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The IRS has paused selection of new cases for its automated substitute for return (ASFR) program because of resource constraints, the agency confirmed to Tax Analysts September 27, 2017

“Like many operations across the IRS, work on the ASFR program has been affected by resource limitations,” the IRS statement said. “These resource constraints have forced us to make difficult decisions, even on programs that provide clear benefits to tax administration.”

The IRS said it is continuing to work on active ASFR cases and ASFR reconsiderations. “In addition, we are committed to taking many actions in 2018 to improve methods of allocating nonfiler cases across our potential compliance treatment streams, and this includes the ASFR program,” it stated.

The IRS statement partially confirms a September 26 post on the Procedurally Taxing blog reporting that a Treasury Inspector General for Tax Administration official had announced suspension of the ASFR program. The post was authored by Carlton M. Smith, a retired professor from the Benjamin N. Cardozo School of Law.

The ASFR program produces automatic tax return filings for individuals whose income reported to the IRS indicates a responsibility to file. The system calculates payments and liabilities, and it produces a letter to the taxpayer with the result.

The IRS said in its statement that the goal of its nonfiler strategy “will be identifying productive nonfiler work that maximizes cases worked while minimizing staff resources and promoting continued filing compliance through programs built to encourage voluntary taxpayer filing and payment.”

Olson told Tax Analysts that she hopes the IRS will use the ASFR case selection pause as an opportunity to address some of the program’s deficiencies.

The Taxpayer Advocate Service declared the ASFR program one of its “Most Serious Problems” in its 2015 annual report to Congress, complaining that the program’s case selection criteria imposed undue burdens on taxpayers and created extra work for the IRS.

Smith said the ASFR program holds taxpayers whose income exceeds a specific threshold to their obligation to file a tax return, but he wondered whether ending the program would save more money than it produces. “I can’t say how many dollars of IRS employee time generates how much revenue out of this program,” he said.

Now once again taxpayers can file the delinquent return(s), then wait 2 years to have them discharged in bankruptcy; as the prohibition against discharging ASFRs in bankruptcy is no longer relevant!

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Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

The Internal Revenue Service (IRS) needs to make improvements in the classification, prioritization, and inventory assignment processes for the Estate and Gift Tax Return Examination Program, according to an audit reportthat the Treasury Inspector General for Tax Administration (TIGTA) issued today.

TIGTA found that IRS estate and gift tax examiners do not always follow estate and gift tax return examination case documentation and timeframe guidelines and that the impact of the Estate and Gift Tax Program’s compliance efforts is uncertain.

Federal estate tax is a tax on the right to transfer property at death.  The Federal gift tax is a tax on transfers of property from a living person to other persons or trusts.  After taxpayers file tax returns with estate or gift transfers and the IRS processes them, the IRS might select some and assign them for further examination if filing requirements have not been met or there are pending issues.  Taxpayers could be treated inconsistently if estate and gift tax returns are not properly assigned to IRS personnel or not properly examined by them.

The IRS reported in its Fiscal Year 2016 data records that it estimated that over $1 billion of tax should be assessed for estate and gift tax returns that were examined and closed for that fiscal year.  TIGTA initiated this audit to determine whether the IRS in its Estate and Gift Tax Program is effectively processing and selecting estate and gift tax returns for examination and to determine the overall compliance impact of the program.

TIGTA’s review found that there is minimal IRS operational guidance for estate and gift tax return examination case classification, prioritization, and examination case inventory assignment processes.  In addition, TIGTA auditors found that some classification documentation sheets, when filled out by classifiers, are difficult to read or are incomplete; that only one employee is responsible for prioritizing cases selected for examination during classification sessions and assigning these cases to the field for examination; and that risks are present due to a lack of documented managerial reviews over the processes.  TIGTA also found that examination case documentation guidelines were not followed in 18 (47 percent) of 38 randomly sampled estate tax examinations, and in 17 (46 percent) of 37 randomly sampled gift tax examinations.

“Taxpayers must be treated fairly and consistently,” said J. Russell George, Treasury Inspector General for Tax Administration.  “The IRS must effectively process, select, and assign estate and gift tax return cases for examination and identify the overall compliance impact of the program,” he added.

TIGTA made several recommendations to improve the examination of estate and gift tax returns, including the creation of a readable document for classifying cases; revisions to the IRM; strengthening of internal controls; and development of guidance on the circumstances in which it is advisable to propose and issue inconsistent notices of tax return case deficiency in estate and gift tax examinations.  IRS management agreed with all of TIGTA’s recommendations and plans to take corrective actions.

Robert S. Blumenfeld  -