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036: IRS SFR standards, IRS Policy Stmt 5-133 (6-year filing requirement), "Beard Test", & eligibility of SFRs for OIC (06/04/2015) - published on 06/14/2025
7 Plays2 months ago
Discussion w/ IRS on 06/04/2015 - Topics encompass Substitute for Return (SFR) standards, IRS Policy Statement 5-133 regarding the six-year filing requirement, the "Beard Test", and the implications of SFR status for filing an Offer-in-Compromise (OIC).
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Transcript
Accepting Substitute For Returns (SFRs) for Early 2000s
00:00:03
Speaker
You said 2003. Wait a second. What'd you say about six years? and Okay. Can I get your help for kids? Well, the reason I called your department is because he's got SFRs on 2000, 2001, 2002, 2004, 2006. And he wants to accept those as his return. And I was researching it on the internet.
00:00:31
Speaker
I thought some old tax law, and it said... If we filed for him, he doesn't have to do anything. The balance is there if he chooses not to file a tax return, in that that is he's accepting it the way
Filing Offers in Compromise with SFRs
00:00:43
Speaker
it is. Otherwise, he would be coming back and filing a tax return to have his account adjusted. So, can he file an offer and compromise with an SFR as his return? I don't know. I don't work in that department.
00:00:57
Speaker
oh Yeah, that would be whoever issued a balanced notice, that would be that phone number. Yeah, I don't have those notices yet. um
00:01:09
Speaker
Well, could you find out what were you going to research or did you have to do something? No, I can give you the phone number for the Balanced View Department if you want. Yes, please. 800-829-0922.
00:01:27
Speaker
you want me to transfer you to that department. But if you want to ask them anything, you would have to fax over your power returning phone to them. So I can remain on the line with them. Yeah. Okay. Would you like me to transfer you to that department? Just a minute. Okay. Um, so
00:01:51
Speaker
What about the Schier? Is he IRS? Again, he lost his records in a move. okay you know the The proverbial lost the records in a move. and um I know he worked those years or did something.
00:02:11
Speaker
um
00:02:15
Speaker
what but feel yeah but thank
00:02:35
Speaker
not pursue that for the checkdown in my in the know here he doesnn't filed he would be the file and he could go onto our website and with his account all information about two here right Okay.
Challenges with IRS Support and Filing Past Returns
00:02:55
Speaker
Uh, transcript. Okay. So what do you mean
00:03:09
Speaker
Why? Why? I don't know anything older than that. It's in the tax law. says What it where is that, seven years? Okay. I'm not really supposed to get into a bunch of laws. That's just kind of a blanket statement that we make from this department. Well, how'd you come up with 2009?
00:03:33
Speaker
returns but you know, we're not going back and at this point pursuing anything before 2000. That's 5 years.
00:03:46
Speaker
yeah said before two thousand and nine a Okay, so that's two thousand eight would be six years
00:03:57
Speaker
because
00:04:01
Speaker
did you need to transfer you to that balance state department?
00:04:07
Speaker
um
00:04:11
Speaker
I hate to bother you, and I'm sorry, and I'm not an attorney. That's why I'm asking.
00:04:28
Speaker
okay you or you could try calling that eternity 200 and 240 right now that's you know i tried to call will educate it's difficult to get through the warrant to call difficult difficult would listen to this practitioner priority hotline that that line is supposed to be open to practitioners i called that line three days excuse me three times today And each time I waited on hold 20 minutes, the first time they hung up on me after 20 minutes, they didn't even, they just picked up the call and hung up. You know, you said, please wait, beep, beep. And then when the call picked up, they just hung up. There was not even a human voice. They just hung up on me. Then the the second time I called, they did the same thing. I was on hold for 20 minutes. Not that, no, not that long the second time. It was like five minutes. And then instead of,
00:05:33
Speaker
it's like what i said no they didn't even hang up i said what how do you get away with that and then i hung up because nobody would answer me i said hello will you please answer me So something's got to be done. You got to tell the commissioner, even though you're on a limited budget, they're not allowed to be abusive to the people. The people that are calling in are trying to get answers and trying to, I'm trying to help get this case resolved and they can't be abusive to the, to the people that are trying to be proactive to get the case settled. You need to escalate that to the commissioner and then tell him that Mr. Kosker can
00:06:23
Speaker
um Well, I know you're working, so I'll let you go. I'm going to trans me that number, please. OK, thank you you. Have a good day. but
00:06:40
Speaker
hello
00:06:51
Speaker
Please wait.
