1. December 14, 2016 CPA Continuing Education Society of PA
IRS Issues
Richard G. Furlong, Jr. Senior Stakeholder Liaison Small Business/Self-Employed Division
December 14, 2016
CPA Continuing Education Society of PA

2. Learning Objectives Compliance Programs for Foreign Assets
Form 2848 & Representation before IRS
Order different types of transcripts
Request change in audit location
File appeal with the Appeals Office
Explain how to detect and report ID Theft
Explain Future State & Early Interaction Initiatives

3. Issue 1: Compliance Program for Undisclosed Foreign Assets
Two Reporting Regimes:
FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR)
Title 31, § 5314
Stand-alone report, must be electronically filed on or before April 15 (new for 2017)
Form 8938, Statement of Specified Foreign Financial Assets (FATCA)
Title 26, § 6038D
Attached to Income Tax Return

4. Commissioner Koskinen (July 2014)
“For our system of voluntary tax compliance to work right, the average taxpayer who abides by the law has to be confident that everyone is being held to a similar standard. As part of that, people can no longer expect to hide their money in foreign countries and avoid paying their fair share.”

5. What Needs to be Reported?
FBAR: * Foreign financial accounts
F8938: * Foreign financial accounts,
* Foreign financial investment assets not held in an account, including:
√ Stock or securities
√ Interest in a foreign entity
√ Instrument or contract held for investment by non-U.S. issuer or counterparty

6. Reporting Undisclosed Foreign Financial Assets
Options available for Taxpayers that need to file delinquent or amended returns to report and pay additional tax:
Offshore Voluntary Disclosure Program
Streamlined Filing Compliance Procedures

7. Offshore Voluntary Disclosure Program
Counterpart to Criminal Investigations Voluntary Disclosure Practice
Enables noncompliant taxpayers to
resolve their tax liabilities
avoid substantial civil penalties, and
generally eliminate the risk of criminal prosecution for all issues relating to tax noncompliance and failing to file FBARs

8. 2014 OVDP
Effective July 1, 2014
Penalties Increased for certain taxpayers from 27.5% to 50%
SFCP participants (initiated after July 1, 2014) not eligible
Details on ‘How to Make an Offshore Voluntary Disclosure’ available on IRS.gov

9. Streamlined Filing Compliance Procedures (SFCP)
Available to taxpayers certifying that their failure
to report foreign financial assets and pay all tax
due in respect to those assets did not result from
willful conduct on their part; provides:
Streamlined procedure for filing amended or delinquent returns
Terms for resolving their tax and penalty obligations

10. Streamlined FOREIGN Offshore Procedures
Eligibility:
Meet non-residency requirements
Failed to report income / pay tax on foreign financial assets
Failure resulted from non-willful conduct
Penalties:
For eligible and qualifying U.S. taxpayers, all penalties will be waived

11. Streamlined DOMESTIC Offshore Procedures
Eligibility:
U.S. resident taxpayers (and their estates)
Filed U.S. tax returns for most recent 3 years
Failed to report income / pay tax on foreign financial assets
Failure resulted from non-willful conduct
Penalties:
Misc. offshore penalty of 5%, in lieu of all other penalties

12. OVDP or SFCP?
Taxpayers whose failure to report income, pay tax and submit information returns was due to willful conduct should consider OVDP
An OVDP submission disqualifies a person from participating in SFCP
An SFCP submission disqualifies a person from participating in OVDP

13. Issue 2: Form 2848, POA & Declaration of Representation
Form 2848 (Rev. December 2015)
Updated description and representation requirements for unenrolled return preparers
Removed registered tax return preparers (designation i)
Prior version forms remain in effect until
Revoked by taxpayer, or
Withdrawn by representative

14. Updated Preparer Groups
Unenrolled Return Preparers must:
Possess valid and active PTIN
Eligible to sign return or claim
For returns prepared/signed after 12/31/15, must possess valid AFSP Record of Completion for calendar year in which
Tax return or claim prepared/signed
Representation occurs

15. Form 2848 – Line 6 Retention/Revocation
POAs received will revoke any earlier POA recorded for the same tax matter/tax period unless Line 6 is checked and copy of prior POA is attached

16. Withdrawal of Representation
Missing Form 2848, request to withdraw representation must…
Be in writing
List all tax matters and periods
Contain current representative signature and date

17. Deceased Tax Professionals
FAQ: When a tax practitioner dies, what actions should be taken to close out their IRS authorities?
RPO - No action needed
CAF - Written request to CAF shown in Form 2848 Inst., “Where to File”
EIN - ref. IRS.gov; ‘Cancelling an EIN Instructions’
EFIN - e-Help

18. Specific Authority
FAQ: Are there special considerations for completing a POA for purposes of the OVDP and FBAR? Yes. In addition to being authorized to represent the taxpayer for tax years within the voluntary disclosure period, the power of attorney must specifically authorize you to represent the taxpayer for income tax, civil penalties, and FBARs

