News From the IRS

The IRS provides a dozen or so articles ever month for practitioners to use in their newsletters to their clients. However, anyone can read these articles on the IRS web site. We thought you might like to see what these articles are like, so we reproduced two of them below.

The Internal Revenue Service and state tax officials recently announced the establishment of a new nationwide partnership to combat abusive tax avoidance. Under agreements with individual states, the IRS will share information on abusive tax avoidance transactions and those taxpayers who participate in them. The agreements creating this partnership are designed to enable both state and federal governments to move more aggressively in the fight to ensure all taxpayers pay their fair share. Forty states and the District of Columbia joined the IRS in announcing the signing of agreements. "This agreement marks a milestone in state and federal cooperation," said IRS Commissioner Mark W. Everson. "From today forward, we will work together combating abusive tax schemes. We will share information and coordinate case management. This agreement effectively extends the resources of the IRS and the states."

Under the partnership, the IRS will exchange information about abusive tax avoidance transaction leads with participating states. This will allow the IRS and state agencies to avoid duplication and to piggyback on the results of each other's work. The states and the IRS will then share information on any resulting tax adjustments, reducing the need for duplicating lengthy taxpayer examinations by both a state and the IRS.

"The states and the IRS share a common goal to dry up abusive schemes," said Stephen M. Cordi, president of the Federation of Tax Administrators and deputy comptroller of Maryland. "This new partnership will strengthen overall tax administration at the federal and state levels and present a united compliance front against those taxpayers tempted by improper avoidance transactions." The Federation of Tax Administrators (FTA) represents all state tax agencies in the 50 states, the District of Columbia, and New York City. Additional states announcing the signing of the partnership agreement include: Alabama, Arizona, Arkansas, Connecticut, Georgia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, Mississippi, Missouri, Montana, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Washington, West Virginia, and Wisconsin. More states are expected to sign the agreement in the weeks ahead.

The ATAT memorandum of understanding focuses solely on abusive tax avoidance transactions. The agreement leaves procedures governing communication on more routine taxpayer compliance efforts unchanged. This maintains the important separation of federal and state tax authority and protection of taxpayer privacy. "We treat taxpayer privacy as a top priority," said Everson. "This agreement does not impede our high standards for protecting taxpayer rights or privacy. The information shared under this agreement will be strictly limited to that pertaining to abusive transactions. In addition to greater cooperation in sharing leads in the area of abusive tax transactions, the partnership with the states includes joint outreach activities to the public to more effectively counter the claims of those marketing tax schemes and scams."

The Small Business/Self Employed (SB/SE) division of the Internal Revenue Service initiated its Examination Re-engineering effort to improve the quality and consistency of income tax examinations. SB/SE interviewed a wide range of individuals both internally and externally to identify the best practices and potential areas of improvement in its examinations. Among the individuals the re-engineering teams interviewed were previously audited taxpayers, tax practitioners, federal and state government agencies, financial institutions, examination employees, and many others involved in the tax community. SB/SE tested the redesigned examination process in both rural and urban areas to ensure the new process is equally effective and consistent throughout the country. The re-engineered process was adjusted according to the feedback from taxpayers, practitioners, and employees involved in the examinations during the test period.

Some of the features of the re-engineered field examination process are clearly communicated expectations of both the taxpayer and field agent through mandatory discussions between the revenue agent and taxpayer regarding the specific examination issues, required documentation, and a mutually agreed upon date to complete the examination. At the beginning of each examination, field agents and their managers will meet to discuss the agent's approach to the examination, the plan to close the examination, and the mutual commitment date arrived at with the taxpayer. Field agents will use standardized templates for every examination issue to gather the information necessary to resolve issues. Agents will use a standardized guide when deciding if additional issues need to be added to the examination. The agent will explain to the taxpayer if any additional issues are included in the examination.

Some of the features of the re-engineered office examination process are clearly communicated expectations of both the taxpayer and the examiner prior to the initial appointment. Office examiners will provide the taxpayer with focused document requests that specifically identify the information needed. Improved flexibility in the scheduling process will enable examiners and taxpayers to reduce the time it takes to complete an examination. Office examiners will use standardized templates for every examination issue to gather the information necessary to resolve issues. Examiners will use a standardized guide when deciding if additional issues need to be added to the examination. The examiner will explain to the taxpayer if any additional issues are included in the examination.

With the final adjustments made, SB/SE will train all of its income tax field agents and office examiners during the 2004 fiscal year. Field agent training began in December 2003, and training for the office examiners began in January 2004. The redesigned examination process will benefit taxpayers and practitioners because the audits will be better focused on relevant issues, expectations between the examiner and taxpayer will be clearly communicated, and the time it takes to complete the examination may be reduced. The consistency and efficiency of the re-engineered process benefits both the taxpayer and the examiner. Clearly communicated expectations and the use of standardized examination tools and templates ensure that taxpayer rights are protected, that the tax laws are administered equitably and fairly, and that the burden of preparing for an examination is reduced.

The IRS web site is huge, and is full of information, forms, instructions, and publications.

If you have any questions regarding tax regulations as they apply to gaming that you would like to see answered in Card Player, please e-mail them to [email protected]. We will keep your identity confidential. If you would like to utilize our professional services or order our book, The Tax Guide for Gamblers, please call (800) 829-7271. R.B.S. will prepare your return without your having to leave the comfort of your home, no matter where you live.