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IRS Audits

Chapter 6. Payer Compliance

Section 1. Information Returns Program (IRP) Scope and Background

4.6.1  Information Returns Program (IRP) Scope and Background

1) This section provides general guidelines for tax responsibilities, filing requirements, and processing procedures for withholding, depositing, and reporting income tax information on various information returns. These guidelines include how to apply for extensions of time for filing information returns, extensions for furnishing recipient statements, waivers from filing information returns magnetically or electronically, and associated penalties for failure to comply.

2) This section also provides detailed information on how to apply for Taxpayer Identification Numbers (TIN), including Social Security Numbers (SSN), Employer Identification Numbers (EIN), Individual Taxpayer Identification Numbers (ITIN), and Adoption Taxpayer Identification Numbers (ATIN).

3) This section provides information about the Payer Master File (PMF), including what information is contained on the PMF and how the information is updated on the PMF. It describes how the Information Returns Program (IRP) data is reformatted, TIN validated, and TIN perfected before building the Information Returns Master File (IRMF). It also provides information about organizing, extracting, and matching information returns through data assimilation, nonfiler correlation, underreporter correlation, as well as nonfiler and underreporter case development.

4.6.1.1  (06-20-2002)
Overview and General Information

  1. This overview provides general guidelines for customer service and taxpayer contact pertaining to filing information returns.

  2. Taxpayers are required to report to the IRS certain transactions with third parties, on prescribed returns and statements. These returns and statements are referred to as information returns.

  3. Every person engaged in a trade or business, including individuals, sole proprietorships, partnerships, corporations, nonprofit organizations and governmental agencies, must file information returns each calendar year for certain payments made during such year in the course of the payer's trade or business (IRC Section 6041).

  4. The Information Reporting Program (IRP) is a critical component of the Service's compliance strategy directly impacting voluntary compliance levels, as well as compliance enforcement activities. Efficient operation of IRP is dependent on the receipt of timely filed and accurate information from third party payers.

4.6.1.1.1  (06-20-2002)
Customer Service

  1. Providing all taxpayers with high quality service in all contacts is a primary area of emphasis for all IRS employees.

  2. Efforts to improve customer service include assisting taxpayers in understanding their tax obligations and performing outreach activities to cultivate an understanding of filing requirements.

4.6.1.1.2  (06-20-2002)
Outreach

  1. Time should be allocated to plan customer education and outreach efforts. Activities may include, but are not limited to, speeches, mailings, booths at conferences/conventions for professional associations, newsletter articles in trade association periodicals, and personal/telephone contacts with taxpayers. Outreach efforts should follow local guidelines/procedures.

4.6.1.1.3  (06-20-2002)
Focus on Problem Solving

  1. Employees should assist taxpayers in solving tax problems, even if the problems are not associated with the current activity.

  2. Assistance should be requested from Customer Service personnel, as needed, to expedite resolution of taxpayer problems.

  3. Referrals should be made to the Taxpayer Advocate, as appropriate.

  4. Referrals should be made to appropriate Collection personnel, if taxpayers have questions about current or past collection actions. If a taxpayer requests information about collection actions taken against a former/separated spouse, this request should also be referred to Collection personnel.

  5. Employees should follow local procedures to determine the appropriate time reporting codes to use when assisting taxpayers in problem solving.

4.6.1.1.4  (06-20-2002)
Ensure Timely Actions

  1. The proper use of time is an essential element of a quality examination/activity. Employees are responsible for the day-to-day management of their workload and are accountable for completing their work in the least amount of time necessary to perform a quality job.

  2. A focus on timely actions will reduce taxpayer burden.

4.6.1.1.5  (06-20-2002)
Ensure Quality TaxpayerCommunication

  1. Effective communication with taxpayers is a significant factor in providing quality customer service and in minimizing taxpayer burden. All communication with taxpayers should be courteous, professional, and clear, with all required identifying information provided.

4.6.1.1.5.1  (06-20-2002)
Oral Communication

  1. In all personal contacts with taxpayers and representatives, employees should always be courteous and professional.

4.6.1.1.5.2  (06-20-2002)
Written Communication

  1. Taxpayer correspondence should be clear, concise, and professional, as well as adhere to legal requirements.

  2. Correspondence should also strive to address the needs of the taxpayer.

  3. Where possible, correspondence with taxpayers should be prepared using standard forms and letters, since the specific language in these documents has been approved for general use.

  4. Correspondence must contain an employee name, contact telephone number, employee identification number, and signature.

  5. (3) The group manager should approve original correspondence prepared by employees and such approval should be documented. If correspondence is not individually approved, managers must develop some type of ongoing review process to ensure the quality of correspondence.

  6. Groups should maintain read files of all taxpayer correspondence that does not use form letters.

4.6.1.1.6  (06-20-2002)
Third Party Contacts

  1. The instructions in IRM 4.2.1.6.12, Examination of Returns Handbook, should be followed when representatives of the Examination function contact third parties with respect to the determination or collection of a specific taxpayer's federal tax liability.

  2. For third party contacts made for the purpose of collecting or determining a tax liability, IRC Section 7602(c) requires the IRS to:

    1. Provide advance notice to the taxpayer that contacts may be made.

    2. Periodically provide a list of all contacts to the taxpayer.

    3. Provide a list of contacts to the taxpayer upon request.

     

  3. A third party contact has been made when:

    1. An employee of the IR