Bill Nemeth, EA wgnemeth@aol - taxhelpsoftware.com

1 NAEA: The Expert in Tax Education The Expert in Tax Education IRS Transcript Analysis UZ6CS T 00046 14 - I Bill Nemeth, EA NAEA: The Expert in Tax Education 2014 IRS Transcripts will change 2014 IRS Transcripts will be updated to include the Marketplace form 1095-A. By January 31 of 2015, the Marketplace will send taxpayers who purchased insurance through the Marketplace form 1095-A. The information statement includes the monthly premium for the applicable SLCSP used to compute the credit, the total monthly premium for the coverage of the taxpayer or family member, the amount of the advance credit payments, the SSN and names for all covered individuals, and all other required information. The Marketplace also reports this information to the IRS. NAEA: The Expert in Tax Education IRS Transcripts Account Transcripts are a chronological history of the taxpayer s tax records, year by year. This history often goes back into the 1980 s.

2 Account transcripts contain a wealth of information about the taxpayer and his/her filing history with the IRS. The information contained in the account transcripts will likely be more comprehensive than the taxpayer s recollection of it. NAEA: The Expert in Tax Education IRS Transcript Analysis Info Tax Liens filed (and hopefully released) Collection issues Active IRS is sending demand letters Resolved Compliant and in installment agreement (or CNC Currently not Collectable - Code 530) CSED Collections timed out (10-year statute) - Code 608 Taxpayer is under audit or will be under audit in the near future - Code 420. How taxpayer responded to a completed audit Agreed to tax liability & signed audit report. Did NOT agree with audit and received Notice of Deficiency (90-day letter) Code 560. Qualify for First Time Abatement (of Penalties) NAEA: The Expert in Tax Education IRS Transcript Analysis Info Compliant returns filed for each year Did IRS file SFR (Substitute for Returns) ?

3 Type of return filed 1040 EZ 1040A 1040 Taxpayer (and spouse) name, SSN, and address Filing Status Extensions filed (payments sent with extensions) Estimated Tax Payments made in current year Refunds processed or applied to other debt (prior tax debt or non-tax items like student loans) Amended returns filed Bankruptcy or CDP or OIC proceedings filed NAEA: The Expert in Tax Education Presentation Overview Describe the different kinds of IRS transcripts Review what is & what is NOT on the transcripts WHEN does a Substitute for Return (SFR) starts the 10-Year Clock Show how to assist elderly taxpayers with their Required Minimum Distributions (RMD) Illustrate how to prepare prior-year tax returns from Transcripts (aimed at the serial non-filer) Learn how to import e-Services Transcripts into Office for improved readability and subsequent analysis. Suggest strategy to eliminate or minimize CP 2000 Notices IRS uses Code shorthand in Transcripts 36 Page List of IRS Transcript Codes can be found at: NAEA: The Expert in Tax Education IRS Transcripts IMF (Individual Master File) The IRS tracks every taxpayer through its IMF System.

4 E-Services Applications are run against the IMF in Read-Only Batch Mode to access and extract taxpayer data. You can read more about the IMF at: NAEA: The Expert in Tax Education IRS Transcripts BMF (Business Master File) The IRS tracks every For-Profit and every Not-For-Profit Business through its BMF System. E-Services Applications are run against the BMF in Read-Only Batch Mode to access and extract taxpayer data. There is a third file which contains information that is erroneous or incomplete: Name / SSN Mismatch; EIN Errors; Etc. NAEA: The Expert in Tax Education Some Definitions Open and Closed Tax Years Rounding contrasted with Truncating NAEA: The Expert in Tax Education Open Tax Years Last 3 Years IRS Policy on OPEN Tax Years: 3 Years from due date of return (including Extensions) Can file an original return or amend a return that was filed and RECEIVE a refund. If an original or amended return was filed after the 3 year date, the refund is FORFEITED (Payments made in the last 2 years may be refunded).

5 By definition, Closed Tax Years are tax years over 3 years old. NAEA: The Expert in Tax Education Rounding versus Truncating IRS permits rounding when using dollars and cents Rounding: is rounded DOWN to 3 is rounded UP to 4 is rounded UP to 4 is rounded UP to 4 IRS Transcripts - TRUNCATES Numbers is truncated to 3 is truncated to 3 is truncated to 3 is truncated to 3 Truncation requires fewer computations early computers were SLOW and expensive. NAEA: The Expert in Tax Education IRS uses Truncation Truncation is most evident in the following: Wage and Income Transcripts Income, Federal Withholding, Social Security Tax, Medicare Tax, etc. Tax Return Transcripts (paper returns where the taxpayer carried out calculations to the penny) NAEA: The Expert in Tax Education E-Services E-Services Online Tools for Tax Professionals e-Services is a suite of web-based products that allows tax professionals to conduct business with the IRS electronically 24 / 7 via the Internet.

