CW Associates CPA's Hawaii: Modernizing Fax Filings with the IRS

Federal and state agencies, including the court systems, are modernizing by allowing the electronic filing of petitions and other court documents. For example, Alabama, Texas, Illinois and Missouri have e-filing systems for court petitions. In 2014, two federal courts (2nd and 9th Circuit Courts of Appeals) piloted an e-filing program for all courts in which the user is authorized to file electronically. The program is expected to become national in the next few years.

The IRS is also modernizing, although not as fast as many practitioners (or the AICPA) would like. Calls to the IRS and cases can be routed to any IRS employee or office all over the country. We are seeing more appeals conferences conducted by telephone with the various service centers instead of in person and expect Skype-type conferences to become more common. For many years, the IRS has electronically processed bank account and wage levies on delinquent accounts. Now, the IRS is also able to issue electronic summonses to eBay and PayPal.

Since November, the IRS has expanded the acceptance of signed forms by fax, including consents to assess additional tax of any amount, taxpayer closing agreements involving any amount and consents to extend the time to assess tax.

This small step may eventually lead to virtual audits and virtual hearings. The expanded consent will be most useful and necessary to preparers who need to perfect (correct small ministerial errors in) the original but rejected e-filed returns during the filing process, resolve post-filing issues and perhaps file delinquent client returns. Original tax returns are not accepted by fax, except as part of return perfection, presumably to encourage e-filing. As such, an unsigned original return can now be perfected with a faxed signature. Generally, faxed signatures will be considered legally sufficient where the IRS has been in contact with a taxpayer, and that contact has been documented in the IRS files.

Note that the IRS will not independently send an acknowledgment of received faxes, but the taxpayer or representative with a power of attorney (POA) may call and request a verbal confirmation of receipt if they feel that the fax report that is generally generated by the sender is insufficient.

The IRS is working on Internal Revenue Manual (IRM) changes that reflect this new policy, which will apply to all divisions that assess and collect income tax, employment tax, excise tax, estate tax, gift tax, generation-skipping transfer tax, tax-exempt filings and employee plan determinations. However, most determination letters, including those for employee plans and exempt organizations, will not be accepted by fax. A list of forms that are now accepted (where the IRS has been in contact with the taxpayer and documented the taxpayer history file) includes:

-          Requests for innocent spouse relief and injured spouse claims.

-          Taxpayer statement about a refund.

-          Installment agreements and offers in compromise (Forms 433-D and 656).

-          Collection information statements (Forms 433-A and 433-B).

-          Early referral requests, fast track mediation requests and requests for collection due process (CDP) hearings.

-          Letters to designate a payment, request non-filing of a lien, or a lien release or lien withdrawal.

-          Letters to request non-assertion of a penalty or to provide a reasonable cause statement.

-          Election by a small business corporation (Form 2553).

-          Consents to assess additional tax or to extend the statute of limitation on assessing tax.

-          Taxpayer closing agreements.

In summary, the electronic world is here and the more the IRS is able to service taxpayers electronically, the better our experiences with the IRS will likely be. 

Check out the AICPA’s IRS Procedure & Tax Administration page, which includes resources to also help with your experiences with the IRS, such as an IRS Organizational Chart and IRS Hotlines Quick Reference Chart.

Valrie Chambers, CPA, PhD, Associate Professor of Accounting, Stetson University. She has over a decade of public accounting experience as owner/partner-in-charge of a CPA firm in Houston that specialized in advising small business owners. Dr. Chambers has been published in numerous journals and received the Texas Society of CPAs Outstanding Accounting Educator Award for mid-sized Texas universities in 2012. She has volunteered for the AICPA and the IRS’ Volunteer Income Tax Assistance in Corpus Christi.

Gerard Schreiber Jr., CPA, Partner, Schreiber & Schreiber CPAs. Gerard specializes in tax, accounting and consulting matters for individuals and small businesses. He serves on the AICPA IRS Advocacy and Relations Committee and has authored numerous courses and articles on various tax subjects.