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Are 8850 Form Entities: What You Should Know

Redacted] is writing to express concerns about the UTC. Specifically, [redacted] is concerned about the fact that taxpayers will often use the UTC to meet the requirements in the Code or regulations. This raises whether taxpayers are making an honest effort to ensure they are providing the amount of financial assistance they are entitled to under the Code or regulations. As a matter of general knowledge, the [redacted] attorney knows that if the UTC is used improperly, taxpayers may have to pay back the UTC, as discussed below. [redacted] also has concerns about the manner in which the UTC is administered, the number of returns filed and the average return filed due date by taxpayers. Moreover, it is important that the UTC be administered consistently with the Code and regulations and ensure that taxpayers don't have undue incentives to file return incorrectly because they will likely have a refund or credit available under the UTC. I agree that most taxpayers do provide the income they are required to provide on the UTC due date. Yet, at times taxpayers file tax returns that appear less than fully utilized. When taxpayers file returns that appear less than fully utilized, the taxpayer may be entitled either to a refund or credit of the applicable UTC amount. The UTC can provide a benefit to the taxpayer in at least two ways. First, under IRS guidance and as interpreted under the Code, the UTC provides a benefit to taxpayers for filing a return that would be a substantial understatement of income if the tax paid on the return were the tax actually due on the return. This benefit is known as the ``fractional credit.'' Second, under Code Section 6213(a)(5)(A)(iii), the UTC provides a tax refund to UTC filers for amounts they pay under the UTC and to cover refundable penalties. For example, a taxpayer who paid 800 on a taxable return and is eligible to claim a UTC credit of 80 under Rule 2475(b)(2)(C) is entitled to an additional refund or tax credit of 32.50 for these additional amounts. However, it is also important that a taxpayer not file a return that appears less than fully utilized to avoid the UTC benefits and penalties discussed above.

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