6 E-Services is NOT available to the general public. (See NEW IRS Get Transcript on next page) Only approved IRS Business Partners are eligible to participate in e-Services. NAEA: The Expert in Tax Education GET Transcripts - Jan 16, 2014 MOST taxpayer can view, print, or download their own transcripts on-line in Real-Time using a computer or Smart Phone. Taxpayer has access to same info as e-Services but limited to how far back info can be accessed. Can print or download encrypted PDF (No HTML) NAEA: The Expert in Tax Education GET Transcripts Screen Shot NAEA: The Expert in Tax Education IRS Transcripts The IRS Transcript Delivery System (TDS) was introduced in 2004 to allow authorized tax professionals to quickly extract data from the IMF in the form of Transcripts. The IRS TDS is the crown jewel of e-Services. TDS is an exceptionally powerful tool in the hands of the skilled tax professional.

7 TDS is a Work in Progress It changes over time. NAEA: The Expert in Tax Education IRS Transcripts CSED Be aware that the IRS assister has access to more data than the TDS system extracts through e-Services. Some examples are: Collection Statute Expiration Date (CSED) Refund Statute Expiration Date (RSED) Assessment Statute Expiration Date (ASED) IRS recently changed its policy to allow practitioners (under POA) to call and request CSED NAEA: The Expert in Tax Education IRS Transcripts Payoff Amount Payoff Amount PPS can give you the payoff amount for the taxpayer useful to determine the overall collection status of the taxpayer. NAEA: The Expert in Tax Education IRS Transcripts Debt Indicator The Debt Indicator (DI) is still part of the IMF You can call PPS and get the Taxpayer s DI which sets the stage quickly for you: DI Codes: N = None GREAT ! ! ! I = IRS Debt - taxpayer owes the IRS Money F = FMS Debt - taxpayer owes student loans, child support, state tax liability, etc.

8 , etc. B = Both taxpayer owes both the IRS and FMS. NAEA: The Expert in Tax Education Access to IRS Transcripts form 8821 or 2848 ? ? ? Either form will produce transcript information. form 8821 is information only. Circular 230 Practitioner cannot represent the taxpayer. form 2848 is Disclosure Authorization and Power of Attorney. Circular 230 Practitioner can represent the taxpayer at all levels of the IRS. I ALWAYS file 2848 on ALL my clients. NAEA: The Expert in Tax Education Access to IRS Transcripts Call the IRS (Problematic) Taxpayer present with you or Executed form 2848 POA There is a Risk of talking to the IRS You may get transferred to Collections. No Time to Strategize IRS will demand returns in 4 weeks. Stealth Approach (Don t Call) Plan A Complete form 2848 POA & FAX it to the CAF Unit Wait 3-5 days Check for Authorization via e-Services (e-Services TDS Will work when the POA is active in the System).

9 Plan B Discontinued 9-13-13 If taxpayer has filed in the last 4 years, enter POA via e-Services. Coming back in 2015 ! ! NAEA: The Expert in Tax Education Access to IRS Transcripts Stealth Approach NEVER talk to the IRS Allows the Tax Professional to access the Taxpayer s information without the IRS being aware of the inquiry. Allows the tax professional to pull the tax history, review and analyze it, and create an action plan to present to the taxpayer. NAEA: The Expert in Tax Education Delivery of IRS Transcripts FAX 5 minutes to 24 hours to never US Mail within 1-2 weeks (requested by call or Phone App) E-Services available in almost real time as: 1. Info to be viewed and printed. into your mailbox (secure repository) as HTML Files (Can be viewed, printed, or downloaded) HTML Files can be imported into Word or EXCEL. Download stores the info and saves paper. Create USEFUL Information out of data.

10 NAEA: The Expert in Tax Education Delivery of IRS Transcripts Take Away Downloaded HTML Files can be imported into Word or EXCEL. Download stores the info and saves paper. Create USEFUL Information out of data. Great for the active stock trader with lots of 1099-Bs Very Powerful Tool to analyze and improve the readability of the IRS Transcripts. Can also download the HTML files for subsequent computer analysis. NAEA: The Expert in Tax Education New Client has his Transcripts Wage Levy Action: Sometimes a NEW client will show up clutching his IRS Transcripts and muttering something about filing returns. This is one case where you do not have to be concerned with talking to the IRS. IRS Collections has issued an ultimatum to the taxpayer and the taxpayer is responding. Typically, the tax pro can call the IRS and get a 30 day hold on collection action while returns are prepared for submission. NAEA: The Expert in Tax Education Types of Transcripts Account Transcript Wage & Income Tax Return Record of Account Account Transcript History of each tax year (back to the 80s) Contains a wealth of useful information.