TIGTA Says IRS Does Not Keep Record Of Methods Used to Determine Tolerances

T.D. 9443, 74 Fed. Reg. 2370 (1/15/08): IRS finalizes rules under §7508A regarding postponement of certain tax-related acts by reason of federally-declared disaster or terroristic or military action.

Discussion: The final rules generally adopt the proposed rules (see REG-142680-06, 73 Fed. Reg. 40471 (7/15/08), and 27 Tax Mgmt. Wkly. Rpt. 1031 (7/21/08)), relating to the postponement of certain tax-related acts by reason of a federally declared disaster or terroristic or military action, but are revised throughout to use the term “federally declared disaster” instead of the term “Presidentially declared disaster” when referring to any disaster determined by the president to warrant federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. (P.L. 110-343 amended §1033(h)(3) by replacing the term “Presidentially declared disaster” with “federally declared disaster” and provided that the term have the meaning given such term by §165(h)(3)(C), added by P.L. 110-343). The definitions essentially are the same and thus do not materially impact the meaning of either the proposed or final regulations.

Regs. §301.7508A-1(d)(1) is revised to expand the definition of “affected taxpayer” to include any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a deadline for an act specified in Regs. §301.7508A-1(c) are located in the covered disaster area. In addition, Regs. §301.7508A-1(d)(1) expands the definition of “affected taxpayer” to include any individual visiting the covered disaster area who was killed or injured as a result of the disaster, to reflect current IRS administrative practice of broadly defining the term. Lastly, Regs. §301.7508A-1(f) was revised to include a new Example 9, which explains the impact of disaster relief on installment agreement payments that become due during the postponement period.

The example explains that the affected taxpayer's obligation to make installment agreement payments is suspended during the postponement period, and further explains that, because installment agreement payments pertain to pre-existing tax liabilities, interest and penalties continue to accrue during the postponement period.

The final regulations are effective on January 15, 2009.