scope.\nTAS \nRecommendation\n[1-3] \u0007\nTrack calls and contacts about out-of-scope topics and develop Interactive Tax Law \nAssistant (ITLA) scripts for frequently asked questions or consider declaring topics \nin-scope.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by September 15, 2019.\nIRS Action\nThe Interactive Tax Law Assistant (ITLA) is an internal tool used by assistors to answer tax law \nquestions while the Interactive Tax Assistant (ITA) is a similar tax law tool for use by taxpayers on \nIRS.gov. In developing ITA topics, we do look at factors such as the volume of taxpayer inquiries \nfor a tax law topic and new topics resulting from tax law changes, including those topics deemed \ncritical. \nWe agree on the importance of reviewing taxpayer contacts to determine the best approach for \nidentifying in-scope Tax Topics and scripts for Frequently Asked Questions. We will analyze and \ncollect data on out-of-scope topics to look for opportunities in determining in-scope and out-of-\nscope topics as appropriate.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased the IRS will implement this recommendation and looks \nforward to reviewing the results of the data collection.\nTAS \nRecommendation\n[1-4] \u0007\nDevelop a method to respond to uncommon or complex questions (i.e., those that \nare out-of- scope for the phones and TACs) via email or call back to the taxpayer, \nsuch as utilizing artificial intelligence and pattern recognition.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by September 15, 2019.\nIRS Action\nThe IRS agrees to study the feasibility of using Artificial Intelligence to assist in resolving inquiries, \nas this aligns with our Customer Experience Vision and Service Delivery Plan designed to provide \nour customers the best possible service within limited resources. The IRS will continue to provide \nguidance to taxpayers through a variety of other channels year-round, including on IRS.gov.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased that the IRS will research the possibility of using \nArtificial Intelligence to assist in answering taxpayer questions. She looks forward to the results of \nthis study.\nSection Two—IRS and TAS Responses\n6\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#2\n\t\n\u0007\nTRANSPARENCY OF THE OFFICE OF CHIEF COUNSEL: Counsel Is \nKeeping More of Its Analysis Secret, Just When Taxpayers Need \nGuidance More than Ever\nPROBLEM\nThe IRS Office of Chief Counsel (OCC) provides advice to headquarters employees called Program \nManager Technical Advice (PMTA). PMTAs must be disclosed to the public pursuant to a settlement \nwith Tax Analysts. Due to the Tax Cuts and Jobs Act (TCJA), taxpayers need prompt guidance now \nmore than ever. Notwithstanding their increased need for guidance, the OCC: (1) has been disclosing \nfewer PMTAs; (2) allows its attorneys to avoid disclosure by issuing advice as an email, rather than a \nmemo; (3) has not issued written guidance to its attorneys describing what must be disclosed as PMTA; \nand (4) has no systems to ensure all PMTAs are timely identified, processed as PMTAs, and disclosed.\nANALYSIS\nThe right to be informed is the first right listed in the Taxpayer Bill of Rights for good reason. If \ntaxpayers do not know the rules and why the IRS has adopted them, they cannot determine if they \nshould exercise their other rights (e.g., the right to challenge the IRS’s position and be heard or the right to \nappeal an IRS decision in an independent forum). Information about how the OCC interprets the law \nalso helps them avoid taking positions that would incur penalties or ensnare them in audits or litigation. \nIn its formal response to TAS, however, the OCC does not acknowledge that a function of its advice is \n“to inform taxpayers or practitioners about how it interprets the law,” and says its failure to do so “is not \na problem that taxpayers have” and “is not a serious problem encountered by taxpayers.” Accordingly, it \nhas declined to specify in writing what advice must be disclosed as PMTA, except to say that documents \nother than memoranda (e.g., email) need not be disclosed. It also has no procedures to ensure PMTAs \nare timely identified. The results are predictable. Although it released 68 PMTA following tax law \nchanges in 1998, it has released only 11 in 2018. Only one of these related to the TCJA, and it was \nreleased only because of a request by the IRS, not because of the settlement with Tax Analysts.\nTAS RECOMMENDATIONS\n[2-1] \u0007\nDevelop clear written guidance that defines when advice constitutes PMTA that must be \ndisclosed.\n[2-2] \u0007\nRequire disclosure of any advice that is, in substance, PMTA. For example, the OCC’s guidance \nshould not permit attorneys to withhold advice because of its form or mode of transmission (e.g., \nemail), because of the title of the recipient, or because a business unit does not want the advice to \nbe disclosed.\n[2-3] \u0007\nEstablish a written process to monitor whether advice that should be disclosed as PMTA is \nbeing identified and disclosed to the public in a timely manner. For example, consider aiming \nto disclose PMTAs no later than when the IRS issues guidance (e.g., FAQs, Publications, News \nReleases, IRMs, etc.) that reveals the agency’s position.\n[2-4] \u0007\nIncorporate the new PMTA guidance and monitoring procedures into the Chief Council \nDirectives Manual, distribute it at PMTA training classes, and release it to the public.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n7\n",
"IRS and TAS Responses\nIntroduction\nIRS RESPONSE\nThe Office of Chief Counsel (Counsel) provides formal written legal advice to program managers when, \nin the exercise of professional judgment, it is appropriate to the issues being considered, the context of \nthe request for advice, and the need of the office to set out a full, comprehensive analysis of an issue. \nCounsel agrees that it would be helpful to clarify the standards that should be considered in deciding \nwhether legal advice should be issued in a formal memorandum and will revise the Chief Counsel \nDirectives Manual (CCDM) to reflect those standards.\nCounsel fully complies with the Tax Analysts settlement when it releases formal written memorandum \nissued to program managers. Counsel attorneys do not provide formal advice to program managers by \nemail to avoid the release of legal advice to the public.\nOne of the examples cited by the National Taxpayer Advocate concerns legal advice on an issue that \narose out of the Tax Cuts and Jobs Act. The suggestion that the advice was not timely released is \nincorrect. The advice was deliberative in nature and a final decision about how to address the issue was \nmade in conjunction with the decision to issue Program Manager Technical Advice (PMTA). After that \ndecision was made, the PMTA was issued and immediately released.\nTaxpayers’ right to be informed is satisfied when the IRS provides guidance on how to comply with \nthe Code that is based on a correct and impartial interpretation of the law provided to those who are \ncharged with tax administration. Counsel is committed to serving taxpayers fairly and with integrity, \nand it accomplishes that goal in part by providing timely, accurate, and impartial legal advice to the IRS.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate is pleased that Counsel has agreed to revise the CCDM to clarify \nthe standards that should be considered in deciding whether legal advice should be issued in a formal \nmemorandum that will be released as PMTA. She is puzzled, however, about why the IRS has asserted \nthat “Counsel attorneys do not provide formal advice to program managers by email to avoid the \nrelease of legal advice to the public.” There are hundreds of National Office attorneys, and Counsel \nmanagement cannot read minds to ascertain why each of its attorneys choose to provide advice in a \nparticular form in individual situations. Counsel has a long history of resisting public disclosure of its \nlegal advice, and attorneys often prefer to avoid public examination—and potential criticism—of their \nlegal conclusions. For these reasons, we think it is far more likely that many attorneys do issue advice by \nemail to avoid disclosure. When the National Taxpayer Advocate asks for advice, she generally receives \nan email unless she asks for a memo. Thus, it seems likely that Counsel attorneys often issue memos \n(rather than emails) only upon request.\nMore importantly, the IRS’s assertion that it “fully complies with the Tax Analysts settlement when it \nreleases formal written memorandum issued to program managers,” seems wrong. As explained in our \nreport, the IRS settled with Tax Analysts in July 2007, agreeing to disclose PMTA dated or prepared \nafter 1994 “on the basis of the standards announced by” the U.S. Court of Appeals for the District of \nColumbia Circuit in its June 14, 2002, opinion in Tax Analysts v. IRS, “as applied by the district court” \nin its February 7, 2007, opinion.1\n1\t\nTax Analysts v. IRS, 294 F.3d 71 (D.C. Cir. 2002), remanded, 483 F. Supp. 2d 8 (D.D.C. 2007).\nSection Two—IRS and TAS Responses\n8\n",
"IRS and TAS Responses\nIntroduction\nThese cases generally permit Counsel to withhold deliberative and pre-decisional communications, but \nnot its final legal positions. The Court of Appeals explained: “It is not necessary that the TAs [advice] \nreflect the final programmatic decisions of the program officers who request them. It is enough that they \nrepresent OCC’s [the Office of Chief Counsel’s] final legal position....”2 Once Counsel sends its legal \nanalysis to the program manager, it is presumably sending its final legal position, a position the program \nmanager is likely to act upon.3\nThe cases that the IRS agreed to follow make no distinction based on the form of the advice. Indeed, \nany such distinction seems absurd. It would be like concluding that Counsel only must disclose memos \nwritten with blue ink, but not those written with black ink. Moreover, the IRS has never previously \nmade any distinction based on the form of its advice. In 2007, it posted at least three PMTA that were \nissued as e-mails.4 The formalistic distinction between emails and memos makes even less sense than \nthe IRS’s former two-hour rule—the rule that the IRS would withhold Counsel advice issued after \nless than two hours of legal work—which the U.S. Court of Appeals for the D.C. Circuit found lacked \nany legal basis.5 Further, the IRS’s formal response to the MSP lacks transparency because it does not \nexplain its conclusions, such as the conclusion that the IRS can withhold advice based on its form.\nAnother mostly unexplained conclusion in the response is the IRS’s assertion that the PMTA addressing \nthe new transition tax under Section 965 was timely released.6 Under Internal Revenue Code (IRC) \n§ 965(h), taxpayers could pay the transition tax in installments without interest. The IRS’s response \nsuggests that its conclusion about why extra transition tax payments could not be refunded was not \nfinal before the PMTA was released. The PMTA was issued and posted on August 2, 2018, but the IRS \nhad posted the PMTA’s conclusion on its website as an FAQ on April 13, 2018. The FAQ said that any \nexcess payments could not be refunded. Thus, the legal basis for the decision must have been finalized \nbefore April 13.\nIdeally, the PMTA would have been posted before or at the same time as the FAQ. Had the PMTA’s \nlegal reasoning been posted sooner, at least some of the controversy and confusion could have been \navoided.7 More taxpayers would have been aware of the IRS’s position before making extra payments \nand fewer would have assumed the FAQ was legally incorrect and asked TAS to intervene. This was not \na victimless problem. According to the Treasury Inspector General for Tax Administration (TIGTA), \na lack of timely guidance led 115 taxpayers to make $2.8 billion in payments on their Section 965 \n2\t\nTax Analysts v. IRS, 294 F.3d at 81.\n3\t\nThe IRS has not taken the position that IRS program managers work with Counsel on legal advice. If the IRS were to take \nthat position, then there would be a risk that unlicensed program managers would be engaged in the unauthorized practice \nof law. For program managers who were licensed as attorneys, there would be a risk that they were in violation of Treasury \nOrder 107-04 (Jan. 16, 2009) and Treasury General Counsel Directive No. 2 (July 8, 2015). Those authorities generally \nrequire attorneys whose duties include providing legal advice to report to the IRS Chief Counsel. \n4\t\nSee, e.g., PMTA 2008-01567 (Sept. 28, 2007); PMTA 2007-01190 (Aug. 14, 2007); PMTA 2007-01186 (June 11, 2007).\n5\t\nSee Tax Analysts v. IRS, 495 F.3d 676, 681 (D.C. Cir. 2007) ([the Internal Revenue Code (IRC) § 6110 disclosure provision] \n“requires no particular form or formality. Nor does it distinguish between advice a lawyer renders in less than two hours \nand advice that takes longer than two hours to prepare. Thus, given the broad definition of “Chief Counsel advice” in sec-\ntion 6110(i)(1)(A), we believe that the temporal distinction the IRS draws in its two-hour disclosure rule is contrary to the \nunequivocal statutory directive…”).\n6\t\nAlthough the IRS response contains no detail or footnotes, we assume it is referencing PMTA 2018-16 (Aug. 2, 2018), \nhttps://www.irs.gov/pub/lanoa/pmta_2018_16.pdf. \n7\t\nMoreover, neither this memo nor any other legal analysis posted by the IRS addressed whether the IRS could grant appli-\ncations on Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, for refunds of excess \nestimated tax payments pursuant to IRC § 6425, before any tax had been assessed for 2017. We understand that the IRS \ndoes not believe it can pay such “quickie” refunds, however, this lack of transparency led taxpayers to ask TAS for assis-\ntance in obtaining such refunds.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n9\n",
"IRS and TAS Responses\nIntroduction\nliabilities that they did not intend to make and could not recover.8 The IRS should change the PMTA \ndisclosure process to help prevent a similar situation from happening again.\nFinally, the IRS response says a “taxpayers’ right to be informed is satisfied when the IRS provides \nguidance … to those who are charged with tax administration.” However, taxpayers need to receive \ninformation to be informed. When the IRS provides guidance to itself, it is bizarre to suggest that it has \nsatisfied the taxpayer’s right to be informed. [Emphasis added.]\nTAS \nRecommendation\n[2-1] \u0007\nDevelop clear written guidance that defines when advice constitutes PMTA that must \nbe disclosed.\nIRS \nResponse\nCounsel agrees to implement TAS recommendation in full by September 30, 2019.\nIRS \nAction\nCounsel agrees with this recommendation and plans to incorporate clear direction about PMTA in \nthe CCDM.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased that the IRS has agreed to issue guidance and looks \nforward to working with Counsel on the CCDM. The CCDM should provide objective standards that \nare based on the settlement and the Freedom of Information Act (FOIA) law, rather than squishy \nconcepts like the form of the advice, the “need of the office,” and the “issue being considered,” as \nthe IRS’s narrative response suggests.\nTAS \nRecommendation\n[2-2] \u0007\nRequire disclosure of any advice that is, in substance, PMTA. For example, the OCC’s \nguidance should not permit attorneys to withhold advice because of its form or \nmode of transmission (e.g., email), because of the title of the recipient, or because a \nbusiness unit does not want the advice to be disclosed.\nIRS \nResponse\nCounsel Does Not Agree to Implement TAS Recommendation.\nCounsel will continue to publish PMTA and will provide clear direction in the CCDM about when \nadvice to program managers should be issued as a formal memorandum rather than in email, but it \ndoes not plan to implement the recommendation.\nIRS \nAction\nN/A\n8\t\nTreasury Inspector General for Tax Administration (TIGTA), Rep. No. 2019-34-033, Implementation of the Tax Cuts and \nJobs Act Deemed Repatriation Tax Presented Significant Challenges 12 (May 22, 2019), https://www.treasury.gov/tigta/\nauditreports/2019reports/201934033fr.pdf. \nSection Two—IRS and TAS Responses\n10\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe IRS’s decision to make disclosure of PMTA dependent on how the advice is transmitted to the \nprogram manager is absurd. The only way a distinction about the mode of transmission might \nmake sense is if Counsel believes it is not required to disclose any PMTA under the settlement or \nthe FOIA law. Under this view, it can choose which advice it discloses.\nHowever, the National Taxpayer Advocate does not believe it is good policy to allow Counsel \nattorneys to choose not to disclose legal advice to program managers, particularly when the \nprogram managers are relying on it to make policy decisions. Even other attorneys within the \nChief Counsel’s office generally check publicly available sources—including PMTAs that have been \nreleased—when analyzing a legal issue. If they cannot find PMTAs that they or their colleagues \nhave issued, they risk providing inconsistent or incorrect legal advice to their colleagues, the IRS, \nor the public.\nMoreover, the National Taxpayer Advocate cannot do her job without real-time direct access to the \nlegal advice the program managers have received. Even if the National Taxpayer Advocate could \nobtain copies of advice upon request, the lack of direct access to it would mean that she would not \nknow the advice exists or that she should request a copy. \nTAS \nRecommendation\n[2-3] \u0007\nEstablish a written process to monitor whether advice that should be disclosed \nas PMTA is being identified and disclosed to the public in a timely manner. For \nexample, consider aiming to disclose PMTAs no later than when the IRS issues \nguidance (e.g., FAQs, Publications, News Releases, IRMs, etc.) that reveals the \nagency’s position.\nIRS \nResponse\nCounsel agrees to implement TAS recommendation in part by September 30, 2019.\nIRS \nAction\nCounsel will continue to rely on its professional staff, including managers, to ensure that PMTA \nis being released. Counsel will change its process for releasing PMTAs so that they are released \nmore contemporaneously with issuance to the program manager.\nTAS Response\nThe National Taxpayer Advocate is pleased that Counsel will change its processes so that PMTAs \nare released more contemporaneously with issuance to the program manager. She believes, \nhowever, that Counsel should set a goal for its attorneys to post PMTA within a specific period \n(e.g., a week) after it is issued to a program manager. Without specific goals or targets, it will be \nimpossible for the National Taxpayer Advocate, IRS management, the Counsel organization, or other \nstakeholders to determine whether the advice is being disclosed timely. Moreover, the longer the \ndelay between the issuance of the advice and its publication, the greater the risk that the IRS will \nact on Counsel’s conclusions without disclosing the underlying legal analysis, potentially prompting \npractitioners, TAS, or other stakeholders to doubt the legality of the IRS’s FAQs, fact sheets, \npublications, instructions, or programs. \nIn addition, if Counsel wants to ensure PMTAs are properly disclosed, it needs a system to ensure \nits PMTAs are routinely identified and provided to the attorneys responsible for disclosing them. It \ncould easily establish an internal mailbox and require its attorneys to “cc” the mailbox when they \nanswer legal questions from program managers. Alternatively, Counsel could expand the email \nsystem that it currently uses to identify and disclose Chief Counsel Advice to field employees under \nIRC § 6110.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n11\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[2-4] \u0007\nIncorporate the new PMTA guidance and monitoring procedures into the Chief Council \nDirectives Manual, distribute it at PMTA training classes, and release it to the public.\nIRS \nResponse\nCounsel agrees to implement TAS recommendation in part by September 30, 2019.\nIRS \nAction\nAs noted, Counsel will incorporate PMTA guidelines in the CCDM, which is available to the public.\nTAS Response\nAs noted above, the National Taxpayer Advocate is pleased that Counsel will incorporate \nprocedures into the CCDM, which it will release to the public. It is important for taxpayers, \nstakeholders, and IRS employees to be able to identify advice that Counsel will and will not \ndisclose. Accordingly, Counsel should use the same guidance in its disclosure training classes \nthat it has posted on its website (e.g., as CCDM or other training material). If it develops different \nmaterials for the purpose of training, then the training materials should be released to the public. \nSection Two—IRS and TAS Responses\n12\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#3\n\t\n\u0007\nNAVIGATING THE IRS: Taxpayers Have Difficulty Navigating the \nIRS, Reaching the Right Personnel to Resolve Their Tax Issues, \nand Holding IRS Employees Accountable\nPROBLEM\nTaxpayers often have difficulty locating IRS personnel who can provide accurate and responsive \ninformation regarding their cases. The IRS emphasizes its main toll-free phone line, which includes \ndifficult-to-interpret options and often leads to extended hold times. Even when taxpayers are provided \nwith a specific phone number, most often it is for a group, rather than for an individual employee. \nThese group numbers make it difficult for taxpayers to have a sense of continuity and rapport with the \npersonnel working their cases. Moreover, a lack of ownership on the part of IRS personnel who work \nthese cases can decrease the efficiency and effectiveness of case resolutions and worsen the customer \nexperience.\nANALYSIS\nThe group numbers relied upon by the IRS as one of two primary mechanisms for addressing \ntaxpayer inquiries sometimes leave much to be desired. For example, TAS conducted a test in which a \nhypothetical caller telephoned the IRS main toll-free line to ask questions about filing a request for an \noffer in compromise. That caller was kept waiting on hold for approximately one hour before finally \ngiving up and terminating the call. Instead of improving telephone service, the IRS prefers to channel \nsometimes-unwilling taxpayers into online self-service venues, which the majority of users deem to be \nsubstandard in many respects. For example, under 20 percent of surveyed taxpayers thought the IRS \nwebsite was easily searchable, well organized, and user-friendly. Accordingly, it is little wonder that the \nIRS has been recently ranked last in quality communication in a study of 15 federal agencies undertaken \nby Forrester Research. In addition to these communication shortcomings, the IRS has no overarching \nmechanism for allowing taxpayers to raise questions and complaints to managers directly and to hold \nboth employees and managers accountable for addressing such complaints. Thus, even if taxpayers can \nnavigate to the proper location within the IRS, no systemic institutional safeguards exist to ensure that \ntheir inquiries will be addressed accurately and responsively.\nTAS RECOMMENDATIONS\n[3-1] \u0007\nProvide all members of the general public with an accessible and easily searchable IRS directory \nthat incorporates metadata and common-speech terminology to assist taxpayers in contacting \nparticular offices within the IRS.\n[3-2] \u0007\nInstitute a 311-type system where taxpayers can be transferred by an operator to the specific office \nwithin the IRS that is responsible for their cases.\n[3-3] \u0007\nAdopt a model for correspondence examinations and similar cases, such as those worked in \nAutomated Collection System (ACS), in which a single employee is assigned to the case while it is \nopen within the IRS function.\n[3-4] \u0007\nEstablish a complaint and inquiry tracker that monitors and records requests to speak with \nsupervisors, subsequent follow-up, and the results of that contact.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n13\n",
"IRS and TAS Responses\nIntroduction\nIRS RESPONSE\nThe IRS recognizes that taxpayers need access to effective service options to understand their tax \nobligations and pay their taxes in a timely manner. The IRS will continue to provide service through \nweb capabilities, telephones, correspondence, and face-to-face interactions as part of our omnichannel \napproach. We continue to educate and encourage the use of a variety of tools across channels.\nThe IRS continues to look for opportunities to improve telephone efficiency. For filing season 2019 we \nare conducting a limited test of customer callback/virtual hold technology. We will consider expanding \nthe capability if the results show significant benefits for customer service.\nWe are also exploring a modernized Enterprise Case Management (ECM) environment. Building \non the precepts of the IRS Future State, the ECM vision specifically highlights the importance of \nempowering employees to rapidly resolve cases, providing top quality service to taxpayers, and upholding \nthe fair administration of tax law. As a more efficient and modern ECM solution is developed, the IRS \nwill continue to engage employees and other stakeholders to identify opportunities to provide quality \ncustomer service to taxpayers.\nAn example of our multi-channel approach that minimizes taxpayer burden is the Taxpayer Assistance \nCenter (TAC) Appointment Line. When taxpayers call for an appointment, telephone assistors \nattempt to resolve the taxpayer’s inquiry prior to setting up a TAC appointment in an attempt to save \nthe taxpayer an unneeded and potentially time-consuming trip to a TAC. In fiscal year 2018, over \n3.5 million calls were answered and, after speaking to an assister, less than 50% of callers needed an \nappointment at a TAC. The IRS has upgraded its Field Assistance Scheduling Tool (FAST) to improve \nscheduling at TACs and provide email confirmation of appointments to taxpayers.\nFinally, we acknowledge the importance of having customers speak directly with supervisors when \nspecifically requested or, if unavailable, requiring managers to return customer calls. We have Internal \nRevenue Manual (IRM) guidelines in place to address this situation. We will continue to pursue \nimproved controls to ensure timely and appropriate actions by managers.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nTAS appreciates the IRS’s omnichannel approach, which includes web capabilities, telephones, \ncorrespondence, and face-to-face interactions. Efforts to develop customer callback/virtual hold \ntechnology, along with an improved Enterprise Case Management (ECM) system, are also welcome. \nFurther, increased empowerment of employees to resolve issues will accrue to the benefit of both \ntaxpayers and the IRS.\nAs the IRS continues to improve the means by which taxpayers seek answers and issue resolution within \nthe IRS, it should be mindful that taxpayers prefer to communicate in a variety of ways. As a result, \neven though some taxpayers may be able to resolve their issues over the phone, the accessibility of \nTaxpayer Assistance Centers should be preserved for those taxpayers whose needs are more effectively \naddressed through quick and easy in-person support. Likewise, as demographics continue to change, \nmore and more taxpayers will seek effective virtual means of addressing their tax issues. The IRS \ntherefore must improve its performance in this area, given that a recent Forrester Research study found \nmost taxpayers consider their digital experience with the IRS to be unsatisfactory in some important \nrespects. Further, although TAS appreciates that the IRS is making efforts to enhance taxpayers’ ability \nSection Two—IRS and TAS Responses\n14\n",
"IRS and TAS Responses\nIntroduction\nto navigate throughout the organization, much remains to be done, as the IRS has been ranked last in \nquality communications in a Forrester Research survey of 15 federal agencies.\nOnce taxpayers successfully arrive at the proper place in the IRS to resolve their issues, a single employee \nor group of employees should be assigned to taxpayers’ cases. This approach, which could be applicable \nto compliance cases and offers-in-compromise in addition to correspondence examinations, would make \nnavigating the IRS a much easier process and lessen the frequency with which it is necessary. It would \nhave the added benefit of increasing the quality of interactions between taxpayers and IRS personnel \nthrough the improved case familiarity and the enhanced trust that often would result from ongoing \ninteraction.\nBased on TAS’s experience, even when taxpayers are successful in having their calls routed to the \nappropriate place, they all too often experience problems having those calls returned and receiving \nresponsive information. Further, managers of unresponsive employees can sometimes be equally \ndifficult to locate and contact. The IRS has guidance addressing the handling of taxpayer complaints \nand, in some cases, does analyze response times. However, taxpayer complaints, the reasons they are \nmade, and the quality of responses they generate are not tracked in a way that can be systematically \nanalyzed to encourage accountability and improved performance. To facilitate accountability, the IRS \nshould create a comprehensive system through which taxpayers can ask to speak with managers and \nthat tracks whether the manager contacts the taxpayer, how quickly the contact is made, what the issue \nis, and how the issue is addressed. Such a system would help increase the odds that once taxpayers \nsuccessfully navigate the IRS, they will receive high-quality assistance in addressing the issues they raise.\nTAS \nRecommendation\n[3-1] \u0007\nProvide all members of the general public with an accessible and easily searchable \nIRS directory that incorporates metadata and common-speech terminology to assist \ntaxpayers in contacting particular offices within the IRS.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nWe don’t agree that providing a directory is the best solution for taxpayers attempting to contact \nthe IRS. Rather than customers trying to track down one specific employee, who may not be \navailable, they can, in most situations, receive the help they need from the “first available” \nemployee. Many employees split their time between answering toll\n free calls and working amended \nreturns or other correspondence received by the IRS. A telephone assister uses online tools to list \npertinent information about a call, so that this information is available to the next assister if the \ntaxpayer calls in again, preventing the caller from having to repeat information. The IRS continues \nto provide service through a balanced approach to educate and inform each taxpayer as to the \nvariety of service options and channels. Our website, IRS.gov, includes a taxpayer contact page, \n“Let Us Help You,” which provides a wealth of information about service options with specific \nguidance based on tax issues and telephone numbers.\nIRS \nAction\nN/A\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n15\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nSituations exist in which taxpayers or their representatives have a need to contact key offices or \npersonnel. The IRS’s continued refusal to facilitate this direct communication, and, in the case \nof some units, its unwillingness to implement public-facing phone numbers hinders the ability of \ntaxpayers to navigate the IRS in a consistent and effective way. The steps outlined in the IRS \nresponse above are worthwhile and TAS applauds them. However, the IRS mechanisms currently \nin place should not serve to nullify the ability of taxpayers to seek direct contact when necessary. \nFurther, the more effective the systems for assisting taxpayers, the less of a need taxpayers will \nhave to seek the direct contact being discouraged by the IRS. Rather, the IRS should provide \ntaxpayers with access to the necessary contact information via a searchable database while, if so \ndesired, simultaneously striving to minimize the need for its use.\nTAS \nRecommendation\n[3-2] \u0007\nInstitute a 311-type system where taxpayers can be transferred by an operator to the \nspecific office within the IRS that is responsible for their cases.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nAs above, we continue to provide service through a variety of channels, including our website, IRS.\ngov, and its taxpayer contact page, “Let Us Help You.” In addition, taxpayers who receive IRS \ncorrespondence are provided a specific telephone number to call to discuss their issue.\nOn the toll-free lines, to provide customers with efficient and accurate tax law and account \nassistance, the IRS uses automation when appropriate to connect a taxpayer with an assister \nwho has the skill set to provide the necessary service. If the taxpayer’s issue falls outside the \nautomated choices, the call is answered by a Screener employee. Screeners perform the role of \nan “operator” by determining the taxpayer’s issue and then transferring the call to the appropriate \narea. A 311 system may work for smaller government entities that have a limited scope of \ndepartments or service options. The extensive scope of IRS tax law and account topics does not \nlend itself to this type of system.\nIRS \nAction\nN/A\nTAS Response\nAs explained by the National Taxpayer Advocate, one way of addressing sometimes differing \ntaxpayer communication preferences, remedying occasionally frustrating IRS computer interactions, \nand helping taxpayers better navigate the IRS is through the utilization of a 311-type system. \nThis 311 system can fit within a comprehensive omnichannel environment that utilizes customer \nexperience mapping and customer journey analytics now employed in private industry. Such \na service channel would facilitate increased efficiencies, diminished wait times, and improved \ninteractions between taxpayers and appropriate IRS personnel. It has been used by cities as large \nas New York and Chicago, and these models can be combined with advances in customer journey \nanalytics to develop a robust 311-type system that could be used IRS-wide or more narrowly \nwith respect to targeted areas. To the extent that such a system is implemented, it would help \ntaxpayers more easily reach their desired destination within the IRS and would improve taxpayers’ \noverall experiences.\nSection Two—IRS and TAS Responses\n16\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[3-3] \u0007\nAdopt a model for correspondence examinations and similar cases, such as those \nworked in Automated Collection System (ACS), in which a single employee is \nassigned to the case while it is open within the IRS function.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nTaxpayer responses to correspondence examination notices are assigned to an examiner when \nreceived, and, in almost all cases, the same employee continues to work the case through \nclosure. Additionally, to provide increased access for taxpayers to resolve their account in Campus \nExamination, all examiners within the specific business operating division have access to the \ntaxpayer's case history, workpapers, notices, and audit report(s), which allows the examiners to \nsufficiently address the information requested on most calls.\nTAS Response\nIn many circumstances, a single employee or group of employees should be assigned to the \ntaxpayer’s case. This approach, which could be applicable to compliance cases and offers in \ncompromise in addition to correspondence examinations, would make navigating the IRS a much \neasier process and lessen the frequency with which it is necessary. It would have the added \nbenefit of increasing the quality of interactions between taxpayers and IRS personnel through \ncase familiarity and the increased trust that typically results from ongoing interaction. While the \n“next available examiner” model may be effective in certain contexts, it fails to deliver the range of \nbenefits associated with a single point of contact for ongoing examinations.\nTAS \nRecommendation\n[3-4] \u0007\nEstablish a complaint and inquiry tracker that monitors and records requests to \nspeak with supervisors, subsequent follow-up, and the results of that contact.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nWhile systemic data collection tools do not exist for the collection of this data, we have \nimplemented processes to record this information. Each case file history is documented to reflect \ntaxpayer requests to speak with supervisors, any subsequent follow-up actions, and the results \nof each contact. Each case is then subject to review by the manager, lead tax technician, and \nnational quality reviewers.\nTAS Response\nThe IRS does have guidance addressing the handling of taxpayer complaints and, in some cases, \ndoes analyze response times. Likewise, the inclusion in case files of complaint-related information \nand subsequent follow-up is beneficial. However, taxpayer complaints, the reasons they are \nmade, and the quality of responses they generate are not tracked in such a way that they can \nbe systematically analyzed to encourage accountability and improved performance. To facilitate \naccountability, the IRS should create a comprehensive system through which taxpayers can ask \nto speak with managers and that tracks whether the manager contacts the taxpayer, how quickly \nthe contact is made, what the issue is, and how the issue is addressed. A key element of this \nmechanism should be a tracker that has the capacity to allow for systemic review of complaints \nand responses, which will enable meaningful oversight of organizational activity and individual \nperformance.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n17\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#4\n\t\n\u0007\nFREE FILE: The IRS’s Free File Offerings Are Underutilized, and \nthe IRS Has Failed to Set Standards for Improvement\nPROBLEM\nTo fulfill its statutory duty to increase electronic filing (e-filing), the IRS partners with Free File, \nInc. (FFI), a group of 12 private-sector tax return preparation software providers. This group offers \ntwo services—Free File software, which provides free options for online software to guide taxpayers \nwith adjusted gross income of less than $66,000 through return preparation, and Free File Fillable \nForms, a tool available for all taxpayers to enter their income tax forms digitally. Use of the Free File \nprogram has steadily declined, and only about 2.5 million people filed returns using Free File software \nin fiscal year (FY) 2018. The IRS is devoting minimal resources to oversight and testing of this \nprogram to understand why taxpayers aren’t using it and how the services offered could be improved. \nWhen the services provided by FFI fail to meet the needs and preferences of taxpayers, particularly in \nunderserved communities, it reflects poorly on the IRS and can further erode taxpayers’ trust in fair tax \nadministration.\nANALYSIS\nElectronic filing has increased greatly since 2002, but the goals of the Free File program have stagnated \nand use of the program has steadily declined. In tax year 2016, only 2.3 percent of eligible taxpayers \nused Free File software, and only 0.20 percent of eligible taxpayers used Free File Fillable Forms. The \nIRS currently has no marketing budget for the Free File program. It has not conducted effective \nevaluation of the program to understand the experience of taxpayers who do use the program or \neven if the terms of the agreement with FFI are being met. For example, the IRS no longer conducts \nFree File satisfaction surveys, which it claims is due to budget constraints, even though the Free File \nMemorandum of Understanding from 2018 specifically assigns the members of FFI the responsibility to \n“provide the necessary support to accomplish a customer satisfaction survey.”\nAge restrictions sharply curtail the number of FFI options available to elderly taxpayers, as only three \nof the 12 FFI providers offer services to taxpayers of all ages and five have age limitations that start \nbefore the age of 60. In filing season 2018, no Free File options were available for English as a Second \nLanguage (ESL) taxpayers. Testing by TAS shows several software providers have limitations in their \nnavigational features and ability to help taxpayers correctly complete their returns, resulting in poor \nservice quality. Furthermore, cross-marketing and advertising of other services on Free File software \nplatforms can confuse taxpayers, and gives the impression of IRS endorsement of for-fee services. \nBecause of these shortcomings, the services provided by FFI do not meet the needs and preferences of \neligible taxpayers, undermining taxpayers’ rights to quality service and to pay no more than the correct \namount of tax.\nSection Two—IRS and TAS Responses\n18\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[4-1] \u0007\nDevelop actionable goals for the Free File program, including targeted-use percentages, prior to \nentering into a new agreement with Free File, Inc.\n[4-2] \u0007\nWork with TAS to create measures evaluating taxpayer satisfaction with the Free File program \nand test each return preparation software’s ability to complete various forms, schedules, and \ndeductions.\n[4-3] \u0007\nProvide Free File Fillable Forms and Software options for English as a Second Language \ntaxpayers.\n[4-4] \u0007\nPrepare an advertising and outreach plan to make taxpayers, particularly in underserved \ncommunities, aware of the services available through the Free File program. \n[4-5] \u0007\nAllow Free File members to provide services to all taxpayers as a part of its next operating \nagreement instead of capping the percentage of eligible taxpayers each software provider can \ncover.\n[4-6] \u0007\nRedesign the Free File Software Lookup Tool to better direct taxpayers to software providers that \nbest meet their circumstances.\n[4-7] \u0007\nImprove the capabilities offered to taxpayers through Free File Fillable Forms, including:\na)\t Linking from IRS form instructions to related IRS publications;\nb)\t Providing increased guidance for common areas of taxpayer confusion;\nc)\t Ensuring taxpayer’s abilities to download, save, and print all forms with troubleshooting \nassistance; and\nd)\t Creating a dedicated email where taxpayers can get help when experiencing technology \nglitches.\n[4-8] \u0007\nIf the above recommendations are not substantially adopted, discontinue the Free File Program \nand create an improved electronic free fillable forms program including the features described in \nRecommendation 7. \nIRS RESPONSE\nThe IRS continues to support the growth of the Free File program. Because of our efforts, more \ntaxpayers are using the improved IRS Free File program to prepare and electronically file their returns \nthan in the past two years. Through March 15, 2019, more than 1.54 million taxpayers chose Free File \nto file their returns, a five percent increase over last year. This is in addition to gains in 2018 over 2017 \nvolumes. This public-private partnership represents an additional choice for taxpayers in the overall tax \necosystem, which also includes paid preparers, Volunteer Income Tax Assistance services, and do-it-\nyourself options. We appreciate your acknowledgement that the new agreement signed with Free File, \nInc. (FFI) broadens the scope of eligibility for the program as well as heightening privacy and security \nrequirements.\nFree File objectives. While serving low-income and disadvantaged taxpayers remains the primary focus \nsince founding the program, we recognize the need to evaluate new objectives as well. When Free File \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n19\n",
"IRS and TAS Responses\nIntroduction\nlaunched in 2003, it was one of the few free do-it\n yourself options for low-income taxpayers, and far less \nthan 80 percent of all returns were filed electronically. Today there are many free do-it-yourself choices \nfor taxpayers. Most major software providers, in addition to participating in Free File, also offer some \nform of free tax preparation software and e-filing outside of this public-private partnership. And we \nare proud to note that, while Free File was originally envisioned as a free federal tax return method, the \nprogram has grown to include many free state options as well. This year, four participating Free File \nmembers offer free state returns in the 41 states (plus the District of Columbia) with an income tax.\nEligible taxpayers. We continue to work with Free File providers and have made improvements to \nmeet taxpayer needs in underserved populations such as the elderly, low-income taxpayers, and taxpayers \nfor whom English is a second language. Now 33 percent of FFI providers offer Free File software to \ntaxpayers of any age, and there is at least one free federal and state return option for all taxpayers of any \nage who have an income of $66,000 or less. Using the Free File software look-up tool on irs.gov will \neasily generate these results for any taxpayer. Elderly taxpayers whose income exceeds $66,000 may also \nuse Free File Fillable Forms that are available to taxpayers regardless of age, income, or any other criteria.\nThe FFI members previously offered free file software in Spanish, but this was discontinued due to \nextremely low usage of annually accepted returns dropping below 1,000. However, we recognize the \nneed to raise this important issue with our FFI partners, and we appreciate the NTA’s perspective that \nthe program is helpful enough to expand the program to non-English speaking taxpayers. We will \ncontinue to partner with FFI to see if even more options can be made available.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate appreciates that the IRS values the Free File program and continues \nto work to promote its growth. However, as the National Taxpayer Advocate discussed in her report, \ntaxpayer use of Free File software has generally declined since it was first implemented. Recent gains, \nwhile positive, have been relatively minimal, especially when considering that only a few percent of the \nover 100 million taxpayers eligible for Free File software use it. Additionally, fewer than half a million \ntaxpayers have used Free Fillable Forms in recent years, despite its availability to all taxpayers.\nThe National Taxpayer Advocate appreciates that the IRS’s budget is limited, but to improve the Free \nFile program, it will have to make a greater commitment to publicizing the program and improving \nits usability. It must also take steps to ensure qualifying taxpayers can easily locate and use a Free \nFile product, without the risk they will be led to purchase a paid version of the same product or other \nancillary products. Because the linkage to private Free File products from IRS.gov gives the appearance \nof IRS endorsement, the National Taxpayer Advocate continues to recommend the IRS establish more \nrigorous standards and periodically test the software to ensure it meets those standards. If the IRS \ncannot allocate the necessary resources to offer an adequate Free File program, the National Taxpayer \nAdvocate recommends the IRS eliminate it and strengthen its Free Fillable Forms product instead.\nSection Two—IRS and TAS Responses\n20\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[4-1] \u0007\nDevelop actionable goals for the Free File program, including targeted-use \npercentages, prior to entering into a new agreement with Free File, Inc.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by March 30, 2021.\nIRS \nAction\nThe existing agreement between IRS and Free File, Inc (FFI) expires on October 31, 2021. We \nagree to study the issue to identify new actionable goals for the program that will inform the IRS's \nformal negotiation position with FFI in reaching a new agreement.\nTAS \nResponse\nThe National Taxpayer Advocate appreciates that the IRS will study the issue to identify new \nactionable goals for the program. The National Taxpayer Advocate looks forward to the results of \nthe study and the opportunity to review the recommended actionable goals. The National Taxpayer \nAdvocate continues to recommend including targeted-use percentages as one of those actionable \ngoals.\nTAS \nRecommendation\n[4-2] \u0007\nWork with TAS to create measures evaluating taxpayer satisfaction with the Free \nFile program and test each return preparation software’s ability to complete various \nforms, schedules, and deductions.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 31, 2021.\nIRS Action\nThe IRS will work with FFI and TAS to better understand the taxpayer experience between the IRS \nand member websites and find a means to measure and track customer satisfaction within the \nlimited IRS budget.\nWhile the IRS and FFI currently require a minimum listing of core Forms 1040 and schedules, most \nparticipating companies go beyond this requirement and offer nearly all available Forms 1040 and \nschedules. Participating companies guarantee the calculations performed by the federal Free File \noffering. This guarantee gives taxpayers confidence that the software they select will accurately \nprepare their return even in complex tax situations, with recourse by taxpayers to the company if \nthere are issues.\nTAS \nResponse\nThe National Taxpayer Advocate appreciates that the IRS will work with TAS to better understand \nthe taxpayer perspective and find ways to measure and track customer satisfaction. The National \nTaxpayer Advocate also appreciates that the IRS is working with a limited budget, which is why she \nrecommends that the IRS discontinue the Free File program if it is unable to adequately administer \nand oversee the program.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n21\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[4-3] \u0007\nProvide Free File Fillable Forms and Software options for English as a Second \nLanguage taxpayers.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 31, 2021.\nIRS Action\nThe IRS plans to evaluate opportunities for expanding Free File software services to taxpayers for \nwhom English is considered a second language. The IRS plans to collaborate with FFI to encourage \nmembers to offer additional Spanish services. We will include the issue in negotiations with FFI \nprior to the existing agreement's expiration on October 31, 2021.\nTAS \nResponse\nThe National Taxpayer Advocate appreciates that the IRS will evaluate ways to expand Free File \nsoftware and Free Fillable Forms for English as a second language taxpayers. TAS has translated \nthe Form 1040 into Spanish and can provide assistance to the IRS to translate Free Fillable Forms \nand better serve Spanish and other English as a second language taxpayers.\nTAS \nRecommendation\n[4-4] \u0007\nPrepare an advertising and outreach plan to make taxpayers, particularly in \nunderserved communities, aware of the services available through the Free File \nprogram. \nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by January 31, 2021.\nIRS Action\nDue to its current budget, the IRS does not have marketing funds to pursue an advertising \ncampaign to increase Free File program awareness. The IRS does issue annual traditional and \nsocial media promotions that include key messages about Free File on IRS.gov and in the Form \n1040 instructions. The IRS welcomes feedback from the NTA about strategies for expanding \nFree File awareness among taxpayers in underserved communities, given our existing resource \nconstraints.\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS faces budget constraints. The National \nTaxpayer advocate also appreciates that the IRS has implemented some measures that may have \nincreased participation for the 2019 filing season (e.g., sending emails to taxpayers who used \nFree File last year welcoming them back to the Free File service). In her 2018 annual report, the \nNational Taxpayer Advocate mentioned that the IRS does little to no advertising of Free Fillable \nforms. She also pointed out that, while making taxpayers aware of the Free File program is useful, \nthe IRS must help taxpayers understand the value of Free File to encourage more taxpayers to \nuse it. Despite its limited budget, the IRS can take some steps to improve its advertising and \nexplanation of the program on its website (for example, by more prominently positioning information \nand links about the Free File Program on its website). However, given that many people, especially \nthose in underserved and low income communities, may not have adequate access to the internet, \nit is also important to conduct outreach and advertising to these communities, and an increased \nbudget may be necessary to make noticeable improvements.\nSection Two—IRS and TAS Responses\n22\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[4-5] \u0007\nAllow Free File members to provide services to all taxpayers as a part of its next \noperating agreement instead of capping the percentage of eligible taxpayers each \nsoftware provider can cover.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 31, 2021\nIRS Action\nWe appreciate the NTA's perspective that the program is helpful enough that the NTA would like \nto see it expanded to all taxpayers. The 50 percent limitation in place at the company level \nincluded in the agreement provides a very important means to allow small and medium companies \nto compete with the largest companies. However, we will explore the feasibility of adjusting the \ncurrent participation percentages.\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS seeks to provide opportunities for small \nand medium companies to join Free File and compete with the largest companies. However, the \nconcern is misplaced. When the Free File program was first launched, there was no cap on the \npercentage of taxpayers a software provider could cover. One of the participants that produced a \nlesser-known product decided to offer its product to all taxpayers. The larger software companies \nquickly followed suit out of concern they might lose market share if taxpayers could prepare their \nreturns for free with a different vendor. These companies were also concerned that taxpayers \nwould stop paying for their products if 100 percent of taxpayers could use their software for free \nthrough Free File. When the first extension of the Free File agreement was negotiated, it was the \nproviders of the best-known software products that pushed hard to impose an upper limit on the \npercentage of returns a software provider could cover. For this reason, the National Taxpayer \nAdvocate does not believe an upper limit would aid small and medium-sized software companies.\nIn addition, use of Free File software was at its greatest when software providers could offer \nunrestricted services to taxpayers. Despite the fact that e-filing has exponentially increased, \nmore taxpayers used Free File software before this restriction was implemented (more than five \nmillion in tax year (TY) 2004, compared with about 2.5 million in fiscal year (FY) 2018), and more \nproviders participated in the program (20 in the program’s early years compared with 12 currently). \nRegardless of the intent, this limitation has failed to achieve its goal, and the National Taxpayer \nAdvocate continues to recommend that it be eliminated.\nTAS \nRecommendation\n[4-6] \u0007\nRedesign the Free File Software Lookup Tool to better direct taxpayers to software \nproviders that best meet their circumstances.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 31, 2021.\nIRS Action\nThe current Free File Software Lookup Tool allows taxpayers to enter criteria such as age, Adjusted \nGross Income, state of residence, and Earned Income Tax Credit or military pay received. The \ncombinations of these criteria identify the specific companies that provide products to best fit the \ntaxpayer's needs. We will explore the feasibility of additional improvements that may better assist \nthe taxpayer in choosing a product that will meet their needs.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n23\n",
"IRS and TAS Responses\nIntroduction\nTAS \nResponse\nThe National Taxpayer Advocate appreciates that the IRS will explore ways to improve the Free File \nSoftware Lookup Tool. Taxpayers are sometimes confused when trying to navigate the website \nand determining which program is the best one for them. This tool, along with additional guidance \nprovided to taxpayers, can help direct taxpayers to the correct programs that fit their needs and \ncircumstances.\nTAS Recommendation\n[4-7] \u0007\nImprove the capabilities offered to taxpayers through Free File Fillable Forms, \nincluding:\na)\t Linking from IRS form instructions to related IRS publications;\nb)\t Providing increased guidance for common areas of taxpayer confusion;\nc)\t Ensuring taxpayer’s abilities to download, save, and print all forms with \ntroubleshooting assistance; and\nd)\t Creating a dedicated email where taxpayers can get help when experiencing \ntechnology glitches.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nFree File, Inc. donates the Free File Fillable Forms tool for free and develops and maintains the \nprogram at no cost to the federal government. Free File Fillable Forms already offer links to \nthe instructions for the Form 1040 and associated schedules. The IRS provides information on \nits help page on IRS.gov for taxpayers and publishes a user guide to help taxpayers navigate \nthe tool. Further, the utility of the Free File Fillable Forms has been enhanced over the years \nwith roll-over information on certain fields and drop-down selection options to restrict entry to \nonly those options appropriate for specific information. Users of Free File Fillable Forms may \ndownload and save their returns on their computers and print their forms today. Some users do \nexperience problems printing when they use an outdated internet browser or do not fill out the form \ncompletely. The IRS includes helpful information about minimum system requirements, including \nrecommended browsers, and printing tips on IRS.gov. The IRS does provide a dedicated email \naddress ([email protected]) for taxpayers to report computer problems. The IRS responds with \nrecommended solutions. This mailbox is made available within the self-help tools so that taxpayers \nmay try to resolve their issue even if encountering a problem after business hours. We will work \nwith FFI to explore the potential for additional capabilities to improve the customer experience.\nTAS Response\nThe National Taxpayer Advocate appreciates the benefits offered by Free Fillable Forms and the \nIRS’s provision of a dedicated email address and other support for taxpayers who experience \nproblems. As she discussed in a blog post, the National Taxpayer Advocate found that the links \nto the instructions did not function properly when she herself tried to use them while preparing \nher returns. She appreciates that the IRS will work with FFI to explore the potential for additional \ncapabilities to improve the customer service experience and continues to believe the above \nrecommendations would improve the program.\nSection Two—IRS and TAS Responses\n24\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[4-8] \u0007\nIf the above recommendations are not substantially adopted, discontinue the Free \nFile Program and create an improved electronic free fillable forms program including \nthe features described in Recommendation 7. \nIRS \nResponse\nIRS agrees to implement TAS recommendation.\nIRS \nAction\nWe have agreed to adopt substantial aspects of the recommendations above, thereby averting the \ncondition on which this Recommendation relies.\nTAS \nResponse\nThe National Taxpayer Advocate appreciates that the IRS has agreed to adopt substantial aspects \nof the recommendations above to make the Free File program better. The Free File program can \nserve as an important tool for many taxpayers, and the National Taxpayer Advocate looks forward \nto working with the IRS to implement necessary improvements, as well as oversight and testing, to \nFree File software and Free Fillable Forms.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n25\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#5\n\t\n\u0007\nFALSE POSITIVE RATES: The IRS’s Fraud Detection Systems Are \nMarred by High False Positive Rates, Long Processing Times, \nand Unwieldy Processes Which Continue to Plague the IRS and \nHarm Legitimate Taxpayers\nPROBLEM\nIRS fraud detection systems generate high false positive rates (FPRs) and long processing times, which \nincrease taxpayer burden, generate phone calls to the IRS, and create TAS cases. Several IRS policies \naffect the ability of taxpayers to timely receive legitimate refunds, including the IRS’s failure to capture \nnecessary information to evaluate the accuracy and efficiency of its non-identity theft (IDT) and IDT \nrefund fraud programs; its past failure to check for third-party information on a daily, versus weekly, \nbasis; and its failure to implement systemic verification capabilities in its fraud detection systems. \nSimple adjustments such as these could very well prevent taxpayers from being selected into the pre-\nrefund wage verification process or could expedite the release of the return if selected, allowing the IRS \nto better use its resources to verify returns where there is a substantial potential for fraud.\nANALYSIS\nAlthough IRS fraud detection systems protected about $7.6 billion in revenue between January 1 and \nOctober 3, 2018, they also delayed the processing of almost $20 billion in legitimate refunds. Between \nJanuary 1 and September 30, 2018, the FPR for non-IDT refund fraud filters was 81 percent, while the \nFPR for IDT refund fraud filters was 63 percent. Further, of the returns remaining in the non-IDT \nrefund fraud program in 2018 after the two-week screening period and two-week review period, 64 \npercent were legitimate. The IRS refers to this 64 percent figure as the “operational performance rate” \n(OPR). The high FPR and long delays resulted in a 287 percent increase in TAS Pre-Refund Wage \nVerification Cases between January 1 and September 30, 2018, when compared to the same time period \nin the prior year, and in nearly half of the cases closed between January 15 and June 30, 2018, taxpayers \nultimately received the refunds originally claimed on their returns.\nTAS RECOMMENDATIONS\n[5-1] Calculate an “Operational FPR” in addition to the FPR and OPR for non-IDT accounts. \n[5-2] Develop criteria to be used in measuring OPR for IDT accounts.\n[5-3] \u0007\nConduct a study to determine why it takes some taxpayers longer to authenticate their identities \nand what barriers they may encounter when attempting to do so.\n[5-4] \u0007\nDesign the refund fraud system to consider if applying the third-party information to the \nreturn would actually result in a larger refund when there is a mismatch between third-party \ninformation and the information on a taxpayer’s return.\n[5-5] \u0007\nRequest from outside vendors information on ways to improve the FPR, along with proposals to \ndetermine the factors that are contributing to high FPRs.\nSection Two—IRS and TAS Responses\n26\n",
"IRS and TAS Responses\nIntroduction\n[5-6] \u0007\nEstablish a maximum acceptable FPR goal within industry accepted standards and an actionable \ntimeline to achieve that goal, based on the information and proposals received from outside \nvendors.\nIRS RESPONSE\nWe appreciate your support of the IRS goal of detecting and mitigating refund fraud. We also \nunderstand concerns regarding the False Positive Rate (FPR), which IRS refers to as the False Detection \nRate (FDR), and its impact on taxpayers. The IRS processes over 150 million returns every year and \nIRS fraud filter selections have protected about $12 billion per year over the last three years. We review \nthe results of programming and processes implemented over the course of each filing season.\nWe agree more information should be captured to better evaluate non-identity theft and identity theft \n(IDT) refund fraud programs. The metrics you propose will help in this effort. Also, current metrics \nfocus on the selected population. Metrics such as the FDR provide insight on the performance of filters, \nbut they do not show the impact to taxpayers. Our FDR for 2018 was calculated on about two million \nrefund returns that initially triggered the fraud filters and were held for additional review, of which over \nhalf were subsequently released after receiving valid third-party data or upon authentication of the actual \ntaxpayer. Going forward, the IRS has added new metrics to track the effect of refund fraud programs \non the broader taxpayer population. Adding these new metrics will help the IRS evaluate the efficiency \nand accuracy of refund fraud filters and their impact on taxpayers.\nWe agree with the majority of the recommendations and have implemented, or started implementing, \nmany of them. The IRS has started tracking data that will be used to calculate “Operational FDR” for \nnon-IDT selections. The IRS is also tracking the time it takes the taxpayer to authenticate for use in \ndeveloping Operational Performance Rate (OPR) criteria for IDT selections. The IRS will undertake \na study to understand why authentication timeframes are inconsistent among taxpayers. We agree \nthat outside perspective can benefit our approach to false positives among fraud selections. The IRS is \ncurrently working with consultants to adapt fraud detection programs to new schemes and approaches \nwhile attempting to limit the effect on legitimate taxpayers.\nThe number of taxpayers requesting IDT victim assistance is declining. In 2015, 677,000 taxpayers \nreported being victims of identity theft. That number fell to 242,000 in 2017 and decreased again to \n199,000 in 2018. Also, the amount of undetected IDT has decreased from $2.8 billion in 2015 to under \n$1 billion in 2017. Still, there will always be a need to adapt and improve the selection process. The \nIRS will continue working to improve the refund fraud program and the taxpayer experience.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate acknowledges the immense challenge of detecting and preventing both \nidentity theft and non-IDT refund fraud. The IRS has done an admirable job in preventing fraudulent \nrefunds from being issued, while striving to minimize burden on taxpayers who filed legitimate \nreturns. In fact, in filing season (FS) 2019, the IRS made significant strides in improving its refund \nfraud processes, such as identifying more refunds for release shortly after they have been selected for \nfurther analysis. The IRS’s response here and its agreement to the majority of TAS recommendations \ndemonstrates that it is committed to moving the program forward in a way that protects revenue while \nminimizing the impact on taxpayers who filed legitimate returns. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n27\n",
"IRS and TAS Responses\nIntroduction\nThe IRS’s agreement to begin tracking an Operational FPR for its non-IDT refund fraud program \nand to establish an OPR for its IDT refund fraud program illustrates the IRS’s commitment toward \ncollecting as much useful data as possible to evaluate the effectiveness of these programs and how they \nimpact taxpayers. Additionally, the National Taxpayer Advocate is pleased that the IRS has agreed \nto collaborate on an important study that will analyze why some taxpayers delayed responding to an \nIRS notice asking them to authenticate their identity, and what barriers taxpayers may encounter when \nattempting this authentication. The results of this study will provide insight into these issues and will \nassist in identifying possible ways the authentication process can be improved. \nDespite these important areas of agreement, the IRS’s responses to the recommendations regarding \nthe high FPRs, which reached 82 percent for calendar year (CY) 2018 for the non-IDT refund fraud \nprogram, were either too vague or too dismissive to be useful. The IRS states it is working with \ninternal and external stakeholders on a number of issues facing the refund fraud program including \nthe FPR, yet its response lacks specific details or information on what stakeholders it is working with, \nand what it is working with them on. The National Taxpayer Advocate does not doubt the veracity of \nthis vague statement but is unable to meaningfully evaluate if these discussions are addressing the high \nFPRs. Additionally, the IRS’s refusal to adopt a target FPR illustrates that the IRS views a high FPR \nas an unavoidable consequence of protecting revenue. Although establishing a target FPR is not the \nonly step that can be taken to improve the effectiveness and accuracy of the refund fraud program, it \nis an important objective that should be established alongside other critical objectives, such as dollars \nprotected. \nTAS \nRecommendation\n[5-1] Calculate an “Operational FPR” in addition to the FPR and OPR for non-IDT accounts. \nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by June 1, 2019.\nIRS Action\nThe IRS agrees that further exploration and refinement of our methodology for calculating the False \nDetection Rate (FDR), which TAS refers to as the False Positive Rate (FPR), and related activity \nwould be beneficial in reflecting the customer experience. To that end, the IRS has started tracking \nnew measures such as the operational FDR (termed the Refile Rate).\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS will begin tracking the Operational FPR. \nThis data point is key to understanding how the IRS fraud detection systems are functioning in \nregards to selecting returns suspected of refund fraud and the time it takes for those returns to \nbe processed through those systems. This information will be yet another data point that can be \nconsidered when designing and modifying filters and developing procedures by which selected \nreturns can be released.\nSection Two—IRS and TAS Responses\n28\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[5-2] Develop criteria to be used in measuring OPR for IDT accounts.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by November 1, 2019.\nIRS Action\nWe agree on the importance of measuring the taxpayer experience when responding to potential \nIDT notices and letters. We continually look for opportunities to refine our process and provide \nadditional clarity to taxpayers. In response to the feedback, the IRS has started tracking \nauthentication timeframes. We will use this information to develop criteria for an IDT OPR that will \nprovide insight on the functional impact of false detections.\nTAS Response\nTo truly evaluate the effectiveness of the IDT refund fraud program and its impact on taxpayers, \nit is critical that the IRS measure how long it takes taxpayers to authenticate their identity from \nthe time the initial notice requesting authentication is sent to the taxpayer. The IRS’s agreement \nto collect this information will help identify to what extent IDT refund fraud processing times are \nattributable to taxpayers authenticating their identity. In other words, this information will assist in \ndetermining if processing times are due to the authentication process or are caused by the release \nprocess after authentication. \nTAS \nRecommendation\n[5-3] \u0007\nConduct a study to determine why it takes some taxpayers longer to authenticate \ntheir identities and what barriers they may encounter when attempting to do so.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by May 1, 2020.\nIRS \nAction\nThe IRS agrees on the importance of better understanding the customer experience during the \nauthentication process. We will conduct a study to determine the difference in timeframes that \nsome taxpayers may encounter.\nTAS Response\nThis collaborative study is a significant step towards identifying what barriers taxpayers may face \nwhen attempting to authenticate their identity, and what other factors may be responsible for \ntaxpayers’ delayed responses to IRS notices requesting the taxpayer to authenticate. The results \nof this study will assist the IRS in measuring the time it takes a refund to be released from the \ntime it is selected into the IDT refund fraud program. TAS looks forward to collaborating with the \nIRS on design, implementation, and analysis of the study and the study’s results.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n29\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[5-4] \u0007\nDesign the refund fraud system to consider if applying the third-party information to \nthe return would actually result in a larger refund when there is a mismatch between \nthird-party information and the information on a taxpayer’s return.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by October 15, 2019.\nIRS \nAction\nThe IRS is developing a framework to study the information we receive from third parties in order \nto improve the selection of returns to review. This effort is included in the IRS' rapid project \ndevelopment that permits appropriate changes to occur more quickly.\nTAS Response\nThis quick implementation of this recommendation will ideally reduce taxpayer burden by preventing \ntaxpayers from being selected into the non-IDT refund fraud program, where a change to the \nincome on the return would result in a larger refund, not a smaller one. In addition to reducing \ntaxpayer burden, this will remove yet another segment of returns that should never have been \nselected in the first place, thereby allowing the IRS to focus on returns that truly deserve further \nscrutiny.\nTAS \nRecommendation\n[5-5] \u0007\nRequest from outside vendors information on ways to improve the FPR, along with \nproposals to determine the factors that are contributing to high FPRs.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by January 15, 2020.\nIRS Action\nThe IRS continues exploring ways to improve the False Detection Rate (FDR), which TAS refers to \nas the False Positive Rate (FPR). We seek input from stakeholders within the IRS, outside vendors, \npartners in state governments, and the tax preparation industry. The IRS seeks to strike a balance \nbetween protecting revenue and improving the taxpayer experience, and will continue to work with \nand develop both internal and external partnerships.\nTAS Response\nThis response communicates a commitment to continually evaluating the programs and how \nthey can be improved in terms of protecting revenue and accuracy. However, the response lacks \nspecificity, making it difficult to evaluate what the IRS has actually agreed to. Although the IRS \nis working with outside vendors, it is not clear that it is working with these vendors on what is an \nacceptable FPR and what factors may be contributing to such a high FPR. In fact, the IRS’s refusal \nto set a target FPR and its acceptance of FPRs over 50 percent for the last three years for both \nIDT and non-IDT refund fraud seems to indicate that to an extent, the IRS is willing to accept higher \nFPRs as long as processing times for these returns are relatively quick. However, since two of the \nnon-IDT refund fraud filters exclusively select returns where either the Additional Child Tax Credit \n(ACTC) or Earned Income Tax Credit (EITC) has been claimed on the return (and where there is \neither no third-party documentation to support the income reported on the return, or the third-party \ninformation does not match the income on the return) they are likely selecting returns filed by low \nincome taxpayers, and a delay of even three weeks in receiving a refund could cause a financial \nhardship. In order to consider this recommendation as “agreed to,” the IRS would need to provide \nmore details, such as what vendors it is working with, what are the objectives, and what are the \ntimeframes for meeting these objectives.\nSection Two—IRS and TAS Responses\n30\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[5-6] \u0007\nEstablish a maximum acceptable FPR goal within industry accepted standards and \nan actionable timeline to achieve that goal, based on the information and proposals \nreceived from outside vendors.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe IRS processes over 150 million returns every year and IRS fraud filter selections have \nprotected about $12 billion per year over the last three years. Although we disagree with setting \na target False Detection Rate (FDR) (which TAS refers to as the False Positive Rate (FPR)), we \ndo look to improve selection efforts to reduce false detections. The IRS weighs the cost of lost \ngovernment revenue, agency integrity, and the taxpayer burden associated with false positives \nand false negatives when configuring its fraud detection systems. Evolving cybercriminal \nschemes require an agile IRS anti-fraud strategy. The IRS’ fraud detection strategy has resulted \nin fewer taxpayers requesting IDT victim assistance. By detecting fraud at the time of tax return \nsubmission, the IRS protects the legitimate taxpayer’s account, making it easier for the taxpayer to \nsubmit their return and receive their refund.\nThe IRS will continue to study the FDR and the factors that contribute to selections. We must \nminimize the burden of false detections while we protect taxpayers and government revenue from \nthe risks posed by third-party data breaches and highly sophisticated cybercriminals.\nIRS \nAction\nN/A\nTAS Response\nAs stated a number of times before, the National Taxpayer Advocate fully agrees that protecting \nrevenue is a critical component to effective tax administration. When addressing this key \ncomponent, it is reasonable to have to balance a number of factors, including protecting revenue \nwhile mitigating the number of legitimate returns that are selected into the refund fraud program. \nJust as the IRS establishes revenue and selection targets, it should also include an FPR target in \nthis analysis, rather than treating high FPRs as a mere consequence of the program that cannot \nbe addressed or mitigated through adequate planning and design of the refund fraud program. \nAn FPR target does not have to be an exact rate that indicates a success or failure, but rather \nis one factor to be considered when evaluating the refund fraud program’s overall success and \ncould be established in the form of a small range, rather than an exact percentage. Further, as \ncircumstances change during filing season, there may be a reasonable explanation why an FPR \ndoes not fall within the established range. However, by failing to set a target range for FPRs that is \nbased in sound reasoning, the IRS omits an important objective from the overall development and \nplanning of the refund fraud program.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n31\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#6\n\t\n\u0007\nIMPROPER EARNED INCOME TAX CREDIT PAYMENTS: Measures \nthe IRS Takes to Reduce Improper Earned Income Tax Credit \nPayments Are Not Sufficiently Proactive and May Unnecessarily \nBurden Taxpayers\nPROBLEM\nWhen the IRS allows a taxpayer’s erroneous claim of the Earned Income Tax Credit (EITC), it makes \nan “improper payment.” The IRS estimates that 25 percent of the EITC credits it allowed in fiscal \nyear (FY) 2018 were improper payments (23.4 percent, when considering improper payments the \nIRS recovered). A principal cause of the EITC improper payment rate is the complexity of the rules \nfor claiming EITC, yet the IRS does not provide a dedicated telephone help line available year-round \nfor taxpayers to call with questions about EITC. Recent measures Congress adopted to reduce the \nimproper payment rate (e.g., legislation requiring submission of third-party income reports by January \n31 and delaying EITC refunds until February 15) may be effective, but will not be reflected in the \nIRS’s estimate for years. In the meantime, in attempting to address improper payments, the IRS \nmay unnecessarily burden taxpayers by seeking expanded math error authority and imposing bans on \nclaiming the credit.\nANALYSIS\nThe improper payment estimate does not reflect the fact that for every dollar of EITC improper \npayments, 40 cents of EITC went unclaimed by taxpayers who appear to be eligible for the credit. EITC \nmisreporting accounts for only about six percent of the gross tax gap, and compared to non-tax payment \nor benefit programs, the cost of administering the EITC program (around one percent of benefits \ndelivered) is relatively low, while the EITC participation rate (79 percent) is relatively high. TAS studies \nshow that sending tailored communications to those who appear to have claimed the credit in error may \navert future erroneous claims.\nTAS RECOMMENDATIONS\n[6-1] \u0007\nSeek a permanent exemption from the requirement that the IRS include recovered EITC \npayments in the EITC improper payment estimate.\n[6-2] \u0007\nCollaborate with TAS to identify a method of identifying taxpayers who do not claim EITC but \nare eligible for the childless worker EITC, and automatically award the childless worker credit to \nthose taxpayers.\n[6-3] \u0007\nCollaborate with TAS to identify the changes to Form 1040 that would be needed, and the data \ngathering techniques that could be employed, to award EITC to taxpayers who are eligible for \nEITC with respect to a qualifying child but do not claim it on their returns.\n[6-4] \u0007\nCollaborate with TAS Research in designing and conducting the planned study to compare prior \nEITC audit results to audit results of taxpayers who used affidavits to establish that they met the \nresidency requirement. \nSection Two—IRS and TAS Responses\n32\n",
"IRS and TAS Responses\nIntroduction\n[6-5] \u0007\nRevise soft notices that are sent to taxpayers advising them they may have claimed EITC in \nerror to explain the error the taxpayer appears to have made (e.g., not meeting the residency \nrequirement or the relationship requirement, misreporting income or deductions).\n[6-6] \u0007\nEstablish a dedicated, year-round toll-free “help line” staffed by IRS personnel trained to respond \nto EITC and Child Tax Credit questions.\n[6-7] \u0007\nIn soft notices to taxpayers advising them that they may have claimed EITC in error, include the \ndedicated telephone “help line.” \nIRS RESPONSE\nThank you for recognizing the importance of reducing improper payments and for outlining \nrecommendations to improve our efforts in doing so without increasing taxpayer burden. As you are \naware, we face a significant challenge in administering refundable credits such as the Earned Income \nTax Credit (EITC). The refundability attracts fraud and other less egregious noncompliance, and the \ncomplexity of the eligibility criteria often leads to unintentional errors, both of which may result in \nimproper payments.\nIn administering the EITC, we have two goals: increasing participation for the eligible population and \nreducing errors that lead to improper payments. As you mentioned in your report, the participation \nrate is high (roughly 80 percent, or four out of five people eligible for the EITC claim it), and the \nadministrative costs are low (less than 1 percent of the credit paid). This is largely due to the reliance on \ntaxpayers’ self-assessment of eligibility for EITC as part of our voluntary tax system, which often makes \nit difficult to prevent improper payments.\nWe continue to administer refundable credits through a balanced program which includes education, \noutreach, and compliance efforts. We employ several EITC educational tools. The EITC Assistant \non IRS.gov is an interactive online tool that helps taxpayers determine if they’ve met the eligibility \nrequirements for the EITC. The Form 886-H Toolkit is an online tool that helps taxpayers determine \nthe correct documents needed if selected for an EITC audit. Our annual EITC Awareness Day \npromotes increased participation, decreased erroneous payments, and improved accuracy of filed returns \nthrough various media sources. Since resources are limited, we use a variety of treatments to address \nnoncompliance. For example, when we identify a discrepancy between information provided by a \ntaxpayer and existing third-party information, we may send an educational notice to allow the taxpayer \nto correct their information prior to any compliance activity. We appreciate TAS collaboration through \nthe Audit Improvement Team to identify improvements to reduce errors, protect taxpayer rights, and \nreduce taxpayer burden. Additionally, since return preparers file more than half of all returns claiming \nthe EITC, we have a robust return preparer strategy to identify and address preparer noncompliance \nthrough a progressive suite of treatments. By treating one preparer we are able to positively impact \nhundreds of taxpayers.\nWe will continue our research as part of our focus on underserved populations to address segments of \nnon-claimants and identify potential actions that can be taken. We will continue to collaborate with \nTAS, as we share the same goal to provide the EITC to all who are eligible.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n33\n",
