One of the most important tasks a tax professional performs for a tax client is to request, and correctly interpret, the IRS Transcript for that client.
This is true regardless of whether a client is an individual, business, partnership, corporation, LLC, or whatever.
The IRS Transcript shows a lot of important information, for example:
- how much tax is owed
- how much in penalties there are
- how much interest there is
- when tax returns were filed, if they were filed
- what Notices have been sent out by the IRS
- whether there are any collection holds on any particular tax years
- whether there is any court action taking place, whether initiated by the IRS or the taxpayer, including any bankruptcy filings
- determining whether all or part of your tax debt is dischargeable in bankruptcy
- perhaps whether a criminal investigation is underway
There are also different kinds of IRS Transcripts:
- Account Transcript
- Payor Transcript (wage and 1099 information the IRS has on you)
- Tax return Transcript (shows the line item amounts from tax returns you’ve filed) this is often easier to obtain than to get a copy of the original tax return from the IRS
A very important piece of information which the Transcript helps us to determine is when the IRS will run out of time to collect a tax liability from you. This is called the Collection Statute Expiration Date, or “CSED”. We must calculate each year’s CSED separately.
In order to better understand a client’s Transcript, it is imperative that the tax professional know and understand the Codes the IRS uses on each line item.
Very infrequently, once every five years or so, the IRS publishes a list of these codes. My experience has been that if you telephone the IRS and ask for a copy of this publication, most IRS employees won’t even know what you are talking about, and those that do know about the publication will tell you that it is for IRS use only and is not to be given out to the public.
If you go to the IRS.gov, and go to the page where their publications are referenced, and then type in the number 6209 in the publication number field, no result will be found. But you can find the publication by typing in 6209 in the general search field at the top of any of the site’s web pages.
I have enclosed a copy of the entire 613 page Publication 6209. If you go to Chapter 8, which is about 110 pages long, you will see most of the codes used on Master File Transcripts. There are a lot of codes.
If you have an IRS tax problem, obtaining, and correctly interpreting, your Transcript is a very important task. The problem is it’s also a very tedious task.
I strongly encourage anyone who has an IRS tax problem to obtain their Transcript from the IRS today.
Here’s a download link to Publication 6209 (downloads PDF).
Until next time,
Jeff Fouts, Tax Attorney
Fouts Law Group, LLC