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Failure to Provide TIN

© by Greta P. Hicks, CPA

The Small Business Jobs Partnership Act allows the IRS to deny a dependency exemption to an individual who fails to provide a correct taxpayer identification number (TIN). The provision indirectly affects other tax benefits conditioned on eligibility to claim a dependency exemption; for example, the head of household filing status, earned income credit and the dependent care credit.

Failure to provide a correct TIN is treated as a mathematical or clerical error. A notification of additional tax owed resulting from an incorrect TIN is not treated as a notice of deficiency.


Mathematical Or Clerical Error vs Audit


AN AUDIT (1)

Under IRC 6501, the government has three years from the date the tax return is filed to assess additional tax.

The Internal Revenue Manual instructs employees to begin audits within a 24 to 26 months from date of filing. For example the normal filing time for the 1996 Form 1040 is April 15, 1997. If an audit is not initiated within 24 to 26 months of April 15, 1997, an audit of the 1996 year will most likely not take place. The is the IRS’ method of measuring old and new inventory.

Point 1: Once an audit has been initiated and closed (assessed by the Service Center), the IRS will most likely not audit that tax return again. The IRM provides for re-opening procedures in case:

  • There is evidence of fraud or misrepresentation of material fact.
  • There is a substantial error based upon an established IRS position.
  • Other circumstances that indicate failure to reopen would be a serious administrative omission.

Bottom line: Once an audit is completed and tax assessed, the tax year is generally closed to future assessments of tax for that tax year.

Point 2: When a taxpayer disagrees with the auditor’s findings, there are provisions for filing a protest and talking to an Appeals Officer. Should a taxpayer continue to disagree, the IRS will issue a statutory notice and the taxpayer can petition Tax Court. (IRS Publications 1 and 5)


CP 2000 PROGRAM (2)

Approximately 12 to 18 months after a return is filed, the Martinsburg Computing Center attempts to match the information return documents, Form W-2, 1099, etc., (IRP) to the individual tax returns. An exception report is prepared and sent to the respective Service Centers. The original tax returns are retrieved from the Federal Records Center and associated with their respective exception report. A real person attempts to manually match the IRP report to the individual return. When the information returns cannot be located on the individual return, the IRS has five options:

  • Mail the taxpayer a letter asking for an explanation.
  • Mail the taxpayer a notice of increase in tax.
  • Send the return and IRP to Office Audit.
  • Send the return and IRP to Field Audit where complete return is at risk of being audited.
  • Send a fraud referral to the Criminal Investigation.


Appeals Process – CP 2000 Notice

The same appeals process applies to a CP-2000 notice as in a Field or Office Audit.

Note: Most IRS staff performing these correspondence type audits are not aware of the appeals process and care has to be taken by the taxpayer or representative to assure that the taxpayer is able to take advantage of all his/her appeals rights. The CP 2000 department has a history of ignoring incoming correspondence and issuing Statutory Notices of Deficiency which the taxpayer many times ignore.


A MATH OR CLERICAL ERROR (3)

Tax returns are process in IRS Service Centers. During the coding process, returns are manually checked for addition error, missing TINs, and missing forms. Once the data has been entered, the computer also checks for errors. If an error is found on a refund return, the return is returned to the taxpayer. An error on a tax due return is corrected and posted to the main computer at the Martinsburg, VW Computing Center.

The Small Business Jobs Partnership Act allows the IRS to treat a missing or incorrect Taxpayer Identification Number (TIN) as a math error, to make changes in the taxpayer’s original return filed, and to process the taxpayer’s return disallowing all affected areas such as filing status, exemption, earned income credit, and child care credit.


Loss Of Rights

When this summary assessment procedure is used, the individual must be notified that, because of mathematical or clerical errors on the return, additional tax is due. Because this notification is not equivalent to a notice of deficiency, the individual may not file a petition with the Tax Court based on such notice. However, the individual may file, within 60 days from the date the notice was sent, a request for abatement of the tax due. Upon receipt of the request for abatement, the IRS must abate the previously assessed tax. Any reassessment of the tax must be made under the regular notice of deficiency procedures.


Service Center Pipeline Processing


-         MAIL OPENED

*      MAIL SORTED

3   CHECKS DEPOSITED

4 BATCHING

·             CODING  Ù DOCUMENT RETURNED

#            NUMBERING

« DATA ENTRY

A      COMPUTER CHECKS Ù DOCUMENT RETURNED

C     ERRORS CORRECTED (2) Ù DOCUMENT FILED

:       POSTING – MARTINSBURG

.      REFUND MAILED

D         DIFF SCORE                          (3) CP2000 .

E          MANUAL SCREENING

2          SHIPPED TO DISTRICT 

'     FIELD AUDIT (1)                    +              OFFICE AUDIT (1)
               ASSIGNED TO AGENT                                LETTER MAILED


Refund Returns Returned To Taxpayers

  • Missing signature.
  • Missing Forms W-2.
  • Missing date of death of deceased.
  • Missing documentary evidence of refund return of deceased taxpayer.
  • Missing Form 2441.
  • Documentary evidence including Power of Attorney or court certificate of legal representative missing from a return not signed by the taxpayer.
  • Missing Social Security Number of the recipient of alimony.
  • Missing Form 8332 or 2120.
  • Inconsistencies concerning the standard deduction.

Note: A returned return has not been processed by the IRS and any subsequent filing may be considered late.

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List of Articles by Greta P. Hicks, CPA

GRETA P. HICKS, CPA and former IRS manager, concentrates in solutions to IRS problems and advises business and tax professional on IRS policies and procedures. Ms Hicks is owner of TAX SOLUTIONS, Inc., a company providing educational materials and programs on solutions to IRS problems and is a nationally known speaker and writer on solutions to IRS problems. To arrange for consultation contact: Greta's web site: http://www.gretahicks.com

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