"IRS and TAS Responses\nIntroduction\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate commends the IRS for recognizing that complexity of the law is a \nprimary driver of erroneous EITC claims and for developing, sometimes with collaboration from TAS, \nonline tools that help taxpayers determine whether they are eligible for the credit. However, as discussed \nbelow, correspondence with taxpayers would be more effective if it were more tailored: IRS letters should \nexplain with greater specificity why the IRS believes a taxpayer claimed EITC in error. Moreover, \nas a TAS study shows, providing a telephone help line that allows taxpayers to speak to a live assistor \nimproves compliance.\nThe National Taxpayer Advocate appreciates that measuring the improper payment rate presents some \nchallenges that are difficult for the IRS to address, such as the lag time between the estimate and the \nearlier audits on which the estimate is based. However, the IRS could seek renewal of the exemption \nfrom the requirement that it exclude recovered amounts in the estimate. Excluding recovered amounts \nmay be generally appropriate in calculating other agencies’ improper payment estimates, but is less \nsuitable for the IRS, where the application for the benefit is made on a tax return and significant \ncompliance activity occurs after issuance of refunds.\nThe National Taxpayer Advocate is encouraged that the IRS is willing to consider how to reach non-\nclaimants. It is unfortunate that IRS databases so easily identify taxpayers who appear ineligible to \nclaim EITC, yet those same databases do not reliably identify non-claimants who are eligible for the \ncredit. The IRS should explore using other techniques or databases to obtain enough information that \nwould allow it to systemically identify these taxpayers and automatically award the credit, especially the \nchildless worker credit.\nTAS \nRecommendation\n[6-1] \u0007\nSeek a permanent exemption from the requirement that the IRS include recovered \nEITC payments in the EITC improper payment estimate.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe IRS does not plan to pursue a permanent exemption because the requirements related to \nrecovered EITC payments are set by law and a permanent exemption from the requirements would \nrequire a legislative change. The Improper Payments Elimination and Recovery Improvement Act \nof 2013 directs the Office of Management and Budget (0MB) to provide guidance to agencies \nthat: “require[s] agencies to include all identified improper payments in the reported estimate, \nregardless of whether the improper payment in question has been or is being recovered.” Pub. \nLaw No. 112-248, § 3(b)(2)(D). Further, 0MB cannot allow any exemptions to the requirements \nsurrounding improper payments reporting unless they are specifically authorized by law.\nIRS \nAction\nN/A\nTAS Response\nBecause the IRS does not appear to object to excluding recovered amounts from the improper \npayment estimate, the National Taxpayer Advocate is perplexed by the response. The Office of \nManagement and Budget (OMB) has in fact exempted the IRS from the requirement to exclude \nrecoveries in the improper payment rate in the past, and there have been no changes in the law \nthat would affect OMB’s authority to do so. Thus, it is not clear why the IRS believes OMB cannot \nallow any exemptions unless they are specifically authorized. Rather than merely anticipating how \nOMB might respond to such a request, the IRS should request the exemption.\nSection Two—IRS and TAS Responses\n34\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[6-2] \u0007\nCollaborate with TAS to identify a method of identifying taxpayers who do not claim \nEITC but are eligible for the childless worker EITC, and automatically award the \nchildless worker credit to those taxpayers.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nWe agree with your thoughts on taxpayers eligible for the childless worker EITC. During the \naudit process, when the taxpayer responds that they are not eligible for the EITC with children, \nCorrespondence Tax Examiners are required to consider and adjust taxpayer accounts for the \nchildless worker credit without receiving a request from the taxpayer. The IRS procedures require \nexaminers working an EITC audit to determine if the taxpayer meets the requirements. If so, they \nare instructed to send the taxpayer an audit report reflecting the appropriate childless worker \nEITC amount. This process cannot be automated due to the different legal requirements and the \nresearch required to determine eligibility.\nIn February 2019, the IRS reconsidered previous proposals to eliminate the Computer Paragraph \nNotice 27 (CP 27), EIC Potential for T/P Without Qualifying Children, sent to taxpayers who appear to \nbe eligible for the EITC without a qualifying child by implementing up-front systemic determination of \nEITC eligibility and awarding of the credit when a return is processed. However, without legislative \nand related policy changes, current processes do not allow for accurate determination of taxpayer \neligibility for the credit at the time of filing, which may result in increasing EITC improper payments.1 \nTAS Response\nThe National Taxpayer Advocate does not dispute that “current processes do not allow for accurate \ndetermination of taxpayer eligibility.” However, it is unclear what “legislative and related policy \nchanges” would, in the IRS’s view, be needed before the childless worker credit could be accurately \nawarded automatically, at least for some taxpayers, and why the IRS is not willing to pursue those \nchanges. The cited Treasury Inspector General for Tax Administration (TIGTA) report does not \nexplain what the impediments may be. The IRS already gathers most of the information it needs \nto identify eligible taxpayers (e.g., income, filing status, Social Security number). To the extent it \nneeds additional information (e.g., whether the taxpayer resided in the United States for more than \nhalf of the year), the IRS should explore how that information can be reliably obtained.\nThe IRS has not implemented this recommendation.\n1\t\nSee Treasury Inspector General for Tax Administration (TlGTA), The Internal Revenue Service Should Consider Modifying the \nForm 1040 to Increase Earned Income Tax Credit Participation By Eligible Tax Filers, Ref. No. 2018-lE-R004 (April 2, 2018).\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n35\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[6-3] \u0007\nCollaborate with TAS to identify the changes to Form 1040 that would be needed, \nand the data gathering techniques that could be employed, to award EITC to \ntaxpayers who are eligible for EITC with respect to a qualifying child but do not claim \nit on their returns.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nAs part of our regular process, all forms are shared for comment and input as we consider \nchanges. Internal stakeholders, such as Counsel, Treasury, and the Taxpayer Advocate Service \n(TAS), receive email circulations of draft forms and instructions early in the development cycle. \nSuch circulations allow for a comment period, generally 30 days, to allow stakeholders to review \nand provide comments. In addition, Media & Publications and TAS have designated points of \ncontacts to receive, coordinate, assign, and track TAS’s comments and recommendations. Once \ninternal comments have been considered, Media & Publications posts draft forms and instructions \nto IRS.gov for outside stakeholders and the general public to review and comment. These external \ndrafts are referred to as Early Releases, and they generally allow 30 days for the public to provide \ncomments before releasing the final product to be used by taxpayers. Stakeholders are invited to \nprovide recommendations to assist us in providing a better customer experience and to ensure we \nare consistent with tax legislation requirements. We will continue our ongoing research efforts to \nidentify and address ways to increase participation in EITC of potentially eligible individuals.\nAdditionally, we agree on the importance of educating and bringing awareness to those taxpayers \nwho may be eligible for EITC. We will continue to hold and enhance our existing outreach efforts \nto increase participation. For example, we host annually an “EITC Awareness Day”, which is a \nnationwide effort led by the IRS to help taxpayers get more information about the EITC through \ntraditional and social media channels and to promote use of the EITC Assistant on IRS.gov. Each \nyear, the IRS uses its available communication resources to reach the broadest range of taxpayers.\nTAS Response\nOn June 21, 2018, pursuant to the procedures the IRS describes above, TAS commented on the \ndraft Form 1040, U.S. Individual Income Tax Return, as follows: \nThere needs to be a column, as in the prior 1040, for taxpayers to indicate they are claiming \nEITC. Moreover, on April 2, 2018, TIGTA recommended that the IRS modify Form 1040 to make \nit easier for the IRS to identify taxpayers who are eligible for EITC, including those who do not \nhave qualifying children. That way, the IRS “could automatically refund the EITC to some eligible \ntaxpayers who did not claim the credit instead of sending notices.” Figure 6 in the TIGTA report \nshows additional minor modifications to the Form 1040 that would elicit most of the information \ncurrently requested on the reminder notices. See TIGTA Ref. No. 2018-IE-R004, The Internal \nRevenue Service Should Consider Modifying the Form 1040 to Increase Earned Income Tax Credit \nParticipation by Eligible Tax Filers. For example, a box that says “check here if you lived in the US \nfor more than half the year” and a box that says, with respect to each person for whom EITC is \nbeing claimed, “check here if this person lived with you for more than half the year” would elicit \ninformation the IRS could use to automatically issue EITC refunds where the taxpayer did not \nclaim the credit. \nThe IRS has not implemented this suggestion or sought to collaborate with TAS to identify ways to \naccomplish the recommendation.\nSection Two—IRS and TAS Responses\n36\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[6-4] \u0007\nCollaborate with TAS Research in designing and conducting the planned study to \ncompare prior EITC audit results to audit results of taxpayers who used affidavits to \nestablish that they met the residency requirement. \nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by November 30, 2020.\nIRS Action\nWe appreciate the collaboration and involvement of the TAS, through the Audit Improvement Team, \nin reviewing audits involving the affidavits. The IRS will work with TAS Research to develop a data \ncollection instrument that will be used to review the audits where the affidavits are applicable. In \naddition, IRS will work collaboratively with TAS to get input on conducting these reviews.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased that the IRS continues to collaborate with TAS Research \nin evaluating the effect of accepting affidavits in EITC audits.\nTAS \nRecommendation\n[6-5] \u0007\nRevise soft notices that are sent to taxpayers advising them they may have claimed \nEITC in error to explain the error the taxpayer appears to have made (e.g., not \nmeeting the residency requirement or the relationship requirement, misreporting \nincome or deductions).\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nWe agree on the importance of taxpayers understanding errors they may make in filing their tax \nreturns. The IRS's most recent compliance study shows that income misreporting and qualifying \nchild errors are the two most frequent errors with the largest dollar impact on overclaims. In an \nattempt to bring awareness to the issue and help educate our taxpayers, the IRS issued notices \nwith language tailored to address qualifying child errors or Schedule C income errors. The \nlanguage was revised to help taxpayers better understand questions regarding relationship to EIC \nqualifying children, age and residency tests, and Schedule C income tests for allowable income. \nWe will continue to collaborate with impacted stakeholders, including TAS, to look for opportunities \nto refine our letters and notices to improve service to taxpayers.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n37\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe IRS does not identify the specific notices or letters it describes in the response. In any event, \nas the IRS notes, an IRS study showed that among known errors taxpayers made in claiming EITC, \nthe largest amount of overclaims was caused by taxpayers claiming children who were not their \nqualifying children. The most frequent known error was income misreporting. In the past, the IRS \nsent taxpayers Letter 5621, Help Us Confirm Your Relationship to the EIC Qualifying Children, or \nLetter 5621-A, Confirm Your Schedule C Income Used to Claim Earned Income Tax Credit, when these \nerrors appear to have been made. These letters gave taxpayers the general instruction to “make \nsure your children meet the criteria for claiming the Earned Income Tax Credit (EITC)” or “make sure \nthe income and expenses you reported on your Schedule C or Schedule C-EZ are correct.” Both \nLetter 5621 and Letter 5621-A were designated as obsolete on May 29, 2019. \nThe IRS also issues CP 85-series notices, but these notices have similarly vague language and \nhave not been revised since January 2018 (see Internal Revenue Manual (IRM) 21.5.10.4.2, \nExam Soft Notices CP 85A, CP 85B, CP 85C, CP 87A, CP 87B, CP 87C, and CP 87D (Jan. 31, 2018)). \nFor example, Notice CP 85B, which is sent to taxpayers who claimed a qualifying child for EITC that \nmay not be correct, advises “We’re asking you to make sure that your child has met all three of \nthe following requirements for age, relationship, and residency.” The notice does not inform the \ntaxpayer that these requirements appear not to have been met, much less specify which of the \nthree requirements may not have been met. \nIn contrast, the letters the National Taxpayer Advocate sent to taxpayers who appeared to have \nmade an error in claiming EITC were tailored and salient. Among other things, they explained which \nerror appeared to have been made.\nNotice CP 85C, sent to taxpayer who filed a Schedule C (Form 1040), Profit or Loss from Business, \nwith little or no expenses and thus may not have a business, advises “We need you to confirm \nthe income and any expenses claimed on your Schedule C,” and “we need you to confirm your \nincome because you claimed Earned Income Credit (EIC) on your [tax year] return.” The notice \ndoes not inform the taxpayer that the IRS believes the return to contain an error, or what aspect of \nSchedule C is causing concern.\nWe are unable to find recently updated or revised soft notices sent to taxpayers who may have \nerred in claiming EITC. From the information available, it appears the IRS has not implemented the \nrecommendation.\nSection Two—IRS and TAS Responses\n38\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[6-6] \u0007\nEstablish a dedicated, year-round toll-free “help line” staffed by IRS personnel trained \nto respond to EITC and Child Tax Credit questions.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nThe IRS currently staffs a year-round toll-free telephone line in order to answer questions on EITC \ncorrespondence audits, many of which contain an audit issue for the Child Tax Credit (CTC)/\nAdditional Child Tax Credit (ACTC). Our employees who answer these toll-free calls are trained and \nexperienced on both issues, and best equipped to answer taxpayer telephone calls related to these \npotential audit issues.\nIn addition, the IRS continues to offer taxpayers with EITC and CTC/ACTC related inquiries multiple \noptions for obtaining assistance from IRS employees and volunteers versed in the tax law. Options \ninclude calling the IRS toll-free telephone line, visiting a Volunteer Income Tax Assistance or Tax \nCounseling for the Elderly site, or making an appointment to visit the local Taxpayer Assistance \nCenter.\nWe also employ several EITC educational tools, including the interactive EITC Assistant on IRS.gov \nthat helps taxpayers determine if they’ve met the eligibility requirements for the EITC and the online \nForm 886-H Toolkit that helps taxpayers determine the correct documents needed if selected \nfor an EITC audit. Our annual EITC Awareness Day promotes increased participation, decreased \nerroneous payments, and improved accuracy of filed returns through various media sources.\nTAS Response\nThe year-round toll-free telephone line the IRS refers to above, while a useful resource, is provided \nonly to taxpayers who are being audited. The other resources referenced above may be helpful to \ntaxpayers who can access the internet, or who manage to meet with an IRS employee or volunteer \nface to face, but they do not address the needs of taxpayers seeking information about EITC or \nCTC from a dedicated telephone help line. \nA principal cause of error in claiming EITC is the complexity of the rules for claiming the credit. \nThe IRS should provide telephone support not only to taxpayers whose returns have been selected \nfor audit, but also to taxpayers seeking assistance in understanding the rules for claiming the \ncredit. As TAS’s 2017 study demonstrates, providing a toll-free number to non-audited taxpayers \nwho appear to not have met the residency requirement is effective in averting erroneous claims. It \nappears the IRS has not implemented the recommendation.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n39\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[6-7] \u0007\nIn soft notices to taxpayers advising them that they may have claimed EITC in error, \ninclude the dedicated telephone “help line.” \nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nWhen a taxpayer may have claimed the EITC in error, the IRS issues a notice explaining the error \nand steps the taxpayer can take if they agree with our conclusion or information they can provide if \nthey disagree with our proposal. Each letter provides a toll-free telephone number for the taxpayer \nor authorized representative to call in order to resolve their account. Although this line is not solely \ndedicated to EITC questions, all employees are trained to answer these questions.\nTAS Response\nThe IRS does not specify which letters or notices it describes in its response. In any event, as \nnoted above, the IRS, in the past, sent taxpayers Letter 5621, Help Us Confirm Your Relationship \nto the EIC Qualifying Children, and Letter 5621-A, Confirm Your Schedule C Income Used to Claim \nEarned Income Tax Credit. These letters provided a telephone number for taxpayers to call. \nHowever, as noted, these letters are no longer used. The CP 85B and 85C notices, discussed \nabove, contain a phone number that taxpayers can call to receive automated options for checking \non the status of a refund or an amended return, or for finding a specific tax topic online. There is \nno option to speak with an IRS assistor.\nWe are unable to find recently updated or revised soft notices sent to taxpayers who may have \nerred in claiming EITC that might contain a different telephone number for taxpayers to call. From \nthe information available, it appears the IRS has not implemented the recommendation.\nSection Two—IRS and TAS Responses\n40\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#7\n\t\n\u0007\nRETURN PREPARER OVERSIGHT: The IRS Lacks a Coordinated \nApproach to Its Oversight of Return Preparers and Does Not \nAnalyze the Impact of Penalties Imposed on Preparers\nPROBLEM\nIn 2018, more than half of the tax returns submitted by return preparers were from individuals who are \nunregulated by the IRS. It is a necessary part of the IRS’s duties to ensure that preparers are competent \nand accountable, since return preparers play such a critical role in tax administration and in promoting \ntax compliance. The public needs a way to differentiate between professional, competent, and \nexperienced preparers and their incompetent or unscrupulous counterparts.\nANALYSIS\nThe IRS had started to implement a program to impose minimum competency requirements on \nthe unenrolled tax preparation profession. However, in 2013, the District Court for the District of \nColumbia enjoined the IRS from regulating tax return preparers via testing and continuing education \nrequirements. Although the IRS cannot mandate return preparers pass competency tests or undergo \ncontinuing education, there is still a need for the IRS to provide a certain level of oversight. Rather than \ndesignating one centralized Commissioner-level office to coordinate oversight of return preparers, the \nIRS has spread this responsibility across several organizations, including (1) the Return Preparer Office \nto oversee registration of preparers, (2) the Office of Professional Responsibility to interpret and apply \nCircular 230, (3) Wage and Investment’s Return Integrity and Compliance Services function to develop \na Refundable Credits Return Preparer Strategy, (4) Small Business/Self-Employed’s Return Preparer \nProgram, and (5) Criminal Investigation’s Abusive Return Preparer Program.\nIn May 2018, the IRS convened a cross-functional team tasked with developing a coordinated \nservicewide return preparer strategy. (Representatives from TAS were not invited to this team.) The \nIRS to date has not delivered a comprehensive, coordinated strategy. Moreover, with respect to \npenalties, it has a no change rate of about 15 percent, and the IRS collects only about 15 percent of the \npenalties it assesses. Beyond preparer audits, the IRS does not have a strategic plan for using letters and \nsoft notices to drive future preparer compliance, and where it does use such letters, it does not routinely \nmeasure the future compliance impact.\nTAS RECOMMENDATIONS\n[7-1] \u0007\nInvite representatives from TAS to the cross-functional team that was established to develop a \ncoordinated strategy to provide effective oversight of return preparers.\n[7-2] \u0007\nDevelop a comprehensive plan to communicate the coordinated return preparer strategy to \nCircular 230 preparers and unenrolled preparers.\n[7-3] \u0007\nDevelop a community-based, grassroots communication strategy for educating vulnerable \ntaxpayer populations about how to select a competent return preparer and the risk of return \npreparer fraud.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n41\n",
"IRS and TAS Responses\nIntroduction\n[7-4] \u0007\nConduct analysis on the impact of penalty assessments and no change audits on preparers’ \nbehavior in subsequent years, and publish the findings.\n[7-5] \u0007\nRevise letters and notices (including Appeals Letter 3808) that reference the Directory of Federal \nTax Return Preparers to ensure that appropriate caveats are clearly articulated.\nIRS RESPONSE\nOur goal at the IRS is to address preparer noncompliance as quickly as possible and in the most efficient \nand effective manner. We employ a multi-faceted and multi-functional approach to both support \nand provide oversight to preparers to ensure the accuracy of the returns they prepare. This includes, \nbut is not limited to, preparer visits conducted before, during, and after filing season; correspondence \noutreach; preparer compliance examinations; and criminal investigations and injunctions.\nWe established a cross-functional team to develop a Service-wide approach to the return preparer \nstrategy. The team includes representatives from the Wage & Investment Division (W&I), the Large \nBusiness & International Division (LB&I), Appeals, Counsel, Research, Criminal Investigation (Cl), \nthe Return Preparer Office, and the Taxpayer Advocate Service (TAS).\nThe team’s focus is on improving program effectiveness through:\n1.\tImproving, leveraging, and centralizing compliance activities;\n2.\tReducing opportunities for preparer misconduct and non-compliance;\n3.\tMaking a multi-year commitment to preparer-related research;\n4.\tContinuing improvements in information technology and information sharing; and\n5.\tCoordinating with external partners and stakeholder groups to establish a Service-wide \ncommunication and outreach strategy to engage both our internal and external partners.\nThis collaboration will include a comprehensive analysis of the current activity within each compliance \norganization to identify gaps and develop a unified Service-wide strategy. This strategy will allow us to \nleverage our limited resources and coordinate a full range of educational, civil, and criminal enforcement \nactions across all IRS functions. We will also establish program goals to support the Service-wide return \npreparer strategy and measures to track progress towards those goals.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate is encouraged by the IRS’s response that it takes its responsibility to \noversee return preparers seriously. IRS management seems to be in agreement that there is much it can \ndo, in spite of the judicial rulings, to effect positive change in how return preparers are trained and how \nthe taxpaying public perceives them. With the vast majority of taxpayers relying on paid preparers, \nit is important that taxpayers be able to have confidence in the competence and integrity of their tax \nprofessionals. \nSection Two—IRS and TAS Responses\n42\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[7-1] \u0007\nInvite representatives from TAS to the cross-functional team that was established to \ndevelop a coordinated strategy to provide effective oversight of return preparers.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS Action\nA TAS representative was identified in February 2019 and attended two Service-wide Preparer \nStrategy team meetings held that month, while a second TAS representative was identified in \nMarch. Both representatives are currently participating in ongoing team meetings. As team \nmembers, these two representatives will assist in developing the Service-wide strategy and provide \ninput from the Taxpayer Advocate perspective.\nTAS \nResponse\nWe are pleased that the IRS has so promptly adopted our recommendation. We expect that \nthe representatives from TAS will provide a perspective that will help ensure taxpayer rights are \nprotected and taxpayer burden minimized.\nTAS \nRecommendation\n[7-2] \u0007\nDevelop a comprehensive plan to communicate the coordinated return preparer \nstrategy to Circular 230 preparers and unenrolled preparers.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS \nAction\nThe Service-wide Preparer Strategy includes an action item to develop a comprehensive \ncommunication and outreach strategy.\nTAS Response\nIt is our understanding that the Servicewide Preparer Strategy team is tasked with developing \na comprehensive communication and outreach strategy, one that will engage both internal and \nexternal stakeholders. The National Taxpayer Advocate is pleased that the IRS has committed \nto this action item and looks forward to being briefed on the comprehensive communication \nand outreach strategy once it is finalized. However, until this strategy is approved by IRS senior \nleadership, we do not believe this recommendation should be closed out as implemented. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n43\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[7-3] \u0007\nDevelop a community-based, grassroots communication strategy for educating \nvulnerable taxpayer populations about how to select a competent return preparer and \nthe risk of return preparer fraud.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by April 15, 2020.\nIRS Action\nSince 2014, the IRS has created multiple messages for the public regarding how to select a \ncompetent return preparer and the risks of return preparer fraud. The messages are centrally \nlocated at www.irs.gov/chooseataxpro. These include news releases, tax tips, videos, and \nwebpages. Some of our most recent offerings include:\n♦\n♦News releases IR-2019-32, Choose tax preparers carefully, and IR-2019-09, Don’t be a victim to a \n“ghost” tax return preparer.\n♦\n♦Tax Tip 2019-06, Ten things for taxpayers to think about when choosing a tax preparer.\n♦\n♦Videos entitled “Choose a Tax Preparer Wisely” and “How to Use the Tax Return Preparer \nDirectory.”\n♦\n♦Web pages on “Understanding Tax Return Preparer Credentials and Qualifications” and the \n“Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.”\nThe IRS widely distributes these messages to the media, national tax professional organizations, \nsmall business organizations, consumer groups, and state partners. The IRS will work to further \nexpand the reach of these messages to vulnerable taxpayer populations for the next filing season.\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS has developed content to host on the \nIRS.gov website. We are concerned that many taxpayers, especially those who may be most \nsusceptible to being victimized by unscrupulous preparers, may not have access to broadband \ninternet or may not be accustomed to going online to get information about taxes. \nWe recommended that the IRS take a multi-faceted approach to outreach. To ensure it reaches \nthe population in a manner that will be best received, the IRS may want to partner with volunteer \norganizations, consumer rights groups, local churches, and other community groups. The IRS \nshould explore the feasibility of developing creative public service announcements for TV and radio, \nas well as for non-traditional social media outlets. \nWe look forward to learning about the IRS’s expanded approach, and appreciate the IRS committing \nto implement this recommendation by April 2020.\nSection Two—IRS and TAS Responses\n44\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[7-4] \u0007\nConduct analysis on the impact of penalty assessments and no change audits on \npreparers’ behavior in subsequent years, and publish the findings.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nDue to the volume of preparers we engage with during our compliance processes, the monitoring \nof individual preparers’ post audit and post penalty assessment behavior would be cost prohibitive. \n \nIn addition, we cannot assume a change in a preparer’s behavior is the result of an enforcement \naction. To know for certain the reason behind a change in a preparer’s behavior would require \nexaminations of the preparer’s clients’ returns. This would be burdensome to the preparer, their \nclients, and may not represent the most effective use of IRS resources. For this reason, from a \ncost-benefit perspective, we do not believe this is the best use of limited IRS resources. However, \nwe do analyze data to identify non-compliant preparers and use that analysis in considering and \nevaluating preparer/promoter investigations and case selection.\nIRS \nAction\nN/A\nTAS Response\nWe understand IRS resource constraints. We feel it would be worthwhile to invest time and \nresources into a study on the impact of preparer penalties, in an attempt to learn whether these \npenalties have an impact at all on behavior. This information would leave the IRS better equipped \nto decide whether spending resources on assessing these penalties has a positive return on \ninvestment, given that only about 15 percent of assessed preparer penalties were actually \ncollected in recent years.\nTAS \nRecommendation\n[7-5] \u0007\nRevise letters and notices (including Appeals Letter 3808) that reference the \nDirectory of Federal Tax Return Preparers to ensure that appropriate caveats are \nclearly articulated.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n45\n",
"IRS and TAS Responses\nIntroduction\nIRS Action\nIn an effort to help taxpayers in responding to IRS correspondence, certain letters have been \nupdated to include individuals and organizations that are independent from the IRS and which \nprovide taxpayer assistance. These letters include references to Low Income Taxpayer Clinics \nas well as the Directory of Federal Tax Return Preparers (Directory). This searchable Directory \nis intended to help taxpayers by providing a listing of preparers in their area who currently hold \nprofessional credentials recognized by the IRS or who hold an Annual Filing Season Program Record \nof Completion.\nTax return preparers have differing levels of skills, education, and expertise. The landing page \nfor the Directory provides very specific definitions of what the various categories of preparers \ncan do. These definitions were negotiated with the stakeholder community at length to ensure \ntheir accuracy and clarity. There is no one included in the Directory who does not have some \nrepresentation rights.\nThe Directory landing page also includes a link to information on “Understanding Tax Return \nPreparer Credentials and Qualifications,” which provides taxpayers with detailed descriptions of the \ndifferent types of tax professionals, including licensing requirements and representation authority. \nWe believe the information provided with the Directory is sufficient to allow taxpayers to make an \ninformed decision. In addition, trying to include this granularity of detail regarding return preparer \nauthorities within the letters themselves is not suitable for plain language notice writing and could \nlead to taxpayer confusion.\nTAS Response\nWe contended that it is misleading and potentially harmful for the IRS to reference the Directory \nof Federal Tax Return Preparers without explaining the potential limited representation authorities \nof such preparers. The IRS responded that there is a link located on the Directory landing page \nthat contains a description of the different types of tax professionals. We find this response to be \ninadequate and in violation of the taxpayers’ right to be informed and right to quality service. To the \nextent that the IRS is able to identify which letters should be modified to include the explanatory \nlanguage when referring to the Directory of Federal Tax Return Preparers, it should do so.\nSection Two—IRS and TAS Responses\n46\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#8\n\t\n\u0007\nCORRESPONDENCE EXAMINATION: The IRS’s Correspondence \nExamination Procedures Burden Taxpayers and Are Not Effective \nin Educating the Taxpayer and Promoting Future Voluntary \nCompliance\nPROBLEM\nIRS correspondence audits may involve complicated rules and procedures, or complicated fact situations, \nor both as in the case of the Earned Income Tax Credit (EITC). Taxpayers in correspondence exams \nmay suffer greater burden because of the difficulty of sending and receiving correspondence (including \nhaving it considered at the right time); the lack of clarity in IRS correspondence; and the lack of a single \nemployee assigned to the taxpayer’s case. Correspondence examiners do not receive sufficient training \non complex issues, and IRS correspondence exam measures do not adequately consider taxpayer needs \nand preferences. These problems are exacerbated when the audited taxpayer is low income or has limited \nEnglish proficiency, or when there are other impediments that hinder communication during the audit.\nANALYSIS\nIn fiscal year (FY) 2017, the IRS audited almost 1.1 million tax returns (including business and \nindividual returns), approximately 0.5 percent of all returns received that year. During FY 2017, the \nIRS conducted approximately 71 percent of all audits (business and individual) by correspondence. For \nFY 2018 correspondence audits, the IRS took more than 65 days to respond to the majority of taxpayer \nreplies in refundable credit cases. During FY 2018, Small Business/Self-Employed (SB/SE) division \nexam employees answered the exam phone only about 35 percent of the time. An examination is \nprimarily an education vehicle, so the taxpayer learns the rules, corrects mistakes, and can comply in the \nfuture. In fact, the IRS gains about twice as much from the long-term effects of an audit than it does \nfrom the actual audit itself. Yet, a significant number of correspondence audits—about 42 percent—\nwere closed with no personal contact in FY 2018. IRS correspondence and forms are inadequate to \ninform and educate taxpayers, and they fail to include contact information for the employee who \nreviewed the taxpayer’s reply. The measures for correspondence exams are inadequate to determine \nwhether the IRS is choosing the best cases to audit, educating the taxpayer, and increasing future \ncompliance.\nTAS RECOMMENDATIONS\n[8-1] \u0007\nRequire at least one personal contact between an IRS employee and the taxpayer (this can be \nsatisfied by an outgoing or incoming phone call) before closing a correspondence examination.\n[8-2] \u0007\nMeasure taxpayers’ filing compliance (including filing a return, making an error on a return, and \nunderreporting taxes on a return) following correspondence examinations and apply this data to \nguide audit selection based on the resulting impact on compliance.\n[8-3] \u0007\nContinue to assign a single employee for a correspondence examination when the IRS receives \na response from the taxpayer either by phone or correspondence, and expand on this right by \nretaining this employee as the single point of contact throughout the remainder of the exam.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n47\n",
"IRS and TAS Responses\nIntroduction\n[8-4] \u0007\nPer RRA 98 § 3705(a), place on outgoing taxpayer correspondence the name and telephone \nnumber of the tax examiner who reviewed the taxpayer’s correspondence where a tax examiner \nhas reviewed and made a determination regarding that specific documentation.\n[8-5] \u0007\nConduct surveys of taxpayers following correspondence examinations to gauge their \nunderstanding of the examination process and their resulting attitudes towards the IRS and \ntowards filing and paying taxes.\n[8-6] \u0007\nCollect data regarding which forms of documentation taxpayers sent in a correspondence \nexamination that were deemed insufficient and revise existing correspondence examination letters \nto better explain documentation requirements.\n[8-7] \u0007\nEnd the practice of using the combination letter and provide taxpayers with an initial contact \nprior to issuing the preliminary audit report.\nIRS RESPONSE\nCorrespondence Examination is a critical part of IRS’ overall compliance approach to fair and balanced \ntax administration. We designed Correspondence Examination to work single-issue (non-complex) \nand single-year cases that can easily be resolved via documentation. Examinations are conducted by \ncorresponding with the taxpayer, a taxpayer contact that is typically less burdensome on the taxpayer, \nrather than having a face-to-face meeting. This approach allows for broader geographic coverage and \naddresses noncompliance across a broad spectrum of the population.\nBalanced coverage, which is improved through the correspondence examination program, is one way \nthat we can better achieve fairness in treatment of taxpayers. In addition, the program focuses on \nimplementing the IRS’ strategy of reducing audit cycle time and improving audit coverage and strives to \nselect case inventory that would produce a low no-change rate.\nExaminers educate taxpayers on the tax law, recordkeeping requirements, and documentation \nnecessary to substantiate what is claimed on the return. We continuously evaluate our Correspondence \nExamination processes and procedures, including our communications with taxpayers. We analyze data \nto help identify improvement opportunities with an eye toward enhancing the taxpayer’s experience, \npromoting better and more productive interactions and exchanges of information, and decreasing case \nprocessing time. In December 2016, we launched a pilot in the Correspondence Examination program \nthat uses an online suite of web-based secure communication tools that allow the IRS and the taxpayer \nto correspond digitally.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate recognizes that correspondence examinations play a role in \nthe IRS’s overall examination strategy; however, the Most Serious Problem details how the IRS’s \nuse of correspondence exams does not lead to balanced coverage or fairness in treatment among \ntaxpayers. Specifically, the Most Serious Problem demonstrates how correspondence examinations \ndisproportionately burden low income taxpayers, noting that 72 percent of the approximately 461,000 \ncorrespondence exams closed in fiscal year (FY) 2018 by the Wage and Investment Division involved \nthe Earned Income Tax Credit (EITC). The IRS response conflates “single issue” with “non-complex,” \nignoring the inherent complexity in certain single issues such as the EITC. Further, the Most Serious \nProblem notes that the IRS is increasingly using correspondence exams for Schedule C (Form 1040), \nSection Two—IRS and TAS Responses\n48\n",
"IRS and TAS Responses\nIntroduction\nProfit or Loss From Business (Sole Proprietorship), exams and could potentially use correspondence exams \nfor the new Internal Revenue Code (IRC) § 199A deduction. By focusing primarily on cycle time \nand no change rates, the IRS is ignoring other key metrics such as response rates, agreement rates, and \nsubsequent compliance, which would allow the IRS to see whether a taxpayer was educated because of \nthe audit. As explained in the Most Serious Problem, an examination is primarily an education vehicle.\nTAS \nRecommendation\n[8-1] \u0007\nRequire at least one personal contact between an IRS employee and the taxpayer \n(this can be satisfied by an outgoing or incoming phone call) before closing a \ncorrespondence examination.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe Correspondence Examination program was specifically designed as a mail-based workstream. \nReturns and issues are selected that are conducive to this type of audit. This workstream \nsupplements other workstreams that necessitate a higher level of taxpayer contact. Current \nCorrespondence Examination procedures in Internal Revenue Manual (IRM) 4.19.13.10.1 require \nemployees to contact the taxpayer or authorized power of attorney by telephone when taxpayer \ninformation provided is insufficient and an audit report has been sent. Non-response cases are \nprocessed using the Automated Correspondence Examination system (ACE). Use of the system \nenables the IRS to process specified cases with no, or minimal, tax examiner involvement until a \ntaxpayer reply is received. Because the ACE system will automatically process the case through \ncreation, statutory notice, and closing process, there is no tax examiner involvement when a \ntaxpayer fails to reply to the initial correspondence contact.\nFor such no-reply cases, contact is made through letters and notices, since Correspondence \nExamination does not have the resources to contact every taxpayer by telephone. This \ncorrespondence provides the taxpayer with information on the audit issues and supporting \ndocuments needed to resolve the issues. In addition, taxpayers are provided options for \nobtaining more information about the audit process and applicable tax law. Taxpayers can call \nthe Examination toll-free telephone line to secure information about their specific case and/or \ndocumentation that will resolve the taxpayer’s issue(s).\nWe understand that taxpayers with lower incomes or education levels, or with a language barrier, \nmay have more difficulty understanding the tax laws. We appreciate the collaboration of the \nTaxpayer Advocate Service on the Audit Improvement Team focused on examinations involving the \nEarned Income Tax Credit (EITC). The team developed an online tool, the Form 886-H-EIC Toolkit, \nthat helps a taxpayer determine the correct documents needed to resolve an audit. The Toolkit is \ntailored to the taxpayers’ situations, based on their responses. This effort was implemented as a \nresult of feedback received from tax preparers, Low Income Tax Clinic counselors, and taxpayers \nwho shared concerns about identifying the documents needed to prove EITC eligibility.\nIRS \nAction\nN/A\nTAS Response\nFirst, the National Taxpayer Advocate would like to acknowledge the IRS’s collaboration in creating \nthe Form 886-H-EIC Toolkit, which provides a valuable resource for taxpayers. Notwithstanding \nthis development, the Toolkit does not eliminate the need for personal contact. The Most Serious \nProblem discusses a TAS study showing the benefits of expanded, personal communication with \ntaxpayers. Direct contact can help educate taxpayers about what they did wrong and how to \navoid making the same mistakes in the future. Although the IRM instructs employees to make an \noutgoing call during a correspondence examination when taxpayer information is insufficient and an \naudit report has been sent, this may be too late in the process. Unless taxpayers know to request \nan extension, they only have 30 days to provide the correct information. Providing a personal \ncontact earlier in the process, before the exam report is sent, may assist the taxpayer in providing \nthe correct information the first time, or fixing it before the IRS goes through the process of issuing \nthe audit report. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n49\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[8-2] \u0007\nMeasure taxpayers’ filing compliance (including filing a return, making an error on a \nreturn, and underreporting taxes on a return) following correspondence examinations \nand apply this data to guide audit selection based on the resulting impact on \ncompliance.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nDue to the large volume of taxpayers we examine in a given year, the monitoring of individual \ntaxpayers' post-audit behavior would be cost prohibitive. In addition, we cannot assume a change \nin a taxpayer's behavior is a result of an examination. A taxpayer's behavior can change from year \nto year for a variety of reasons, including changes to their employment or other environmental \nfactors. We also may not know whether a subsequently-filed return is accurate. To know for \ncertain whether a return is accurate, or the reason for the behavioral change, would require \na follow-up examination of the taxpayer. This would be burdensome to the taxpayer and may \nnot represent the most effective use of IRS resources. For this reason, from a cost-benefit \nperspective, we do not believe this is the best use of limited IRS resources. However, we do \nanalyze closed examination results for use in improving our audit selection process. We will \ncontinue to use aggregated examination data to find areas that need further taxpayer education, \nform or instruction changes, or outreach events.\nTAS Response\nThe IRS’s response provides a general description of how it uses aggregated examination data, \nbut does not provide any details about whether it analyzes taxpayers’ subsequent filing behavior \nafter examinations. The IRS raises a valid point that monitoring the subsequent filing behavior of \nevery taxpayer who underwent an exam might be cost prohibitive. However, the IRS could instead \nuse samples of different taxpayers audited for different issues to determine how the exams might \neducate taxpayers or lead them to repeat the same mistakes. While the IRS is correct that a \ntaxpayer’s behavior can change from year to year based on several factors, the IRS could conduct \nan analysis and control for other factors so that it was comparing like taxpayers. The IRS could \ncompare taxpayers’ likelihood to make a specific mistake for taxpayers who were previously audited \non an issue versus those who were not, controlling for things such as filing status, income, age, \nand other factors. A discrepancy between these two groups would suggest that the examination \nplayed a role in changing taxpayer behavior. \nIt is surprising that the IRS is characterizing a follow-up examination as burdensome, given that it \nis common practice for the IRS to conduct related-year audits on taxpayers already under audit for \nanother year. Finally, although conducting audits does use resources, the IRS should consider the \ncost benefits that would result from increasing voluntary compliance and better selecting taxpayers \nfor audit.\nBased on the limited actions the IRS has committed to in its response, the National Taxpayer \nAdvocate disagrees with the IRS’s characterization of this response as “agreed to in part.” \nSection Two—IRS and TAS Responses\n50\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[8-3] \u0007\nContinue to assign a single employee for a correspondence examination when the \nIRS receives a response from the taxpayer either by phone or correspondence, \nand expand on this right by retaining this employee as the single point of contact \nthroughout the remainder of the exam.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nThe Correspondence Examination program was specifically designed as a mail-based workstream. \nReturns and issues are selected that are conducive to this type of audit. When Correspondence \nExamination receives a response from a taxpayer or representative, it is assigned to one employee. \n \nThis employee remains as the single point of contact. If additional responses are received on the \ncase, those responses are generally reviewed by the same employee.\nGiven the design of the program, employees do not have telephones able to receive direct external \nincoming calls. Instead, the program was designed for Correspondence Examination enterprise \ntelephone calls to be answered corporately for all campus operations. When taxpayers call the \nCorrespondence Examination toll-free line, their call is routed to the next available assister. \nThe assistor is experienced, has access to case history, and will work with the taxpayer toward \nresolution. A phone call alone does not constitute assignment to an employee. An employee \nis not assigned to the case until documentation is received from the taxpayer. However, if the \ntaxpayer has responded to the initial contact letter with correspondence and later calls the toll-free \nline and is not satisfied at the end of the call, the taxpayer has the option to have the assigned tax \nexaminer return their call.\nThe program appropriately implements the direction in the IRS Restructuring and Reform Act of \n1998 to develop procedures to the extent practicable and if advantageous to the taxpayer for one \nIRS employee to handle a taxpayer’s matter until it is resolved. Given the technology limitations, it \nis not practical to assign one employee to handle the taxpayer’s correspondence examination from \nbeginning to end; however, upon receiving a written response, we are able to assign one employee \nto review. We disagree with the Recommendation’s characterization of this assignment procedure \nas a “right” to be expanded.\nTAS Response\nIt is troubling that the IRS disagrees with “the Recommendation’s characterization of this \nassignment procedure as a ‘right’ to be expanded.” First, the ability to have a single employee \nassigned is most certainly a taxpayer right, provided by section 3705(b) of the Internal Revenue \nService Restructuring and Reform Act of 1998 (RRA 98). Second, the IRS’s implementation of this \nright should be expanded because the IRS’s current procedures only implement this right half-way. \nThe IRS assigns a single employee as a point of contact after a taxpayer submits documentation \nduring a correspondence exam. This misses taxpayers who call in prior to submitting \ndocumentation. The Most Serious Problem notes how many callers in correspondence exams are \nrepeat callers; yet, these taxpayers must talk to a different employee each time. Furthermore, as \nthe IRS implements programs using virtual service, taxpayers may share documentation during a \nvideo call, yet not receive the same benefit as a taxpayer who mails in documentation because the \nIRM only requires assigning an employee upon receiving mailed correspondence from the taxpayer. \nEven for taxpayers who have submitted documentation and been assigned to a single employee, \nthis assignment is of little use if when they call to ask a question, they speak to an employee not \nfamiliar with their case. \nAlthough taxpayers who are not satisfied with the employee on the phone can request the assigned \ntax examiner return their call, this practice burdens the taxpayer and wastes IRS resources by \nhaving two contacts where one would likely suffice. The IRS’s reference to technology limitations \nappears disingenuous considering the IRS itself designed the system that makes it impossible for \nemployees to receive direct, external, incoming calls. The National Taxpayer Advocate hopes the \nIRS will reconsider its policy and remove the technological limitations it has placed on the program.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n51\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[8-4] \u0007\nPer RRA 98 § 3705(a), place on outgoing taxpayer correspondence the name and \ntelephone number of the tax examiner who reviewed the taxpayer’s correspondence \nwhere a tax examiner has reviewed and made a determination regarding that \nspecific documentation.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nIn compliance with section 3705(a) of the Restructuring and Reform Act of 1998, the Internal \nRevenue Manual provision addressing Correspondence Examination letters dictates that any \nletter sent in reply to taxpayer correspondence must identify the originating tax examiner for all \nsubsequent contact and include a telephone number. See IRM 4.19.10.1.5.1(6). The toll-free \ntelephone number is provided since tax examiners do not have telephones capable of receiving \ndirect external incoming calls. Extensive training was provided to all examiners on all audit issues \nto effectively respond to telephone calls. The Correspondence Examination toll-free line allows \ntaxpayers to reach an experienced assister at any campus for immediate assistance without \nhaving to wait for a return call from an individually-assigned examiner. If, at the end of the call, the \ntaxpayer is not satisfied, they have the option to have the assigned tax examiner return their call.\nIRS \nAction\nN/A\nTAS Response\nThe IRS is ignoring the purpose of RRA 98 § 3705(a) by only providing a general toll-free \nnumber. RRA 98 § 3705(a) requires “the name, telephone number, and unique identifying \nnumber of an Internal Revenue Service employee the taxpayer may contact with respect to the \ncorrespondence…” (emphasis added). There is little point in providing a telephone number if it \ndoes not allow the taxpayer to reach the specific employee whom he or she “may contact with \nrespect to the correspondence.” If the IRS is concerned that taxpayers would prefer to speak to \nany examiner to avoid the time waiting for the specific employee to return the call, then the IRS \ncould have the employee’s voicemail message provide the general toll-free number for taxpayers \nto call who did not want to wait for a call back. Similar to the above response, the IRS is placing \nblame on self-imposed technology limitations.\nTAS \nRecommendation\n[8-5] \u0007\nConduct surveys of taxpayers following correspondence examinations to gauge their \nunderstanding of the examination process and their resulting attitudes towards the \nIRS and towards filing and paying taxes.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nSection Two—IRS and TAS Responses\n52\n",
"IRS and TAS Responses\nIntroduction\nIRS Action\nThe IRS has conducted Customer Satisfaction (CSAT) survey analysis since the Restructuring and \nReform Act of 1998. The Small Business/Self-Employed Division’s (SB/SE) research function \ncompletes the analysis and reporting of CSAT survey results for functions in SB/SE on an annual \nbasis.\nThe CSAT survey questions are constructed in a manner to solicit feedback from the taxpayer \nto gauge their understanding of the examination process and their attitude and feelings toward \nthe IRS. Taxpayers are asked to rate the overall way the IRS handled their audit and if our \ncorrespondence to them adequately explained the examination process. The taxpayer is also \ninvited to provide any positive or negative feedback and comments regarding their experience.\nThe survey results are reviewed and used to identify process improvement opportunities, prepare \nfor program reviews, and identify training issues. In addition, we use the results to identify areas \nof poor communication within the examination process and revise letters as warranted, to increase \nclarity to the taxpayer. We review the survey questions annually for any necessary changes.\nThe survey population is determined by the contractor from the total population of all closed cases \nwith the expectation that a minimum of 193 taxpayers will be surveyed per campus. The data on \nall closed cases are sent to the survey contractor monthly. Surveying the entire correspondence \nexam population would be cost prohibitive.\nTAS Response\nThe National Taxpayer Advocate disagrees with the IRS’s characterization of this recommendation \nas implemented. The Most Serious Problem explains how the customer satisfaction surveys do not \ncapture taxpayers’ attitudes towards the IRS and filing and paying taxes. Open-ended questions \nthat allow taxpayers to provide any additional comments will not capture statistically valid data \nregarding whether taxpayers have changed their attitudes towards the IRS and meeting their tax \nobligations. The National Taxpayer Advocate would welcome the opportunity to work with the IRS to \ndraft additional questions that would help the IRS better determine the effects of correspondence \nexams on taxpayers.\nTAS \nRecommendation\n[8-6] \u0007\nCollect data regarding which forms of documentation taxpayers sent in a \ncorrespondence examination that were deemed insufficient and revise existing \ncorrespondence examination letters to better explain documentation requirements.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nSystemic data collection tools do not exist for this data. However, there are other internal \nprocesses that provide this type of information. Tax examiners are required to document the \nworkpapers with the information the taxpayer provided. In addition, the responses to taxpayers \nexplain why the information was insufficient and what additional information is needed. There are \ninternal processes that provide feedback to program owners. For example, employees elevate \ndocumentation issues through their management chain and other employee feedback vehicles, \nsuch as the Servicewide Electronic Research Program (SERP) Feedback Tool.\nProgram owners review the feedback received to determine if existing letters need to be revised \nand if the information document requests need to be clarified to provide clear guidance to \ntaxpayers on acceptable documentation to support the issue under examination.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased the IRS has internal processes in place to provide \ninformation to program owners about what types of documentation are confusing for taxpayers \nor where the IRS could provide further guidance. Although systemic data collection tools are not \navailable, the National Taxpayer Advocate hopes the IRS will highlight the importance of examiners \nproviding this information to program owners through employee training and other messaging.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n53\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[8-7] \u0007\nEnd the practice of using the combination letter and provide taxpayers with an initial \ncontact prior to issuing the preliminary audit report.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe IRS has previously acted to reduce the use of combination letters. We use combination letters \non a small percentage of cases in correspondence examinations, and only when the IRS already \nhas internal information that supports the issues for the examination. The taxpayer still has the \nopportunity to dispute the facts and provide supporting or correcting documentation.\nIRS \nAction\nN/A\nTAS \nResponse\nThe National Taxpayer Advocate is disappointed that the IRS continues to use combination letters, \nwhich send a message to taxpayers that the IRS has already made a determination before the \nexamination begins. These letters infringe upon taxpayers’ right to challenge the IRS’s position and \nbe heard. If the IRS only uses combination letters in a small percentage of cases, then it should \nnot be overly burdensome for the IRS to discontinue the practice altogether.\nSection Two—IRS and TAS Responses\n54\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#9\n\t\n\u0007\nFIELD EXAMINATION: The IRS’s Field Examination Program \nBurdens Taxpayers and Yields High No Change Rates, Which \nWaste IRS Resources and May Discourage Voluntary Compliance\nPROBLEM\nThe primary objective in identifying tax returns for examination is to promote the highest degree of \nvoluntary compliance. Yet the IRS does not know whether its field exams are promoting voluntary \ncompliance because it does not have a measure to track future filing compliance post-audit. Instead, the \nIRS focuses primarily on the bottom line and the direct effects of a specific audit—measuring closures, \ncycle time, employee satisfaction, and quality scores. The IRS may also be selecting the wrong taxpayers \nand cases for field audit, given declining resources. High no change rates for field audits show that \nthe IRS may be wasting resources and failing to drive future voluntary compliance. From a taxpayer’s \nperspective, the field examination process is not working as intended because some taxpayers may not \nhave access to all IRS employees making decisions about their issues, or do not know how to elevate an \nissue or a complaint. Others experience difficulty understanding the scope of the audit due to a lack \nof transparency or overly broad document requests. These shortcomings impair taxpayers’ rights to be \ninformed and to quality service.\nANALYSIS\nThe IRS has conducted fewer field exams in recent years, with approximately 272,000 field exams \nin fiscal year (FY) 2010 and only about 156,000 field exams in FY 2018. Both operating divisions \nconducting field audits, Small Business/Self-Employed (SB/SE) and Large Business and International \n(LB&I), in FY 2018 employed only about 60 percent of the Revenue Agents they had in FY 2010, \nreflecting the IRS may need to be more discriminating in choosing cases. Yet SB/SE selects over half \nof its field audits based on a related-year audit, meaning instead of auditing a new taxpayer, it opens an \naudit on another tax year for a taxpayer already under audit. Although LB&I created the campaign \nprogram to be more nimble in identifying trends, currently campaigns only comprise about six percent \nof its audit work. Both SB/SE and LB&I track audit reconsiderations, but neither tracks how many of \nthese reconsiderations are eventually appealed by the taxpayer. Thus, the IRS does not know when an \nexaminer gets the answer wrong or when there are hazards of litigation, both of which should inform \naudit selection. Research shows that audits proposing no additional tax (“no change” audits) result \nin greater future noncompliance; yet field exams have unacceptably high no change rates—averaging \n23 percent for SB/SE field audits and 32 percent for LB&I field audits from FY 2010 to FY 2018. No \nchange audits negatively affect voluntary compliance: a recent study found Schedule C taxpayers \nreduced their reported income in the three years after a no change audit by about 37 percent. Finally, \nthe field exam programs do not have a formal centralized system to track taxpayer complaints and \nrequests to speak to a manager, so the IRS cannot track and analyze taxpayer concerns about the \nconduct of an audit.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n55\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[9-1] \u0007\nPeriodically survey taxpayers after field exams to determine the impact of the exam on the \ntaxpayers’ understanding of the audit process and audit adjustments, and attitudes towards the \nIRS and filing and paying taxes.\n[9-2] \u0007\nPeriodically study taxpayers’ filing behavior following field exams to determine whether the \nexams had an impact on whether the taxpayer filed, how much income the taxpayer reported, and \nwhether the taxpayer repeated a mistake made on a previous return.\n[9-3] \u0007\nRequire SB/SE to provide an examination plan similar to what LB&I requires for all audited \ntaxpayers for all field examinations.\n[9-4] \u0007\nNotify taxpayers during an audit of any consultations with specialists and provide an opportunity \nfor taxpayers to discuss with the specialist any technical conclusions that result from these \nconsultations.\n[9-5] \u0007\nTrack and report on the number of field examinations (including audit reconsiderations) that go \nto Appeals and the resulting adjustments.\nIRS RESPONSE\nRevenue Agents within the Large Business and International (LB&I) Division serve corporations, \nsubchapter S corporations, and partnerships with assets greater than $10 million. These businesses \ntypically employ large numbers of employees, deal with complicated issues involving tax law and \naccounting principles, and conduct business in an expanding global environment. Revenue Agents \nwithin the Small Business/Self-Employed (SB/SE) Division serve business taxpayers with assets of $10 \nmillion and below, including sole proprietors filing a Schedule C with their individual returns, as well as \nother high-income individual returns.\nThe Field Examination program has responsibility for the taxpayer population with the most complex \nfederal tax return issues. This requires a high level of skill by the examiner and warrants a field visit \nto the taxpayer’s business to fully understand their operations. Field Examination employees assist \ntaxpayers with meeting their tax responsibilities through education and enforcement when necessary.\nWe continue to focus on areas of known non-compliance in Field Examination. We have developed \ncross-functional teams for issues that require a Service-wide strategy for case selection and issue \nresolution. In SB/SE, we have created consolidated groups containing examiners with the experience \nand technical expertise to work these types of examinations.\nAs part of our normal examination process, our examiners educate taxpayers on the tax law, \nrecordkeeping requirements, and documentation necessary to substantiate what is claimed on the return. \n \nOur procedures, letters, and document requests are tailored to the type of taxpayer we are interacting \nwith, which is why there are differences between how Field Examination in LB&I and SB/SE conduct \ntheir business.\nSection Two—IRS and TAS Responses\n56\n",
"IRS and TAS Responses\nIntroduction\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe Most Serious Problem points out numerous concerns with how the IRS conducts its field exam \nprogram, such as the high no change rate, the refusal to share an individual exam plan with all \ntaxpayers, the lack of a mechanism for taxpayers to raise complaints, and the IRS’s failure to track \ncomplaints. The IRS narrative only loosely addresses these problems, without providing any details as \nto what the IRS is doing to mitigate them or why the IRS believes they have addressed them. Without \nchanging how the IRS chooses taxpayers for field exams and the way in which it conducts the exams and \ninteracts with taxpayers, these problems will persist. \nTAS \nRecommendation\n[9-1] \u0007\nPeriodically survey taxpayers after field exams to determine the impact of the exam \non the taxpayers’ understanding of the audit process and audit adjustments, and \nattitudes towards the IRS and filing and paying taxes.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nThe IRS has conducted Customer Satisfaction (CSAT) surveys since the Restructuring and Reform \nAct of 1998. LB&I and SB/SE, alongside the Research, Applied Analytics, and Statistics (RAAS) \nfunction, periodically conduct post-filing burden surveys, customer satisfaction surveys, and other \nroot-cause analyses related to taxpayer understanding of and engagement with IRS examination \nand issue resolution processes.\nThe CSAT survey questions are designed to solicit feedback from the taxpayer to gauge their \nunderstanding of the examination process and their attitude and feelings toward the IRS. \nTaxpayers are asked to rate the overall way the IRS handled their audit and if our correspondence \nto them adequately explained the examination process. The taxpayer is also invited to provide any \npositive or negative feedback and comments regarding their experience.\nThe survey results are reviewed and analyzed for trends and are shared with examination directors. \nTaxpayer feedback is taken into consideration and used to find ways to improve processes.\nFurther, the IRS is engaged in discussions with other tax authorities, through the Organization \nof Economic Cooperation and Development and the Forum on Tax Administration, related to \nunderstanding taxpayer attitudes and behavior with an eye toward finding methods and processes \nthat could be employed at the IRS.\nTAS Response\nThe National Taxpayer Advocate is pleased the IRS has engaged with other tax authorities to better \nunderstand how exams affect taxpayer attitudes and behaviors. This collaboration should allow \nthe IRS to learn from other countries and apply best practices to its own field exam program. \nNotwithstanding this positive action by the IRS, the National Taxpayer Advocate does not agree \nthat the IRS’s actions address her recommendation. As explained in the Most Serious Problem, \nthe field exam customer satisfaction surveys are more focused on how the taxpayer feels about a \nspecific encounter and not how the taxpayer might alter their behavior in the future. The National \nTaxpayer Advocate would welcome the opportunity to work with the IRS to draft additional questions \nthat would help the IRS better determine the effects of field exams on taxpayers.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n57\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[9-2] \u0007\nPeriodically study taxpayers’ filing behavior following field exams to determine \nwhether the exams had an impact on whether the taxpayer filed, how much income \nthe taxpayer reported, and whether the taxpayer repeated a mistake made on a \nprevious return.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nDue to the large volume of taxpayers we examine in a given year, the monitoring of individual \ntaxpayers’ post-audit behavior would be cost prohibitive. In addition, we cannot assume a change \nin a taxpayer’s behavior is a result of an examination. A taxpayer’s behavior can change from \nyear to year for a variety of reasons, including changes to their employment, business operations, \nor other environmental factors. We also may not know whether a subsequently-filed return is \naccurate. To know for certain whether a return is accurate, or the reason for the behavioral \nchange, would require a follow-up examination of the taxpayer. This would be burdensome to the \ntaxpayer and may not represent the most effective use of IRS resources. For this reason, from a \ncost\nbenefit perspective, we do not believe this is the best use of limited IRS resources. However, \nwe do analyze closed examination results for use in improving our audit selection process. We will \ncontinue to use aggregated examination data to find areas that need further taxpayer education, \nform or instruction changes, or outreach events.\nIn addition, LB&I is collaborating with RAAS on a set of reporting tools and special studies looking \nat taxpayer filing and reporting responses to enforcement efforts. Outside researchers from \nTreasury as well as the academic community are also involved in some of these special studies. \nThe IRS reviews their findings for relevant insights.\nTAS Response\nThe National Taxpayer Advocate appreciates the IRS’s collaboration with RAAS to better understand \nhow enforcement actions, such as field exams, affect taxpayers’ subsequent filing behavior. Still, \nthe IRS misses an opportunity to study how its field exams of different types of taxpayers on \ndifferent issues may affect their subsequent behavior. While the IRS is correct that a taxpayer’s \nbehavior can change from year to year based on several factors, the IRS could conduct an analysis \nand control for other factors so that it was comparing like taxpayers. The IRS could compare \ntaxpayers’ likelihood to make a specific mistake for taxpayers who were previously audited on an \nissue versus those who were not, controlling for things such as filing status, income, and other \nfactors. A discrepancy between these two groups would suggest that the examination played a role \nin changing taxpayer behavior. \nIt is surprising that the IRS is characterizing a follow-up examination as burdensome, given that it \nis common practice for the IRS to conduct related-year audits on taxpayers already under audit for \nanother year. Finally, although conducting audits does use resources, the IRS should consider the \ncost benefits that would result from increasing voluntary compliance and better selecting taxpayers \nfor audit.\nSection Two—IRS and TAS Responses\n58\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[9-3] \u0007\nRequire SB/SE to provide an examination plan similar to what LB&I requires for all \naudited taxpayers for all field examinations.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nSB/SE Revenue Agents provide taxpayers information similar to what is outlined in LB&l’s Internal \nRevenue Manual (IRM) 4.46.3.9.1, Elements of an Examination Plan, in a manner appropriate for \nthe size and type of return under audit.\nIRM 4.10.2.8.1.2, Field Examination Initial Contact, requires SB/SE Revenue Agents to mail an \ninitial contact letter to the taxpayer. Generally, SB/SE examiners initiate the examination by mailing \nLetter 2205-A to the taxpayer. The Revenue Agent is required to complete the “preliminary issues” \nsection of the letter. The letter states, “The issues listed below are the preliminary items identified \nfor examination. During the course of the examination, it may be necessary to add or reduce the \nlist of items. If this should occur, I will advise you of the change.” SB/SE’s IRM provision also \nstates, “Revenue agents must mail a detailed Form 4564, Information Document Request, with the \nconfirmation letter listing all the information needed at the initial appointment.” This IRM provision \nfurther references Lead Sheet 120-1, which is a checklist for Revenue Agents to follow with respect \nto initial taxpayer or representative contact that addresses the items a Revenue Agent should \ndiscuss with the taxpayer or representative during their initial conversation. One of the discussion \nitems is “Issues to be examined (including the type of books and records available).”\nAdditionally, IRM 4.10.2.8.2(1)(e) requires the SB/SE Revenue Agent to “Discuss the issues to \nbe examined and inform the taxpayer or representative that the examination may be expanded \nto additional issues’’ during the Revenue Agent’s initial telephone contact with the taxpayer or \nrepresentative.\nIRM 4.10.3.3.8, Mutual Commitment Date, generally requires SB/SE Revenue Agents to discuss \nand establish a Mutual Commitment Date (MCD) for issuing the audit report with the taxpayer or \nrepresentative at the conclusion of the first appointment. The MCD process establishes mutual \nresponsibilities such as identifying and discussing potential areas of examination (including issues \nraised by the taxpayer); requesting, providing and reviewing pertinent information; keeping all \nparties advised of unavoidable delays; addressing all parties’ questions and concerns raised during \nthe audit; and keeping all parties fully informed about the adjustments being proposed as well as \nthe progress of the audit.\nThe information and expectations above exhibit SB/SE’s requirement to share the “audit plan” with \nthe taxpayer and representative and conduct the examination in a collaborative and communicative \nmanner.\nIRS \nAction\nN/A\nTAS Response\nThe IRS response details actions SB/SE takes to communicate with the taxpayer during the field \nexam, but these are not the equivalent of an individual exam plan. As explained in the Most \nSerious Problem, the exam plan allows LB&I to share the relevant information with the taxpayer \nregarding scope, timeline, personnel involved, and expectations. The taxpayer also signs the plan, \ncommitting to achieving the timeline. As discussed in the Most Serious Problem, the Information \nDocument Request (IDR) may not provide the same level of detail and is not shared and discussed \nwith the taxpayer before being finalized. It is a request for documents, not a plan for conducting \nthat audit that is agreed to by the taxpayer. The Most Serious Problem discusses complaints by \npractitioners about how the IDRs are so broad that they do not help the taxpayer understand the \nscope of the exam. An initial conversation does not fulfill a taxpayer’s right to be informed in the \nsame way a written exam plan does.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n59\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[9-4] \u0007\nNotify taxpayers during an audit of any consultations with specialists and provide an \nopportunity for taxpayers to discuss with the specialist any technical conclusions that \nresult from these consultations.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by December 31, 2019.\nIRS Action\nIn May 2016, LB&I launched the LB&I Examination Process (LEP) outlined in IRM 4.46. An \nupdated LEP IRM was published in December 2018. Updated training for managers and employees \nwill be launched before the end of the third quarter of fiscal year 2019. The revised IRM and \ntraining clarify the roles and responsibilities of all parties to the examination and emphasize the \nprinciples of collaboration between the examination team and the taxpayer to ensure end-to-end \naccountability and to reinforce the importance of transparency. All issue team members, including \nassigned specialists, work collaboratively with the taxpayer. Each issue identified for examination \nwill have a designated issue manager, who is the decision maker for that issue and is responsible \nfor promoting communication, collaboration, and cooperation among LB&I issue team members, \nconsultants as appropriate, and with the taxpayer.\nSB/SE examiners utilize various tools and resources most conducive to their taxpayer population to \nassist with issue development. These resources provide the examiners with the background and \nknowledge to discuss technical issues with the taxpayer or representative. In the event a specialist \nis necessary to explain a technical issue, the examiner can coordinate a meeting with the taxpayer \nor representative and the specialist.\nTAS Response\nThe National Taxpayer Advocate is pleased to learn that LB&I is updating its procedures to provide \nfor one issue manager who is the decision maker for the issue. This will provide transparency \nand certainty to taxpayers. Although LB&I states that an examiner will coordinate a meeting \nbetween a specialist and the taxpayer where necessary, experience has not shown this to always \nbe the case. The National Taxpayer Advocate hopes LB&I will update its guidance to examiners to \nfurther encourage examiners to provide this consultation when a taxpayer requests to speak to the \nspecialist.\nSection Two—IRS and TAS Responses\n60\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[9-5] \u0007\nTrack and report on the number of field examinations (including audit \nreconsiderations) that go to Appeals and the resulting adjustments.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe examination functions and Appeals are unlikely to benefit from tracking or reporting on the \naggregate results of appealed cases because the resulting adjustments or outcomes are uniquely \ndrawn from the facts and circumstances of each case. Therefore, tracking the results in the \naggregate would not be informative to our processes or our examiners. We do receive Appeals \nCase Memoranda, which allow us to better understand Appeals’ case resolution on individual cases \nand can inform our future work by providing examiners feedback on their technical positions.\nIn addition, we do not support the calculation of dollar-based sustention rates. Appeals’ mission \nis to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the \ngovernment and the taxpayer. A fair and impartial settlement reflects the probable result in the \nevent of litigation or mutual concessions based on the relative strength of the opposing positions \nwhere there is substantial uncertainty of the result in the event of litigation, as outlined in Internal \nRevenue Manual (IRM) 8.6.4.1.\nIRS \nAction\nN/A\nTAS Response\nThe National Taxpayer Advocate is disappointed the IRS will not agree to track the number of field \nexams that go to Appeals. Tracking which issues taxpayers appeal and which issues taxpayers \nultimately succeed on should guide the IRS’s audit selection process. While each case is based on \nspecific facts and circumstances, tracking these cases would allow the IRS to identify trends that \nmay indicate certain issues require further guidance to taxpayers or certain issues should receive \na different enforcement approach. The fact that Appeals settles issues based on the hazards of \nlitigation does not negate the usefulness of looking at the resulting adjustments. Less important \nis the amount of the adjustments and more important is which issues are settled, indicating that \nperhaps the taxpayer should or should not have been audited on that issue. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n61\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#10\n\t\n\u0007\nOFFICE EXAMINATION: The IRS Does Not Know Whether Its \nOffice Examination Program Increases Voluntary Compliance or \nEducates the Audited Taxpayers About How to Comply in the \nFuture\nPROBLEM\nPromoting voluntary compliance should be an underlying goal of the IRS examination process; however, \nfailure to appropriately measure the outcomes of examinations and the scope of the office examination \nprogram may limit its effectiveness. Office exams typically examine a limited scope of issues, which \nprovides a structure to the exam and helps the taxpayer focus specifically on how to better comply in \nthe future. The IRS employee has an opportunity to educate the taxpayer in-person and ensure the \ntaxpayer understands the law going forward. The face-to-face experience benefits both the taxpayer and \nthe IRS—the taxpayer can, in real time, ask questions and explain his or her position to the IRS, and \nthe IRS employee can immediately see if the taxpayer understands the current examination, next steps to \nbe taken, and how to comply in the future. Compare this with the correspondence examination process \nwhere a taxpayer with limited understanding of the law may never speak to an IRS employee during the \nentire process.\nANALYSIS\nOffice exams are generally scheduled at the office closest to the taxpayer’s residence, if the office has the \nappropriate examination personnel on site. This constraint immediately limits which taxpayers may ever \nbe selected for office exam. Selecting taxpayers for office exam based on where Tax Compliance Officers \n(TCOs) are located introduces selection bias into the office exam process and impacts the right to quality \nservice and the right to a fair and just tax system. The employees who conduct office exams have declined \nprecipitously. In fiscal year (FY) 2011, the IRS had 1,256 employees conducting office exams and in \nFY 2018, only 639, a decrease of 49 percent in only seven years. Since office exams have a higher agreed \nto rate than correspondence exams, they can serve as a more effective means to get to the right answer \nfor the taxpayer as well as educating him or her about future compliance. If the IRS’s goal is to promote \nvoluntary compliance through the examination process, it needs to measure how taxpayers who undergo \naudits comply in future years. Currently the IRS relies on typical measures of cycle time, closure rates, \nquality scores, and employee satisfaction in evaluating the examination process. None of these measures \naddress the impact of audits on voluntary compliance, whether the taxpayer understood why his or her \ntax was adjusted, or whether the examination concluded in the right result for the taxpayer—i.e., what \nhappens when a taxpayer appeals the results of the exam?\nTAS RECOMMENDATIONS\n[10-1] Develop measures to track the downstream compliance of audited taxpayers by type of exam.\n[10-2] Track results of audits that are appealed by the taxpayer by type of exam.\n[10-3] \u0007\nAdd educating the taxpayer on future compliance to the quality attributes of an exam for field \nand office exam.\n[10-4] \u0007\nIncrease the number of TCOs and put them in more locations throughout the United States.\nSection Two—IRS and TAS Responses\n62\n",
"IRS and TAS Responses\nIntroduction\n[10-5] \u0007\nExpand the issues covered by office exam, develop pilot programs for office exams for issues such \nas charitable contributions, and track the customer satisfaction for these pilots versus taxpayers \naudited via correspondence exam for the same issues.\nIRS RESPONSE\nOffice Examination is an important piece of our compliance approach, along with the Correspondence \nExamination program and the Field Examination program. The Office Examination program has \nevolved over the years, although dwindling resources have created some challenges in executing the \nprogram’s goals.\nThe purpose of Office Examination is to examine returns with more than one issue, and possibly \nmultiple years, that require more documentation and analysis to substantiate items on the return than \nissues that can be addressed in a correspondence audit. This requires a higher level of skill by Tax \nCompliance Officer (TCO) examiners and warrants a face-to-face interaction with the taxpayer, but \nnot necessarily at the taxpayer’s place of business. Examiners are required to follow IRM 4.10.1.3, \nCommunication, and IRM 4.10.7.5, Proposing Adjustments to the Taxpayer and/or Representative, \nwhich entails educating the taxpayer on the tax law, recordkeeping requirements, and documentation \nnecessary to substantiate what is claimed on the return.\nWe continually evaluate all of our examination workstreams (i.e., Correspondence Examination, \nOffice Examination, and Field Examination), to ensure we are utilizing our resources as efficiently and \neffectively as possible. We are currently reviewing the accounting education requirements for the TCO \nposition in addition to evaluating the workload of the program and identifying areas where additional \ntraining is necessary.\nWe are always looking for ways to improve the taxpayer experience. In fiscal year 2018, we launched a \npilot in the Office Examination program that uses an online suite of web-based secure communication \ntools and includes secure messaging. Secure messaging is not standard email, but a message box within a \nsecure portal allowing the IRS and the taxpayer to correspond digitally. This provides an alternative for \ntaxpayers who prefer to use these online options.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate agrees that Office Examination is an important part of the IRS \nExamination Program and would like to see the IRS use it effectively to bring taxpayers back into \ncompliance and keep them in compliance going forward. A crucial step to keeping taxpayers in \ncompliance in the future is ensuring that the taxpayer understands any errors that were made and how \nto avoid those errors in the future. After reviewing the Internal Revenue Manuals (IRMs) cited by the \nIRS above, while the National Taxpayer Advocate agrees that effective, continuous, courteous, and \nopen communication is important, she does not see any components of the referenced IRMs specifically \nrequiring the examiners to educate the taxpayer. While IRM 4.10.7.5, Proposing Adjustments to the \nTaxpayer and/or Representative, requires the examiner to discuss issues with the taxpayer, the National \nTaxpayer Advocate believes that explicitly adding an education of the taxpayer component to the exam \nprocess will help clarify and ensure taxpayers understand what to do going forward. In other words, you \nget what you measure. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n63\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[10-1] \u0007\nDevelop measures to track the downstream compliance of audited taxpayers by \ntype of exam.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nDue to the large volume of taxpayers we examine in a given year, the monitoring of individual \ntaxpayers' post-audit behavior would be cost prohibitive. In addition, we cannot assume a change \nin a taxpayer's behavior is a result of an examination. A taxpayer's behavior can change from \nyear to year for a variety of reasons, including changes to their employment, business operations, \nor other environmental factors. We also may not know whether a subsequently-filed return is \naccurate. To know for certain whether a return is accurate, or the reason for the behavioral \nchange, would require a follow up examination of the taxpayer. This would be burdensome to the \ntaxpayer and may not represent the most effective use of IRS resources. For this reason, from a \ncost-\nbenefit perspective, we do not believe this is the best use of limited IRS resources. However, \nwe do analyze closed examination results for use in improving our audit selection process. We will \ncontinue to use aggregated examination data to find areas that need further taxpayer education, \nform or instruction changes, or outreach events.\nTAS Response\nThe National Taxpayer Advocate is concerned that the IRS did not understand the purpose of this \nrecommendation. While it may be true that a taxpayer’s behavior could change in subsequent \nyears for any number of reasons, it would seem logical that having undergone an exam in one \nyear should have the goal of changing behavior in future years. The National Taxpayer Advocate \ncontinues to urge the IRS to develop measures to track the downstream compliance of audited \ntaxpayers to gauge the effectiveness of its audit programs. The National Taxpayer Advocate does \nnot agree that this recommendation was partially adopted.\nSection Two—IRS and TAS Responses\n64\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[10-2] Track results of audits that are appealed by the taxpayer by type of exam.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe examination functions and Appeals are unlikely to benefit from tracking or reporting on the \naggregate results of appealed cases because the resulting adjustments or outcomes are uniquely \ndrawn from the facts and circumstances of each case. Therefore, tracking the results in the \naggregate would not be informative to our processes or our examiners. We do receive Appeals \nCase Memoranda, which allow us to better understand Appeals’ case resolution on individual cases \nand can inform our future work by providing examiners feedback on their technical positions.\nIn addition, we do not support the calculation of dollar-based sustention rates. Appeals’ mission \nis to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the \ngovernment and the taxpayer. A fair and impartial settlement reflects the probable result in the \nevent of litigation or mutual concessions based on the relative strength of the opposing positions \nwhere there is substantial uncertainty of the result in the event of litigation, as outlined in Internal \nRevenue Manual (IRM) 8.6.4.1.\nIRS \nAction\nN/A\nTAS Response\nThe National Taxpayer Advocate believes the IRS did not fully understand the purpose of this \nrecommendation. The National Taxpayer Advocate was trying to point out that the IRS should track \nif a certain type of exam is being appealed more frequently and with success on the part of the \ntaxpayer. Such data could suggest to the IRS that it is not getting the right result at the exam level \nand allow the IRS to tweak its selection process or better educate examiners to help get to the \nright result at the exam level.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n65\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[10-3] \u0007\nAdd educating the taxpayer on future compliance to the quality attributes of an \nexam for field and office exam.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS Action\nOffice examiners are required to discuss the progress of the examination and proposed issues \nwith the taxpayer or representative at frequent intervals throughout the examination. They are \nrequired to follow the IRM, including IRM 4.10.1.3, Communication, and IRM 4.10.7.5, Proposing \nAdjustments to the Taxpayer and/or Representative. The IRM also directs the examiner to provide \nthe taxpayer with specific information to properly report their tax in subsequent years. For \nexample, when applicable, a depreciation schedule or Passive Activity Loss worksheet is provided \nto the taxpayer to properly compute their tax liability in subsequent years (IRM 4.10.8.14, Issues \nRequiring Special Reports and Forms). Thus, in the Office Examination program, a high percentage \nof the oral and written communication between the taxpayer and the examiner serves to educate \nthe taxpayer on their understanding of the tax law, improve their recordkeeping practices, and \npromote their future compliance. \nThe following three quality attributes are used to measure adherence with these requirements:\n♦\n♦Attribute 604, Meet and Deal, measures:\nö\nö Effective communication skills (i.e., listening, responding, and clarifying) to secure the taxpay-\ner’s cooperation during the course of the audit.\nö\nö The use of tact to explain findings and conclusions.\nö\nö Clear communication of tax law and accounting principles and practices.\nö\nö If communication methods are appropriate to the listener and if the examiner listens to and \nconsiders the taxpayer’s/representative’s point of view.\n♦\n♦Attribute 617, Taxpayer/Power of Attorney (TP/POA) Rights and Notification, measures if the exam-\niner advised the taxpayer or representative of all rights and kept the taxpayer or representative \ninformed throughout the examination process. This includes ensuring all findings and conclusions \nreached have been discussed with the taxpayer or representative. The examiner’s responsibilities \nrelating to this quality attribute are found in IRM 4.10.1.2.1, Taxpayer Bill of Rights (TBOR).\n♦\n♦Attribute 719, Report Writing and Tax Computation, measures if the examiner correctly determined \nor computed the proposed or actual assessment or abatement of tax using applicable report \nwriting procedures. The report must present all the information necessary to ensure clear under-\nstanding of the adjustments and to demonstrate how the tax liability was computed. For most \nOffice Examination reports, examiners include the standard explanations in IRM 4.10.10, Standard \nParagraphs and Explanation of Adjustments, to provide plain language adjustment information \nto the taxpayer and enable the taxpayer to challenge the issue if desired. As an option, more \nin-depth lead sheets may be attached to the report to explain the issue(s).\nThese quality attributes measure adherence to the IRM, and therefore, the protection of taxpayer \nrights.\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS understands the importance of effective \ncommunications in protecting taxpayer rights, however does not agree that this recommendation \nhas been adopted in full. She urges the IRS to explicitly add educating the taxpayer on future \ncompliance to the quality attributes of an exam. While advising the taxpayer of their rights, keeping \nthem informed, and clear communication of tax law and accounting principles and practices all \ntouch on the edges, explicitly measuring whether the examiner has educated the taxpayer on future \ncompliance will ensure it happens.\nSection Two—IRS and TAS Responses\n66\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[10-4] \u0007\nIncrease the number of TCOs and put them in more locations throughout the United \nStates.\nIRS \nResponse\nIRS agrees with TAS recommendation but cannot implement it currently due to funding limitations.\nIRS \nAction\nHiring is based on approval authority and funding. We plan to hire over 200 TCOs in over 80 \nlocations in fiscal year 2019. However, attrition has outpaced hiring efforts and impacts our ability \nto increase the overall number of TCOs nationwide.\nTAS \nResponse\nThe National Taxpayer Advocate understands the impact of budget and the effects of attrition on \nthe workforce. The National Taxpayer Advocate urges the IRS to continue to work with Congress \nto ensure that Congress understands the importance of face-to-face interactions with the IRS, \nincluding office exams, and the impact the loss of TCOs has on the ability of the IRS to carry out \nthis function.\nTAS \nRecommendation\n[10-5] \u0007\nExpand the issues covered by office exam, develop pilot programs for office exams \nfor issues such as charitable contributions, and track the customer satisfaction for \nthese pilots versus taxpayers audited via correspondence exam for the same issues.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nOur Office Examination and Correspondence Examination programs serve very different yet critical \nfunctions for compliance. Office Examination works more complex issues that warrant a face-to-\nface interaction, and Correspondence Examination works single-issue cases that can easily be \nresolved through documentation. The issues currently covered by both TCOs in Office Examination \nand Tax Examiners in Correspondence Examination are selected appropriately according to their \nposition descriptions and grade levels.\nIRS \nAction\nN/A\nTAS \nResponse\nThe National Taxpayer Advocate is disappointed that the IRS will not consider at least attempting \na pilot on any issue to see if the IRS or the taxpayer receive better results via a different type of \nexamination. Given the disparity of default rates between types of exam, it seems clear that while \nthe IRS deems certain issues easy to resolve through documentation, these issues are often not \nbeing resolved with any participation on the part of the taxpayer. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n67\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#11\n\t\n\u0007\nPOST-PROCESSING MATH ERROR AUTHORITY: The IRS Has \nFailed to Exercise Self-Restraint in Its Use of Math Error \nAuthority, Thereby Harming Taxpayers\nPROBLEM\nWhen a return appears to contain one of 17 types of errors (misleadingly called math errors), the IRS \ncan summarily assess additional tax without first giving the taxpayer a notice of deficiency, which \ntriggers the right to petition the Tax Court. This “math error authority” (MEA) can deprive taxpayers \nof benefits to which they are entitled and leave them with no realistic opportunity for judicial review. \nThe taxpayer is best equipped to address the IRS’s questions immediately after filing. On April \n10, 2018, however, the IRS concluded that it can use MEA after processing the return. It used this \nnewfound post-processing MEA to reverse and recover refundable credits for students, children, and \nthe working poor on 17,691 returns in fiscal year 2018—often nearly two years after the returns were \nfiled. It improperly denied credits to 289 taxpayers and sent 113 taxpayers the wrong letters to explain \nwhy their credits were disallowed, according to the Treasury Inspector General for Tax Administration \n(TIGTA). TIGTA also said it wasted over $400,000 doing manual reviews because it did not address \nthe problem systemically and did not reject e-filed returns—a process that would have allowed taxpayers \nor their preparers to address the problem immediately. The National Taxpayer Advocate is concerned \nthat the IRS may continue to use MEA and its new post-processing MEA in situations where it poses \nunacceptable risks to the taxpayer’s right to pay no more than the correct amount of tax or to challenge the \nIRS’s position and be heard, and wastes more IRS resources.\nANALYSIS\nMEA burdens taxpayers because (1) mismatches do not always mean the assessment is correct, (2) the \nIRS does not always try to resolve apparent discrepancies on its own, (3) confusing letters and shorter \ndeadlines make it more difficult for taxpayers to respond timely as compared to the audit process, and \n(4) if they miss the deadlines, taxpayers generally lose access to the Tax Court. Post-processing MEA \nexacerbates these burdens because the longer the IRS waits to question the return, the less likely the \ntaxpayer is to be able to (1) receive and understand the IRS’s letter, (2) discuss the issue with a preparer, \n(3) access underlying documentation, (4) recall and explain relevant facts, (5) return any refunds \nwithout suffering an economic hardship, and (6) learn how to avoid the problem before filing another \nreturn. Thus, if the IRS does not use MEA when processing the return, an audit is generally more \nappropriate. The National Taxpayer Advocate has recommended legislation that would limit MEA to \nsituations least likely to burden taxpayers or waste IRS resources.\nTAS RECOMMENDATIONS\n[11-1] \u0007\nLimit the circumstances in which the IRS will use MEA (including post-processing MEA).\n[11-2] \u0007\nVoluntarily adopt the limits on the use of MEA recommended to Congress by the National \nTaxpayer Advocate in her 2015 annual report.\n[11-3] \u0007\nRequire the IRS to alert taxpayers to any discrepancies as early as possible, for example, by \nrejecting an e-filed return, where permissible, rather than waiting to use MEA, or waiting even \nlonger to use post-processing MEA. \nSection Two—IRS and TAS Responses\n68\n",
