SBSE Campus Compliance Services

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SBSE Campus Compliance Services

• Addressing the Tax Gap
• Charlestine D. Hardy
• Director, Campus Compliance - Memphis

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Tax Gap

• The difference between the tax that taxpayers
  should pay and what they actually pay on a timely
  basis
• Includes three components Nonfiling,
  Underreporting, and Underpayment
• 345 Billion Gross Tax Gap

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NATIONAL TAX GAP 2001 ( in Billions)Gross Tax
Gap 345 Billion (NCR 16.3)
Non-Filing 27
Underreporting 285
Underpayment 33
SB/SE portion is 27.5
SB/SE portion is 23.8
Individual Income Tax 197
Corporation Income Tax 30
Employment Tax 66.1
Estate Excise Tax 4
Non-Business Income - 56
SBSE 50.2 Remainder TEGE and LMSB
SB/SE portion is 117
LMSB 25 SBSE 4.9
Business Income - 109
Adjustments, Deductions Exemptions - 16.7
Updated using Census tabulations, March 2006
Credits 12.8 (EITC 7.8)
NCR Non Compliance Rate
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Compliance Services StructureSB/SE Campus
Compliance Services
Director
PMO
Campus Filing Payment Compliance
Campus Reporting Compliance
Finance
Brookhaven Campus
Cincinnati Campus
Memphis Campus
Ogden Campus
Philadelphia Campus
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Compliance Initiatives

• Examination Correspondence Audits (Corr. Audits)
• Automated Underreporter (AUR)
• Telephone Excise Tax Refund (TETR)
• Centralized Offer in Compromise (COIC)

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Examination Correspondence Audits (Corr. Audits)

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Campus Examination Program

• Approximately 1 million Campus Exam
  letters/notices were issued and audits conducted
• Less than 596,000 cases were closed with taxpayer
  responses
• Campus Exam generated tax assessments totaling
  more than 7.7 billion

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Campus Examination Letters and Notices

• A selection of taxpayer notices are used to
• identify the issues being audited
• request supporting information/documentation
• All notices include
• Publication 3498-A
• Form 886

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Campus Examination Letters and Notices

• Most common Campus Exam notices are CP 75 and CP
  75A for EITC and dependency issues
• Most common Campus Exam ICLs are L566(SC/CG) and
  L566-B(SC/CG) with Form 4549

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AutomatedUnderreporter (AUR)

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Automated Underreporter Impact

• More than 4 million AUR notices issued
• IRS issues CP2000 notice to taxpayer for
  discrepancies that remain unaccounted for
• AUR generated increased tax assessments totaling
  more than 3.9 billion

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The AUR Program

• Third parties including employers, banks, and
  brokers provide information returns to the IRS
• IRS matches amounts reported on individual tax
  returns to the information returns
• IRS issues CP2000 notice to taxpayer for
  discrepancies that remain unaccounted for
• Initial match begins after the original return
  due date not a real-time process

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Responding to the Notice If the taxpayer agrees
to the CP2000

• Do not file an amended return
• Check box A on the CP2000 response page
• Return the response page timely along with a
  check, money order, or request for an installment
  agreement

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Responding to the Notice If the taxpayer
disagrees with the CP2000

• Respond in writing by the due date
• Provide a written statement that details why the
  taxpayer disagrees
• Attach relevant documents to support the
  taxpayers position, and
• (We recommend that Taxpayers) Provide a contact
  number

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Online Payment Agreement (OPA)
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Objective

• To have taxpayers self qualify and apply for a
  payment agreement online
• To have taxpayers receive notification of payment
  agreement online during the same internet session
• The major goal of OPA is to automate payment
  agreements for individual taxpayers
• OPA is a web based application that can be
  accessed through irs.gov

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OPA allows user to

• pay now
• arrange a short-term extension to pay
• arrange a monthly payment agreement via
• direct debit
• payroll deduction
• routine payment agreement
• participate in a customer satisfaction survey

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Benefits of OPA

• It will
• reduce payment agreement processing costs
• expand available taxpayer service beyond normal
  business hours.
• allow taxpayers to know in real-time if their
  agreement request is granted and it will be
  established while the taxpayer is online.
• facilitate payments starting sooner thus
  benefiting the taxpayer and IRS.

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Offer in CompromiseProgram Update
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Tax Increase Prevention Reconciliation Act of
2005

• Created significant changes to the Offer in
  Compromise Program
• Effective for offers received July 16, 2006

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IRC 7122 subsection (c) Rules for Submission of
OICs

• There are 3 types of payment terms
• Lump sum offers 5 or less installments
• - 20 of offer amount with Form 656
• Short Term Periodic Payment 6 or more payments
• Deferred Periodic Payment paid in 25 or more
  months and within time remaining on the statutory
  period for collection

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New Processability Criteria

• TP cannot be a debtor in a bankruptcy case.
• TP must submit the 150 application fee, or Form
  656-A, "Income Certification for Offer in
  Compromise Application Fee and Payment
• TP must submit 20 payment with lump sum offer,
  or a signed Form 656-A
• Submit first installment payment on a periodic
  payment offer, or a signed Form 656-A

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New Timeframe forRendering OIC Decision

• An OIC will be declared accepted if a written
  decision is not rendered within 24 months from
  the date the offer is received by IRS
• Litigation period will not be included in 24
  month calculation

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Telephone Excise Tax
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Telephone Excise Tax

• One year initiative to refund telephone excise
  tax. Tax Year 2006, only.
• Taxpayers had the option of claiming a safe
  harbor amount or an actual amount.
• IRS SBSE enforcement activity in Memphis Campus
• On most of the returns selected the credit
  claimed was reduced to the standard amount.