Tax News Archive:

Alerts by the IRS

IRS Improperly Denied Earned Income Tax Credit to Some Taxpayers Filing Form 4797 – Due to a processing error, the IRS improperly denied the Earned Income Tax Credit to some taxpayers with investment income exceeding $2,350. Affected are a relatively small number of taxpayers who filed returns claiming EITC and who sold investment property including culled cows, farming equipment and other business assets. Taxpayers who used Form 4797 and received notice that their investment income disqualified them for EITC should notify the contact person or office listed on the error notice to correct the problem. The IRS assistor may be able to make an on-line adjustment to the taxpayer's account and issue a notice that a correction gas been made and a refund is being issued.

Top Errors for Paid Preparers on Paper Return Submissions – The top errors for paid preparers on paper return submissions this filing season relate to Social Security Numbers or Individual Taxpayer Identification Numbers and to names. Numbers and names are sometimes illegible, incorrect or do not match IRS or SSA records. Other top errors include figuring Earned Income Credit and Child Tax Credit.

Incorrect Version of Instructions for Form 8839, Qualified Adoption Expenses – Instructions for Form 8839 that were downloaded before December 9, 1999 contain an incorrect version of the Exclusion of Prior Year Benefits Worksheet on page 2 of the instructions. The text on lines 2 and 5 of the worksheets told taxpayers to enter the employer-provided adoption benefits included on Form 8839, line 22 (line 20 for 1998) for the child. Those lines should instruct taxpayers to enter the benefits included on line 22 (line 20 for 1998) for all children. Using either of those worksheets, taxpayers could overstate their excludable benefits if they received employer-provided adoption benefits in connection with the adoption of more than one eligible child.

E-file Rejection of Returns with Child-Care Credit or Employer Dependent-Care Benefits. Due to a processing error, the IRS e-file system has improperly rejected most individual returns, which claimed a child care credit or reported dependent care benefits from an employer. After the IRS corrected an initial system error at the end of January, the system continued to reject returns with more than one Form W-2 in which the W-2 that reflected dependent care benefits was not the first one entered. All of the affected returns had Error Reject Code 090 in the rejection notice. The IRS has rejected about 40,000 e-filed returns because of these problems this year. It is not known how many of these returns were repeatedly re-transmitted and rejected. Taxpayers whose e-filed returns were rejected because of Error Reject Code 090 should re-transmit the returns on or after Feb.10.

Power of Attorney Errors - Due to a programming problem, the Power of Attorney (POA) indicator was erroneously turned off during the first few weeks of Processing Year 2000. This problem affected individual taxpayer notices or letters dated January 31 through February 21, 2000. The information contained in the notice or letter issued to the taxpayers is correct. Taxpayers may wish to contact their representative regarding any notice or letter received during this period.

Caution – Your Client May Have An Incorrect Copy of Publication 54 - If your client downloaded Publication 54, Tax Guide for U.S. Citizens and Residents Abroad, before January 28, 2000, the discussion under "Services Available Only Outside the United States" on page 33 has been changed. The following services available to overseas taxpayers should have appeared in this section under the following headings.
Phone: Overseas taxpayers can also call the Puerto Rico site for help at (787) 759-5100.
Mail: The office can also be accessed by fax at (202) 874-5440. TaxFax Forms can be ordered by fax at the following locations:


  • San Juan (787) 759-4524
  • Tokyo (81) (3) 3224-5465
  • Virginia (703) 368-9694

Missing Icons, Chart and Worksheet in the 1999 Package X, Volume 1 - The following pages in Volume 1 of the 1999 Package X, Reference Copies of Federal Tax Forms and Instructions were inadvertently printed with missing icons, chart and worksheet:

  • Pages 123 through 128: the "Caution and TIP" icons are missing on the Instructions for Schedule A, Itemized Deductions (Form 1040, catalog number 24328L). In addition, on page 123, the section Limit on Long-Term Care Premiums You May Deduct, is missing a chart. On page 128, Line 28, Total Itemized Deductions, the worksheet is missing.
  • Pages 129 and 130: the "TIP" icons are missing on the Instructions for Schedule B, Interest and Ordinary Dividends (Form 1040).

Your Client May Have an Incorrect Version of the Instructions for Form 3800 - If your client downloaded the 1999 Instructions for Form 3800, General Business Credit , before December 31, 1999, they have an incorrect version of the instructions. Using those instructions, taxpayers with a suspended research credit might enter an incorrect amount on lines 17c and 18. The version of the instructions now available for downloading is correct. Also, all printed copies of the 1999 Instructions for Form 3800 are correct.