"IRS and TAS Responses\nIntroduction\nIRS RESPONSE\nThe IRS’s statutory math error authority provides the IRS with a valuable tool to address mathematical \nor clerical errors on tax returns in appropriate cases. It allows the IRS the ability to adjust the tax \nreturn to reflect the correct tax liability without referring the case to Examination for an audit of the \nreturn, which is time-consuming for the taxpayer and resource-intensive for the agency. Over the years, \nCongress has incrementally expanded the authority to allow the IRS to automatically correct returns \nfor additional types’ of mathematical or clerical errors, including instances in which the IRS receives \nreliable third-party information. This authority has enabled the IRS to effectively and efficiently adjust \nreturns and prevent erroneous refunds from being issued. The IRS recognizes that taxpayer rights are \nan important consideration in the use of math error authority.\nCongress authorized an exception to the restrictions on assessments for mathematical or clerical errors \nin section 6213(b)(1) of the Internal Revenue Code. In the absence of this exception or self-assessment \nby the taxpayer, the IRS is required to follow statutory deficiency procedures before any additional tax \nmay be assessed. This exception authorizes the IRS to summarily assess additional tax when there is \na mathematical or clerical error on a taxpayer’s return. Section 6213(g)(2) defines seventeen specific \ntypes of errors that Congress determined to be mathematical or clerical errors for which the summary \nassessment authority exists. Like statutory deficiency procedures, math error authority may be exercised \nif the statute of limitations for assessments has not expired.\nOn April 10, 2018, Chief Counsel issued a memorandum titled, Section 6213 Math Error Assessment \nAuthority. This memo addresses the IRS’ ability to use math error assessment authority to correct \nthe erroneous issuance of refundable credits identified by the Treasury Inspector General for Tax \nAdministration (TIGTA) in a report titled, Processes Do Not Maximize The Use Of Third-Party Income \nDocuments To Identify Potentially Improper Refundable Credit Claims (Ref. No. 2017-40-042), and issued \nJuly 17, 2017. Counsel concluded that section 6213 authorizes the IRS to use math error authority to \ncorrect the errors identified in the TIGTA report, even though the returns have already been processed \nand refunds have been issued. Accordingly, the IRS has discretion to use either math error authority or \nstatutory deficiency procedures to assess the tax due.\nThe National Taxpayer Advocate (NTA) asks the IRS to adopt a policy statement that requires the \nIRS to alert taxpayers to any discrepancies on their tax returns as early as possible, for example by \nrejecting an e-filed return. The IRS currently uses business rules to reject electronically-filed returns in \nappropriate cases, and routinely considers whether new business rules should be adopted to enhance the \nefficiency of electronic return processing. We strive to notify taxpayers at the earliest opportunity when \nthere is an issue with their tax return, allowing them time to correct math errors with the least amount \nof burden.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate agrees that math error authority (MEA) is a valuable tool in \nappropriate situations. An inappropriate use of MEA, however, can burden taxpayers, waste resources, \nand cause taxpayers to lose the opportunity to petition the Tax Court even in cases where their returns \nare accurate. Moreover, the IRS’s new post-processing MEA exacerbates these problems because the \nlonger the IRS waits to question the return, the less likely the taxpayer is to be able to: (1) receive and \nunderstand the IRS’s letter, (2) discuss the issue with a preparer, (3) access underlying documentation, \n(4) recall and explain relevant facts, (5) return any refunds without suffering an economic hardship, and \n(6) learn how to avoid the problem before filing another return. Accordingly, the National Taxpayer \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n69\n",
"IRS and TAS Responses\nIntroduction\nAdvocate recommended that the IRS voluntarily adopt a policy statement or other guidance that says \nit will only use MEA in situations least likely to burden taxpayers or waste IRS resources. The IRS’s \nnarrative does not address these problems, which were the focus of the report.\nTAS \nRecommendation\n[11-1] \u0007\nLimit the circumstances in which the IRS will use MEA (including post-processing \nMEA).\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe IRS is charged with using resources appropriated to administer the Internal Revenue Code. In \nmost instances, when a math error is identified during the processing of a return, taxpayers are \nsent a notification when the situation is identified. By not utilizing existing math error authority, IRS \nwould effectively delay the resolution of taxpayer errors in the processing of returns.\nThe IRS will continue to evaluate the potential use of all math error authority provided by Congress \nand consider the context of how a taxpayer’s information is presented on the tax return and the \nreliability of the sources of other information when making a summary assessment. As highlighted \nin the NTA’s description of this issue, the IRS does not use the Federal Case Registry to deny the \nEarned Income Tax Credit (EITC) to any taxpayer because we have determined that the information \nin the Federal Case Registry is not reliable.\nIRS \nAction\nN/A\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS does not adjust a taxpayer’s return using \nMEA simply because the return does not match the relatively unreliable data found in the Federal \nCase Registry. Doing so would unnecessarily burden taxpayers, deprive them of benefits to which \nthey are entitled, and waste IRS resources. For the very same reason, it would make sense for the \nIRS to adopt a policy statement that, in effect, pledges not to waste resources and unnecessarily \nburden taxpayers in the future. \nThe IRS’s refusal to adopt such a common sense policy should make Congress think twice \nbefore expanding the IRS’s MEA. Moreover, the IRS’s failure to establish a policy on how it will \nuse MEA or post-processing MEA leaves the IRS open to criticism by other stakeholders who \nmight recommend that it use its MEA or post-processing MEA in an unproductive or potentially \nunconstitutional manner.\nIn addition, the National Taxpayer Advocate disagrees with the portion of the IRS’s response which \nsuggests that by not using existing math error authority, IRS would effectively delay the resolution \nof taxpayer errors in the processing of returns. As the report points out, returns subjected to the \nmath error process are sometimes correct. In such cases, any IRS inquiry is a waste of resources \nand unnecessarily burdensome. For returns that are actually wrong, the IRS can reject those that \ncontain certain defects. It can correspond with taxpayers about discrepancies. In appropriate \nsituations it can and should use its regular MEA. It should generally avoid using post-processing \nMEA, however, because it delays resolution of errors, burdens taxpayers, and has fewer procedural \nprotections than exams. By establishing a policy statement addressing when it is appropriate \nto use each of these tools, the IRS could demonstrate that it takes seriously its responsibility to \nuphold taxpayer rights and avoid wasting resources.\nSection Two—IRS and TAS Responses\n70\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[11-2] \u0007\nVoluntarily adopt the limits on the use of MEA recommended to Congress by the \nNational Taxpayer Advocate in her 2015 annual report.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nMath error authority provides the IRS with a valuable tool to address mathematical or clerical \nerrors on tax returns in appropriate cases. Math error authority allows the IRS to effectively and \nefficiently adjust returns and prevent erroneous refunds from being issued. The IRS recognizes \nthat taxpayer rights are an important consideration in the use of math error authority.\nIRS \nAction\nN/A\nTAS Response\nThe National Taxpayer Advocate agrees with the IRS that MEA is a valuable tool. It can, however, \nbe misused. For this reason, she recommended that the IRS only use MEA in the following \nsituations:\n1.\tThere is a mismatch between the return and unquestionably reliable data.\n2.\tThe IRS’s math error notice clearly describes the discrepancy and how taxpayers may contest the \nassessment. \n3.\tThe IRS has researched the information in its possession (e.g., information provided on prior-year \nreturns) that could reconcile the apparent discrepancy.\n4.\tThe IRS does not have to analyze facts and circumstances or weigh the adequacy of information \nsubmitted by the taxpayer to determine if the return contains an error.\n5.\tThe abatement rate for a particular issue or type of inconsistency is below a specified threshold \nfor those taxpayers who respond.\n6.\tFor any new data or criteria, the Department of Treasury, in conjunction with the National Taxpayer \nAdvocate, has evaluated and publicly reported to Congress on the reliability of the data or criteria \nfor purposes of assessing tax using math error procedures. \nThe IRS could issue a policy statement adopting these common-sense limits. Doing so would \nminimize risks to the taxpayer’s right to pay no more than the correct amount of tax or to challenge \nthe IRS’s position and be heard. It would also help prevent the IRS from wasting resources on \nincorrect assessments that generate unnecessary correspondence and taxpayer burden. It will be \nmore difficult for the IRS to make the case that Congress should expand its MEA if it is unwilling \nto adopt such reasonable limits on how it will use its authority. Without such a policy statement, \nit may also be more difficult for the IRS to explain to certain stakeholders why it is not using \nMEA more aggressively. Moreover, the IRS response does not explain why it is opposed to these \nreasonable limits.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n71\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[11-3] \u0007\nRequire the IRS to alert taxpayers to any discrepancies as early as possible, for \nexample, by rejecting an e-filed return, where permissible, rather than waiting to use \nMEA, or waiting even longer to use post-processing MEA.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nWe aim to inform taxpayers at the earliest opportunity when there is an issue with their tax return, \nallowing them time to correct math errors with the least amount of taxpayer burden. For example, \nthe IRS currently uses business rules to reject electronically-filed returns in appropriate cases, and \nroutinely considers whether new business rules should be adopted to enhance the efficiency of \nelectronic return processing.\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS agrees with her that in cases where a \nreturn is wrong, it should alert taxpayers to the discrepancy as early as possible, for example, \nby rejecting an e-filed return, where permissible, rather than waiting to use MEA, or waiting even \nlonger to use post-processing MEA. She does not agree, however, that the IRS has implemented \nher recommendation to “adopt a policy statement (or similar guidance)” to this effect. Establishing \nsuch a policy would explain to new leaders at the IRS how they should exercise their authorities. It \nwould also help the IRS resist calls from stakeholders who believe it should use MEA when it could \nhave rejected returns at the outset, or that it should use post-processing MEA when it could have \nused MEA or deficiency procedures.\nSection Two—IRS and TAS Responses\n72\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#12\n\t\n\u0007\nMATH ERROR NOTICES: Although the IRS Has Made Some \nImprovements, Math Error Notices Continue to Be Unclear and \nConfusing, Thereby Undermining Taxpayer Rights and Increasing \nTaxpayer Burden\nPROBLEM\nMath error authority allows the IRS to summarily resolve mathematical (e.g., 2 + 2 = 5) and clerical (e.g., \nwriting 12 for an entry on the return instead of 21, or leaving an entry blank) errors with taxpayers’ tax \nreturns that are obvious just by looking at the face of the return. However, the range of issues that fall \nunder these definitions has steadily expanded and the IRS is using math error authority to summarily \nresolve more complex issues. Concerned with protecting taxpayer rights, Congress directed the IRS \nto provide taxpayers with an explanation when it makes an adjustment to taxpayers’ returns. The IRS \ndoes this by sending taxpayers a math error notice. The explanation of the adjustment in the math error \nnotice is critical to taxpayers’ ability to challenge the adjustment and preserve their right to petition \nthe U.S. Tax Court, before paying the tax, by timely requesting abatement. Despite the congressional \ndirective, many math error notices remain confusing and lack clarity. This makes it difficult for \ntaxpayers to determine what, specifically, the IRS corrected on their return and whether they should \naccept the adjustment or request a correction, as well as the consequences of inaction.\nANALYSIS\nWhile using math error authority is cheaper and faster than normal deficiency procedures, it does not \nafford taxpayers the same protections they would otherwise have. For example, math error notices do \nnot give taxpayers the right to petition the U.S. Tax Court to challenge the IRS’s decision. Taxpayers \nmust request the IRS abate the change within a shorter timeframe than normal deficiency procedures \n(60 days versus 90 days) to retain their right to petition the Tax Court before paying the tax. These \nlesser protections and shortened timeframes make the clarity of math error notices especially important. \nIn calendar years 2015-2017, the IRS issued approximately two million math error notices each year. \nHowever, the IRS does not track the abatement rates of math errors. Many math error notices lack \nclarity, only giving taxpayers short, generic explanations of the purported errors, without adequately \ndirecting taxpayers to the exact issue with their return or all of the steps they must take. Additionally, \nmath error notices are designed like bills, framed to emphasize payment by taxpayers, without first \nexplaining the math error issues or the rights taxpayers have to challenge the IRS’s determination. The \ndesign of the notices deemphasizes, and in some cases omits, that taxpayers lose their right to make \na prepayment petition to the Tax Court if they don’t request the IRS abate the tax within 60 days \nof receiving the notice. A TAS study found that in a sample of cases, the IRS summarily denied tax \nbenefits to taxpayers that many of them were entitled to, which further demonstrates the need for clarity \nand explicit notice of taxpayers’ right to challenge the change to the return in case the IRS made a \nmistake. Instead of denying taxpayers benefits they are entitled to, the IRS should examine historical \nreturn data to summarily correct transposed digits or missing information, such as a dependent Taxpayer \nIdentification Number, on the taxpayer’s return if it would benefit the taxpayer.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n73\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[12-1] \u0007\nMeasure the abatement rates of its math errors and use the data to assess which math errors are \nmost problematic and which notices need to be revised for clarity.\n[12-2] \u0007\nOn all math error notices, cite to the actual line on the return that the IRS is changing, and \nthe reason why the IRS is making the change (e.g., “you claimed 6 dependents on line x, but \nmultiplied the dependency exemption by 7 on line y”).\n[12-3] \u0007\nEmphasize the Taxpayer Bill of Rights, and specific taxpayer rights on math error notices \nby including the taxpayer’s right to challenge the IRS and be heard, and the right to appeal, \nthe specific deadline date the taxpayer must respond by, and the loss of their right to make a \nprepayment petition of the IRS’s change to their return to the Tax Court, if the taxpayer does \nnot respond by the date in the notice.\n[12-4] \u0007\nFurther emphasize the steps that taxpayers may take (pay or file to petition) on the first page of \nits math error notices, so that taxpayers are clear on what their options are in response to notices. \n \nThe section heading that discusses appeal options should be similarly as big and bold as the \nsection heading discussing payment.\n[12-5] \u0007\nPlace the explanation of the math error on the first page of the notice, not the third or fourth, \nso that taxpayers see and read the explanation before they read about the numerous payment \noptions, which nudges them to pay and not question the purported error or if they should \nappeal. Page one should also include the deadline date to appeal, and what taxpayers lose if they \ndo not appeal, as well as information about the TBOR, TAS, and LITCs.\n[12-6] \u0007\nWork directly with TAS on notice redesign to ensure notice clarity and adequate inclusion of \ntaxpayer rights on math error notices.\n[12-7] \u0007\nUse internal data to make corrections to returns that benefit taxpayers, instead of burdening \ntaxpayers with unnecessary math error assessments that are later abated.\nIRS RESPONSE\nWe continue to look for opportunities to simplify and improve the clarity of notices and other \ncommunications to taxpayers. The IRS has designed math error notices to ensure the taxpayer has \nall information needed to take appropriate actions regarding the adjustments made to their return. \nAlthough we cannot tailor all language to each individual taxpayer’s situation, we agree that notices \nshould be clear and understandable to taxpayers.\nThe IRS issues many versions of math error notices to ensure taxpayers are informed of adjustments \nmade to their returns. Additionally, we provide taxpayers with their rights as provided by law, including \nto administrative appeal and judicial review.\nThank you for acknowledging improvement to explanations on some math error notices. The IRS \nperforms a yearly review of new notice explanation codes to ensure information is clearly communicated. \n \nWe appreciate feedback from the Taxpayer Advocate Service (TAS) on all new and revised math \nerror notices and explanation codes during development. Currently, the IRS is working with the \nTaxpayer Advocate Panel (TAP) to review math error notices CP10, CP11, CP13, and CP16. The TAP \nSection Two—IRS and TAS Responses\n74\n",
"IRS and TAS Responses\nIntroduction\nidentified similar issues to those addressed by the National Taxpayer Advocate, and we will work them \nconcurrently.\nIn June 2019, the IRS will host a Taxpayer Correspondence Summit to bring business operating \ndivision representatives together to create a shared vision for the future state of taxpayer correspondence, \nincluding notice revisions. We welcome the partnership with TAS to share perspectives and concerns \nabout taxpayer correspondence. The Summit will be the starting point to engage participants from \nbusiness organizations that produce correspondence, respond to correspondence, or provide support for \ncorrespondence development and implementation.\nIn addition, the IRS will continue to colloborate cross-functionally as we improve taxpayer \ncorrespondence. The IRS welcomes any additional specific data driven analysis and information TAS \ncan provide for notices.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate appreciates the IRS’s continued efforts to improve its notices. The \nNational Taxpayer Advocate additionally commends the IRS on hosting the Taxpayer Correspondence \nSummit, and looks forward to seeing further improvements to IRS notices that will arise from the \nprogress made at the Summit. As discussed in volume one, TAS plans to develop sample math \nerror notices in fiscal year (FY) 2020, that will incorporate the National Taxpayer Advocate’s \nrecommendations and serve as an example to the IRS on how to implement them.\nTAS \nRecommendation\n[12-1] \u0007\nMeasure the abatement rates of its math errors and use the data to assess which \nmath errors are most problematic and which notices need to be revised for clarity. \nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe IRS can measure abatement rates and the associated dollar amounts but cannot systemically \ndetermine that those abatements occurred because of a math error.\nMeasuring the abatement rates would involve identifying every math error related adjustment \nin our systems. There are two major transaction codes to identify an additional assessment \nor abatement, respectively. IRS employees input additional reason codes and source codes \nas applicable. There is no singular code (transaction, reason, or source code) that identifies \nassessment or abatement specific to math errors.\nThe Internal Revenue Manual specifies the transaction codes and source codes for employees \nto use in resolving a math error. Thus, the IRS can identify if a taxpayer had a math error on the \nreturn and if there was a negative adjustment (abatement of tax) but, due to the subjective nature \nof reason and source codes, we cannot say with certainty that the abatement was related to a \nparticular math error.\nIRS \nAction\nN/A\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n75\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe National Taxpayer Advocate remains concerned that some math errors unnecessarily place \nburdens on taxpayers whose returns did not actually contain errors or who were entitled to tax \nbenefits that the IRS summarily denied. As mentioned in the Most Serious Problem, a 2011 \nTAS study measured math error authority and dependent Taxpayer Identification Numbers (TINs). \nThe study found that 55 percent of these types of errors were abated, and 56 percent of the \nabatements could have been identified by the IRS with internal data. In a sample of cases where \ntaxpayers had a missing or incorrect dependent TIN math error and received no refund, 41 percent \nof the cases that received no adjustment could have been corrected, and all the refunds allowed, \nby the IRS examining its own records. Another 11 percent of these cases could have been at least \npartially corrected by historical data. This translates to more than 40,000 taxpayers who may have \nnot received refunds that they were entitled to. These taxpayers lost an average of $1,274.49. \nTAS understands there may be certain technical constraints, but measuring abatement rates of \nmath errors could allow the IRS to proactively prevent issues like the one TAS found in its 2011 \nstudy from occurring. Thus, the National Taxpayer Advocate continues to recommend that the IRS \ndo so.\nTAS \nRecommendation\n[12-2] \u0007\nOn all math error notices, cite to the actual line on the return that the IRS is \nchanging, and the reason why the IRS is making the change (e.g., “you claimed 6 \ndependents on line x, but multiplied the dependency exemption by 7 on line y”).\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS \nAction\nMath error notices currently cite the recommended detail with tax return line number references in \nthe “changes to your 20XX tax return” section.\nTAS Response\nThe National Taxpayer Advocate appreciates the improvements to math error notices, which do \ninclude the line number on the return. The National Taxpayer Advocate’s recommendation was \nintended to advocate for including the line numbers at issue in the Taxpayer Notice Code (TPNC) \nexplanation of the math error, such as the example given in her recommendation (“you claimed \n6 dependents on line x, but multiplied the dependency exemption by 7 on line y”). The National \nTaxpayer Advocate believes that including the line numbers in the explanation will further benefit \ntaxpayer understanding of the math error issue with their return.\nSection Two—IRS and TAS Responses\n76\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[12-3] \u0007\nEmphasize the Taxpayer Bill of Rights, and specific taxpayer rights on math error \nnotices by including the taxpayer’s right to challenge the IRS and be heard, and the \nright to appeal, the specific deadline date the taxpayer must respond by, and the \nloss of their right to make a prepayment petition of the IRS’s change to their return \nto the Tax Court, if the taxpayer does not respond by the date in the notice.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by February 1, 2021.\nIRS Action\nThe IRS agrees it is important for taxpayers to understand their rights. Publication 1, Your Rights \nas a Taxpayer, is included with math error notices. We continually look for opportunities to \nimprove the clarity of our letters and notices in order to improve the customer experience, and we \nare working with the Taxpayer Advocate to revise the language in our math error notices on the \nTaxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics \n(LITCs). We will take steps to emphasize the taxpayer’s right to challenge the IRS and be heard \nand the right to appeal. We will also provide greater emphasis on response times and the right to \nmake a prepayment petition with the U.S. Tax Court.\nTAS \nResponse\nThe National Taxpayer Advocate appreciates the IRS’s agreement to implement the \nrecommendation in full. TAS looks forward to working with the IRS to revise its language to help \nimprove taxpayer understanding of their rights, necessary actions, options, and deadlines.\nTAS \nRecommendation\n[12-4] \u0007\nFurther emphasize the steps that taxpayers may take (pay or file to petition) on the \nfirst page of its math error notices, so that taxpayers are clear on what their options \nare in response to notices. The section heading that discusses appeal options \nshould be similarly as big and bold as the section heading discussing payment.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by February 1, 2021.\nIRS Action\nThe IRS agrees that taxpayers need clear information regarding their options. The IRS has \ndesigned math error notices to ensure the taxpayer has all information needed to take appropriate \nactions. With the current notice design there is insufficient space to display appeals process \ninformation on Page 1; however, the IRS will take steps to emphasize taxpayers’ appeals options.\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS will take steps to further emphasize \ntaxpayers’ appeals options. The National Taxpayer Advocate recognizes that there is limited space \non the first page of the notice. In FY 2020, TAS will be designing sample notices, including a math \nerror notice, that will be designed to include the recommended information on page one of the \nnotice, including information on the taxpayer’s right to appeal and deadline to exercise that right. \nThis may act as a guide for possible future IRS redesign of its notices and for how to implement \nTAS’s notice recommendations.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n77\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[12-5] \u0007\nPlace the explanation of the math error on the first page of the notice, not the \nthird or fourth, so that taxpayers see and read the explanation before they read \nabout the numerous payment options, which nudges them to pay and not question \nthe purported error or if they should appeal. Page one should also include the \ndeadline date to appeal, and what taxpayers lose if they do not appeal, as well as \ninformation about the TBOR, TAS, and LITCs.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by February 1, 2021.\nIRS Action\nThe IRS agrees the taxpayer should receive a detailed explanation of the math error earlier in \nthe notice. With the current notice design there is insufficient space to display the detailed \nexplanation on Page 1; however, the explanation can be moved to an earlier position in the notice. \nThe IRS will ensure taxpayers have access to information on the appeal due date, Taxpayer Bill of \nRights (TBOR), Taxpayer Advocate Service (TAS), and Low Income Taxpayer Clinics (LITCs).\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS will consider moving the explanation of \nthe math error(s) to an earlier position in the notice. The National Taxpayer Advocate recognizes \nthat there is limited space on the first page of the notice. In FY 2020, TAS will be designing \nsample notices, including a math error notice, that will be designed to include the recommended \ninformation on page one of the notice, including the explanation of the error and information on \nTBOR, TAS, and LITCs. This may act as a guide for possible future IRS redesign of its notices and \nfor how to implement TAS’s notice recommendations.\nTAS \nRecommendation\n[12-6] \u0007\nWork directly with TAS on notice redesign to ensure notice clarity and adequate \ninclusion of taxpayer rights on math error notices.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by February 1, 2021.\nIRS Action\nThe IRS agrees with the importance of the clarity and inclusion of taxpayer rights on all notices \nand letters. TAS currently participates in the review and feedback of all new and revised \ncorrespondence. IRS employees participate on the Taxpayer Advocacy Panel (TAP) to support \nrecommendations for notice improvement. We are also working with TAP to revise math error \nnotices and we are currently collaborating with the Taxpayer Advocate to revise the language in \nthese notices on the Taxpayer Bill of Rights (TBOR), Taxpayer Advocate Service (TAS), and Low \nIncome Taxpayer Clinics (LITCs). In addition, Publication 1, Your Rights as a Taxpayer, is included \nwith math error notices to ensure the taxpayer is aware of appeal rights.\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS participates on the TAP and collaborating \nwith the National Taxpayer Advocate to revise the language of notices regarding TBOR, TAS, and \nLITCs. However, the National Taxpayer Advocate recommends that TAS be more involved in the \ninitial notice design and redesign process, to advocate in the initial stages for what TAS believes \nwill be the best ways to promote taxpayer rights and understanding. This would be an improvement \nover the current system where the IRS produces notices and the National Taxpayer Advocate \nthen recommends changes, when it is more difficult to do than in the initial design and redesign \nprocess.\nSection Two—IRS and TAS Responses\n78\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[12-7] \u0007\nUse internal data to make corrections to returns that benefit taxpayers, instead \nof burdening taxpayers with unnecessary math error assessments that are later \nabated.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nThe IRS agrees with the importance of identifying opportunities to relieve taxpayer burden and does \nso within our statutory limits. The IRS currently has legislative authority to correct some clerical \nerrors, commonly made by taxpayers, during the processing of the return. For example, we use the \ntaxpayer’s current year return to “fix” clerical errors, such as a document missing a Social Security \nnumber (SSN) by verifying the taxpayer’s SSN from elsewhere on the return. We may also correct \nan invalid child’s taxpayer identification number (TIN) on a Form 2441, Child and Dependent Care \nExpenses, by verifying the valid TIN from elsewhere on the return, such as from the Schedule EIC, \nEarned Income Credit. When these types of errors are corrected, taxpayers are notified of the \nchange. However, if the IRS is unable to correct the error, the taxpayer is issued a math error \nnotice that explains the identified error(s) and includes the amount of any resulting adjustment(s).\nTAS Response\nThe National Taxpayer Advocate appreciates that the IRS fixes taxpayer returns in some cases \nwhere it may do so by looking elsewhere on the return. However, to further improve its ability to \ncorrect such errors before resorting to sending taxpayers math error notices, the National Taxpayer \nAdvocate recommends the IRS look to prior-year historical return data (such as past dependent \nTINs) to attempt to fix taxpayer errors (such as an incorrect dependent TIN). The National Taxpayer \nAdvocate believes that this will allow the IRS to correct some taxpayer returns that are currently \nsent through math error procedures, which will reduce burdens for both the IRS and taxpayers.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n79\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#13\n\t\n\u0007\nSTATUTORY NOTICES OF DEFICIENCY: The IRS Fails to Clearly \nConvey Critical Information in Statutory Notices of Deficiency, \nMaking It Difficult for Taxpayers to Understand and Exercise \nTheir Rights, Thereby Diminishing Customer Service Quality, \nEroding Voluntary Compliance, and Impeding Case Resolution\nPROBLEM\nThe statutory notice of deficiency (SNOD) notifies the taxpayer there is a proposed additional tax due, \nidentifying the type of tax, and period involved, and that the taxpayer has the right to bring suit in \nthe United States Tax Court before assessment and payment. If the taxpayer does not petition the Tax \nCourt, after the 90 days (or 150 days if the taxpayer resides outside the United States) expires, the IRS \nwill assess the tax, send the taxpayer a tax bill, and start collection. The SNOD is the taxpayer’s “ticket” \nto the Tax Court, the only pre-payment judicial forum where the taxpayer can appeal an IRS decision. \nHowever, data suggests that less than one percent of the taxpayers in 2017 who received a SNOD filed \na petition with the Tax Court, not availing themselves of a fundamental taxpayer right—the right to \nappeal an IRS decision in an independent forum. These taxpayers may not be availing themselves of \ntheir rights, in part because of faulty design and poor presentation of information in the notices. The \nSNODs do not effectively communicate the information needed for taxpayers to understand their rights \nand the consequences for not exercising them, the relevant tax issues, or how to respond. Nor do notices \nsufficiently apply plain writing principles or incorporate behavioral research insights, as directed by the \nPlain Writing Act and Executive Order 13707. Additionally, the IRS continues to omit Local Taxpayer \nAdvocate (LTA) information required by law on certain SNODs, thereby violating taxpayer rights.\nANALYSIS\nThe SNOD is critical to many low income and middle income taxpayers because generally without it \nthey would be required to pay the tax first and go to refund fora, such as federal district courts or the \nUnited States Court of Federal Claims, in order to challenge the tax adjustment. Approximately 69 \npercent of cases in Tax Court are brought by unrepresented taxpayers, and that percentage increases \nto 91 percent among cases where the deficiency for a tax year is $50,000 or less and the taxpayer elects \nsmall tax case (S Case) procedures. In fiscal year (FY) 2017, the IRS issued more than 2.7 million of the \nfour types of SNODs that are separately tracked (called the “3219 SNODs”). There were only about \n27,000 docketed cases in Tax Court that year however, suggesting that less than one percent of taxpayers \nwho received a SNOD filed a petition with the Tax Court. The IRS tracks the income level of taxpayers \nreceiving three of the 3219 SNODS, excluding the SNODs issued to those who did not file a return. \nThe majority of these three types of 3219 SNODs (called the Non-Automated Substitute for Return, \nor Non-ASFR SNODS) were issued to low income taxpayers. Nearly 59 percent of those receiving a \nNon-ASFR SNOD make less than $50,000 per year. Yet low income taxpayers, who may be eligible for \nrepresentation through Low Income Taxpayer Clinics (LITCs), are less likely to petition the Tax Court. \nIn FY 2018, the median total positive income for individuals who did not petition the Tax Court in \nresponse to a SNOD issued after an audit was about $24,000.\nSection Two—IRS and TAS Responses\n80\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[13-1] \u0007\nRedesign the notices of deficiency, using plain language principles and behavioral science \nmethods, to clearly convey the taxpayer’s proposed tax increase, his or her right to challenge \nthe IRS’s determination before the Tax Court, and his or her ability to obtain TAS or LITC \nassistance. \na)\t Collaborate with the TAS and stakeholders, especially the Taxpayer Advocacy Panel (TAP) \nand LITCs, in designing the SNOD.\nb)\t Conduct a pilot of several SNODs, including current notices and rights-based prototypes, \nto measure: (1) the petition rate of each notice; (2) the TAS contact rate for each notice; (3) \nthe IRS contact rate for each notice; and (4) the downstream consequences of each notice \n(e.g., disposition of cases, such as whether the taxpayer settled, conceded, or prevailed in \nTax Court and whether the taxpayer’s deficiency decreased or the taxpayer requested an \naudit reconsideration).\n[13-2] \u0007\nDevelop and train IRS employees in best practices for assisting taxpayers who call the IRS in \nresponse to a SNOD, to include having IRS employees remind and guide taxpayers in filing Tax \nCourt petitions.\n[13-3] \u0007\nFacilitate the process for petitioning the Tax Court by including with the notice of deficiency the \nTax Court website and telephone number, as well as a copy of IRS Publication 4134, Low Income \nTaxpayer Clinic List.\n[13-4] \u0007\nInclude the Local Taxpayer Advocate’s contact information on the face of the notices, specifically \non Letters 3219-C, 1753, 531-A, and 531-B.\na)\t If the IRS is unable to update computer programming to provide the telephone number and \naddress information of LTAs pursuant to IRC § 6212(a) during the current year, include \nNotice 1214,1 listing all LTA office contact information, when mailing letters 3219-C,1753, \n531-A, and 531-B.\nb)\t Develop a timeline to secure and allocate funding to implement the necessary IRS system \nupgrades to allow for the programming of LTA addresses and contact information on the \nface of letters 3219-C, 1753, 531-A, and 531-B, as required by law.\nIRS RESPONSE\nThe Statutory Notice of Deficiency (SNOD) is an important step in the IRS’ examination process and \nis authorized under Internal Revenue Code (Code) section 6212(a). As prescribed, such notices shall \ninclude a notice to the taxpayer of their right to contact a local office of the Taxpayer Advocate and the \nlocation and phone number of the appropriate office.\nOver the years, the IRS has evaluated the notices to include plain language principles. We recently \nupdated several SNOD letters with plain language, which clearly indicates the proposed tax increase, \nthe taxpayer’s right to petition tax court, information on how to file a U.S. Tax Court petition, and \ninformation on how to obtain assistance from the Taxpayer Advocate Service (TAS). In addition, \nwe’ve added information on the return preparer directory. In the event the taxpayer feels they need \nprofessional assistance, they can use the directory to identify and locate a return preparer. \n1\t\nNotice 1214, Helpful Contacts for your “Notice of Deficiency” (Jan. 2018).\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n81\n",
"IRS and TAS Responses\nIntroduction\nSome of the notices that were updated include the Automated Underreporter Program (AUR) \nSNOD, Notice 3219A; Correspondence Examination Program SNOD, Notice 3219; and the BMF \nUnderreporter Program (BUR), Notice 3219B. In the process of updating these notices we collaborated \nwith the IRS Office to Taxpayer Correspondence (OTC), Office of Chief Counsel (Counsel), and TAS.\nThe IRS continually seeks to improve taxpayer correspondence to ensure all correspondence \ncomplies with the Plain Writing Act of 2010. TAS provides feedback on all new and revised taxpayer \ncorrespondence products in development, including statutory notices of deficiency. Often, comments \nfrom TAS are incorporated into the final version. The IRS recently worked with TAS to include specific \nLocal Taxpayer Advocate (LTA) contact information on many statutory notices. However, it was not \npossible to add customized LTA addresses for all letters due to programming issues. We appreciate the \nacknowledgement from the National Taxpayer Advocate and the alternate recommendations on this \nissue.\nIn 2019, the IRS will host a Taxpayer Correspondence Summit to bring business operating division \nrepresentatives together to create a shared vision for the future state of taxpayer correspondence \nincluding notice revisions. We welcome the partnership with TAS to share perspectives and concerns \nabout taxpayer correspondence. The Summit will be the starting point to engage participants from \nbusiness organizations that produce correspondence, respond to correspondence, or provide support for \ncorrespondence development and implementation. In addition, the IRS will continue to collaborate \ncross-functionally as we improve taxpayer correspondence. The IRS welcomes any additional specific \ndata driven analysis and information TAS can provide on problematic notices.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate appreciates the IRS’s efforts and commitment to continue to \ncollaborate with our office and stakeholders to improve the content and design of statutory notices of \ndeficiency. As detailed in the Annual Report, it’s critical that the IRS use plain language principles \nand behavioral science methods in redesigning notices of deficiency, to clearly convey the taxpayer’s \nproposed tax increase, as well as his or her right to challenge the IRS’s determination before the Tax \nCourt and obtain TAS or LITC assistance in responding to the notice. Considering the statutory notice \nof deficiency is the taxpayer’s “ticket” to the Tax Court, which is the only pre-payment judicial forum \nwhere the taxpayer can appeal an IRS decision, it’s incumbent upon the IRS to ensure taxpayers avail \nthemselves of this fundamental taxpayer right—the right to appeal an IRS decision in an independent \nforum.\nThe IRS has made significant strides in evaluating the notices with an eye towards including plain \nlanguage principles. The National Taxpayer Advocate applauds the IRS for adding information on the \nreturn preparer directory and recently updating several SNOD letters with plain language, indicating \nthe proposed tax increase, the taxpayer’s right to petition tax court, information on how to file a U.S. \nTax Court petition, and information on how to obtain assistance from the Taxpayer Advocate Service \n(TAS). \nWe appreciate the IRS’s willingness to include specific Local Taxpayer Advocate (LTA) contact \ninformation on many statutory notices, despite the programming barriers in adding customized LTA \naddresses for all letters. TAS will continue to push the IRS to develop a timeline to secure and allocate \nfunding to implement the necessary IRS system upgrades to allow for the programming of LTA \naddresses and contact information on the face of computer-generated letters, as required by law.\nSection Two—IRS and TAS Responses\n82\n",
"IRS and TAS Responses\nIntroduction\nThe National Taxpayer Advocate is pleased the IRS will host a Taxpayer Correspondence Summit in \n2019, bringing business operating division representatives together to create a shared vision for the future \nstate of taxpayer correspondence, including notice revisions. We look forward to working with the IRS \non this action.\nTAS Recommendation\n[13-1] \u0007\nRedesign the notices of deficiency, using plain language principles and behavioral \nscience methods, to clearly convey the taxpayer’s proposed tax increase, his or her \nright to challenge the IRS’s determination before the Tax Court, and his or her ability \nto obtain TAS or LITC assistance. \na)\t Collaborate with the TAS and stakeholders, especially the TAP and LITCs, in \ndesigning the SNOD.\nb)\t Conduct a pilot of several SNODs, including current notices and rights-based \nprototypes, to measure: (1) the petition rate of each notice; (2) the TAS \ncontact rate for each notice; (3) the IRS contact rate for each notice; and \n(4) the downstream consequences of each notice (e.g., disposition of cases, \nsuch as whether the taxpayer settled, conceded, or prevailed in Tax Court and \nwhether the taxpayer’s deficiency decreased or the taxpayer requested an audit \nreconsideration).\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\na)\tThe IRS collaborates with TAS and other stakeholders to secure feedback during the revision and \ncreation of statutory notices as part of the regular stakeholder\nreview process.\n\t\nWe revised Letter 3219 (Correspondence Exam), Notice 3219A (AUR), Letter 531 (Field \nExamination), Letter 1753 (Tax-Exempt), and Letter 531-A/B in collaboration with TAS, Counsel, \nand the OTC. The revised notices include plain language principles, clearly indicate the proposed \ntax increase and taxpayer’s right to petition tax court, and provide information on how to file a U.S. \nTax Court petition and how to obtain assistance from TAS.\n\t\nWe revised Letter 3219-B (BMF Underreporter) using plain language principles and the notice \nincludes the closest local TAS office and phone number based on the taxpayer’s zip code.\nb)\tOur Collection Operating Unit has been working on an in-depth notice redesign program for certain \nbalance due notices. This redesign has included various organizations across the IRS as well \nas private contractors. Based on the success of that effort, the SB/SE Examination Operating \nUnit will consider whether such an effort is appropriate for SNOD notices based on cost-benefit \nconsiderations. Regardless, letters are reviewed on a regular basis and updated as necessary to \ncontinuously provide clear guidance and information.\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS agrees a focus on redesigning notices \nof deficiency, using plain language principles and behavioral science methods, is a priority and \nappreciates the IRS’s efforts in collaborating with TAS, Counsel, and the OTC in revising several \nnotices. However, the IRS should expand on those efforts to include outside stakeholders, such \nas the Taxpayer Advocacy Panel (TAP) and LITCs, which would produce a better-informed notice \nredesign. The data confirms that less than one percent of taxpayers who received a statutory \nnotice of deficiency filed a petition with the Tax Court. The National Taxpayer Advocate is \nconcerned that the lack of taxpayers’ responses to SNODs may be, in part, due to faulty design \nand poor presentation of information in the notices, making it difficult for taxpayers to understand \ncritical information and exercise their right to appeal an IRS decision in an independent forum. \nEven more alarming is that the majority of those notices of deficiency are issued to low income \ntaxpayers, who are less likely to petition the Tax Court, as illustrated in the Annual Report. The IRS \nshould investigate new, and different, approaches in reaching this low income population. By all \naccounts, the IRS can improve upon the “regular stakeholder-review process” it describes above by \ndoing so.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n83\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[13-2] \u0007\nDevelop and train IRS employees in best practices for assisting taxpayers who call \nthe IRS in response to a SNOD, to include having IRS employees remind and guide \ntaxpayers in filing Tax Court petitions.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS Action\nExamination employees are trained on how to respond to taxpayers regarding questions received \nabout a SNOD and the process to file a petition. Employees do not assist with the actual \npreparation of a petition.\n♦\n♦The Enterprise Learning Management System (ELMS) Course# 12256, Exam Toll-Free Telephone \nAssistors Guide, provides guidance for employees responding to taxpayer questions on information \ncontained in a SNOD and how to assist taxpayers on how to file a U.S. Tax Court petition.\n♦\n♦For Field operations, contact procedures are outlined in Internal Revenue Manual (IRM) 4.8.9.20.3, \nTaxpayer Contact.\nTAS Response\nThe National Taxpayer Advocate is pleased the IRS provides an ELMS course focused on guiding \nemployees responding to taxpayer questions on information contained in a SNOD and how to assist \ntaxpayers on how to file a U.S. Tax Court petition. However, the course should be mandatory for \ntelephone assistors. Because it is critical that taxpayers dispute the assessed tax within 90 days \nof receiving the notice in order to challenge the tax in an independent judicial forum, it’s incumbent \nupon these telephone assistors to communicate that information to taxpayers, particularly because \nthe telephone assistors may be the only IRS employee the taxpayer speaks with before the 90 days \nexpire.\nTAS \nRecommendation\n[13-3] \u0007\nFacilitate the process for petitioning the Tax Court by including with the notice of \ndeficiency the Tax Court website and telephone number, as well as a copy of IRS \nPublication 4134, Low Income Taxpayer Clinic List.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full by January 31, 2020.\nSection Two—IRS and TAS Responses\n84\n",
"IRS and TAS Responses\nIntroduction\nIRS Action\nWe agree with this recommendation and have already updated a number of notices as follows. \nThe recent redesign of the Letter 3219 (Correspondence Examination) and Letter 3219-B \n(BMF Underreporter) includes the U.S. Tax Court website and telephone number. Publication \n3498-A sent with the Letter 3219 provides information on Low Income Tax Clinics (LITCs) and \nrefers taxpayers to the LITC website and IRS Publication 4134. The BMF Underreporter taxpayers \ndo not meet the criteria for LITC assistance.\nThe revised Letter 531 (Field Examination) includes the U.S. Tax Court website and telephone \nnumber. Information regarding the LITCs is in the letter, including the web address for LITCs, \nreference to Publication 4134, LITC List, and a web address to link to LITCs on the Taxpayer \nAdvocate’s webpage.\nThe revised notices relating to tax-exempt organizations and employee plans (Letters 531-A, 531-B, \nand 1753) also include the U.S. Tax Court website and telephone number. We will update these \nnotices to cite or enclose Publication 4134 where appropriate.\nThe IRS will add the U.S. Tax Court’s website and phone number to any statutory notices not yet \nupdated. A copy of the four-page IRS Publication 4134 will be included with each notice.\nTAS Response\nWe commend the IRS for its dedication in providing excellent service and delivering the best service \npossible to taxpayers, particularly those who may be trying to get back on their feet and respond to \nnotices of deficiency. The National Taxpayer Advocate greatly appreciates the IRS’s commitment \nto update notices to cite or enclose Publication 4134, where appropriate, and to add the U.S. Tax \nCourt’s website and phone number to any statutory notices not yet updated. We also appreciate \nthe IRS’s agreement to implement this recommendation, to include providing a copy of the four-\npage IRS Publication 4134 with each notice.\nTAS Recommendation\n[13-4] \u0007\nInclude the Local Taxpayer Advocate’s contact information on the face of the \nnotices, specifically on Letters 3219-C, 1753, 531-A, and 531-B.\na)\t If the IRS is unable to update computer programming to provide the telephone \nnumber and address information of LTAs pursuant to IRC § 6212(a) during the \ncurrent year, include Notice 1214,2 listing all LTA office contact information, \nwhen mailing letters 3219-C,1753, 531-A, and 531-B.\nb)\t Develop a timeline to secure and allocate funding to implement the necessary \nIRS system upgrades to allow for the programming of LTA addresses and \ncontact information on the face of letters 3219-C, 1753, 531-A, and 531-B, as \nrequired by law.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by January 30, 2020.\nIRS Action\na)\tRevisions of Letters 531-A, 531-B, 1753 were recently sent to publishing. The revised \nletters say, “Find the location and phone number of your local Taxpayer Advocate at \nwww.taxpayeradvocate.irs.gov/contact-us or call TAS at 877-777- 4778.” Letters 1753 and 3219-C \ninclude Notice 1214.\nb)\tIn 2018, the IRS added LTA addresses based on the taxpayer’s ZIP code to many statutory \nnotices. The IRS has submitted a request for programming in order to add the LTA addresses \nto the letter 3219-C and is awaiting approved funding to complete the request, which would be \ncontingent on significant upgrades to the system. For the other letters, we are working to identify \na technological solution and will develop a timeline depending on the systemic requirements.\n2\t\nNotice 1214, Helpful Contacts for your “Notice of Deficiency” (Jan. 2018).\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n85\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nIn the twenty years since Congress enacted the Internal Revenue Service Restructuring and Reform \nAct of 1998 (RRA 98), codified at 26 U.S.C. § 6212(a), the National Taxpayer Advocate has \ncontinued to raise this issue, and TAS has worked extensively with the IRS to ensure the service \nupdates its notices with the required LTA information. While the National Taxpayer Advocate \nappreciates the IRS’s efforts to include Notice 1214, which contains LTA contact information for \neach state, by its own admission, the IRS is still not able to include the Notice 1214 with every \nSNOD. \nWe also appreciate that the IRS has submitted a request for programming to add LTA addresses to \nthe letter 3219-C. Understanding the budget constraints in making upgrades to the system, the \nNational Taxpayer Advocate applauds the IRS’s commitment to work on identifying a technological \nsolution and developing a timeline for programming, particularly in light of the IRS’s previous claims \nthat doing so was impossible.\nSection Two—IRS and TAS Responses\n86\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#14\n\t\n\u0007\nCOLLECTION DUE PROCESS NOTICES: Despite Recent Changes \nto Collection Due Process Notices, Taxpayers Are Still at Risk for \nNot Understanding Important Procedures and Deadlines, Thereby \nMissing Their Right to an Independent Hearing and Tax Court \nReview\nPROBLEM\nCollection Due Process (CDP) rights provide taxpayers with an independent review by the IRS Office of \nAppeals of the decision to file a Notice of Federal Tax Lien (NFTL) or the IRS’s proposal to undertake \na levy action, which can be appealed to Tax Court. The IRS communicates these important rights \nduring two critical times. The IRS communicates the right to request a CDP administrative hearing \nwith the intent to levy notice or the NFTL. Following the CDP hearing, the IRS communicates \nits determination to the taxpayer via a notice of determination. Perhaps because the notices provide \nconfusing instructions regarding the due date to file a response, the response rate for CDP notices \nranges from one percent to over ten percent, depending on income and type. Moreover, CDP notices \nemphasize collection actions and under-emphasize the statutory due process protections afforded by the \nhearings, leading unrepresented taxpayers to not avail themselves of important taxpayer rights.\nANALYSIS\nThe National Taxpayer Advocate and other stakeholders have highlighted specific problems with the way \nin which the CDP notices do not fully inform taxpayers. First, the design and wording in CDP notices \nunderemphasize the importance of CDP rights. They do not explain what a hearing is, why a taxpayer \nwould want to request one, and what an equivalent hearing is. Second, the notices do not clearly \nmention important information, such as a deadline by which to file a hearing request. Last, the notice of \ndetermination lacks a specific date by which to file a petition in Tax Court and does not explain why the \nnotice is salient to taxpayers.\nApplying principles of behavioral science help us understand how these notices should be improved. \nTaxpayers are more likely to read material if it is salient to them. Providing a full explanation on \nthe importance of CDP rights and what they are losing if they do not request a hearing may prompt \ntaxpayers to exercise their rights. Moreover, providing them with information about the availability \nof a Low Income Taxpayer Clinic (LITC) for representation may overcome the barrier posed by self-\nrepresentation. Last, plain language includes more than just simple wording. It includes structuring the \nnotice so that it is easy to read and setting apart important information to guide the reader. This means \nthat things such as a filing deadline should appear early in the notice and in bold font. With improved \nnotices, perhaps the CDP response rates will increase.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n87\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[14-1] \u0007\nInclude the exact date on the Notices of Determination by which the taxpayer must file a \npetition in Tax Court.\n[14-2] \u0007\nWork with TAS to redesign the CDP notices so that they reflect the principles of visual cognition \nand processing of complex information. This will include changes such as:\na)\t Putting clear explanations about the importance of these hearings in terms relating to \ntaxpayer rights and protections;\nb)\t Highlighting deadlines early in the notices and in bold font; and\nc)\t Including references to TAS and the LITC program.\n[14-3] \u0007\nWork with TAS to explore methods of more accurate notification of the due date for CDP \nhearing requests with respect to lien filings.\nIRS RESPONSE\nIn July 1998, Congress enacted Internal Revenue Code (Code) sections 6320 and 6330 to require \nthe IRS to provide taxpayers with notice of, and an opportunity for, a Collection Due Process (CDP) \nhearing after a Notice of Federal Tax Lien (NFTL) is filed and before a notice of levy is issued. In \nJanuary 1999, in accordance with the legislation, the IRS implemented letters to fulfill the new \nrequirements—Letter 3172, the CDP notice of the NFTL filing, and Letter 1058 or Letter LT11, the \nCDP notice of the intent to levy.\nFrom their implementation, the CDP notices have satisfied the statutory content requirements by \nincluding items such as the amount of the unpaid tax, the right of the taxpayer to a fair hearing, and the \ntime frame for the taxpayer to request a CDP hearing. Through their 20 year history, the CDP notices \nhave been revised several times with the concurrence of the Taxpayer Advocate Service (TAS) to enhance \ntheir clarity and incorporate modifications to the law. Similarly, we recently made changes to the Notice \nof Determination based on concerns raised by TAS.\nThe IRS strives to produce letters and notices that clearly inform taxpayers of their rights and \nresponsibilities. To that end, the IRS is always receptive to suggestions for improvement. However, any \nchanges must not detract from the purpose of the particular letter. The purpose of the CDP notices \nis to inform taxpayers of their CDP rights with regard to the potential levy or filed NFTL. Other \ninformation that may be included in collection letters, regardless of its inherent value, may obscure \nthe importance of the CDP opportunity. To keep the taxpayer aware of other valuable information, \ninstructional publications are included with the CDP notices.\nThe IRS is currently working with TAS and other stakeholders to evaluate the LT11 CDP notice and \nthe most effective way to convey the letter’s information, particularly the placement of the response \ndue date. Similar revisions are also under consideration for Letter 1058. The current version of Letter \n3172, which was developed with the Office of Taxpayer Correspondence and approved by TAS prior to \npublication, indicates in bold the date for the taxpayer to exercise their rights and clearly sets forth the \naddress for submitting the CDP request.\nThere are many significant factors that influence the CDP request rate. Most notably, the CDP notices \nare generally sent after numerous other notices and verbal warnings of the possible collection actions. \nSection Two—IRS and TAS Responses\n88\n",
"IRS and TAS Responses\nIntroduction\nAdditionally, the issuance of CDP notices does not preclude taxpayers from other collection alternatives. \nThe Code does not require the IRS to solicit CDP requests from taxpayers but rather to timely provide \ntaxpayers the information necessary for them to exercise their rights. IRS policies and procedures \npromote consistency with the statutory requirements so that all taxpayers are treated the same and have \nequal opportunities.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nTAS agrees that the CDP notices, with the enclosed publications, meet legal requirements as spelled out \nin the tax code. However, the tax code does not stipulate how the information is to be communicated to \ntaxpayers. That is up to the IRS to decide. The National Taxpayer Advocate, practitioners, taxpayers, \nand even the U.S. Tax Court, have expressed various concerns over the current content of these \nnotices. If the notices are not salient to taxpayers or do not clearly communicate with the taxpayers, it \nis understandable that the response rate to CDP notices will continue to be low. TAS is not saying that \nthe IRS should be soliciting CDP requests from taxpayers, but the CDP notices should be written with \nsufficient clarity to allow taxpayers to make truly informed decisions. \nIn general, the design and wording in the notices underemphasize the importance of CDP rights. The \nnotices do inform the taxpayers of the right to request a CDP hearing. However, this information does \nnot appear until the second page of Letter LT 11. Letter 1058 includes the information halfway down \nthe first page. Moreover, the notices do not explain what a hearing is, why a taxpayer would want \none, and what an equivalent hearing is. While this information is not required by the tax code, the \nimportance of a CDP hearing makes little sense to a taxpayer without knowing more about the hearing \nor why he or she would want one. Last, the notice of determination lacks a specific date by which the \ntaxpayer must file a petition in U.S. Tax Court. \nTAS \nRecommendation\n[14-1] \u0007\nInclude the exact date on the Notices of Determination by which the taxpayer must \nfile a petition in Tax Court.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nAppeals recently revised Letter 3193, Notice of Determination, to reduce potential confusion \nabout how to calculate the petition deadline. We initiated the change in response to stakeholder \nfeedback, including concerns raised by some tax practitioners and the National Taxpayer Advocate. \nAfter considering a number of options, we determined that the most efficient and effective \napproach would be to use the same language that is used in other Appeals letters to explain the \ndeadline. We are unaware of any taxpayer complaints related to the language in the revised letter.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n89\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe current version of Letter 3193 reads “If you want to dispute this determination in court, you \nmust file a petition with the United States Tax Court within 30 days from the date of this letter.” \nTAS acknowledges that this is an improvement from the previous version, which read “If you want \nto dispute this determination in court, you must file a petition with the United States Tax Court \nwithin a 30-day period beginning the day after the date of this letter.” However, the revised \nlanguage may still confuse taxpayers. For instance, what does the term “within” mean to the non-\nexpert taxpayer? Is the date of the letter day one or day zero? The best way to protect taxpayer \nrights is to include a specific date by which taxpayers must file their petition in Tax Court.\nUnlike a notice of deficiency, which legally requires a specific date by which the taxpayer must \nfile his or her petition in Tax Court, the IRS is not required to include a specific date in a notice of \ndetermination. However, the process for including a date on the notice of deficiency is included \nin Internal Revenue Manual (IRM) 8.20.6.8.4, which Appeals employees follow. It is unclear from \nthe IRS response why this process could not apply to the notice of determination given that it will \neliminate a lot of uncertainty for taxpayers.\nTAS Recommendation\n[14-2] \u0007\nWork with TAS to redesign the CDP notices so that they reflect the principles of \nvisual cognition and processing of complex information. This will include changes \nsuch as:\na)\t Putting clear explanations about the importance of these hearings in terms \nrelating to taxpayer rights and protections;\nb)\t Highlighting deadlines early in the notices and in bold font; and\nc)\t Including references to TAS and the LITC program.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by August 31, 2019.\nIRS Action\nThe IRS will work with TAS to ensure the notices clearly explain the importance of Collection Due \nProcess (CDP) hearings and emphasize deadlines. We are revising the LT11 CDP notice and plan \nto pilot multiple versions of the new notice in the future. TAS is participating in that process. \nOne version to be tested will use the National Taxpayer Advocate’s suggested taxpayer rights \nframework. While the precise content of notices will vary, the most effective way to show the \ndue date and other key information will be addressed in the revisions. Similar revisions will be \nconsidered for Letter 1058. No revision is planned for Letter 3172, as it was recently redesigned \nto comply with plain-\nlanguage standards and to highlight key response information.\nTAS Response\nTAS was not included in the process to develop the notices for the LT 11 pilot. We did offer \nresponses once the notices were provided for review. As far as TAS is aware, no TAS notices were \nincluded with the study. The pilot notices do include a specific date by which the taxpayer must \nrequest a CDP hearing. However, the emphasis of these notices is nonetheless on collection. The \nIRS’s taxpayer education focuses on timely payment and methods of payment, not on the right to \nrequest a CDP hearing. If taxpayers do not find this information to be salient to them, they may \nnot continue to the second page to find out about their CDP rights. Last, the use of plain language \nentails more than just simple word choice. It encompasses notice design and the placement \nof material. For instance, a notice dedicated to educating taxpayers on their CDP rights should \ninclude CDP information up front and in bold font.\nSection Two—IRS and TAS Responses\n90\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[14-3] \u0007\nWork with TAS to explore methods of more accurate notification of the due date for \nCDP hearing requests with respect to lien filings.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nCode section 6320(a)(2) requires that the CDP notice be provided to the taxpayer not more than \nfive business days after the filing of the notice of lien. An NFTL is considered filed on the date the \nrecording office receives the NFTL. The practice of adding three business days to the mailing date \nof the NFTLs to calculate the receipt (filing) of the NFTLs is the same standard equally applied to \nthe thousands of various recording offices. The practice ensures fair treatment for all taxpayers as \nit provides consistent calculations for CDP hearing request deadlines.\nIRS \nAction\nN/A\nTAS Response\nThe process adopted by the IRS may ensure consistent treatment among taxpayers but it does \nnot ensure fair treatment. As the Most Serious Problem points out, the IRS considers the NFTL to \nbe filed on the date it should be received by the recording office. There is no way to know when \nthe recording office receives the NFTL until it is received. Untold circumstances could delay the \nreceipt of an NFTL. Since the filing date is critical to the timeframe for requesting a CDP hearing, \nthe taxpayer could have a longer period of time to request a CDP hearing than the NFTL letter \nindicates, but he or she would not know it.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n91\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#15\n\t\n\u0007\nECONOMIC HARDSHIP: The IRS Does Not Proactively Use \nInternal Data to Identify Taxpayers at Risk of Economic Hardship \nThroughout the Collection Process\nPROBLEM\nEconomic hardship, as defined in Treasury regulations and the Internal Revenue Manual, occurs when \nan individual is “unable to pay his or her reasonable basic living expenses.” Although Congress requires \nthe IRS to halt some collection actions, like a levy, if a taxpayer is in economic hardship, the IRS is not \nproactive in identifying these taxpayers throughout the collection process. This means that the IRS does \nnot have a method to alert collection employees that a taxpayer may be at risk of economic hardship and, \nwhen responding to taxpayer inquiries, to ask questions about the taxpayer’s finances to determine an \nappropriate collection action or alternative. As a result, taxpayers may be lured into entering installment \nagreements (IAs) they cannot afford, violating their right to be informed, right to quality service, and right \nto a fair and just tax system.\nANALYSIS\nThe IRS routinely undertakes collection treatments without performing the financial analysis required \nto make a hardship determination. For example, taxpayers need not submit any financial information to \nqualify for streamlined IAs and may enter into them online without interacting with an IRS employee. \nMany anxious or intimidated taxpayers seeking to resolve their liabilities as quickly as possible may be \nunaware the IRS is required to halt collection action if they are in economic hardship, and thus agree to \nmake tax payments they cannot afford. Over the last six years, taxpayers whose cases were assigned to \nthe IRS’s Automated Collection System (ACS) entered into nearly 4.3 million IAs. About 84 percent \nof those IAs were streamlined. TAS estimates that about 40 percent of taxpayers who entered into a \nstreamlined IA within ACS in fiscal year (FY) 2018 had incomes at or below their Allowable Living \nExpenses (ALEs), the standards the IRS uses in determining ability to pay a tax liability. In other \nwords, four out of every ten taxpayers who agreed to streamlined IAs in ACS could have been eligible \nfor collection alternatives, such as offers in compromise (OICs) or “currently not collectible - hardship” \n(CNC-Hardship) status, if they had known or been asked to explain their financial circumstances. The \ndefault rate within ACS for streamlined IAs of taxpayers whose income was at or below their ALEs in \nFY 2018 was about 39 percent.\nThe TAS Research function has developed an automated algorithm that we believe can identify \ntaxpayers with incomes below their ALEs with a high degree of accuracy. The IRS could apply this \nformula by automation to the accounts of all taxpayers who owe back taxes, and then place a marker on \nthe accounts of taxpayers whom the screen identifies as having incomes below their ALEs. While this \nmarker would not automatically close a case as CNC-Hardship, it could be used to create a warning for \ntelephone assistors responding to taxpayers calls and for taxpayers entering into IAs online. The IRS \ncould also use this algorithm to screen out these taxpayers from automated collection treatments such \nas the Federal Payment Levy Program, selection for referral to Private Collection Agencies (PCAs), or \npassport certification unless and until the IRS has made a direct personal contact with the taxpayer to \nverify the information.\nSection Two—IRS and TAS Responses\n92\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[15-1] \u0007\nDevelop and utilize an algorithm to compare a taxpayer’s financial information to ALEs during \nInventory Delivery System (IDS) case scoring and as a template made available to Revenue \nOfficers and telephone assistors responding to taxpayer inquiries.\n[15-2] \u0007\nApply this algorithm before sending any cases to PCAs, and exclude any case involving a \ntaxpayer at risk of economic hardship from potentially collectible inventory.\n[15-3] \u0007\nRoute cases identified as at risk of economic hardship to a specific group within ACS and send \nthose taxpayers a specific written notification to educate them on collection alternatives and \nadditional assistance available, including TAS and Low Income Taxpayer Clinics (LITCs).\n[15-4] \u0007\nCreate a new help line dedicated to responding to taxpayers at risk of economic hardship and \nhelping them determine the most appropriate collection alternative, including OICs.\n[15-5] \u0007\nPartner with TAS and LITCs to develop issue-focused training for IRS employees who interact \nwith taxpayers at risk of economic hardship.\nIRS RESPONSE\nWe have implemented a number of safeguards over the years to ensure that taxpayers who are \nexperiencing economic hardship are appropriately addressed during the collection process, including \nthrough the use of allowable living expense standards to ensure consistent treatment and opportunities \nto challenge the appropriateness of a proposed collection action. The IRS Collection Operating Unit \nensures its employees have the knowledge and tools to efficiently and effectively assist all taxpayers. \nTraining and procedural guidelines in the Internal Revenue Manual (IRM) provide employees \ninformation on how to determine a taxpayer’s ability to pay, enabling appropriate decision making to \nresolve cases.\nEconomic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses. Collection \nemployees receive training to address situations where a taxpayer is experiencing economic hardship, \nand all Automated Collection System (ACS) and Field Collection employees are empowered to assist \nthese taxpayers when contact is made. Routing cases involving economic hardship to a specific group of \nemployees would create inefficiencies and delay the proper resolution of these cases.\nThe IRS cannot reliably determine economic hardship based solely on information available in IRS \nand third-party databases, which is often incomplete. An accurate determination of a taxpayer’s \nability to pay generally requires the taxpayer to submit financial information along with supporting \ndocumentation. IRS’s financial analysis procedures vary based on case characteristics, but generally a \nCollection Information Statement (CIS) is secured from the taxpayer along with other documentation.\nEach case is analyzed individually under guidelines that are applied uniformly. These guidelines provide \na comprehensive structure for making an appropriate collection determination, balancing the needs of \nthe taxpayer against their obligation to pay tax and, at the same time, fostering public confidence that \nall taxpayers are being held to the same standard of compliance. Any attempt to proactively identify \ntaxpayers likely to be in economic hardship based on an incomplete set of facts would lead to flawed \nresults.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n93\n",
"IRS and TAS Responses\nIntroduction\nPrior to 2007, the published Allowable Living Expense (ALE) tables included the exact living expense \nfigures, so the living expense amounts increased or decreased from year to year. In 2007, at the \nsuggestion of the National Taxpayer Advocate and following the completion of a research study of \nthe ALE standards, the IRS removed income-based ranges for the ALE standards and came to an \nagreement that the ALE tables would not show decreases in amounts from year to year. That change \ncreated higher allowances for most expenses for lower-income taxpayers, resulting in a Currently Not \nCollectible determination for most taxpayers who are below the poverty threshold. In 2014, there were \nconcerns about the accuracy of the ALE figures. IRS agreed to look at this issue and work with TAS to \naddress these concerns. In January 2016, SBSE Collection Policy and TAS came to an agreement that \nALE standards could reflect some decreases in amounts from year to year when indicated. However, \nthe amounts of any decreases are limited from one year to the next; even if the data reflects a significant \ndecrease, the ALE standard is reduced by no more than 10% of the prior year published amount.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate commends the IRS on their past efforts on this issue and their \nwillingness to work with the Taxpayer Advocate Service in trying to implement more safeguards for \ntaxpayers who are experiencing economic hardship. While it is true that the IRS and TAS agreed to \nlimit decreases to the ALE standards to ten percent, the IRS was also going to update their instructions \nto Collection personnel to consider allowing the non-decreased ALE amount, when appropriate. \nUnfortunately, the IRS subsequently decided not to update its ALE guidance to its employees, instead \nchoosing to rely on other instructions regarding deviations from ALE standards. Nevertheless, the IRS \nhas misunderstood our recommendations. In its response to our recommendations, the IRS stated that \n“[t]he IRS cannot reliably determine economic hardship based solely on information available in IRS \nand third-party databases, which is often incomplete.” It is true the IRS cannot conclusively reach a \ndetermination about whether a taxpayer faces economic hardship based on its internal data alone. But \nthat is not what we are recommending. Rather, we are recommending that the IRS systemically place \na marker on the accounts of all taxpayers whom its filter identifies as having incomes below their ALEs \nand no detectable assets. The marker would signal that a taxpayer is at risk of economic hardship and \ntherefore additional information should be requested. Specifically, the marker would alert IRS assistors \nspeaking with taxpayers over the phone that they should verify the taxpayer’s ability to pay before \nplacing them in streamlined IAs. Under this approach, the IRS would be using data to proactively \nprotect financially struggling taxpayers from further financial harm. \nSimilarly, the indicator could be used to warn taxpayers who are attempting to enter into streamlined \nIAs online about collection alternatives if they are able to substantiate financial hardship. Perhaps a \npop-up message could suggest the taxpayer seeks an alternative collection option, such as Currently Not \nCollectible-Hardship (CNC-Hardship) or an OIC. Moreover, the indicator would alert IRS assistors \nspeaking with taxpayers over the phone of the need to verify their ability to pay before placing them in \nstreamlined IAs that are likely to default. In fact, the IRS could program its systems so when an assistor \nkeys in the Social Security number of a taxpayer with an economic hardship risk indicator, a screen is \ngenerated with the income information, projected family size, and appropriate ALEs. This way, the \nassistor can engage with the taxpayers and simply run through some high-level information to verify its \naccuracy. This approach uses data to proactively protect the taxpayers’ rights to privacy and a fair and \njust tax system. \nThe IRS further states in its response that “[a]ny attempt to proactively identify taxpayers likely to be \nin economic hardship based on an incomplete set of facts would lead to flawed results.” However, we \nSection Two—IRS and TAS Responses\n94\n",
