January 2002

IRS Discusses Handling of WTC and the New Offers Program with IRS Relations Committee

Last fall, Internal Revenue Service personnel visited the New York State Society of CPAs’ Relations with the IRS Committee to discuss the agency’s responses to the attack on the World Trade Center as well as the changes made to the IRS’ Offers-In-Compromise (OIC) Program. Committee Vice Chair Gerard Borod welcomed the IRS personnel, who were introduced by former Committee Chair Robert Steele.

Joseph J. Lewandoski, senior tax specialist with the tax education area of the IRS Small Business/Self-Employed Division, spoke first of the extensions and other tax relief being administratively granted by the IRS. He talked about compliance activity guidelines for taxpayers such as for filing extensions and postponements, payment extensions and postponements, and suspension of certain penalties such as those relating to payments and deposits. As of Sept. 13, there is a six-month postponement on levies and certain other enforcement activities pertaining to those taxpayers who were actually affected by the World Trade Center attack. Lewandoski can be reached at (212) 436-1028.

Kristen E. Bailey, territory manager, Small Business/Self-Employed Division, manages the OIC Program in the area. Contacts in Bailey’s department are Elaine Holder at (212) 719-8067 and Robert Marks at (212) 436-1404. However, if a question involves an offer that has already been submitted, practitioners should contact the Brookhaven, N.Y., Service Center directly at (866) 611-6191. In addition, practitioners can call the service center’s general number at (800) 829-1040 for general questions regarding offers.

Effective July 2001, all new OIC processing was centralized in two locations: the service centers in Brookhaven and Memphis, Tenn. To clear out the substantial current inventory of OIC cases, the IRS is forming fast-track teams throughout the U.S. In New York, the fast-track teams are located in Buffalo and Long Island.

As of Oct. 25, Bailey noted that she had a number of cases in her current inventory. To expedite resolution, excess noncomplex cases in that inventory will be transferred to Buffalo and Long Island. New offers from this area will be handled by the Brookhaven Service Center. When fully operational, the IRS expects to turn around cases more expeditiously once all needed information is included in the IRS’ file. Bailey also noted that under current guidelines, a reasonable deposit must be made toward current taxes due as a prerequisite to processing the offer.

Bailey reminded the committee that the IRS Council’s offices at the World Financial Center were destroyed along with some OIC files at council’s offices. The IRS is making every effort to rebuild the lost files while minimizing the requests for additional documents. If a practitioner has one of these cases, they should contact Deirdre White at (212) 436-1404. To rebuild these files, the IRS will need a new Form 656 and a financial statement dating back no further than 12 months. The agency will not need new copies of appraisals and other documents, if the IRS’ database shows that it has evaluated the document.

Bailey touched upon certain legislative proposals that, if enacted, would affect the OIC Program in one way or another. Proposed reforms to the installment agreement area might well greatly reduce the volume of deferred OICs. A second proposal would suspend the statute of limitations while an offer is in process. Also, there is a proposed expanded penalty for filing frivolous offers and installment agreement proposals.

The Relations with the IRS Committee is comprised of more than 35 CPAs who specialize in representation of clients before the IRS. The committee serves as a conduit for information between the IRS and the CPA profession. The committee meets 10 times annually, including annual visits to the service centers in Brookhaven and Andover, Mass.