00:07:06
Speaker
Please wait.
00:07:23
Speaker
revenue service this is mr hinderlier identification number one zero zero
00:07:30
Speaker
0621185. Let me help you.
Process of Accepting SFRs and Offers in Compromise
00:07:32
Speaker
Hi, Mr. Hindeliter. Steven B. Jordan. In New Hampshire. Hindeliter, could you spell your name? H-I-N? T-E-R. L-I-T-E-R. Okay. 100-062-1185. Correct. Okay, so...
00:07:52
Speaker
This call is probably going to be ended prematurely because I don't think I'm going to be able to satisfy your requirements up front. But I'm calling the balanced new department um on a particular taxpayer. And um man I'm going to ask you a couple of things. I think I figured out my strategy. But I think im as as soon as the power of attorney was supposed to be on file yesterday,
00:08:18
Speaker
I don't know if it's registered yet, I haven't checked it, but I think what I'm going to do is get the wage and income transcripts once I can get access to the system. um I'm an enrolled agent, private, I'm hired by this guy, and get the transcripts for 2000 through 2009 at preparers returns because even though, um so,
00:08:48
Speaker
But he's well he's got SFRs on file for 2000, 2001, 2002, 2004, 2006. And he told me yesterday, Brooks, the taxpayer, that he's willing to sign off on, like they used to have a form 4059 that if you signed it, it could be considered You could say, what what's that? Considered agreed. Agreed, yes. But then I guess Congress changed the law and said, because an SFR is not purported to meet the beard test, meaning a return on a valid return on the forms signed under penalties and perjury, you know, attacks computed and reasonable compliance with the law. I guess it meets three out of the four because it's, i't I don't know, but
00:09:39
Speaker
how do you tell the IRS you agree and you we you know you waive any sort of um assessment statute or what is that called exactly so that you can just if he just wants to accept the SFR as his liability and if you have an SFR can you still file an offer and compromise and use that SFR for that year as the tax for that year?
IRS Policies on Unfiled Returns and Wage Garnishments
00:10:03
Speaker
can The that's there is considered it a tax return by the internal revenue service card and if you agree to it and you don't want to file a reconsideration
00:10:16
Speaker
you just leave what's there there So how do you how if you how would one filer be consideration just filed the 1040 form Okay Okay, so and just leave it there and it's ah it's a tax return. Okay fine now What about 2003? There's nothing on the file yet.
00:10:38
Speaker
For 2003, 2005, 2007, 2008, or 2009, I was talking to a lady at SFR and she said, well, why don't you pull the tran the wage and income transcripts and prepare a return based on what's out there? I said, well, that's a good idea.
00:10:59
Speaker
should have a fars been for prepare for
00:11:10
Speaker
okay He's good for 2010 on. He's filed and he only owes like $300 for all those years. He's zero balance on 2010, $64 on 11, $258 on 12. That's what he owes. And but he owes nothing on 13 or 14.
00:11:32
Speaker
Okay, so Eight seven we wouldn't require filing for. Why is that? Because if we don't we don't go after those returns now. Too late. We're not going to ask for them. Boy, don't let that news out. Nobody's going to file the returns.
00:11:58
Speaker
so we have them have to do those ones and then any kind of reconsiderations you could file, otherwise we're just going forward with the balances that we've prepared. So what I'm saying then is how is he going to submit an offer and compromise if he has neither a return or an SFR on file for 03-05-07-08-09? The only one that would be required is 09. Really?