"IRS and TAS Responses\nIntroduction\ndisagree and believe this further misses the point of the recommendation. An indicator would serve as \na starting point to engage taxpayers and verify the financial status of taxpayers who may face economic \nhardship. The indicator would not constitute a final determination of the taxpayers’ financial status or \nability to pay.\nThe National Taxpayer Advocate hopes that the IRS will reconsider and work with TAS on addressing \nthese recommendations in the near future.\nTAS \nRecommendation\n[15-1] \u0007\nDevelop and utilize an algorithm to compare a taxpayer’s financial information to \nALEs during Inventory Delivery System (IDS) case scoring and as a template made \navailable to Revenue Officers and telephone assistors responding to taxpayer \ninquiries.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nA comparison of taxpayer income to allowable living expense (ALE) standards would not yield a \nuseful indicator of financial condition. The ALE standards represent an average of all taxpayers; \na given taxpayer may spend more or less or not incur the expense at all. A taxpayer’s financial \ncondition can only be evaluated by looking at their individual facts and circumstances.\nIRS \nAction\nN/A\nTAS Response\nWe agree that a taxpayer’s financial condition can only be verified by looking at their individual \nfacts and circumstances. That is why we are recommending a systemic indicator as a starting \npoint to engage this population of vulnerable taxpayers and verify their financial status. \nThe IRS could use the TAS algorithm (or one similar to it) to apply a marker during case scoring to \nroute the case to the appropriate group. For example, flagging potential economic hardship cases \nearly on during Inventory Delivery System (IDS) scoring would allow the IRS to better use resources \nin later stages of the collection process and prevent economic harm to taxpayers who are at risk of \neconomic hardship. The IRS could program their systems so when an assistor keys in the Social \nSecurity number of a taxpayer with an economic hardship risk indicator, a screen is generated with \nthe income information, projected family size, and appropriate ALEs. This way, the assistor can \nsimply run through some high-level information to verify its accuracy. This indicator would prompt \nthe IRS employee to ask a few more detailed questions in order to ascertain the taxpayer’s ability \nto pay and identify more appropriate collection alternatives, including Currently Not Collectible \n(CNC) status. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n95\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[15-2] \u0007\nApply this algorithm before sending any cases to PCAs, and exclude any case \ninvolving a taxpayer at risk of economic hardship from potentially collectible \ninventory.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nA comparison of taxpayer income to allowable living expense (ALE) standards would not yield \na useful indicator of financial condition. The ALE standards represent an average of what all \ntaxpayers spend; a given taxpayer may spend more or less or not incur the expense at all. A \ntaxpayer’s financial condition can only be evaluated by looking at their individual facts and \ncircumstances. Further, there is no authorization in the statute to exclude cases from private debt \ncollection based on such an indicator.\nIRS \nAction\nN/A\nTAS Response\nWe agree that a taxpayer’s financial condition can only be evaluated by looking at their individual \nfacts and circumstances. The IRS could use the TAS algorithm to apply a marker during case \nscoring and route the case to the appropriate group that would properly assist and engage those \ntaxpayers who are at risk of economic hardship. For example, flagging potential economic hardship \ncases during IDS scoring and before routing the cases to be worked would allow the IRS to better \nuse resources in later stages of the collection process and prevent economic harm to taxpayers \nwho are at risk of economic hardship. Many anxious or intimidated taxpayers seeking to resolve \ntheir liabilities as quickly as possible may be unaware the IRS is required to halt collection actions \nif they are in economic hardship and thus agree to make tax payments they cannot afford. \nPursuing this category of taxpayers through private debt collection without first proactively \nidentifying and engaging the taxpayers wastes resources and creates later rework for IRS \nemployees due to the likelihood of taxpayers’ inability to pay. It also goes against the intent of \nCongress, which is to avoid putting taxpayers into economic hardship. For example, see Internal \nRevenue Code (IRC) § 6343(a)(1)(D), which requires the IRS to release a levy if it is determined \nthat the levy is creating an economic hardship for the taxpayer.\nTAS \nRecommendation\n[15-3] \u0007\nRoute cases identified as at risk of economic hardship to a specific group within \nACS and send those taxpayers a specific written notification to educate them on \ncollection alternatives and additional assistance available, including TAS and LITCs.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nA taxpayer’s financial condition cannot be adequately pre-evaluated to perform this routing. \nMoreover, all ACS employees are already empowered to assist taxpayers facing economic hardship. \n \nPublication 594, The IRS Collection Process, is enclosed with Letter 1058 and the campus \ngenerated CP Notices 504, 523, and LT11. It includes a section titled “Options if you can’t pay in \nfull now” with information on installment payment agreements, Offers in Compromise, and Currently \nNot Collectible determinations. It also includes a section on “If you have questions or need help” \nas well as providing information on both the Taxpayer Advocate Service and Low Income Taxpayer \nClinics.\nIRS \nAction\nN/A\nSection Two—IRS and TAS Responses\n96\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe IRS’s response does not go far enough to address the issue. There is more work to be done \nin terms of educating vulnerable taxpayers. As we explained in the Most Serious Problem, 40 \npercent of taxpayers who entered into a streamlined IA in ACS in fiscal year (FY) 2018 had incomes \nat or below their ALEs. These taxpayers agreed to pay their tax debts while, even by the IRS’s own \nstandards, they could not pay for their basic living expenses. \nWhile we are mindful of the IRS’s concern for resources, the IRS has never quantified the amount \nof employee time expended upon undoing the downstream effects of unnecessary and unwarranted \ncollection actions. We believe there would be significant resource savings if the IRS used this \nindicator to prioritize the cases that were most likely to have collection potential and applied its \nresources to that population. After creating this indicator, if the IRS wanted to attempt some \ncollection against taxpayers with this indicator, then it should first attempt to engage the taxpayers \nand verify their financial information.\nTAS \nRecommendation\n[15-4] \u0007\nCreate a new help line dedicated to responding to taxpayers at risk of economic \nhardship and helping them determine the most appropriate collection alternative, \nincluding OICs.\nIRS \nResponse\nIRS does not agree to implement TAS recommendation.\nA taxpayer’s financial condition cannot be adequately pre-evaluated to perform this routing. \nMoreover, all ACS employees are already empowered to assist taxpayers facing economic hardship.\nIRS \nAction\nN/A\nTAS Response\nThe IRS needs to do more to educate these vulnerable taxpayers. Notices directed at this \npopulation should include clear information about collection alternatives. Telephone assistors \nresponding to taxpayers’ calls, or taxpayers entering into IAs online, could receive prompting to \ninquire about their financial situation. When there is no indication beforehand to prompt the \nassistors to verify the taxpayers’ financial status, we see that many of these taxpayers are still \nentering streamlined installment agreements without having their financial situation evaluated. \nThese taxpayers often do not know all the collection alternatives available to them and must rely on \nself-help tools available online.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n97\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[15-5] \u0007\nPartner with TAS and LITCs to develop issue-focused training for IRS employees who \ninteract with taxpayers at risk of economic hardship.\nIRS \nResponse\nIRS does not agree to implement TAS recommendation.\nTAS reviews and provides input on the training materials used by our Collection employees. All \nACS employees and Field Collection Revenue Officers are already trained to assist taxpayers facing \neconomic hardship.\nIRS \nAction\nN/A\nTAS \nResponse\nThe National Taxpayer Advocate has written extensively about the gap in training at the IRS. In the \ncontext of economic hardship issues, we believe that the training is not enough. Issue-focused \ntraining is needed for employees who interact with taxpayers at risk of economic hardship. The IRS \nshould work with TAS in this arena because more work is needed; and these are the taxpayers TAS \nworks with on a daily basis.\nSection Two—IRS and TAS Responses\n98\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#16\n\t\n\u0007\nFIELD COLLECTION: The IRS Has Not Appropriately Staffed \nand Trained Its Field Collection Function to Minimize Taxpayer \nBurden and Ensure Taxpayer Rights Are Protected\nPROBLEM\nField Collection works cases that have not been resolved through the notice stream or through the \nAutomated Collection System (ACS). In general, to resolve cases, Revenue Officers can file a lien, issue \na levy, seize assets, recommend suits to foreclose on a federal tax lien or reduce the tax debt to judgment. \nNotwithstanding their responsibility to collect tax, Revenue Officers must adhere to taxpayers’ right to \nprivacy and right to a fair and just tax system, and they have the responsibility to educate the taxpayer \nin order to avert future noncompliance. The current state of Field Collection has impaired the ability \nof Revenue Officers to fulfill their mission in accord with the Taxpayer Bill of Rights. The National \nTaxpayer Advocate has the following concerns: (1) Revenue Officers are not as accessible to taxpayers, \nand are less able to assess economic conditions on the ground; (2) IRS procedures do not provide for \nearly intervention by Revenue Officers; (3) Revenue Officers are not given the appropriate tools to \neffectively collect revenue; and (4) IRS metrics for evaluating the effectiveness of Field Collection are \nincomplete.\nANALYSIS\nThe Field Collection function is the final depot in the collection roadmap. The function relies on \nRevenue Officers to work all tax accounts that were not resolved in the notice stream and the ACS. \nAspects of a Revenue Officer’s responsibilities include education, research and investigation, and \nappropriate enforcement. Because they are expected to engage in personal contact with taxpayers, it is \nimportant for Revenue Officers to maintain a geographic presence in the communities in which they \nserve. In recent conversations TAS held with stakeholder groups, practitioners voiced concern about the \ndifficulty in not only arranging face-to-face meetings, but even in reaching Revenue Officers via phone \nor having them return calls.\nBy the time a Revenue Officer makes contact, taxpayers may be unable to pay the debt in full because \nthe debt has grown so large as a result of accrued penalties and interest, or because the taxpayer’s \nfinancial condition has deteriorated over time. Thus, it is imperative that a Revenue Officer quickly \nreceive delinquent accounts, so that face-to-face contact with the taxpayer can be made, assisting with \na resolution of the liability before the liability grows significantly or additional liabilities accrue. The \nNational Taxpayer Advocate has advocated for the benefits of early intervention; it is an effective \nmeasure in promoting tax compliance and closing the noncompliance gap on employment taxes.\nThe IRS has slashed three-quarters of its training budget from fiscal year (FY) 2010 to FY 2017, and is \nmoving away from face-to-face training in favor of virtual learning. In FY 2018, there were at least eight \ntimes as many virtual training sessions as there were in-person training sessions.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n99\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[16-1] \u0007\nFormally evaluate the impact on taxpayers of hoteling Revenue Officers—for example, is there \nany quantifiable harm to taxpayers due to the lag time in responding to taxpayer or practitioner \ncalls or appointments, or in posting payments and tax returns, installment agreements, and \noffers in compromise (OICs)?\n[16-2] \u0007\nImplement lessons from the “Fresh Inventory” pilot to modify its case selection and assignment \nmethodologies for Revenue Officers to focus on early intervention that educate taxpayers on \ncompliance, resolve cases timely, and promote future voluntary compliance.\n[16-3] \u0007\nImplement the Early Interaction Initiative to ensure business taxpayers are in compliance with \nand educated on the federal tax deposit requirements for employment taxes.\n[16-4] \u0007\nIssue a policy for a “Revenue Officer of the day” in all field offices, except offices with only \none Revenue Officer, so every taxpayer, wherever they are located in the country, receives the \nsame quality service. Such a policy would help ensure that payments and tax returns are posted \ntimely, correspondence and questions are responded to timely, and face-to-face meetings are \navailable.\n[16-5] \u0007\nPromote taxpayers’ future compliance by Revenue Officers conducting and participating in \noutreach events that provide information on policy and procedures of Field Collection and the \nrole of Revenue Officers in the collection of taxes and voluntary tax compliance.\n[16-6] \u0007\nEstablish a quality measurement system that measures (using a statistically valid sample) the \nfuture voluntary compliance impact of Field Collection actions, including if those actions \nresulted in undue harm or burden to taxpayers.\n[16-7] Grant Revenue Officers the authority to work OIC cases.\nIRS RESPONSE\nField Collection is responsible for protecting the revenue and the interests of the government through \ndirect collection and enforcement activity with taxpayers and/or their representatives and helping \ntaxpayers understand and comply with all applicable tax laws. Revenue Officers working in Field \nCollection are assigned cases involving more complex financial circumstances that generally require \nworking away from the office to uncover or view taxpayer assets and perform other investigative \ntechniques.\nOver the last several years, our Field Collection resources have dwindled due to budget constraints. The \nIRS recognizes the negative impact caused by these significant losses and fully supports the need for \nadditional personnel as well as reducing burden throughout the collection process. We have received \nfunding approval to hire 750 Revenue Officers in Fiscal Year (FY) 2019, which is our most significant \nhiring for this position in the past ten years.\nDespite these challenges, Field Collection put meaningful and actionable focus on protecting the \nrights of taxpayers. More than half of Field Collection’s assigned cases involve businesses. Since 2015, \nwe continue to place increased priority on early intervention with these important customers (who \naccount for over 70% of the revenue secured by the IRS) through expansion of the Federal Tax Deposit \nAlert program. This program ensures business taxpayers understand the potential consequences of \nSection Two—IRS and TAS Responses\n100\n",
"IRS and TAS Responses\nIntroduction\nnon-\ncompliance before enforcement action is necessary. Data appear to show positive compliance \nimpacts from this effort. In March 2019 our employees made Employer Educational Visits to over 100 \nbusiness customers to further augment these proactive efforts. In FY 2019, Field Collection leaders \nand experts will participate in a number of National Tax Forums, practitioner events, and business \nindustry conferences to further assist taxpayers and practitioners in understanding their federal tax \nresponsibilities.\nWe deliver comprehensive training to new Revenue Officers as well as continuing professional education \nto seasoned Revenue Officers on topics such as taxpayer rights, how to conduct civil investigations, and \nhow to take enforcement actions. Between November 2016 and December 2018, we delivered advanced \ntechnical training and formal workshops to enhance existing Revenue Officers’ skills. For new Revenue \nOfficers, we delivered three classroom training sessions during their first year on the job that gradually \nintroduced them to more and more complex topics and actions. Offers in Compromise are worked by \nspecially-trained offer specialists and examiners to ensure consistency and efficiency in that program. \nWe use a quality review process to ensure our employees are taking the right actions at the right time \nand use the results to uncover additional training needs.\nLeadership communications and operational reviews place emphasis on the importance of helping \ntaxpayers understand the collection process and how to remain compliant in the future. They stress \nkeeping taxpayers informed of the status of their cases, avoiding unnecessary delays, and giving them \n“finality” when their case is resolved.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate appreciates the difficult challenges faced by Field Collection in \nan environment where their Revenue Officers staffing has declined significantly in recent years. It \nis encouraging that the IRS has approved funding to hire up to 750 additional Revenue Officers in \nFY 2019. This makes it even more critical that Field Collection develop the appropriate tools and \ncontent for the on-boarding and training of these new hires. The IRS has a tremendous opportunity \nthis year to lay the groundwork in establishing a culture where cycle time and closures are not the central \nfocus for its Revenue Officers—they should instead strive to deliver the right treatment at the right time, \nand be given the flexibility to do so.\nTAS \nRecommendation\n[16-1] \u0007\nFormally evaluate the impact on taxpayers of hoteling Revenue Officers—for \nexample, is there any quantifiable harm to taxpayers due to the lag time in \nresponding to taxpayer or practitioner calls or appointments, or in posting payments \nand tax returns, installment agreements, and OICs?\nIRS Response\nIRS does not agree to implement TAS recommendation.\nRevenue Officers are available by appointment and can be reached by cell phone. Additionally, \nRevenue Officers have the ability to forward calls received on their business line to their laptop \ncomputer. Requirements for timely and courteous service are the same regardless of where the \nRevenue Officer is working on a given day.\nIRS \nAction\nN/A\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n101\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nWe do not question the value derived by the government in allowing its employees to participate \nin hoteling arrangements. However, the IRS needs to acknowledge that there are trade-offs in \ntaxpayer service that accompany the decision to allow hoteling. In our discussion, we provided \nexamples of when a taxpayer may be negatively impacted when a Revenue Officer is teleworking \n(e.g., reduced ability to accommodate walk-in or last-minute appointments). We are disappointed \nthat the IRS will not agree to even assess the impact of such arrangements. \nTAS \nRecommendation\n[16-2] \u0007\nImplement lessons from the “Fresh Inventory” pilot to modify its case selection \nand assignment methodologies for Revenue Officers to focus on early intervention \nthat educate taxpayers on compliance, resolve cases timely, and promote future \nvoluntary compliance.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe Fresh Inventory Pilot was one of three case assignment studies undertaken simultaneously \nunder the umbrella of the Field Inventory Process Improvement Team (FIPIT) project. The \nhypothesis of the Fresh Inventory pilot was that early intervention and cases with more current \nmodules would lead to improved cycle time and yield with no negative impact on quality or \ncustomer satisfaction. The other tests were the Virtual and Flex Inventory Pilots. The Virtual pilot \ntested whether Revenue Officers could, in some situations (disasters or inventory imbalances), \nwork cases “virtually” in another geographic location without negatively impacting quality or \nbusiness results. The Flex Inventory pilot hypothesized that Revenue Officers could resolve more \ncases if they had increased flexibility in inventory and casework management.\nBecause the Fresh Inventory Pilot Project limited the case assignment methodology to one simple \nfactor, it is not compatible with the very complex assignment and delivery processes developed and \nimplemented over a number of years in the Collection Operation. We are continuing to review the \nresults and analysis of the FIPIT pilots to leverage the information in exploring diverse alternatives \nto assigning cases to Revenue Officers.\nIRS \nAction\nN/A\nTAS Response\nFrom our perspective, the Fresh Inventory pilot was a resounding success—cases in this pilot \ngenerally had a higher number of full pay cases and a lower number of Currently Not Collectible \nclosures. The pilot groups also closed substantially more cases per Revenue Officer. Yet, the IRS \nresponse seems to imply that Field Collection is satisfied with the status quo—that it does not \nwant to adopt changes to its case assignment methodology. The IRS should expand the FIPIT to \ncover the current case assignment process to make the results more relevant and use the existing \nresults to inform its current work processes.\nSection Two—IRS and TAS Responses\n102\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[16-3] \u0007\nImplement the Early Interaction Initiative to ensure business taxpayers are \nin compliance with and educated on the federal tax deposit requirements for \nemployment taxes.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS Action\nWe began implementing recommendations from the Early Interaction Initiative project in 2017, \nincluding expanded Federal Tax Deposit Alert treatment segments and expanded issuance of soft \nletters. We continue to collaborate with the IRS Information Technology (IT) function to find ways to \nincorporate learnings from the Early Interaction Initiative into systemic processes.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased that Field Collection has begun implementing \nrecommendations from the Early Interaction Initiative. We ask that the IRS not consider this \nrecommendation as “implemented” until the recommendations are fully adopted, including working \nwith IT to overcome any systems challenges. \nTAS \nRecommendation\n[16-4] \u0007\nIssue a policy for a “Revenue Officer of the day” in all field offices, except offices \nwith only one Revenue Officer, so every taxpayer, wherever they are located in the \ncountry, receives the same quality service. Such a policy would help ensure that \npayments and tax returns are posted timely, correspondence and questions are \nresponded to timely, and face-to-face meetings are available.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nBeing treated with respect and avoiding needless delay is important in every customer interaction, \nand taxpayers have a right to have timely communications and access to their assigned Revenue \nOfficer, whether contact is made in the field or through a scheduled appointment in the IRS office. \nField Collection can appropriately serve taxpayers without requiring a policy of “Revenue Officer \nof the day” in every office. Revenue Officers are available by appointment and by cell phone. \nRevenue Officers and Group Managers coordinate daily to ensure payments and tax returns are \nposted timely.\nIRS \nAction\nN/A\nTAS \nResponse\nThe IRS seems to discount the value in allowing taxpayers the ability to walk in or make last-\nminute appointments to meet with a Revenue Officer. We propose that the value of designating \na “Revenue Officer of the day” be included in the formal evaluation of the benefits and costs of \nhoteling that we urged the IRS to conduct in Recommendation 1. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n103\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[16-5] \u0007\nPromote taxpayers’ future compliance by Revenue Officers conducting and \nparticipating in outreach events that provide information on policy and procedures \nof Field Collection and the role of Revenue Officers in the collection of taxes and \nvoluntary tax compliance.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in full.\nIRS Action\nField Collection leaders and experts regularly participate in outreach events, including National Tax \nForums, practitioner events, and business industry conferences, to increase understanding of a \ncomprehensive list of topics relating to the Collection process. We also provide educational talking \npoints and other background to the IRS Communications and Liaison organization to leverage their \nresources.\nTAS \nResponse\nThe National Taxpayer Advocate is pleased to learn that Field Collection leadership participate in \nNational Tax Forums and other outreach events. In addition, we recommend that ALL Revenue \nOfficers participate in outreach events. We believe the IRS will benefit from having Revenue \nOfficers regularly interact with members of their local community.\nTAS \nRecommendation\n[16-6] \u0007\nEstablish a quality measurement system that measures (using a statistically \nvalid sample) the future voluntary compliance impact of Field Collection actions, \nincluding if those actions resulted in undue harm or burden to taxpayers.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nOur current quality review process measures actions that potentially could result in undue harm or \nburden to the taxpayer. Changes to a taxpayer’s compliance behavior in the years after a case was \nworked by Field Collection may be attributed to many external factors. We are continuing to study \npotential methods to accurately measure the impact of specific compliance efforts on reducing \nrecidivism. For instance, the IRS Research, Applied Analytics, and Statistics (RAAS) organization is \nperforming analysis on the impact of our Federal Tax Deposit Alerts. In FY 2019, RAAS is working \nwith Field Collection to measure the impact of pairing Revenue Officers when performing certain \nspecialized taxpayer interviews versus interviews by a single Revenue Officer.\nIRS \nAction\nN/A\nTAS \nResponse\nEstablishing a perfect measurement of quality is an elusive goal for many organizations. The \nresponse above appears that Field Collection is open to improving its quality measures. We are \npleased with Field Collection’s efforts to continually review and improve its quality measures.\nSection Two—IRS and TAS Responses\n104\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[16-7] \u0007\nGrant Revenue Officers the authority to work OIC cases.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nIRS centralized the Offer-In-Compromise (OIC) process in 2001 to provide more control and \nconsistency in processing OICs. The recent realignment of the Collection program within the \nSmall Business/Self-Employed Division further centralized the offer program under one Executive. \nIn contrast, decentralizing the process would significantly increase training costs, decrease the \neffectiveness of specialized training, increase the chance that a taxpayer’s offer is processed by \nan employee with limited exposure to the offer program, require revenue officers to reprioritize their \nwork to ensure that offer decisions are made within the statutorily mandated 24-month period, and \ngenerally increase the risk that there will be inconsistencies in OIC processing.\nIRS \nAction\nN/A\nTAS \nResponse\nWhile we see some benefits of allowing Revenue Officers to work OIC cases instead of passing \nthem along to OIC specialists who will not be well-versed in the taxpayers’ particular set of \ncircumstances, we recognize there are some drawbacks as outlined by the IRS in its response. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n105\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#17\n\t\n\u0007\nIRS’S AUTOMATED COLLECTION SYSTEM (ACS): ACS Lacks \na Taxpayer-Centered Approach, Resulting in a Challenging \nTaxpayer Experience and Generating Less Than Optimal \nCollection Outcomes for the IRS\nPROBLEM\nThe Automated Collection System (ACS) is a major IRS automated collection inventory system used \nto send notices demanding payment, and to issue notices of federal tax lien (NFTLs) and levies. ACS \nemployees also answer taxpayer telephone calls to resolve balance due accounts and delinquencies. In \nrecent years, ACS has drifted away from its philosophy of understanding the cause of the tax debt, \nconsidering collection alternatives, and ensuring that these collection alternatives enable future voluntary \ncompliance. Instead, ACS today primarily focuses on collecting the tax owed without securing or \ndiscussing the facts surrounding the taxpayer’s particular situation.\nANALYSIS\nAt the end of fiscal year (FY) 2018, ACS had about $47 billion placed in its inventory and it collected \nabout $3.5 billion of that amount during the same time period, and about $4.3 billion was collected \nthrough installment agreements (IAs), for a total collection of nearly $8 billion. However, ACS \ntransferred $13.6 billion to the queue, an electronic holding area for accounts that will not be worked \nimmediately. Additionally, $3.2 billion was collected through refund offsets (i.e., without any action by \nan ACS employee or any interaction with the taxpayer).\nACS is actively trying to avoid person-to-person interaction with taxpayers. For example, it stopped \nissuing a letter previously sent to taxpayers systemically, LT16: Request for Taxpayer to Contact ACS, in \norder to decrease the number of taxpayers calling ACS, which in turn would help improve the ACS level \nof service (LOS)—63 percent for filing season (FS) 2018. Moreover, ACS notices proposed in redesign \nstudies omit the name and phone number of an individual ACS employee, and any focus on taxpayer \nrights.\nACS heavily relies on streamlined IAs: about $3.1 billion (71 percent) of the total $4.3 billion of its \nFY 2018 IA collections were collected pursuant to streamlined IAs. Streamlined IAs do not require \nfinancial analysis, and taxpayers often agree to payments they cannot afford. Taxpayers in ACS whose \nincome did not exceed their ALEs defaulted on their streamlined IAs 39 percent of the time in FY 2018. \nACS does not prioritize working defaulted IA cases, thereby missing an opportunity to quickly engage a \ntaxpayer who has previously shown initiative to resolve their tax debt.\nIn 2009, the Tax Court held, in Vinatieri v. Commissioner,1 that when the IRS sustains even a proposed \nlevy on a taxpayer it knows is in economic hardship, it abuses its discretion. Ten years later, ACS \nemployees continue to take action that is inconsistent with the Vinatieri decision.\n1\t\nVinatieri v. Comm’r, 133 T.C. 392 (2009).\nSection Two—IRS and TAS Responses\n106\n",
"IRS and TAS Responses\nIntroduction\nTAS RECOMMENDATIONS\n[17-1] \u0007\nAssign one ACS employee to a taxpayer’s case, provide this employee’s contact information on \neach notice that is sent to the taxpayer, and assign the case to an ACS employee who is located in \nthe same geographic region as the taxpayer.\n[17-2] \u0007\nSend out monthly notice reminders to taxpayers regarding their tax liabilities and accrued \npenalties and interest.\n[17-3] \u0007\nRevise ACS notices using a Taxpayer Bill of Rights framework that conspicuously informs \ntaxpayers of the rights impacted by a given notice.\n[17-4] \u0007\nApply an indicator to cases in which the taxpayer is likely experiencing economic hardship and \nroute these cases to a separate Economic Hardship Shelter excluded from assignment to private \ncollection agencies.\n[17-5] \u0007\nRevise ACS’s Internal Revenue Manual and scripts to instruct employees when a taxpayer \nhas an economic hardship indicator placed on their account, to consider all possible avenues \nfor resolution, including Partial Payment Installment Agreements, offers in compromise, or \nplacement into Currently Not Collectible hardship status.\n[17-6] \u0007\nConduct a research study to determine if IRS’s modeling scores and collection potential \ncalculator are truly identifying the cases that are most likely to be resolved.\n[17-7] \u0007\nReorder ACS protocols to give high priority to cases where a taxpayer has defaulted on a prior \ninstallment agreement.\nIRS RESPONSE\nThe Automated Collection System (ACS) was created to provide taxpayers with the opportunity to \nresolve delinquent tax obligations with a single telephone contact. ACS provides employees with the \ncapability to take a wide range of actions to resolve cases in an efficient and equitable manner that is in \nthe best interest of both the taxpayer and the Service. \nACS is set up to assist taxpayers as quickly as possible by sending them to the first available Collection \nRepresentative (CR), no matter where the assister is located geographically in the country (as opposed \nto waiting for a particular assister to become available). This allows approximately 1,800 to 2,000 full \ntime equivalents in ACS to answer 8 to 14 million taxpayer calls per year. If we were to assign a single \nemployee to each case, we could not answer the same number of calls, further frustrating taxpayers with \nlonger hold times and less responsive service. \nSimilarly, the inventory prioritization system used by ACS employs statistical models designed to \nidentify the next best case to be worked. We conduct an annual review to determine if any updates to \nour inventory delivery system models are required. \nIn 2010, we updated our guidance to our employees on levies and economic hardship based on the \njudicial Vinatieri decision. We provided training to our ACS employees on this issue on several \noccasions, most recently in continuing professional education courses in 2015 and 2017. We will \ncontinue to remind our employees of these procedures. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n107\n",
"IRS and TAS Responses\nIntroduction\nTo improve service to taxpayers, we have begun to leverage technology to create alternative ways of \nproviding services. Self-service options, such as the online payment agreement application and the \noffer-in-compromise prequalifier tool, are an alternative method for providing taxpayers with the quality \nservices that they have a right to expect. Self-service options are often available outside of normal \nbusiness hours, provide quicker resolutions than telephonic or mail options, and can be less intrusive for \nthe taxpayer. For example, in certain situations, we offer streamlined installment agreements, allowing \ntaxpayers to arrange a payment agreement online without providing financial documentation or talking \nwith an IRS employee. Many taxpayers appreciate and want these self-service options. For those who \ncannot access or do not want self-service options, we continue to have ACS employees available.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate recognizes that ACS receives a voluminous number of calls from \ntaxpayers each and every day, and agrees that part of good customer service is ensuring that a taxpayer \ncan reach an ACS assistor quickly. However, good customer service is also providing taxpayers with \na single point of contact when they call ACS who resides in the same geographic location as the \ntaxpayer, thereby ensuring the assistor is familiar with the economic conditions and circumstances \naffecting the taxpayer’s particular region. Although this would undoubtedly have an effect on ACS \ncase management and inventory balancing, it could also make these optional selections, rather than \nrestructuring the entire ACS group. Some taxpayers will prefer to speak with one assistor throughout \ntheir communications with the IRS regarding their issue, while others will simply want to speak to the \nnext available assistor. The option should be available, and the choice should be left up to the taxpayer. \nDespite the IRS’s revision to their procedures in 2010 to reflect the holding in Vinatieri and subsequent \ntraining on these issues, ACS assistors still get the guidance wrong. The IRS’s statement that it will \n“continue to remind its employees of these procedures” is insufficient, especially in light of the fact that \nthe IRS’s prior efforts to train their employees have, to a certain extent, been unsuccessful. Failing \nto inform taxpayers of the holding in Vinatieri and to abide by it compromises taxpayer’s right to be \ninformed and right to a fair and just tax system. \nIn no way does the National Taxpayer Advocate imply that leveraging technology to offer self-service \noptions is an inappropriate strategy to employ or doesn’t offer benefits when compared to more \ntraditional modes of customer service. However, what the Most Serious Problem emphasizes is that it \nis inappropriate to highlight solely self-service options in notices or to bury the ACS toll-free number in \nthe notice to essentially force taxpayers to move toward self-service options for the purpose of improving \nthe level of service (LOS) on ACS’s toll-free lines. This leaves taxpayers who either aren’t able to use self-\nservice options or who prefer to call ACS struggling to track down ACS’s contact information. \nAlthough the National Taxpayer Advocate understands the significant challenge facing ACS to respond \nto and assist millions of taxpayers every year, it is important that it seriously considers a variety of \ndifferent approaches that may ultimately provide better service options to taxpayers while improving the \nefficiency of ACS. These options and strategies should always be constructed within the framework of \nthe Taxpayer Bill of Rights, especially the right to quality service, to be informed, and to a fair and just tax \nsystem. \nSection Two—IRS and TAS Responses\n108\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[17-1] \u0007\nAssign one ACS employee to a taxpayer’s case, provide this employee’s contact \ninformation on each notice that is sent to the taxpayer, and assign the case to an \nACS employee who is located in the same geographic region as the taxpayer.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nIf implemented, this recommendation would result in overall lower service to taxpayers. ACS uses \na “first available” method of routing incoming calls. This method allows approximately 1,800 to \n2,000 full time equivalents in ACS to answer 8 to 14 million taxpayer calls per year. If we were to \nassign a single employee to each case, we could not answer as many calls, reducing our ability to \nprovide service to these taxpayers.\nIRS \nAction\nN/A\nTAS Response\nWe understand the need to consider how implementation of this recommendation would affect \nACS’s ability to answer calls or to answer calls in a timely fashion. However, these options, \n(i.e., speaking to an assistor in the same geographic region as the taxpayer, and having the \nsame assistor address his or her issues to finality) could be presented to the taxpayer with the \nunderstanding that they could result in a longer hold time. Also, the taxpayer could be given \nthe option of leaving a message with the specific assistor who would return their call within 24 \nhours. These options would mitigate the effect on ACS assistors’ availability to answer calls while \nproviding more customer service options to the taxpayer. \nTAS \nRecommendation\n[17-2] \u0007\nSend out monthly notice reminders to taxpayers regarding their tax liabilities and \naccrued penalties and interest.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nMonthly notices are sent to taxpayers that have an installment agreement. Taxpayers currently \nare provided with two to four notices when they have a balance due, including the Collection Due \nProcess (CDP) notice, consistent with the statutory requirements. Additionally, reminder notices \nare sent yearly. The recommendation to provide monthly or quarterly notices to taxpayers is cost \nprohibitive and is not an effective use of our limited resources. While the study TAS referenced \ndoes show that sending a letter multiple times increases case resolutions, it does so with \ndiminishing returns. Instead, we are working on an in-depth notice redesign program for certain \nbalance due notices that will include behavioral insights to improve the effectiveness of notices we \nsend.\nIRS \nAction\nN/A\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n109\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe National Taxpayer Advocate is pleased that ACS is redesigning a number of its notices to \nconsider behavioral insights. However, as illustrated by the Notice of Federal Tax Lien (NFTL) study, \nthese notices would likely yield better results if they were sent out on a more regular and frequent \nbasis, rather than the sporadic notice schedule that is currently used, where months can go by \nwithout the taxpayer hearing from the IRS.2 Additionally, this would keep taxpayers better informed \nas to how penalties and interest continue to increase their tax liabilities, thereby more properly \nobserving a taxpayer’s right to be informed.\nTAS \nRecommendation\n[17-3] \u0007\nRevise ACS notices using a Taxpayer Bill of Rights framework that conspicuously \ninforms taxpayers of the rights impacted by a given notice.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by March 31, 2021.\nIRS Action\nThe Collection Operating Unit has been working on an in-depth notice redesign program for \ncertain general balance due notices as well as for notices used specifically by ACS. Since the \nproject's inception in August 2015, this redesign effort has included TAS personnel. Other IRS \norganizations, such as the Office of Chief Counsel, Information Technology (IT), On-Line Services, \nand Research, Applied Analytics, and Statistics (RAAS), have been deeply involved. We have also \nworked in coordination with private contractors. The CP14 and LT16 letters have been redeveloped \nand the LT11 and CP501/503 are currently in development. Collection is working with TAS on a \nnotice that uses the Taxpayer Bill of Rights framework and intends to test that notice along with the \nothers being developed. We must account for IT Unified Work Request processes in estimating our \nimplementation date.\nTAS Response\nA careful redesign of ACS notices is an important first step toward providing taxpayers with more \ninformation about their tax issue and their rights surrounding that issue while presenting it in a \nmanner that is easy to understand and grabs the taxpayer’s attention. The National Taxpayer \nAdvocate understands there are a number of competing priorities in redesigning these notices, but \nthe first priority should be to design the notice in a taxpayer rights framework that clearly informs \nthe taxpayer of the rights impacted by the particular notice. If the taxpayer is totally unaware of \nwhat rights are being impacted after reading the notice, then the value of the notice is miniscule at \nbest. \n2\t\nNational Taxpayer Advocate 2018 Annual Report to Congress 258 (Research Study: Further Analyses of “Federal Tax Liens \nand Letters: Effectiveness of the Notice of Federal Tax Liens and Alternative IRS Letters on Individual Tax Debt Resolution”).\nSection Two—IRS and TAS Responses\n110\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[17-4] \u0007\nApply an indicator to cases in which the taxpayer is likely experiencing economic \nhardship and route these cases to a separate Economic Hardship Shelter excluded \nfrom assignment to private collection agencies.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe likelihood that a taxpayer is experiencing economic hardship cannot be determined without \ntaxpayer contact. A comparison of taxpayer income to allowable living expense (ALE) standards \nwould not yield a useful indicator of financial condition. The ALE standards represent an average \nof what all taxpayers spend; a given taxpayer may spend more or less or not incur the expense at \nall. A taxpayer’s financial condition can only be evaluated by looking at their individual facts and \ncircumstances. Further, there is no authorization in the statute to exclude cases from private debt \ncollection based on such an indicator.\nIRS \nAction\nN/A\nTAS Response\nThe IRS’s statement that “The likelihood that a taxpayer is experiencing economic hardship cannot \nbe determined without taxpayer contact” is very dubious. Recently, TAS Research staff analyzed \nthe financial circumstances of taxpayers assigned to the Automated Collection System (ACS) over \nthe last five years. Three multiples of federal poverty levels were applied to that same population \nbase to determine if a percentage of federal poverty level (computed on adjusted gross income) \nwould be a reasonable proxy for allowable living expenses (ALE),3 which are guidelines that \n“establish the minimum a taxpayer and family needs to live.”4\nThis research showed that over a five-year period, applying 250 percent of the federal poverty level \n(FPL) consistently excluded about 85 percent of taxpayers that the ALE analysis predicted could not \npay IRS debts without incurring economic hardship.5 The bottom line is that the IRS has sufficient \ndata in-house to determine if a taxpayer’s adjusted gross income is at or below 250 percent of the \nfederal poverty level, which has shown to be a very reliable proxy for economic hardship. In fact, \nit is this threshold that the IRS currently uses to exclude taxpayers from the Federal Payment Levy \nProgram (FPLP).6\nThe IRS’s rejection of the implementation of this indicator to be used by ACS employees is a failure \nto adhere to the Taxpayer Bill of Rights, which was codified by Congress in Internal Revenue Code \n(IRC) § 7803(a), and is a particular infringement on a taxpayer’s right to a fair and just tax system \nand the taxpayer’s right to privacy.7 \n3\t\nNina E. Olson, The IRS is Not Doing Enough to Protect Taxpayers Facing Economic Hardship, NTA Blog (May 24, 2019), \nhttps://taxpayeradvocate.irs.gov/news/nta-blog-the-irs-is-not-doing-enough-to-protect-taxpayers-facing-economic-hardship?-\ncategory=Tax%20News. Approximately ten percent of this population could not be analyzed because these taxpayers did \nnot file recent tax returns and therefore their adjusted gross income (AGI) could not be determined.\n4\t\nInternal Revenue Manual (IRM) 5.15.1.8 (6), Allowable Expense Overview (Aug. 29, 2018). Allowable expenses include \ntransportation expenses, which may consist of ownership expenses (loan or lease payments) and operating expenses \n(maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking, and tolls). The IRS may allow additional \namounts for basic living expenses if the taxpayer substantiates the need to deviate from the standards.\n5\t\nFor a more in depth discussion of what TAS analysis showed, see Nina E. Olson, The IRS Is Not Doing Enough to Protect \nTaxpayers Facing Economic Hardship, NTA Blog (May 24, 2019), https://taxpayeradvocate.irs.gov/news/nta-blog-the-irs-is-\nnot-doing-enough-to-protect-taxpayers-facing-economic-hardship?category=Tax%20News.\n6\t\nSee IRM 5.19.9.3.2.3, Low Income Filter (LIF) Exclusion (June 23, 2014).\n7\t\nSee Taxpayer Bill of Rights (TBOR), www.TaxpayerAdvocate.irs.gov/taxpayer-rights.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n111\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[17-5] \u0007\nRevise ACS’s Internal Revenue Manual and scripts to instruct employees when a \ntaxpayer has an economic hardship indicator placed on their account, to consider all \npossible avenues for resolution, including Partial Payment Installment Agreements, \noffers in compromise, or placement into Currently Not Collectible hardship status.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nInternal Revenue Manual (IRM) 5.19.1 already allows employees to address economic hardship \nwhen it is brought to their attention. Employees have a suite of account resolution options open to \nthem when working with taxpayers. There would be no new or special process to follow based on \nthe presence or absence of this proposed indicator.\nIRS \nAction\nN/A\nTAS Response\nAs discussed in the previous response, the IRS has the data available to proactively place an \neconomic hardship indicator on a taxpayer’s account. This indicator would allow the ACS employee \nto open up a discussion about the taxpayer’s financial circumstances and what type of collection \nalternative may be most appropriate for their situation. The current approach in ACS is to first \ndiscuss full payment or payment arrangements with little or no discussion of the taxpayer’s \nparticular financial circumstances. \nAs discussed in the Most Serious Problem, solely focusing on full payment or establishing \na payment arrangement to satisfy the outstanding tax liability with little regard to financial \ncircumstances results in taxpayers entering into payment arrangements they cannot afford and \nwill likely later default on.8 The IRS’s failure to use the data it has to create an economic hardship \nindicator which would in turn allow the ACS assistor to have a more meaningful conversation with \nthe taxpayer about their particular circumstances and what collection options may best suit them, \nwill ultimately result in burdening taxpayers, wasting IRS resources, and creating rework for IRS and \nTaxpayer Advocate Service employees. \nTAS \nRecommendation\n[17-6] \u0007\nConduct a research study to determine if IRS’s modeling scores and collection \npotential calculator are truly identifying the cases that are most likely to be \nresolved.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nACS Systems and Inventory, in conjunction with the Strategic Analysis and Modeling (SAM) group, \nlooks at possible changes or adjustments to models to determine if any updates are needed to \nensure that the system runs properly and identifies the best cases to be worked and resolved. The \nSAM group conducts annual reviews of cases modeled by the Inventory Delivery System to evaluate \nhow well the models are performing at predicting a variety of case outcomes and taxpayer behavior. \n \nIn addition, we are working towards incorporating model scores in the analysis of recent notice \nredesign randomized control trials.\n8\t\nNational Taxpayer Advocate 2018 Annual Report to Congress 256 (Most Serious Problem: IRS’s Automated Collection System \n(ACS): ACS Lacks a Taxpayer-Centered Approach, Resulting in a Challenging Taxpayer Experience and Generating Less Than \nOptimal Collection Outcomes for the IRS).\nSection Two—IRS and TAS Responses\n112\n",
"IRS and TAS Responses\nIntroduction\nTAS Response\nThe National Taxpayer Advocate is pleased that the IRS conducts annual reviews on its case \nselection models to determine if those models are accurately predicting the outcomes of the \ncases, thereby identifying what models may need to be modified going forward. However, the \nInventory Delivery System is a system used to prioritize cases for all stages of collection, including \nwhich cases are assigned to ACS or the field. TAS’s recommendation is that an analysis is \nconducted specifically on ACS inventory, how it is prioritized, and whether that prioritization has \nproven to be effective. Thus, the IRS’s current annual review fails to exclusively focus on ACS \ninventory and whether or not it is applying its resources to the most productive cases.\nTAS \nRecommendation\n[17-7] \u0007\nReorder ACS protocols to give high priority to cases where a taxpayer has defaulted \non a prior installment agreement.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nACS Systems and Inventory annually looks at its prioritization process to make decisions on \nwhether it is feasible to adjust the order of taxpayer accounts. Detailed analysis is conducted to \nmake a determination as to whether changes should be made. This analysis includes looking at \naccounts, such as defaulted installment agreements, to determine if they need to be moved up in \npriority to be worked by Collection representatives.\nIRS \nAction\nN/A\nTAS Response\nTaxpayers who have defaulted on an installment agreement are taxpayers with whom the IRS has \npreviously made contact and who have taken a significant step to resolving their tax debt (i.e., \nentering into an installment agreement and beginning regular payments on the liability). This is a \ngood indicator that these are taxpayers who want to resolve their tax situation but who may have \nencountered unexpected circumstances that have impacted their ability to continue with monthly \npayments, such as sudden medical emergencies, changes in employment status, or unforeseen \nexpenses. It seems logical that the sooner ACS contacts these taxpayers after the default, the \nmore likely it is that they can find out what caused the default and how they can help the taxpayers \nenter into some other arrangements that will better meet their current financial circumstances. \nAllowing these types of cases to linger in ACS inventory is a missed opportunity for the IRS to \nre-engage taxpayers who have previously expressed the desire to address their tax issues, and \nharms taxpayers by allowing penalties and interest to accrue, making the liability larger and \ndiminishing the likelihood of achieving a satisfactory resolution.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n113\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#18\n\t\n\u0007\nOFFER IN COMPROMISE: Policy Changes Made by the IRS to \nthe Offer in Compromise Program Make It More Difficult for \nTaxpayers to Submit Acceptable Offers\nPROBLEM\nThis year, the National Taxpayer Advocate studied business offers in compromise (OICs) out of concern \nthat the IRS is not doing enough to help business taxpayers file successful OICs. Additionally, the IRS \nmade changes that create barriers to all taxpayers from submitting successful OICs. First, not every \nstate has an OIC Specialist, creating a situation where circumstances unique to a particular area are not \nalways known by the employee reviewing the OIC. Also, the IRS now returns OICs as not processable \nwhen submitted by taxpayers who have not filed all necessary tax returns, instead of holding on to them \nfor a period as leverage for the taxpayer to cure the filing defects. In conjunction, the IRS now keeps \nthe payments sent with OICs it returns for lack of filing compliance. Taxpayers may face additional \ndifficulties because OICs returned in error are no longer subject to the 24-month acceptance period in \nIRC § 7122(f) and, processing time is so long, some taxpayers lose two years of refunds as part of their \nOIC agreement. All of these obstacles could explain why the acceptance rate for individual OICs is at \njust 44 percent while business OICs have an even lower acceptance rate of 24 percent.\nANALYSIS\nIn 2018, TAS Research reviewed business OICs and determined that the IRS is losing revenue collection \nopportunities because of inflated reasonable collection potential (RCP) calculations. In about 40 percent \nof the business OICs that were not accepted, the OIC amounts offered were much higher than the \namounts ultimately collected. Additionally, in fiscal year (FY) 2017, the IRS returned 2,767 individual \nOICs because of unfiled returns. Of those returned OICs, approximately 34 percent resubmitted an \nOIC. The IRS returned 561 business OICs because of unfiled returns in FY 2017. Of those returned \nOICs, approximately 47 percent resubmitted OICs. These numbers indicate that, if the IRS worked with \ntaxpayers to perfect OICs prior to rejection, it might obtain even more returns and would not impose an \nadditional Tax Increase Prevention and Reconciliation Act (TIPRA) payment on these taxpayers.\nTAS RECOMMENDATIONS\n[18-1] \u0007\nHave at least one OIC Specialist in each state to ensure a more even geographic presence for OIC \nanalysis.\n[18-2] \u0007\nChange its policy for deeming OICs not processable if the taxpayer is not current with his or \nher filing requirement and reinstate the requirement to retain the OIC and contact taxpayers to \nobtain missing returns within a specified period of time.\n[18-3] \u0007\nReconsider its determination that OICs returned or withdrawn in error are not subject to the \n24-month deemed acceptance period in IRC § 7122(f).\n[18-4] \u0007\nLimit the number of refunds that can be offset while an OIC is pending to one refund only.\n[18-5] \u0007\nConduct a study to analyze the OIC amount offered and collected amounts to understand why \nthe IRS is rejecting OICs that have an offered amount greater than the dollars collected. For \nSection Two—IRS and TAS Responses\n114\n",
"IRS and TAS Responses\nIntroduction\ninstance, the IRS should look at how it is applying the Allowable Living Expense standards and \nwhere the taxpayer is obtaining the payment for the OIC.\nIRS RESPONSE\nWe appreciate the National Taxpayer Advocate’s (NTA) acknowledgement of our efforts to make Offer \nin Compromise (OIC) a more visible collection tool. In addition to the outreach efforts mentioned in \nthe NTA’s report, we made available a Frequently Asked Questions (FAQ) page and an online “pre-\nqualifier tool” at IRS.gov, which taxpayers and tax professionals can use to determine if an OIC is a \nviable option for them. There has been a 10-percentage point increase in the OIC acceptance rate from \nFY10 to FY18.1 \nThe OIC program reviews and revises procedures and policies on a regular basis. Revisions to the \nprocess have included requiring taxpayers to be in filing compliance when submitting an offer. The \nrevised policy allows the Service to concentrate on the offer investigation and not delay the potential \noffer acceptance waiting for a tax return to post. It also allows the Service to focus our limited staff on \noffers from taxpayers who are in full filing compliance upon submission of their offer. \nUnder section 7122 of the Internal Revenue Code, taxpayers are required to include a user fee and a \nnon-refundable initial payment as a condition of submitting an OIC application. This means that if a \ntaxpayer files an OIC application before having filed all required tax returns, they will get their user fee \nback, but any required initial payment will not be returned. It will be applied to reduce their balance \nowed as required by law.\nReasonable collection potential is a complex and nuanced topic. It is the policy of the Service to accept \nan OIC when it is unlikely the tax liability can be collected in full and the amount offered reasonably \nreflects collection potential. We are reviewing the future collection results in cases where an OIC was \nrejected and we will consider changes to the program based on the findings.\nOICs are worked by offer examiners and offer specialists, and not by revenue officers. The Service \ncentralized the OIC process in 2001 to provide more control and consistency in processing OICs. \nDecentralizing the process would significantly increase training costs, decrease the effectiveness of \nspecialized training, and generally increase the risk of inconsistencies in OIC processing.\nFor purposes of the two-year deemed acceptance rule, the IRS program does not distinguish between \nrejections, returns, and withdrawals. When the IRS returns an offer, or it is withdrawn, the deemed \nacceptance provisions no longer apply, even where the initial decision is later determined to have been in \nerror.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nTAS appreciates that all of the decisions the IRS has made come from a standpoint of conserving \nresources and focusing on OICs that successfully enter the OIC program. However, the OIC program \noffers many benefits to both the IRS and taxpayers. It is in the best interest of the IRS to make the OIC \nprogram as user-friendly as possible. The policies highlighted in the Most Serious Problem (MSP) may \nbe saving time or other resources at the expense of taxpayers who want to submit a successful OIC. \n1\t\nAcceptance rate as a percentage of processable dispositions.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n115\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[18-1] \u0007\nHave at least one OIC Specialist in each state to ensure a more even geographic \npresence for OIC analysis.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nPositioning an offer specialist in each state would not add value. Research can be completed \nonline when unique situations are identified. In addition, the Internal Revenue Manual (IRM) \nprovides for a Form 2209, Courtesy Investigation, to be issued requesting assistance from another \narea if local expertise is required.\nIRS \nAction\nN/A\nTAS \nResponse\nHaving a specialist readily available in each state may allow for on-demand assistance tailored to \nthe OIC process when needed and not just when an employee thinks it is needed. \nTAS \nRecommendation\n[18-2] \u0007\nChange its policy for deeming OICs not processable if the taxpayer is not current \nwith his or her filing requirement and reinstate the requirement to retain the OIC \nand contact taxpayers to obtain missing returns within a specified period of time.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nThe policy to require taxpayers to have filed all delinquent tax returns prior to submitting an OIC \nhelps to prevent frivolous offer filings, puts the taxpayer in good standing for the required offer \ninvestigation, and allows us to focus our resources on cases that are ready to be worked. We \nhave clearly communicated this policy in the Form 656, Offer in Compromise, the Form 656-Booklet \ninstructions, and the OIC home page on IRS.gov. Additionally, the Form 656 requires taxpayers to \ncertify they have filed all returns or are not required to file.\nContrary to the statement in the report, we have evaluated the relative costs of working \nresubmissions versus holding offers open while waiting for the taxpayer to meet their filing \nrequirement. Although there are costs associated with the resubmission of returned offers once \nthe taxpayer is current on their filing requirement, it costs far less to immediately return the offer \nthan to hold it open. In FY 2017, the percentage of offers resubmitted after being returned was \n34% (947) for IMF taxpayers and 47% (266) for BMF taxpayers.\nIRS \nAction\nN/A\nTAS Response\nWhile it is laudable that the IRS has communicated these changes to the public, the very nature \nof the changes makes it more difficult for taxpayers to submit a successful OIC. The IRS is \nalso squandering an opportunity to improve filing compliance. Once a taxpayer leaves the OIC \nprogram, he or she may determine that it is too much of a burden to return to it, and the IRS \ncould have used that interaction to get the taxpayer current on filing obligations. It is true that 47 \npercent of the Business Master File (BMF) taxpayers who had an OIC returned for failure to file all \nreturns resubmitted OICs. However, that means that over half did not reenter the OIC program. \nThis number represents many lost opportunities to encourage successful OICs and future filing \ncompliance. \nSection Two—IRS and TAS Responses\n116\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[18-3] \u0007\nReconsider its determination that OICs returned or withdrawn in error are not \nsubject to the 24-month deemed acceptance period in IRC § 7122(f).\nIRS \nResponse\nIRS does not agree to implement TAS recommendation.\nThe deemed acceptance rules do not apply if the IRS rejects the offer, the IRS returns the offer as \nnon-processable or no longer processable, or the offer is withdrawn within the 24-month period, \neven if it is later determined that the initial decision was in error.\nIRS \nAction\nN/A\nTAS Response\nIn an email dated April 27, 2018, IRS Counsel stated that OICs returned in error are not subject \nto the 24-month deemed acceptance period in Internal Revenue Code (IRC) § 7122(f). It is true \nthat the legal guidance Counsel relied on does not differentiate between OICs being returned in \nerror or not. However, the IRS could allow an exception for OICs returned due to IRS error. Such \nan exception would further congressional intent to make the OIC program less burdensome for \ntaxpayers. \nTAS \nRecommendation\n[18-4] \u0007\nLimit the number of refunds that can be offset while an OIC is pending to one \nrefund only.\nIRS \nResponse\nIRS does not agree to implement TAS recommendation.\nFailing to exercise the IRS’s right to offset refunds while an OIC is pending would treat these \ntaxpayers differently from other taxpayers who did not file an OIC. Disparate treatment could \nencourage abuse of the program. \nIRS \nAction\nN/A\nTAS Response\nAs the MSP showed, taxpayers within the OIC program will have different experiences depending \non when in the calendar year they submit their OIC, particularly if their OIC goes to Appeals. The \ntaxpayers who agree to have their refund offset as part of the OIC program should not be compared \nto taxpayers who are not in the OIC program. Instead, all taxpayers within the OIC program should \nbe treated similarly, regardless of when their OIC is received. This problem disproportionately \naffects low income taxpayers who rely on their refunds. \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n117\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[18-5] \u0007\nConduct a study to analyze the OIC amount offered and collected amounts to \nunderstand why the IRS is rejecting OICs that have an offered amount greater \nthan the dollars collected. For instance, the IRS should look at how it is applying \nthe Allowable Living Expense standards and where the taxpayer is obtaining the \npayment for the OIC.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 31, 2019.\nIRS Action\nReasonable collection potential is a complex and nuanced topic. It is the policy of the Service to \naccept an OIC when it is unlikely the tax liability can be collected in full and the amount offered \nreasonably reflects collection potential. We are reviewing the future collection results in cases \nwhere an OIC was rejected, and we will consider changes to the program based on the findings.\nTAS \nResponse\nTAS is pleased to hear that the IRS is reviewing future collection results in cases where an OIC \nis rejected. However, we are not familiar with the parameters or nature of the review. We look \nforward to the IRS sharing its results when available. \nSection Two—IRS and TAS Responses\n118\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#19\n\t\n\u0007\nPRIVATE DEBT COLLECTION: The IRS’s Expanding Private Debt \nCollection Program Continues to Burden Taxpayers Who Are \nLikely Experiencing Economic Hardship While Inactive Private \nCollection Agency Inventory Accumulates\nPROBLEM\nThe IRS implemented its current Private Debt Collection (PDC) initiative in April 2017. As of \nSeptember 13, 2018, about $5.7 billion in debts of more than 600,000 taxpayers were in the hands of \nprivate collection agencies (PCAs). As of September 30, 2018, more than 400,000 taxpayers’ debts were \nin Private Collection Agency (PCA) inventory with no installment agreement (IA) or payment for more \nthan three months after assignment, and had been in PCA inventory for 244 days on average. Thus, \nPCA inventory is fast becoming a substitute of the IRS collection queue.\nPDC program revenues in fiscal year (FY) 2018 surpassed program costs, but this surplus was achieved, \nto a significant extent, by collecting from financially vulnerable taxpayers. According to IRS databases \nthat contain information from tax returns filed by taxpayers and reports of income filed by third parties:\n■\n■40 percent of taxpayers who entered into IAs while their debts were assigned to PCAs had \nincomes at or below their allowable living expenses (ALEs);\n■\n■44 percent of taxpayers who made payments while their debts were assigned to PCAs (a group \nthat includes recipients of Social Security Disability Insurance (SSDI) income) had incomes at or \nbelow 250 percent of the federal poverty level;\n■\n■37 percent of taxpayers who entered into IAs while their debts were assigned to PCAs defaulted, \na frequency that rises to 44 percent when defaulted IAs that PCAs do not report to the IRS as \nrequired are taken into account, while the overall default rate for streamlined IAs for taxpayers \nwhose debts are not assigned to PCAs is 19 percent; and\n■\n■34 percent of the amount paid that was attributable to PCA activity was made by taxpayers whose \nincomes were at or below their ALEs.\nThe PDC program revenues for fiscal year (FY) 2018, $75 million, are not at the level Congress \nexpected for FY 2018 ($470 million) or even the level expected for FY 2017 ($374 million). Moreover, \nIRS collection activity with respect to taxpayers whose debts were assigned to PCAs actually generated \nmore dollars for the public fisc in FY 2018 ($37.4 million) than did PCA activity ($25.8 million).\nANALYSIS\nInternal Revenue Code § 7122(d) requires the IRS to develop ALE guidelines; if the ALE standards \nexceed a taxpayer’s income, the IRS believes the taxpayer is unable to pay his or her necessary living \nexpenses. For taxpayers whose debts are assigned to PCAs, the congressionally-mandated ALE \nguidelines for analyzing their ability to pay and evaluating collection alternatives are disregarded because \nPCAs do not collect financial information from taxpayers. In addition to assigning the liabilities of \ntaxpayers who did not dispute their liability, by the end of FY 2018, the IRS had assigned over 150,000 \nmore complex cases, involving assessments: based on substitutes for returns; pursuant to the Automated \nUnderreporter (AUR) computer matching system; or where the taxpayer did not respond, or stopped \nresponding, to IRS inquiries pursuant to an audit. These types of cases are subject to reconsideration \nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n119\n",
"IRS and TAS Responses\nIntroduction\nand have an increased risk that all or part of the liability may not be owed, so that abatement would be \nappropriate, including penalty abatement.\nTAS RECOMMENDATIONS\n[19-1] \u0007\nExclude from assignment to PCAs the debts of taxpayers whose incomes are at or below their \nallowable living expenses.\n[19-2] \u0007\nWork with the Social Security Administration to identify recipients of Social Security Disability \nInsurance and Supplemental Security Income and exclude those taxpayers’ debts from \nassignment to PCAs.\n[19-3] \u0007\nRevise PDC procedures to require IRS review of all PCA cases in which the taxpayer made \nmore than one payment that did not fully pay the liability and was not made pursuant to an \nIA, to determine whether the PCA requested more than one payment from a taxpayer who can \nmake payments, but cannot fully pay the liability within the Collection Statute Expiration Date \n(CSED) and if so:\na)\t Recall the case from the PCA;\nb)\t Impose a penalty on the PCA for requesting more than one such payment without \nreturning the case to the IRS; and\nc)\t Assign an IRS employee to work the case.\n[19-4] Revise PDC procedures to:\na)\t Require PCAs to return to the IRS cases in which the taxpayer entered into an installment \nagreement but made no payments for 120 days thereafter; and\nb)\t Assign an IRS employee to work the case.\n[19-5] \u0007\nRevise PDC procedures to require PCAs to return to the IRS cases in which the taxpayer did not \nenter into an IA and did not make any payments within six months of assignment to the PCA. \nIRS RESPONSE\nThe Fixing America’s Surface Transportation (FAST) Act, enacted in December 2015, requires the IRS \nto enter into qualified collection contracts for the collection of inactive tax receivables. The IRS has \nbeen actively assigning cases to private collection agencies (PCAs) since April 2017 to collect on tax \ndebts that the IRS is not actively pursuing. Since that time (through December 13, 2018), the Private \nDebt Collection (PDC) program has assigned over 1.1 million cases to PCAs and recovered over $130 \nmillion in overdue tax debts for the government. The current PDC program has already proven itself to \nbe significantly more effective in the first two years as compared to the prior iterations.\nWe agree with the National Taxpayer Advocate that the IRS must ensure the PDC program operates in \naccordance with the law and respects taxpayers’ rights. The law is very specific about the types of cases \nthat are excluded from the program. Neither the statute nor the Conference Report accompanying \nits enactment contemplates the exclusion of taxpayers whose incomes are at or below allowable living \nexpense levels. Accounts the IRS identifies as “currently not collectible” due to hardship circumstances \nare not assigned to Private Collection Agencies (PCAs). The PCAs offer payment arrangements to \ntaxpayers in a manner consistent with IRS installment agreement procedures for similarly-situated \nSection Two—IRS and TAS Responses\n120\n",
"IRS and TAS Responses\nIntroduction\ntaxpayers who call the IRS. As is the practice within the IRS, a taxpayer’s proposal to pay is accepted \nwithout questioning the ability to pay, if the case meets certain criteria.\nAlthough the statute does not exclude taxpayers receiving Social Security Disability Income (SSDI) \nor Supplemental Security Income (SSI) from the program, the PCA will return any account to the \nIRS when, during discussion with the taxpayer, they give any indication of receipt of SSDI or SSI, or \nwhen the taxpayer, for any reason, states they are unable to pay. Additionally, the IRS has taken steps \nto systemically exclude SSDI recipients from PCA inventory by submitting a Unified Work Request \nthrough our Information Technology (IT) function in January 2019.\nAs the result of a Treasury Inspector General for Tax Administration (TIGTA) audit of the program, the \nIRS has agreed to revise its policy regarding PCA account retention. The new policy will include criteria \nas to when the PCAs should return cases and include a specific retention period when a taxpayer is not \nin a current payment arrangement. In addition, taxpayers will be allowed to make payments outside of \na structured payment arrangement within the retention period, which will replace the current policy on \nmaking only one voluntary payment prior to returning the case to the IRS.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe IRS asserts that the current PDC initiative is more effective than prior iterations, but even if that is \ntrue, the fact remains that more than a third of the payments attributable to PCA activity that ultimately \nmake their way to the Treasury General Fund come from taxpayers who cannot pay their basic living \nexpenses. IRS data demonstrates that taxpayers frequently make payments and enter into installment \nagreements they cannot afford. The National Taxpayer Advocate believes the effectiveness of the PDC \nprogram is undermined by the burden the program places on vulnerable taxpayers. \nThe National Taxpayer Advocate welcomes the IRS’s decision to impose some parameters on how PCAs \nretain unproductive or unresolved inventory. TAS will be very interested in the details of the new \nprocedures, such as the length of the retention period and how the IRS will ensure the procedures are \nfollowed. The National Taxpayer Advocate is also pleased that the IRS will seek to systemically exclude \nSSDI recipients from the program. TAS is willing to assist the IRS in entering into a data sharing \nagreement with the Social Security Administration (SSA) that would allow the IRS to identify SSI \nrecipients and exclude them from the PDC program as well.\nTAS \nRecommendation\n[19-1] \u0007\nExclude from assignment to PCAs the debts of taxpayers whose incomes are at or \nbelow their allowable living expenses.\nIRS Response\nIRS does not agree to implement TAS recommendation.\nCongress defined the debts that must be collected under qualified tax collection contracts in \nInternal Revenue Code (Code) section 6306(c) and those that may not be collected under such \ncontracts in Code section 6306(d). The law does not exclude taxpayers whose incomes are at or \nbelow allowable living expenses. Therefore, the IRS will not implement this exclusion. There are \nprocedures in place for PCAs to return accounts where the taxpayer states they are unable to pay.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n121\n",
"IRS and TAS Responses\nIntroduction\nIRS \nAction\nN/A\nTAS Response\nThe National Taxpayer Advocate recognizes that the IRS is required to outsource the collection \nof some tax debt. Internal Revenue Code (IRC) § 6306 specifies the accounts that are required \nto be assigned to private collection agencies, and also provides for some exclusions. The IRS \nstates that it does not have the statutory authority to exclude from the program taxpayers whose \nincomes are below their ALEs, yet it already excludes taxpayers whose accounts are in Currently \nNot Collectible (CNC) status and proposes to exclude those who are SSDI recipients, categories \nof taxpayers that are not among the statutory exclusions. Thus, it appears the IRS could exclude \nother categories of taxpayers from the PDC program but declines to do so, despite data that show \nhow the program burdens taxpayers who are likely in economic hardship. \nTAS \nRecommendation\n[19-2] \u0007\nWork with the Social Security Administration to identify recipients of Social \nSecurity Disability Insurance and Supplemental Security Income and exclude those \ntaxpayers’ debts from assignment to PCAs.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part.\nIRS Action\nThe IRS only receives SSDI benefit information via Form 1099-SSA. In January 2019, a Unified \nWork Request was submitted to our IT function to allow us to identify and systemically exclude \nSSDI recipients from PCA inventory. SSI is not reported to the IRS and the Social Security \nAdministration (SSA) has indicated they cannot provide such information. The IRS has provided \nPCAs with guidelines for returning cases where a taxpayer receives income from SSI or SSDI \npayments.\nTAS \nResponse\nThe National Taxpayer Advocate applauds the IRS for honoring its 2017 commitment to exclude \nSSDI taxpayers from the PDC program. The SSA is able to identify SSI recipients, and TAS is \nwilling to assist the IRS in entering into a data sharing agreement with the SSA to obtain that \ninformation. \nSection Two—IRS and TAS Responses\n122\n",
"IRS and TAS Responses\nIntroduction\nTAS Recommendation\n[19-3] \u0007\nRevise PDC procedures to require IRS review of all PCA cases in which the taxpayer \nmade more than one payment that did not fully pay the liability and was not made \npursuant to an IA, to determine whether the PCA requested more than one payment \nfrom a taxpayer who can make payments, but cannot fully pay the liability within \nthe Collection Statute Expiration Date (CSED) and if so:\na)\t Recall the case from the PCA;\nb)\t Impose a penalty on the PCA for requesting more than one such payment \nwithout returning the case to the IRS; and\nc)\t Assign an IRS employee to work the case.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 1, 2019.\nIRS Action\nAs the result of a TIGTA audit of the program, the IRS has agreed to revise its policy regarding PCA \naccount retention. The new policy will include criteria as to when the PCAs should return cases and \ninclude a specific retention period when a taxpayer is not in a current payment arrangement. In \naddition, taxpayers will be allowed to make payments outside of a structured payment arrangement \nwithin the retention period, which will replace the policy on making only one voluntary payment.\nTAS \nResponse\nThe National Taxpayer Advocate welcomes a revision in the IRS’s policy regarding PCA account \nretention, depending on details, such as the length of the retention period. However, she remains \nconcerned about allowing PCAs to solicit payments that do not resolve the liability. She also \nremains concerned about the IRS’s current practice of not working cases that are returned by \nPCAs. \nTAS \nRecommendation\n[19-4] \u0007\nRevise PDC procedures to:\na)\t Require PCAs to return to the IRS cases in which the taxpayer entered into an \ninstallment agreement but made no payments for 120 days thereafter; and\nb)\t Assign an IRS employee to work the case.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 1, 2019.\nIRS Action\nAs with Recommendation #19-3, the IRS has agreed to revise its policy regarding PCA account \nretention, as the result of a TIGTA audit of the program. The new policy will include criteria as to \nwhen the PCAs should return cases and include a specific retention period when a taxpayer is \nnot in a current payment arrangement. In addition, taxpayers will be allowed to make payments \noutside of a structured payment arrangement within the retention period, which will replace the \npolicy on making only one voluntary payment.\nTAS \nResponse\nThe National Taxpayer Advocate welcomes a revision in the IRS’s policy regarding PCA account \nretention, depending on details, such as the length of the retention period. However, she remains \nconcerned about allowing PCAs to solicit payments that do not resolve the liability. She also \nremains concerned about the IRS’s current practice of not working cases that are returned by \nPCAs.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n123\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[19-5] \u0007\nRevise PDC procedures to require PCAs to return to the IRS cases in which the \ntaxpayer did not enter into an IA and did not make any payments within six months \nof assignment to the PCA.\nIRS \nResponse\nIRS agrees to implement TAS recommendation in part by October 1, 2019.\nIRS Action\nAs above, the IRS has agreed to revise its policy regarding PCA account retention, as the result \nof a TIGTA audit of the program. The new policy will include criteria as to when the PCAs should \nreturn cases and include a specific retention period when a taxpayer is not in a current payment \narrangement. In addition, taxpayers will be allowed to make payments outside of a structured \npayment arrangement within the retention period, which will replace the policy on making only one \nvoluntary payment.\nTAS \nResponse\nThe National Taxpayer Advocate welcomes a revision in the IRS’s policy regarding PCA account \nretention, depending on details, such as the length of the retention period. However, she remains \nconcerned about allowing PCAs to solicit payments that do not resolve the liability. She also \nremains concerned about the IRS’s current practice of not working cases that are returned by \nPCAs.\nSection Two—IRS and TAS Responses\n124\n",
"IRS and TAS Responses\nIntroduction\nMSP \n#20\n\t\n\u0007\nPRE-TRIAL SETTLEMENTS IN THE U.S. TAX COURT: Insufficient \nAccess to Available Pro Bono Assistance Resources Impedes \nUnrepresented Taxpayers From Reaching a Pre-Trial Settlement \nand Achieving a Favorable Outcome\nPROBLEM\nTaxpayers unable to afford representation to defend against a potential IRS assessment or collection \naction may believe there are only two courses of action: do nothing, or proceed unrepresented. When \nit comes to civil justice problems involving money or housing, poor households are twice as likely to do \nnothing than moderate-income households, according to legal scholars. For over 20 years, Tax Court \njudges have steadfastly supported programs to bring together unrepresented litigants and representatives \noffering pro bono assistance. Despite broad-based institutional support for these programs, and high \nrates of same-day resolution for attendees, taxpayer participation rates remain inconsistent. The \nNational Taxpayer Advocate is concerned efforts to provide unrepresented petitioners access to free, \ncompetent advice are being undercut and underused because of ineffective outreach and lack of \nconsistent guidance between the IRS Chief Counsel and pro bono representatives which undermine the \ntaxpayers’ rights to be informed, to retain representation, and to a fair and just tax system, and increases the \nburden on the Tax Court.\nANALYSIS\nThe U.S. Tax Court is the only prepayment judicial forum for taxpayers to resolve their disputes with \nthe IRS. More than 80 percent of cases in Tax Court are brought by unrepresented taxpayers, and that \npercentage increases to almost 94 percent among cases where the deficiency for a tax year is $50,000 or \nless and the taxpayer elects small tax case (S Case) procedures. We identified the following challenges \naffecting unrepresented taxpayers’ ability to consult with pro bono counsel and resolve cases pre-trial: \nconfidentiality restrictions that limit communication with unrepresented taxpayers about Pro Bono \nDay and other pre-trial resolution events by local Low Income Taxpayer Clinics (LITCs) and TAS; \nlimited availability of easily accessible but private meeting spaces for taxpayers experiencing difficulties \nwith security and building access, and pro bono resolution events scheduled outside of regular business \nhours; insufficient staffing and unavailability of interpreter services at Pro Bono Days and other pretrial \nresolution events; and inadequate coordination of events reducing opportunities to offer one-stop \nresolution options for unrepresented petitioners. When unrepresented taxpayers have better access to \npro bono assistance, it eases burden on the Tax Court and IRS Counsel, and can help taxpayers avoid \nprocedural errors and achieve a better outcome in their case.\nTAS RECOMMENDATIONS\n[20-1] \u0007\nAdopt alternative methods for communicating with unrepresented Tax Court petitioners, \nincluding working with the Tax Court to modify the petition form to allow taxpayers to consent \nto direct contacts from local LITCs and TAS.\n[20-2] \u0007\nHold more events to encourage pre-trial resolution in easily accessible but private locations and \nschedule the events outside of regular business hours as necessary.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n125\n",
"IRS and TAS Responses\nIntroduction\n[20-3] \u0007\nProvide staffing at Pro Bono Days and other pre-trial resolution events that can provide \ninterpreting services.\n[20-4] \u0007\nDevelop one-stop resolution options for pro se petitioners at Pro Bono Days and other pre-trial \nresolution events to include representatives from Appeals, Collection, and TAS, along with \ninviting local LITC or Bar Association volunteers or staff and assigning counsel attorneys from \nthe same locality.\nIRS RESPONSE\nThis MSP highlights the need for early resolution of cases filed in the Tax Court by unrepresented \ntaxpayers. The Office of Chief Counsel (Counsel) is committed to resolving appropriate cases quickly \nand without the need for a trial. Counsel has partnered with Low Income Tax Clinics (LITCs) and \nthe American Bar Association (ABA) to provide representation to unrepresented Tax Court petitioners \nearlier in their litigation through Settlement/Pro Bono Days, and has held dozens of these events \nover the last few years. Counsel welcomes and encourages early involvement by LITCs and pro bono \npractitioners and will continue to work with them to make Settlement/Pro Bono Days even more \nsuccessful.\nTAXPAYER ADVOCATE SERVICE COMMENTS ON IRS RESPONSE\nThe National Taxpayer Advocate commends Counsel’s efforts to partner with LITCs and the ABA to \nprovide opportunities for unrepresented Tax Court petitioners to benefit from the assistance of pro bono \npractitioners to encourage resolution of their issues without the need for a trial. The Tax Court’s recent \nrule change to allow limited scope representation demonstrates the Court’s commitment to making it \neasier for unrepresented petitioners to access pro bono assistance. Collaboration between IRS Counsel \nand TAS will provide critical support to that mission.\nTAS \nRecommendation\n[20-1] \u0007\nAdopt alternative methods for communicating with unrepresented Tax Court \npetitioners, including working with the Tax Court to modify the petition form to allow \ntaxpayers to consent to direct contacts from local LITCs and TAS.\nIRS \nResponse\nCounsel agrees to implement TAS recommendation in part.\nSection Two—IRS and TAS Responses\n126\n",
"IRS and TAS Responses\nIntroduction\nIRS Action\nOur attorneys and paralegals effectively communicate with pro se petitioners through regular \npre-trial discussions or during Settlement/Pro Bono Days. We use all means of communication, \nincluding telephone, mail, fax, Virtual Service Delivery, and WebEx. Email has not been adopted as \nan alternate form of communication since it is prohibited for security and confidentiality reasons. \nIRM 1.10.3.2.1(7). \nUnrepresented taxpayers receive LITC contact information with the notice of deficiency, the Answer, \nand the Branerton letter, as well as when trial-related documents, such as the Stipulation of Facts \nand Pre-Trial Memorandum, are sent to petitioners. Counsel has suggested to the Tax Court that \nit consider modifying the standard petition form to allow petitioners to consent to direct contacts \nfrom local LITC attorneys. We do not think that it would be appropriate to amend the form petition \nto provide direct contact for Taxpayer Advocate Service (TAS). While TAS serves a valuable purpose \noutside of litigation, TAS should not be involved in the matter once a petition has been filed. See \nIRM 13.1.10.10.1(4) (“TAS employees shall not provide any information or guidance to the taxpayer \nor the taxpayer’s counsel (or other authorized representative) concerning the pending litigation”). \nBased on past experience with Settlement/Pro Bono Day events, Counsel employees, LITC \nrepresentatives, pro bono volunteer attorneys have demonstrated a commitment to making these \nevents successful and providing taxpayers an opportunity to fully resolve their docketed cases. \nMoreover, as part of the partnership with the ABA, Counsel is exploring efforts to further improve \nthe success of Settlement/Pro Bono Days. We continue to look at the data we have accumulated \nof past successful Settlement/Pro Bono Days in an effort to increase taxpayer participation and \noptimize successful outcomes for taxpayers.\nTAS Response\nThe National Taxpayer Advocate commends Counsel’s efforts to use multiple communication \nmethods to communicate with unrepresented Tax Court petitioners and urging the Tax Court to \nconsider modifying the standard petition form to allow petitioners to consent to direct contacts \nfrom local LITC attorneys. The National Taxpayer Advocate acknowledges that TAS should not \nintervene in a matter petitioned for Tax Court review, however, inviting TAS to participate in \nSettlement/Pro Bono Day events provides additional opportunities for holistic relief for taxpayers \nwith issues before the court to address issues relating to tax years not before the court in a face-\nto-face environment.\nTAS \nRecommendation\n[20-2] \u0007\nHold more events to encourage pre-trial resolution in easily accessible but private \nlocations and schedule the events outside of regular business hours as necessary.\nIRS \nResponse\nCounsel agrees to implement TAS recommendation in part.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n127\n",
"IRS and TAS Responses\nIntroduction\nIRS Action\nCounsel agrees that pre-trial resolution should be encouraged and strives to reach such a \nresolution in all appropriate cases. For example, our attorneys and paralegals are encouraged to \nreach out to unrepresented taxpayers even before the Answer is filed in an effort to resolve those \ncases as early as possible. \nAs noted, Counsel is committed to increasing the number and effectiveness of Settlement/Pro \nBono Days this fiscal year and in the future. To ensure these events reach a maximum number \nof unrepresented petitioners, we understand they must be at a convenient location and time and \nprivate, and petitioners must feel comfortable participating. We have not seen any difference in \nresults between the use of government or non-government space and many of our offices are in \ncommercial buildings. Counsel does schedule events on weekday evenings and on Saturdays, \nwhich are staffed by volunteer Counsel and IRS employees. There are generally far more employee \nvolunteers present than are needed to work with the small number of petitioners who attend. \nThrough our partnership with LITCs and the ABA we will continue to explore ways of improving \nparticipation, including through the use of technology (such as WebEx) at the request and \nconvenience of unrepresented taxpayers.\nTAS Response\nThe National Taxpayer Advocate commends Counsel’s efforts to hold more Settlement/Pro \nBono Day events and to recruit volunteers to allow the events to be held outside of normal \nbusiness hours. The National Taxpayer Advocate also recognizes the value of support from IRS \nleadership for this program. Commissioner Rettig’s in-person attendance at a recent settlement \nday in Washington, D.C., received media coverage and helped to increase public awareness of \nSettlement/Pro Bono Days. The National Taxpayer Advocate recommends that Counsel continue to \npursue new methods for raising awareness to increase taxpayer attendance at the events.\nTAS \nRecommendation\n[20-3] \u0007\nProvide staffing at Pro Bono Days and other pre-trial resolution events that can \nprovide interpreting services.\nIRS Response\nCounsel does not agree to implement TAS recommendation.\nCounsel is sensitive to the fact that some unrepresented taxpayers may need or benefit from \nthe presence of a translator. Counsel attorneys have access to the Lionbridge telephonic \ninterpreter service, which provides interpreter services if needed during Settlement/Pro Bono Days. \n \nAdditionally, SB/SE Division Counsel maintains a list of employees who are fluent in a variety of \nlanguages and dialects and who can be contacted if translation services are needed. We have \nfound these options to be adequate.\nIRS \nAction\nN/A\nTAS \nResponse\nThe National Taxpayer Advocate commends Counsel’s acknowledgement of the need for \ninterpretation services during Settlement/Pro Bono Day events. Over the phone interpreters may \nbe satisfactory, however, if Counsel is aware in advance of an event that potential attendees live in \nnon-English speaking communities, Counsel should seek out the assistance of local organizations \nthat can provide in-person translation. \nSection Two—IRS and TAS Responses\n128\n",
