Whenever we get a new client that has multiple years of unfiled federal and state tax returns, we always, 1) get a power of attorney (Form 2848 – the new one!), and 2) contact the tax practitioner’s hotline and obtain what is known as “wage and income” information.
Wage and income information is important because in many cases, the client may have forgotten an item of income and you may find it by cross-referencing with the IRS transcript of wage and income information. In other cases it may be the only information available, and with the client’s approval that the IRS data is all he or she is aware of, a return could be filed with that information.
Usually, the practitioner’s hotline will result in getting the necessary wage and income information via facsimile pretty quickly, and from there you can proceed to prepare the delinquent returns.
But there is one little weakness with the computer system of the Internal Revenue Service. They forget one very important item. Oh sure, gross wages is included, along with federal withholding, social security wages and social security withholding. Heck, even the name, address and employer identification number of the employer is listed…
But what is NOT listed is the state wages and state withholding. After all these years that function has yet to be fixed. As a practitioner, how can we possibly help a client get into compliance with their respective states if we don’t have that data? And how can the IRS spot check state taxes paid on Schedule A if this information is excluded from their system? The IRS gets it when employers file their W-2’s. They have it right in their hands, and neglect to include it into the system. The IRS was our only hope, as the thought of getting wage and income information from the Commonwealth of Massachusetts, outside of a MA Freedom of Information Act (assuming that works), isn’t worth the effort of discussion.
“Mr. Shulman (IRS commissioner) if you are reading this, PLEASE fix the IRS wage and income transcript system to include state wages and withholding.”