00:12:27
Speaker
a And that's if he has a filing requirement it out but I didn't quite understand you can't close it out. What do you mean?
00:12:47
Speaker
and i can just close out that delinquency return is refund due Okay. All right. Um,
00:13:03
Speaker
But when you say you're not going after those years, I mean, to get the return filed in the first place because he's been, he's been garnished. He's being garnished right now at work. They're taking all of this paycheck at work. And that's why he, what I'm saying like 2003 and Anything prior to Oh nine. Okay.
00:13:32
Speaker
Did that come out in a revenue procedure or a bulletin or when did that six-year thing come out? which returns alright I still think as a practitioner the the best luck I've always had is to file the returns so that we have a legitimate tax balance either refund or bail due on the file on the master file so that the taxpayer can either so first of all so he knows where he is and then he could do an an offering compromise or a so like if he wanted to compromise 2003 and there's nothing on file what
00:14:24
Speaker
um
00:14:33
Speaker
Oh, sure you do. I... I... sure you do. What's the number for archives? Okay. And mail it to Kansas City?
00:15:00
Speaker
would have to work it's probably on
00:15:08
Speaker
I know, an income on file i know but how is he going to do a successful offer on compromise if he has these question marks for these open years? because didn could come back they shouldn't be open they should not be open they should not be ah delinquency open for any tax your prior owner
00:15:30
Speaker
they should be closed by us we should not require them to be filed for an offer in compromise. I know but they're garnishing his wages for those years is what I'm saying. That's not for the ones that we did the substitute for returns on. Yeah. For the ones that aren't filed.
00:15:50
Speaker
Yeah. You understand that like you said 03 was never filed. Correct. There's nothing on file. And it's not a substitute for return. Correct. And when we're not
00:16:06
Speaker
the fact that three is not done, just forget that it even existed.
Legitimacy and Agreement of SFRs since 2005
00:16:11
Speaker
And just excluded from the offer and compromise as part of the years to be, um, compromised? Sure, because there's nothing there to offer. There's no balance to settle. and Okay. Okay.
00:16:26
Speaker
So, okay, so that the SFR does count as a legitimate return and one that must purport to be a return, be filed in a penalty perjury, provide sufficient information to allow computation of tax and represent an honest and a reasonable attempt to comply with the law.
00:16:43
Speaker
mean when comes to then in collections okay yeah when it comes to us in terms of setting up an installment agreement when you call in so you're gonna file an offer and compromise anything like that or saying okay that is what it is they we file the return you don't want a final reconsideration return that's the balance that's the tax return that is what it is okay peace brother it's just I was researching this on the internet last night and prior to
00:17:19
Speaker
um 2005, it says in 2005, the service changed its position as to all forms 870, 1902, 4549, and any successive warrants, because these are not filed in the penalties and purges, and the service believes that they flunk the beard test, which is discussed below. Now, you've already explained this to me, but I just wanted to tell you the history that You used to have to sign a 4549 that I agree with the SFR as a bona fide return and you may technically, you know, you may may assess me and I will accept that as my return, but apparently no longer since they they changed the law in 2005, it now becomes, if you don't file a reconsideration, it's automatically the assessed legitimate balance.
00:18:04
Speaker
i mean basically what happens in there is something that when we assess the tax return, something still goes out where you can agree to it or not. But it'll show up on the account as agreed or unagreed. But regardless of the fact of whether it's a agreed or unagreed, we don't solicit the tax return to us. That is a return. So if it's agreed, then you can't apply for reconsideration. okay you to the assessment
00:18:37
Speaker
and even if you send in an original return we're not going to change it however if it's on agreement that we just discussed it and tax fair didn't agree to it then they can apply for reconsideration by filing an original rate return I say. Okay. I got it. Very well said. Very well spoken. Okay. Well, I do appreciate your time, sir. No problem. Thank you much. Goodbye.