"IRS and TAS Responses\nIntroduction\nTAS \nRecommendation\n[20-4] \u0007\nDevelop one-stop resolution options for pro se petitioners at Pro Bono Days and \nother pre-trial resolution events to include representatives from Appeals, Collection, \nand TAS, along with inviting local LITC or Bar Association volunteers or staff and \nassigning counsel attorneys from the same locality.\nIRS Response\nCounsel does not agree to implement TAS recommendation.\nGiven that the cases at issue are docketed in the Tax Court, Settlement/Pro Bono Days are \norganized and staffed by Chief Counsel with the specific goal of resolving pending cases early and \nefficiently. These events usually include IRS employees from Appeals, Examination, and Collection, \nas appropriate, to provide taxpayers a one-stop resolution in their docketed case. The insertion \nof non-docketed tax years in the Settlement/Pro Bono Days run by Counsel may have the opposite \nresult of thwarting resolution of the docketed case efficiently and would not be in the best interest \nof the parties. It would be more effective for taxpayers to resolve their administrative issues \nusing the IRS’s existing processes. Indeed, Settlement/Pro Bono Days have contributed to the \nresolution of petitioners’ other tax problems since some LITCs and Pro Bono attorneys continue \ntheir representation to resolve problems administratively. \nTAS can help facilitate successful Settlement/Pro Bono Days by encouraging LITCs and Pro Bono \nprograms to work together with Counsel to organize, host, and learn from these events. However, \nTAS should not participate in matters relating to litigation, including Settlement/Pro Bono Days. \nOnce a taxpayer becomes involved in litigation with the government, TAS employees have no \njurisdiction over the issue(s) involved in the litigation. I.R.C. § 7803(b); IRM 13.1.10.10.1(4). \nCounsel has sporadically organized “Problem Solving Days,” providing a “one-stop shop” approach \nfor taxpayers with various tax issues, but these events are typically not focused on cases \npending in the Tax Court. Lastly, Appeals and Chief Counsel leadership meet regularly with LITC \nrepresentatives to get their feedback and learn how we can improve the case resolution process for \nall taxpayers.\nIRS \nAction\nN/A\nTAS Response\nCounsel acknowledges that some LITCs and Pro Bono attorneys continue their representation \nbeyond Settlement/Pro Bono Days to help resolve the petitioners’ other tax problems. Given the \nunique opportunity to seamlessly communicate with employees from Appeals, Examination, and \nCollection, the National Taxpayer Advocate maintains that Counsel should encourage taxpayers \nattending a Settlement/Pro Bono Day event to resolve as many outstanding issues as possible, \nand not limit assistance to the tax periods addressed in the Tax Court petition.\nTaxpayer Advocate Service — Fiscal Year 2020 Objectives Report to Congress — Volume Two\n129\n",
"",
"",
"Publication 4054C (Rev. 6-2019) Catalog Number 72693V Department of the Treasury Internal Revenue Service www.irs.gov\nwww.TaxpayerAdvocate.irs.gov\n"
] |
f2032.pdf
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1110 Form 2032 (PDF)
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https://www.irs.gov/pub/irs-pdf/f2032.pdf
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[
"The form you are looking for begins on the next page of this file. Before viewing it, please see \nthe important update information below.\nRevised Mailing Address\nThe filing address for Form 2032 no longer varies based on where the employer files Form 941 or if an \nemployer files electronically. All Forms 2032 must be sent to:\nDepartment of the Treasury \nInternal Revenue Service \nOgden, UT 84201-0023\n",
"Form 2032\n(Rev. November 2010)\nDepartment of the Treasury \nInternal Revenue Service \nContract Coverage Under Title II \nof the Social Security Act\nFor use by an American employer to extend social security coverage to \n U.S. citizens and resident aliens employed by its foreign affiliates. \nOMB No. 1545-0137\nFile three copies \nof this form \nName of American employer\nEmployer identification number\nAddress number and street (P.O. Box if no mail delivery to street address)\nApt. or suite no.\nCity, state, and ZIP code\nThis Form 2032 is filed as (check applicable box(es)): \n1 \nAn original (new) agreement. \nThis agreement is effective for services performed on and after (for original agreements only, check one): \na \nThe first day of the calendar quarter in which the submission processing field director signs this agreement. \nb \nThe first day of the calendar quarter following the calendar quarter in which the submission processing field director signs \nthis agreement. \n2 \nAn amendment to an agreement previously entered into. \n3 \nAn election to apply the rules in effect after April 20, 1983, to agreements in effect on that date. By making this election, U.S. \nresident aliens as well as U.S. citizens will be covered by social security. \nIf this is an amended election or agreement, provide the following information: \n(Location where previous Form 2032 was filed) \non \n(Date submission processing field director signed original agreement on Form 2032) \n4 This agreement extends the federal insurance system under Title II of the Social Security Act to certain services performed outside \nthe United States by U.S. citizens and resident aliens employed by any of the foreign affiliates listed below. If you checked the box on \nline 2 and did not check the box on line 3 above, this amendment extends Title II social security coverage to certain services \nperformed outside the United States by U.S. citizens employed by any of the foreign affiliates listed below.\nNote. Enter foreign affiliate addresses below in the following order: city, province or state, and country. Do not abbreviate the country name, \nand follow the country’s practice for entering the postal code. If this agreement includes more than four foreign affiliates, attach a separate \nsheet of paper identified as part of this agreement with the name and address of each additional foreign affiliate. \na Name and address of foreign affiliate\nb Name and address of foreign affiliate\nc Name and address of foreign affiliate\nd Name and address of foreign affiliate\n5 Estimated number of employees to be initially covered by this agreement, amendment, or election:\nNonagricultural employees ▶\nAgricultural employees ▶\nThis agreement applies to all services performed outside the United States by each U.S. citizen or resident alien employed by any of the foreign \naffiliates named above. However, the agreement applies only to the extent that payments to each employee for the services would be considered \nwages if paid by the employer for services performed in the United States. This agreement does not apply to any service that is considered \nemployment for purposes of the employee tax and the employer tax under the Federal Insurance Contributions Act. \nFor an original agreement, an amendment to an agreement that was entered into after April 20, 1983, or an election to apply the rules in effect after \nApril 20, 1983, to agreements in effect on that date, the American employer declares that it owns at least a 10% interest (directly or through one or \nmore entities) in the voting stock or profits of each foreign entity named above. It also declares that section 3121(l) does not prevent this agreement. \nFor an amendment to an agreement in effect on April 20, 1983, without making the election to apply the new rules in effect after that date, the \ndomestic corporation declares that (a) it owns at least 20% of the voting stock of each foreign corporation named above, or (b) it owns at least 20% of \nthe voting stock of a foreign corporation that owns more than 50% of the voting stock of each foreign corporation named above. It also declares that \nsection 3121(l) does not prevent this agreement. \nThe American employer agrees: \n1. To pay amounts equal to the taxes that would be imposed by sections 3101 and 3111 if the payment for the services was considered wages; \n2. To pay, on written notification and demand, amounts equal to the interest, additions to taxes, and penalties that would apply if the payment for the \nservices were considered wages; and \n3. To comply with the applicable regulations under section 3121(l). \nThis agreement (or amended agreement or election) is entered into under the provisions of section 3121(l) of the Internal Revenue Code and the \napplicable regulations. \nSignature of individual authorized to enter into this \nagreement for the American employer \nTitle \nDate \nField Director, Submission Processing \nLocation \nDate \nFor Privacy Act and Paperwork Reduction Act Notice, see back of form. \nCat. No. 49954D \nForm 2032 (Rev. 11-2010) \n",
"Form 2032 (Rev. 11-2010) \nPage 2 \nGeneral Instructions \nSection references are to the Internal Revenue \nCode. \nBefore April 21, 1983, only domestic \ncorporations could enter into this agreement to \ncover only U.S. citizens employed by foreign \nsubsidiaries. For this agreement, a foreign \nsubsidiary was defined as a foreign corporation \nin which: \n• at least 20% of the voting stock was owned by \nthe domestic corporation, or \n• more than 50% of the voting stock was owned \nby another foreign corporation in which the \ndomestic corporation owned at least 20% of the \nvoting stock. \nAfter April 20, 1983, any American employer \n(no longer limited to a domestic corporation) can \nenter into this agreement to cover U.S. resident \naliens as well as U.S. citizens employed by a \nforeign affiliate. For this agreement, a foreign \naffiliate is any foreign entity (no longer limited to \na foreign corporation) in which the American \nemployer owns at least a 10% interest in the \nvoting stock or profits. This interest must be \nowned directly or through one or more entities. \nA domestic corporation having an agreement \nin effect that was entered into before April 21, \n1983, can elect to apply the post-April 20,1983 \nrules to such agreements. If a domestic \ncorporation makes this election, social security \ncoverage will be extended to U.S. resident alien \nemployees of any foreign subsidiary for which \nU.S. citizens are currently covered by an existing \nagreement. In addition, the election allows a \ndomestic corporation to extend social security \nand Medicare coverage to U.S. citizens and \nresident aliens employed by a foreign entity that \ndid not qualify for coverage under the old 20% \nownership rules, but that now qualifies under the \n10% ownership rules. \nNote. The United States has social security \n(totalization) agreements with specific countries. \nThese agreements ensure that social security \ntaxes are paid to only one country. However, \nthese agreements may affect the withholding \nrequirements resulting from filing Form 2032. For \nmore information, see Social Security and \nMedicare Taxes in Pub. 54, Tax Guide for U.S. \nCitizens and Resident Aliens Abroad. \nPurpose of form. An American employer uses \nthis form to: \n• Enter into the agreement specified in 3121(l) to \nextend coverage under Title II of the Social \nSecurity Act to U.S. citizens and resident aliens \nabroad by foreign affiliates, \n• Amend a previous agreement, or \n• Elect to apply the rules in effect after April 20, \n1983, to agreements in effect on that date. \nFor this agreement, an American employer is \nan employer that is: \n• The United States or any instrumentality \nthereof, \n• An individual who is a resident of the United \nStates, \n• A partnership if two-thirds or more of the \npartners are residents of the United States, \n• A trust if all the trustees are residents of the \nUnited States, or \n• A corporation organized under the laws of the \nUnited States or of any state. \nWhere To File \nSend three copies of this form to: \nInternal Revenue Service \nOgden, UT 84201-0023 \nAn American employer already filing Form 941, \nEmployer’s Quarterly Federal Tax Return, should \nfile Form 2032 with the Internal Revenue Service \nwhere the employer files Form 941 (generally \ntheir principal place of business). For electronic \nForm 941 filers, send Form 2032 to Internal \nRevenue Service, Cincinnati, OH 45999-0038. \nEnter on Form 2032 the employer identification \nnumber (EIN) as shown on Form 941. This will \nhelp the IRS process your form faster. \nCompleting Form 2032 \nComplete Form 2032 in triplicate. Each copy of \nthe form must be signed and dated by the \nindividual authorized to enter into the agreement, \namendment, or election. Attach to each form \nevidence showing the authority for such \nindividual to sign the form. For example, \ncorporations must include a certified copy of the \nminutes of the board of directors’ meeting. \nAfter the director signs and dates the form, it \nconstitutes the agreement, amendment, or \nelection authorized by section 3121(l). The IRS \nwill return one copy of Form 2032 to the \nAmerican employer, send one copy to the Social \nSecurity Administration, and keep one copy with \nall related papers. \nOriginal agreements. Check the box on line 1. \nAlso check the applicable box on line 1a or b to \ndesignate when the agreement will take effect. \nAmending agreements. You may amend an \nagreement at any time to extend coverage to \nany foreign affiliate not covered by an existing \nagreement. File Form 2032 in triplicate, and \ncheck the box on line 2. If you amend an \nagreement entered into on or before April 20, \n1983, without making the election to apply the \nrules in effect after that date, the agreement and \namendments will continue to be governed by the \nrules in effect before April 21, 1983. \nEffective date. If you file an amendment to an \nagreement on Form 2032 to include foreign \naffiliates not previously covered, and if the field \ndirector signs the amendment during the quarter \nfor which the original agreement is first effective \nor during the first month following that quarter, \nthe amendment will be effective as of the \neffective date of the original agreement. But if \nthe amendment is signed by the field director \nafter the end of the 4th month for which the \noriginal agreement is in effect, the amendment \nwill not be effective until the first day of the \nquarter following the one in which the field \ndirector signed the amendment. \nElection to apply post-April 20, 1983 rules. A \ndomestic corporation having an agreement in \neffect that was entered into before April 21, \n1983 (old agreement), may elect to have the \nrules in effect after April 20, 1983, apply to the \nold agreement. File Form 2032 in triplicate, and \ncheck the box on line 3. \nIf you make this election, it will be effective for \nall foreign entities covered by the agreement. By \nmaking the election, U.S. resident alien \nemployees as well as U.S. citizen employees will \nbe covered by the agreement. \nTo extend coverage to any foreign affiliate not \ncovered by an agreement, indicate the name and \naddress of the foreign affiliate on line 4 and \ncheck the box on line 2 for the amended \nagreement, and the box on line 3 for the \nelection. \nEffective date. Generally, the election will be \neffective on the day following the quarter in \nwhich the election is signed by the field director. \nNo Termination of Agreement \nOnce you enter into an agreement, you cannot \nterminate it, either in its entirety or with respect \nto any foreign affiliate. However, the agreement \nwill terminate for a foreign entity at the end of \nany quarter in which the foreign entity, at any \ntime in that quarter, ceased to be your foreign \naffiliate. \nPrivacy Act and Paperwork Reduction Act \nNotice. We ask for the information on this form \nto carry out the Internal Revenue laws of the \nUnited States. We need it to figure and collect \nthe right amount of tax. Section 6109 requires \nyou to provide your taxpayer identification \nnumber (SSN or EIN). Section 3121 of the \nInternal Revenue Code allows employees of \nforeign affiliates to be covered under social \nsecurity. Routine uses of this information include \ngiving it to the Social Security Administration for \nuse in calculating social security benefits, the \nDepartment of Justice for civil and criminal \nlitigation, and cities, states, and the District of \nColumbia for use in administering their tax laws. \nWe may also disclose this information to federal \nand state agencies to enforce federal nontax \ncriminal laws and to combat terrorism. We may \nalso give the information to foreign countries \nunder tax treaties. If you want this coverage, you \nare required to give us this information. If you fail \nto provide this information in a timely manner, or \nyou provide incorrect or fraudulent information, \nyou may be denied this coverage and you may \nbe liable for penalties and interest. \nYou are not required to provide the \ninformation requested on a form that is subject \nto the Paperwork Reduction Act unless the form \ndisplays a valid OMB control number. Books or \nrecords relating to a form or its instructions must \nbe retained as long as their contents may \nbecome material in the administration of any \nInternal Revenue law. Generally, tax returns and \nreturn information are confidential, as required \nby section 6103. \nThe time needed to complete and file this form \nwill vary depending on individual circumstances. \nThe estimated average time is: Recordkeeping, \n4 hr., 46 min.; Learning about the law or the \nform, 35 min.; Preparing and sending the form \nto the IRS, 42 min. If you have comments \nconcerning the accuracy of these time estimates \nor suggestions for making this form simpler, we \nwould be happy to hear from you. You can write \nto: Internal Revenue Service, Tax Products \nCoordinating Committee, SE:W:CAR:MP:T:T:SP, \n1111 Constitution Ave. NW, IR-6526, \nWashington, DC 20224. Do not send Form 2032 \nto this address. Instead, see Where To File \nabove. \n"
] |
p5336.pdf
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0419 Publ 5336 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5336.pdf
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[
" \nTAXPAYER\nEXPERIENCE\nMODERNIZED IRS \nOPERATIONS\nCYBERSECURITY \n& DATA \nPROTECTION\nCORE TAXPAYER \nSERVICES & \nENFORCEMENT\nIRS Integrated\nModernization Business Plan\nApril 2019\n",
"IRS INTEGRATED MODERNIZATION BUSINESS PLAN \nTABLE OF \nCONTENTS \n1.0 \nMessage \n from \n the \n Commissioner \n \n3 \n \nand Deputy Commissioners \n2.0 \nMessage from the CIO \n4 \n3.0 \nIntroduction \n5 \n4.0 \nIntegrated Business Plan Overview \n8 \n5.0 \nIntegrated Business Plan Detail \n16 \n4.1 \nModernization Portfolio \n \n11 \n& Pillars \n \n4.2 \nStrategic Alignment \n14 \n4.3 \nImplementation \n & \n Management \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n15 \n5.1 \nModernization Pillar— \n \n17 \nTaxpayer Experience \n \n5.1.1 Objectives & Outcomes \n17 \n5.1.2 Modernization Programs \n \n19 \n& Initiatives \n5.1.3 Target Capabilities & Roadmap \n20 \n5.2 \nModernization Pillar— \n \n21 \nCore Taxpayer Services \n \n& Enforcement \n5.2.1 Objectives & Outcomes \n21 \n5.2.2 Modernization Programs \n \n22 \n& Initiatives \n \n5.2.3 Target Capabilities & Roadmap \n24 \n6.0 \n7.0 \nConclusion \n38 \n8.0 \nAppendices \n39 \n5.3 \nModernization Pillar— \n \n25 \nModernized IRS Operations \n5.3.1 Objectives & Outcomes \n25 \n5.3.2 Modernization Programs \n \n27 \n& Initiatives \n5.3.3 Target Capabilities & Roadmap \n28 \n5.4 \nModernization Pillar— \n \n30 \nCybersecurity & Data \n \nProtection \n \n5.4.1 Objectives & Outcomes \n31 \n5.4.2 Modernization Programs \n \n32 \n& Initiatives \n \n5.4.3 Target Capabilities & Roadmap \n33 \nImplementation & Management \n34 \n6.1 \nManaging Modernization \n34 \n6.2 \nMeasuring Success \n35 \n6.3 \nAlignment to Federal \n \n37 \nRegulations \nA. \nIRS Primary Business Processes \n39 \nB. \nAcronyms \n43 \nPAGE 1 \n",
" \n \n \nIRS INTEGRATED MODERNIZATION BUSINESS PLAN \nTABLE OF \nFIGURES \n1. \nIRS Business Units & Primary \n \n9 \nBusiness Processes \n5. \nModernized IRS Operations: \n \n29 \nCapabilities \n & \n Implementation \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n2. \nIRS Information Technology \n \n10 \nSupport to Primary Business \n \nProcesses \n6. \nCybersecurity & Data \n \n33 \nProtection: Capabilities & \n \nImplementation \n \n3. \nTaxpayer Experience: \n \n20 \nCapabilities \n & \n Implementation \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n4. \nCore Taxpayer Services & \n \n24 \nEnforcement: Capabilities & \n \nImplementation \n \nTABLES \nTABLE OF \n1. \nModernization Portfolio & Pillars\n 13 \n2. \nAcronyms & Descriptions \n43 \nPAGE 2 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n1.0\nMESSAGE FROM THE\nCOMMISSIONER AND \nDEPUTY COMMISSIONERS \nInformation technology is critical to the health and security of our tax system, and as \nCommissioner and Deputy Commissioners of the IRS, we’re committed to making sure \nthe IRS becomes the best it can be. Modernizing the agency’s infrastructure is one of \nour top priorities. To that end, we fully support our Chief Information Officer’s plan \nand look forward to leading the agency through this multi-year transformation. \nThe IRS is important to every American, and every American is important to the IRS. The \nvalues of hard work and serving your community permeate the IRS. We carry these values \nwith us each day; and, even though the IRS is a large institution, it’s run by people who care. \nDuring our time working in both the private and public sector, we have repeatedly \n \nseen the IRS work to quickly implement major tax law changes under demanding \ndeadlines. We’ve also seen the IRS’s aging infrastructure and competing demands \nhinder our ability to improve taxpayer services. If providing high-quality, personalized \nservice is key to helping taxpayers understand and comply with their filing and \nreporting obligations, then modernizing the information technology that makes \n \nthose interactions possible is the way we will deliver. \nThis plan is built on the need to improve the taxpayer experience, by modernizing \ncore tax administration systems, IRS operations and cybersecurity. As the nation’s \ntax agency, we’re responsible not only for collecting over 90 percent of all federal \nrevenues but also for protecting hundreds of millions of taxpayer accounts every \nminute of every day. We can’t always predict the future, but we can be transparent \nand open about what we can and must do in the near-term. \nWe all know that advances in technology will require adjustments over time and that \nchallenges lie ahead. If and when disaster strikes, the story shouldn’t be that a system \nwent offline but rather how quickly we recovered and resumed normal operations. \nKeeping up with technology isn’t easy, but we’re confident that with this plan, the \nIRS will continue making critical improvements that will enhance security, efficient \noperations, and the taxpayer experience this year and for years to come. \n \nCharles P. Rettig \nCommissioner of \nInternal Revenue \nJeffrey J. Tribiano \n \nDeputy Commissioner \nfor Operations Support \nKirsten B. Wielobob \n \nDeputy Commissioner for \nServices and Enforcement \nPAGE 3 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nMESSAGE FROM THE \n2.0CIO \nEvery day, private-sector companies introduce new technologies that enhance how \n \npeople conduct their business and raise expectations of the services they should receive. \n \nWe expect the services we receive from our government to keep pace. This belief rings \n \nparticularly true for the IRS. Taxpayers expect to access their sensitive financial information \n \nsecurely and easily, find and understand complex tax information from any device, and to \n \nresolve issues quickly, proactively, using a variety of self and assisted services. \n \nThe IRS Integrated Modernization Business Plan positions the IRS to transform the \ncustomer experience and meet these expectations. The IRS processes trillions of tax \ndollars and hundreds of millions of interactions every year and adjusts routinely to an \never-changing set of tax rules and regulations. However, it is increasingly difficult to meet \ntaxpayer expectations and deliver upon our growing mission without extensive changes \nto our core tax systems. Our legacy computing infrastructure cannot keep pace with the \ndesire for instantaneous data, real-time interactions, and other customer-centric services. \nAnd the cost to operate our current technology ecosystem continues to increase. Our \nability to successfully modernize our information technology foundation is critical to our \nability to continue to deliver the IRS mission in a cost-effective way. \nModernization is more than the replacement of aged infrastructure, software products and \n \noutdated code. To endure, modernization must transform all aspects of our organization. It \n \nmust address how our workforce, processes and culture will evolve and sustain on-going \n \ninnovation and transformation. The solutions we implement must be resilient and flexible \n \nto adapt. With this in mind, we created a vision for the future that drives change across \n \nall aspects of our organization. Guided by that vision and the lessons learned from prior \n \nmodernization efforts, the Integrated Modernization Business Plan defines how we will \n \nachieve IRS transformation goals. \n \nWe expect to implement this plan, monitor our progress over time, and adjust our \n \ninvestment decisions along the way. We have confidence that with this approach we \n \nwill know where to focus our transformation efforts and where we are going on our \n \nmodernization journey. \n \nWe are pleased to present the IRS Integrated Modernization Business Plan– a six-year road \nmap for achieving necessary modernization of IRS systems and taxpayer services in two \nthree-year phases beginning in fiscal year (FY) 2019. \nWe are excited by this opportunity and plan, and we hope you are, too. \nS. Gina Garza \n \nIRS Chief Information Officer \nMarla L. Somerville \n \nDeputy Chief Information Officer for Strategy and \nModernization \nPAGE 4 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \nINTRODUCTION \n3.0 \nThe IRS and the Department of the Treasury (Treasury) are \ncommitted to modernizing and are fully engaged in this effort. \nThe IRS Integrated Modernization Business Plan (the Business \nPlan) outlines the major components necessary to transform \nour technology and deliver a modernized taxpayer experience in \nsupport of the IRS mission. Our goal is to serve all our customers \nin an effective and sustainable manner. \nRapid advancements in the digital customer service experience \n \noffered by private industry increase customer expectations of \n \nsuperior service from government agencies, including the IRS. Over \n \nthe last several years, the IRS has prioritized resources to implement \n \nnumerous tax laws, legislative changes, and deliver the annual filing \n \nseason, leaving the IRS with limited opportunity to transform the \n \ntaxpayer experience. The IRS has had success in delivering high \n \npriority business requirements and applications such as daily return \n \nprocessing and a relational database through Customer Account Data \n \nEngine 2 (CADE 2), sophisticated identity theft and anomaly detection \n \nthrough Return Review Program (RRP), and breakthroughs in online \n \naccount access for taxpayers through our Web Applications program. \n \nWe have made great progress towards modernizing our systems to \n \nprovide quality taxpayer service, and we know there is more that \n \nwe must accomplish to meet our modernization goals. \n \nThere is a robust network of technology infrastructure that supports \n \nthese and all business applications and while we have maintained \n \nthe supporting infrastructure, we have not been able to focus on \n \nmodernizing it as we should. Adding and layering new business \n \napplications has created a complex IT infrastructure that impedes \n \nour ability to keep pace with evolving customer expectations. The cost \n \nto operate the IRS technology infrastructure annually now exceeds \n \n$2.2 billion and is expected to exceed $3 billion by FY2026 if current \n \ntrends continue. Modernization is necessary to deliver efficient taxpayer \n \nservices and enforcement with enhanced user experiences and to curtail \n \nthe rising operational costs. \n \nNow is an opportune time to transform the IRS given increasing \ncustomer demand and advances in technology. Delivering the \nBusiness Plan will enable the IRS to: \n• \n Significantly improve the taxpayer experience by standardizing \ncustomer workflows and by expanding access to information. \n• \n Reduce call wait and case resolution times with customer callback \nIRS MISSION \nProvide America’s \ntaxpayers top quality \nservice by helping \nthem understand \nand meet their tax \nresponsibilities and \nenforce the law with \nintegrity and fairness \nto all. \nIRS IT MISSION \nTo deliver IT services \nand solutions that \ndrive effective tax \nadministration to ensure \npublic confidence. \nPAGE 5 \n",
" \ntechnology, online notices, and live online customer support. \n• Expedite return and refund processing with real-time return \nprocessing and taxpayer error correction. \n• Simplify identity verification to expand acce\nwhile protecting data. \nss to online services \n• Increase systems availability for taxpayers and practitioners. \n• Facilitate implementation of new tax provisions including common \nextenders enacted by Congress by eliminating millions of lines of \nlegacy code. \nThe Business Plan will enable the IRS to consistently provide superior \nservice to taxpayers and deliver long-term budget efficiencies as the \nIRS decommissions legacy applications, automates manual processes, \nand expands advanced analytics programs to more effectively serve \nand bring taxpayers into compliance. Additionally, this plan will allow \nthe IRS to stabilize the rising costs associated with maintaining legacy \napplications and infrastructure and creates opportunities to reinvest \nsavings to keep technology current and grow digital services consistent \nwith similar trends in the private sector.\nOur Modernization Pillars\nThe Business Plan is organized around four Modernization Pillars \ncritical to the agency’s mission and future development: Taxpayer \nExperience, Core Taxpayer Services & Enforcement, Modernized IRS \nOperations, and Cybersecurity & Data Protection. Together, these four \nPillars and key objectives represent a strategic view of our initiatives \nand help us ensure alignment with the agency’s mission critical work. \nThe IRS modernization portfolio includes key programs and \ninitiatives that help accelerate this transformation. This includes \nnew options for live assistance and enhanced security operations. \nWe will also standardize business operations, expand the digital \nconversion of paper case files and documentation, automate \nrepetitive manual processes, leverage existing data to detect \nnoncompliance earlier, and enable a strong and secure systems \nplatform for taxpayer-facing applications. With these investments, \nwe are positioning ourselves to adopt the taxpayer service \nenhancements made possible through artificial intelligence (AI), \nanalytics, cloud and other emerging technologies (see Section 5.2.1 \nfor a detailed look at our future analytics capabilities, and Section \n5.3.1 for insight into our cloud implementation strategy). \n3.0 INTRODUCTION \n \n \n \n \n \n \n \nPAGE 6\n",
" \n \n3.0 INTRODUCTION \nCreation of the Business Plan & the Companion Document \nThe IRS developed the Business Plan with input from IRS employees, the Treasury, \n \nFederal government partners, and independent assessors, including the MITRE \nCorporation and McKinsey & Company (McKinsey). The plan’s overall feasibility, \napproach, schedule, cost, and the IRS’s capacity to deliver were independently \nvalidated by McKinsey. One key recommendation was that a previous iteration of the \nplan was overly aggressive given a portfolio of this size within the timeframe proposed \nand the magnitude of the underlying assumptions. IRS agreed, and developed a six-\nyear schedule to be implemented in two phases. McKinsey conducted a second review \nusing the same criteria of feasibility, approach, schedule, and cost, and found it to be \nreasonable based on the IRS’s capacity to deliver. \nOur phased implementation is detailed in the IRS Integrated Modernization Business \nPlan Companion Document (the Companion Document). While the Business Plan \narticulates our modernization strategy, the Companion Document serves as the current \nimplementation plan, which will be updated throughout the plan’s two phases (FY2019 \n- FY2021; FY2022 - FY2024). These phases are comprised of a series of discrete \nprojects and initiatives, and we anticipate new capabilities will be incorporated into \nthe current baseline over time due to technology advances and evolving customer \nexpectations. Delivering on the phased plan will allow us to \nachieve the expected outcomes we have identified. \nPAGE 7 \n",
" \n \n \n \n \n \n \n \n4.0\nINTEGRATED BUSINESS PLAN \nOVERVIEW \nThe IRS runs one of the largest and most complex business operations in the world, serving a \n \nbroad and diverse customer base comprised of millions of individual filers, small businesses, \n \nlarge corporations, tax exempt organizations, and preparers. We also operate one of the largest \n \ncall centers in the country, answering more than 64 million calls annually and providing essential \n \nsupport to numerous agencies, including surge call center support for victims of disaster on \n \nbehalf of the Department of Homeland Security and support to the Old-Age Survivors and \n \nDisability Health Insurance and Unemployment Insurance Trust Funds. This modernization effort \n \nimpacts our full breadth of customers and partners, from taxpayers to government entities, and \n \nsupports the customer experience for all groups as we transform our systems. \n \nFoundation for Taxpayer Service \nWith the capabilities provided by the modernization initiatives, we will deliver a customer \n \nexperience comparable to the best financial institutions in the world. The taxpayer \n \nexperience will be characterized by a more proactive and interactive relationship between \n \nthe IRS, taxpayers, and their representatives. Taxpayers and their representatives will have \n \naccess to more proactive assistance to help them avoid pitfalls through an expanded \n \narray of service channels. Employees and taxpayers will have a complete view of their \n \ninteraction history regardless of the channel or the employee assigned. The Business \n \nPlan represents a unified strategy for enabling this experience by modernizing case \n \nmanagement, account management, real-time tax processing, data and analytics, \n \ncentralized information return processing, and anomaly detection. \nTo support the taxpayer experience, the IRS delivers major technology investments and \nkey initiatives aligned to our major business unit and our six primary business processes: \n• Large Business and International (LB&I) \n• Tax-Exempt and Government Entities (TE/GE) \n• Small Business/Self-Employed (SB/SE) \n• Wage & Investment (W&I) \nThese primary business processes, depicted in Figure 1, include: \n• Case Management \n• Internal Operations \n• Account Management \n• Intake \n• Customer Service \n• Compliance \nPAGE 8 \n",
"4.0 INTEGRATED BUSINESS PLAN OVERVIEW\nFIGURE 1: IRS Business Units & Primary Business Processes\nTAX EXEMPT/\nGOVERNMENT\nENTITIES\nWAGE\nAND \nINVESTMENT\nIRS BUSINESS UNITS\nSMALL\n BUSINESS/\nSELF EMPLOYED\nLARGE\nBUSINESS AND\nINTERNATIONAL\nPRIMARY BUSINESS PROCESSES \nCASE \nMANAGEMENT\nACCOUNT \nMANAGEMENT\nCUSTOMER\nSERVICE\nINTERNAL\nOPERATIONS\nINTAKE\nCOMPLIANCE \nDelivering Modernized Business Capabilities\nWe will engage early and often to understand and address emerging business \nrequirements and manage potential technology risks to operational functions and \nbusiness processes. Modernization investments require careful prioritization based on \nbusiness needs, taxpayer impact, and available resources. \nTo enable delivery of the IRS Strategic Plan FY2018-2022 and modernization initiatives, \nwe developed a phased approach to transform IRS operations and facilitate the delivery \nof primary business processes. In Figure 2, we depict the support provided by our \ninformation technology initiatives to meet the evolving needs of the IRS and taxpayers. \nChallenges to Supporting an Enhanced Taxpayer Experience \nThe IRS’s legacy computing infrastructure reflects a complex set of demands: ongoing \nchanges to tax rules and regulations, a tremendous surge of more than 150 million \nreturns and refunds every January through April, and rigorous security measures to \nprotect taxpayer data. These factors make it increasingly difficult to meet taxpayer \nexpectations without extensive changes to core tax systems. Our goal is to meet \ntaxpayer expectations for easy, simple, secure access to real-time data and provide more \npersonalized, proactive interactions through multiple channels and touchpoints.\nThe cost of maintaining the current complex technology ecosystem continues to \ngrow every year on an unsustainable trajectory. The cost of operating these systems \nPAGE 9\n",
"4.0 INTEGRATED BUSINESS PLAN OVERVIEW\nis overtaking other important components of effective tax administration and limiting \ncapacity to deliver quality service. \nWe need to transform the taxpayer experience to deliver taxpayer services with speed and \nquality. We can do so by modernizing our processes and systems and aligning the IRS with \nindustry standards for digital innovation. \nLeverage Every Dollar\nWe commit to being mindful of every dollar we spend and considering every investment \nan opportunity to advance modernization. As the pace of business operations and service \ndelivery expectations accelerates, we will respond with agile and innovative solutions \naimed at stabilizing costs. We will take advantage of industry trends that are proven to \ndecrease time to market, provide enhanced customer experiences, and reduce cost. \nTo fully achieve our “leverage every dollar” principle, the IRS is revisiting core \nprocesses and resources across the enterprise. Our broader transformation \nthemes include the adoption of new industry standards for capability delivery (e.g., \nDevelopment & Operations (DevOps), Agile, Cloud, Managed Services), along with \nrefining how we procure products and leverage the expertise of our industry partners.\n. \nFIGURE 2: IRS Information Technology Support to Primary Business Processes\nIRS PRIMARY BUSINESS PROCESSES\nACCOUNT MANAGEMENT\n• Record Business Events\n• Settle Account\n• Settlement Actions\n• Post Transaction\n• Analyze Account \nCUSTOMER SERVICE\n• Online Payment\n• Online Account\n• Third Party\n• Customer Management\n• Education & Outreach\nINTERNAL OPERATIONS\n• Financial Management\n• Human Capital Management\n• Asset Management\n• IT Management\n• Administrative Management \n• Case Inventory\n• Case Treatment\n• Workflow Management\n• Correspondence \n Management\nCASE MANAGEMENT\n• Issue Detection\n• Issue Identification\n• Issue Selection \n• Correlation\n• Inventory Prioritization\nCOMPLIANCE \n• Ingestion Service\n• Perfection Service\n• Calculator Services\n• Anomaly Detection\n• Verification\n• Issue Resolution\nINTAKE \nPAGE 10\n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n4.1\nMODERNIZATION \nPORTFOLIO & PILLARS \nThe modernization portfolio incorporates four core Pillars that will \ndrive innovation within the IRS over the next six years (FY2019-\nFY2024). Modernization objectives and initiatives support these \nPillars and will transform the taxpayer experience. Section 5.0 \nprovides additional detail. \nModernization Pillar \nTAXPAYER EXPERIENCE \nOur view of taxpayer experience incorporates all parties across the \ntax ecosystem, including individual and business taxpayers, taxpayer \nrepresentatives, and federal tax return preparers. We fully understand \nthe complexities associated with delivering quick and efficient \ntax filing services. As a result, we have taken steps to ensure that \ntaxpayers receive the necessary tools for successful filing. We commit \nto providing a high-quality service experience including simpler \ninterfaces, faster processing times, enhanced digital platforms, and \nconsistent access to critical systems and applications—all while \nprotecting taxpayer information and data. \nModernization Pillar \nCORE TAXPAYER SERVICES \n& ENFORCEMENT \nThe taxpayer experience depends on the underlying business \nprocesses that support smooth, accurate, and efficient taxpayer \nservices. We will overhaul core tax systems to provide quicker and \neasier tax filing services that taxpayers expect through data-driven \noperations and decision-making, real-time tax processing, and core \ntaxpayer administration integration. \nPAGE 11 \n",
" \n \n \n \n \n \n \n \n \n \n4.1 MODERNIZATION PORTFOLIO & PILLARS \nModernization Pillar \nMODERNIZED IRS OPERATIONS \nOur modernization investments in IRS Operations will accelerate the \npace of change and adoption of emerging technologies within our \ncore functional operations. We will improve operational efficiencies \nby reducing system complexities, and increasing standardization \nacross the enterprise. Our plan also considers areas where emerging \ntechnologies (AI, robotics process automation (RPA), data analytics) \ndrive automation to enhance taxpayer services. \nModernization Pillar \nCYBERSECURITY & \nDATA PROTECTION \nIRS systems contain a high volume of sensitive taxpayer data, representing \na target for cyber-attack. The IRS has encountered increasingly advanced \ncyber threats, requiring strong security and a dedication to safeguarding \ntaxpayer information. We acknowledge that new technologies result in \nincreased use of online systems, which may raise the risk of unauthorized \naccess to taxpayer data. In response, our workforce will need to function \nas security stewards and consider how our modernized programs and \napplications affect taxpayer information and data. \nPAGE 12 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n4.1 MODERNIZATION PORTFOLIO & PILLARS \nTABLE 1: Modernization Portfolio & Pillars \nMODERNIZATION \nPILLAR \n• Help taxpayers resolve issues quickly and \nefficiently \nKEY OBJECTIVES \nKEY PROGRAMS \n& INITIATIVES \nTaxpayer \nExperience: \nDeliver a service \nexperience \ncomparable to \nprivate industry \nCore Taxpayer \nServices & \nEnforcement: \nStreamline and \nintegrate IT \nprograms that \nenable top-\nquality service \nModernized IRS \nOperations: \nRetire and \ndecommission \nlegacy systems \nin place of more \nsustainable \ninfrastructure \nCybersecurity \n& Data \nProtection: \nContinue to \nprotect taxpayer \ndata and address \nemerging threats \n• Empower taxpayers with information about \ntheir account, obligations, and payment options \n• Make services available to customers when \nthey need them \n• Protect taxpayer information and data \n• Integrate tax processing systems to increase \nthe cost effectiveness of operations \n• Enable real-time processing and increase \ntransparency of returns status \n• Increase data usability and the use of data \nanalytics to combat fraud \n• Reduce complexity of the technical \nenvironment \n• Leverage data to deliver secure, agile, and \nefficient applications and services \n• Strengthen organizational agility through \nautomation and streamlining processes \n• Establish trusted and streamlined access \nto information through identity and access \nmanagement technologies \n• Proactively identify emerging threats and \nvulnerabilities through the use of real-time \nintelligence information and analytics \n• Protect taxpayer data and systems via \nend-to-end visibility and common platforms \n• WebApps (Web Applications) \n• Taxpayer Digital Communications \nOutbound Notifications (TDC—ON) \n• Live Assistance \n(Callback & Omnichannel) \n• Customer Account Data Engine \n(CADE) 2 Transition State 2 (TS2) \n• CADE 2 Target State \n• Enterprise Case Management (ECM) \n• Enterprise Case Selection \n(if necessary) \n• Return Review Program (RRP) \n• Real-Time Tax Processing (RTTP) \n• Information Returns Processing \n• Application Programming Interface \n(API) Management \n• Cloud Execution \n• Data Digitization \n• Next Generation Infrastructure \n• Robotics Process Automation (RPA) \n• Universal Data Hub / Analytics Tools \n/ Platform \n• Virtual Desktop \n• Identity & Access Management \n(IAM) \n• Security Operations & Management \n• Vulnerability & Threat Management \nPAGE 13 \n",
" \n \n \n \n \n \n \n \n \n \n4.2 \nSTRATEGIC \nALIGNMENT \nWe set ambitious modernization targets to provide the highest-quality service to \ntaxpayers and members of the tax community. We articulate these goals in the key \ndocuments focusing on the IRS’s organizational direction, including the Treasury \nStrategic Plan 2018-2022, and the IRS Strategic Plan FY2018-2022. The Business Plan is \nguided by these foundational documents, in addition to the President’s Management \nAgenda, to establish a transformational modernization vision. \nThe IRS Strategic Plan FY2018-2022 guides enterprise resource decisions, programs, \nand operations to meet the taxpayer and tax community members’ changing needs \nand expectations. The Business Plan details a technology and cultural modernization \nstrategy to meet the strategic goals articulated in the IRS Strategic Plan FY2018-2022: \n• Strategic Goal 1: Empower and enable taxpayers to meet their tax obligations \n• Strategic Goal 2: Protect the integrity of the tax system by encouraging compliance \n through administering and enforcing the tax code \n• Strategic Goal 3: Collaborate with external partners proactively to improve tax \n administration \n• Strategic Goal 4: Cultivate a well-equipped, diverse, flexible and engaged workforce \n• \n Strategic Goal 5: Advance data access, usability and analytics to inform decision- \n making and improve operational outcomes \n• \n Strategic Goal 6: Drive increased agility, efficiency, effectiveness and security in \n IRS operations \nThe plan also aligns to Treasury’s strategic plan, specifically Objective 1.1 (Tax Law \nImplementation), Objective 4.1 (Financial Data Access and Use), and Objective 5.3 \n(Customer Value). \nPAGE 14 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n4.3 \nIMPLEMENTATION \n& MANAGEMENT \nWe developed the Business Plan and the Companion Document to align with federal \nregulations and guidelines, including: \n• Elements of the Federal Information Technology Acquisition Reform Act (FITARA); \nand, \n• The Capital Planning and Investment Control (CPIC) process, as mandated by the Clinger-\nCohen Act of 1996. \nIn addition, the Business Plan aligns to enhanced information technology and customer \nexperience metrics in the President’s Management Agenda Cross Agency Priority Goals \n(CAP), specifically: \n• CAP Goal 1: Modernize IT to increase productivity and security \n• CAP Goal 4: Improve customer experience with Federal services \nThe Office of Management and Budget (OMB) publishes the results of these efforts on \nPerformance.gov quarterly. \nThe IRS commits to achieving concrete milestones in each fiscal year. We will track \nand report on progress as a part of budget and strategic reports including, customer \nexperience/outcome-oriented performance measures and project/program scope, \nschedule, and cost. Examples of the outcome-oriented metrics the IRS will track \ninclude: the number of taxpayers utilizing the new services; lines of legacy code \nconverted to modern language; taxpayer burden hours, and; National Institute of \nStandards and Technology cybersecurity benchmarks. The IRS will baseline these \nmetrics and refine them over the next year (see Section 6.2 for more information). \nOur overall success will depend on several special legislative proposals and regulatory \nauthorities that we believe are appropriate for an effort of this scope and importance: \n• Engaging the Office of Personnel Management to utilize existing direct hire authority for \nIT modernization positions and/or broadening government-wide critical pay authority; \n• Seeking reauthorization of IRS Streamlined Critical Pay Authority that expired in \n2013; and, \n• Ensuring funding is available for multiple fiscal years at somewhat predictable intervals. \nOur existing governance bodies and external stakeholders will provide modernization \n \nportfolio oversight. We will ensure that modernization investments benefit from our and \n \nTreasury’s extensive experience in strategic planning, budgeting, procurement, and management \n \nprocesses to deliver capabilities that support the IRS’s mission and business needs. \n \nPAGE 15 \n",
" \n \n \n5.0\nINTEGRATED BUSINESS PLAN \nDETAIL \nInformation technology supports nearly every facet of the IRS. Technology is vital \nto successfully delivering annual tax filing season services, ensuring the health of \nthe nation’s tax system, and supporting the federal government’s financial strength. \nThe country depends on our systems and services to collect $3.5 trillion or over 90 \npercent of federal receipts (FY2018). Together, these multiple and complex duties \nrequire proven technology solutions that support the delivery of secure and customer-\nfocused services. The Business Plan aligns to critical business functions and needs \nwith a vision to transform operations and improve service delivery. \nThe Business Plan facilitates voluntary compliance and self-service by providing \ntaxpayers the resources and technology needed to efficiently file their taxes and \nreceive their refunds easily and quickly. To narrow the tax gap and increase voluntary \ncompliance, we are updating our service approach of multi-channel offerings that \ndeliver consistent service quality, empowering taxpayers to select their most efficient \nservice option. In addition, this multi-channel strategy also enhances existing service \nchannels to increase overall taxpayer engagement and satisfaction. Updated online \nservices will provide streamlined service options to taxpayers who have simple, \ninformational interactions, making telephone and in-person taxpayer resource \n \nservices more readily available for taxpayers with more complex needs. \nConsolidating Priorities \nThe Business Plan consolidates the priorities for the IRS established in the IRS Strategic \n \nPlan FY2018-2022 and related strategy and planning artifacts to define a single path \nforward. The Business Plan outlines the specific programs and initiatives defined within \nthe modernization portfolio. By executing the strategies in the Business Plan, the \nIRS will help taxpayers to meet their tax obligations, increase voluntary compliance, \nand decrease the gross tax gap (estimated at $458 billion in 2017) while stabilizing \ninformation technology costs over time. \nSections 5.1, 5.2, 5.3, and 5.4 describe each modernization Pillar, along with \ncorresponding modernization portfolio initiatives and accompanying capabilities. \nEach Pillar outlines the transformation trajectory over the next six years to reach a \nmodernized information technology ecosystem. \nPAGE 16 \n",
" \n \n \n \n \n \n \n \n \n \n \n5.1.1 \nObjectives & Outcomes \n5.1\nMODERNIZATION PILLAR \nTAXPAYER EXPERIENCE \nTaxpayers stand at the core of the IRS mission. We will place \ntaxpayer needs at the front and center of every program and \napplication embedded within the modernization portfolio, including \nenhancing our multi-channel engagement model to improve \ntaxpayer interactions with the IRS so taxpayers may elect their \npreferred or most efficient option as described in Section 5.0. \nWe will focus on modernizing the taxpayer experience through the \nimplementation of innovative technologies (e.g., mobile) and the \nenhancement of existing capabilities. This development will provide \nan environment that encourages multiple points of engagement \nthrough enhanced digital platforms and high levels of customer \nservice interaction. By reducing taxpayer burden and achieving \nthe objectives detailed in Section 5.1.1, the IRS could facilitate an \nincrease in voluntary compliance. \nThe remainder of Section 5.1 describes the Taxpayer \nExperience Pillar in detail across three key elements: \n• Objectives & Outcomes \n• Modernization Programs & Initiatives \n• Target Capabilities & Roadmap \nTo guide the modernization of the taxpayer experience, we defined \nobjectives and mapped desired outcomes to each objective: \nObjective 1: Help taxpayers resolve issues quickly and \nefficiently \nExpanding digital options will allow customers to easily and \nconveniently access information. With taxpayers increasingly \naccessing our service channels through mobile devices, we have \nredesigned IRS.gov to be more mobile-friendly through deployment \nof a new Web Content Management Systems (WCMS). Taxpayers will \nbe able to navigate to the most efficient service channel that meets \ntheir needs, with the potential to resolve the majority of support \nTAXPAYER \nEXPERIENCE \n*Peak of filing season* \n171 million \n \ntotal IRS.gov website visits \no\n6\nf visi\n8% \nts from \n \nmobile \n \ndevices \nFebruary 2018 \nFiling Season\n2018 \nSource: Fiscal Year 2018 \n \nManagement’s Discussion \n \nand Analysis, November 5, 2018 \nPAGE 17 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n5.1 MODERNIZATION PILLAR: TAXPAYER EXPERIENCE \nrequests using self-service tools. By providing taxpayers with easy and secure services, \ntaxpayers will be able to resolve many simple requests quickly and on their own. This \nwill reserve IRS staff assistance for complex issues and non-digital service touchpoint \nrequirements. Regardless of the service channel used, taxpayers will receive timely \nresponses to their questions. Ultimately, we will provide an environment where taxpayers \ncan navigate to the most efficient service channel based on level of support required. \nObjective 2: Empower taxpayers with information about their account, \nobligations, and payment options \nModernizing the taxpayer experience will empower taxpayers with knowledge of \ntheir tax responsibilities. We will continue to support taxpayer education efforts by \nimproving the delivery of educational material on IRS.gov to help taxpayers resolve \ncommon tax-related questions. We will also deploy programs such as Taxpayer Digital \nCommunications Outbound Notifications (TDC-ON), which provides a web-based \nplatform for taxpayers to receive online notifications (e.g., tax credit qualifications, \nbalance due). Over time TDC-ON can reduce the amount of time it takes for the IRS \nand taxpayers to resolve compliance issues by instantly delivering notices to a secure \nonline account and avoiding costly, time-consuming mail delivery. Ultimately, this \ntechnology will save the IRS and taxpayers millions of dollars in postage and printing. \nTaxpayers and tax professionals will also be able to address compliance questions \npreemptively through IRS communications and related targeted outreach using \nfindings from behavioral science and other inputs. These efforts will improve the \ntaxpayers’ knowledge regarding proper filing processes and payment obligations and \nincrease transparency across the tax process lifecycle. \nObjective 3: Make services available to customers when they need them \nWe will enhance existing tools and services to improve the customer experience and \nallow taxpayers to access any tax service at any time. Some of these tools are immediately \naccessible on the IRS website, where taxpayers have access to forms, instructions and \ntax calculators. We will continue to build upon this core customer-facing platform to \nprovide taxpayers with the tools they need and the dynamic experience they expect. In \nconcert with this effort, we seek innovative ways to interact with the tax community on \nhow it wants to engage with the IRS, and then use those findings to streamline taxpayer \ncommunications. \nObjective 4: Protect taxpayer information and data \nWe are committed to providing a secure tax environment that protects sensitive taxpayer \ndata. In the face of constantly evolving threats, we continue to implement stringent \nsecurity standards to prevent unauthorized users from gaining access to taxpayer \ninformation. In meeting this goal, we must also deliver a user-friendly experience where \ntaxpayers can easily and confidently verify their identity and access necessary services \nacross our service channels (e.g., online, in-person, telephone). \nPAGE 18 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n5.1.2 \nModernization Programs & Initiatives \n5.1 MODERNIZATION PILLAR: TAXPAYER EXPERIENCE \nAs we improve our system architecture, we remain dedicated to providing taxpayer security \nand enhancing the overall taxpayer experience. This new system architecture will lead to three \nprimary outcomes: \n1. Taxpayers know that the IRS protects their information and proactively combats identity \ntheft tax refund fraud; \n2. Taxpayers know that we quickly identify and mitigate any attempt to steal IRS or \ntaxpayer data; and, \n3. Taxpayers know that the IRS has a secure but user-friendly technology environment. \nWe identified several programs that will improve the taxpayer \n \nexperience through increased functional capabilities. These include: \n \n• Web Applications (Web Apps): These programs and initiatives improve interactions \nand communications across taxpayers, employers, the IRS, and third parties by \nproviding a broad range of self-service options, establishing secure information \nexchange options, and building internal capabilities. By enabling authorized third \nparties and taxpayers to interact digitally with the IRS, the investment will provide \na better user experience, achieve significant savings by moving some service \ninteractions to lower cost channels, and deliver consistent data and services through \nreusable Application Programming Interfaces (APIs). Web Apps will transform the \nway the IRS does business by delivering a digital service that allows taxpayers to \ntrack and receive information they need when they need it. \n• Taxpayer Digital Communications Outbound Notifications (TDC-ON): The \nprogram will improve the user experience through reliable, user-friendly, secure \nonline services. For example, the IRS will develop digital notices through the secure \nmessaging platform that provides communications to taxpayers who prefer that \nchannel over mailed correspondence, including digital chat. \n• \n Live Assistance (Callback & Omnichannel): Taxpayers will receive customer call-back, \n \nengage a redesigned customer voice portal, and enjoy improved identity verification. \n \nFuture live assistance enhancements will broaden service channels to include live text \n \nchat, virtual assistant capabilities, and video chat assistance. \nPAGE 19 \n",
"YEAR 6\nYEAR 1\nFY2024\nFY2019\n \n \n5.1.3 \nTarget Capabilities & Roadmap \n5.1 MODERNIZATION PILLAR: TAXPAYER EXPERIENCE \nTo achieve the Pillar’s four objectives, we identified target capabilities for each initiative over the next \nsix years (FY2019-FY2024). Figure 3 depicts the targeted individual capabilities for this Pillar. \nFIGURE 3: Taxpayer Experience: Capabilities & Implementation \nYEAR 6\nFY2024\nYEAR 1 \nFY2019 \nLive \n \nAssistance \nCallback \n• \n Customer Callback Functionality \n• \n External application—Balance Due \n• Internal application—IRS IT Help Desk \n• Expanded toll-free capacity \n• Enterprise Callback Solution: Requirements \n \nand Design \nOmnichannel \n• Expand taxpayer service channels to include \n \ntext chat, virtual assistant and video chat \n \nassistance technologies \n• \n Expanded ability for taxpayers and their \n \nrepresentatives to receive and submit \n \ndocuments electronically and securely \n \nwith IRS \n• \n Expanded online capability for taxpayers and \n \ntheir representatives to view, correct and \n \nupdate account information securely \n• \n Modernize infrastructure platform to support \n \nexpanded capabilities and faster delivery \n \nTaxpayer Digital \n \nCommunications \n \nOutbound \n Notifications \n• \n Taxpayer Digital Communications Outbound \n \nNotifications \n• \n Taxpayer Digital Communications functionality \n \nadded \nWebApps \n• Taxpayer Protection Program—ID Verify tool \n \n(deployed) \n• Taxpayer Payment API with Fiscal Services \n• Modernize Online Installment Agreements \n• Disclosure Authorization for Tax Pro \n• Power of Attorney for Tax Pro \nTAXPAYER EXPERIENCE—6 YEAR ROADMAP \nPHASE 1 \nPHASE 2 \nTimeline is subject to budget and available resources \nPAGE 20 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n5.2 \nMODERNIZATION PILLAR \nCORE TAXPAYER SERVICES\n& ENFORCEMENT \nLooking at the future needs of the IRS and taxpayers, we will assess \n \nand identify opportunities to modernize tax administration. We will \n \nmodernize core tax systems to provide the quicker and easier tax filing \n \nexperience that taxpayers expect, realizing these outcomes through \n \ndata-driven operations and decision-making, real-time tax processing, \n \nand core tax administration systems integration. These systems will \n \nenhance the taxpayer experience when taxpayers engage with IRS \n \npersonnel, such as during audits. \n \nThe remainder of Section 5.2 describes the Core Taxpayer \nServices & Enforcement Pillar in detail across three key elements: \n• Objectives & Outcomes \n• Modernization Programs & Initiatives \n• Target Capabilities & Roadmap \n5.2.1 \nObjectives & Outcomes \nTo guide the modernization of the tax administration, we defined \nobjectives and mapped desired outcomes to each objective: \nObjective 1: Integrate tax processing systems to increase the \ncost effectiveness of operations \nWe will emphasize the customer experience when engaging with IRS \nsystems. Our goal is to enable an end-to-end view of taxpayer cases \nand interactions, in part, by aggregating customer experience data \nacross different taxpayer touchpoints with the IRS. These touchpoints \nallow us to trace customer engagement throughout the tax system \nand enhance overall service. \nThrough the Enterprise Case Management (ECM) program, the IRS is \ndeveloping a long-term solution to deliver a consolidated enterprise-\nwide case management system. This will allow us to decommission \napproximately 60 case management systems. This solution will allow \nPAGE 21 \nCORE TAXPAYER \nSERVICES & \nENFORCEMENT \nFY 2018 Tax Statistics \n \nHighlights \nTotal Returns and Other \nForms Processed— \n253 million \nNumber of 3rd party \ninformation returns \nreceived (of $3.6B \nreceived, $3.2B (90%) \nreceived electronically) \nTotal Revenue \nCollected—$3.5 trillion \nEnforcement Revenue \nCollected—$59.4 billion \nSource: Fiscal Year 2018 \nManagement’s Discussion \nand Analysis, November 5, 2018 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n5.2 MODERNIZATION PILLAR: CORE TAXPAYER SERVICES & ENFORCEMENT \nthe IRS to effectively resolve tax administration issues through better \nmanagement of case creation, execution, maintenance, and closure. \nStandardization provides compatibility benefits while reducing the \nburden on employees to support multiple technologies and platforms. \nRefactoring redundant system components will inevitably create \nreusability across the enterprise using a modern architecture. \nObjective 2: Enable real-time processing and increase \ntransparency of returns status \nReal-time processing is core to the commercial financial experience— \n \nwhether a taxpayer engages with their bank or another lender. Enabling \n \nthat same capability for the tax process is fundamental for improving \n \noverall customer experience through enterprise speed and efficiency. \n \nProcessing data quickly will improve operational outcomes and allow \n \nthe IRS to react in real time. \n \nAdditionally, the ability to deliver real-time processing allows us to meet \n \ntaxpayers’ expectations of service. For instance, through Real Time Tax \n \nProcessing (RTTP) we will standardize data intake which allows us to \n \nprovide taxpayers with faster responses. \n \nObjective 3: Increase data usability and the use of data \nanalytics to combat fraud \nWe will increase data analytics capabilities, skills, and tools. Ultimately, \n \nour data will be one of our strongest assets, allowing our workforce \n \nto make data-driven strategic and operational decisions. Enhanced \n \nanalytics will allow for increased fraud detection, more effective \n \ntaxpayer notification of issues, prediction of filing patterns, and \n \nimproved understanding of taxpayer interactions. \n \n5.2.2 \nModernization Programs & Initiatives \nThe following programs will support modernization of the IRS’s core \ntaxpayer services and enforcement processes: \n• \n CADE 2 Transition State (TS) 2: The “Customer Account Data \n \nEngine” Program includes investments to achieve Transition State 2. \n \nThe program will help modernize the taxpayer account processing \n \nenvironment and develop an integrated, near real-time processing \n \nenvironment to support tax returns, information returns, payments, \n \nand other transactions. A key project supporting CADE 2 TS 2 is \n \nPAGE 22 \nFrom \n 2015 to \n \nAugust \n 2018 \nRRP decreased ID \n \ntheft victims by over 60% \nProtection of \n9\n m\n6% \nore ID theft \n \nfraud on electronic \n \nreturns than legacy \n \nsystems \nReturn Review \n \nProgram \nAs of August 22, 2018 \n1,692% \nRRP’s ROI \n \non total \n \ninvestment \nRRP has \n \nprotected over \n$ 13.09 \n \nbillion \nin total \n \nconfirmed \n \nrevenue \nSource: Fiscal Year 2018 \nManagement’s Discussion \nand Analysis, November 5, 2018 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n5.2 MODERNIZATION PILLAR: CORE TAXPAYER SERVICES & ENFORCEMENT \nthe Individual Tax Processing Engine (ITPE) project, which will convert approximately \n \n200,000 lines of legacy assembly language code to modern software language. This \n \ncode conversion is a major milestone towards retiring the Individual Master File (IMF). \n• CADE 2 Target State: The CADE 2 Target State includes activities focused on evaluating \nthe new CADE solution architecture to inform planning and execution. This target \nstate environment provides capabilities that will allow direct visibility and access to \ntaxpayer account detail on a near real-time basis and furthers the overarching effort \nto retire the IMF. This will facilitate voluntary compliance and improve traceability of \nfinancial data from core accounting systems to IRS financial statements. \n• Enterprise Case Management (ECM): This solution provides an IRS-wide solution for \nstreamlining case and workload management processes. The solution digitizes case \ninformation, automates work selection, and improves resource alignment. Once the \nECM solution is identified, we will determine if a separate investment for Enterprise \nCase Selection (ECS), as a stand-alone initiative, will be necessary. \n• Return Review Program (RRP): The program seamlessly integrates taxpayer data from \nmultiple sources and provides taxpayer data and systemic anomaly detection results for \nfraud and civil noncompliance detection using a service-oriented approach and modern \nuser interface technologies. The program provides an enterprise platform for anomaly \ndetection at the IRS. \n• Real-Time Tax Processing (RTTP): The program will deliver independent and near \nreal-time data processing, allowing the IRS to move away from batch processing, view \nreturns dynamically, and understand the status of a return as it is processed. Currently, \nbatch processing prevents a taxpayer from easily adjusting their individual return. Within \ncertain parameters, RTTP will allow amendments to be processed directly, improving the \noverall taxpayer experience and level of confidence with multi-channel options to enable \naccount access. It also improves at-filing compliance and communication with the IRS. \n• \n Information Returns System Processing: \n The program consists of a modern intake \n \ndatabase and applications that allow for improved document matching to improve intake \n \nconsistency. \nPAGE 23 \n",
"FY2024\nFY2019\nYEAR 6\nYEAR 1\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n5.2 MODERNIZATION PILLAR: CORE TAXPAYER SERVICES & ENFORCEMENT \n5.2.3 \nTarget Capabilities & Roadmap \nTo achieve the Pillar’s three objectives we identified target capabilities for each initiative over the next six \nyears (FY2019-FY2024). Figure 4 depicts the targeted individual capabilities for this Pillar. \nFIGURE 4: Core Taxpayer Services & Enforcement: Capabilities & Implementation \nCORE TAXPAYER SERVICES & ENFORCEMENT \n—6 YEAR ROADMAP \nYEAR 1 \nFY2019 \nPHASE 1 \nCADE 2 TS2 \nITPE: Initial Java code delivered to modernize IMF \n \ncore components \n• \n Simple Single Filing to testing \n• \n Subsequent Payment with Filing for Ext to testing \n• \n Internal balancing and Control to testing \n• \n Completion of Java code conversion \n• \n IMF Core components modernized—planning \n \nand initialization of parallel validation \nCADE 2 \n \nTarget State \n• CADE 2 Target State Plan development \n• CADE 2 Target State Plan independent validation \nEnterprise Case \n \nManagement (ECM) \n• \n Developing long-term strategy to deliver ECM to \n \nenterprise \n• \n Procure ECM solution \n \n• \n Deliver initial case management capabilities \n• \n Deliver subsequent releases focused on adding \n \nincremental business value \nInformation Returns \nSystems Processing \nBegins in Phase 2 \nReal Time Tax \nProcessing (RTTP) \nBegins in Phase 2 \nReturn Review \n \nProgram (RRP) \n• \n Develop data access & visualization reporting \n \nsolution \n• \n Create new models and filters based on new \n \nschemes to prevent potential fraud \n• \n Plan & develop fraud detection functionality and \n \nenhance automated verification for business returns \n• \n Plan & expand the fraud detection functionality for \n \nbusiness units \n• \n Develop post-refund and non-refund returns \n \nfunctionality \nYEAR 6 \nFY2024 \nPHASE 2 \n• \n Modernized core tax processing system that \n \nsimplifies subsequent maintenance and filing \n \nseason delivery \n• Modernize pre-processing (validation of tax \ntransactions) and post-processing (distribution of \ntaxpayer information needed to establish CADE \n2 as the authoritative data store for the general \nledger) \n• \n Additional functionality to create a more efficient \n \nand seamless consolidated view of \n \nall taxpayer history/actions/cases \n• \n Reduction to separate case management systems \n \nand related O&M costs \n• Provide a consistent solution for acceptance, \nvalidation, perfection, management and use \nof Information Return data that will improve \ndocument matching and provide taxpayers with \nvisibility to third-party data before filing \n• Redesign of the current batch processing to deliver \nindependent and near real-time processing to enable \ntaxpayers to correct their tax filing information online \nand update their tax records in near real-time \n• Revenue is futher protected from risks of \nincreasing global fraud sophistication by \nexpanding and maximizing real-time anomaly \nand fraud detection at-filing \nTimeline is subject to budget and available resources \nPAGE 24 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n5.3\nMODERNIZATION PILLAR \nMODERNIZED \nIRS OPERATIONS \nOur focus in this Pillar is developing standardized, agile, solutions that \nleverage emerging technologies, while decommissioning and replacing \nlegacy systems. A leaner, nimbler capability portfolio will power the IRS \nwhile keeping operational costs controlled. \nOur approach combines investments in new and emerging \ntechnologies while also taking advantage of expiring contracts to \nacquire technologies that will accelerate modernization efforts. \nBy modernizing IRS operations, we will improve existing business \nprocesses. We project cost savings in O&M due to reduced costs \nassociated with supporting antiquated systems as we improve \nprocesses and implement contemporary systems. \nThe remainder of Section 5.3 describes the Modernized IRS \nOperations Pillar in detail across three key elements: \n• Objectives & Outcomes \n• Modernization Programs & Initiatives \n• Target Capabilities & Roadmap \n5.3.1 \nObjectives & Outcomes \nTo accomplish operations modernization, we identified the following \nobjectives and desired outcomes: \nObjective 1: Reduce complexity of the technical environment \nAddressing business requirements without a clear understanding of \nrequired functionality propagates IT complexity, creating duplicative \nand potentially unnecessary systems. We can accelerate “time to \nvalue” by minimizing fragmentation of both business and IT processes \nacross legacy applications. Building with the future in mind, we foster \na proactive approach to eliminating legacy technical debt, which \noccurs when we continue to patch and re-work instead of creating \n \nPAGE 25 \n",
" \n \n \n \n \n \n \n \n5.3 MODERNIZATION PILLAR: MODERNIZED IRS OPERATIONS \nmodern, flexible solutions. \nFor example, we are standardizing business processes currently supported by \nnumerous systems to create an enterprise-wide solution for case management, ECM. \nAlthough ECM is a component of the Core Taxpayer Services & Enforcement Pillar, it is \na key example that demonstrates our efforts to simplify infrastructure. By integrating \nexisting case management programs where possible and migrating legacy systems, \nwe encourage an incremental and low risk alternative to traditional solutions, which \nmay involve a complete redesign of older systems. Additionally, a “reuse-first” mindset \nleverages common services and data, and optimizes technologies to support efficient \nand reliable change, configuration, and release management. \nWe are also upgrading technology by migrating applications from Solaris to Linux, \nwhile limiting operational costs and risks associated with the retirement of aged \ninfrastructure and the need for extended support. Refreshing our aging infrastructure \nfrom Solaris to Linux will also drive us to deliver several thousand servers efficiently. \nSimilarly, efforts are underway to migrate from text-based legacy programming \nlanguages (e.g., Common Business-Oriented Language (COBOL)) to modern, \ncommon languages (e.g., .NET, JAVA), which will promote programming language \nstandardization and reduce workforce sustainment risks. \nReducing complexity will allow us to quickly respond to changes. For example, heavily \ntangled systems often make it difficult to detect the root causes of system outages. \nInvestigating multiple systems delays timely resolution and affects high service \navailability. A standardized environment opens the ability to detect and resolve issues \nquickly with minimal disruption to end users. Ultimately, for many of the systems \nwithin our portfolio, the most sensible path to the future is retirement. We will reduce \ncosts and vulnerabilities by working to eliminate legacy systems no longer capable of \nsupporting their required business processes. \n \nObjective 2: Leverage data to deliver secure, agile, and efficient applications \n \nand services \nEffective decision-making relies on key insights obtained through trusted information. \nHigh-quality data when managed as an asset supports the continuous delivery of value. \nWith data as an asset, we will continue to drive, develop, and enhance value from data \ncapabilities to support exchanges with external agencies, partners, taxpayers and their \nrepresentatives. We will also support effective data use by IRS staff and leadership, \nautomated operational dashboards, and tracking of strategic priorities and processes. \nUtilizing data in day-to-day operations and decision-making has transformed our \n \nexisting processes. For example, utilizing systems data as part of our enterprise IT \n \nAsset Management (ITAM) modernization strategy, our team will employ a data-driven \n \napproach to strengthen our security posture and management. Similarly, enabling end-\nto-end visibility for IT applications will allow the prioritization and delivery of critical \n \ncustomer and IRS user-facing services. \n \nPAGE 26 \n",
" \n \n \n \n \n \n \n \n \n5.3 MODERNIZATION PILLAR: MODERNIZED IRS OPERATIONS \nMaintaining application efficiency—and its underlying data—is critical in creating end-to-\nend visibility and enhancing overall service agility. For this reason, we will transition IRS \n \ndata, applications, and services from on-site to the cloud, where applicable. Maintaining \n \na cloud infrastructure will reduce fixed investment, minimize the risks of aging hardware, \n \nand improve scalability and elasticity. The expansion to private and hybrid cloud, will \n \nsupport long-term and emergent business requirements for enterprise IT orchestration \n \nand service management. IRS systems must accommodate heavy demand during peak \n \ntimes, resulting in the critical need for both infrastructure scalability and flexibility. \nObjective 3: Strengthen organizational agility through automation and \nstreamlining processes \nWe continue to implement unified standards as a component of our transition to cloud \nand virtual environments, including expanding our current use of DevOps, Agile, and \nother methodologies to streamline delivery across our IT functions. \n \nSimilarly, by automating transactional processing, task replication occurs faster and with \n \ngreater accuracy. For instance, 1) DevOps enables automated software development \n \nlifecycle (SDLC) processes to simplify handoffs between development, test and \n \nproduction; 2) Robotics Process Automation enables the execution of highly laborious \n \ntasks in \n seconds via \n artificial intelligence; \n and \n 3) machine learning allows for \n almost-instant \n \ndocument analysis as tax information is scanned, aiding in compliance case selection \n \naccuracy. These technologies will aid in eliminating error-prone and time-consuming \n \nmanual work. This change reduces the need for manually intensive processes by IRS staff, \n \nallowing them to focus on implementing modernization technologies and processes. \n \n5.3.2 \nModernization Programs & Initiatives \nWe targeted seven modernization programs and initiatives to support operations \nmodernization: \n• Application Programming Interface (API) Implementation: Our API initiative \nincorporates efforts to drive internal and external API deployment. For example, \nauthorized third parties will have easier access and a streamlined data exchange with \nthe IRS on behalf of their clients through standard, reusable services and common \nprogramming code. \n• \n Cloud Execution: Execution will result in improved “time to market” agility, increased \n \noperational efficiency and resilience, increased innovation, and an enhanced or \n \nmaintained security posture by migrating workloads to cloud platforms and services. \n• Data Digitization: Electronic files will be enhanced, and the intake of paper forms and \n \ncorrespondence will be simplified and streamlined through the integration of scanned \n \ndata and content management systems. This will improve processing of taxpayer \n \npaper submissions and create efficiencies from not having to manually process, \n \ntranscribe, and store documents. \nPAGE 27 \n",
" \n \n5.3 MODERNIZATION PILLAR: MODERNIZED IRS OPERATIONS \n• \n Next Generation Infrastructure: A series of packaged initiatives to support a more \n \nefficient, scalable, and flexible architecture implemented through advanced IT \n \ninfrastructure tools and technologies (e.g., Standard Stacks, Enterprise Storage \n \nSolution). Implementing our Next Generation Infrastructure initiative encompasses \n \ntransformation of compute, network, and storage activities—along with DevOps— \nto automate software delivery and infrastructure changes. We will also continue to \n \nconvert legacy code to modern languages. \n• \n Robotics Process Automation (RPA): Enhancing business process execution, speed, and \n \naccuracy through smart software designed to perform high-volume, repeatable tasks. \n• Universal Data Hub / Analytics Tools / Platform: The program will support foundational \n \narchitecture and technology elements that enable business capabilities like real-time \n \nprocessing, error correction, expanded online tools and data analytics capabilities, \n \nimproved fraud detection, and other anomaly detection capabilities. The program will \n \nstreamline data availability and will allow for more data-driven business decisions. \n• \n Virtual Desktop: The program will enable streamlined patching, provisioning, and \ntroubleshooting, and higher availability by storing user “desktop” centrally in the \ndata center. \n5.3.3 \nTarget Capabilities & Roadmap \nTo achieve the Pillar’s three objectives, we identified target capabilities for each \ninitiative over the next six years (FY2019-FY2024). Figure 5 depicts the targeted \nindividual capabilities for this Pillar. \nPAGE 28 \n",
"FY2024\nFY2019\nYEAR 6\nYEAR 1\n \n \n \n \n \n \n \n \n5.3 MODERNIZATION PILLAR: MODERNIZED IRS OPERATIONS \nFIGURE 5: Modernized IRS Operations: Capabilities & Implementation \nMODERNIZED IRS OPERATIONS—6 YEAR ROADMAP \nApplication \nProgramming \nInterface (API) \nImplementation \nCloud Execution \nData Digitization \nNext Generation \nInfrastructure \nRobotics Process \nAutomation (RPA) \nUniversal Data Hub/ \nAnalytics Tools/ \nPlatform \nYEAR 1 \nFY2019 \nPHASE 1 \n• \n Define External API Product Strategy, Operating \n \nModel & Capability, \n• \n Leverage security efforts with 3rd parties to \ndevelop & deploy API(s) \n• \n Procure and deliver ECM Release 1 Cloud \n \nplatform on Treasury Cloud \n• \n Deploy Cyber CDM Phase 2 on Treasury Cloud \n• \n Establish Cloud Management Office and Cloud \nGovernance \n• \n Complete RFI for the Enterprise Cloud ecosystem \n• \n Build out sample Cloud Target State Model on the \nTreasury Cloud \n \n• \n Tapeless Backup Solution: Cloud Migration \n• \n Deliver an additional cloud migration project \nBegins in Phase 2 \n• \n DevOps: CI/CD** Onboard projects, Standard \n \n• \n \nstack: Develop, validate & deploy stack solutions \nvia automation, Containerization solution, \n \ncentralized code repository \n• \n Automate Desktop performance assurance & \nNetwork provisioning \n• \n \n• \n Tapeless Backup Solution: Procure Solution, \n \nTape Consolidation, & Restoration Assurance \n• \n \n• \n Enterprise Online Storage (EOS): Develop Target \n \nState Solution, & Pilot \n• \n \n• \n On Premises Managed Infrastructure: Solution \nArchitecture & Evaluation \n• \n Convert Legacy Code/Reduce Application \n \nFootprint: Strategy on Legacy Code Convention \n• \n Implement solution for one Procurement process \n• \n SB/SE Monitoring Offer in Compromise (MOIC) \n• \n IT Help Desk Self-Service (Natural language processing) \n• \n TE/GE Referrals Batch Process Identification \n• \n Scale enterprise solution and onboard new projects \n• \n Full Operational Capability (FOC) to enable \n \nadditional use cases \nBegins in Phase 2 \nYEAR 6 \nFY2024 \nPHASE 2 \n• \n Tax Professionals will have easier access and a \n \nstreamlined data exchange with the IRS on behalf \n \nof their clients through standard, reusable services \n \n& common programming code \n• \n Expand adoption of cloud services that will \nimprove “time to market” agility, increase \n \noperational efficiency and resilience, enable \n \nincreased innovation, and enhance or maintain \n \nour security posture \n• \n Implement technology to scan and store incoming paper \n \nforms and correspondence in an electronic format \n• \n Modify the paper processing pipeline and retire \n \nlegacy systems \n• \n Increase access to electronic data to support \nadvanced analytics \nProvide a more efficient, scalable, and flexible \n \narchitecture by implementing advanced \nIT infrastructure tools and technologies \n \nencompassing compute, network, and storage \n \nactivities \nImprove network performance and efficiency \n \nthrough software defined networking \nExpand use of DevOps to automate software \ndelivery and infrastructure changes \nContinue converting legacy code to modern \n \nlanguages \nComplete in Phase 1 \n• \n Modernize infrastructure to provide universal data \naccess under a unified technology platform \n• \n Expand data availability and tools \n• \n Provide quicker data availability and access \nTimeline is subject to budget and available resources \n* CI/CD=Continuous Integration & Continious Delivery \nPAGE 29 \n",
" \n \n \n \n \n \n \n \n \n5.4\nMODERNIZATION PILLAR \nCYBERSECURITY & \nDATA PROTECTION \nProtecting our systems and taxpayer information against cyber threats \n \nis a top priority for the IRS. The cyber landscape is constantly evolving, \n \nand we continue to experience increasingly sophisticated and \n \nfrequent efforts by cybercriminals to steal taxpayer data (1.4 billion \n \nattacks annually, including denial-of-service attacks, unsuccessful \n \nintrusion attempts, probes or scans, and other unauthorized \n \nconnectivity attempts), file fraudulent refunds, and infiltrate our \n \nsystems. Due to the proliferation of sophisticated security threats and \n \nthe sensitive taxpayer information contained within our systems, we \n \nmust have an agency-wide, proactive approach to security. Continued \n \ninvestment in technology, tools, and processes is necessary to defend \n \nagainst expanding cyber threats and stay current with changing NIST \n \nguidelines. \n \nFor example, as part of our Network Security Enhancement initiative, \nour teams have deployed Network Segmentation to restrict IRS Local \nArea Network (LAN) access to users and devices based on pre-\ndetermined authorization levels. This effort enhances visibility across \nour networks and drives proactive mitigation of potential threats. As \npart of the initiatives within this Pillar, we will continue to enhance \nour real-time insights and defensive capabilities across the IRS \nenterprise to protect the organization and American taxpayer data \nfrom cyberattacks. \n \nThe remainder of Section 5.4 describes the Cybersecurity & \nData Protection Pillar in detail across three key elements: \n• Objectives & Outcomes \n• Modernization Programs & Initiatives \n• Target Capabilities & Roadmap \n \nSafeguarding \nTaxpayer Data \n1.\nCyber4B \n access \n \nattempts \n \ndenied in FY2018 \nThe IRS’s computer systems \n \ncurrently withstand \n2.5 million \nunauthorized access \n \nattempts each day \nSource: IRS Strategic Plan \nFY2018–2022, Congressional \nTestimony, September 2018 \nPAGE 30 \n",
" \n \n \n \n \n \n \n5.4.1 \nObjectives & Outcomes \n5.4 MODERNIZATION PILLAR: CYBERSECURITY & DATA PROTECTION \nTo protect IRS systems and retain public trust, we must maintain a strong security posture \n \nwith a focus on Identity & Access Management (IAM), vulnerability and threat management, \n \nand enterprise-wide security operations and management. The following objectives and \n \ncapabilities characterize our approach to transforming our cybersecurity posture: \nObjective 1: Establish trusted and streamlined access to information through \nidentity and access management technologies \nIAM refers to the capabilities (processes, technologies, and policies) for managing \nusers’ digital identities and controlling their use to access enterprise resources. In \nthe target IRS environment, we will implement existing IAM capabilities as a set of \ncommon services. Standardizing authentication and authorization across platforms will \nreduce complexity while enhancing end user experience through streamlined identity \n \nverification, e.g., with federated IAM protocols and certificate management processes. \nWe adhere to Federal guidelines and standards to ensure proper authentication, \naccess, \n \nand authorization requirements on our public-facing applications. \nOur data approach is critical to reaching and sustaining our target-state cyber \nenvironment. Currently, we collect and correlate cyber risk data across the IRS \nenterprise and external partners and use advanced analytics and threat sensing \napproaches to identify threats. We work proactively to detect and evaluate business \nrisk associated with emerging threats and vulnerabilities. One example initiative, the \nContinuous Diagnostics and Mitigation (CDM) program, will establish a set of COTS \ninformation security continuous monitoring tools to help protect IRS networks. CDM \nwill provide dashboards to improve situational awareness and enhance the IRS’s ability \nto identify and respond to the risk of emerging cyber threats. \nObjective 2: Proactively identify emerging threats and vulnerabilities through \nthe use of real-time intelligence information and analytics \nIt is critical that we maintain defense in depth to detect breaches and mitigate \nthreats effectively. To support this, we proactively hunt for threats active within the \nIRS ecosystem. While a focus on external threats is important, it is equally critical to \nmonitor internal activities to address potential breaches arising from unintentional \nactions or as the result of malicious intent. We will provide end-to-end monitoring of \nsecurity integration into the delivery lifecycle, creating a complete understanding of \nwhat and who operates within the security ecosystem. \nThe IRS is also implementing data encryption at rest and in transit to protect against \ntaxpayer data loss. This effort provides us the ability to integrate secure services effectively \nwhile maintaining a strong security posture aligned with technological advancements. \nPAGE 31 \n",
