With tax season just around the corner—officially opening on Jan. 29, 2024—the IRS is continuing to focus efforts on increasing in-person and online services for taxpayers.
In-Person Help
The IRS has opened or reopened 54 Taxpayer Assistance Centers—or TACs—since the Inflation Reduction Act was signed into law. That number includes four locations since November of 2023 in Bellingham, Washington; Eau Claire, Wisconsin; Washington, Pennsylvania; and Media, Pennsylvania.
TAC employees can help you answer questions, get tax forms, set up an installment agreement, and review documents required to apply and renew for Individual Taxpayer Identification Numbers (ITINs).
According to the IRS, TACs will collectively offer more than 8,000 more hours of in-person assistance this year than they did last filing season. That’s made possible with new hires—as of the end of December, the IRS has hired 858 employees to staff TACs, a net increase of 410 in staffing compared to Fiscal Year 2022. Plus, the IRS continues to hire to replace departing staff.
TACs operate by appointment. You can schedule an appointment by phone (844.545.5640) or online.
Online Services
During the last filing season, taxpayers could respond online to 10 of the most common notices for credits like the Earned Income Tax Credit (EITC) and the premium tax credit. As of July 2023, taxpayers could respond to 61 IRS notices and letters. Since October 2023, taxpayers could respond to all notices and letters that did not have a filing or payment action. Taxpayers are finally taking notice—as of last month, the IRS has received more than 45,000 responses to notices via the online tool.
The IRS also launched natural voice language bots for taxpayers calling about refunds and amended returns. These bots allow callers to ask questions using natural language instead of following menu-driven prompts.
With the latest updates to individual online accounts, taxpayers can access tax records, make and view payments (including scheduling and canceling payments), view or create payment plans (including expanding and revising plans), view their balance, and manage communication preferences. You can also save multiple bank accounts, validate bank account information, and display bank names.
The IRS has also expanded its business tax account online. As a result, individual partners of partnerships and individual shareholders of S corporations are eligible for a business tax account in addition to sole proprietors with an employer identification number (EIN). Eligible entities can now access business tax transcripts and view digital notices and letters.
With new enhancements to the online tax pro account, tax professionals can manage active powers of attorney and tax information authorizations, as well as view individual and business clients’ tax information like balances.
Status
To help taxpayers remain informed, the IRS has launched a public-facing Processing Status for Tax Forms dashboard, which shows the current processing status for essential forms and general correspondence. For example, as of today, the IRS says it’s currently processing original paper Forms 1040 received during December of 2023, and amended paper Forms 1040 received during July of 2023. This does not include forms that require error correction or other special handling. Notably, the IRS generally processes paper returns where a refund is expected before all other returns.
The IRS has also updated its IRS operations webpage which reports on data, like unprocessed returns. Here’s the most recent information:
The webpage will be updated weekly to reflect the current processing status.
Enforcement
The IRS is also expanding enforcement efforts related to high-income individuals, large corporations, and complex partnerships. As previously noted, the IRS has focused IRA resources on strengthening enforcement to pursue complex partnerships, large corporations, and high-income, high-wealth individuals who do not pay overdue tax bills.
New Hires
As part of its enforcement efforts, the IRS offered positions to more than 560 new accountants in November and December. Those new hires will focus on work pursuing high-wealth individuals, complex partnerships, and large corporations that do not pay taxes owed.
That hiring is slated to continue—and to happen quickly. At a December 2023 hiring event in Houston, the IRS hired 160 accountants in two days—a process that typically takes three to six months. At these events, following an initial screening, applicants are interviewed by hiring managers and passed to selecting officials for a final decision. Successful applicants are given tentative offers and sponsored and fingerprinted on-site, leaving only background and tax checks to be completed. Additional in-person events are planned.
Millionaires
According to IRS Commissioner Danny Werfel, the IRS is working to keep in step with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying taxes owed. As part of these efforts, the IRS has continued to pursue millionaires who have not paid their tax debt.
The focus on taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt is paying off. In an initial success, the IRS collected $38 million from more than 175 high-income earners. Last fall, the IRS began contacting about 1,600 new taxpayers in this category who owe hundreds of millions of dollars in taxes. The IRS has assigned over 900 of these 1,600 cases to revenue officers, with over $482 million collected so far. This brings the total recovered from millionaires through these new initiatives to $520 million.
Partnerships
The IRS has also identified ongoing discrepancies on balance sheets involving partnerships with over $10 million in assets, which is an indicator of potential noncompliance. Taxpayers filing partnership returns show millions of dollars in discrepancies between end-of-year balances compared to the beginning balances the following year. The numbers of these discrepancies have been increasing, with many taxpayers not attaching required statements explaining the difference. The IRS announced an initiative to address the balance sheet discrepancy in September and, as of the end of October, had sent 480 compliance alerts.
In 2021, the IRS launched the first stage of its Large Partnership Compliance (LPC) program focused on examinations of large and complex partnerships. The IRS announced in September that it would expand this program to additional large partnerships. With the help of artificial intelligence (AI), the IRS is working to identify potential compliance risks in partnership tax, general income tax and accounting, and international tax in a taxpayer segment that historically has been subject to limited examination coverage. As of December, the IRS had open examinations of 76 of the largest partnerships in the U.S. that represent a cross-section of industries, including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms, and other industries. On average, these partnerships each have more than $10 billion in assets.
And, as part of the agency’s increased focus on the tax issues applicable to partnerships and partners, the IRS has been increasing compliance to ensure that Self-Employment Contributions Act (SECA) taxes are being properly reported and paid. A specific look is being given to wealthy individual partners who provide services and have inappropriately claimed to qualify as “limited partners” in state law limited partnerships (such as investment partnerships) not subject to SECA tax. In contrast to wage earners whose employment taxes are deducted from their paychecks, self-employed individuals must report and pay their SECA taxes on their federal income returns. The IRS’ efforts to date include more than 80 audits of wealthy individuals.
Strengthening the IRS’ position, in November of 2023, the Tax Court issued an opinion in Soroban Capital Partners LP v. Commissioner that the limited partner exception to SECA tax does not apply to a partner who is “limited” in name only. As a result, partners who actively participated in the state law limited partnership must report their partnership share as net earnings from self-employment subject to SECA tax.
Foreign Corporations
The IRS is increasing compliance efforts on the U.S. subsidiaries of foreign companies that distribute goods in the U.S. and do not pay appropriate tax on the profit they earn from their U.S. activity. These foreign companies use transfer pricing rules to report losses engineered through the improper use of these rules to avoid reporting an appropriate amount of U.S. profits. To crack down on this strategy, as of mid-November, the IRS has sent compliance alerts to more than 180 subsidiaries of large foreign corporations to reiterate their U.S. tax obligations and incentivize self-correction.
Large Corporations
The Large Business & International Division’s (LB&I) Large Corporate Compliance (LCC) program focuses on noncompliance by using data analytics to identify large corporate taxpayers for audit. These are not small companies: LCC includes the largest and most complex corporate taxpayers with average assets of more than $24 billion and average taxable income of approximately $526 million annually. LB&I will be expanding the program by starting an additional 60 audits of the largest corporate taxpayers selected using a combination of AI and subject matter expertise in cross-border issues, corporate planning, and transactions.
More Info
As tax season opens, expect more IRS updates, including enforcement initiatives and online tools to help you find the information you need. And, of course, check back with the Forbes tax team for updates throughout the season.
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