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July 2016

The Increasing Importance of Form 8822

By Julie Dale, CPA-Austin

CPAs with a tax practice are always looking for additional ways to assist their clients in tax compliance and tax planning. Form 8822, Change of Address, is a form that should be given special attention. If a client is moving in the future or moves between tax return filings, this form is becoming increasingly important to file for a variety of reasons, a few of which are outlined below.

  1. Identity Protection Personal Identification Number (IP PIN): Fraudulent tax return filings are on the rise. When a fraudulent return is filed, the Internal Revenue Service (IRS) requires the taxpayer to file Form 14039, Identity Theft Affidavit and may issue an IP PIN to the taxpayer. This IP PIN is required to e-file future tax returns. In an effort to keep the IP PIN as secure as possible, the IRS issues a new IP PIN each year and mails a letter to the taxpayer. It is especially important to file Form 8822 as soon as possible for any clients who move and have been issued an IP PIN to make sure that e-filing will be possible each year.
  1. Identity Theft: As mentioned above, identity theft is a constantly increasing problem. The IRS has automated most of its matching notices (CP2000 notices) and these are mailed to the taxpayer’s last known address. These letters contain an abundance of sensitive taxpayer information, including some of the following items: name, address and Social Security number (SSN) for the taxpayer; name, address and SSN of the spouse since notices are mailed concurrently; adjusted gross income on the return in question; tax liability on the return in question; information on the differences between the return filed and the IRS records; and other information. Identity theft could occur if CP2000 notices or other IRS correspondence falls into the wrong hands due to an unreported move of a taxpayer. Form 8822 should be filed to avoid misdelivery of IRS notices.
  1. Timely Response to IRS Notices: The IRS provides limited time to respond to notices regarding matching differences and other tax return adjustments. If no response is received, the letters progress through a series of collection efforts and can eventually result in a levy of taxpayer bank accounts. The bank will notify the taxpayer of the levy. For a taxpayer who has moved and not updated his/her address with the IRS, the bank notification of a levy may be the first notice received by the taxpayer indicating that there is a problem. It may not be possible to stop the levy in some cases and this could lead to financial hardship for the taxpayer due to the inability to pay bills, NSF fees charged by the bank and late fees. Filing Form 8822 immediately upon a move may help avoid this financial hardship.

Since CPAs sometimes have limited correspondence with their clients throughout the year, it may be helpful to educate our clients on the importance of letting us know when they move. This simple form can help save our clients from certain tax issues.

TSCPA Committee Issues Comments on New Partnership Audit Rules

TSCPA’s FTP Committee recently responded to IRS Notice 2016-23 on implementation of the new partnership audit regime enacted by the Bipartisan Budget Act of 2015. The act replaces the Tax Equity and Fiscal Responsibility Act (TEFRA) rules with new rules and generally applies to partnership taxable years beginning after Dec. 31, 2017. The committee is concerned the new centralized procedures may negate some of the basic long-established pass-through principles with potentially inequitable results. The committee encourages the IRS to exercise its discretion when administering the new laws by issuing guidance that balances consistency with flexibility.

TSCPA Committee Requests Proposed Regulations on Implementation of New Passport Law

TSCPA’s FTP Committee recently asked the IRS to publish proposed regulations addressing how it will administer enforcement of IRC Section 7345, Revocation or Denial of Passport in Case of Certain Tax Delinquencies. The new statute, which went into effect Jan. 1, 2016, directs the U.S. State Department to deny a passport application or renewal and to revoke (in some cases) a current passport if the delinquent tax debt exceeds $50,000. The committee addresses some immediate concerns and encourages the IRS to expose proposed rules to enable the public to comment to make the process more reasonable and fair.