" \n \n \n \n \n \n \n \n \n \n5.4 MODERNIZATION PILLAR: CYBERSECURITY & DATA PROTECTION \nObjective 3: Protect taxpayer data and systems via end-to-end visibility \nand common platforms \nWe must integrate effective and efficient security within our systems, a requirement \nthat stretches across our environments. To do so, we will establish security standards \nand reusable security services and tools appropriate to the evolving technology \necosystem. We will integrate security processes into the service design/operations \nlifecycle to deliver systems and processes with security built in at the outset. \nFollowing industry best practices, we will focus on security throughout the enterprise \nand development lifecycle. Integrating security throughout the delivery lifecycle may \ninvolve: 1) iterative security testing at all stages of development, 2) new collaboration \nwith development teams throughout the lifecycle to define secure approaches, and, \n3) proactively embedding cybersecurity within new technologies before they enter \n \nproduction. \n5.4.2 \nModernization Programs & Initiatives \nWe have three inter-related cyber modernization initiatives: \n• Identity & Access Management: Further prevent malicious or unintended access \nand disclosure of taxpayer and other sensitive data using a common platform for \nsecure authorization and authentication services and encrypting sensitive data at \nrest as well as in transit. \n• Security Operations & Management: Enhance the ability to secure taxpayer data \nand systems through full visibility of hardware and software on the network, and \nenhance incident response and detection of internal threats to data and systems. \n• Vulnerability & Threat Management: Enable IRS cybersecurity professionals to \nprotect taxpayer data and systems, providing full visibility into endpoints and \nservers to monitor. \nPAGE 32 \n",
"FY2024\nFY2019\nYEAR 6\nYEAR 1\n \n \n \n5.4 MODERNIZATION PILLAR: CYBERSECURITY & DATA PROTECTION \n5.4.3 \nTarget Capabilities & Roadmap \nTo achieve the Pillar’s three objectives, we identified target capabilities for each initiative over the next \nsix years (FY2019-FY2024). Figure 6 depicts the targeted individual capabilities for this Pillar. \nFIGURE 6: Cybersecurity & Data Protection: Capabilities & Implementation \nCYBERSECURITY & DATA PROTECTION—6 YEAR ROADMAP\nYEAR 1 \nFY2019 \nYEAR 6 \nFY2024 \nIdentity \n \nand Access \n \nManagement \n• Continuous Diagnostics & Mitigation (CDM) Phase \n \n1, 2 & 3 \n• Convert 49 facilities for physical access compliance \n• Upgrade 57 facilities to multi-factor access \n \ncapability \n• \n Implement the DHS program Continuous \n \nDiagnostics and Mitigation (CDM) phase 4 \n• Complete implementation for multifactor facilities \n \naccess capabilities \n• \n Complete network segmentation for remaining \n \nIRS High Value Assets \n• Implement key Cybersecurity initiatives in \n \nthe cloud including Data Loss Prevention and \n \nenhanced data analytics \nSecurity \nOperations and \n \nManagement \n• Cyber Cloud Strategy and Migration Plan \n• Malware Email & Web Sandboxing FOC \n• Endpoint Detection Response \n• \n Continue network access restrictions in \n \nEnforcement Mode implementation \n• IRS Cloud Access Security Broker (CASB) FOC \n• Cyber Hyper Converged Infrastructure FOC \n \nfor Real-Time Correlation Analysis \n• Network segmentation for High Value Assets (HVA) \n• Cyber GPU-Based Machine Learning Analytics FOC \n• Cyber Threat Sharing Intelligence Platform Initial \n \nOperating Capability (IOC) \n• Next Generation Secure Operations Center FOC \nPHASE 1 \nPHASE 2 \n• Complete implementation of Next Generation \n \nEnterprise Security Audit Trails \n• Complete Threat intelligence platform \nVulnerability \n \nand Threat \n \nManagement \n• \n Complete IT Asset Management Use Case \n• Pilot, expand Data at Rest Encryption (DARE) \n \nimplementation \n• Enhanced Security Testing (EST) and Process \n \nAutomation \n• Next Generation Enterprise Security Audit \nTrails (ESAT) \n• Enhanced Cyber User Behavior and Fraud Analytics \n• Cyber Analytics Dashboard/Metrics FOC \nTimeline is subject to budget and available resources \nPAGE 33 \n",
"IMPLEMENTATION \n& MANAGEMENT \n6.0 \nThe Business Plan outlines the direction and goals for our modernization program and \nincludes developing, monitoring, and reporting progress against a baseline series of \nmetrics. We will hold ourselves accountable to our modernization investments through \nregular reporting, providing stakeholders with insight on modernization performance \nand progress, beyond cost/schedule/scope of individual initiatives. \nMANAGING \n6.1 MODERNIZATION \nOur current governance framework provides oversight via a multi-layer leadership \n \nand management structure encompassing the full lifecycle of information technology \n \ninvestments and projects. The IRS administers IT oversight recommendations through four \n \nseparate IT Executive Steering Committees (ESCs): Infrastructure, Strategic Development, \n \nSustaining Operations, and Information Technology Enterprise. Each IT ESC meets at \n \nregular intervals throughout the fiscal year to oversee the IT investment portfolio and \n \nescalate risks brought forward by their subordinate Governance Board (GB). \n \nWe will use established forums and cadence to provide updates on modernization \n \nperformance. Owners of individual modernization initiatives will continue to provide \n \nstatus updates, progress, and other metrics directly through their governance bodies. \n \nThroughout the modernization initiative and IT program lifecycles, leadership and \n \nstakeholders will review and assess factors that could influence a change in the \n \nimplementation direction. Leveraging existing project-level reporting, we will incorporate \n \nan enterprise portfolio reporting overlay (using initial measures described in Section 6.2). \nPAGE 34 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nMEASURING \nSUCCESS \n6.2 \nMetrics are crucial for determining the success of our modernization efforts. As part \nof our implementation planning, we constructed an initial set of outcome-oriented \nmetrics (in addition to the collection of normal Cost/Schedule/Scope metrics at \nthe individual initiative/project levels). We will establish the baseline metrics in year \none and monitor progress over the course of the plan. The process of refinement \nincludes assessing the effectiveness of individual metrics during performance reviews, \ndetermination of additional metrics for collection, and potential recommendations for \nretirement, as appropriate. \nAs we work to refine our modernization metrics, we will consider the following: \n• Ability to move the enterprise closer to strategic goals \n• Achievement of improvements in speed, accuracy, and efficiency \n• Effect on taxpayers and stakeholders, including taxpayer burden \n• Identification of opportunities for innovation \n• Development of documentation and tools to track value and ongoing returns on \n investments \n• Cost effectiveness of implemented solutions \nModernization Metrics \nWe will deliver and report on incremental value and progress on measures each \nyear. Our initial modernization metrics baseline includes reporting on performance \nindicators comprised of enterprise outcome-focused metrics in addition to traditional \nIT project management measures (Cost/Schedule/Scope). \nMost metrics have an associated numerical goal, but in some instances indicators \nwill need to be developed as the detailed planning process proceeds. The timeline \nto achieve these initial goals is FY2024, unless otherwise stated, and we will report \nincremental progress. To support our overall goals of stabilizing operations and \nmaintenance and being a nimble organization, we will target the following initial \nmetrics: \n• Promote ease and simplicity in taxpayer interactions and deliver a customer \n experience in line with the Customer Experience Agency Priority Goal \n– Increase American Customer Satisfaction Index score \n– Increase Enterprise Self-Assistance Participation Rate \nPAGE 35 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n6.2 MEASURING SUCCESS \n– 75 percent of taxpayer interactions have a digital alternative \n– 80 percent of annual outbound notifications available to be delivered digitally \n– Convert 100 percent of high-volume notices to an electronic format for taxpayer \nview by FY2020; with 10 percent of taxpayers completing an online installment \nagreement opting in to receive the monthly installment agreement notice through \nonline account by FY2021 and increasing adoption to 25 percent by FY2024 \n– 95 percent of product lines will offer callback capability \n• Protect revenue by improving the ability to identify fraudulent returns and assisting\n victims of identity theft \n– Reduce the amount of unprotected identity theft tax refunds paid by two percent \nby the end of CY2019, and an additional one percent annually through CY2024 \n– Increase the number of return types screened for anomaly detection through \nReturn Review Program (RRP) \n– Increase the percent of taxpayer using the ID Verify tool to validate their identity by \nfive percent in FY2020 and 50 percent by FY2024 \n• \n Expand opportunities and assistance for voluntary compliance and enhance \n systemic identification of non-compliance and fraud \n– Increase taxes collected as a percent of taxes owed \n– Increase audit efficiency, as measured by more closures per FTE, via reduced audit \ncycle time and less time on case, and fewer no-change audit results \n– Measure enforcement impact on voluntary compliance \n– Measure taxpayer self-correction rate \n• Stabilize operations and maintenance costs in line with industry standards \n– O&M cost stabilized at 80 percent of total IT spend in FY2019 \n– Reduce and then sustain aged infrastructure at 25 percent \n– Retire 75 percent of legacy code (Assembly Language Coding (ALC) & Common \nBusiness-Oriented Language (COBOL)) \n– 75-80 percent efficiency gain on work processes where robotic process \nautomation is applied \n• Minimize the risk of catastrophic system failure and data breaches \n– Ensure high-service availability with 100 percent of critical systems at the \nappropriate level of redundancy \n– Protect systems with 100 percent of applications at assessed level of risk or \nmitigated with compensating controls \nIn addition to tracking and reporting on the initial metrics above, we will also track \nperformance measures aligned to the FY2020 Congressional Budget Justification and \nAnnual Performance Report and Plan. \nPAGE 36 \n",
" \nALIGNMENT TO \nFEDERAL REGULATIONS \n6.3 \nWe will report progress towards modernization goals as directed by Congress and \n \nthe Office of Management and Budget. In addition, we will execute our governance \n \nprocesses in compliance with federally mandated legislation, such as the Federal \n \nInformation Technology Acquisition Reform Act (FITARA). As part of implementing the \n \nmodernization portfolio, we will continue to implement FITARA oversight and controls, \n \nenabling effective management of the portfolio and utilization of lessons learned. \n \nLeadership engagement in overseeing the Business Plan is key to aligning with FITARA. \nWe will continue to adhere to the primary requirements of Capital Planning and \n \nInvestment Control (CPIC), mandated by the Clinger-Cohen Act of 1996 as we manage \n \nand report on effective portfolio performance metrics associated with the targeted \n \nmodernization initiatives described in \n Section 5.0. \nWe will also continue to work towards the underlying goals and objectives described \n \nin the President’s Management Agenda, specifically in relation to modernizing IT and \n \ntransforming the customer experience. \nPAGE 37 \n",
" \nCONCLUSION \n7.0 \nWe continue our commitment towards fulfilling the IRS’s mission to provide America’s \ntaxpayers with top quality service by helping them understand and meet their tax \nresponsibilities. The Business Plan illustrates the tools and techniques necessary to \nachieve the customer experience and modernization goals over the two-phase six-\nyear plan. The four modernization Pillars and initial metrics provide the foundation \nfor organizing and measuring the IRS’s success in achieving its goals. \nDelivering on our modernization plan will enable the IRS to provide enhanced \nservices to taxpayers and deliver long-term budget and personnel efficiencies. \nEfficiencies are the results of decommissioning legacy applications, using robotics \nto automate manual processes, and expanding advanced analytics programs to more \neffectively serve and facilitate taxpayer compliance. Deploying these capabilities, \nwhile simplifying our legacy applications and infrastructure, is necessary for \nstabilizing the rising cost associated with maintaining our IT ecosystem. In the end, \nthis holistic approach will accelerate our modernization journey by putting taxpayer \nneeds first, supported by innovative technologies and sound operational processes. \nPAGE 38 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \nAPPENDICES \nAppendix A \nIRS PRIMARY BUSINESS PROCESSES \nThe IRS focuses on six primary business processes enabled by information technology services and \nsolutions. The following section describes each business process, the individual business units that \nutilize their functionality, and the supporting capabilities. \nIntake \nThe Intake business process includes the receipt, \nconversion, validation, issue resolution and \nprocessing of all inbound electronic and paper \nsubmissions (for example, tax returns, payments, \ninformation returns and reports), correspondence \nand other inbound taxpayer information. It also \nencompasses the initial capture and accounting \nof tax revenues and user fees, handling of exempt \ndeterminations, issuing of taxpayer notices and \nprocessing of refunds. Moreover, Intake entails up\nfront issue detection and resolution activities that \ncontribute to effective tax law enforcement. \n-\nThe IRS business units associated \nwith Intake are: \n• Wage & Investment (W&I) \n• Large Business & International (LB&I) \n• Small Business/Self Employed (SB/SE) \n• Tax Exempt/Government Entities (TE/GE) \nThe Intake business process’ core \ncapabilities include: \n• Submission Receipt and Preparation \n• Submission Conversion and Formatting \n• Submission Validation and Issue Resolution \n• Remittance Transaction Processing \nPAGE 39 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAPPENDICES \nAccount Management \nThe Account Management business process \nmaintains centralized access to billions of tax \nrecords and provides critical account services to: \nprocess tax returns, payments and other types \nof financial transactions; post transactions; and \nsettle taxpayer accounts. Account Management \nsupports the other primary business processes \nby providing the ability to access and update the \ntaxpayer account data necessary to investigate, \nrespond to and resolve taxpayer account issues, \nrefunds and notice inquiries. It is also used by \nInternal Operations to support tax processing \n(for example, financial reporting) and the annual \nGovernment Accountability Office (GAO) audit \nof financial systems. \nAccount Management is in some capacity \nassociated with every IRS business unit. Some \nof those are: \n• Wage & Investment (W&I) \n• Small Business/Self Employed (SB/SE) \n• Tax Exempt/Government Entities (TE/GE) \n• Large Business & International (LB&I) \n• IRS Criminal Investigation (CI) \nAccount Management’s core\ncapabilities include: \n• Account Services \n• Account Validation and Posting \n• Account Settlement \n• Account Analysis \n• Post-Settlement Actions \n• Fee Processing \nCompliance \nThe Compliance business process includes those \nprocesses that prevent, detect and resolve income \ntax filing, payment, refund and reporting compliance \nissues. The IRS designed the maintenance and \nenhancement of these processes to make non-\ncompliant taxpayers compliant and save taxpayers \nand corporations time in return preparation and \nrefund receipt. This business process spans taxpayer \nand tax-preparer awareness and education; validates \nreturns and tax data after filing; and enforces \ncompliance for any violations. Compliance includes \n \nthe collection, examination, appeals and criminal \n \nenforcement functions, with key activities that \n \ninclude forecasting potential non-compliance issues, \n \nperforming pre-filing preventive treatment, case \n \nprioritization models and algorithms, performing \n \nfiling, payment and reporting compliance actions \n \nand investigating criminal violations of the tax law. \nThe IRS business units associated \nwith Compliance are: \n• Wage & Investment (W&I) \n• Large Business & International (LB&I) \n• Small Business/Self Employed (SB/SE) \n• Tax Exempt/Government Entities (TE/GE) \n• IRS Criminal Investigation (CI) \n• IRS Office of Appeals \nPAGE 40 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAPPENDICES \nThe Compliance business unit’s core \ncapabilities are: \n• Compliance Planning \n• Workload Identification \n• Compliance Modeling \n• Preventive Treatment \n• Compliance Actions \n• Criminal Enforcement \nCase Management \nThe Case Management business process provides \n \ncomplex processing capabilities that require \n \na combination of IRS business personnel and \n \nelectronic workflow for a wide range of case types, \n \nsuch as a newly identified compliance issue, a \n \nsubmitted taxpayer claim, a taxpayer complaint, \n \nor a compliance issue that is moving to litigation. \n \nThe enterprise case management functions include \n \ncase identification; case creation; workflow; case \n \ndecision-making support; case processing and \n \ncase closure. Case Management is a cross-cutting \n \nprimary business process that comprises policy, \n \nprogrammatic and managerial support functions \n \nnecessary to IRS operations for cases that may \n \noriginate in other primary business processes (for \n \nexample, compliance and customer service). An \n \nenterprise-level case management solution will \n \nyield efficiencies by implementing standard case \n \nmanagement functions, providing visibility across \n \nvarious tax transactions and improving \n \ndata accessibility and usability. \nThe IRS business units associated with \nCase Management include: \n• Wage & Investment (W&I) \n• Large Business & International (LB&I) \n• Small Business/Self Employed (SB/SE) \n• Tax Exempt/Government Entities (TE/GE) \n• IRS Criminal Investigation (CI) \nThe core capabilities that encompass \nCase Management are: \n• Account Administration \n• Case Initiation \n• Case Select & Assign \n• Case Work \n• Case Closure \n• Case Tracking & Control \n• Reporting & Analytics \n• Case Management Administration \nPAGE 41 \n",
" \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nAPPENDICES \nCustomer Service \nThe Customer Service business process provides \n \ntax law and compliance assistance; taxpayer and \nstakeholder education and outreach; third party \nservices, and; responses to taxpayer account, \nrefund and notice inquiries. This primary business \nprocess provides account specific, non-account \nspecific and advocacy services. Customer Service \nassistance is provided through three primary \nmeans: centralized contact centers (phone, \nwritten and electronic inquiries); Automated Self-\nService Applications (ASSA) via the phone and \nweb, and; Taxpayer Assistance Centers (TACs) for \nwalk-in assistance. \nIRS business units tied to Customer Service are: \n• Wage & Investment (W&I) \n• Large Business & International (LB&I) \n• Small Business/Self Employed (SB/SE) \n• Tax Exempt/Government Entities (TE/GE) \nCustomer Service’s core capabilities include: \n• Inbound Receipts, Routing and Resolution \n• Outbound Management \n• Taxpayer Assistance \n• Outreach and Education \n• Third-Party Services \n• Self-Services \nInternal Operations \nThe Internal Operations primary business \n \nprocess defines enterprise-wide administrative \n \nsystems related to workforce support, human \n \ncapital management, accounting, and financial \n \nmanagement, IT management, budget and \n \nplanning, procurement, facilities, and travel. \n \nMany related organizations perform Internal \n \nOperations functions, including the Commissioner’s \n \nComplex (CC), Chief Financial Officer (CFO), \n \nChief Information Officer (CIO), Human Capital \n \nOfficer (HCO), Chief Risk Officer (CRO), Facilities \n \nManagement and Security Services (FMSS), \n \nInformation Technology and the Office of \n \nProcurement. \n \nInternal Operations systems support all the \nbusiness and functional operating divisions \ndefined within the IRS. \nThe core capabilities include: \n• Financial Management \n• Human Resources Management \n• Asset Management \n• Administrative Management \n• IT Management \n• Enterprise Strategy, Planning, \nGovernance, and Policy \n• Legal & Legislative Affairs \nPAGE 42 \n",
"ACRONYM DESCRIPTION \nAI \nArtificial Intelligence \nAPI \nApplication Programming Interface \nASSA \nAutomated Self-Service Applications \nCADE \nCustomer Account Data Engine \n \nCADE 2 TS \n2 \nCustomer Account Data Engine 2 \nTransition State 2 \nCAP \nCross-Agency Priority \nCC \nCommissioner’s Complex \nCDM \nContinuous Diagnostics and Mitigation \nCFO \nChief Financial Officer \nCI \nCriminal Investigation \nCIO \nChief Information Officer \nCOBOL \nCommon Business-Oriented Language \nCOTS \nCommercial Off-the Shelf \nCPIC \nCapital Planning and Investment \nControl \nCRO \nChief Risk Officer \nCSF \nCybersecurity Framework \nDevOps \nDevelopment & Operations \nEA \nEnterprise Architecture \nECM \nEnterprise Case Management \nESC \nExecutive Steering Committee \nFITARA \nFederal Information Technology \nAcquisition Reform Act \nFMSS \nFacilities Management and Security \nServices \nGAO \nGovernment Accountability Office \nACRONYM \nDESCRIPTION \nGB \nGovernance Board \nHCO \nHuman Capital Officer \nIAM \nIdentity & Access Management \nIMF \nIndividual Master File \nIRS \nInternal Revenue Service \nIT \nInformation Technology \nITAM \nIT Asset Management \nLAN \nLocal Area Network \nLB&I \nLarge Business and International \nLOS \nLevel of Service \nNIST \n \nNational Institute of Standards \nand Technology \nO&M \nOperations and Maintenance \nPMA \nPresident’s Management Agenda \nRPA \nRobotic Process Automation \nRRP \nReturn Review Program \nRTTP \nReal Time Tax Processing \nSB/SE \nSmall Business/Self-Employed \nSDLC \nSoftware Development Lifecycle \nTAC \nTaxpayer Assistance Centers \nTE/GE \nTax-Exempt and Government Entities \nTDC-ON \nTaxpayer Digital Communications \n \nOutbound Notifications \nWCMS \nWeb Content Management System \nW&I \nWage & Investment \nWebApps \nWeb Applications \nAppendix B \nACRONYMS \nTABLE 2: Acronyms & Descriptions \nPAGE 43 \n",
" \n \nPublication 5336 Catalog Number 72554V (4-2019) \nDepartment of the Treasury Internal Revenue Service \nwww.irs.gov \n"
] |
p4194.pdf
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1014 Publ 4194 (PDF)
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https://www.irs.gov/pub/irs-pdf/p4194.pdf
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[
"E\narned Income Tax Credit is for people who work for \nsomeone else or own or run a business. To qualify, you \nmust have low to mid income. If you qualify, you must file a \nfederal tax return to get EITC even if you owe no tax and are \nnot required to file. With EITC (sometimes called EIC), you \ncould pay less federal tax, pay no tax, or receive money back. \nThe amount of EITC changes based on:\n• if you are single or married and\n• if you have no children or the number of children living \nwith you.\nAll people eligible for EITC have seven things in common:\n1.\tHave earned income\n2.\tHave a valid Social Security number\n3.\tDo not file as married filing separately\n4.\tGenerally are not a nonresident alien\n5.\tAre not a qualifying child of another person\n6.\tAre not filing Form 2555 or Form 2555-EZ\n7.\tHave limited investment income\nFour most common EITC filing errors:\n1.\tClaiming a child who does not meet the qualifying tests \nfor age, relationship and residency\n2.\tFiling as single or head of household when married\n3.\tUnder or over reporting income or expenses\n4.\tSocial Security number and last name mismatches\nPublication 4194 (Rev. 10-2014) Catalog Number 59737M Department of the Treasury Internal Revenue Service www.irs.gov\nLife’s a little easier with\nGoing for tax help or return preparation? Go prepared with:\n• Valid driver’s license or other photo id card for you and \nyour spouse if filing a joint return\n• Social security cards or a Social Security number (SSN) \nverification letter for all persons listed on the return\n• Birth dates for all persons listed on return\n• All income statements: Forms W-2 and 1099, Social \nSecurity, unemployment, and other statements, such as \npensions, stocks, interest and any documents showing \ntaxes withheld. If self-employed or you own or run a \nbusiness, bring records of all your income\n• All records of expenses, such as tuition, mortgage \ninterest, or real estate taxes. If self-employed or you own \nor run a business, bring records of all your expenses.\n• Copies of last year’s state and federal tax returns, if you \nhave them\n• Bank routing numbers and account numbers to direct \ndeposit any refund\n• Dependent child care information: name and address of \nwho you paid and either the caretaker’s SSN or other tax \nidentification number\n• Both spouses to sign forms to e-file your joint tax return\nYour preparer, whether paid or volunteer, needs to ask many \nquestions to file your return correctly.\nAre you paying someone to do your taxes?\nBe sure to choose one who uses a PTIN, preparer tax identification number and signs your tax returns. See irs.gov for more \ninformation on how to choose a tax return preparer.\nSee if you qualify.\nwww.irs.gov/eitc\nOr ask your tax preparer\nErrors can delay the EITC part of your refund until it’s fixed. If the IRS audits your return and finds the EITC claim incorrect, you must pay back the \namount of EITC you received in error plus interest and penalties. You may also have to file Form 8862 for future claims. And, if the IRS finds your \nincorrect claim was intentional or fraudulent, we may ban you from claiming EITC for 2 or 10 years.\n"
] |
p5335.pdf
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0419 Publ 5335 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5335.pdf
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[
"History\nTimeline\n",
"",
"This book is made in collaboration with\nOffice of Online Services and the IRS Design Office\nFor Internal Use Only as Source Document for IRS.gov and print design and content development\nIRS\nHISTORY\nTIMELINE\n",
"CONTENTS\nINTRODUCTION\b\n7\nTAXES AND REVOLUTION\b\n9\nEVOLUTION OF TAXATION\b\n11\nTHE WHISKEY REBELLION\b\n12\nTHE WAR OF 1812\b\n15\nTHE TREASURY GETS A NEW HOME\b\n16\nCIVIL WAR EXPENSES\b\n19\nPROPERTY SEIZURES AND TAX REFUNDS\b\n21\nSTATE-OF-THE-ART TECHNOLOGY\b\n23\nPERSONAL PRIVACY\b\n25\nFIRST FEDERAL INCOME TAX\b\n26\nFORM 1040\b\n27\nPUBLIC AWARENESS\b\n29\nPROHIBITION\b\n31\nBUREAU OF INTERNAL REVENUE GETS NEW HOME\b\n32\nAL CAPONE\b\n35\nPAYROLL WITHHOLDING\b\n37\nVICTORY TAX\b\n39\nEARLY TAX COLLECTION MODERNIZATION\b\n41\nINTERNAL REVENUE SERVICE CREATED\b\n43\nTAXPAYER COMMUNICATION AND SUPPORT \b\n45\nPUBLIC OUTREACH\b\n47\nIRS MODERNIZES DATA PROCESSING\b\n49\nPRESIDENT KENNEDY VISITS IRS\b\n50\nINVENTION OF THE TINGLE TABLE\b\n53\nTAXPAYER SERVICE\b\n55\nIRS REACHES OUT TO MORE TAXPAYERS\b\n57\nFASTER, MORE ACCURATE SERVICE\b\n59\nTAX REFORM ACT OF 1986\b\n61\nSERVICE DESIGN\b\n63\nTAXPAYER RIGHTS\b\n65\nE-FILE\b\n66\nIRS BULLETIN BOARD SYSTEM AND IRS E-FILE\b\n67\nDIGITAL DAILY\b\n68\nRESTRUCTURING AND REFORM ACT OF 1998\b\n71\nDIGITAL TOOLS FOR TAXPAYERS\b\n72\nONLINE PAYMENTS\b\n74\nDIGITAL TOOLS FOR TAX PROFESSIONALS\b\n76\nIRS STUDENT AID TOOL\b\n79\nIRS GOES MOBILE\b\n80\nTAXPAYER BILL OF RIGHTS\b\n83\nTAX DESIGN CHALLENGE\b\n85\nONLINE ACCOUNT\b\n87\nIRS.GOV REDESIGNED\b\n89\nTAX CUTS AND JOBS ACT\b\n91\nIRS SOCIAL MEDIA\b\n93\nNEW 1040\b\n95\nCRIMINAL INVESTIGATION CENTENNIAL \b\n97\nWorking with teams from Communications and Liaison, Online Services, Criminal Investigation, and \nFacilities Management Support Services, the IRS Design Office created four captivating wall murals and \nmultiple corner banners. These were installed in 2016. In 2017, Online Services initiated and led a project \nto translate the content from the murals and banners into an engaging online experience. This project let \nthe team push the limits of IRS.gov’s new Drupal content management system and explore capabilities \nthat will better serve taxpayers online. The History of the IRS on IRS.gov has been a cross-divisional \nproject with passionate volunteers from the organizations above and from Privacy Government Liaison \nand Disclosure, Information Technology, and the Office of the Commissioner. The content from the \nfour murals and the resulting digital experience reflects contributions from retirees, employees across \nthe Service, the IRS Historical Fact Book: A Chronology, and other historical sources. This project was \ninitiated by Commissioner John Koskinen, who privately funded four wall art installations at IRS Head\nquarters to capture the rich history of the IRS. The project was completed under Commissioner Charles \nRettig with a single vision: to acknowledge the people of the IRS and their longstanding commitment \nto serving the American public. The rich and storied history of the IRS reinforces that commitment time \nand again. As you browse through a timeline that begins in the 1700s with the American Revolution and \ncontinues through the December 2017 passage of the Tax Cuts and Jobs Act, you will see the IRS’s \nongoing dedication to service and to the citizens of this nation. As the history of the Service carries \nforward, more acts of service will be added. Visit the living timeline on IRS.gov under About Us (www.\nirs.gov/about-IRS) and see how the commitment that has marked our history defines our future.\nI\nNTRODUCTION\n7\n",
"8\n9\n1770\n1765\n1765 – 1776\n1776\nThe Bloody Massacre Perpetrated in King Street, Boston on March 5, 1770. | Paul Revere | 1770 | Prints and Photographs Division, Library of Congress\nTaxation without representation was the seed of the American \nRevolution. Colonists rebelled against Britain’s punitive taxes because \nthey had no voice in parliament. On July 4, 1776, the Declaration of \nIndependence severed ties with England. The Revolutionary War ended \nin 1783, and a new nation was born.\nTAXES AND \nREVOLUTION\n",
"10\n11\nOn February 21, 1787, Congress approved a Constitutional Convention \nto revise the Articles of Confederation: “… the Congress shall have the \npower to lay and collect taxes, duties, imposts, and excesses, to pay the \ndebts and provide for the common defense and general welfare of the \nUnited States.”\nOn September 2, 1789, Congress established the Department of the \nTreasury and appointed Alexander Hamilton as the first Secretary.\nEVOLUTION\nOF TAXATION\n1789\n1787\n1787 – 1789\nAlexander Hamilton | John \nTrumbull | 1806 National \nPortrait Gallery, Smithsonian \nInstitution | Gift of Henry \nCabot Lodge\n",
"12\n13\n1794 saw the first outright challenge \nto the U.S. government’s revenue laws \nwhen a federal court summoned 75 \ndistillers in western Pennsylvania to \nappear in court and explain why they \nshouldn’t be arrested for whiskey tax \nevasion. The Whiskey Rebellion set up \na clash between citizens and federal \nofficers. The federal government \nprevailed, but at a cost of $1.5 million \nto American taxpayers.\n1794\n1795\nWashington Reviewing the Western Army at Fort Cumberland, Maryland | Frederick Kemmelmeyer | \ncirca 1795 | Metropolitan Museum of Art | Gift of Edgar William and Bernice Chrysler Garbisch, 1963\nTHE \nWHISKEY \nREBELLION\n1794\n",
"14\n15\nCapture and Burning of Washington by the British, in 1814 | Illustration in Our First Century by Richard Miller Devens | 1876 | Library of Congress\n1812\n1814\n1817\nTo pay for the War of 1812, Congress passed new internal taxes on refined sugar, carriages, \ndistillers and auction sales and reinstated the Commissioner of the Revenue to collect \nthem. On August 24, 1814, the British burned the Treasury building in Washington, D.C.\nOn December 23, 1817, Congress repealed these and all remaining internal taxes and \nabolished the position of the Commissioner of the Revenue and all offices to collect them.\nTHE WAR\nOF 1812\n1812 – 1817\n",
"16\n17\nTHE TREASURY \nGETS A NEW HOME\nConstruction began on a new Treasury building in \n1836. The first segment opened in 1842.\n1836\n1842\nArchitectural drawing of the Treasury building | Mills, Robert, 1781-1855, architect | \n1842 | Library of Congress Prints and Photographs Division Washington, D.C.\n1836 – 1842\n",
"18\n19\n1862\nOn July 1, 1862, President Lincoln signed the second revenue measure \nof the Civil War into law. This law levied internal taxes and established a \npermanent internal tax system. \nCongress established the Office of the Commissioner of Internal Revenue \nunder the Department of the Treasury. On July 17, 1862, George S. \nBoutwell became its first commissioner.\nCIVIL WAR \nEXPENSES\nAbraham Lincoln papers: Series 1. General Correspondence. | 1833-1916: Salmon \nP\n. Chase to Abraham Lincoln, Thursday, July 03, 1862 (Recommendation) Lincoln, \nAbraham, 1809-1865 | July 3, 1862 | Abraham Lincoln Papers at the Library of Congress\n1862\n",
"20\n21\n1863\n1864\nIn its first year, 1863, the Office of the Commissioner of Internal Revenue \ncollected $39.1 million.\nThe Revenue Act of June 30, 1864, authorized the Commissioner of \nInternal Revenue to compromise all suits “relating to internal revenue,” \nto abate outstanding assessments and to refund taxes subject to current \nregulations.\n1863 – 1864\nPROPERTY \nSEIZURES AND \nTAX REFUNDS\nTreasury department, July 25, 1864 | To the people of the United States. By an act of \nCongress, approved June 30, 1864, the Secretary of the Treasury is authorized to issue \nan amount not exceeding two hundred millions of dollars in Treasury notes. U. S. Treasury \ndept. | Washington, 1864 | Broadsides, leaflets, and pamphlets from America and Europe\n",
"22\n23\nHydrometer | Designed by \nGiuseppe Tagliabue of New \nYork, NY. | circa 1867 | SIA Acc. \n11-006, Box 005 - United States \nNational Museum. Division of \nGraphic Arts, Photographic \nCollection, 1860-1960 | \nSmithsonian Institution Archives\nIn February 1867, the Secretary of the Treasury adopted a hydrometer to \nestablish a uniform system to inspect and gauge alcoholic spirits subject \nto tax.\nThe March 1, 1867 Revenue Act authorized the Secretary of the Treasury \nto adopt, procure and prescribe these and other weighing and gauging \ninstruments to prevent and detect fraud by spirit distillers.\nSTATE-OF-THE-ART \nTECHNOLOGY\n1867\n1867\n",
"24\n25\nWill he dare do it? | Nast, Thomas, 1840-1902, artist | March 2, 1878. Illustrations and political \ncartoons by Thomas Nast Library of Congress Prints and Photographs Division Washington, D.C.\nRepresentative (later president) James Garfield \nof Ohio spearheaded an effort to make tax \ninformation private. On April 5, 1870, IRS \nCommissioner Delano forbade tax assessors from \nfurnishing lists of taxpayers for publication. On July \n14, 1870, Congress passed a revenue act stating, \n“no collector …shall permit to be published in any \nmanner such income returns or any part thereof, \nexcept such general statistics …”\n1878\n1870\n1870\nPERSONAL PRIVACY\n",
"26\n27\n1914\nOn February 25, 1913, the 16th \nAmendment officially became part of \nthe Constitution, granting Congress \nconstitutional authority to levy taxes on \ncorporate and individual income. The \nBureau of Internal Revenue established \na Personal Income Tax Division and \nCorrespondence Unit to answer a flood \nof questions about its enforcement, \nand a special division within General \nCounsel to prepare opinions interpreting \ninternal revenue laws.\nFIRST \nFEDERAL \nINCOME \nTAX\n16th Amendment to the U.S. Constitution: Federal Income \nTax | Congress | 1913 | National Archives at Washington, D.C.\nOriginal Form 1040 | 1913 | From OurDocuments.gov, a joint undertaking of the National \nArchives & Records Administration, National History Day, and the USA Freedom Corps\nOn January 5, 1914, the Treasury \nDepartment unveiled the four-\npage form (including instructions) \nfor the new income tax. The \nform was numbered 1040 in the \nordinary stream of numbering \nforms in sequential order. In the \nfirst year, no money was to be \nreturned with the forms. Instead, \neach taxpayer’s calculations \nwere verified by field agents, \nwho sent out bills on June 1. Tax \npayments were due by June 30.\n1913\n1914\n1913\nFORM \n1040\n",
"28\n29\n4 Minute Men - A Message \nfrom Washington | Welsh, \nH. Devitt, 1888-1942 | 1917 \n| Library of Congress Prints \nand Photographs Division \nWashington, D.C.\n1917\nIn 1917, the Internal Revenue Bureau launched a special nationwide \npublic education program to help citizens understand the new tax \nburden. The campaign tried to popularize war taxes by emphasizing the \nneeds of the country and appealing to national pride and patriotism.\n“Four Minute Men” fanned out across the nation, preaching the \nimportance of paying taxes promptly and fully.\nPUBLIC \nAWARENESS\n1917\n",
"30\n31\n1919\n1921\nCongress passed the National Prohibition Enforcement Act on \nOctober 27, 1919. It prohibited the manufacture, sale, and use of \nintoxicating beverages. It also designated the Bureau of Internal \nRevenue as the enforcement agency. The Bureau hired and \ntrained hundreds of prohibition agents to enforce the law and \ncreated a new intelligence unit to uncover corrupt prohibition \nagents and bootleggers.\nPROHIBITION\nNew York City Deputy Police Commissioner John A. Leach, right, watching agents pour liquor into sewer following \na raid during the height of prohibition | 1921 | Library of Congress Prints and Photographs Division Washington, D.C.\n1919\n31\n",
"32\n33\nBUREAU OF INTERNAL\nREVENUE GETS\nNEW HOME\nInternal Revenue Service Headquarters Building | 1111 Constitution Avenue Northwest, Washington, District of Columbia, \nDC | Historic American Buildings Survey | After 1933 | Library of Congress Prints and Photographs Division Washington, D.C.\nOn June 1, 1930, the main section of the \nnew Internal Revenue building opened, 16 \nmonths ahead of schedule and with a total \nconstruction cost of just over $6 million. \nIn addition to a state-of-the-art fire alarm \nsystem, it contained 1,400 telephones and \na synchronized system of 861 clocks, the \nlargest system of its kind at the time.\n1930\n1933\n1930\nAfter\n",
"34\n35\n1931\n1925\nAmerican gangster Alphonse “Al” Capone attained fame during the \nProhibition Era by raking in millions of dollars through bootlegging and \nother illicit activities. In 1931, an IRS Intelligence Unit investigation led \nto his indictment on federal income tax evasion and violations of the \nVolstead Act. He pled guilty, was convicted, and sentenced to 11 years in \nfederal prison, a $50,000 fine, and ordered to pay $215,000 plus interest \non back taxes.\nAL CAPONE\nAl Capone | Unidentified Artist | December 26, 1925 | National Portrait Gallery, Smithsonian Institution\n1931\n",
"36\n37\n1935\n1940\nOn August 14, 1935, Franklin D. Roosevelt signed the Social Security \nAct. Employees originally paid one percent of the first $3,000 of their \nsalaries to finance the benefits. The law required a new system of \ntax withholding, which the Bureau of Internal Revenue had to collect \nand turn over to the Social Security Trust Fund. It also created an \nunemployment compensation program and laid the foundation for \nmodern payroll withholding.\nPAYROLL \nWITHHOLDING\nFranklin D. Roosevelt | Oskar Stoessel | 1940 | National Portrait Gallery, Smithsonian Institution; gift of David E. Finley\n1935\n",
"38\n39\nStamp ‘em out Buy U.S. \nstamps and bonds | Byrne, \nThomas A., artist, Federal \nArt Project, sponsor | \nLibrary of Congress Prints \nand Photographs Division \nWashington, D.C.\n1942\nThe Roosevelt administration hoped to pay for at least half the cost of World \nWar II by increased taxation. The 1942 Revenue Act sharply increased most \nexisting taxes, introduced the Victory tax (a 5 percent surcharge on all net \nincome over $624 with a postwar credit), lowered exemptions and began \nprovisions for medical and dental expenses and investors’ expense deductions.\nStill, taxes only funded 43 percent of the war’s cost, 7 percent short of the goal.\nVICTORY TAX\n1942\n",
"40\n41\nThe Punched Card | Trade \npublication for the Punched Card \nPublishing Company | 1952 | National \nMuseum of American History, Gift of \nThomas J. Bergin\n1948\n1950\n1952\nIn 1948, the Bureau introduced punch-card equipment to process \nnotices. They also introduced photocopying to reduce the typing \nworkload and relieve a typist and stenographer shortage.\nIn 1949, the IRS introduced electric typewriters, continuous forms, dual-\nroller platens and posting machines to more efficiently process income \ntax returns. By 1950, the Bureau introduced computers for tabulation.\nEARLY TAX \nCOLLECTION \nMODERNIZATION\n1948 – 1950\n",
"42\n43\n1953\n1948\nIn 1952, President Harry S. Truman called for a comprehensive \nreorganization of the Bureau of Internal Revenue. The agency officially \nbecame the Internal Revenue Service on July 9, 1953.\nINTERNAL REVENUE \nSERVICE CREATED\nHarry S. Truman | Martha Greta Kempton | 1948 | National Portrait Gallery, Smithsonian Institution\n1953\n",
"44\n45\nPhoto | Records of the Internal Revenue Service\nDuring the 1950s, the Service primarily interacted with taxpayers through \nwritten and print communication using the U.S. Postal Service and walk-\nin offices. Walk-in offices, or Tax Assistance Centers (TAC), continue to \nprovide assistance to taxpayers today.\nTAXPAYER \nCOMMUNICATION \nAND SUPPORT \nPresent\n1950\n1950\nPresent\n",
"46\n47\nIn 1953, the IRS began the “Teaching Taxes” program by mailing a tax kit \nwith teaching text, enlarged copies of tax return forms and regular return \nforms to 30,000 junior and senior high school principals.\nBy 1959, the IRS offered public service announcements to television and \nradio stations throughout the entire year, not just during filing season.\nPUBLIC \nOUTREACH\n1959\n1953\nRight on the Button | Screenshots | Motion Picture Films, compiled ca. 1960 - ca. 1970 | Record Group 58: Records of the Internal Revenue Service, 1791 – 2006\n1953 – 1959\n",
"48\n49\nIn 1959, Congress and the Secretary of the Treasury approved IRS plans \nto install a nationwide automatic data processing system.\nBy January 1962, automated data processing entered full operation, \nprocessing up to 680,000 characters per second.\nIRS MODERNIZES \nDATA PROCESSING\n1962\n1959\nPhotos | Records of the Internal Revenue Service\n1959 – 1962\n",
"50\n51\n1961\nOn May 1, 1961, President John F\n. Kennedy attended the Joint \nConference of Regional Commissioners and District Directors \nof the IRS. The only U.S. President to visit IRS headquarters, \nPresident Kennedy praised the Service for pursuing fair taxation \nin the promotion of national interest.\nPRESIDENT \nKENNEDY \nVISITS IRS\nPresident John F. Kennedy addresses the Joint Conference of Regional Commissioners and Directors of Internal \nRevenue Service (IRS) | May 1, 1961 | White House Photographs | John F\n. Kennedy Presidential Library and Museum\n1961\n",
"52\n53\nFor over 50 years, Tingle Tables have saved taxpayers millions of \ndollars by reducing the time it takes IRS employees to sort through \nindividual paper-filed returns. In 1962, James Tingle invented the table \nwhile working in an IRS Service Center. Mr. Tingle built the prototype \nin his backyard. Still in use today, over 15 million tax returns flowed \nthrough the tables during the 2019 tax filing season.\nINVENTION\nOF THE \nTINGLE TABLE\nIRS Philadelphia, PA | Leffler, Warren K., photographer | April 14, 1971 | U.S. News & World Report magazine \nphotograph collection Library of Congress Prints and Photographs Division Washington, D.C. 20540\nPresent\n1962\n1962\nPresent\n",
"54\n55\nThe toll-free telephone network system, \npiloted in 1966, eventually allowed the \nIRS to handle most taxpayer inquiries \nby phone. On January 1, 1967, the IRS \nlaunched a nationwide, automated \nfederal tax system. That same year, the \nIRS established a long-range study to \ndetermine automated data processing \nrequirements through 1970 and beyond.\n1966\n1965\n1967\nIRS, Philadelphia, PA | Trikosko, Marion S., photographer | March 11, 1965 \n| U.S. News & World Report magazine photograph collection | Library of \nCongress Prints and Photographs Division Washington, D.C.\nTAXPAYER \nSERVICE\n1966 – 1967\n",
"56\n57\n1972\n1965\n1976\nIn 1972, the IRS began to offer tax information in Spanish. Over \ntime, translations expanded to include additional languages in print \nand on IRS.gov. In 1976, the Service offered toll-free telephone and \nteletypewriter service to the deaf and hard of hearing. Today, the \nIRS provides support through social media channels, relay services, \nAmerican Sign Language YouTube videos, and at Volunteer \nIndividual Tax Assistance Centers.\nIRS REACHES \nOUT TO MORE \nTAXPAYERS\nInternal Revenue Service | Trikosko, Marion S., photographer | February 2, 1965| Library of Congress Prints and Photographs Division Washington, D.C. 20540\n1972 – 1976\n",
"58\n59\n1978 the IRS installed a Remittance Processing System (RPS) and mail \nsorting system in all service centers. The system automated the sorting \nand opening of incoming tax returns at a rate of 22,000 pieces of mail \nper hour with a 98 percent accuracy rate. In contrast, the top speed of \nthe manual sort process it replaced was 1,200 pieces per hour.\nFASTER, MORE \nACCURATE \nSERVICE\n1978\n1978\nIRS Service Center Automated Mail \nProcessing System, Fresno, CA | March \n6, 2019 | Internal Revenue Service\nScreenshot from IRS video training \nvideo | Internal Revenue Service\n",
"60\n61\n1986\nU.S. Congress passed the Tax Reform Act to “simplify the income tax \ncode.” The Service marked a pivotal change in the way it interacted \nwith taxpayers by beginning the progression from paper-based filing to \nelectronic filing.\nTAX REFORM \nACT OF 1986\nPresident Ronald Reagan signing the Tax Reform Act of 1986 with members of Congress and White House staff present on the \nSouth Lawn | October 22, 1986 | The U.S. National Archives and Records Administration: Ronald Reagan Presidential Library & Museum\n1986\n",
"62\n63\n1982\n1986\n1988\n1978\nIn 1978, the IRS studied the economic, social, and behavioral factors \nthat impact taxpayer compliance.\nIn 1986, the IRS established an artificial intelligence laboratory as part \nof an initiative to explore potential applications of new technologies to \ntax processing.\nIn 1988, the IRS revised its “Understanding Taxes” program for high \nschool students to include computer software and video programs in \nthe instructional materials.\nSERVICE DESIGN\nUnderstanding Taxes 1982 Poster | Publication 1042 (Rev \n7-81) | Department of the Treasury, Internal Revenue Service\n1988\n",
"64\n65\n1988\nIn 1988, the IRS published Publication 1, Your Rights as a Taxpayer, \nwhich required the IRS to fully inform taxpayers of their rights as a \ntaxpayer and the processes for examination, appeal, collection, and \nrefunds.\nTAXPAYER RIGHTS\nPublication 1, Your Rights as a \nTaxpayer | August 1988 | Internal \nRevenue Service\n1988\n",
"66\n67\n1991\nThe IRS started electronic filing to lower operating costs and paper \nuse. The Service anticipated over 90 percent of 150 million individual \nreturns would be filed electronically for 2019 tax-filing season.\nThe National Technical Information Service (NTIS) established \nFedWorld in 1992 to serve as the online locator service for an \nextensive inventory of information distributed by the federal \ngovernment. Two years later in 1994, NTIS launched a bulletin \nboard system to support the IRS, giving the Service the ability \nto provide forms and publications online.\nE-FILE\n1994\n1991\nIRS e-File Logo 1995\nFedWorld Bulletin Board System \n(BBS) screenshot | Kermit 95+ Manual \nfor K95 Version 2.1.3 | columbia.edu\nIRS BULLETIN BOARD \nSYSTEM AND IRS E-FILE\nPhoto credit: Getty Images\n1995\n",
"68\n69\n2015\n2018\n2006\n1996\nThe Digital Daily was the first presence of the IRS on the World Wide \nWeb. It had a warm and humorous tone, and a design that resembled \na newspaper. The site grew and evolved into IRS.gov, which had \nmore than 609 million visits in 2018.\nDIGITAL DAILY\nWayback Machine | IRS.gov: January 1, 2006; January 1, 2015; January 1, 2016; January 1, 2018\n1996 – 2018\nPhoto credit: Getty Images\n",
"70\n71\n1998\nThe IRS Restructuring and Reform Act of 1998 prompted the most \ncomprehensive reorganization and modernization of the IRS in nearly \nhalf a century. The IRS reorganized itself in 2000 to closely resemble the \nprivate sector, creating four major business divisions, each aligned to a \ngroup of taxpayers with similar needs.\nRESTRUCTURING \nAND REFORM \nACT OF 1998\n1998\nInternal Revenue Service Building | Getty Images\n",
"72\n73\n2012\n2006\n2005\nThe IRS leaned into digital innovation, launching multiple tools:\n• 2001 – Withholding Calculator\n• 2002 – Where’s My Refund (used more than 18 million times in 2003)\n• 2003 – Free File (served almost 3 million taxpayers its first year)\n• 2005 – Taxpayer Local Assistance Office Locator\n• 2007 – Sales Tax Deduction Calculator\nDIGITAL TOOLS \nFOR TAXPAYERS\nWayback Machine | Where’s My Refund: September 7, 2005; FreeFile: September 26, 2006; Withholding Calculator: October 1, 2012\n2001 – 2007\n",
"74\n75\nONLINE \nPAYMENTS\nTo keep up with digital demand, the IRS introduced two applications that allowed \ntaxpayers to pay their bills online.\n• 2002 – IRS launched the Electronic Installment Agreement application. In 2006, it \nbecame the Online Payment Agreement\n• 2013 – Direct Pay: The IRS worked with the Bureau of the Fiscal Service to launch \nthe first online method for federal tax payments that allows users to quickly pay \nwithout pre-registration\n2013\n2002\nOnline Payment Agreement: screenshot 2013 | Direct Pay: screenshot 2018\n2002 – 2013\nPhoto credit: Getty Images\n",
"76\n77\nDIGITAL TOOLS FOR \nTAX PROFESSIONALS\nIn a continued effort to move toward a paperless filing process, the IRS \nlaunched digital solutions for tax professionals\n• 2004 – Transcript Delivery System (TDS): Client tax records requested \nonline and received within minutes instead of days.\n• 2008 – Electronic PIN Signature (ePIN): Client individual tax returns \nelectronically filed and signed.\n2008\n2011\n2004\n2002\nTranscript Delivery Service: screenshot 2002 | Electronic PIN Signature: screenshot 2011\n2004 – 2008\n",
"78\n79\n2010\nThe Department of Education and the IRS collaborated to build a tool \nthat enabled students and parents to transfer tax information from the \nIRS directly to their Free Application for Federal Student Aid (FAFSA) \nonline application, streamlining the student aid application experience.\nIRS STUDENT \nAID TOOL\n2010\nWayback Machine | November 1, 2010\nPhoto credit: Getty Images\n",
"80\n81\nAs taxpayers moved toward mobile devices, the IRS developed \napplications to meet demand. In January 2011, the IRS launched its \nfirst native mobile application, IRS2Go.\nThe app initially allowed taxpayers to check the status of their \nrefunds and returns from their mobile devices. Subsequent updates \nlet users access free tax preparation assistance, link to IRS news and \nuse the app in Spanish.\nIRS GOES \nMOBILE\n2011 – 2015\n2011\n2015\n2018\nIRS2Go screenshots | 2011 and 2018\nPhoto credit: Getty Images\n",
"82\n83\n2014\nIn 2014, Commissioner John Koskinen and Taxpayer Advocate Nina E. \nOlson released an enhanced Taxpayer Bill of Rights. Written to be clear, \nunderstandable and accessible for both taxpayers and IRS employees, \nthe updated document grouped the dozens of existing rights in the tax \ncode into ten fundamental rights. The Taxpayer Bill of Rights is displayed \nin IRS offices across the country as a reminder that “respecting taxpayer \nrights continues to be a top priority for IRS employees.”\nTAXPAYER\nBILL OF RIGHTS\nPublication 5170, Taxpayer \nBill of Rights | Internal \nRevenue Service\n2014\n",
"84\n85\n2016\nIRS hosted its first crowdsourcing competition that encouraged \ninnovative ideas for the taxpayer experience of the future. Of 48 \nsubmissions, winners from California, Minnesota and Washington, \nD.C. were among those selected in categories covering:\n• Overall design \n• Taxpayer usefulness \n• Best financial capability\nTAX DESIGN \nCHALLENGE\nIRS Tax Design Challenge | 2016 | Internal Revenue Service\n2016\n",
"86\n87\n2016\nIn November 2016, the IRS launched Online Account, a self-service \napplication that allows taxpayers to check the amount they owe, see \ntheir payment history for the last two years, view a snapshot of their most \nrecently filed tax return and link to payment options or full transcripts.\nONLINE ACCOUNT\n2016\nOnline Account screenshot | Screenshot | 2018\nPhoto credit: Getty Images\n",
"88\n89\n2017\nIn August 2017, the IRS.gov team launched a major refresh of the \nwebsite. The new site was designed to be accessible for people with \ndisabilities, viewable on mobile devices and organized for taxpayers to \nquickly find what they need.\nIRS.GOV \nREDESIGNED\nIRS.gov | desktop and mobile device screenshots | 2017\nPhoto credit: Getty Images\n2017\n",
"90\n91\nOn December 22, 2017, President Donald J. Trump signed into law H.R. \n1, known as the Tax Cuts and Jobs Act, the most significant piece of \ntax reform legislation in decades. Today, the IRS continues its mission \nto provide America’s taxpayers with top quality service by helping them \nunderstand and meet their tax responsibilities and enforce the law with \nintegrity and fairness to all.\nTAX CUTS AND \nJOBS ACT\n2017\n2017\nU.S. Capitol Building | Getty Images\n",
"93\nPSSST...\nIRS is now on\nInstagram!\nFollow\n@IRSNews!!\nAs part of its mission to help taxpayers understand and meet their tax \nresponsibilities, the IRS added Instagram to its social media portfolio \nin late 2018. The @IRSnews account brings new audiences closer to \ntax topics that affect all taxpayers. The Service also has an established \npresence on:\n• YouTube \n• Facebook \n• Twitter \n• LinkedIn\nIRS\nSOCIAL MEDIA\n2018\n2018\nImage | December 2018 | Internal Revenue Service\n",
"94\n95\nIRS Form 1040 | December 2018 | Internal Revenue Service\nAs part of a larger effort to help taxpayers, the Internal Revenue Service \nstreamlined the Form 1040 into a shorter, simpler form. In December \n2018, the IRS released the redesigned Form 1040 and six accompanying \nschedules for taxpayers with more complicated returns. This new Form \n1040 retired the use of Form 1040-A and Form 1040-EZ for tax year 2018.\nNEW 1040\n2018\n2018\n",
"96\n97\nCriminal Investigation \nDivision Centennial \nPoster | 2019 | Internal \nRevenue Service\nIn 1919, the Treasury Secretary asked the IRS Commissioner to form a \ncriminal investigation unit to go after tax cheats and other criminals. 100 \nyears later, Criminal Investigation (CI) special agents continue to bring \ndown the most notorious criminals. CI remains the only law enforcement \nagency with the authority to investigate tax crimes—and has earned the \nreputation as the premier financial investigation unit in the world.\nCRIMINAL \nINVESTIGATION \nCENTENNIAL \n2019\n2019\n",
"Image List and Credits\n8—The Bloody Massacre Perpetrated in King Street, \nBoston on March 5, 1770. | Paul Revere | 1770 | Prints \nand Photographs Division, Library of Congress\n10—Alexander Hamilton | John Trumbull | 1806 National \nPortrait Gallery, Smithsonian Institution | Gift of Henry \nCabot Lodge\n12—Washington Reviewing the Western Army at Fort \nCumberland, Maryland | Frederick Kemmelmeyer | circa \n1795 | Metropolitan Museum of Art | Gift of Edgar William \nand Bernice Chrysler Garbisch, 1963\n14—Capture and Burning of Washington by the \nBritish, in 1814 | Illustration in Our First Century by \nRichard Miller Devens | 1876 | Library of Congress\n16—Architectural drawing of the Treasury building \n| Mills, Robert, 1781-1855, architect | 1842 | Library of \nCongress Prints and Photographs Division Washington, \nD.C.\n18—Abraham Lincoln papers: Series 1. General \nCorrespondence. | 1833-1916: Salmon P\n. Chase \nto Abraham Lincoln, Thursday, July 03, 1862 \n(Recommendation) Lincoln, Abraham, 1809-1865 | \nJuly 3, 1862 | Abraham Lincoln Papers at the Library of \nCongress\n20—Treasury department, July 25, 1864 | To the \npeople of the United States. By an act of Congress, \napproved June 30, 1864, the Secretary of the Treasury \nis authorized to issue an amount not exceeding two \nhundred millions of dollars in Treasury notes. U. S. \nTreasury dept. | Washington, 1864 | Broadsides, leaflets, \nand pamphlets from America and Europe\n22—Hydrometer | Designed by Giuseppe Tagliabue of \nNew York, NY. | circa 1867 | SIA Acc. 11-006, Box 005 \n- United States National Museum. Division of Graphic \nArts, Photographic Collection, 1860-1960 | Smithsonian \nInstitution Archives\n24—Will he dare do it? | Nast, Thomas, 1840-1902, \nartist | March 2, 1878. Illustrations and political cartoons \nby Thomas Nast Library of Congress Prints and \nPhotographs Division Washington, D.C.\n26—16th Amendment to the U.S. Constitution: \nFederal Income Tax | Congress | 1913 | National \nArchives at Washington, D.C.\n27—Original Form 1040 | 1913 | From OurDocuments.\ngov, a joint undertaking of the National Archives & \nRecords Administration, National History Day, and the \nUSA Freedom Corps\n28—4 Minute Men - A Message from Washington | \nWelsh, H. Devitt, 1888-1942 | 1917 | Library of Congress \nPrints and Photographs Division Washington, D.C.\n30—New York City Deputy Police Commissioner John \nA. Leach, right, watching agents pour liquor into \nsewer following a raid during the height of prohibition \n| 1921 | Library of Congress Prints and Photographs \nDivision Washington, D.C.\n32—Internal Revenue Service Headquarters Building \n| 1111 Constitution Avenue Northwest, Washington, \nDistrict of Columbia, DC | Historic American Buildings \nSurvey | After 1933 | Library of Congress Prints and \nPhotographs Division Washington, D.C.\n34—Al Capone | Unidentified Artist | December 26, 1925 \n| National Portrait Gallery, Smithsonian Institution\n36—Franklin D. Roosevelt | Oskar Stoessel | 1940 | \nNational Portrait Gallery, Smithsonian Institution; gift of \nDavid E. Finley\n38—Stamp ‘em out Buy U.S. stamps and bonds | \nByrne, Thomas A., artist, Federal Art Project, sponsor \n| Library of Congress Prints and Photographs Division \nWashington, D.C.\n40—The Punched Card | Trade publication for the \nPunched Card Publishing Company | 1952 | National \nMuseum of American History, Gift of Thomas J. Bergin\n42—Harry S. Truman | Martha Greta Kempton | 1948 | \nNational Portrait Gallery, Smithsonian Institution\n44—Photo | Records of the Internal Revenue Service\n46—Right on the Button | Screenshots | Motion Picture \nFilms, compiled ca. 1960 - ca. 1970 | Record Group 58: \nRecords of the Internal Revenue Service, 1791 – 2006\n48—Photos | Records of the Internal Revenue Service\n50—President John F. Kennedy addresses the \nJoint Conference of Regional Commissioners and \nDirectors of Internal Revenue Service (IRS) | May \n1, 1961 | White House Photographs | John F\n. Kennedy \nPresidential Library and Museum\n52—IRS Philadelphia, PA | Leffler, Warren K., \nphotographer | April 14, 1971 | U.S. News & World \nReport magazine photograph collection Library of \nCongress Prints and Photographs Division Washington, \nD.C. 20540\n54—IRS, Philadelphia, PA | Trikosko, Marion S., \nphotographer | March 11, 1965 | U.S. News & World \nReport magazine photograph collection | Library of \nCongress Prints and Photographs Division Washington, \nD.C.\n56—Internal Revenue Service | Trikosko, Marion S., \nphotographer | February 2, 1965| Library of Congress \nPrints and Photographs Division Washington, D.C. 20540\n58—IRS Service Center Automated Mail Processing \nSystem, Fresno, CA | March 6, 2019 | Internal Revenue \nService\n58—Screenshot from IRS video training video | \nInternal Revenue Service\n60—President Ronald Reagan signing the Tax Reform \nAct of 1986 with members of Congress and White \nHouse staff present on the South Lawn | October \n22, 1986 | The U.S. National Archives and Records \nAdministration: Ronald Reagan Presidential Library & \nMuseum\n63—Understanding Taxes 1982 Poster | Publication \n1042 (Rev 7-81) | Department of the Treasury, Internal \nRevenue Service\n64—Publication 1, Your Rights as a Taxpayer | August \n1988 | Internal Revenue Service\n66—IRS e-File Logo 1995\n67—FedWorld Bulletin Board System (BBS) \nscreenshot | Kermit 95+ Manual for K95 Version 2.1.3 | \ncolumbia.edu\n68—Wayback Machine | IRS.gov: January 1, 2006; \nJanuary 1, 2015; January 1, 2016; January 1, 2018\n70—Internal Revenue Service Building | Getty Images\n72—Wayback Machine | Where’s My Refund: \nSeptember 7, 2005; FreeFile: September 26, 2006; \nWithholding Calculator: October 1, 2012\n74—Online Payment Agreement: screenshot 2013 | \nDirect Pay: screenshot 2018\n76—Transcript Delivery Service: screenshot 2002 | \nElectronic PIN Signature: screenshot 2011\n78—Wayback Machine | November 1, 2010\n80—IRS2Go screenshots | 2011 and 2018\n82—Publication 5170, Taxpayer Bill of Rights | Internal \nRevenue Service\n85—IRS Tax Design Challenge | 2016 | Internal \nRevenue Service\n86—Online Account screenshot | Screenshot | 2018\n88—IRS.gov | desktop and mobile device screenshots \n| 2017\n90—U.S. Capitol Building | Getty Images\n92—Image | December 2018 | Internal Revenue Service\n94—IRS Form 1040 | December 2018 | Internal Revenue \nService\n96—Criminal Investigation Division Centennial Poster \n| 2019 | Internal Revenue Service\n",
"Publication 5335 (4-2019) Catalog Number 72503E Department fo the Treasury Internal Revenue Service www.irs.gov\n"
] |
p5261.pdf
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0619 Publ 5261 (PDF)
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https://www.irs.gov/pub/irs-pdf/p5261.pdf
|
[
"ITIN Outreach Products\nThese communication products provide information on changes made to the Individual Taxpayer \nIdentification Number (ITIN) program. They are intended for use in raising awareness among taxpayers with \na need to file a federal tax return but whose ITIN will expire at the end of this year.\nThe products, available in multiple languages, are offered in electronic format for electronic distribution or for \nprinting. To link to the electronic version please click on the publication numbers below. \nPub 5259, ITIN Fact \nSheet (English and \nSpanish)\nAlso available in the following \nlanguages: \nChinese, Haitian, Korean, \nRussian and Vietnamese.Sample of previous year Form 5259\nThis publication is a guide to \nchanges IRS implemented as \na result of the PATH Act that \nrequired expiration of certain \nITINs. It also covers required \ndocumentation for dependent \nITIN applications. \nPub 5256, You May \nNeed to Renew Your \nExpiring ITIN (English \nand Spanish)\nAlso available in the following \nlanguages: \nChinese, Haitian, Korean, \nRussian and Vietnamese.Sample of previous year Form 5256\nThis publication provides \ntaxpayers quick facts about \nwhich ITINs are expiring and \nhow to get more information. It \nprovides three flyers per page \nand can be printed and cut/\nseparated for use. \nPub 5257, Renewing \nYour ITIN (English and \nSpanish)\nAlso available in the following \nlanguages: \nChinese, Haitian, Korean, \nRussian and Vietnamese.Sample of previous year Form 5257\nThis publication is a full page \n(8.5 X 11) document detailing \nthe facts about expiring ITINs \nand basic information about \nhow to renew them. There’s an \nelectronic version with resource \nlinks and a printable version with \ninstructions on how and where to \nfind more information. \nPublication 5261 (Rev. 6-2019) Catalog Number 69136R Department of the Treasury Internal Revenue Service www.irs.gov\n"
] |
n1016.pdf
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0206 Notc 1016 (PDF)
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https://www.irs.gov/pub/irs-pdf/n1016.pdf
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[
"How to Stop Interest on Your Account\nMaking Remittances to Stop Interest \nWhen the IRS proposes adjustments to \nyour account, interest on the liability runs \nfrom the tax return due date to the date the \nIRS receives your remittance paying the \nentire liability, including tax, penalties, and \ninterest.\nWhat Amount Do I Have to Pay to Stop \nInterest from Running?\nTo completely stop interest from running \non a proposed tax liability, your remittance \nmust cover the entire amount of the \nproposed liability, including all interest that \nhas accrued to that point and penalties. \nOtherwise, interest may continue to build on \nany excess tax, penalties, and interest that \nmay be assessed against you. Your local \nAppeals Offi\n ce can help you compute the \namount of interest and process your \nremittance. \nHow Do I Stop Interest from Running on \nProposed Liabilities?\nYou may stop interest from building up \nagainst a proposed tax liability by making a \nremittance on your account as soon as you \nknow the amount of tax that potentially may \nbe owed, but before the tax liability is \nassessed. There are two types of \nremittances that will stop the running of \ninterest on proposed liabilities. You need to \ndecide which type is right for you.\nWhat are the Different Types of \nRemittances I Can Make for Proposed \nLiabilities?\nA remittance for additional tax liabilities that \nhave been proposed by IRS may take the \nform of either a “deposit” or an “advance \nNOTICE 1016 (Feb. 2006)\n",
"payment” of tax. \nHow are Deposits and Advance\nPayments Similar?\nBoth types of remittances will reduce or \nstop the accrual of additional interest on \nproposed tax liabilities (depending on the \namount of the remittance). IRS will credit a \ndeposit or an advance payment to your \naccount on the date it is received. If the \nfi\n nal decision on a proposed liability results \nin a lower liability than the amount of your \nremittance, the IRS will either credit the \nexcess against your other tax liabilities, or \nreturn (or refund) the excess to you.\nHow are Deposits and Advance \nPayments Different?\nOne signifi\n cant difference between a \ndeposit and an advance payment is that \nyou may ask in writing for a deposit to be \nreturned to you at any time. The IRS will \nreturn the deposit to you, with interest if you \nqualify, unless the IRS has already applied \nthe deposit as a payment against an \nassessed tax liability on your account. An \nadvance payment is treated as a payment \nof tax and will be refunded to you only if you \nmake a claim for refund and IRS \ndetermines you are entitled to a refund. \nAnother difference between deposits and \nadvance payments is that a higher interest \nrate will usually be paid on refunds of \nadvance payments than on returned \ndeposits.\nOnce a notice of defi\n ciency (often referred \nto as a 90-day letter) is issued in your case, \nthe IRS will convert your deposit to a \npayment against the proposed defi\n ciency \nafter the expiration of the 90-day or 150-day \nperiod for the notice of defi\n ciency, unless \nyou request in writing that you want IRS to \n",
"continue to treat your remittance as a \ndeposit. You must provide the IRS with \nyour written request before the expiration of \nthe 90-day or 150-day period.\nWhat If I Want to Go to Tax Court to \nChallenge the Proposed Liability?\nIf you make a remittance after the IRS \nsends you a notice of defi\n ciency, the Tax \nCourt will have jurisdiction to hear your case \nregardless of whether the remittance is \ntreated as a deposit or an advance \npayment, except in situations where you \nsign a waiver for assessment and collection. \n \nHowever, if you make a remittance that is \ndesignated as a payment of tax for the full \namount of the tax liability before a notice \nof defi\n ciency is mailed, you generally will \nnot have a right to challenge the proposed \ndefi\n ciency in Tax Court. Therefore, if you \ndesire to go to Tax Court, it is important that \nyou clearly designate your remittance as a \ndeposit in this situation.\nWhat Happens if I Do Not Clearly \nDesignate the Type of Remittance I \nIntend to Make?\nIf you send a remittance to the IRS without \nclearly designating the type of remittance \nyou are intending to make, the IRS \nmay apply the remittance to your account \nas either a deposit or an advance payment \nof tax depending on the circumstances. \nTherefore, it is important to be specifi\n c if \nyou desire a particular type of treatment for \nyour remittance.\nHow Do I Designate the Remittance as a \nDeposit?\nIf you want to make a deposit, provide the \nIRS (where you are required to fi\n le your \nreturn or the offi\n ce where your return is\nbeing examined) with a check or money \n",
"IRS\n$EPARTMENT\u0000OF\u0000THE\u00004REASURY\n)NTERNAL\u00002EVENUE\u00003ERVICE\n.OTICE\u0000\u0011\u0010\u0011\u0016\u0000\b\u0012\r\u0012\u0010\u0010\u0016\t\n#ATALOG\u0000.UMBER\u0000\u0012\u0010\u0014\u0019\u00134\norder payable to the United States \nTreasury accompanied by a written \nstatement designating the remittance as a \ndeposit. Include in the written statement \nthe type(s) of tax and tax year(s) that are \npotentially in dispute along with the amount \nand basis for the disputable tax. You may \ninclude a copy of the 30-day letter that you \nreceived explaining the proposed liability \nas the written statement as long as you \nmake it clear the remittance is a deposit for \nthe tax type(s), tax years(s) and disputable \namount(s) shown on the 30-day letter. \nCan I Withdraw a Deposit and Do I \nReceive Interest on It?\nYou may withdraw a deposit at any time, as \nlong as the IRS has not already converted \nthe deposit as a payment of tax against \nyour account. \nIf you withdraw a deposit, you may qualify \nto receive interest at the federal short-term \nrate. To qualify for interest beginning on \nthe date the IRS receives your deposit, you \nneed to include with your remittance the \nwritten statement identifying the tax type(s), \ntax year(s), and disputable tax (or a copy \nof the 30-day letter). Interest will not begin \non your deposit until the IRS receives this \ninformation from you. \n If you withdraw a deposit and it is later \ndetermined that you are liable for the tax, \nyou will be charged interest on the tax \nliability from the return’s original due date as \nif no deposit had been made. (See \nRevenue Procedure 2005-18 for more \ninformation on deposits).\n"
] |
i706gsd.pdf
|
0619 Inst 706-GS(D) (PDF)
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https://www.irs.gov/pub/irs-pdf/i706gsd.pdf
|
[
"Instructions for\nForm 706-GS(D)\n(Rev. June 2019)\nGeneration-Skipping Transfer Tax Return for Distributions\nDepartment of the Treasury\nInternal Revenue Service\nSection references are to the Internal \nRevenue Code unless otherwise noted.\nFuture Developments\nFor the latest information about \ndevelopments related to Form \n706-GS(D) and its instructions, such \nas legislation enacted after they were \npublished, go to IRS.gov/\nForm706GSD.\nWhat’s New\nNew filing address. Effective July 1, \n2019, Form 706-GS(D) will be filed in \nKansas City, Missouri. See Where To \nFile, later.\nGeneral Instructions\nPurpose of Form\nForm 706-GS(D) is used by a skip \nperson distributee to calculate and \nreport the tax due on distributions \nfrom a trust that are subject to the \ngeneration-skipping transfer (GST) \ntax.\nWho Must File\nIn general, any skip person who \nreceives a taxable distribution from a \ntrust must file Form 706-GS(D). \nTrustees are required to report \ntaxable distributions to skip person \ndistributees on Form 706-GS(D-1), \nNotification of Distribution From a \nGeneration-Skipping Trust.\nIf you receive a Form 706-GS(D-1) \nand the inclusion ratio found on Part II, \nline 3, column d, is zero for all \ndistributions, you do not need to file \nForm 706-GS(D). If you are required \nto file Form 706-GS(D), you do not \nhave to include any distributions that \nhave an inclusion ratio of zero.\nWhen To File\nThe GST tax on distributions is figured \nand reported on a calendar year \nbasis, regardless of your income tax \naccounting period. Generally, you \nmust file Form 706-GS(D) on or after \nJanuary 1 but not later than April 15 of \nthe year following the calendar year \nwhen the distributions were made.\nIf you are not able to file the return \nby the due date, you may request an \nautomatic 6-month extension of time \nto file by filing Form 7004, Application \nfor Automatic Extension of Time To \nFile Certain Business Income Tax, \nInformation, and Other Returns. The \nextension is automatic, so you do not \nhave to sign the form or provide a \nreason for your request. You must file \nForm 7004 on or before the regular \ndue date of Form 706-GS(D). See \nForm 7004 for more information.\nPrivate delivery services (PDSs). \nYou can use certain PDSs designated \nby the IRS to meet the \"timely mailing \nas timely filing/paying\" rule for tax \nreturns and payments. Go to IRS.gov/\nPDS for the current list of designated \nservices.\nThe PDS can tell you how to get \nwritten proof of the mailing date.\nFor the IRS mailing address to use \nif you’re using a PDS, go to IRS.gov/\nPDSStreetAddresses.\nPDSs can’t deliver items to \nP.O. boxes. You must use the \nU.S. Postal Service to mail \nany item to an IRS P.O. box address.\nWhere To File\nOn or before June 30, 2019, file Form \n706-GS(D) at the following address:\nDepartment of the Treasury\nInternal Revenue Service Center\nCincinnati, OH 45999\nIf using a PDS, use this address.\nInternal Revenue Submission \nProcessing Center\n201 West Rivercenter Blvd.\nCovington, KY 41011\nAfter June 30, 2019, file Form \n706-GS(D) at the following address:\nCAUTION\n!\nDepartment of the Treasury\nInternal Revenue Service Center\nKansas City, MO 64999\nIf using a PDS, use this address.\nInternal Revenue Submission \nProcessing Center\n333 W. Pershing\nKansas City, MO 64108\nPenalties and Interest\nSection 6651 provides penalties for \nboth late filing and late payment \nunless there is reasonable cause for \nthe delay. The law also provides \npenalties for willful attempts to evade \npayment of tax.\nA return is late when it is filed after \nthe due date, including extensions. \nThe late filing penalty will not be \nimposed if the taxpayer can show that \nthe failure to file a timely return is due \nto reasonable cause.\nReasonable cause determinations. \nIf you receive a notice about penalties \nand interest after you file Form \n706-GS(D), send us an explanation \nand we will determine if you meet \nreasonable cause criteria. Do not \nattach an explanation when you file \nForm 706-GS(D). Explanations \nattached to the return at the time of \nfiling will not be considered.\nSection 6662 provides a penalty for \nunderpayment of GST taxes which \nexceeds $5,000, if the underpayment \nis due to a valuation understatement. \nA substantial valuation under-\nstatement occurs when the reported \nvalue of property listed on Form \n706-GS(D) is 65% or less of the actual \nvalue of the property. A gross \nvaluation understatement occurs \nwhen the reported value of property \nlisted on Form 706-GS(D) is 40% or \nless of the actual value of the \nproperty.\nInterest will be charged on taxes \nnot paid by their due date, even if an \nextension of time to file is granted. \nInterest is also charged on any \nJanuary 15, 2019\nCat. No. 10828G\n",
"additions to tax imposed by section \n6651 from the due date of the return \n(including any extensions) until the \naddition to tax is paid.\nReturn preparer. Estate tax return \npreparers who prepare any return or \nclaim for refund which reflects an \nunderstatement of tax liability due to \nan unreasonable position are subject \nto a penalty equal to the greater of \n$1,000 or 50% of the income derived \n(or to be derived) for the preparation \nof each such return. Estate tax return \npreparers who prepare a return or \nclaim for refund which reflects an \nunderstatement of tax liability due to \nwillful or reckless conduct are subject \nto a penalty of $5,000 or 75% of the \nincome derived (or income to be \nderived), whichever is greater, for the \npreparation of each such return. See \nsections 6694(a) and 6694(b), the \nrelated regulations, and \nAnnouncement 2009-15, 2009-11 \nI.R.B. 687 (available at IRS.gov/pub/\nirs-irbs/irb09-11.pdf), for more \ninformation.\nSignature\nEither the distributee or an authorized \nrepresentative must sign Form \n706-GS(D).\nIf you fill in your own return, leave \nthe Paid Preparer Use Only space \nblank. If someone prepares your \nreturn and does not charge you, that \nperson should not sign the return.\nGenerally, anyone who is paid to \nprepare the return must sign the \nreturn in the space provided and fill in \nthe Paid Preparer Use Only area. See \nsection 7701(a)(36)(B) for exceptions.\nIn addition to signing and \ncompleting the required information, \nthe paid preparer must give a copy of \nthe completed return to the \ndistributee.\nNote. A paid preparer may sign \noriginal or amended returns by rubber \nstamp, mechanical device, or \ncomputer software program.\nSpecific Instructions\nPart I\nLine 1a\nIf the skip person distributee is a trust, \nenter the name of the trust here.\nLine 1b\nFor skip person distributees who are \nindividuals, enter the distributee's \nsocial security number (SSN) here \nand leave line 1c blank. If the skip \nperson distributee is a trust, see the \ninstructions for line 1c. Do not enter a \nnumber on both line 1b and line 1c.\nLine 1c\nIf the skip person distributee is a trust, \nenter the trust's employer \nidentification number (EIN) and leave \nline 1b blank. Do not enter a number \non both line 1b and line 1c.\nLine 2a\nIf the skip person distributee is a trust, \nenter the trustee's name here. If the \nskip person distributee is a minor or is \nunder some disability that precludes \nthe individual from filing the return, \nenter the name of the person who is \nlegally responsible for conducting the \naffairs of the distributee, such as a \nparent or guardian. Also, include the \ntitle or relationship to the distributee.\nLine 2b\nEnter the address at which you wish \nto receive correspondence from the \nIRS regarding this return. If there is an \nentry on line 2a, the address entered \nhere will normally be that of the \nperson listed on line 2a, rather than \nthe individual or trust listed on line 1a.\nPart II\nReport all the taxable distributions \nwith inclusion ratios greater than zero \nthat you received during the year. The \ntrustee will report these distributions \nto you on Form 706-GS(D-1). Attach a \ncopy of each Form 706-GS(D-1) you \nreceived during the year to this return. \nYou should also keep a copy for your \nrecords.\nIf you need more space than is \nprovided in Part II, attach an additional \nsheet of the same size and use the \nsame format that is used in Part II. \nMake sure that the total tentative \ntransfers from the continuation sheet \nare included on line 3 of Part II.\nColumn b\nIn column b, use the same item \nnumber that was used for the \ncorresponding distribution on Form \n706-GS(D-1). If you receive \ndistributions from more than one trust, \nyou may need to repeat item \nnumbers.\nColumn c\nThere may be instances when the \ntrustee has either not completed \ncolumns e (value) and f (tentative \ntransfer) of Form 706-GS(D-1) or \nwhen you disagree with the amounts \nthe trustee entered. If this occurs, \nattach a statement to this return \nshowing what you think are the \ncorrect amounts and how you figured \nthem.\nTo figure the tentative transfer \n(column c of this form), multiply the \napplicable inclusion ratio from Form \n706-GS(D-1), Part II, column d, by the \nvalue of the distribution. Use the \nfollowing guidelines to determine the \nvalue of the distribution.\nThe value of a distribution is its fair \nmarket value on the date of \ndistribution. Fair market value (FMV) \nis the price at which the property \nwould change hands between a \nwilling buyer and a willing seller when \nneither is forced to buy or to sell, and \nboth have reasonable knowledge of \nall the relevant facts. FMV may not be \ndetermined by a forced sale price nor \nby the sale price of the item in a \nmarket other than that in which the \nitem is most commonly sold to the \npublic. The location of the item must \nbe taken into account whenever \nappropriate.\nDetermine the value of the property \ndistributed as of the date of the \ndistribution. The date of distribution is \nlisted in Form 706-GS(D-1), Part II, \ncolumn c.\nReduce the value of any property \nbeing reported in Part II by the amount \nof any consideration provided by the \ndistributee.\nValue the stock of close \ncorporations or inactive stock on the \nbasis of net worth, earnings, earning \nand dividend capacity, and other \nrelevant factors. For such stock, \nattach balance sheets, particularly the \none nearest the date of the \ndistribution, and statements of net \nearnings or operating results and \ndividends paid for each of the 5 \npreceding years.\nReduce the reported value of real \nestate by the amount of any \noutstanding lien against the property \non the date of distribution. Attach \ncopies of any such liens. Explain how \nthe reported values were determined \nand attach copies of any appraisals.\n-2-\n",
"For more information, see the \nInstructions for Form 706, United \nStates Estate (and Generation-\nSkipping Transfer) Tax Return. You \ncan get the Instructions for Form 706, \nand other IRS forms and publications, \nby calling 800-TAX-FORM or by \nvisiting IRS.gov.\nPart III\nLine 4\nYou may deduct any adjusted \nallowable expenses incurred in \nconnection with the preparation of this \nForm 706-GS(D) or any other \nexpenses incurred in connection with \nthe determination, collection, or \nrefund of the GST tax reported or \nwhich should have been reported on \nthis return from the amount of the \ndistribution you received.\nAdjusted allowable expenses are \nequal to the total allowable expenses \nmultiplied by the inclusion ratio. If you \nhave more than one inclusion ratio in \nPart II, column d, of Form 706-GS\n(D-1), prorate the total expense \namong the inclusion ratios based on \nthe relative value of each distribution \nmade at the various inclusion ratios.\nYou may deduct an expense even \nthough it has not been paid at the time \nthe return is filed as long as the \namount of the expense is clearly \nascertainable at that time. If an \nadditional allowable expense is \nincurred after the return is filed, file \nForm 843, Claim for Refund and \nRequest for Abatement, to claim a \nrefund.\nExample. The following example \nillustrates the rules above.\nYou listed three distributions in Part \nII of Form 706-GS(D). The value of the \nfirst distribution is $10,000 and has an \ninclusion ratio of 0.25. The value of \nthe second distribution is $20,000 and \nhas an inclusion ratio of 0.33. The \nvalue of the third distribution is \n$30,000 and has an inclusion ratio of \n0.50. You received the completed \nreturn from the preparer along with the \nbill for the preparer's fee on April 14 \nand filed the return on April 15. You \npaid the preparer's $200 fee on April \n20. The adjusted allowable expense \nyou should report on line 4 of Part III is \n$80, calculated as follows.\n$60,000\n$10,000 × 200 = 33.33 × 0.25 =\n8 (rounded)\n$60,000\n$20,000 × 200 = 66.67 × 0.33 = 22 (rounded)\nAdjusted allowable expense\n$30,000 × 200 = 100 × 0.50\n= 50\n= 80\n$60,000\nLine 6\nEnter, using the table below, the \napplicable rate in effect at the time the \ngeneration-skipping distribution \noccurred.\nLine 9\nMake your check payable to “United \nStates Treasury.” Please write your \nSSN (or EIN), the year, and “Form \n706-GS(D)” on the check to assist us \nin posting it to the proper account. \nEnclose, but do not attach, the \npayment with Form 706-GS(D).\nTable of Maximum Tax Rates\nIf the generation-skipping \ntransfer occurred:\nThe \nmaximum \ntax rate is:\nAfter December 31, 2002, but \nbefore January 1, 2004\n. .\n 49%\nAfter December 31, 2003, but \nbefore January 1, 2005\n. .\n 48%\nAfter December 31, 2004, but \nbefore January 1, 2006\n. .\n 47%\nAfter December 31, 2005, but \nbefore January 1, 2007\n. .\n 46%\nAfter December 31, 2006, but \nbefore January 1, 2010\n. .\n 45%\nAfter December 31, 2009, but \nbefore January 1, 2011\n. .\n0%\nAfter December 31, 2010, but \nbefore January 1, 2013\n. .\n35%\nAfter December 31, \n2012\n. . . . . . . . . . . . . .\n40%\nPrivacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal \nRevenue laws of the United States. We need it to figure and collect the right amount of tax. Subtitle B, Estate and Gift \nTaxes, of the Internal Revenue Code imposes a tax on certain distributions from a trust to a skip person; section 6109 \nrequires you to provide your identification number. This form is used to figure the amount of the taxes that you owe. \nFailure to provide this information in a timely manner, or providing false or fraudulent information, may subject you to \npenalties. We may disclose this information to the Department of Justice for civil and criminal litigation, and to cities, \nstates, the District of Columbia, and U.S. commonwealths and possessions for use in administering their tax laws. We \nmay also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal \nnontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism.\nYou are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act \nunless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be \nretained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax \nreturns and return information are confidential, as required by section 6103.\nThe time needed to complete and file this form will vary depending on individual circumstances. The average \nestimated time is:\nRecordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n6 min.\nLearning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n13 min.\nPreparing the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n18 min.\nCopying, assembling, and sending the form to the IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n20 min.\nIf you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, \nwe would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the \n-3-\n",
"Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC \n20224. Do not send the form to this address. Instead, see Where To File, earlier.\n-4-\n"
] |
f14242cn.pdf
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1016 Form 14242 (CN) (PDF)
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https://www.irs.gov/pub/irs-pdf/f14242cn.pdf
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[
"Please wait... \n \nIf this message is not eventually replaced by the proper contents of the document, your PDF \nviewer may not be able to display this type of document. \n \nYou can upgrade to the latest version of Adobe Reader for Windows®, Mac, or Linux® by \nvisiting http://www.adobe.com/products/acrobat/readstep2.html. \n \nFor more assistance with Adobe Reader visit http://www.adobe.com/support/products/\nacrreader.html. \n \nWindows is either a registered trademark or a trademark of Microsoft Corporation in the United States and/or other countries. Mac is a trademark \nof Apple Inc., registered in the United States and other countries. Linux is the registered trademark of Linus Torvalds in the U.S. and other \ncountries.\n"
] |
f2553.pdf
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1217 Form 2553 (PDF)
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https://www.irs.gov/pub/irs-pdf/f2553.pdf
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[
"Note: Form 2553 begins on the next page.\nWhere To File Form 2553 after 6/17/19\nIf the corporation’s principal business, office, \nor agency is located in\nUse the following address \nor fax number\nConnecticut, Delaware, District of Columbia, \nGeorgia, Illinois, Indiana, Kentucky, Maine, \nMaryland, Massachusetts, Michigan, New \nHampshire, New Jersey, New York, North Carolina, \nOhio, Pennsylvania, Rhode Island, South Carolina, \nTennessee, Vermont, Virginia, West Virginia, \nWisconsin\nDepartment of the Treasury \nInternal Revenue Service \nKansas City, MO 64999 \n \nFax # 855-887-7734\nAlabama, Alaska, Arizona, Arkansas, California, \nColorado, Florida, Hawaii, Idaho, Iowa, Kansas, \nLouisiana, Minnesota, Mississippi, Missouri, \nMontana, Nebraska, Nevada, New Mexico, North \nDakota, Oklahoma, Oregon, South Dakota, Texas, \nUtah, Washington, Wyoming\nDepartment of the Treasury \nInternal Revenue Service \nOgden, UT 84201 \n \nFax # 855-214-7520\n",
