for Pro Bono Lawyers Presented by Maryland Volunteer Lawyers - PowerPoint PPT Presentation

Tax Controversy Training for Pro Bono Lawyers Presented by Maryland Volunteer Lawyers Service, Inc. September 15, 2016

Instructors Gerald W. Kelly Kelly | Dorsey, P.C. gkelly@kellydorseylaw.com 410-740-8750 James P. Leith Local Taxpayer Advocate – Maryland James.P.Leith@irs.gov 443-853-5145 Andrew “Jay” Maschas Comptroller of Maryland amaschas@comp.state.md.us 410-767-4124 Cheri P. Wendt-Taczak Kelly | Dorsey, P.C. Cwendttaczak@kellydorseylaw.com 410-740-8750 2

Introduction • Who are MVLS’ LITC clients? - Individuals with income <250% FPL who have an income tax controversy with the IRS and/or MD Comptroller in which the amount in controversy does not exceed $50K per tax year. • What is a tax controversy? – dispute between the Taxpayer (“TP”) and the Government concerning a tax matter directly, financially impacting TP. • What is the role of the attorney? – Education • Taxpayer rights and responsibilities • Tax laws pertaining to specific case – Bring taxpayer into Current Compliance – Resolution of Outstanding Issues 3

IRS Taxpayer Bill of Rights 1. The right to be informed. 2. The right to quality service. 3. The right to pay no more than the correct amount of tax. 4. The right to challenge the IRS’s position and be heard. 5. The right to appeal an IRS decision in an independent forum. 6. The right to finality. 7. The right to privacy. 8. The right to confidentiality. 9. The right to retain representation. 10. The right to a fair and just tax system.

Maryland Taxpayer Bill of Rights All Maryland taxpayers have: 1. The right to fair treatment and helpful advice. 2. The right to privacy of tax records. 3. The right to free forms and instructions available 24-hours a day at www.marylandtaxes.com. 4. The right to free assistance and state tax return preparation at any of the Comptroller’s 11 taxpayer service offices. 5. The right to a free copy of previously filed state tax returns. Taxpayers who disagree with a tax assessment: 1. The right to file an appeal and ask to have case heard by a hearing officer. 2. The right to have representation. 3. The right to file an additional appeal with the Maryland Tax Court within 30 days from the date of the final determination by the hearing officer.

Types of Controversy Cases you will Encounter • Examination (Audit) • Appeals • U.S. Tax Court Litigation • Collection • Audit Reconsideration • Non-filers • Innocent Spouse Relief • Claim for Refund • ID Theft • More 6

Types of Controversy Cases - Comptroller of Maryland • Compliance Division – MD Tax Adjustments following CP2000 Federal Adjustments – MD Tax Adjustments following Federal Adjusted Gross Income (FAGIM) – Revenue Adjustment Reports (RAR) – Computer Matching Program – Non-Filer Cases • Revenue Administration Division – Balance Due Return – Processing Adjustments – Refund Denials – Amended Return Denials – Questionable Return Detection Team (“QRDT”) – Field Enforcement 7

Case Management Overview • Client contacts attorney w/in 1 week of receiving letter from MVLS. • Attorney conducts initial client interview. • Attorney submits POA to IRS / MD Comptroller. • Attorney obtains account status information from IRS / Comptroller. • Attorney discusses next steps and resolution options with client. • Attorney executes resolution of dispute. • Attorney submits Case Update Form to MVLS on quarterly basis. • Upon completion of case, – Attorney sends client written notification of case closure; – Attorney withdraws POA from IRS / Comptroller; and – Attorney sends MVLS Case Closure Form. • MVLS closes case & sends Client Satisfaction Survey to client. 8

Initial Client Contact / Interview • Gather Info from Client – ALL IRS & Comptroller Notices for all tax years at issue – ALL W-2s, 1099s, other support docs (if unfiled returns) – Form 433 Collection Information Statement (if collections issue) – Any other relevant documentation (tax returns, documentation already submitted by TP to IRS/MD Comptroller • Review with TP & both sign: – Engagement Letter – POA – IRS Form 2848 or IRS Form 8821 • Discuss the 3 Cs: Cause, Compliance and Cure

Completing the POA - Form 2848 Neither IRS nor the Comptroller will talk to 3 rd parties without POA. • • IRS – IRM 21.3.7.5 – Years: Before and after problem years – Forms : 1040, “separate assessment” – TP Tel#: Yours (POA) – CAF : All representatives are assigned CAF #. If no CAF, write “none” to get one assigned. – Married couple: Must have separate POA for each spouse – If working with client’s POA, client’s POA signs on behalf of TP – If client has/had business, list business, business address, EIN, TPs title • MD – Will accept a completed Form 2848 until December 31, 2016. – New POA form: Maryland Form 548

