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Before
Mailing Tax Returns, Obtain Transcripts from IRS
Find Out What the IRS Already Knows about You by William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor  Before completing your tax return, you might consider obtaining a transcript from the Internal Revenue Service
showing all of your wages and income reported to the agency. You never
want to omit income reported to the Internal Revenue Service on your
tax return. Not only will you receive a letter from the IRS
several months later requesting additional taxes to be paid, but you
will be charged interest and penalties on the amounts omitted. If
you do not know already, the interest and penalties charged by the
Internal Revenue Service can be very significant over time, as much as
the original tax liability, if not more. Even more importantly,
the omission of income on your tax return might prompt an audit of your
tax return by the IRS, a prospect never welcomed by any taxpayer.Sometimes tax preparers will request a transcript on your behalf in order to confirm that all amounts are complete and agree with what has been received by the IRS, especially if your files appear to be missing documents or are in a state of disarray. There is always the possibility that you failed to receive 1099 or W-2 forms—particularly if you have changed your address recently—or more likely that you lost or misplaced them. Consequently, it may be prudent to determine what has been reported to the IRS. If a tax form has been incorrectly submitted, you can then request that the issuer prepare a corrected 1099 or W-2 and submit it to you and the Internal Revenue Service or Social Security Administration, depending on the type of form. In order for your tax preparer to request your transcripts, you will need to authorize him or her by filling out and signing a Power of Attorney authorization, Form 2848. I customarily fax these forms over to the IRS as soon as possible, since it sometimes takes a considerable time for the IRS to process them. It is advisable to include the past three years on the Power of Attorney (POA) form, in the event of any future need to amend prior years tax returns. Of course, a separate Power of Attorney form needs to be submitted to the State tax department as well in order for your tax preparer to obtain any information from this entity on your behalf. In Connecticut, the appropriate form is LGL-001. I sometimes request this authority to confirm that all tax payments have been received and recorded by both the State and my clients and to determine if there are any other open issues. Connecticut has been known not to inform taxpayers of overpayments made to their accounts. I have known of clients unaware of considerable credit balances remaining in Connecticut's coffers for years. If you request a transcript and desire it to be faxed immediately, you will need to have a separate phone line for your fax machine, since the IRS requires you to be physically present at the fax machine to acknowledge its receipt; otherwise, the IRS will not immediately fax the transcript to you, but will schedule a fax of your transcript sometime within the next 48 hours. Moreover, unless you speak to a live customer service representative, the IRS's automated telephone menu will process your transcript by mail, which may take anywhere from 10 to 30 days to receive. So be certain to speak to a live agent and specifically request an immediate faxing if time is of the essence, which ordinarily it is when it comes to preparing a last minute tax return. Unfortunately, the clarity of the transcripts may vary depending upon the timing and request of the fax transmission. I have noted far clearer faxes received when scheduled for transmission within 48 hours than when immediately faxed while you are online with the customer service representative. There are several transcripts that the Internal Revenue Service has in its custody, so be certain to request the one that you require. Ordinarily to assist you in preparing your tax return, you will request the Wage and Income Transcript, which includes data from Form W-2, Form 1099 series, Form 1098, and Form 5498 series received by the Internal Revenue Service over the past 10 years. If you need other information, such as the estimated tax payments that you made, penalties and interest assessed against you or paid by you, interest received from the IRS, adjustments made by the IRS on returns filed, your balance of outstanding tax liabilities, or if extensions or returns were received by the IRS, then you would request an Account Transcript. Account Transcripts are available for most tax returns for the current processing year and the three prior years. If you lost a copy of your prior year’s tax return and need it in order to prepare this year’s tax return or to meet the requirements for lending institutions for mortgage verification purposes, you can request a Tax Return Transcript. The Tax Return Transcript shows most line items contained on the return as it was originally filed, including any accompanying forms and schedules. However, it does not reflect changes made to the account after a return is processed. A Tax Return Transcript is available for the current year and three prior years for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S. Why request a Tax Return Transcript and not a copy of your originally filed tax return from the IRS? Transcripts can be requested over the phone and received by fax, allowing for immediate receipt if necessary. And there is no charge for a transcript. On the other hand, an exact copy of a previously filed and processed tax return and all attachments requires the mailing of Form 4506 along with a payment of $57 for each tax return requested. While Tax Return Transcripts are only available for the current year and previous three years, copies of tax returns are available for seven years after their filing dates. A new kind of transcript evolving largely in response to considerable amended return fraud reported by lending and credit institutions is the Record of Account Transcript. In essence it is a combination of the tax return and tax account transcripts containing the line items on a tax return transcript plus any adjustments. As noted above, the tax return transcript shows items as originally filed without reflecting any changes afterwards, while the tax account transcript shows those changes without including items as reported on the original return. The Record of Account displays both the originally filed and amended values all on one transcript. Like the Account and Tax Return Transcripts, it is available for the current year and three prior tax years. Be prepared to wait over an hour before you reach someone on the phone at the IRS to take your transcript request as well as to be interrogated by a drill sergeant, confirming your identity. Besides your name, address, social security number, and date of birth, the IRS will request your filing status of your last submitted tax return and other information; so have last year's tax return on hand. In addition, if you are filing a joint return and you need a transcript of your spouse's information, he or she will need to speak directly to the IRS agent on the phone to request such information. Because of the tightening of privacy rules, unless your spouse is present with you, the IRS will not fax your spouse's information without his or her direct confirmation of identity on the phone with you. When the IRS representative questions you on the phone, be sure that only you answer his or her questions. If the agent hears your spouse in the background providing answers to the questions, your call may be terminated on the grounds that you are impersonating the taxpayer. So muzzle your spouse and be prepared, careful, and vigilant until your request for your individual transcript has been approved and processed by the IRS agent. Then hand the telephone receiver over to your spouse to request his or her own transcript. If you do not wish to subject yourself to such an interrogation, wait on the phone for over an hour, or use the automated request line to request a transcript, you can process Form 4506-T Request for Transcript of Tax Return and mail it to the IRS office indicated for your location. Although the form’s title specifies a transcript for a tax return, you can request all four different transcripts previously discussed on this tax form. There is no charge for the transcript and you should receive it in 10 business days from the time the Internal Revenue Service receives your request, so allow up to 30 calendar days to receive the transcript. The Internal Revenue Service has a wealth of information on you in its computerized database. You may request this information by processing transcript requests either by telephone or mail. If you need information to prepare a tax return or make a payment, request a transcript over the phone and request that the information be faxed to you. Be certain to request the appropriate transcript, since there are currently four different kinds, depending upon the information you require. If you are in doubt as to which transcript you need, you might consider requesting all four, since there is no cost and it is always better to be safe than sorry, especially with the IRS. This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant. Have a tax, a QuickBooks, or an accounting question? Please feel free to submit it under "Comments" on our blog, Accounting, QuickBooks, and Taxes by William Brighenti, Certified Public Accountant, Accountants CPA Hartford, LLC. For information and assistance on any tax, QuickBooks, or accounting issue, please visit our website: Accountants CPA Hartford, LLC. If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose. The above tax advice was written to support the promotion or marketing of the accounting practice of the publisher and any transaction described herein. The taxpayer recipients of this offering memorandum should seek tax advice based on their particular circumstances from an independent tax advisor. |
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| Supreme Court Justice George Sutherland: "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, by means which the law permits, cannot be doubted." |
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