"Form 2553\n(Rev. December 2017)\nDepartment of the Treasury \nInternal Revenue Service \nElection by a Small Business Corporation\n(Under section 1362 of the Internal Revenue Code) \n(Including a late election filed pursuant to Rev. Proc. 2013-30)\n▶ You can fax this form to the IRS. See separate instructions. \n▶ Go to www.irs.gov/Form2553 for instructions and the latest information.\nOMB No. 1545-0123\nNote: This election to be an S corporation can be accepted only if all the tests are met under Who May Elect in the instructions, all \nshareholders have signed the consent statement, an officer has signed below, and the exact name and address of the corporation \n(entity) and other required form information have been provided. \nPart I \nElection Information \nType \nor \nPrint \nName (see instructions) \nNumber, street, and room or suite no. If a P.O. box, see instructions. \nCity or town, state or province, country, and ZIP or foreign postal code \nA Employer identification number \nB Date incorporated \nC State of incorporation \nD \nCheck the applicable box(es) if the corporation (entity), after applying for the EIN shown in A above, changed its \nname or\naddress\nE \nElection is to be effective for tax year beginning (month, day, year) (see instructions) .\n.\n.\n.\n.\n. ▶\nCaution: A corporation (entity) making the election for its first tax year in existence will usually enter the \nbeginning date of a short tax year that begins on a date other than January 1. \nF \nSelected tax year: \n(1) \nCalendar year \n(2) \nFiscal year ending (month and day) ▶\n(3) \n52-53-week year ending with reference to the month of December \n(4) \n52-53-week year ending with reference to the month of ▶\nIf box (2) or (4) is checked, complete Part II. \nG \nIf more than 100 shareholders are listed for item J (see page 2), check this box if treating members of a family as one \nshareholder results in no more than 100 shareholders (see test 2 under Who May Elect in the instructions) ▶\nH \nName and title of officer or legal representative whom the IRS may call for more information \nTelephone number of officer or legal \nrepresentative \nI\nIf this S corporation election is being filed late, I declare I had reasonable cause for not filing Form 2553 timely. If this late \nelection is being made by an entity eligible to elect to be treated as a corporation, I declare I also had reasonable cause for not \nfiling an entity classification election timely and the representations listed in Part IV are true. See below for my explanation of the \nreasons the election or elections were not made on time and a description of my diligent actions to correct the mistake upon its \ndiscovery. See instructions. \nSign \nHere \nUnder penalties of perjury, I declare that I have examined this election, including accompanying documents, and, to the best of my \nknowledge and belief, the election contains all the relevant facts relating to the election, and such facts are true, correct, and complete. \n▲\nSignature of officer \nTitle \nDate \nFor Paperwork Reduction Act Notice, see separate instructions. \nCat. No. 18629R \nForm 2553 (Rev. 12-2017) \n",
"Form 2553 (Rev. 12-2017) \nPage 2 \nName \nEmployer identification number \nPart I \nElection Information (continued) Note: If you need more rows, use additional copies of page 2.\nJ \nName and address of each \nshareholder or former shareholder \nrequired to consent to the election. \n(see instructions) \nK \nShareholder’s Consent Statement \nUnder penalties of perjury, I declare that I \nconsent to the election of the above-named \ncorporation (entity) to be an S corporation \nunder section 1362(a) and that I have \nexamined this consent statement, including \naccompanying documents, and, to the best \nof my knowledge and belief, the election \ncontains all the relevant facts relating to the \nelection, and such facts are true, correct, \nand complete. I understand my consent is \nbinding and may not be withdrawn after the \ncorporation (entity) has made a valid \nelection. If seeking relief for a late filed \nelection, I also declare under penalties of \nperjury that I have reported my income on all \naffected returns consistent with the S \ncorporation election for the year for which \nthe election should have been filed (see \nbeginning date entered on line E) and for all \nsubsequent years. \nL \nStock owned or \npercentage of ownership \n(see instructions) \nNumber of \nshares or \npercentage \nof ownership \nDate(s) \nacquired \nM \nSocial security \nnumber or \nemployer \nidentification \nnumber (see \ninstructions) \nN \nShareholder’s \ntax year ends \n(month and \nday) \n \nSignature \nDate \n \n \n \n \nForm 2553 (Rev. 12-2017) \n",
"Form 2553 (Rev. 12-2017) \nPage 3 \nName \nEmployer identification number \nPart II \nSelection of Fiscal Tax Year (see instructions)\nNote: All corporations using this part must complete item O and item P, Q, or R. \nO \nCheck the applicable box to indicate whether the corporation is: \n1. \nA new corporation adopting the tax year entered in item F, Part I. \n2. \nAn existing corporation retaining the tax year entered in item F, Part I. \n3. \nAn existing corporation changing to the tax year entered in item F, Part I. \nP \n \n \n \nComplete item P if the corporation is using the automatic approval provisions of Rev. Proc. 2006-46, 2006-45 I.R.B. 859, to \nrequest (1) a natural business year (as defined in section 5.07 of Rev. Proc. 2006-46) or (2) a year that satisfies the ownership \ntax year test (as defined in section 5.08 of Rev. Proc. 2006-46). Check the applicable box below to indicate the representation \nstatement the corporation is making. \n1. Natural Business Year ▶\n I represent that the corporation is adopting, retaining, or changing to a tax year that qualifies \nas its natural business year (as defined in section 5.07 of Rev. Proc. 2006-46) and has attached a statement showing \nseparately for each month the gross receipts for the most recent 47 months. See instructions. I also represent that the \ncorporation is not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, \nretention, or change in tax year. \n2. Ownership Tax Year ▶\n I represent that shareholders (as described in section 5.08 of Rev. Proc. 2006-46) holding more\nthan half of the shares of the stock (as of the first day of the tax year to which the request relates) of the corporation have the \nsame tax year or are concurrently changing to the tax year that the corporation adopts, retains, or changes to per item F, Part \nI, and that such tax year satisfies the requirement of section 4.01(3) of Rev. Proc. 2006-46. I also represent that the corporation \nis not precluded by section 4.02 of Rev. Proc. 2006-46 from obtaining automatic approval of such adoption, retention, or \nchange in tax year. \nNote: If you do not use item P and the corporation wants a fiscal tax year, complete either item Q or R below. Item Q is used to \nrequest a fiscal tax year based on a business purpose and to make a back-up section 444 election. Item R is used to make a regular \nsection 444 election. \nQ \nBusiness Purpose—To request a fiscal tax year based on a business purpose, check box Q1. See instructions for details \nincluding payment of a user fee. You may also check box Q2 and/or box Q3. \n1. Check here ▶\n if the fiscal year entered in item F, Part I, is requested under the prior approval provisions of Rev. Proc. \n2002-39, 2002-22 I.R.B. 1046. Attach to Form 2553 a statement describing the relevant facts and circumstances and, if \napplicable, the gross receipts from sales and services necessary to establish a business purpose. See the instructions for \ndetails regarding the gross receipts from sales and services. If the IRS proposes to disapprove the requested fiscal year, do \nyou want a conference with the IRS National Office? \nYes\nNo\n2. Check here ▶\n to show that the corporation intends to make a back-up section 444 election in the event the \ncorporation’s business purpose request is not approved by the IRS. See instructions for more information. \n3. Check here ▶\n to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary \nfor the IRS to accept this election for S corporation status in the event (1) the corporation’s business purpose request is not \napproved and the corporation makes a back-up section 444 election, but is ultimately not qualified to make a section 444 \nelection, or (2) the corporation’s business purpose request is not approved and the corporation did not make a back-up \nsection 444 election. \nR \nSection 444 Election—To make a section 444 election, check box R1. You may also check box R2. \n1. Check here ▶\n to show that the corporation will make, if qualified, a section 444 election to have the fiscal tax year \nshown in item F, Part I. To make the election, you must complete Form 8716, Election To Have a Tax Year Other Than a \nRequired Tax Year, and either attach it to Form 2553 or file it separately. \n2. Check here ▶\n to show that the corporation agrees to adopt or change to a tax year ending December 31 if necessary \nfor the IRS to accept this election for S corporation status in the event the corporation is ultimately not qualified to make a \nsection 444 election. \nForm 2553 (Rev. 12-2017) \n",
"Form 2553 (Rev. 12-2017) \nPage 4 \nName \nEmployer identification number \nPart III \nQualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2)* Note: If you are making more than \none QSST election, use additional copies of page 4.\nIncome beneficiary’s name and address \nSocial security number \nTrust’s name and address \nEmployer identification number \nDate on which stock of the corporation was transferred to the trust (month, day, year) .\n.\n.\n.\n.\n.\n.\n.\n ▶\nIn order for the trust named above to be a QSST and thus a qualifying shareholder of the S corporation for which this Form 2553 is \nfiled, I hereby make the election under section 1361(d)(2). Under penalties of perjury, I certify that the trust meets the definitional \nrequirements of section 1361(d)(3) and that all other information provided in Part III is true, correct, and complete. \nSignature of income beneficiary or signature and title of legal representative or other qualified person making the election \nDate \n* Use Part III to make the QSST election only if stock of the corporation has been transferred to the trust on or before the date on \nwhich the corporation makes its election to be an S corporation. The QSST election must be made and filed separately if stock of the \ncorporation is transferred to the trust after the date on which the corporation makes the S election. \nPart IV \nLate Corporate Classification Election Representations (see instructions)\nIf a late entity classification election was intended to be effective on the same date that the S corporation election was intended to be \neffective, relief for a late S corporation election must also include the following representations.\n1\nThe requesting entity is an eligible entity as defined in Regulations section 301.7701-3(a);\n2\nThe requesting entity intended to be classified as a corporation as of the effective date of the S corporation status;\n3 \n \nThe requesting entity fails to qualify as a corporation solely because Form 8832, Entity Classification Election, was not timely \nfiled under Regulations section 301.7701-3(c)(1)(i), or Form 8832 was not deemed to have been filed under Regulations section \n301.7701-3(c)(1)(v)(C);\n4 \nThe requesting entity fails to qualify as an S corporation on the effective date of the S corporation status solely because the \nS corporation election was not timely filed pursuant to section 1362(b); and\n5a \n \nThe requesting entity timely filed all required federal tax returns and information returns consistent with its requested \nclassification as an S corporation for all of the years the entity intended to be an S corporation and no inconsistent tax or \ninformation returns have been filed by or with respect to the entity during any of the tax years, or\nb \nThe requesting entity has not filed a federal tax or information return for the first year in which the election was intended to be \neffective because the due date has not passed for that year’s federal tax or information return.\nForm 2553 (Rev. 12-2017) \n"
] |
f14154es.pdf
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0619 Form 14154 (EN-SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/f14154es.pdf
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[
"Catalog Number 55178N\nwww.irs.gov\nForm 14154 (EN-SP) (Rev. 6-2019)\nForm 14154 (EN-SP) \n(June 2019)\nDepartment of the Treasury - Internal Revenue Service\nForm W-7 Checklist\nThis brochure is a tool to assist Acceptance Agents or Tax Professionals complete their client’s Form W-7 with the required supporting identification \nand exception documents if applicable, and to ensure taxpayer understanding of the requirements for obtaining an ITIN. See Publication 1915, \nUnderstanding Your IRS ITIN, for specific details and examples of completed/filled out Forms W-7. \n(Do not attach the checklist to the W-7 but keep it for your information).\nIf you are an Acceptance Agent (certifying or non-certifying) or Tax Professional, it is important to inform all applicants of the following ITIN restrictions \nbefore completing a W-7 application:\n• The ITIN cannot be used to claim the earned income tax credit as defined under section 32 of the Internal Revenue Code, nor for non-tax purposes \nsuch as to obtain a driver’s license.\n• The assignment of an ITIN does not change the applicant’s immigration status or entitle them to legal employment in the United States.\n• The ITIN does not take the place of an SSN or qualify the applicant for Social Security benefits.\n• The applicant who may be eligible for an SSN presently or in the future must apply for one from the Social Security Administration (SSA). If they \nare assigned an SSN, the ITIN if assigned will be revoked and can no longer be used. \nYou must also explain the information required by Form W-7 and that IRS may communicate information about the applicant to the acceptance agent \nor to a representative with a valid power of attorney. Point out that Form W-7 is signed under penalties of perjury and the consequences for making \nfalse statements or providing incorrect or false documents. \nThe following is a list of items to help you complete Form W-7 with quality and accuracy: \nUse the most current version of Form W- 7. The instructions can change with each revision and may contain new exhibits or criteria for applying. \nDetermine if the applicant is eligible for an SSN. Direct them to apply for one at the SSA if they are eligible, or have them obtain a denial letter to \nattach to Form W-7 if the SSA determines they are not. \nEnsure there is a federal tax purpose for obtaining or renewing the ITIN, such as filing a federal tax return. Ensure that you check the correct box \nfor the reason for submitting Form W-7. An ITIN must not be used outside the tax system as a form of personal identification. \nAttach a federal tax return to Form W-7 or exception documents in lieu of a tax return. A tax return is not required when renewing an existing ITIN. \nFor tax years 2018 through 2025, spouses and dependents who reside outside of the U.S. don't need to renew their ITIN unless they qualify for an \nallowable tax benefit, or if they file their own tax return. See Instructions for Form W-7 or Publication 1915 for more information. \nEnsure the number of completed Forms W-7 matches the number of dependents listed on the federal tax return. For example, if you complete three \ndependent applications you should list three dependents on the federal tax return. \nDiscuss what is acceptable Form W-7 supporting identification and exception documentation with the applicant or their authorized representative.\nAccept only supporting identification documents that are on the list of acceptable documents described in Instructions for Form W-7 and in \nPublication 1915. Ensure the documents are original or certified copies by the issuing agency. \nAccept only supporting identification documents that prove the applicant’s identity and foreign status. A passport is the only document that can be \nused to prove both. Otherwise, you must submit two documents, one of which must have a recent photograph; except for applicants under the age \nof 14 (under the age of 18 if a student). A passport without a date of entry won't be accepted as a stand-alone identification document for \ndependents, unless they are a dependent of U.S. military personnel stationed overseas. In these cases, applicants must submit additional original \ndocuments with the passport to prove U.S. residency. See Instructions for Form W-7 or Publication 1915 for more information.\nAttach exception documents when the applicant meets an “exception” to filing a federal tax return. See the Instructions for Form W-7 or Publication \n1915 for examples. \nEnsure that a Form 2848 (Power of Attorney) or evidence of Court-Appointed Guardian is attached, if applicable. \nAttach the Certifying Acceptance Agent’s required Certificate of Accuracy for each W-7 completed. This does not apply to non-certifying agents or \nother tax professionals. \nComplete the Acceptance Agent's Use Only portion of Form W-7. This does not apply to Tax Professionals who are not approved as an IRS \nAcceptance Agent or Certifying Acceptance Agent.\nVerify that Form W-7 is appropriately signed by the applicant, or a parent if applicant is under 18 years of age, or a court-appointed guardian or \nvalid power of attorney. \nFor more information on Form W-7 and requirements, visit www.irs.gov/itin. Look for helpful Frequently Asked Questions and Answers. Spanish-\nspeaking applicants can find the same information at www.irs.gov/espanol and search ITIN.\nComments and Suggestions\nWe value and appreciate your comments and suggestions. Send them by email to: [email protected] or write to IRS ITIN Policy Section MS \n97WI, 401 W. Peachtree St NW, Atlanta GA 30308. \n",
"Catalog Number 55178N\nwww.irs.gov\nForm 14154 (EN-SP) (Rev. 6-2019)\nFormulario 14154 (EN-SP) \n(junio de 2019) \nDepartamento del Tesoro – Servicio de Impuestos Internos \nLista de verificación del Formulario W-7(SP)\nEste folleto es una herramienta para ayudar a los Agentes Tramitadores o Profesionales de Impuestos a completar el Formulario W-7(SP) de sus \nclientes con la documentación comprobatoria de identificación y excepción requerida, si corresponde, y para asegurar el entendimiento del \ncontribuyente de los requisitos para obtener un ITIN. Para obtener información detallada y ejemplos del formulario completado, consulte la Publicación \n1915(SP), Información Para Entender su Número de Identificación Personal del Contribuyente (ITIN) del IRS. \n(No adjunte la lista de verificación Formulario W-7(SP); guárdela para su información).\nSi usted es Agente Tramitador (certificante o no) o Profesional de Impuestos, es importante informar a todos los solicitantes de las siguientes \nrestricciones del ITIN antes de completar una solicitud por medio del Formulario W-7(SP): \n• El ITIN no puede ser utilizado para reclamar el crédito tributario por ingreso del trabajo tal como se define en la sección 32 del Código de \nImpuestos Internos, ni para fines no tributarios tal como obtener una licencia de conducir. \n• La asignación de un ITIN no cambia el estado inmigratorio del solicitante ni le da el derecho legal de obtener empleo en los Estados Unidos. \n• El ITIN no toma el lugar de un número de seguro social (SSN, por sus siglas en inglés) ni califica al solicitante para recibir beneficios del seguro \nsocial. \n• El solicitante que actualmente (o en el futuro) puede cumplir los requisitos para obtener un número de seguro social, tiene que solicitarlo a la \nAdministración del Seguro Social (SSA, por sus siglas en inglés). Si se le asigna un número de seguro social y ya se le había asignado el ITIN, \néste será revocado y no podrá ser utilizado nuevamente.\nUsted también tiene que explicarle al contribuyente sobre la información requerida en el Formulario W-7(SP) y que el IRS puede facilitar información \nsobre el solicitante al agente tramitador o al representante legal autorizado. Indique que el Formulario W-7(SP) es firmado bajo pena de perjurio y las \nconsecuencias por hacer declaraciones falsas o de proporcionar documentos incorrectos o falsos.\nLa siguiente es una lista de puntos para ayudarle a completar el Formulario W-7(SP) con calidad y precisión: \nUtilice la versión más reciente del Formulario W-7(SP) y sus Instrucciones por separado. El formulario y sus instrucciones pueden cambiar con cada revisión \ny pueden contener nuevas pruebas o criterios para la solicitud. \nDetermine si el solicitante cumple los requisitos para obtener un SSN. Indíquele que tiene que solicitar uno a la SSA si cumple los requisitos o pídale que \nobtenga una carta de denegación si la SSA determina que no cumple los requisitos y adjúntela al Formulario W-7(SP). \nAsegúrese de que haya un propósito tributario federal para obtener o renovar el ITIN, tal como presentar una declaración del impuesto federal. Asegúrese \nde que marque el recuadro correcto con la razón para enviar el Formulario W-7 (SP). Un ITIN no debe ser utilizado fuera del sistema tributario como una \nforma de identificación personal. \nAdjunte una declaración del impuesto federal al Formulario W-7(SP), o los documentos requeridos en casos de excepción en lugar de la declaración de \nimpuestos. No se requiere adjuntar una declaración de impuestos al renovar un ITIN que ya tiene. Para los años tributarios 2018 a 2025, los cónyuges y \ndependientes que viven fuera de los Estados Unidos no tienen que renovar su ITIN a menos que tengan derecho a algún beneficio tributario permitido, o si \npresentan su propia declaración de impuestos. Para obtener más información, consulte las Instrucciones del Formulario W-7(SP) o la Publicación 1915(SP). \nAsegúrese de que el número de Formularios W-7(SP) completados concuerda con el número de dependientes reclamados en la declaración del impuesto \nfederal. Por ejemplo, si completa tres solicitudes de dependientes, usted debe declarar tres dependientes en la declaración del impuesto federal. \nHable con el solicitante o el representante autorizado, sobre cuáles son los documentos que comprueban la identificación y los documentos en el caso de \nuna excepción que se aceptan para el Formulario W-7(SP). \nAcepte solo los documentos que comprueban la identidad que figuran en la lista de documentos aceptables descritos en las Instrucciones del Formulario \nW-7(SP) y en la Publicación 1915(SP). Asegúrese de que los documentos sean los originales o copias certificadas por la agencia emisora. \nAcepte solo los documentos que comprueben la identidad y la condición de extranjero del solicitante. El pasaporte es el único documento que puede \ncomprobar ambas cosas. De lo contrario, usted tiene que presentar dos documentos de los cuales uno tiene que tener una fotografía reciente, a excepción \nde los solicitantes menores de 14 años de edad (menor de 18 años si es estudiante). Los pasaportes que no tengan una fecha de entrada no se aceptarán \ncomo un documento único de identificación para los dependientes, a menos que sean los dependientes del personal militar estadounidense estacionado en \nel extranjero. En estos casos, los documentos originales adicionales deben enviarse junto con el pasaporte para comprobar la residencia en los Estados \nUnidos. Consulte las instrucciones del Formulario W-7(SP) o la Publicación 1915(SP) para obtener más información.\nAdjunte los documentos para los casos de una excepción cuando el solicitante reúne el criterio de “excepción” para presentar una declaración del impuesto \nfederal. Para ver ejemplos de dichos casos, consulte las Instrucciones del Formulario W-7(SP) o la Publicación 1915(SP). \nAsegúrese de que el Formulario 2848(SP) (Poder Legal y Declaración del Representante), o los documentos que comprueben la tutoría legal expedidos por \nun tribunal se adjunten, si corresponde a su caso. \nAdjunte el Certificado de Exactitud que se le requiere al Agente Tramitador Certificante por cada Formulario W-7(SP) que éste complete. Este requisito no \nles corresponde a los Agentes Tramitadores no certificantes ni a otros profesionales de impuestos. \nComplete la sección del Formulario W-7(SP) titulada Para Uso Exclusivo del Agente Tramitador. Esto no se aplica a los profesionales de impuestos que no \nson Agentes Tramitadores o Agentes Tramitadores Certificantes del IRS.\nVerifique que el Formulario W-7(SP) esté debidamente firmado por el solicitante o el padre/madre si el solicitante es menor de 18 años de edad, el tutor \nlegal designado por un tribunal o el represente legal autorizado por un poder legal válido. \nPara obtener más información sobre el Formulario W-7(SP) y los requisitos, visite www.irs.gov/espanol y pulse sobre \"Solicite un Número de \nIdentificación Personal del Contribuyente (ITIN)\". Consulte la sección titulada “Preguntas sobre el ITIN”. \nComentarios y Sugerencias\nValoramos y agradecemos sus comentarios y sugerencias. Envíelos por correo electrónico a [email protected] o escriba al IRS ITIN Policy \nSection MS 97WI, 401 W. Peachtree St NW, Atlanta GA 30308. \n"
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f706qdt.pdf
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0619 Form 706-QDT (PDF)
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https://www.irs.gov/pub/irs-pdf/f706qdt.pdf
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[
"Form 706-QDT\n(Rev. June 2019)\nDepartment of the Treasury \nInternal Revenue Service \nU.S. Estate Tax Return for \nQualified Domestic Trusts\nCalendar Year\n▶ Go to www.irs.gov/Form706QDT for instructions and the latest information.\nOMB No. 1545-1212\nPart I\nGeneral Information\n1a Name of trust\n1b EIN of trust\n2a Name of trustee/designated filer (see instructions)\n2b SSN or EIN of trustee/designated filer\n2c Address of trustee/designated filer\n3a Name of surviving spouse (see Definitions in the instructions)\n3b TIN of surviving spouse\n3c Surviving spouse’s date of death (if applicable)\n3d Surviving spouse’s current marital status\n4a Name of decedent\n4b SSN of decedent\n4c Decedent’s date of death\nPart II\nElections by the Trustee/Designated Filer (see instructions)\nPlease check the “Yes” or “No” box for each question.\nYes\nNo\n1\nDo you elect alternate valuation? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\nDo you elect special use valuation? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” you must complete and attach Schedule A-1 of Form 706.\n3\nDo you elect to pay the taxes in installments as described in section 6166? .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nIf “Yes,” you must attach the additional information described in the instructions.\nNote: By electing section 6166, you may be required to provide security for estate tax deferred under \nsection 6166 and interest in the form of a surety bond or a section 6324A lien.\n4 \n \nIf the surviving spouse has become a U.S. citizen, does he or she elect under section 2056A(b)(12)(C) to treat all prior \ntaxable distributions as taxable gifts and to treat any of the decedent’s unified credit applied to the QDOT tax on \nthose distributions as the surviving spouse’s unified credit used under section 2505? (If not a U.S. citizen, enter “N/A”)\nPart III\nTax Computation\n1\nCurrent taxable trust distributions (total from Part II of Schedule A) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nValue of taxable trust property at date of death (if applicable) (total from Part III of Schedule A) .\n.\n.\n2\n3\nAdd lines 1 and 2 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4\nCharitable and marital deductions. See Schedule B instructions (total from col. D, Part IV of Sch. A) .\n4\n5\nNet tentative taxable amount. Subtract line 4 from line 3 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5\n6\nPrior taxable events (total from Part I of Schedule A) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nTaxable estate of the decedent. See instructions .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8\nAdd lines 6 and 7 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nAdd lines 5 and 8 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9\n10 \nRecomputation of decedent’s estate tax based on the amount on line 9. See instructions. Attach\ncomputation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n10\n11 \nRecomputation of decedent’s estate tax based on the amount on line 8. See instructions. Attach\ncomputation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11\n12\nNet estate tax. Subtract line 11 from line 10 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12\n13\nPayment made with request for extension, if any, and credit under section 2056A(b)(2)(B)(ii) .\n.\n.\n. \n13\n14\nTax due. (If the amount on line 12 exceeds the amount on line 13, enter the difference here.) .\n.\n ▶\n14\n15\nOverpayment. (If the amount on line 13 exceeds the amount on line 12, enter the difference here.) .\n15\nUnder penalties of perjury, I declare that I have examined this return, along with accompanying schedules and statements, and to the best of my knowledge and belief, it is \ntrue, correct, and complete. Declaration of preparer (other than trustee or designated filer) is based on all information of which preparer has any knowledge.\nSign \nHere\n▲\nSignature\n▲\nDate\nPaid \nPreparer \nUse Only\nPrint/Type preparer’s name\nPreparer’s signature\nDate\nCheck if \nself-employed\nPTIN\nFirm’s name ▶\nFirm’s address ▶\nFirm’s EIN ▶\nPhone no.\nFor Paperwork Reduction Act Notice, see the separate instructions for this form.\nCat. No. 12292E\nForm 706-QDT (Rev. 6-2019)\n",
"Form 706-QDT (Rev. 6-2019)\nPage 2\nSchedule A\nComplete Schedule A only if you are a designated filer filing this return for multiple trusts.\nPart I\nSummary of Prior Taxable Distributions\nA \nYear\nB \nAmount\nC \nYear\nD \nAmount\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\nTotal. Combine columns B and D \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart II\nSummary of Current Taxable Distributions\nA \nEIN of QDOT\nB \nTotal Taxable Distributions for the Year\nC \nEIN of QDOT\nD \nTotal Taxable Distributions for the Year\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\nTotal. Combine columns B and D \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart III\nSummary of Property Remaining in QDOTs at Death of Surviving Spouse\nA \nEIN of QDOT\nB Alternate Valuation \nDate (if applicable)\nC \nValue\nD \nEIN of QDOT\nE Alternate Valuation \nDate (if applicable)\nF \nValue\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\nTotal. Combine columns C and F \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. ▶\nPart IV\nSummary of Marital and Charitable Deductions\nA \nEIN of QDOT\nB \nTotal Marital Deduction\nC \nTotal Charitable Deduction\nD \nTotal Deductions (add cols. B and C)\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\nTotal .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nForm 706-QDT (Rev. 6-2019)\n",
"Form 706-QDT (Rev. 6-2019)\nPage 3\nSchedule B\nTo be completed by trustee.\nPart I\nGeneral Information (see instructions)\n1a Name of trust\n1b EIN of trust\n2a Name of trustee\n2b SSN or EIN of trustee\n2c Address of trustee\n3 Name of designated filer, if applicable\n4a Name of surviving spouse\n4b TIN of surviving spouse\n4c Surviving spouse’s date of death (if applicable)\n4d Surviving spouse’s current marital \nstatus (or at death, if applicable)\n5a Name of decedent\n5b SSN of decedent\n5c Decedent’s date of death\nPart II\nTaxable Distributions From Prior Years\nA \nYear\nB \nAmount\nC \nYear\nD \nAmount\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\n$\nTotal. Combine columns B and D .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart III\nCurrent Taxable Distributions\nA \nDate of Distribution\nB \nDescription\nC \nValue\nD \nAmount of Hardship \nExemption Claimed \n(see instructions)\nE \nNet Transfer \n(col. C minus col. D)\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nForm 706-QDT (Rev. 6-2019)\n",
"Form 706-QDT (Rev. 6-2019)\nPage 4\nSchedule B\nTo be completed by trustee. (continued)\nPart IV\nTaxable Property in Trust at Death of Surviving Spouse\nA \nItem No.\nB \nDescription\nC \nAlternate Valuation \nDate\nD \nValue\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart V\nMarital Deductions\nA \nItem No.\nB \nDescription of Property Interests Passing to Spouse\nC \nValue\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nPart VI\nCharitable Deductions\nA \nItem No.\nB \nDescription\nC \nName and Address of Beneficiary\nD \nCharacter of \nInstitution\nE \nAmount\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶\nForm 706-QDT (Rev. 6-2019)\n"
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f706na.pdf
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0619 Form 706-NA (PDF)
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https://www.irs.gov/pub/irs-pdf/f706na.pdf
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[
"Form 706-NA\n(Rev. June 2019)\nUnited States Estate (and Generation-Skipping Transfer) Tax Return \nEstate of nonresident not a citizen of the United States\nDepartment of the Treasury \nInternal Revenue Service \nTo be filed for decedents dying after December 31, 2011. \nGo to www.irs.gov/Form706NA for instructions and the latest information.\n▶ File Form 706-NA at the following address: \nDepartment of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999.\nOMB No. 1545-0531\nAttach supplemental documents and translations. Show amounts in U.S. dollars.\nPart I\nDecedent, Executor, and Attorney\n1a Decedent’s first (given) name and middle initial\nb Decedent’s last (family) name\n2 U.S. taxpayer ID number (if any)\n3 Place of death\n4 Domicile at time of death\n5 Citizenship (nationality)\n6 Date of death\n7a Date of birth\nb Place of birth\n8 Business or occupation\n9a Name of executor\n b Address (city or town, state or province, country, and ZIP or foreign postal code)\nc Telephone number\nd Fax number\ne Email address\n10a Name of attorney for estate\nb Address (city or town, state or province, country, and ZIP or foreign postal code)\nc Telephone number\nd Fax number\ne Email address\n11 If there are multiple executors or attorneys, check here and attach a list of the names, addresses, telephone numbers, fax \nnumbers, and email addresses of the additional executors or attorneys.\nPart II\nTax Computation\n1 \nTaxable estate from Schedule B, line 9 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1 \n2 \nTotal taxable gifts of tangible or intangible property located in the U.S., transferred (directly or indirectly) \nby the decedent after December 31, 1976, and not included in the gross estate (see section 2511) .\n.\n2 \n3 \nTotal. Add lines 1 and 2 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \n4 \nTentative tax on the amount on line 3 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \n5 \nTentative tax on the amount on line 2 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n5 \n6 \nGross estate tax. Subtract line 5 from line 4 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n7 \nUnified credit. Enter smaller of line 6 amount or maximum allowed (see instructions) .\n.\n.\n.\n.\n.\n7 \n8 \nBalance. Subtract line 7 from line 6 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nOther credits (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n9 \n10 \nCredit for tax on prior transfers. Attach Schedule Q, Form 706 \n.\n.\n.\n.\n.\n10 \n11 \nTotal. Add lines 9 and 10 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n11 \n12 \nNet estate tax. Subtract line 11 from line 8 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n12 \n13 \nTotal generation-skipping transfer tax. Attach Schedule R, Form 706 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n13 \n14 \nTotal transfer taxes. Add lines 12 and 13 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n14 \n15 \nEarlier payments. See instructions and attach explanation .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n15 \n16 \nBalance due. Subtract line 15 from line 14 (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n16 \nUnder penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is \ntrue, correct, and complete. I understand that a complete return requires listing all property constituting the part of the decedent’s gross estate (as defined by the statute) \nsituated in the United States. Declaration of preparer (other than the executor) is based on all information of which preparer has any knowledge. \nSign \nHere\n▲\nSignature of executor\n▲\nDate\n▲\nSignature of executor\n▲\nDate\nMay the IRS discuss this return \nwith the preparer shown below? \nSee instructions. \nYes\nNo\nPaid \nPreparer \nUse Only\nPrint/Type preparer’s name\nPreparer’s signature\nDate\nCheck if \nself-employed \nPTIN\nFirm’s name ▶\nFirm’s address ▶\nFirm’s EIN ▶\nPhone no. \nFor Privacy Act and Paperwork Reduction Act Notice, see the separate instructions.\nCat. No. 10145K\nForm 706-NA (Rev. 6-2019)\n",
"Form 706-NA (Rev. 6-2019)\nPage 2\nPart III\nGeneral Information\nAuthorization to receive confidential tax information under Regulations section 601.504(b)(2), to act as the estate’s representative before \nthe IRS, and/or to make written or oral presentations on behalf of the estate:\nName of representative (print or type)\nLicense state\nAddress (city or town, state or province, country, and ZIP or foreign postal code)\nI declare that I am the\nattorney/\ncertified public accountant/\nenrolled agent/\nother representative (check the applicable\nbox) for the executor. If licensed to practice in the United States, I am not under suspension or disbarment from practice before the Internal \nRevenue Service and am qualified to practice in the state shown above.\nIf not licensed to practice in the United States, check here.\nSignature\nCAF number\nDate\nTelephone number\nYes\nNo\n1a\nDid the decedent die testate? .\n.\n.\n.\n.\nb Were letters testamentary or of administration \ngranted for the estate? \n.\n.\n.\n.\n.\n.\n.\nIf granted to persons other than those filing the \nreturn, include names and addresses on page 1.\n2\nDid the decedent, at the time of death, own any:\na\nReal property located in the United States? .\nb\nU.S. corporate stock? .\n.\n.\n.\n.\n.\n.\n.\nc \n \nDebt obligations of (1) a U.S. person; or (2) the \nUnited States, a state or any political \nsubdivision, or the District of Columbia? \n.\nd\nOther property located in the United States? . \n3 \nWas the decedent engaged in business in the \nUnited States at the date of death? \n.\n.\n.\n4 \n \nAt the date of death, did the decedent have \naccess, personally or through an agent, to a \nsafe deposit box located in the United States?\n5 \n \n \n \nAt the date of death, did the decedent own \nany property located in the United States as a \njoint tenant with right of survivorship; as a \ntenant by the entirety; or, with surviving \nspouse, as community property? .\n.\n.\n.\nIf “Yes,” attach Schedule E, Form 706.\n6 \na Had the decedent ever been a citizen or resident \nof the United States? See instructions .\n.\n.\nb If “Yes,” did the decedent lose U.S. citizenship or \nresidency within 10 years of death? See instructions\n7 \n \n \n \n \nDid the decedent make any transfer (of \nproperty that was located in the United States \nat either the time of the transfer or the time of \ndeath) described in section 2035, 2036, 2037, \nor 2038? See the instructions for Form 706, \nSchedule G \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nYes\nNo\nIf “Yes,” attach Schedule G, Form 706.\n8 \n \n \n \nAt the date of death, were there any trusts in \nexistence that were created by the decedent \nand that included property located in the \nUnited States either when the trust was \ncreated or when the decedent died? .\n.\n.\nIf “Yes,” attach Schedule G, Form 706.\n9\nAt the date of death, did the decedent:\na Have a general power of appointment over \nany property located in the United States? .\nb\nOr, at any time, exercise or release the power?\nIf “Yes” to either a or b, attach Schedule H, \nForm 706.\n10a\nHave federal gift tax returns ever been filed? .\nb\nPeriods covered ▶\nc\nIRS offices where filed ▶\n11 \n \n \nDoes the gross estate in the United States \ninclude any interests in property transferred to \na “skip person” as defined in the instructions \nfor Schedule R of Form 706? \n.\n.\n.\n.\n.\nIf “Yes,” attach Schedules R and/or R-1, Form 706.\nSchedule A. Gross Estate in the United States (see instructions)\nYes\nNo\nDo you elect to value the decedent’s gross estate at a date or dates after the decedent’s death (as authorized by section 2032)? ▶\nTo make the election, you must check this box ‘‘Yes.’’ If you check ‘‘Yes,’’ complete all columns. If you check ‘‘No,’’ complete \ncolumns (a), (b), and (e); you may leave columns (c) and (d) blank or you may use them to expand your column (b) description.\n(a) \nItem \nno.\n(b) \nDescription of property and securities \nFor securities, give CUSIP number\n(c) \nAlternate \nvaluation date\n(d) \nAlternate value in \nU.S. dollars\n(e) \nValue at date of \ndeath in U.S. dollars\n(If you need more space, attach additional sheets of same size.)\nTotal \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\nSchedule B. Taxable Estate (Caution: You must document lines 2 and 4 for the deduction on line 5 to be allowed.)\n1\nGross estate in the United States (Schedule A total) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n1\n2\nGross estate outside the United States (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n2\n3\nEntire gross estate wherever located. Add amounts on lines 1 and 2 \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3\n4 \nAmount of funeral expenses, administration expenses, decedent’s debts, mortgages and liens, and \nlosses during administration. Attach itemized schedule (see instructions) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4\n5\nDeduction for expenses, claims, etc. Divide line 1 by line 3 and multiply the result by line 4 .\n.\n.\n.\n5\n6 \nCharitable deduction (attach Schedule O, Form 706) and marital deduction (attach Schedule M, Form\n706, and computation) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6\n7\nState death tax deduction (see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n7\n8\nTotal deductions. Add lines 5, 6, and 7 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8\n9\nTaxable estate. Subtract line 8 from line 1. Enter here and on line 1 of Part II .\n.\n.\n.\n.\n.\n.\n.\n.\n9\nForm 706-NA (Rev. 6-2019)\n"
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f706gsd.pdf
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0619 Form 706-GS(D) (PDF)
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https://www.irs.gov/pub/irs-pdf/f706gsd.pdf
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[
"Form 706-GS(D)\n(Rev. June 2019)\nDepartment of the Treasury \nInternal Revenue Service \nGeneration-Skipping Transfer Tax Return For Distributions\nOMB No. 1545-1144\n▶ Use for distributions made after December 31, 2010. \n \n▶ Go to www.irs.gov/Form706GSD for instructions and the latest information.\nFor calendar year \n. \nAttach a copy of all Forms 706-GS(D-1) to this return. \nPart I \nGeneral Information \n1a Name of skip person distributee \n1b Social security number of individual distributee (see instructions) \n1c Employer identification number of trust distributee (see instructions)\n2a Name and title of person filing return (if different from 1a, see instructions) \n2b Address of distributee or person filing return (see instructions) (number and street or P.O. box; city, town, or post office; state; and ZIP code). If you have a foreign \naddress, also complete the spaces below. \nForeign country name\nForeign province/county\nForeign postal code\nPart II \nDistributions \na \nTrust EIN (from Form 706-GS(D-1), \nline 2a) \nb \nItem no. (from Form 706-GS(D-1), \nline 3, column a) \nc \nAmount of transfer (from Form 706-GS(D-1), \nline 3, column f (Tentative transfer)) \n3 \nTotal transfers (add amounts in column c) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n3 \nPart III \nTax Computation \n4 \nAdjusted allowable expenses (see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n4 \n5 \nTaxable amount (subtract line 4 from line 3) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n5 \n6 \nMaximum federal estate tax rate (see instructions) \n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n6 \n%\n7 \nGeneration-skipping transfer tax (multiply line 5 by line 6) .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n. \n7 \n8 \nPayment, if any, made with Form 7004 .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n8 \n9 \nTax due .\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n.\n ▶ \n9 \n10 \nOverpayment. If line 8 is larger than line 7, enter amount to be refunded .\n.\n.\n.\n.\n.\n.\n ▶\n10 \nUnder penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is \ntrue, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. \nSign \nHere \n▲\nSignature of taxpayer or person filing on behalf of taxpayer \nDate \nPaid \nPreparer \nUse Only\nPrint/Type preparer’s name\nPreparer’s signature\nDate\nCheck if \nself-employed\nPTIN\nFirm’s name ▶\nFirm’s EIN ▶\nFirm’s address ▶\nPhone no.\nFor Privacy Act and Paperwork Reduction Act Notice, see instructions. \nCat. No. 10327Q\nForm 706-GS(D) (Rev. 6-2019) \n"
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f15094.pdf
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0619 Form 15094 (PDF)
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https://www.irs.gov/pub/irs-pdf/f15094.pdf
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[
"Please wait... \n \nIf this message is not eventually replaced by the proper contents of the document, your PDF \nviewer may not be able to display this type of document. \n \nYou can upgrade to the latest version of Adobe Reader for Windows®, Mac, or Linux® by \nvisiting http://www.adobe.com/go/reader_download. \n \nFor more assistance with Adobe Reader visit http://www.adobe.com/go/acrreader. \n \nWindows is either a registered trademark or a trademark of Microsoft Corporation in the United States and/or other countries. Mac is a trademark \nof Apple Inc., registered in the United States and other countries. Linux is the registered trademark of Linus Torvalds in the U.S. and other \ncountries.\n"
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p5303sp.pdf
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0319 Publ 5303 (SP) (PDF)
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https://www.irs.gov/pub/irs-pdf/p5303sp.pdf
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"Revisar su cheque \nde pago puede \nevitar una sorpresa \nen la temporada de \nimpuestos\nUse la Calculadora de Retención del IRS para verificar su cheque de pago\n•\nLa Calculadora de Retención del IRS ayuda a determinar si debe presentarle un nuevo\nFormulario W-4 a su empleador o efectuar pagos del impuesto estimado al IRS antes del\nfinal del año.\n•\nTenga a la mano su comprobante de pago y la declaración de impuestos federales más reciente.\n•\nLos resultados de la calculadora son tan precisos como la información ingresada.\n•\nEncuentre la calculadora del IRS en IRS.gov/retencion.\n*La Calculadora de Retención no está disponible en español.\nTodos deben verificar su retención. Debido a los cambios en la ley \ntributaria, es especialmente importante verificar ahora si usted:\n•\nEs parte de una familia con dos ingresos\n•\nTiene dos o más trabajos a la vez\n•\nTiene un trabajo temporero o solo trabaja parte del año\n•\nReclama el crédito tributario por hijos\n•\nTiene dependientes mayores de 17 años\n•\nDetalló sus deducciones anteriormente\n•\nTiene un ingreso alto o una declaración de impuestos compleja\n•\nTuvo un reembolso o una factura de impuestos por una suma alta la última vez que\npresentó la declaración\nEs importante verificar ahora su retención de \nimpuestos federales sobre el ingreso para \nevitar una factura de impuestos o una multa \ninesperada con la declaración del próximo \naño. La Calculadora de Retención del IRS \npuede ayudar. \nPublicación 5303 (SP) (Rev. 3-2019) Número de Catálogo 71606C Departamento del Tesoro Servicio de Impuestos Internos www.irs.gov \n"
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p3079.pdf
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1018 Publ 3079 (PDF)
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https://www.irs.gov/pub/irs-pdf/p3079.pdf
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" \nTAX-EXEMPT \nORGANIZATIONS \nAND GAMING\nPublication 3079 (Rev. 10-2018) Catalog Number 25706L Department of the Treasury Internal Revenue Service www.irs.gov\n",
"Introduction \nSaturday night bingo in the church hall, one-armed \nbandits in the social club, video lottery at the veterans’ \nclub, poker night at the fraternal lodge – these are ex-\namples of gaming1 – sometimes called gambling – by \norganizations exempt from federal income tax.\nFor many years now, exempt organizations have operated these and many other \ntypes of games as a part of their activities. Why do organizations “game”? \nProbably the number one reason is to raise funds – either to help cover the \ncost of running their organizations or to support worthy causes. For some \norganizations, gaming also permits its members to socialize with each other \nand fosters fellowship.\nWhatever the reason, an organization conducting any type of gaming should \nunderstand the relationship between that activity and its exempt purposes, \nand how the activity can impact its federal tax-exempt status. An organization \nengaged in gaming activities also needs to understand its tax and informa-\ntion reporting responsibilities. This publication provides an exempt organization \nwith the information it needs to engage in gaming activities in a manner that will \nnot jeopardize its exempt status or lead to unexpected tax liabilities, whether \nthe organization is currently running games or is considering whether to start.\nNote: Many states and localities regulate gaming by exempt organizations. This \npublication does not address state or local gaming licensing requirements. For \nlicensing requirements, please consult the appropriate agencies in your locale.\n1 \nGaming includes (but is not limited to): bingo, pull-tabs/instant bingo (including satellite and internet bingo), Texas \nHold-Em poker and other card games, raffles, scratch-offs, charitable gaming tickets, break-opens, hard cards, banded \ntickets, jar tickets, pickle cards, Lucky Seven cards, Nevada Club tickets, casino nights, Las Vegas nights and coin-op-\nerated gambling devices. Coin-operated gambling devices include slot machines, electronic video slot or line games, \nvideo poker, video blackjack, video keno, video bingo, video pull-tab games and so on.\n",
"CHAPTER 1\n2\nTable of Contents\nChapter 1 \nGaming’s Impact on Tax-Exempt Status \n3\nChapter 2 \nGaming and Unrelated Business Income \n6\n Exhibit A \nIs It Unrelated Business Taxable Income? \n10\nChapter 3 \nMaintaining Records \n11\nChapter 4 \nExempt Organizations Reporting Requirements \n12\nChapter 5 \nWorkers Conducting Gaming Activities \n13 \nChapter 6 \nReporting Winnings and Withholding Income Tax \n18\nChapter 7 \nGaming Excise Taxes \n22\n Exhibit B \nGeneral Tax Calendar for Organizations That Conduct Gaming \n26\n Exhibit C \nSummary of Forms, Publications and Other Resources for \nOrganizations Conducting Gaming \n31\n \n",
"Chapte\nr 1\nCHAPTER 1\n3\nChapter 1 - Gaming’s Impact on Tax-Exempt Status\nGaming’s Impact on Tax-Exempt Status\nThis chapter explores the impact of gaming on an organization’s tax-exempt status according to the section of the Internal \nRevenue Code (IRC) under which it is exempt. Chapter 2 explores when an organization’s gaming might give rise to income \ntax liability. You should refer to your organization’s exemption letter from the IRS to determine the subsection under which \nyouare recognized as exempt. If you do not have a copy of your organization’s letter, you can call IRS Tax Exempt and Govern-\nment Entities Customer Account Services at 877-829-5500 (toll-free) to request a copy or to determine your organization’s \nsubsection.\nGaming, itself, does not further the exempt purpose of most organizations. In general, when gaming does not further the \norganization's exempt purpose, gaming is no different than the conduct of any other trade or business carried on for profit. \nIn most instances, gaming's contribution to the operations of an exempt organization is generation of funds to pay expenses \nassociated with the conduct of the organization's exempt activities.\nThe exceptions to the general rule (that gaming does not usually further an exempt purpose) include organizations whose ex-\nempt purposes include social or recreational activities. For these organizations, gaming itself may further an exempt purpose.\nFor more information on specific subsections, see the following summaries and Publication 557, Tax-Exempt Status for Y\nOrganization.\nour \nSection 501(c)(3) – Charities, Schools, Churches and Religious Organizations\nAn organization may qualify for exemption under IRC Section 501(c)(3) if it is organized and operated exclusively for reli-\ngious, charitable, scientific, literary or educational purposes or for the purposes of testing for public safety, fostering national \nor international amateur sports competition or preventing cruelty to children or animals. To be exempt under Section 501(c)\n(3), an organization must engage in activities that accomplish one or more of these purposes. Examples of Section 501(c)(3) \norganizations include schools, churches and non-profit hospitals.\nA common misconception is that gaming is a “charitable” activity. There is nothing inherently charitable about gaming. It is a \nrecreational activity and a business. Although a charity may use the proceeds from gaming to pay expenses associated with \nits charitable programs, gaming itself does not further any charitable purpose. Thus, gaming cannot be a more than an insub-\nstantial purpose of a 501(c)(3) organization.\nIn addition, a Section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the \ncreator or the creator’s family, shareholders of the organization, other designated individuals or persons controlled directly or \nindirectly by such private interests. No part of the net earnings of a Section 501(c)(3) organization may inure to the benefit of \nany private shareholder or individual.2 An organization puts its exempt status in jeopardy when gaming results in inurement or \nprohibited private benefit to individuals, or where funds from the activity are diverted for private purposes.\nA charity conducting gaming as an insubstantial part of its activities will not ordinarily jeopardize its tax-exempt status but may \nbe subject to the tax on unrelated business income. See Chapter 2.\nThe IRS determines whether an organization is conducting a “substantial” unrelated activity by examining all the facts and \ncircumstances. There is no “bright-line” or numerical test prescribed by the IRC. The IRS will consider the dollars raised by \nand spent on an unrelated activity as well as the time and other resources devoted to it in making the determination of sub-\nstantiality.\nEvery 501(c)(3) organization has a second important tax classification: It is either a private foundation or a public charity. \nCertain types of organizations – schools, hospitals and churches, among others – are specifically listed in the IRC as public \ncharities. Many organizations, however, must show and maintain a broad base of financial support from the public to be clas-\nsified as public charities. If these organizations receive too much of their financial support from a limited number of sources \nor from an unrelated trade or business, such as gaming, they may fail the “public support” test and be classified as private \nfoundations. \nIf an organization is classified as a private foundation because its sole source of support is from an unrelated trade or business, \nit will have excess business holdings in a business enterprise within the meaning of IRC Section 4943(a)(1), and the organiza-\ntion must divest itself of them. Generally, the organization must cease to operate its gaming activities (or at least substantially \nrestructure its operations and sources of support). \nFor more information about foundation classification, the public support tests for certain public charities and the special tax \n2A private shareholder or individual is a person having a personal and private interest in the activities of the organization.\n",
"CHAPTER 1\n4\nChapter 1 - Gaming’s Impact on Tax-Exempt Status\nrules that apply to private foundations, see Publication 557, Tax-Exempt Status for Your Organization.\nSection 501(c)(4) – Social Welfare Organizations\nSection 501(c)(4) organizations promote social welfare. These types of organizations are sometimes called civic leagues. \nThey operate primarily to further the common good and general welfare of the people of a community through civic betterment \nand social improvements. No part of a Section 501(c)(4)’s net earnings may be used to benefit any private shareholder or \nindividual. An organization puts its exempt status in jeopardy when gaming revenue is diverted for private purposes. Examples \nof social welfare organizations include civic leagues, volunteer fire companies and homeowners’ associations.\nGaming is considered both a business and a recreational activity; it does not ordinarily promote social welfare. For example, \nRevenue Ruling 66-150 holds that a 501(c)(4) organization whose primary activity was to operate a social facility (including \na bar, restaurant and game room) is not exempt under Section 501(c)(4). Therefore, a Section 501(c)(4) organization whose \nprimary activity is gaming may jeopardize its exempt status.\nIn very limited situations, however, a social activity such as gaming may be considered a social welfare activity. The volunteer \nfire company described in Rev. Rul. 74-361, provided a club room for both on and off duty members of the department when \nthey were not otherwise engaged in fire calls. The facility was not open to the public. Access to the social club served to in-\ncrease camaraderie of the firefighters and encouraged better performance of the department, thus promoting social welfare.\nProvided that the organization’s primary purpose is the promotion of social welfare, the conduct of gaming will not ordinarily \njeopardize its tax-exempt status, but its gaming income may be subject to the tax on unrelated business income. \nSection 501(c)(5) and 501(c)(6) – Labor and Agricultural Organizations and Business Leagues\nSection 501(c)(5) describes labor, agricultural and horticultural organizations. Their exempt purposes include bettering the \nconditions of workers, improving the grade of products and/or developing a higher degree of efficiency in a particular occu-\npation. Section 501(c)(6) organizations are devoted to the improvement of conditions of one or more lines of business. Like \nSection 501(c)(3) and Section 501(c)(4) organizations, inurement of any part of the net earnings of a Section 501(c)(5) or \nSection 501(c)(6) organization to the benefit of any private shareholder or individual jeopardizes its exemption.\nGaming does not further the exempt purposes of any of these types of organizations. Thus, an organization exempt under Sec-\ntion 501(c)(5) or 501(c)(6) may jeopardize its exemption if gaming becomes the organization’s primary activity. Even if the \nactivity does not jeopardize the organization's exempt status, and the gaming income may be subject to the tax on unrelated \nbusiness income. \nSection 501(c)(7), 501(c)(8) and 501(c)(10) – Social Clubs and Fraternal Organizations\nThe exempt function of organizations classified under these sections includes providing social and recreational activities for \nmembers and their bona fide guests.3 Thus, social clubs and fraternal organizations may engage in gaming involving only \nmembers without jeopardizing their exempt status. \nGaming open to the public does not further the exempt purposes of social clubs or fraternal organizations. Section 501(c)(7), \n501(c)(8) and 501(c)(10) organizations whose primary activity is public gaming jeopardize their exempt status and the gaming \nincome may also be subject to the tax on unrelated business income. \nSection 501(c)(7) social clubs endanger their exempt status when receipts from nonmembers – including those from gaming \nactivities – exceed certain thresholds. A social club may receive no more than 35 percent of its gross annual receipts (includ-\ning investment income) from sources outside of its membership. Within that 35 percent, no more than 15 percent of gross \nreceipts can come from the public’s use of club facilities or services. If those limits are exceeded, the club’s exempt status \nmay be in jeopardy.\nSection 501(c)(19) – Veterans’ Organizations\nThis subsection describes posts or organizations of past or present members of the U.S. Armed Forces. To qualify for ex-\nemption under Section 501(c)(19), at least 75 percent of the members must be past or present members of the U.S. Armed \nForces and at least 97.5 percent of all members must be past or present members of the U.S. Armed Forces, cadets (including \nonly students in college or university ROTC programs or at armed services academies) or spouses, widows, widowers, ances-\ntors or lineal descendants of past or present members of the U.S. Armed Forces or of cadets. In addition to these membership \nrequirements, a veterans’ organization must be operated for one or more of the following purposes:\n• \nTo promote the social welfare of the community.\n• \nTo assist disabled and needy war veterans and members of the U.S. Armed Forces and their dependents and the \nwidows and orphans of deceased veterans.\n",
"CHAPTER 1\n5\nChapter 1 - Gaming’s Impact on Tax-Exempt Status\n3 \nFor Section 501(c)(7), 501(c)(8), 501(c)(10) and 501(c)(19) organizations, the term “bona fide guests” is generally defined as individuals whom the \nmember invites and for whom the member pays. If, for example, a nonmember pays for his or her own wagers in gaming activities, he or she is considered \nto be a member of the public and not a guest, even though he or she may have entered the organization’s premises with a member. Also, if an organization \nrequires only a nominal payment to join as a “member,\n” individuals making this payment to gain admission to the organization’s facilities or activities may not \nbe considered members or bona fide guests.\n• \nTo provide entertainment, care and assistance to hospitalized veterans or members of the U.S. Armed Forces.\n• \nTo carry on programs to perpetuate the memory of deceased veterans and members of the Armed Forces and to \ncomfort their survivors.\n• \nTo conduct programs for religious, charitable, scientific, literary or educational purposes.\n• \nTo sponsor or participate in activities of a patriotic nature.\n• \nTo provide insurance benefits for its members or dependents of its members or both.\n• \nTo provide social and recreational activities for its members.\n(Note: Some older veterans’ organizations hold exemption as 501(c)(4) social welfare organizations. A veterans' organization \nthat is unsure of the IRC section it is classified under in IRS records should contact Customer Account Services at 877-829-\n5500.)\nGaming that is limited to members and bona fide guests furthers a 501(c)(19) veterans’ organization’s social and recreational \npurposes. However, if a 501(c)(19) organization permits the public to participate in its social and recreational activities \n – including gaming – the activity does not further an exempt function.\nVeterans’ organizations may endanger their exempt status if a social or recreational activity open to the public becomes a \nprimary activity of the organization. If a social or recreational activity (such as gaming) that is open to the public is not the \nprimary purpose of a veterans’ organization, exemption will not be jeopardized, but the gaming income may be subject to the \ntax on unrelated business income. \nIn addition, inurement of any part of the net earnings of a Section 501(c)(19) organization to the benefit of any private share-\nholder or individual jeopardizes its exemption.\nFor more information about veterans’ organizations, see Publication 3386, Tax Guide – for Veterans’ Organizations.\nSection 527 – Political Organizations\nA political organization exempt under IRC Section 527 is organized and operated primarily for the purpose of directly or \nindirectly accepting contributions or making expenditures to influence or attempt to influence the selection, nomination, \nelection or appointment of an individual to a federal, state or local public office. \nGenerally, political organization income (including contributions and proceeds from political fundraising or entertainment \nevents) is not subject to federal income tax, as long as the income results from events that are political in nature and not \ncarried on in the ordinary course of a trade or business. One factor that indicates an event is “political” is the extent to which \nit is related to a political activity aside from the need of the organization for income or funds.\nPolitical organizations might conduct raffles to raise funds. In general, the proceeds from a raffle are taxable unless the raffle \nis conducted during a political fundraising or entertainment event. Where there is no evidence that the sale of raffle tickets is \nclosely related to a political event, the IRS will generally conclude that revenue is taxable income. \nIncome from bingo may be exempt function income for political organizations, provided it is segregated for use for an exempt \n(political) function. To be exempt, the game from which the income is derived must meet the requirements for the statutory \nbingo exclusion described in Chapter 2.\n",
"Chapte\nr 2\nCHAPTER 2\n6\nChapter 2 - Gaming and Unrelated Business Income\nGaming and Unrelated Business Income\nAn exempt organization is not taxed on income from an activity that is substantially related to its exempt purposes even if that \nactivity is a trade or business. However, if an exempt organization regularly carries on a trade or business that is not substan-\ntially related to its exempt purpose, except that the trade or business provides funds to carry out that purpose, income from \nthe unrelated trade or business may be subject to tax. As explained in Chapter 1, gaming is considered related to an organiza-\ntion's exempt purpose only in specific circumstances. As a general rule, gaming is considered unrelated to exempt purposes.\nThis chapter provides an overview of the unrelated business income (UBI) tax and the exclusions from that tax. See Publication \n598, Tax on Unrelated Business Income of Exempt Organizations, for a more in-depth discussion of the unrelated business \nincome tax and additional information about filing requirements and computing unrelated business income.\nThe following three conditions must be met before an activity may be classified as an unrelated trade or business:4\n1. The activity must be considered a trade or business;\n2. The activity must be regularly carried on; and\n3. The activity must not be substantially related to the organization’s exempt purpose. (The fact that the activity gener-\nates income for the organization to spend on its charitable programs does not make the activity related to the orga-\nnization’s exempt purpose.)\nWhen will gaming generate UBI? Let’s look at each of the three parts of the definition in relation to gaming.\nFirst, gaming is generally considered a “trade or business” if it generates revenue.\nSecond, gaming is considered “regularly carried on” if it is conducted with a frequency and continuity similar to comparable \nactivities of a non-exempt organization and if pursued in a manner similar to commercial gaming activities. Gaming activi-\nties will not ordinarily be treated as regularly carried on if they occur only occasionally or sporadically. For example, gaming \nconducted only at an annual fundraising event is not regularly carried on. On the other hand, gaming that occurs weekly is \nconsidered to be regularly carried on.\nThird, gaming is generally not an exempt activity. As discussed in Chapter 1, whether gaming is substantially related to an \norganization’s exempt purposes will depend on the classification of the exempt organization, and the circumstances under \nwhich the activity is conducted.\nEven if a gaming activity meets the three conditions above, some UBI exceptions may apply. These include:\n•\nCertain bingo games;\n•\nActivities conducted with substantially all volunteer labor;\n•\nQualified public entertainment activities; and\n•\nGames of chance conducted in North Dakota.\nThese exceptions are explained below in more detail. In addition to these exceptions, gaming does not generate taxable in-\ncome when it actually furthers the exempt purposes for which an organization exists. This can be the case for membership \norganizations (generally, Section 501(c)(7), 501(c)(8), 501(c)(10) and 501(c)(19) organizations), as explained in Chapter 1.\nBingo\nCertain bingo games are not included in the term “unrelated trade or business.\n” To qualify for this statutory bingo exclusion, a \ngame must:\n•\nMeet the definition of bingo under the IRC and Regulations;\n•\nNot violate state or local law where it is played; and\n•\nBe played in a jurisdiction where bingo games are not regularly carried on by for-profit organizations.\nBingo is defined in the IRC and Regulations as a game of chance played with cards that are generally printed with five rows of \nfive squares each. Participants place markers over randomly called numbers on the cards in an attempt to form a pre-selected \npattern such as a horizontal, vertical or diagonal line or all four corners. The first participant to form the pre-selected pattern \nwins the game. In addition, for a game to meet the legal definition of bingo, wagers must be placed, winners must be deter-\nmined and prizes or other property must be distributed in the presence of all persons placing wagers in that game.\n4 Social clubs exempt under Section 501(c)(7) are treated differently under the UBI tax rules. See the separate discussion on Unrelated Business Income \nTax and Section 501(c)(7) Social Clubs on page 8.\n",
"CHAPTER 2\n7\nChapter 2 - Gaming and Unrelated Business Income\nA wagering game that does not meet the definition of bingo under the IRC and Regulations does not qualify for the exclusion \nregardless of its name. For example:\n• \nSatellite and internet bingo do not qualify because these games are conducted in many different places simultane-\nously and those placing wagers are not all present when the wagers are placed, the winners are determined and the \nprizes are distributed.\n• \n“Instant Bingo,\n” “Mini Bingo” and similar pull-tab or scratch-off games do not qualify. In these games, a player places \na wager by purchasing a card containing pre-printed numbers or a pattern covered by tabs or film. By uncovering the \nnumbers or pattern, the player discovers whether the card is a winner. Unlike bingo meeting the exclusion, the winners \nof these games are pre-determined.\nThe bingo exclusion applies only if the game is legal under the laws of the jurisdiction where it is conducted. Even if a \njurisdiction rarely enforces or generally disregards a law prohibiting bingo, the conduct of bingo is not legal for this purpose.\nThe bingo exclusion applies only if for-profit organizations cannot regularly carry on bingo games in any part of the same juris-\ndiction. Jurisdiction is normally the entire state; however, in certain situations, local law may control.\nExample: Church Z, a tax-exempt organization, conducts weekly bingo games in State O. State and local laws in State O \nexpressly provide that bingo games may be conducted by tax-exempt organizations. Bingo games are not conducted in State \nO by any for-profit businesses. Because Z’s bingo games are not conducted in violation of state or local law and are not the \ntype of activity ordinarily carried out on a commercial basis in State O, Z’s bingo games qualify for the exception from an un-\nrelated trade or business.\nBecause of the statutory bingo exclusion, an exempt organization may conduct games meeting the exclusion to raise funds, \nand the activity will not generate unrelated business income subject to taxation. (The exception does not apply to 501(c)(7) \nsocial clubs. See below.)\nVolunteer Labor\nDoes your organization use volunteers to conduct its gaming? Even if gaming is not limited to bingo games that meet the \nbingo exclusion, the gaming will not be considered an unrelated trade or business – and the income earned from it will not \nbe taxed – if substantially all the work is performed by volunteers. Although “substantially all” is not defined in this context, \nan unofficial guideline borrowed from other areas of exempt organization law is 85 percent. Absent other factors, if at least \n85 percent of the work (as measured by the number of hours \nworked) is carried on by people who work without pay and no \nmore than 15 percent of the work is carried on by people who \nare compensated, as a general rule, \"substantially all\" work will \nhave been performed by volunteers.\nExample: A volunteer fire company regularly holds a slot ma-\nchine night that is open to the public. Regularly holding public \nslot machine nights may, given the facts and circumstances, be \nconsidered unrelated trade or business. However, because un-\npaid volunteers performed the work at the slot machine night, \nthe income from the wagering is not taxable as unrelated business income.\n“Compensation” is interpreted broadly and may include payments to bartenders, waitresses, snack bar staff, maintenance \nworkers, security and other workers, as well as the tips these workers receive from patrons at the gaming session. Workers \nwho obtains good or services at a reduced price in return for their services may be considered to be compensated.\nExample: ABC Organization operates a private school and sponsors gaming to raise revenue for the school. Parents who \nwork at the gaming session are given a tuition reduction of $50 for each week they work. This reduction of tuition is compen-\nsation to the parents; they are not working as “volunteers.\n” \nCompensation may also include non-monetary benefits, such as free drinks or food, if the items are more than a mere gratu-\nity and are intended to be compensation for the workers’ services. On the other hand, a worker who receives insignificant \nmonetary or non-monetary benefits is considered a volunteer, not a compensated worker. Determining whether a benefit is \ninsignificant requires consideration of the value of the benefit and:\n• \nThe quantity and quality of the work performed;\n• \nThe cost to the organization of providing the benefit; and\n• \nThe connection between the benefit received and the performance of services.\nTip: If you rely on the volunteer labor exclu-\nsion to exclude gaming from unrelated trade or \nbusiness, you should maintain accurate records \nreflecting the number of hours worked by com-\npensated and volunteer workers.\n",
"CHAPTER 2\n8\nChapter 2 - Gaming and Unrelated Business Income\nNote that the volunteer labor exclusion is separate from the bingo exclusion. Thus, if gaming satisfies the bingo exclusion, the \nbingo income is not taxed even if workers are paid, as long as state or local law does not prohibit payment. Many jurisdictions, \nhowever, require as a condition of receiving a gaming license that exempt organizations conduct their gaming activities with \nall volunteer labor. If an exempt organization violates the requirement by compensating its bingo game workers, then the bingo \nexception would not apply if the payment made the game illegal under state law.\nCompensation includes tips. If tipping is allowed, the exception for volunteer labor may not apply. Many jurisdictions prohibit \ntipping at gaming venues. When the organization conducts bingo, the bingo exclusion may not apply if tipping occurs in viola-\ntion of the jurisdiction’s prohibition.\nQualified Public Entertainment\nIncome from qualified public entertainment activities is also excluded from the definition of unrelated business income. A \n“public entertainment activity” is one traditionally conducted at a fair or exposition promoting agriculture and education, includ-\ning any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals \nor the development of products or equipment. A “qualifying organization” is an organization exempt under Section 501(c)\n(3), 501(c)(4) or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial \nexempt purposes.\nTo be excluded from the term “unrelated trade or business,\n” a public entertainment activity must be conducted by a qualifying \norganization:\n• \nIn conjunction with an international, national, state, regional or local fair or exposition;\n• \nIn accordance with provisions of state law that permit only qualifying organizations (or an agency, instrumentality or \npolitical subdivision of the state) to conduct the activity; or\n• \nIn accordance with provisions of state law that permit a qualifying organization to be granted a license to conduct the \nactivity for 20 days or less on payment to the state of a lower percentage of the revenue from the licensed activity \nthan is required from non-qualifying organizations.\nExample: Organization X, a 501(c)(5) agricultural organization, conducts harness racing at an agricultural fair in State L \npursuant to a state law that permits the organization to conduct parimutuel betting in connection with the races. Income from \nwagers placed is excluded from the tax on unrelated business income.\nGames of Chance Conducted in North Dakota\nMost games of chance conducted by exempt organizations in North Dakota are not unrelated trades or businesses if conduct-\ning the games does not violate any state or local law. See Section 311 of the Deficit Reduction Act of 1984, as amended by \nSection 1834 of the Tax Reform Act of 1986.\nUnrelated Business Income Tax and Section 501(c)(7) Social Clubs\nMost types of exempt organizations pay tax on their unrelated business taxable income. A Section 501(c)(7) social club, on \nthe other hand, must pay tax on its gross income except that portion that is considered exempt function income.\nThe exempt function income of a social club is, generally, its gross income from dues, fees and charges received from \nmembers in return for providing recreational and social facilities or services to those members, their dependents or guests. \nBecause gaming is recreational and social, the income a social club receives from gaming activities limited to its members is \nconsidered exempt function income and is not subject to tax. On the other hand, income received from gaming activities open \nto nonmembers is part of the social club’s gross income that is subject to the unrelated business income tax.\nSocial clubs do not qualify for any of the exclusions explained above. Even if a social club conducts a bingo game that would \nfall within the bingo exclusion or uses only volunteers to conduct all its gaming, if the public participates, the income will be \ntaxable. In addition, the nonmember income, if a large enough percentage of the social club’s overall income, may jeopardize \nits exempt status.\nDetermining Whether Gaming Generates UBI – Flow Chart\nAt the end of this chapter is a flow chart to help you assess whether your gaming – or other – activity creates UBI for your \norganization. Exhibit A is for all organizations except 501(c)(7) social clubs. The flow chart is a summary of the unrelated busi-\nness income rules and exclusions. See Publication 598, Tax on Unrelated Business Income of Exempt Organizations, for a \ncomplete explanation.\nReporting UBI and Paying Tax\nWhen gross UBI (gross receipts) equals or exceeds $1,000, an organization must file Form 990-T, Exempt Organization Busi-\nness Income Tax Return. If an organization’s total anticipated tax for the year equals or exceeds $500, it must pay quarterly \nestimated tax. Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, may be help-\n",
"CHAPTER 2\n9\nChapter 2 - Gaming and Unrelated Business Income\nful in computing the tax. However, do not send this form to the IRS. Failure to pay estimated taxes as required or to file the \nappropriate forms may subject the organization to penalties.\nIf you find that you are unable to file Form 990-T by the original due date, you can request an extension of time by filing Form \n8868, Application for Automatic Extension of Time To File an Exempt Organization Return, by that original due date. If you are \na corporation or a trust, you may request an automatic 6-month extension.\nYou must pay any unrelated business income tax due by the original due date for filing Form 990-T. No extension for paying the \ntax will be given. Do not send the payment with Form 990-T. You must deposit the tax by the Electronic Federal Tax Payment \nSystem (EFTPS).\n",
"Chapter 3 - Maintaining Records\nCHAPTER 3\n10\n \nIs It Unrelated Business Taxable Income (UBTI)? (Does Not Apply to 501(c)(7) Organizations)\nChapter 3\nNO\n",
"11\nChapter 3 - Maintaining Records\nCHAPTER 3\nMaintaining Records\nRecordkeeping\nAn exempt organization must maintain complete books and records so it can meet its reporting responsibilities and determine \nany tax liabilities it may have. Exempt organizations must keep the same types of books and records that other businesses \nmaintain. These include cash receipt and disbursement journals, accounts payable journals, general ledgers, detailed source \ndocuments and copies of any federal tax returns filed. See Publication 583, Starting a Business and Keeping Records, for \ngeneral information about tax recordkeeping requirements.\nPublication 4221-PC, Compliance Guide for 501(c)(3) Public Charities, or Publication 4221-NC, Compliance Guide for Tax \nExempt Organizations (other than 501(c)(3) Public Charities and Private Foundations), contain information on recordkeeping \nrequirements that apply specifically to exempt organizations. Revenue Procedure 71—17, explains the recordkeeping required \nof 501(c)(7) social clubs to document member vs. nonmember income. Fraternal organizations (Section 501(c)(8) and 501(c)\n(10)) and veterans' organizations (Section 501(c)(19)) should also maintain complete records of member and nonmember \nincome.\nOrganizations that conduct gaming must maintain records of gross receipts from gaming, prize payouts and other related \ndisbursements to substantiate information submitted on the exempt organization information return (Form 990 or 990-EZ) and \nthe income tax return (Form 990-T), if one is required.\nAn organization must maintain records until the statute of limitations expires; generally three years from the later of the filing or \ndue date of a return. Employment tax returns should be kept for four years after the due date of the return, or four years from \nthe date when the organization paid the tax, if the payment date was later than the due date.\nEffective Gaming Controls\nGaming can generate substantial amounts of income. Much of it is cash that passes through many hands at each gaming \nsession. Exempt organizations should carefully oversee and control gaming to ensure that funds are not diverted to private \nindividuals or for private purposes.\nEffective oversight is more than simply choosing a location to hold the gaming and approving the lease or other arrangements \nwith the gaming operator. The exempt organization should maintain active involvement in the conduct of the games themselves.\nHere is an example of appropriate oversight for a bingo operation that conducts multiple sessions per week:\n•\nA gaming manager controls the execution of the games, including payouts, and records transactions on a “daily\nsheet.\n”\n•\nA cashier – a different person from the gaming manager – receives funds and records serial numbers of games sold.\n•\nA third person serves as cash controller and prepares inventory/paid out reports, independently counts cash receipts\nand matches the cash to the reports prepared by the gaming manager. He or she also prepares and makes the bank\ndeposit.\n•\nA fourth person serves as inventory controller and reviews the daily sheets received from the gaming manager to\ndetermine inventory usage and profit achieved. The inventory controller may also receive the bank statement directly\nand ensure that all deposits stated on the daily sheet appear on it.\n•\nA fifth person writes the checks to pay gaming expenses.\n•\nThe organization’s board of directors reviews and compares bingo reports or daily sheets with previous reports for\nconsistency. The board monitors the games to ensure that internal controls are functioning properly.\nIf an organization also sells pull-tabs at its bingo sessions or conducts other forms of gaming, it will want to implement ad-\nditional controls, such as verifying that the gaming manager reports all receipts.\nState and local laws may require additional recordkeeping and reporting and impose specific internal controls over gaming. \nContact the appropriate agencies to determine the state and local rules that may apply.\n",
"C\nh\na\np\nte\nr \n4\nChapter 4\n12\nChapter 4 - Exempt Organizations’ Reporting Requirements\nCHAPTER 4\nExempt Organizations Reporting Requirements\nThe IRC requires most exempt organizations to file an annual information return showing gross receipts and disbursements \nand other information the IRS needs to administer the tax laws. Form 990, Return of Organization Exempt From Income Tax, \nor Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, are the standard forms used to make this re-\nport. (See the IRS website for the filing thresholds for each of these forms.) Filing a 990-T to report UBI will not satisfy an \norganization's obligation to file an annual return or notice.\nMost small tax-exempt organizations whose annual gross receipts are normally $50,000 or less may meet their filing require-\nments by submitting online Form 990-N, also known as the e-Postcard, unless they choose to file a complete Form 990 or \nForm 990-EZ instead. \nFor a gaming organization, gross receipts include all amounts wagered in games, not just the net proceeds after winning \nwagers have been paid out. Therefore, most organizations conducting gaming will have gross receipts well above the Form \n990-N filing threshold.\nNote: If an organization eligible to file an e-Postcard chooses to file a Form 990 or 990-EZ instead, it must file a complete \nreturn, including all required sections and schedules.\nChurches and certain other religious organizations are excepted from filing either an annual return or an e-Postcard. See the \nInstructions for Form 990 or Form 990-EZ for a description of the religious organizations that are excepted from the require-\nment to file an annual return or e-Postcard.\nIf you are required to file an annual return or e-Postcard, you must file it by the15th day of the 5th month after your accounting \nperiod ends. If your accounting period coincides with the calendar year, file your return or e-Postcard by May 15th following \nthe close of the tax year.\nYou can get an automatic 6-month extension of time for filing a Form 990 return by filing Form 8868, Application for Automatic \nExtension of Time To File an Exempt Organization Return, by the original due date of the return. You cannot get an extension \nof the due date for filing an e-Postcard.\nIf you are required to file an information return or e-P\n \nostcard, and you fail to do so for three consecutive years, your exempt \nstatus is automatically revoked by law.\nYou must make a copy of your Form 990 or 990-EZ annual information returns available for public inspection during normal \nbusiness hours at your principal office and at regional or district offices. A return must be made available for a period of three \nyears from the date it was required to be filed. Most organizations are not required to disclose the names and addresses of \nany contributors reported on Schedule B of the return.\nSchedule G, Form 990 or Form 990-EZ\nIf your organization’s revenue from gaming exceeds a threshold amount, you will be required to complete and attach Schedule \nG, Supplemental Information Regarding Fundraising or Gaming Activities, to your Form 990 or Form 990-EZ. (For details on \nthe threshold amounts triggering filing of Schedule G, see the instructions for Form 990 or Form 990-EZ.)\nUse Part III of Schedule G to report specific information about your organization’s gaming activities. To be able to complete \nthis part, for each tax year you will need to know:\n•\nGross revenues from bingo, pull-tabs/instant bingo and other types of gaming;\n•\nCash and non-cash prizes paid for each type of gaming;\n•\nRent or costs of facilities and other direct gaming expenses;\n•\nPercentage of your organization’s games operated in your own facilities and in outside facilities;\n•\nPercentage of volunteer labor for each type of gaming;\n•\nStates in which you operated gaming activities and the states in which your organization holds gaming licenses;\n•\nRevocation, suspension or termination of any of your organization’s gaming licenses;\n•\nAmount of mandatory charitable distributions from gaming proceeds required under state law, or the amount of pro-\nceeds spent on your organization’s own exempt activities;\n•\nNames and addresses of the gaming manager and the person who prepares your gaming/special events books and\nrecords; and\n",