Completing the POA – MD Form 548 • On July 1, 2016, Comptroller’s office has a new MD Form 548 (Power of Attorney) • Completed Form must have: – Taxpayer’s Name, Address, Social Security Number(s), Signature(s), and Date – POA’s Name, Address, telephone number, and signature – Type of MD Tax, MD Form Number, Years Covered – Declaration of Representative • Not currently suspended or disbarred • Aware of regulations and penalties for false statements • Designation Number

Additional Instructions - MD Form 548 • Volunteer Organizations – Volunteers can use MD POA with no PTIN – Clearly indicate the volunteer organization on the form • Verbal POA – There are no Verbal POAs, but… – MD websites states that if a TP and their representative is present, the TP can give permission for the representative to speak with the Comptroller’s office at that time. “The approval is for phone call at that time only.” • Questions on MD POAs – Call 410-260-7424 – E-mail taxprohelp@comp.state.md.us

Submitting the Power of Attorney • IRS : – Fax Form 2848 to Centralized Authorization Unit (“CAF”) – Fax #: 855-214-7519 (Memphis CAF Unit) – If urgent, fax POA to PPS rep during initial call. • MD : – Can submit POA by fax, email, or mail – Fax #: 410-260-6213 – Email: RADPOA@comp.state.md.us – Mailing Address: Comptroller of Maryland Revenue Administration Division P.O. Box 1829 Attn: POA Annapolis, Maryland 21404-1829

Contacting the IRS & Comptroller • IRS – Practitioner Priority Service: Tel#866-860-4259 – Automated Collection System (“ACS”) • Large Dollar Unit • Federal Government Employees Unit – Revenue Officers • MD – Visit www.marylandtaxes.com for information – Individual Tax Collections: Tel# 410-974-2432 or 888-674-0016 – Taxpayer Services: Tel# 410-260-7980, 1-800-MD TAXES, or e-mail taxhelp@comp.state.md.us – Correspondence Unit Fax # 410-974-2967 – Hearing & Appeals: Phone # 410-767-1572, Fax # 410-333-7745, or e-mail cdhearings@comp.state.md.us

Contacting the IRS & Comptroller • Best Practices – Both IRS and Comptroller representatives take notes of conversations so BE POLITE! – When calling, always write IRS representative’s name & ID#. – When writing: • Include key case info on ALL pages, and • Send documents “return receipt.”

Resolving Tax Collection Cases Flow Overview • IRS Roadmap • MD

Resolving Tax Collection Cases First Steps • Gather Relevant Information – Initial Info Needed – How to Obtain • Tax Assessment – Was it proper? • Validity of Collection Action • Filing Compliance • Financial Analysis to Determine Viable Options • Client Preference

Gathering Relevant Information IRS Transcripts – Account Transcript • by year and type of tax – Wage & Income Transcript • Past ten years – Tax Return Transcript • Past three years

Tax Assessment – Was it Proper? Ways to Assess Tax • Filed Tax Returns – Self-Assessment (IRS & MD) – Data sufficient to calculate tax – Must purport to be tax return – Must be honest and reasonable attempt to satisfy tax law requirements – Must be executed by TP under penalty of perjury • “ Math Error ” (automatic assessment) – I.R.C. § 6213(b)(1)) – ACA – t/b used for PTC. I.R.M. 21.6.3.4.2.16.3.1 • Examination (MD & IRS) – I.R.C. § 6211 • IRS Substitute for Return (“SFR”) – If TP fails to file valid return or files a false or fraudulent return, IRS may execute its own return based on information obtained. – I.R.C. § 6020(b)(2) – SFR “shall be prima facie good and sufficient for all legal purposes.” – I.R.C. § 6501(b)(3) – SFR does not start SOL on assessment or collections – I.R.M. 25.6.1.9.4.5 (10/1/2010). • Non-MD Taxpayer who has been erroneously assessed (MD) – Proof of residency – Other state income tax returns

Tax Assessment – Was it Proper? Considerations • Assessment Statute of Limitations (ASED) – IRS: • 26 U.S.C. § 6501 • Generally, 3 years from date I.R.C. § 6501(a) • No time limit for SFR – I.R.C. § 6020 • If no return filed, statute of limitations (“SOL”) does not begin to run so indefinite ASED. – MD • Tax-General § 13-1101 • Generally, 3 years from date of filing or due date of tax return • No limit if failure to file, false tax return/willful evasion of tax, or failure to report IRS adjustments