19. Issue 3: Levels of Representation
Effective Jan. 1, 2016
Unlimited Representation Rights: Credentialed Tax Professionals…EA, CPA and Attorneys
Limited Representation Rights: Annual Filing Season Program (AFSP) Participants
No Authority to Represent Clients before IRS: PTIN holders without professional credentials and do not participate in AFSP

20. Issue 4: IRS Transcripts
Transcript Types:
Tax Return Transcript
Tax Account Transcript
Record of Account Transcript
Wage and Income Transcript
Verification of Non-Filing Letter

21. Requesting Transcripts
Get Transcript
By Mail
Online
Form 4506-T
Practitioner Priority Service
Transcript Delivery Service

22. Get Transcript Secure Access Authentication
confirmation code
Same as before; code sent to address; taxpayer re-enters in order to continue to next step
Identity proofing
Similar as before
Two new steps:
Financial Verification
Activation code text sent to mobile phone

23. Issue 5: Transferring the Place of an Audit
Requests by taxpayers to change place of examination, factors considered:
Current Residence
Current Principal place of Business
Location of Books, Records, and Source Doc.
Location for Efficient Examination
Resources at Location
Undue Inconvenience to Taxpayer

24. Issue 6: IRS Office of Appeals
When to Request an Appeals Conference?
IRS letter received explaining appeal rights
Do not agree with decision
Did not sign agreement form

25. Requesting Appeals Conference
How to Request an Appeals Conference?
Formal Written Protest
Small Case Request

26. The Appeals Process First Notice from Appeals
Contact (normally) within 90 days after request filed
The Appeals Conference
Appeals will not raise new issues
If taxpayer raises a new issue, Appeals may return case to examiner

27. Mediation Alternatives
When the taxpayer and Appeals are unable to agree on all or some of the issues, two mediation services are available as an alternative to litigating the case through the courts:
Fast Track Settlement (FTS)
Fast Track Mediation (FTM)

28. Issue 7: Identity Theft Warning Signs:
More than one return filed using clients SSN
Client has a balance due, refund offset or a collection action taken for year return not filed
IRS records indicate client received wages from unknown employer
Business client receives IRS letter about an amended tax return, fictitious employees or about a defunct, closed or dormant business

29. Beware IRS Impersonation Scams
Avoid IRS impersonators; IRS will not:
Call demanding tax payment without mailing a notice
Threaten to call police
Demand payment without opportunity to question or appeal
Require a specific payment method
Ask for credit or debit card numbers over phone

30. Steps for Tax-Related IDT Victims
Respond immediately to IRS notices
File IRS Form 14039, Identity Theft Affidavit
Continue to pay and file return, even if by paper
Place “fraud alert” on credit records by contacting one of three major bureaus
File complaint with FTC

31. Tax-Related Identity Theft
Taxpayer Protection Program generates:
Letter 4883C for prior-year suspicious returns
Letter 5071C for current-year suspicious returns
Most common correspondence
Taxpayer self-verifies at Idverify.IRS.gov
Letter 5447C for suspicious returns with foreign addresses

32. Security Summit Actions for 2016
Agreed on new “trusted customer” standards for use of tax software
New password standards
Lockout features
Out-of-band features
Identified more than 20 new data elements for submission
Improved information sharing

33. About the Identity Protection PIN (IP PIN)
Six-digit number that adds an additional layer of protection along with the SSN or ITIN
Victims notified once tax-related IDT case resolved
Taxpayer will receive a CP01A notice containing a new IP PIN each year
Some taxpayers have the option of getting an IP PIN from IRS.gov
Enter numbers for all IP PIN holders

34. W-2 Verification Code Pilot
Taxpayers enter verification codes on their e-filed federal tax returns
When processing returns, IRS recalculates codes
Matching codes = genuine W-2s
Verification codes not included in W-2 data submitted to SSA, states or local departments of revenue
Won’t affect state or local tax returns

35. Issue 8: IRS Future State Initiative
Taxpayer Component
A more complete online experience
Freeing up resources for those who need 1-on-1 assistance
More up-front issue identification when the return is filed
Improved authentication to prevent fraudulent returns using stolen identities

36. Future State Initiative
Ongoing Activities Component
TE/GE Lean Six Sigma review
Taxpayer Assistance Centers Appointment-Based System
Improved Online Services
Compliance Realignment
Identity Theft Victim Assistance
Enterprise Records Management

37. Early Intervention Initiative for Employers
What is Early Interaction?
An effort to:
Proactively address payroll tax compliance
Raise awareness
Provide better service

38. Early Interaction Initiative
Early Interaction Results
FTD Alert cases quadrupled
Compliance results improved
What’s Next
IRS compliance efforts have an impact
IRS outreach efforts have an impact
But we need more

39. Contact Information
Richard Furlong, Jr.
Senior Stakeholder Liaison