"13\nChapter 5 - Workers Conducting Gaming Activities\nCHAPTER 5\n•\nInformation about third parties with which your organization has contracts to receive gaming revenue.\nFor detailed information about filing requirements for Forms 990, 990-EZ or 990-N, see their instructions, which include an \nexplanation of the public inspection rules for these forms.\nWorkers Conducting Gaming Activities\nIt's Saturday night and your lodge is hosting its weekly bingo game for members and their guests. During the game, Mr. P \ntends the bar and Ms. J calls the numbers. The lodge pays Ms. J $10 an hour for calling numbers. Mr. P, though not paid for \ntending bar, does receive tips from bingo patrons. You probably know that you should withhold income, Social Security and \nMedicare taxes from Ms. J’s wages and send these taxes and the employer share of Social Security and Medicare taxes to the \nIRS, as well as report the wages and tax to both Ms. J and the Social Security Administration on Form W-2, Wage and Tax \nStatement. But did you also know that you may have reporting and withholding requirements for Mr. P’s tip income?\nThis chapter will help your organization determine whether its gaming employees should be classified as employees, \nindependent contractors or volunteers. (Different compliance requirements apply to each type of worker.) This chapter also \nexamines compensation: Is your organization compensating its gaming workers and if so, how, and how much? (Just a “tip” \nhere: Mr. P’s tips count as compensation!) Then, the information in this chapter will help you make sure that your organization \ndoes not inadvertently turn its gaming “volunteers” into compensated employees.\nThis chapter ends with a quick survey of your organization’s reporting and withholding responsibilities for any compensated \nemployees and independent contractors. (These requirements apply to any workers your organization pays – not just those \nemployed in its gaming activities.) The chapter also discusses the recordkeeping and reporting that employees must do for \ntip income.\nEmployee, Independent Contractor or Volunteer?\nA worker at your organization’s gaming activity is:\n•\nAn employee – someone whose work your organization has the right to control and direct;\n•\nAn independent contractor – someone your organization contracts with to provide a specific service or product. Your\norganization contracts with the person for the end product or service and does not have the right to supervise or\ndirect how the independent contractor does the work; or\n•\nA volunteer – someone who works for your organization for no compensation, either monetary or non-monetary. Note\nthat volunteers can be either employees or independent contractors under the common law test.\nGenerally, if a worker is compensated in any manner, he or she will be either an employee or an independent contractor. As \nnoted above, someone is your employee when you have the right to control and direct that person’s work, not only as to the \nresult to be accomplished but also as to the details and means by which that result is accomplished. In other words, an em-\nployee is someone who is subject to your will and control not only as to what will be done but how it will be done. You need \nnot actually direct or control how the person works; simply your right to do so is sufficient to make the person your employee.\nFor more information on how to determine whether a worker is an employee or independent contractor, see Publication 15-A, \nEmployer’s Supplemental Tax Guide, and Publication 1779, Independent Contractor or Employee. Then, if you are still unsure \nwhether the person you are paying is an employee or independent contractor, you can ask the IRS for a ruling by filing Form \nSS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.\nTypes of Compensation\nAll pay you give to an employee for services performed is considered wages and is subject to federal employment taxes unless \nan exception applies. The pay may be in cash or in other forms. It includes salaries, bonuses, commissions and fringe benefits. \nHow you measure or make the payments does not matter.\nIf your organization uses a method other than cash or a check to pay its workers, you are paying them “in kind.\n” Payments in \nkind may be in the form of goods, lodging, food, clothing or services. Generally, the fair market value of the payments at the \ntime they are provided is subject to employment taxes.\nTips gaming activity workers receive from players, whether cash or non-cash, are taxable income. Tips paid to a worker in \ncash, checks or other cash equivalent (including charged tips) of more than $20 in a calendar month while working for any \none employer are also wages subject to employment taxes.\nVolunteers and Gaming Activities\nExempt organizations often rely on uncompensated workers when conducting gaming. In fact, many states and localities \nrequire that exempt organizations use all (or substantially all) volunteer labor to conduct their games to qualify for a license.\nCh\napt\ner 5\n",
"14\nChapter 5 - Workers Conducting Gaming Activities\nCHAPTER 5\nIf a “volunteer” worker at a gaming activity is permitted to receive tips from players and the volunteer is subject to the direction \nand control of the organization, he or she becomes a compensated employee. The organization would have the same report-\ning and withholding requirements for this person as for any other employee. In addition, by permitting the otherwise-volunteer \nworker to receive tips, the organization may be violating state or local rules that require all volunteer labor for licensed gaming \norganizations.\nExempt organizations often want to recognize and thank their volunteers, and often do so with awards or gifts. In general, if \nthese are non-cash items of nominal value, such as turkeys or hams around the holidays, they would not constitute taxable \nwages. However, cash items, including gift certificates as well as any other taxable fringe benefit, would be a payment of tax-\nable compensation, and if the volunteer is subject to the organization’s right to direct and control, the amounts are wages. This \nis true even if the organization receives donated gift certificates, which it then passes on to its volunteers. Organizations should \nbe aware that their methods of thanking or recognizing volunteers may create employment tax and reporting responsibilities.\nWhat if an organization permits an individual to help out at a gaming activity and thereby “work off” a program payment or fee \nthat he or she would otherwise have? These arrangements – whether “voluntary” or required – can also result in a worker \nhaving wages subject to employment taxes.\nExample: Private school X, a 501(c)(3) organization, conducts a weekly bingo game to raise funds for the school. Parents \nwho work at the bingo games are given a tuition reduction of $100 for each week they work.\nThe fair market value of the parent’s or guardian’s work at the weekly bingo game is $100 – the amount of the tuition reduction. \nGenerally, the parent would be subject to the organization's right to direct and control (unless the parent is in the business of \nrunning bingo games); thus, a parent who works at the weekly bingo game has compensation of $100. \nYour Organization’s Reporting and Withholding Responsibilities for Employees\nIf your organization’s gaming workers are employees, you are responsible for withholding and paying employment taxes and \nfiling and furnishing the required employment tax forms and information returns. This section provides a general discussion \nabout withholding and reporting employment taxes. If your organization has employees, see Publication 15, (Circular E), Em-\nployer’s Tax Guide, and the Instructions for Forms W-2 and W-3 for the specific rules you will need to follow.\nSoliciting a Social Security Number – An employer has a requirement to solicit an employee’s Social Security number \n(SSN) at the time the employment begins. Because the employee is required to furnish Form W-4, Employee’s Withholding \nAllowance Certificate, to the employer on commencement of employment, Form W-4 may be used for the initial solicitation \nof the employee’s SSN. See Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect \nName/TINs, for more information about solicitation requirements when employees do not furnish their SSNs.\nWithholding Income Tax – As an employer, you must withhold federal income tax from your employees’ wages. To know \nhow much tax to withhold, you should have a Form W-4 on file for each employee. Ask all new employees to give you a signed \nForm W-4 when they start work. You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, \nin place of Form W-4, to your Spanish-speaking employees. Generally, a Form W-4 remains in effect until the employee gives \nyou a new one.\nIn some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a \nnotice (commonly referred to as a “lock-in letter”) to the employer specifying the withholding rate (marital status) and maximum \nnumber of withholding allowances permitted for a specific employee for purposes of calculating the required withholding. The \nIRS will provide the employee with an opportunity to dispute the determination before the employer adjusts withholding based \non the lock-in letter.\nAfter the lock-in letter takes effect, the employer must disregard any Form W-4 that results in less tax withheld, until the IRS \nnotifies the employer otherwise. However, the employer must honor any Form W-4 that claims a withholding rate (marital sta-\ntus), withholding allowances and any additional amount that results in more income tax withheld than at the withholding rate \nand withholding allowances specified in the lock-in letter. Employers who use electronic Form W-4 systems must make sure \nthe employee cannot override the lock-in letter to decrease withholding through the electronic Form W-4 system.\nWithholding and Paying FICA Taxes – The Federal Insurance Contributions Act (FICA) imposes taxes on both the em-\nployee and the employer. FICA taxes are composed of two elements: old-age, survivor and disability insurance (OASDI, com-\nmonly known as Social Security) and hospital insurance (Medicare).\nThe Social Security tax rate is 12.4 percent, split equally between employee and employer. The tax applies to wages up to \na “wage base” limit. The wage base limit is the maximum wage that is subject to the tax for the year. The wage base limit is \nadjusted annually. \nThe employee and employer each pay the Medicare tax rate of 1.45 percent on wages, for a total of 2.9 percent. There is no \nwage base limit for Medicare tax; all covered wages are subject to Medicare tax.\n",
"15\nChapter 5 - Workers Conducting Gaming Activities\nCHAPTER 5\nThe employer collects the employee portion of the Social Security and Medicare taxes by deducting the tax from the em-\nployee’s wages at the time of each payment. For tipped employees, an employee’s regular pay may not be enough to withhold \nall the taxes owed on the regular pay plus reported tips. If this happens, an employee can give the employer money until the \nclose of the calendar year to pay the rest of the taxes.\nIf the employer cannot collect all the Social Security and Medicare taxes on the tips reported by an employee, the uncollected \ntaxes must be reported on Form W-2. See Employee’s Responsibility for Tip Income, below, for more information. As an \nexempt organization, you need not withhold or pay FICA taxes for an employee that you pay less than $100 for the calendar \nyear.\nIf income, Social Security or Medicare taxes that are required to be withheld are not withheld or are not paid, the organiza-\ntion is liable for the taxes and certain individuals may be personally liable for the amount of the employee taxes as a trust fund \nrecovery penalty.\nPaying FUTA Taxes – Employers are subject to a federal unemployment (FUTA) tax on the total employment wages during \nthe calendar year. Only the employer pays FUTA tax. FUTA tax is not collected from the employee’s wages.\nServices performed in the employ of a Section 501(c)(3) organization are excluded from the definition of “employment” for \nFUTA tax purposes. Consequently, 501(c)(3) organizations do not pay FUTA tax on their employees’ wages. \nServices performed in the employ of other types of exempt organizations are excepted from the definition of FUTA employment \nin any calendar quarter in which the remuneration earned for those services is less than $50.\nApplication of these FUTA exceptions is based on the status of the common law employer.\nFiling Form 941, Employer’s Quarterly Federal Tax Return – Every employer liable for withheld income and FICA taxes \nmust report its liability. The report is ordinarily made quarterly on Form 941, which must be filed by the last day of the month \nfollowing the close of the calendar quarter. If, by that date, you made timely deposits (see below) in full payment of your taxes \nfor the quarter, you can take an additional 10 days to file Form 941. If you discover an underpayment or overpayment error on a \npreviously filed Form 941, use Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to make the \ncorrection. Publication 15, (Circular E), Employer’s Tax Guide, and the instructions for Form 941-X provide more information.\nFiling Form 944, Employer’s Annual Federal Tax Return – If, based on your Form 941 reporting history, the IRS esti-\nmated that your liability for FICA tax and withheld income tax for the year will be $1,000 or less, or you inform the IRS that \nyou expect your annual tax liability to be $1,000 or less, you may be notified to file an annual return on Form 944 instead of \nthe quarterly Form 941. You must get IRS approval to start (or to stop) filing Form 944. Form 944 is due by January 31 fol-\nlowing the end of the calendar year of the return. If, by that date, you made timely deposits in full payment of your taxes for the \ncalendar year, you can take an additional 10 days to file Form 944. If you discover an underpayment or overpayment error on a \npreviously filed Form 944, use Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund, to make the \ncorrection. Publication 15, (Circular E), Employer’s Tax Guide, and the instructions for Form 944-X provide more information.\nFiling Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return – If you are liable for FUTA tax in any \ncalendar year, you must file Form 940 by January 31 of the following year. If you deposited all FUTA taxes for the year when \ndue, you can take an additional 10 days to file the return.\nDepositing FICA, FUTA and Withheld Income Taxes – If you report less than a $2,500 tax liability for the quarter on Form \n941 (or for the year on Form 944), you may remit those taxes with the return. Otherwise, you must deposit on a monthly or \nsemiweekly schedule using the EFTPS. For more information about the deposit schedule you will be required to follow, see \n“Depositing Taxes” in Publication 15.\nNote: Employers who file Form 941 do not have to make deposits during a quarter if their accumulated tax liability for either \nthe current quarter or the prior quarter is less than $2,500 and they fully pay the amount due with a timely filed return for the \ncurrent quarter.\nDeposit income taxes withheld from wages and FICA taxes separately from non-payroll withheld income taxes (such as in-\ncome tax withheld from gambling winnings).\nFUTA taxes must be deposited by the last day of the month following the end of any calendar quarter in which your undepos-\nited tax liability is more than $500. If your FUTA tax liability in any quarter (except the fourth) is $500 or less, carry it over to \nthe next quarter. If your liability for the fourth quarter is $500 or less, you can either deposit the amount by EFTPS or pay it \nwith your Form 940 by January 31.\nFiling Forms W-2, Wage and Tax Statement and W-3, Transmittal of Income and Tax Statement – Tax-exempt orga-\nnizations must furnish each employee with a copy of Form W-2, Wage and Tax Statement, by January 31 of the year after the \n",
"16\nChapter 5 - Workers Conducting Gaming Activities\nCHAPTER 5\nyear of payment. If employment ends before December 31 and an employee asks for Form W-2, give the employee Form W-2 \nwithin 30 days of the request or within 30 days of the final wage payment, whichever is later. The organization must file Form \nW-2 with the Social Security Administration (SSA) by January 31. Paper Forms W-2 are transmitted to the SSA using Form \nW-3, Transmittal of Income and Tax Statements.\nIf your employees give their consent, you may be able to furnish Forms W-2 to your employees electronically. See Publication \n15-A, Employer’s Supplemental Tax Guide, for additional information.\nIf you are required to file 250 or more Forms W-2, you must file them electronically, unless the IRS granted you a waiver. You \nare encouraged to file electronically even if you are filing fewer than 250 Forms W-2. The 250 threshold applies separately to \neach type of form. Thus, for example, if a person is required to file 200 returns on Form 1099-MISC and 350 returns on Form \nW-2 for a calendar year, the person is not required to file Forms 1099-MISC electronically but is required to file Forms W-2 \nelectronically.\nEmployee’s Responsibility for Tip Income\nEmployees who receive tips should keep a daily tip record so they can accurately report tips to the employer and on their tax \nreturns. The daily tip record can take the form of a tip diary such as that found in Form 4070A, Employees Daily Record of Tips.\nEvery employee who, while working for your organization, receives cash tips in any calendar month of at least $20 must report \nthose tips in a written statement by the 10th day of the following month. To report, the employee may use Form 4070, Em-\nployee’s Report of Tips to Employer, or some other written statement containing the:\n•\nEmployee’s name, address and Social Security number;\n•\nEmployer’s name, business name (if different) and address;\n•\nThe month for which the report is made; and\n•\nThe total tips received in that month.\nYou may establish an electronic tip reporting system in lieu of receiving tip statements in paper form.\nAn employee who fails to report tips that are required to be reported must pay the employee’s portion of the FICA tax on those \ntips by filing Form 4137, Social Security and Medicare Tax on Unreported Tip Income, with the employee’s Form 1040, U.S. \nIndividual Income Tax Return. The employee is also subject to a penalty equal to 50 percent of the employee’s portion of the \nFICA tax on the unreported tips unless the failure was due to reasonable cause and not due to willful neglect.\nFor more information on an employee’s responsibilities with respect to reporting tip income, see Publication 531, Reporting \nTip Income.\nIf the taxes on an employee’s tips are greater than the regular pay from the employer, the employee can either pay the taxes \nwhen the employee files Form 1040 or the employee can give the employer money to be applied to the underwithheld taxes. \nThe employer will report any uncollected FICA taxes on Form W-2. If the employee waits to pay the taxes with the employee’s \nForm 1040, the employee may be subject to a penalty for underpayment of estimated taxes. See Publication 505, Tax With-\nholding and Estimated Tax, for more information.\nYour Organization’s Reporting Responsibilities for Independent Contractors \n \nSoliciting a TI\n \nN - Your organization should solicit an independent contractor’s TIN before the independent contractor \nprovides services, and before you pay the person. You can use Form W-9, Request for Taxpayer Identification Number and \nCertification. Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in \nplace of Form W-9, for Spanish-speaking nonemployees. Form W-9 certifies the correct TIN and name of person receiving \npayments, and will help the organization verify whether it needs to complete Form 1099-MISC with respect to a payment. \nForm W-9 is not filed with the IRS, but kept in your organization’s records.\nIf your organization pays independent contractors – in other words a compensated worker who is not your organization’s em-\nployee – it does not have to withhold or pay FICA taxes. However, you may be required to withhold 24 percent of any report-\nable payments for federal income tax. This is referred to as backup withholding, and applies when a payee refuses or neglects \nto provide a Taxpayer Identification Number (TIN) or the IRS notifies the organization that the reported TIN is incorrect. See \nPublication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Whether your organization has made report-\nable payments may depend on the amount paid during the year and whether an exception applies. \nFiling and Furnishing Form 1099-MISC, Miscellaneous Income – Use Form 1099-MISC to report payments of $600 \nor more to independent contractors. Include fees, salaries, commissions, prizes and awards for services performed as a non-\nemployee. Generally, payments to a corporation are not required to be reported on Form 1099-MISC. However, you must use \n",
"17\nChapter 5 - Workers Conducting Gaming Activities\nCHAPTER 5\nForm 1099-MISC to report payments of $600 or more for medical or health care services provided by corporations, including \nprofessional corporations and legal services provided by corporations. Forms 1099-MISC must be furnished to payees by \nJanuary 31. File Form 1099-MISC on paper or electronically by January 31, if you are reporting nonemployee compensation \n(NEC) in box 7. File all other Forms 1099-MISC (not reporting NEC in box 7) with the IRS by February 28. Paper Forms 1099-\nMISC are transmitted to the IRS using Form 1096, Annual Summary and Transmittal of U.S. Information Returns. You may \nfurnish the copies to the payees electronically. See the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and \nW-2G for more information. If you are required to file 250 or more Forms 1099-MISC, you must file them electronically, unless \nthe IRS granted you a waiver. You are encouraged to file electronically even if you are filing fewer than 250 Forms 1099-MISC.\nExample: Organization Y pays Ted Oaks $100 per week for 9 weeks to clean up the hall where it holds bingo sessions. Mr. \nOaks operates a janitorial service as a sole proprietorship, has the right to hire and fire workers and provides needed tools and \nsupplies. Y does not have the right to direct and control Mr. Oaks. Therefore, Mr. Oaks is not a Y employee. Y must file Form \n1099-MISC with the IRS and furnish a copy of Form 1099-MISC to Mr. Oaks.\nFor more details on the types of payments that must be reported on Form 1099-MISC, see the instructions for Form 1099-\nMISC.\n",
"18\nChapter 6 - Reporting Winnings and Withholding Income Tax\nCHAPTER 6\nReporting Winnings and Withholding Income Tax\nIt’s Saturday night again, and your organization is hosting a bingo game meeting the statutory bingo exclusion. Mr. S pays $5 \nfor a bingo card and sits down to play. “B-I-N-G-O!!!” It’s Mr. S’s lucky night. He wins the game and the jackpot of $1,200. \nIn tax terminology, the “wager” is $5 and the “winnings” are $1,200. Did you know that your organization must report Mr. S’s \nwinnings to the IRS?\nReportable Winnings\nIf you pay the winner or winners of a game more than a certain amount, you must report the amount and information about \nthe winners to the IRS. The threshold amount at which winnings become reportable depends on the type of game involved.\nUnless the winnings are from poker, keno, bingo or slot machines, you must report a payment of winnings, including raffle \nprizes, when the amount paid is:\n•\n$600 or more, and\n•\nAt least 300 times the amount of the wager.\nIn determining whether the $600 threshold is met, you may reduce the winnings by the amount of the wager. \nExample: Mr. G buys a $2 raffle ticket from your organization. At the raffle, Mr. G’s number is drawn and he wins $1,000. \nBecause the winnings ($998) are greater than $600 and more than 300 times the amount of the wager, you must report Mr. \nG’s winnings to the IRS.\nExample: Mr. S buys a $2 pull-tab and wins $600. You may reduce the winnings by the amount of the wager, in which case \nthe winnings are $598. You do not have to report Mr. S’s winnings because the $600 threshold is not met.\nKeno Games: Keno is a gambling game, a variety of the game of lotto, played with numbered balls or knobs, and cards also \nnumbered.\nYou must report winnings from a keno game that are $1,500 or more after deducting the amount of the wager. That is, you \nmust reduce the amount of the winnings by the amount of the wager in determining whether the $1,500 threshold is met.\nExample: One of your gaming activities is keno. Ms. E wagers $5 on keno and wins $1,500. The winnings are less than \n$1,500 after deducting the amount of the wager ($1,495), so you do not have to report Ms. E’s winnings.\nBingo Games and Slot Machines: You must report winnings from a bingo game or slot machine that are $1,200 or more \nbefore deducting the amount of the wager.\nExample: You have a slot machine in the barroom of your lodge. Ms. C feeds a quarter into the slot machine and wins $1,200. \nYou must report Ms. C’s winnings because the winnings are $1,200 or more before deducting the amount of the wager.\nPoker Tournaments: If you sponsor a poker tournament, you must report any winnings of more than $5,000 after deducting the \nwager (in other words the entry or “buy-in” fee). You need not report poker tournament winnings paid before March 4, 2008, \nor winnings that are $5,000 or less.\nSummary of Reportable Winnings\nType of Game\nWinnings Amount at Least:\nReduced by Amount of Wager?\nBingo\n$1,200\nNo\nSlot machines\n$1,200\nNo\nKeno\n$1,500\nYes\nOther wagering transactions \n(instant bingo, pull-tabs, raffles and \nso on)\n$600 and at least 300 times the \nwager\nAt option of payer\nPoker tournaments\n$5,000.01\nYes\nC\nha\npt\ner \n6\n",
"19\nChapter 6 - Reporting Winnings and Withholding Income Tax\nCHAPTER 6\nReporting Winnings\nEach time you pay reportable winnings, you must complete a Form W-2G, Certain Gambling Winnings, to report those win-\nnings to the IRS and to the person receiving the winnings (the payee). The payee should provide you with his or her name, \naddress and Social Security number, and you should verify the information from the person’s driver’s license, Social Security \ncard, voter registration card or other proper identification.\nIf you use a paper form, you must file copy A of Form W-2G with the IRS by February 28 following the calendar year in which \nyou paid the winnings. Use Form 1096 to transmit paper Forms W-2G to the IRS. If you file electronically, you must file Form \nW-2G by March 31 following the calendar year in which you paid the winnings. If you complete 250 or more Forms W-2G in \na year, you cannot file the paper form; you must file electronically instead. \nIn addition to filing Form W-2G with the IRS, you must give the winner copies B and C of Form W-2G by January 31 following \nthe calendar year in which you paid the winnings.\nMultiple Winners: When the payee is one of a group of two or more winners, or is not the actual winner, he or she must com-\nplete and sign a Form 5754, Statement by Person(s) Receiving Gambling Winnings, and give it to you. The payee enters his \nor her name, address and taxpayer identification number in Part I. In Part II, the payee enters the name, address and taxpayer \nidentification number of each person entitled to the winnings, together with the amount won and the amount of any additional \nwinnings from identical wagers. You then prepare a separate Form W-2G for each winner listed in Part II of Form 5754.\nRegular Income Tax Withholding\nMs. V pays $10 for a ticket in your church raffle. As luck would have it, hers is the winning ticket. You pay Ms. V winnings \nof $6,000. You now know that you have to report the winnings to the IRS. But did you also know that you have to withhold \nincome tax from Ms. V’s winnings?\nYou must withhold income tax from a payment of winnings when \nthe proceeds from the wager are more than $5,000 and the wa-\nger was placed in:\n• \nA sweepstakes, wagering pool, lottery, raffle or poker \ntournament; or\n• \nAny other wagering transaction, if the proceeds are at \nleast 300 times the amount wagered.\nThe “proceeds from a wager” are the difference between the \namount of the winnings and the amount of the wager. When the \nwinnings are in the form of a non-cash payment, such as a car \nwon at a raffle, the proceeds from the wager are the difference between the fair market value of the item won and the amount \nof the wager.\nYou must deduct and withhold tax from the cash winnings in an amount equal to the product of the third lowest rate of tax \napplicable under IRC Section 1(c) (in other words, the rates that apply to unmarried individuals) and the amount subject to \nwithholding. The applicable rate is 24 percent. The amount subject to withholding is the proceeds from the wager, as defined \nabove. Withhold on the entire amount, not just on that portion greater than $5,000.\nExample: In 2018, your organization conducts a raffle, and Mr. L purchases a $1 ticket. At the drawing, Mr. L wins $6,000. \nBecause the proceeds from the wager are more than $5,000 ($6,000 prize minus $1 ticket), you must withhold $1,440 \n($5,999 x .24) from the winnings.\nA non-cash prize, such as a car, with a fair market value exceeding $5,000 after deducting the amount of the wager is also \nsubject to withholding. The tax is computed and paid under either of the following two methods:\n• \nThe winner pays the withholding tax to the organization conducting the gaming activity. In this case, the withholding \namount is 24 percent of the fair market value of the non-cash item less the amount of the wager.\n• \nThe organization pays the withholding tax for the winner. In this case, the withholding amount is 31.58 percent of the \nfair market value of the non-cash item less the amount of the wager. (The withholding percentage in this case is higher, \nbecause the winner gets not only the value of the prize but also the value of having the taxes paid by the organization.)\nSignature of the Payee on Form W-2G: Any person who receives a payment of winnings from which you are required to with-\nhold tax must sign the Form W-2G on which those winnings are reported. By signing, the payee declares that no other person \nis entitled to any portion of the payment and that the winnings are subject to regular gambling withholding.\nExceptions:\n1. Do not withhold income tax on winnings from bingo, \nkeno or slot machines no matter what the amount of \nwinnings. (However, see below.)\n2. You need not withhold income tax on winnings from \na poker tournament as long as you report the win-\nnings on Form W-2G.\n",
"20\nChapter 6 - Reporting Winnings and Withholding Income Tax\nCHAPTER 6\nBackup Withholding\nYou may be required to withhold 24 percent of gambling winnings (including winnings from bingo, keno, slot machines and \npoker tournaments) for federal income tax. This is referred to as backup withholding, and applies when:\n• \nThe winner of reportable winnings does not furnish a correct TIN;\n• \nRegular gambling withholding was not withheld (currently 24%); and\n• \nThe winnings are at least $600 and at least 300 times the wager (or the winnings are at least $1,200 from bingo or \nslot machines or $1,500 from keno or more than $5,000 from a poker tournament).\nExample: Your organization has slot machines in its barroom. Mr. B wins $1,200 at the slot machine. Mr. B refuses to give \nyou his taxpayer identification number. Because winnings of $1,200 or more from a slot machine are reportable winnings, you \nmust report the winnings on Form W-2G. Slot machine winnings are not subject to regular withholding at the 24 percent rate, \nbut because Mr. B refuses to give you his taxpayer identification number so that you can properly complete the Form W-2G, \nyou must backup withhold $288 ($1,200 X .24).\nYou will pay Mr. B $912 ($1,200 - $288) instead of the entire amount of winnings. If you mistakenly pay Mr. B the entire \n$1,200, your organization will be responsible for paying the backup withholding amount of $288.\nBackup withholding applies to the total amount of the winnings reduced by the amount wagered, if the payer chooses to make \nthat reduction.\nSummary of Withholding Requirements\nType of Gaming\nRegular Withholding at 24% if \nWinnings Are:\nBackup Withholding at 24% if \nWinner Does Not Provide TIN \nand Winnings Are:\nBingo\nN/A\n≥ $1,200\nSlot machines\nN/A\n≥ $1,200\nKeno\nN/A\n≥ $1,500\nSweepstakes, wagering pools, \nlotteries and raffles\n> $5000\n$600 to $5,000\nWagering transactions when \nwinnings are at least 300 times the \namount wagered\n> $5,000\n$600 to $5,000\nPoker tournaments\nN/A if winnings are reported on \nForm W-2G\n> $5,000\nReporting Withheld Taxes\nReport the amount of any taxes withheld from winnings (whether at the regular or backup withholding rate) in box 2 of the Form \nW-2G on which you report the winnings.\nWithholding Tax on Nonresident Aliens\nGenerally, gambling winnings paid to a nonresident alien are subject to withholding at 30 percent on the gross proceeds un-\nless the income is exempted by treaty. But winnings of a nonresident alien from blackjack, baccarat, craps, roulette or big-6 \nwheel are not subject to withholding and reporting.\nThe winnings and tax withheld are reported on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign \nPersons, and Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. For more information, see Publica-\ntion 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.\nAnnual Return of Non-Payroll Withheld Taxes \nTaxes withheld from gaming winnings are called non-payroll withheld taxes. You must report the total amount of federal \nincome tax you withhold from these payments during the year on Form 945, Annual Return of Withheld Federal Income Tax. \n",
"21\nChapter 6 - Reporting Winnings and Withholding Income Tax\nCHAPTER 6\nNon-payroll payments include gaming winnings subject to either regular or backup withholding. Therefore, the amounts you \nreport on your annual Form 945 must include the total amount of tax withheld from gaming winnings that you reported on \nall the Forms W-2G filed for the year. You must file Form 945 by January 31 following the close of the reporting year. If you \ndiscover an underpayment or overpayment error due to an administrative error on a previously filed Form 945, use Form 945-\nX, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund, to make the correction. See Publication 15, \n(Circular E) Employer’s Tax Guide and the instructions for Form 945-X for more information.\nDepositing Non-Payroll Withheld Taxes\nIf you report less than a $2,500 non-payroll tax liability for the year, you may pay the tax with your annual timely-filed Form 945. \nIf your non-payroll tax liability is $2,500 or greater, you must deposit those taxes on a monthly or semiweekly schedule using \nthe EFTPS. Be sure to deposit non-payroll withheld taxes separately from any payroll taxes for which your organization may \nbe liable.\nFor more information about the deposit schedule you will be required to follow, see “Depositing Taxes” in Publication 15\n(Circular E), Employer’s Tax Guide\n, \n. \n",
"Ch\napt\ner \n7\n22\nChapter 7 - Gaming Excise Taxes\nCHAPTER 7\nGaming Excise Taxes\nMost gaming requires the participant to stake, or bet, some money for the chance of winning a prize, award or jackpot. The \nmoney a bettor places in a game is called the wager. If you are engaged in the business of accepting wagers, you may be \nrequired to pay two separate excise taxes. These are in addition to any unrelated business income tax that gaming may gener-\nate. The excise taxes are:\n•\nA tax on wagers (wagering tax) under IRC Section 4401(a); and\n•\nAn occupational tax on persons in the business of accepting wagers and on persons who receive wagers on behalf\nof someone in the business of accepting wagers (occupational tax) under IRC Section 4411(a).\nYou are engaged in the business of accepting wagers for an event or contest if, depending on the outcome, you are assuming \nthe risk of profit and loss. This is true regardless of how few bets you accept or how infrequently you take them.\nWagering Tax\nYou are required to pay the wagering tax when you accept a wager from a bettor:\n•\nOn a sports event;\n•\nOn a contest;\n•\nParticipating in a wagering pool with respect to a sports event or contest, if the wagering pool is conducted for profit;\nor\n•\nParticipating in a lottery conducted for profit.\n(Some wagers are exempt – see the section “Wagers Exempt from Wagering Tax,\n” below.)\nConducted for Profit: A wagering pool or lottery is conducted for profit if it earns a direct profit, if it is expected to generate \nan indirect profit such as increased sales or attendance, or if the operator takes a percentage of the contributions or charges \na fee to join the pool.\nWagers Subject to Wagering Tax\nNote: Any person or entity in the business of accepting wagers will be liable for the wagering excise tax even if the business \nis illegal in the state where it is conducted. The categories of wagers to which the tax applies are detailed below.\nSports Events: If you accept a wager placed on a sports event, you must pay the wagering tax on the wager. It does not matter \nwhether the sports event is an amateur, scholastic or professional event. Typical sports events on which wagers are placed \ninclude horse, auto or dog racing; boxing or wrestling matches; baseball, football or basketball games; tennis or golf matches; \nor track meets.\nContests: You are responsible for paying the wagering tax if you accept a wager placed on a contest. A contest includes any \nkind of contest involving speed, skill, endurance, popularity, politics, strength, appearances and so on. Typical contests on \nwhich wagers are placed include dance marathons, log-rolling contests, wood-chopping contests, spelling bees and beauty \ncontests.\nWagering Pools: If you conduct a wagering pool for profit and accept a wager placed in the wagering pool, you must pay the \nwagering tax on the wager. A wagering pool is any scheme or method where prizes are distributed to one or more winning \nbettors based on the outcome of a sports event or contest or a combination of both.\nLotteries: If you conduct a lottery for profit and accept a wager placed in the lottery, you must pay the wagering tax on the \nwager. A lottery is a type of wagering in which:\n•\nA prize is offered;\n•\nParticipants pay for the opportunity to win the prize; and\n•\nThe prize is awarded by chance.\nA lottery also includes “numbers game” types of wagering in which the player pays a fixed amount and selects a number or \ncombination of numbers. If the selected number or numbers appear or are published in the mutually understood manner, the \nlottery operator pays the player a prize. Tip jars, raffles, pull-tabs and similar games meet the definition of wagers placed in a \nlottery.\n",
"23\nChapter 7 - Gaming Excise Taxes\nCHAPTER 7\nWagers Exempt from Wagering Tax\nThere is no wagering tax on wagers placed in:\n•\nGames when all participants are present;\n•\nDrawings conducted by exempt organizations; or\n•\nGames played on a coin-operated device.\nGames When All are Present: A wager placed in a game in which the wagers are placed, the winners are determined and the \nprizes are distributed in the presence of all persons placing wagers in the game is not subject to the wagering tax.\nGames of this type involve group play, and include bingo meeting the statutory bingo exclusion (as described in Chapter 2), \nkeno, card games, dice games and games involving wheels of chance, such as roulette wheels.\nDrawings Conducted by Exempt Organizations: A wager placed in a drawing conducted by a tax-exempt organization is not \nconsidered a “wager placed in a lottery conducted for profit” (and, thus, is not subject to the tax on wagers) so long as no part \nof the net proceeds from the drawing “inures” to the benefit of any private shareholder or individual.\nDrawing: A drawing is any physical drawing of a ticket or use of a wheel or similar device by which the winner is conclusively \ndetermined by a number, letter, legend or symbol without reference to an outside event that is beyond the operator's control.\nInures to the Benefit of Private Shareholders or Individuals: This phrase comes directly from the IRC and describes a circum-\nstance where a drawing benefits an individual personally in some way. This could happen if, for example, the drawing opera-\ntor’s salary is unreasonable, or if the operator receives a percentage of the total wagers as compensation.\nWhen the drawing is conducted by a membership organization, such as a social club, fraternal society or veterans’ organiza-\ntion, the drawing could benefit the members if wagers are accepted from nonmembers and used for operating expenses or \nto pay for member benefits or services. If, however, the wagering revenue is separately accounted for and earmarked solely \nfor charitable purposes, there is no inurement and no liability for wagering tax arises. And, if the wagers are accepted from \nmembers only, proceeds of a drawing may be used for the organization’s operations without triggering the wagering tax.\nExample: S, a social club exempt under Section 501(c)(7), sells lottery tickets. Only club members may purchase tickets. \nThe winners receive a portion of the proceeds from the sale of the tickets. The remaining proceeds go to the general funds of \nthe club and are used to defray its operating expenses or to offset losses incurred in the club’s activities, which are devoted \nexclusively to the pleasure and recreation of its members. Because the drawing is limited to members and the net proceeds \nare used solely to meet the club’s operating expenses, none of the proceeds inure to the benefit of any private shareholder or \nindividual. Therefore, the club is not engaged in the business of accepting wagers placed in a lottery conducted for profit and \nis not liable for wagering tax.\nExample: B, a veterans’ organization exempt under Section 501(c)(19), occasionally sells pull-tabs at bingo games which are \nopen to the public. A portion of the proceeds from pull-tab sales are used to pay B’s operating and administrative expenses, \nwithout which B would have to increase its dues or other member contributions. Because a portion of the net proceeds from \nthe pull-tabs indirectly inures to the members, B is considered to be engaged in the business of accepting wagers placed in \na lottery conducted for profit and is liable for wagering taxes.\nExample: Y, a Section 501(c)(3) organization, sells pull-tabs. The organization uses net proceeds from pull-tab sales to carry \nout its exempt purpose. There is no inurement or private benefit to individuals, so the wagering tax does not apply to the sales \nof the pull-tabs.\nCoin-Operated Device: There is no wagering tax on amounts spent to operate coin-operated devices, which include slot ma-\nchines, pinball machines and video machines such as those that display poker hands.\nParimutuel Wagering: There is no wagering tax on wagers placed with or in a wagering pool conducted by a parimutuel en-\nterprise licensed under state law.\nState-Conducted Lotteries: There is no wagering tax on wagers placed in lotteries, sweepstakes or wagering pools conduct-\ned by a state, under state law where the wager is placed with the state or its authorized employees or agents.\nRate of Wagering Tax\nThe tax rate depends on whether the wager is authorized under the law of the state in which it is accepted, in other words, on \nwhether the wager is legal. The tax on legal wagers is 0.25 percent of the amount of the wager. The tax on unauthorized, or \nillegal, wagers is 2 percent of the amount of the wager.\nExample: Lodge Y, a fraternal beneficiary society exempt under Section 501(c)(8), sells pull-tabs at its bar to both members \nand nonmembers. The proceeds go to Y’s general account to pay administrative and operating expenses. Y is liable for \n",
"24\nChapter 7 - Gaming Excise Taxes\nCHAPTER 7\nwagering tax because the proceeds from pull-tab sales to nonmembers inure to the private benefit of Y’s members. The rate \nof tax is 0.25 percent because Y is licensed by the state to sell pull-tabs and the wager is legal under state law.\nThe amount of the wager is the sum risked by the bettor, including any charges incurred in placing the bet. If you charge the \nbettor for the wagering tax as a separate charge, the charge is not included in the amount of the wager.\nIf you engage in illegal wagering, paying the wagering tax does not shield you from any penalties or punishment under federal \nor state law.\nMonthly Return of Wagering Tax\nYou must file a return on Form 730, Monthly Tax Return for Wagers, for every month in which you accept a wager on which \nyou owe wagering tax. Use Form 730 to report the gross amount of wagers accepted and to figure the tax on those wagers.\nFile the Form 730 by the last day of the month following the month for which you are reporting. For example, if you accepted \nwagers in April, you would report them on your Form 730 due by May 31. Once you file a Form 730, you must continue to file \nit every month, regardless of whether you owe wagering tax, until you stop accepting wagers. If you stop accepting wagers, \ncheck the “final return” box on the last Form 730 you file.\nPaying the Wagering Tax\nYou can pay the wagering tax either electronically by using the EFTPS or by mailing a check or money order with your Form \n730. Include the payment voucher Form 730-V whenever you mail any payment.\nOccupational Tax\nAn annual occupational tax must be paid by:\n•\nAny person or organization that is responsible for paying wagering tax; and\n•\nAny person who receives wagers on behalf of a person or organization that is responsible for paying wagering tax.\nIn other words, if you are in the business of accepting wagers and are required to pay wagering tax, then you and each of your \nemployees or agents who receive wagers on your behalf must separately pay an occupational tax. If your games meet any of \nthe exemptions to the wagering tax shown above, you will not be liable for the occupational tax.\nIf you engage in illegal wagering, paying the occupational tax does not shield you from any penalties or punishment under \nfederal or state law.\nAmount of the Tax\nThe amount of the occupational tax depends on whether the wager is authorized, in other words, legal, under the laws of the \nstate in which the wager is accepted. \n•\nIf the person or organization required to pay the occupational tax accepts only authorized wagers, the amount of the\ntax is $50 per year.\n•\nIf the person or organization required to pay the occupational tax accepts any wager that is not authorized, the amount\nof the tax is $500 per year.\nRegistering and Paying the Occupational Tax\nEach person required to pay the occupational tax must register with the IRS by filing a return on Form 11-C, Occupational Tax \nand Registration Return for Wagering. The occupational tax must be paid when filing the return.\nInitial Return: You must file the first return on Form 11-C and pay the occupational tax before you start accepting wagers. The \ntax for the year in which you start accepting wagers is determined proportionately, from the first day of the month in which you \nbegin accepting wagers to the following June 30. For example, if you accept wagers for the first time on April 14, you must pay \na prorated tax for the period from April 1 to June 30. You would pay a tax that is 91/365ths of the annual tax.\nSubsequent Returns: After your initial return, you must file subsequent returns on Form 11-C by July 1 of each year to cover a \none-year period beginning July 1 and ending June 30 of the following year. You must pay the tax for the entire year, even if you \naccept wagers for only a part of the year.\nRecordkeeping by the Organization for Wagering and Occupational Taxes\nDaily Record: You must keep a daily record showing the gross amount of all wagers on which wagering tax is due. The record \nfor each day’s operations must show:\n•\nThe gross amount of wagers accepted;\n•\nThe gross amount of each class or type of wager accepted on each separate event, contest or other wagering medium;\n",
"25\nChapter 7 - Gaming Excise Taxes\nCHAPTER 7\n•\nThe gross amount, separately, of wagers:\n•\nYou accepted directly or at your registered place of business; and\n•\nYou or your agents accepted at any place other than your registered place of business; and\n•\nThe gross amount of tax collected from or charged to bettors as a separate item.\nRecords of Agents and Employees: You must maintain a separate record of each agent or employee receiving wagers on your \nbehalf. The record must include the employee’s or agent’s name, address, periods of employment and employer identification \nnumber.\nForm 730 and Form 11-C: You must keep a copy of each Form 730 and Form 11-C that you file.\nYou must keep each record at your principal place of business for at least three years from the due date of the return to which \nthe record pertains. The record must be available to the IRS at all times.\nRecordkeeping by Agents and Employees\nEvery agent or employee of your organization who receives wagers on your behalf at any place other than your registered place \nof business must keep a daily record of:\n•\nThe gross amount of wagers received;\n•\nThe amount, if any, retained as a commission or as compensation for receiving the wagers; and\n•\nThe amount turned over to you.\nThe records must be kept for at least three years from the date the wager was received, and must be available to the IRS at \nall times.\n",
"Ex\nhi\nbi\nt \nB\n26\nExhibit B - General Tax Calendar for Organizations That Conduct Gaming\nEXHIBIT B\nGeneral Tax Calendar for Organizations That Conduct \nGaming (Calendar Year Filers)\nFiscal Year Filers: If you use a fiscal year as your accounting \nperiod rather than a calendar year, change the dates in this \ncalendar as follows:\n•\nFile Form 990 or 990-EZ (or file Form 8868 to apply for\nan extension to file Form 990 or 990-EZ) by the 15th day\nof the 5th month after your accounting period ends.\n•\nFile Form 990-T (or file Form 8868 to apply for an exten-\nsion to file Form 990-T) by the 15th day of the 5th month\nafter your accounting period ends.\n•\nPay estimated unrelated business income tax by the 15th\nday of the 4th, 6th, 9th and 12th months of your fiscal\nyear.\nThe first quarter of a calendar year comprises January, February and March.\nBy January 10\nEmployees who work for tips: If you received $20 or more in tips during December, report them to your employer. You can \nuse Form 4070, Employee’s Report of Tips to Employer.\nBy January 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in De-\ncember.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in December.\nBy January 31\nEmployers: Give your employees their copies of Form W-2 for the previous year.\nIf you use paper or file electronically, you must file Copy A of all Forms W-2 issued for the previous calendar year by the last \nday of January, with the Social Security Administration. Use Form W-3, Transmittal of Wage and Tax Statements, to transmit \nForms W-2 to the SSA. For information on reporting Form W-2 information to the SSA electronically, visit the Social Security \nAdministration’s webpage.\nPayers of independent contractors: If an employer is reporting nonemployee compensation payments either paper or elec-\ntronically in box 7 on Form 1099-MISC, they must be filed with the IRS on or before January 31. Use Form 1096, Annual \nSummary and Transmittal of U.S. Information Returns, to transmit paper Forms 1099-MISC to IRS.\nPayers of gambling winnings: If you either paid reportable gambling winnings or withheld income tax from gambling winnings \nthe previous calendar year, give the winners their copies of Form W-2G.\nNonpayroll taxes: File Form 945 to report income tax withheld the previous calendar year on all nonpayroll items, including \nbackup withholding and withholding on gambling winnings. Deposit or pay any undeposited tax. If your tax liability is less than \n$2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until \nFebruary 10 to file the return.\nSocial Security, Medicare and withheld income tax: File Form 941 for the fourth quarter of the previous calendar year. Deposit \nor pay any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited \nthe tax for the quarter in full and on time, you have until February 10 to file the return.\nCertain small employers: File Form 944 to report Social Security, Medicare and withheld income taxes for the previous calen-\ndar year. Deposit or pay any undeposited tax. If your tax liability is $2,500 or more the entire previous year but less than $2,500 \nfor the fourth quarter of the previous year, deposit any undeposited tax or pay it in full with a timely filed return.\nFederal unemployment tax: File Form 940 for the previous calendar year. If your undeposited tax is $500 or less, you can \neither pay it with your return or deposit it. If it is more than $500, you must deposit it. If you deposited the tax for the year in \nfull and on time, you have until February 10 to file the return.\nWagering tax: File Form 730 and pay the tax on wagers accepted during December.\nNote: This calendar does not account for Sat-\nurdays, Sundays or legal holidays. If a due date \nfor performing any act for tax purposes falls \non a Saturday, Sunday or legal holiday, it is de-\nlayed until the next day that is not a Saturday, \nSunday or legal holiday. See Publication 509, \nTax Calendars, for due dates adjusted to take \naccount of the weekends and holidays of the \nparticular calendar year.\n",
"27\nExhibit B - General Tax Calendar for Organizations That Conduct Gaming\nEXHIBIT B\nBy February 10\nEmployees who work for tips: If you received $20 or more in tips during January, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy February 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in January.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in January.\nBy the Last Day of February (February 28 or February 29 in leap years)\nWagering tax: File Form 730 and pay the tax on wagers accepted during January.\nFile paper Forms W-2G and paper Forms 1099-MISC without box 7 checked with the IRS by February 28.\nBy March 10\nEmployees who work for tips: If you received $20 or more in tips during February, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy March 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Febru-\nary.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in February.\nBy March 31\nWagering tax: File Form 730 and pay the tax on wagers accepted during February.\nThe second quarter of a calendar year comprises April, May and June.\nBy April 2\nFor electronically filed Forms W-2G, and electronically filed Forms 1099-MISC without box 7 checked, file with IRS by April \n2. For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic\nFiling of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. \nBy April 10\nEmployees who work for tips: If you received $20 or more in tips during March, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy April 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in March.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in March.\nUnrelated business income tax: If total expected tax for the tax year is $500 or more, deposit the first installment of estimated \ntax. Use Form 990-W to figure your estimated tax liability.\nBy April 30\nSocial Security, Medicare and withheld income tax: File Form 941 for the first quarter of the calendar year. Deposit or pay any \nundeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax \nfor the quarter in full and on time, you have until May 10 to file the return.\nFederal unemployment tax: Deposit the tax owed through March if more than $500.\nWagering tax: File Form 730 and pay the tax on wagers accepted during March.\nBy May 10\nEmployees who work for tips: If you received $20 or more in tips during April, report them to your employer. You can use Form \n4070, Employee’s Report of Tips to Employer.\nBy May 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in April.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in April.\nExempt organization annual information return or notice: File annual information return (Form 990 or 990-EZ) or e-Postcard \n(Form 990-N). If you want an automatic 6-month extension to file Form 990 or 990-EZ, file Form 8868. Then, file Form 990 or \n990-EZ by November 15. There is no extension for Form 990-N.\n",
"28\nExhibit B - General Tax Calendar for Organizations That Conduct Gaming\nEXHIBIT B\nUnrelated business income tax return: File Form 990-T to report your unrelated business income and unrelated busi\nness income tax liability for the previous calendar year, and deposit any tax due in full. Corporations and trusts may re\nquest an automatic 6-month extension to file Form 990-T by filing Form 8868. Then, file Form 990-T by November 15. \n-\n-\n \nReminder: Fiscal year (non-calendar year) filers do not use this date for Form 990-series returns and notices. Use the 15th \nday of the 5th month after your fiscal year ends.\nBy May 31\nWagering tax: File Form 730 and pay the tax on wagers accepted during April.\nBy June 10\nEmployees who work for tips: If you received $20 or more in tips during May, report them to your employer. You can use Form \n4070, Employee’s Report of Tips to Employer.\nBy June 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in May.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in May.\nUnrelated business income tax: If total expected tax for the year is $500 or more, deposit second installment of estimated tax. \nUse Form 990-W to figure your estimated tax liability.\nBy June 30\nWagering tax: File Form 730 and pay the tax on wagers accepted during May.\nThe third quarter of a calendar year comprises July, August and September.\nBy July 1\nOccupational excise taxes: File Form 11-C to register and pay the annual tax if you are in the business of taking wagers.\nBy July 10\nEmployees who work for tips: If you received $20 or more in tips during June, report them to your employer. You can use Form \n4070, Employee’s Report of Tips to Employer.\nBy July 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in June.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in June.\nBy July 31\nSocial Security, Medicare and withheld income tax: File Form 941 for the second quarter of the calendar year. Deposit or pay \nany undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the \ntax for the quarter in full and on time, you have until August 10 to file the return.\nCertain small employers: Deposit any undeposited tax if your tax liability is $2,500 or more for the calendar year but less than \n$2,500 for the second quarter.\nFederal unemployment tax: Deposit the tax owed through June if more than $500.\nWagering tax: File Form 730 and pay the tax on wagers accepted during June.\nBy August 10\nEmployees who work for tips: If you received $20 or more in tips during July, report them to your employer. You can use Form \n4070, Employee’s Report of Tips to Employer.\nBy August 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in July.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in July.\n",
"29\nExhibit B - General Tax Calendar for Organizations That Conduct Gaming\nEXHIBIT B\nBy August 31\nWagering tax: File Form 730 and pay the tax on wagers accepted during July.\nBy September 10\nEmployees who work for tips: If you received $20 or more in tips during August, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy September 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in August.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in August.\nUnrelated business income tax: If total expected tax for the year is $500 or more, deposit third installment of estimated tax. \nUse Form 990-W to figure your estimated tax liability.\nBy September 30\nWagering tax: File Form 730 and pay the tax on wagers accepted during August.\nThe fourth quarter of a calendar year comprises October, November and December.\nBy October 10\nEmployees who work for tips: If you received $20 or more in tips during September, report them to your employer. You can \nuse Form 4070, Employee’s Report of Tips to Employer.\nBy October 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Sep-\ntember.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in September.\nBy October 31\nSocial Security, Medicare and withheld income tax: File Form 941 for the third quarter of the calendar year. Deposit or pay \nany undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the \ntax for the quarter in full and on time, you have until November 10 to file the return.\nCertain small employers: Deposit any undeposited tax if your tax liability is $2,500 or more for the calendar year but less than \n$2,500 for the third quarter.\nFederal unemployment tax: Deposit the tax owed through September if more than $500.\nWagering tax: File Form 730 and pay the tax on wagers accepted during September.\nBy November 10\nEmployees who work for tips: If you received $20 or more in tips during October, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy November 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Oc-\ntober.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in October.\nExempt organization annual information return: If you requested an automatic 6-month extension to file your annual informa-\ntion return, file Form 990 or 990-EZ.\nUnrelated business income tax: If you requested an automatic 6-month extension to file your exempt organization business \nincome tax return (corporations and trusts), file Form 990-T.\nReminder: Fiscal year (non-calendar year) filer Form 990-series extensions end on the 15th day of the 5th month after your \ntax year ends (not November 15).\nBy November 30\nIncome tax withholding: Ask employees whose withholding allowances will be different next calendar year to fill out a new \nForm W-4, Employee’s Withholding Allowance Certificate.\nWagering tax: File Form 730 and pay the tax on wagers accepted during October.\n",
"30\nExhibit B - General Tax Calendar for Organizations That Conduct Gaming\nEXHIBIT B\nBy December 10\nEmployees who work for tips: If you received $20 or more in tips during November, report them to your employer. You can use \nForm 4070, Employee’s Report of Tips to Employer.\nBy December 15\nSocial Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in No-\nvember.\nNonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in November.\nUnrelated business income tax: If total expected tax for the year is $500 or more, deposit fourth installment of estimated tax. \nUse Form 990-W to figure your estimated tax liability.\nDecember 31\nWagering tax: File Form 730 and pay the tax on wagers accepted during November.\n",
"E\nx\nh\ni\nb\nit \nC\n31\nExhibit C - Summary of Forms, Publications and Other Resources for Organizations Conducting Gaming\nEXHIBIT C\nSummary of Forms, Publications and Other Resources \nfor Organizations Conducting Gaming\nForms\nForm 990, Return of Organization Exempt From Income Tax\nForm 990-EZ, Short Form Return of Organization Exempt From Income Tax\nForm 990-N, e-Postcard (electronic only)\nForm 8868, Application for Automatic Extension of Time To File an Exempt Organization Return\nSchedule G, Form 990 or Form 990-EZ, Supplemental Information Regarding Fundraising or Gaming Activities \nForm 990-T, Exempt Organization Business Income Tax Return\nForm W-2G, Certain Gambling Winnings\nForm 1096, Annual Summary and Transmittal of U.S. Information Returns\nForm 5754, Statement by Person(s) Receiving Gambling Winnings\nForm 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons\nForm 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding\nForm 945, Annual Return of Withheld Federal Income Tax\nForm 730, Monthly Tax Return for Wagers\nForm 11-C, Occupational Tax and Registration Return for Wagering\nForm SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding\nForm W-4, Employee’s Withholding Allowance Certificate\nForm 941, Employer’s Quarterly Federal Tax Return\nForm 944, Employer’s Annual Federal Tax Return\nForm 940, Employer's Annual Federal Unemployment (FUTA) Tax Return\nForm W-2, Wage and Tax Statement\nForm W-3, Transmittal of Wage and Tax Statements\nForm 4070A, Employee’s Daily Record of Tips\nForm 4070, Employee’s Report of Tips to Employer\nForm 4137, Social Security and Medicare Tax on Unreported Tip Income\nForm W-9, Request for Taxpayer Identification Number and Certification\nForm 1099-MISC, Miscellaneous Income\nPublications\nPublication 557, Tax-Exempt Status for Your Organization\nPublication 598, Tax on Unrelated Business Income of Exempt Organizations\nPublication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities\nPublication 15, (Circular E), Employer’s Tax Guide\nPublication 15-A, Employer’s Supplemental Tax Guide\nPublication 531, Reporting Tip Income\n",
"32\nExhibit C - Summary of Forms, Publications and Other Resources for Organizations Conducting Gaming\nEXHIBIT C\nPublication 583, Starting a Business and Keeping Records\nPublication 1779, Independent Contractor or Employee\nPublication 4221-PC, Compliance Guide for 501(c)(3) Public Charities\nPublication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations\nPublication 4221-NC, Compliance Guide for Tax-Exempt Organizations (Other than 501(c)(3) Public Charities and Private \nFoundations)\nOther Resources\nIRS Tax Exempt and Government Entities Customer Account Services: 877-829-5500 (toll-free). This department can \nanswer your technical and procedural questions concerning charities and other non-profit organizations.\nBusiness and Specialty Tax Line: 800-829-4933 (toll-free). This department can answer your specific questions about \nemployment and wagering taxes.\nIRS Forms and Publications: 800-829-3676 (toll-free) You can order tax forms and publications for delivery by U. S. mail. Be \naware that quantities are limited. \nIRS.gov\nTax Information for Charities & Other Non-Profits\nSocial Security Administration\nIRS Forms, Instructions & Publications\nFiling Information For Charities & Non-Profits \nEO Update: The IRS electronic newsletter with information for tax-exempt organizations and the practitioners who represent \nthem\nLife Cycle of an Exempt Organization\nStay Exempt – Tax Basics for 501(c)(3) Organizations: A specialized educational website from the IRS Exempt \nOrganizations office\n"
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fw7coa-2023-07-00.pdf
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0519 Form W-7 (COA)
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https://www.irs.gov/pub/irs-pdf/fw7coa-2023-07-00.pdf
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[
"Catalog Number 56020G\nwww.irs.gov\nForm W-7 (COA) (Rev. 7-2023)\nForm W-7 (COA) \n(July 2023)\nDepartment of the Treasury \nInternal Revenue Service\nCertificate of Accuracy for IRS Individual \nTaxpayer Identification Number\nSee Publication 4520\nForm use only by IRS Certifying Acceptance Agents when submitting Form W-7\nOMB Number \n1545-0074\nCertificate of Accuracy\nThe undersigned\n is an responsible party of\n(CAA business name)\n, a Certifying Acceptance Agent under an agreement entered into with\nthe Internal Revenue Service dated\n/\n/ 20\n. The undersigned certifies with regard to Form W-7 submitted for\n(Form W-7 applicant’s name)\n, that the applicant is not eligible for a SSN and has\nprovided the documentation checked below that sufficiently supports the applicant’s identity, foreign status and, if applicable, residency.\nREMINDER: A passport is the only stand-alone document that proves both “foreign status” and “identity”. If a passport is not provided, \na combination of two or more documents must be provided to meet the documentation requirements. Note: Additional \noriginal documentation requirements may apply for some dependents. See Supporting Documentation in this form's \ninstructions.\nCheck the box under each category (Identity, Foreign Status) that corresponds to the documents reviewed by you.\nSupporting Documentation\nIdentity\nForeign \nStatus\nPassport (Stand Alone Document)*\nNational Identification Card (must be current and contain name, photograph, address, date of \nbirth and expiration date)\nUnited States Drivers License\nCivil Birth Certificate (Required for applicants under 18 if passport is not provided)\n**\nMedical Records (valid only for dependents under age 6)\n**\nForeign Drivers License\nUnited States State Identification Card\nForeign Voters Registration Card\nUnited States Military Identification Card\nForeign Military Identification Card\nSchool Records (valid only for dependents under age 14 (under age 18 if a student))\n**\nVisa issued by United States Department of State\nUnited States Citizenship and Immigration Services (USCIS) Photo Identification\n*Passport must have a date of entry for dependents, unless they are a dependent of U.S. military personnel stationed overseas.\n**May be used to establish \"foreign status\" only if the documents are foreign.\nCheck and complete the following paragraph only if the applicant is applying for an ITIN under “Exception 1(a) - \nPartnership Interest”.\nThe undersigned further certifies that the Applicant has provided a copy of the relevant pages of the Partnership\nAgreement of\n(Name of Partnership)\nand\nEIN\nas documentation in support of meeting the requirements for Exception 1(a).\n The undersigned further certifies that the documentation was reviewed in accordance with the procedures set forth in the \nAcceptance Agent Agreement and is authentic, complete, and accurate based on the information and documentation submitted by the \napplicant.\n The Certifying Acceptance Agent shall retain copies of all relevant documents including signed copies of the Forms W-7 submitted \nto the IRS on behalf of the applicant upon which the Certifying Acceptance Agent has relied upon to certify the applicant’s foreign status \nand identity.\n(Signature of Responsible Party)\n(Date signed)\nAcceptance Agent EIN\nAcceptance Agent office code\nAcceptance Agent PTIN\n",
"Catalog Number 56020G\nwww.irs.gov\nForm W-7 (COA) (Rev. 7-2023)\nInstructions for Form W-7 (COA), Certificate of Accuracy for IRS Individual Taxpayer Identification Number \nWhat is Form W-7 (COA)?\nForm W-7 (COA) is a “Certificate of Accuracy” prepared by an ITIN \nCertifying Acceptance Agent (CAA) and attached to each Form W-7 \n(Application for IRS Individual Taxpayer Identification Number) that is \nsubmitted to IRS. It contains the following information. \n• The name of the designated responsible party of the CAA who is \ncompleting the Certificate of Accuracy (COA). \n• The legal name of the business.\n• The Employers Identification Number (EIN) and office code of the CAA.\n• The date that the Acceptance Agent Agreement was approved. \n• The name of the ITIN Applicant. \n• The type(s) of supporting documentation reviewed by the CAA to prove \nthe ITIN applicant’s “identity” and “foreign status”. \n• A statement by the CAA that they have verified to the best of their \nknowledge, the authenticity, accuracy and completeness of the \ndocumentation they reviewed. \n• The signature of the individual who has prepared the COA and the \ndate that it was signed. \nWhat is the purpose of Form W-7 (COA)?\nThe COA is a certification by the CAA that they have reviewed the \nsupporting documentation to prove the ITIN applicant’s “identity” and \n“foreign status” and to the best of their knowledge the documents are \ncomplete, authentic, and accurate. Note: With the exception of \ndocumentation to prove Exception 1(a) criteria, the only documents that \nshould be included in the COA are those that were reviewed by you to \nprove the applicant’s claim of identity and foreign status. All other \nsupplemental documentation supporting “Exception” criteria, (i.e. a copy \nof a withholding document, a letter from a financial institution, etc,) as \nwell as a denial letter from the Social Security Administration (if \napplicable) must be attached to Form W-7 and submitted to IRS.\nWho must submit a COA? \nAll CAAs are required to complete and submit a separate COA for each \nForm W-7 that is sent to IRS. It is important to remember that as a CAA, \ndocumentation to support identity and foreign status must be reviewed \nby you and should be included with your COA. You must attach a copy of \nthe original documents or certified copy by the issuing agency for primary \nand secondary applicants. For dependents, you must attach a copy of \nthe passport or birth certificate. For all other dependent documents, you \nmust attach the original document or certified copy by the issuing \nagency. IRS employees at designated Taxpayer Assistance Centers \n(TAC) will not review W-7 applications prepared by CAAs.\nWho can sign the Certificate of Accuracy? \nOnly the designated responsible party of the business is permitted to sign \nthe COA.\nWhere can I find Form W-7 (COA)? \nForm W-7 (COA) can be found on the IRS web site at www.irs.gov by \nsearching for “Form W-7 (COA)”.\nWhose PTIN is required?\nOnly tax practitioners are required to have a PTIN. The approved \nresponsible party of the business must provide their PTIN on Form W-7 \n(COA).\nSupporting Documentation \nYou should check only the boxes that correspond to the documents which \nyou reviewed and certified to support the ITIN applicant’s identity and \nforeign status. A passport is the only stand alone document for purposes \nof satisfying both the “identity” and “foreign status” criteria. A passport \nthat doesn't have a date of entry won't be accepted as a stand-alone \nidentification document for dependents, unless they are a dependent of \nU.S. military personnel stationed overseas. In these cases, additional \noriginal documents must be submitted with the passport to prove U.S. \nresidency. See Part 4 of Publication 4520 for documents accepted as \nproof of U.S. residency for dependents. If you review the applicant’s \npassport, you would place an “x” in the box under the “Identity” and \n“Foreign Status” column on the Passport line. If, however, a passport is \nnot reviewed by you, then a combination of at least two or more \ndocuments must be examined from the list of Supporting Documents; one \nwhich satisfies identity, and one which satisfies foreign status. If a \ndocument does not display a box under the Identity or Foreign Status \ncolumn, it signifies that the document can not be used to support that \ncategory. For example: A Foreign Drivers License, U.S. State \nIdentification Card, and U.S. Military Identification Card can not be used \nto prove an applicant’s “foreign status”. Therefore there is no check-box \nfor those documents under the foreign status column. They can, however, \nbe used to prove the applicant’s “identity”, so there are check-boxes \nunder the identity column. Medical records valid for children under 6 \nyears of age and school records are valid only for dependents under age \n14, (under age 18 if a student).\nPhrase\nDefinition \nThe Undersigned \nThis is the name of the individual who is preparing and signing the Certificate of Accuracy. This person must be the \nindividual who has been designated as the responsible party of the business. \nCAA Business Name \nThis is the legal name of the business that was entered by you on Form 13551, Application to Participate in the \nITIN Acceptance Agent Program. \nAgreement approved date \n___ / ___ / 20__ \nThis is the date that IRS approved your agreement. You can locate this date on your CAA Agreement. \nForm W-7 Applicant’s Name \nThis is the name of the individual for whom you are completing the Form W-7 and Certificate of Accuracy. \nName of Partnership \nThe name of the partnership should be entered on this line only if you are requesting an ITIN under Exception 1\n(a) – Partners in a U.S. or foreign partnership that invests in the U.S. \nEIN, Office Code and PTIN\nThis is the Employer’s Identification Number (EIN) that was assigned to the business by IRS. The office code is a \nnumber assigned by the ITIN Policy Section when the application for AA status is approved. Preparer Tax \nIdentification Number (PTIN) is required for anyone who prepares or assists in preparing federal tax returns for \ncompensation. This number should be entered on the line for Acceptance Agent PTIN \nDate signed\nThis is the date that the Certificate of Accuracy is signed by the responsible party of the Business. \nFor additional information regarding documentation, please refer to Publication 4520 Acceptance Agents Guide for Individual Taxpayer Identification \nNumber (ITIN)\nDefinitions — The following chart represents definitions for phrases used in Form W-7 (COA).\n"
] |
p5059.pdf
|
0519 Publ 5059 (PDF)
|
https://www.irs.gov/pub/irs-pdf/p5059.pdf
|
[
"How to prepare a \nCollection Information Statement (Form 433-B)\nWho should use Form 433-B?\nForm 433-B is used to obtain current financial information \nnecessary for determining how a business can satisfy an \noutstanding tax liability.\nThe following business entities need to complete \nForm 433-B: \n• Partnerships \n• Corporations \n• Exempt Organizations \n• S Corporations \n• Limited Liability Companies (LLC) classified as a corporation \n• Other LLCs\nSection 1 \nBusiness Information\nComplete items 1 through 6. For items 4 and 5, include \ninformation for mobile commerce and mobile accounts \nsuch as PayPal Mobile or Paymate. Include virtual \ncurrency wallet, exchange or digital currency exchange. \nAnswer all questions in this section or write N/A if a \nquestion is not applicable. Include attachments if additional \nspace is needed to respond completely to any question.\nSection 2 \nBusiness Personnel and Contacts\nEnter information about all persons (foreign and domestic) \nresponsible for collecting, paying and depositing withheld \nincome and employment taxes, or for paying collected \nexcise taxes. These persons could be officers, employees, \npartners, major shareholders, etc. Include attachments if \nadditional space is needed to respond completely to the \nquestion.\nSection 3 \nOther Financial Information\nComplete items 8 through 15 and attach copies of all \napplicable documentation. Answer all questions in this \nsection or write N/A if a question is not applicable. Include \nattachments if additional space is needed to respond \ncompletely to any question.\nSection 4 \nBusiness Asset and Liability Information \n(Foreign and Domestic)\nItem 16 – Cash on Hand \nEnter the amount of cash on hand which includes cash in \na safe, cash register and petty cash.\nIf the business has a safe, list the contents.\nItems 17 –Business Bank Accounts \nEnter all accounts, even if there is currently no balance. \nInclude online bank accounts, money market accounts, \nsavings accounts, checking accounts, mobile payment \naccounts and stored value cards such as a payroll cards \nand government benefit cards. Also, list all safety deposit \nboxes including location, box number and value. Attach a \nlist of contents. Do not enter bank loans.\nItem 18 – Accounts/Notes Receivable \nEnter the name, address and phone number of the \nreceivable. Include e-payment accounts and factoring \ncompanies, as well as any bartering or online auction \naccounts. Include Federal Government Contracts. List all \ncontracts separately, including contracts awarded, but not \nstarted. Include attachments if additional space is needed.\nItem 19 – Investments \nInclude stocks, bonds, mutual funds, stock options, \ncertificates of deposit, commodities such as gold, silver, \ncopper, etc., and virtual currency (e.g., Bitcoin, Ripple and \nLitecoin).\nItem 20 – Available Credit \nInclude all lines of credit and credit cards issued by a \nbank, credit union, or savings and loan (MasterCard, Visa, \noverdraft protection, etc.).\nItems 21, 22 and 23 – Real Property, Vehicles and \nBusiness Equipment and Intangible Assets\nCurrent Fair Market Value – Indicate the amount you \ncould sell the asset for today.\nDate of Final Payment – Enter the date the loan or lease \nwill be fully paid.\nPublication 5059 (Rev. 5-2019) Catalog Number 60901W Department of the Treasury Internal Revenue Service www.irs.gov\n",
"Item 21 – Real Property \nList locations of all property that is leased, owned or \nis being purchased by the business. If the business is \nleasing or renting, list lessor or landlord. If the business is \npurchasing, list lender. Include attachments if additional \nspace is needed.\nItem 22 – Vehicles, Leased and Purchased \nList all vehicles owned and leased (cars, boats, RVs, \nmotorcycles, all-terrain and off-road vehicles, trailers, \nmobile homes, etc.). If the business is leasing, list the \nlessor. If the business is purchasing, list the lender. Include \nattachments if additional space is needed.\nItem 23 – Business Equipment and Intangible Assets \nList all machinery, equipment, merchandise inventory, and \nother assets in 23a through 23d. List intangible assets \nin 23e through 23g. Intangible assets include licenses, \npatents, logos, domain names, trademarks, copyrights, \nsoftware, mining claims, goodwill and trade secrets. \nInclude attachments if additional space is needed.\nItem 24 - Business Liabilities \nInclude notes and judgments not listed previously on this \nform (e.g., if equipment is secured by a note and the note \nwas listed in Item 23, it would not be included in Item 24).\nSection 5 \nMonthly Income/Expense Statement for \nBusiness\nIdentify a time period that reflects your typical business \nincome and expenses (e.g., 3, 6, 9 or 12 months). \nComplete the average monthly income/expense statement \nfor the stated time period. The business information should \nreconcile with your business profit and loss statement.\nDo not complete lines 47, 48 and 49 (For IRS use only).\nTotal Monthly Business Income\nItem 25 – Gross Receipts from Sales/Services \nEnter the amount of money received by the business \nfrom all sources for the goods sold or services rendered. \nThis figure is the total before any costs or expenses are \nsubtracted.\nItem 26 – Gross Rental Income \nEnter the amount of gross rents which represent payments \nreceived for the use of business assets and may be in \nthe form of monies, services, assets, bartering or any \ncombination of these.\nItem 27 - Interest Income \nEnter the amount of interest received by the business \nfrom loans, notes, mortgages, bonds, bank deposits, tax \nrefunds, etc.\nItem 28 - Dividends \nEnter the amount of dividends received by the business \nfrom U.S. and foreign sources.\nItem 29 – Cash Receipts \nInclude cash received from customers that is not included \nin income items 25 through 28.\nItems 30 through 34 – Other Income \nOther income represents items that do not fit into one of \nthe specific categories on Form 433-B or listed in other \nincome on the business tax return. \nFor example: \n• \u0007\nA construction company may have income from scrap \nconstruction materials.\n• A legal firm may have referral fees. \n• \u0007\nA Medical Professional Corporation may have expert \nwitness fees associated with a trial.\nTotal Monthly Business Expenses \nEnter total monthly expenses for the business. Allowable \nbusiness expenses are the cost of carrying on a business \nor trade. Generally, they must be necessary for the \noperation of the business. Do not include “non-cash” \nexpenses, such as depreciation, bad debts or depletion. \nInterest cannot be deducted as a separate expense if \nit is already included in any other allowable installment \npayments.\nAttachments Required \nInclude attachments if additional space is needed to \nrespond completely to any question. You may be asked \nto provide additional verification after we review the \ncompleted Form 433-B.\nCertification for Signature Line \nThe partner, corporate officer, or LLC member must \nsign Form 433-B, Collection Information Statement for \nBusinesses, under penalties of perjury. The signature \ncertifies that the information is accurate and complete. Any \nchanges made after signing the form should be initialed \nand dated.\nDistributions from Businesses \nDistributions from partnerships and subchapter S \ncorporations reported on Schedule K-1 and from limited \nliability companies reported on Form 1040, Schedule C, \nD, or E, should be included in the total distributions on \nLine 25, page 4 of the Form 433-A, Collection Information \nStatement for Wage Earners and Self-Employed \nIndividuals.\nPublication 5059 (Rev. 5-2019) Catalog Number 60901W Department of the Treasury Internal Revenue Service www.irs.gov\n"
] |
f12203a.pdf
|
0419 Form 12203-A (PDF)
|
https://www.irs.gov/pub/irs-pdf/f12203a.pdf
|
[
"Catalog Number 68271P\nwww.irs.gov\nForm 12203-A (Rev. 4-2019)\nForm 12203-A \n(April 2019)\nDepartment of the Treasury - Internal Revenue Service\nRequest for Appeal\nYou must complete the information in the spaces below, including your signature(s) and the date.\nContinuing Education Provider name\nProgram name\nProgram number(s)\nYear of review\nMailing address\nCity\nState\nZIP code\nIdentify the item(s) that you disagree with on Letter 4890 Notice of Denial or on the Summary of Findings Report that you received with \nthe Letter 5015 Notice of Revocation. Tell us why you disagree. You can add more pages if this is not enough space. Please refer to \nthe appropriate Continuing Education Provider Standards in your remarks. \nCE Provider standard number\nReason why you disagree\nCE Provider standard number\nReason why you disagree\nCE Provider standard number\nReason why you disagree\nCE Provider standard number\nReason why you disagree\nSignature(s) of Designated Official for Provider\nName\nSignature\nDate\nName\nSignature\nDate\nPurpose of this form: You can use this form to appeal a Letter 4890 Notice of Denial or a Letter 5015 Notice of Revocation of your IRS-approved \nCE Provider status. You must complete this form in its entirety and attach all supporting information, explanations or documents for the appeal to be \nconsidered valid. \nInstructions: Upload the completed form through your secure email in your online CE provider account or mail it to the address on the Letter 4890 or \nLetter 5015. The IRS must receive this form within 30 calendar days of the date of the denial or revocation letter. Once a valid appeal is received, a \ndetermination will be made. You will receive a notice that your appeal has either been upheld or overturned. \nIf you received a Letter 5015 Notice of Revocation and take no action within 30 calendar days, you will be removed from the public listing of IRS \napproved CE Providers and be prohibited from reinstatement as an approved IRS CE Provider for a period of two years from the date of revocation. \nYour website should not indicate that you are an approved IRS CE provider nor advertise IRS approved programs. Any outstanding PTIN records not \nuploaded must be submitted within 10 calendar days.\n"
] |
f13424m.pdf
|
0319 Form 13424-M (PDF)
|
https://www.irs.gov/pub/irs-pdf/f13424m.pdf
|
[
"Please wait... \n \nIf this message is not eventually replaced by the proper contents of the document, your PDF \nviewer may not be able to display this type of document. \n \nYou can upgrade to the latest version of Adobe Reader for Windows®, Mac, or Linux® by \nvisiting http://www.adobe.com/go/reader_download. \n \nFor more assistance with Adobe Reader visit http://www.adobe.com/go/acrreader. \n \nWindows is either a registered trademark or a trademark of Microsoft Corporation in the United States and/or other countries. Mac is a trademark \nof Apple Inc., registered in the United States and other countries. Linux is the registered trademark of Linus Torvalds in the U.S. and other \ncountries.\n"
] |
p1518a.pdf
|
1218 Publ 1518-A (PDF)
|
https://www.irs.gov/pub/irs-pdf/p1518a.pdf
|
[
"Tax Calendar Options for \nBusinesses and Self-Employed\nBusinesses can track federal tax due dates on their computers or mobile \ndevices using the electronic versions of the IRS Tax Calendar for Businesses \nand Self-Employed.\nThe Online Calendar\n•\n•\n•\n•\nAvailable in English and Spanish\nAccess from your computer, smartphone or tablet\nFilter due dates by monthly depositor, semiweekly depositor, excise or general\nevent types to see the dates that apply to you\nSee all due dates for each month\nSubscribe/Download to Your Electronic Calendar\nPublication 1518-A (Rev. 12-2018) Catalog Number 66021N Department of the Treasury Internal Revenue Service www.irs.gov\nCalendar Reminders\n•\n•\n•\nHave Calendar reminders sent to your email inbox via RSS Feeds\nSelect one or two weeks in advance of when a form or payment is due.\nView the Instructions for RSS Feeds (Spanish)\n•\n•\n•\nSubscribe using Outlook 2010, Outlook 2007 or Mac iCal (Spanish)\nDownload important tax dates to Outlook 2003 or other calendar programs\n(Spanish) \nWorks with your computer, iPhone or iPad\nAll these options are available on the IRS Tax Calendar for Businesses and \nSelf-Employed page of IRS.gov. Just enter “Tax Calendar” in the search box.\n"
] |
p1518asp.pdf
|
1218 Publ 1518-A (SP) (PDF)
|
https://www.irs.gov/pub/irs-pdf/p1518asp.pdf
|
[
"Opciones del Calendario de Impuestos para \nNegocios y Trabajadores por Cuenta Propia\nLos negocios pueden rastrear en sus computadoras o dispositivos móviles, \nlas fechas de vencimiento de los impuestos federales, utilizando las versiones \nelectrónicas del Calendario de Impuestos para Negocios y Trabajadores por \nCuenta Propia del IRS.\nEl Calendario en-Línea\n•\n•\n•\n•\nDisponible en inglés y español\nAcceso desde su computadora, smartphone o tableta\nFiltra las fechas de vencimiento por depositante mensual, depositante\nbisemanal, impuestos sobre artículos de uso y consumo o tipos de eventos\ngenerales, para conocer las fechas que le corresponden a usted\nVer todas las fechas de vencimiento para cada mes\nRecordatorios del Calendario\n•\n•\n•\nHaga que los recordatorios del calendario sean enviados a su buzón de\ncorreo electrónico a través de RSS Feeds\nSeleccione una o dos semanas de antelación de cuando un formulario o\nun pago es debido.\nVea las Instrucciones de RSS Feeds\nSuscribirse/Descargar a su Calendario Electrónico\n•\n•\n•\nSuscribirse utilizando Outlook 2010, Outlook 2007 o Mac iCal\nDescargar las fechas importantes de impuestos a Outlook 2003 u otros\nprogramas de calendario\nFunciona con su computadora, iPhone o iPad\nTodas estas opciones están disponibles en el Calendario de Impuestos para \nNegocios y Trabajadores por Cuenta Propia en la página web de IRS.gov. Sólo \ningrese “Calendario de Impuestos” en la caja de búsqueda\nPublication 1518-A (SP) (Rev. 12-2018) Catalog Number 66518V Department of the Treasury Internal Revenue Service www.irs.gov\n"
] |
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