IRS updates: Restarting the income tax levy program, and more

August 3, 2021 5:25 PM

At a recent meeting of government officials and stakeholders, officials from the Internal Revenue Service offered updates on the Office of Promoter Investigations, the Fraud Enforcement Office, Forms 940X and 941, and the introduction of several new office directors. National Conference of CPA Practitioners tax chair Stephen Mankowski shared highlights:

Notices, liens and levies

Andrew Harrer/Bloomberg

The IRS began sending out letters from the Automated Collection System function in June, and restarted the income tax levy program in July. In addition, responsible officers continue to work on nonfiler cases and are sending out notices and billing notices; however, their focus is primarily on egregious cases, such as high-income non-filers, according to Mankowski.

“Unfortunately, there’s still a backlog of paper, and until that’s cleared there will be people that efiled and mailed in their check, the check cleared, but they get notices saying they never paid,” he said. “That’s the downside of restarting the program. They have to do it because otherwise people will get complacent when they think there’ll be no repercussion for not paying.”

“The phone lines are still backlogged due to taxpayers not getting their refunds,” he explained. “They have to go through manual processing, mostly for returns that had additional stimulus funds. Because of time constraints, the IRS didn’t have time to fully reconfigure their computers to recalculate the additional credits due for the additional stimulus money. I tell my clients that if they don’t owe and have proof of payment, hold off on responding to the notices.”

Office of Promoter Investigations

This is a newly created service-wide office headed by Lois Deitrich, a 20-year veteran of the service. “She is working on agency-wide compliance issues, including coordination of promoter activities with other business divisions, including Large Business & International, Tax Exempt/Government Entities, Office of Fraud Enforcement, and Criminal Investigations,” explained Mankowski. “The office works with data analytics and operates like a think-thank to identify promoter behavior prior to auditing returns. Currently, they are working internally but will be shifting their focus to outreach with practitioners, with the intention of identifying tax schemes as early as possible. “

“Basically they’re a resource,” he explained. “Any of the divisions can refer to them. They’re trying to stay a little ahead of the curve, almost spitballing different ideas to determine if these are items that could be deemed as promoter type activity. For example, if they see different industries having out of the ordinary expenses, that could be something that prompts them to investigate further to determine if promoter activities are involved.”

Forms 940X/941 inventory

This year continues to be unique and present filing issues, Mankowski noted. “The IRS has hired over 3,200 employees to cover attrition and to increase staffing. As the IRS is attempting to reduce the backlog, Austin and Fresno have been tapped to help process Form 941. As of mid-July, approximately 1.8 million forms have not yet been processed. For returns prior to 2021, 11,000 are still in inventory. These figures are for Form 941 returns — they don’t include Form 940, or Form 941X amended returns.”

Fraud Enforcement Office

“The office is now about one year old. It has been dealing with emerging threats and evolving frauds,” said Mankowski. “The National Fraud Counsel is a dedicated group that began as a one-year test and is now being expanded. The Emerging Threats Mitigation Team is the data analytics arm that identifies threats — basically where investigation meets data science. They deal with the gig economy and decentralized finance, high-net-worth non-filers and falsification of asset disclosure statements. With the gig economy, this is much more than Uber-type drivers; they are looking at internet activity that is not reported. They also cover fuel tax and other refundable credit schemes. Fraud enforcement advisors deal with case-specific issues in the field. In addition, the FEO has been involved with virtual currency and Paycheck Protection Program fraud issues.”

New officials

Lou Ann Kelleher became the field director of exam for SB/SE in mid-June. She was formerly the field director for the Western Region in Denver. ”Field exam focuses on areas of non-compliance, including areas and priority categories from Congress: high income, offshore, referrals, high wealth, and preparer promoter cases,” said Mankowski.

Meanwhile, Douglas O’Donnell, deputy commissioner of services & enforcement, recently transferred from the Large Business & International Division, according to Mankowski: “This office primarily deals with addressing compliance within the IRS. This includes whistleblower, LB&I, and other areas, as well as budgeting to ensure the ability to hire and screen applicants so that they can be placed into the proper area within the IRS.”