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Jim Buttonow
Eight ways to save time while dealing with the IRS

Learning how to use the IRS’s e-Services tools can greatly improve practitioners’ efficiency.

April 22, 2013
By Jim Buttonow, CPA/CITP

Looking back on the busy tax season that just ended, some practitioners are spending too much time on the phone with the IRS. They’re needlessly navigating the phone lines to find the right person to help with what is often a small matter.

Fortunately, learning how to maximize the full range of the IRS’s e-Services tools can greatly improve efficiency. The rate of e-Services usage among practitioners is increasing as tax professionals learn more about the system. From 2011 to 2012, practitioners filed 17% more authorization forms and requested 33% more transcripts via e-Services.

The IRS has continually expanded e-Services to enable practitioners to use three e-Services products:

  • Disclosure Authorization (DA), which allows practitioners to file Form 2848, Power of Attorney and Declaration of Representative, and Form 8821, Tax Information Authorization.
  • Transcript Delivery System (TDS), which allows practitioners to obtain any of the five types of IRS transcripts.
  • Electronic Account Resolution (EAR), which allows practitioners to make inquiries and resolve client account-related issues. EAR inquiries are answered by the same IRS customer service representatives who handle Practitioner Priority Service (PPS) calls, but without the wait times. EAR also offers the ability to work with one PPS representative to resolve a client account issue. However, you can’t use EAR to resolve compliance issues, such as audits, appeals, and collection matters.

Most practitioners are aware of the most common uses of e-Services. But here are eight less commonly known ways to maximize e-Services to save time and help your clients:

Get a complete tax history for a new client

Often, new clients arrive with incomplete tax records. Using TDS, you can obtain background information to use in tax preparation and planning. You can instantly download and review an electronic copy of your client’s returns from the past three years or review your client’s individual wage and income information from the past 10 years. Reviewing account transcripts will also reveal any challenges to your client’s tax returns, such as an underreporter notice or an audit. Having a complete picture of your client’s tax history can help you begin a new client relationship with all the facts.

Determine qualification and apply for first-time penalty abatement.    

The IRS will abate certain filing and payment penalties for individual, business, and payroll clients if your client has a clean compliance history. First-time abatement is a little-known, and infrequently used, administrative waiver that can benefit taxpayers with an isolated incident. Using TDS, you can research a client’s compliance history to determine whether the client qualifies for first-time penalty abatement. You also can use EAR to request and receive abatement.

File an annual Form 8821 to get copied on your client’s notices. 

In today’s compliance environment, it’s common for clients to receive IRS notices, which can stress the client relationship. However, you can turn IRS notices into an opportunity to strengthen your client relationships by submitting Form 8821 via e-Services DA to be copied on your clients’ notices immediately. This way, when your clients receive an IRS notice, they’ll know that you also have received it and will address the issue.

Use wage and income transcripts to prevent a CP2000 underreporter notice. 

In 2012, the IRS sent more than 4.5 million CP2000 notices to individual taxpayers who may have incorrectly reported income on their returns. To prevent a CP2000 notice, you’ll need to file an extension for your client. That’s because the IRS historically makes wage and income information for the previous filing year available via TDS at the end of May. By comparing that wage and income information to his or her return, you can file a return that includes all income reported to the IRS. 

Get a status update.  

Practitioners can use EAR to request a status update of actions on a taxpayer account. For instance, you can ask whether the IRS has received a penalty abatement request or appeal, which would not appear on an IRS transcript.

Research tax identity theft.    

If you suspect that your client is the victim of tax identity theft, e-Services can be a helpful tool in researching and documenting the theft. Identity thieves commonly steal taxpayers’ Social Security numbers (SSNs) to file fraudulent returns or for employment purposes. Using TDS, you can request and review wage and income transcripts to identify unauthorized uses of your client’s SSN. You can also request account transcripts to determine whether a return has been fraudulently filed under your client’s SSN.

Establish a payment plan.  

If your client owes the IRS and can’t pay at the time of filing, you can use the EAR installment agreement feature to set up most direct debit streamlined installment agreements for your client. For individuals, a direct debit installment agreement is applicable if your client owes $50,000 or less and can pay the balance within 72 months. The IRS also has an online payment arrangement tool on its website that allows taxpayers or their representatives to establish streamlined installment agreements. 

Prepare for an audit.  

In an IRS field audit, the agent will do a three-year comparison of line items on filed returns. The agent also will compare your client’s return to information statements filed on behalf of your client.

E-Services tools allow you to plan for these important audit steps. Using TDS, you can obtain electronic copies of your client’s last three tax returns to complete a three-year return comparison, reviewing for significant fluctuations in income and expenses. TDS also allows you to access your client’s information statements to confirm the proper reporting of specific sources of income.

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Jim Buttonow, CPA/CITP, is co-founder of New River Innovation and creator of its flagship product Beyond415. He has more than 25 years of experience in IRS practice and procedure.