IRS talk: acronyms, dilemma and new Form 8919.

The following are highlights from the annual meeting between CalCPA's Committee on Taxation and the IRS. A transcript of the Q & As discussed will be available at www.calcpa.org/Content/24157.aspx later this month.

Acronym Update: TAS and SAMS

Got tax problems? Joe Benton, Area 7 Director for the Taxpayer Advocate Service (TAS), wants you to report any "systemic" issues you may encounter via the Systemic Advocacy Management System (SAMS). Systemic problems are those that don't apply to just one taxpayer.

Although none of the CPAs at the liaison meeting said they had used SAMS, Benton encouraged all tax practitioners to utilize SAMS as the TAS uses the system to identify issues and work with the IRS to correct problems. If there's a high volume being reported on a particular issue, it may be included in the National Taxpayer Advocate's Annual report to Congress.

Along the same lines, Benton reported that the TAS is struggling to meet increased inventory work demands, which CalCPA practitioners say is causing a several-month wait when trying to get cases resolved.

To fix this problem, National Taxpayer Advocate Nina Olson is working on methods to increase the TAS budget so more case advocates can be hired. The hope is that 120 new case advocates will be added nationwide in the first six months of this fiscal year, and 120 more will be added in the last six months.

For more information on the TAS, visit www.irs.gov/advocate/index.html. For more information on SAMS, visit www.irs.gov/advocate/article/0,,id=117703,00.html.

Legislative Dilemma

A question was raised concerning community property for California's registered domestic partners (RDPs).

CPA Gregory Bogden asked, "How will the IRS treat community property for California RDPs? For instance, will the transfer of 50 percent of community assets (wages earned by one partner) to the other partner result in a gift or will the IRS defer to state law and treat the 50 percent interest in the assets as already 'owned' by the other partner?"

Pat Donahue, an IRS Area Counsel, said, "Publication 555 instructions, revised as of May 2007, state that the community property rules do not apply to RDPs in California. Each partner must report their own income on their own return."

Furthermore, she cited Chief Counsel Advice 2000608038, which states that the U.S. Supreme Court's decision in Poe v. Seaborn dealt with Washington's community property law, which applied to a husband and wife.

The IRS does not believe that the Poe v. Seaborn decision applies to the application of a state's community property law outside the context of a husband and wife.

In the IRS's view, the rights afforded domestic partners under the California Domestic Partner Rights and Responsibilities Act of 2003 are not "made an incident of marriage by the inveterate policy of the State." The relationship between RDPs under the California Act is not marriage under California law.

Therefore, the Supreme Court's decision does not extend to RDPs.

Consequently, an individual who is an RDP in California must report all income earned from the performance of personal services, notwithstanding the enactment of the California Act.

Donahue also noted that "recent legislation in California requires RDPs not filing joint state returns to file separate married returns. Clearly, this will be an area of challenge for practitioners and taxpayers in California and other states."

This question generated much discussion and the general consensus in the room appeared to be that this issue needs federal legislative relief due to California's law regarding RDPs, which conflicts with federal law.

For more information, visit www.irs.gov/publications/p555/ar01.html or the FTB's site on RDPs, www.ftb.ca.gov/forms/RegDomPrtnr/RegDomPrtnr.shtml.

New Form 8919

Senior Stakeholder Liaison Specialist Celeste Neal discussed with the COT new Form 8919, Uncollected Social Security and Medicare Tax on Wages, to get some feedback on its efficacy.

Neal pointed out that the form was intended for workers who are treated as independent contractors, but believe they are employees and want to calculate their share of the Federal Insurance Contributions Act tax.

However, Form 4137 should continue to be used to report social security and medicare tax on unreported tip income.

Comments given by the COT included:

* Form 8919 is asking a person unaccustomed to making such complex determinations to make a distinction between being an employee or an independent contractor.

* Filing Form SS-8, which may be required in conjunction with Form 8919, is a slow and extensive process.

* Form 8919 has the potential of being abused by those seeking unwarranted employee coverage.

Are you a tax practitioner who has feedback about this new form? You may send your comments to [e-mail] or [e-mail].

Damien B.M. English is CalCPA's managing editor. You can reach him at [e-mail].