Politics & Finances

Is the IRS finally getting help from Washington?

by
Lee Reams II
on
9/14/2015
Is the IRS finally getting help from Washington?

There has been some recent movement in Washington that might help the IRS do its job better.

Five Democratic senators have sent a letter to Treasury Secretary Jack Lew, and Politico has shared it online. The letter included several interesting requests.

The letter was signed by Robert P. Casey, Patrick Leahy, Dianne Feinstein, Benjamin L. Cardin and Sherrod Brown and included their concern about recent IRS budget cuts.

The letter begins, “We write to express concern that as a consequence of shortsighted budget cuts the IRS has struggled this year to meet its objective to provide taxpayers with quality assistance.” They continued, “Our constituents have shared many examples of difficulties they faced this tax season, including long wait times to reach the IRS on the telephone and difficulty receiving in-person service.”

The five senators added, “We also recognize the IRS must be supported with the appropriate resource levels to ensure it can complete its responsibilities to taxpayers.”

The letter included a request from the treasury for a list of services that have been affected by the budget cuts. These cutbacks have hurt both taxpayers and tax professionals, have all encountered the IRS's courtesy disconnect. The Obama administration has already requested an increase of $242 million in funding to upgrade IT systems and protect from identity theft

In addition, the IRS has been trying for several years to regulate federal tax preparers. The first attempt was through its RTRP program, which was overturned through legal action in the Loving vs. IRS case. Now, Nina Olson, a national taxpayer advocate, is asking Congress to create a new RTRP-type program that would give the IRS authority to oversee all paid tax preparers.

Orrin Hatch and Senate Finance Committee member Ron Wyden will start the markup period for legislation that would “help root out the bad actors who pose as law-abiding return preparers.”

The legislation would give the treasury and the IRS the authority to regulate all aspects of federal tax practice, including paid tax return preparers. As of today, there is not a matching bill in the House of Represenatives. This bipartisan bill is being promoted to prevent identity theft and tax refund fraud. Wyden added, “I'm confident this is legislation that the Finance Committee can get behind on a bipartisan basis, and I look forward to continuing to find ways to protect taxpayers from identity theft and fraud.”

The Bill is scheduled for markup before the Senate Committee on Finance on September 16, 2015. Included in the current version are many interesting changes to help combat scams being perpetuated by criminals.

They include:

  • Requiring the IRS to develop guidelines for identity theft and refund fraud cases to reduce burdens for victims
  • Requiring the IRS to prepare a report on identity theft and refund fraud
  • Requiring the IRS to study the feasibility of blocking electronically filed tax returns
  • Extending the IRS's authority to require a truncated Social Security number on Form W-2
  • Providing the Department of the Treasury and the IRS with the authority to regulate all paid tax return preparers
  • Authenticating the identity of electronic services accounts
  • Permitting enrolled agents who meet the secretary's qualifications to use the designation “enrolled agent.”

The proposed legislation also addresses the future of state-run programs such as California's CTEC.org and the current Annual Filing Season Program run by the IRS: “The Senate Committee on Finance encourages the Department of the Treasury and the IRS to expeditiously (i) approve third-party examination and continuing education providers for purposes of allowing individuals to obtain registered tax return preparer status; (ii) establish a program for evaluating and approving State-based tax credential programs for purposes of providing individuals with registered tax return preparer status; and (iii) end the voluntary Annual Filing Season Program.”

The legislation also closes loopholes to help combat the fraud epidemic. Whether granting the IRS the ability to regulate all tax preparers improves the quality of the advice and cuts down on rogue preparers is yet to be seen. The fear, of course, is that the legislation will just drive the unqualified or criminal element underground. Regardless, requiring continuing education standards does make sense with the constant changes in tax law. 

If the legislation is approved, the new guidelines and program will be implemented within six months of the date of enactment.

Update 9/15/2015: The American Institute of CPAs, in a letter to the Senate Finance Committee dated Sept. 15, 2015, stated “We strongly urge Congress to limit the IRS's authority to require the use of PTINs to only those individuals who (1) sign a tax return or claim for refund, and (2) are involved in the preparation of tax returns or claims for refund, but are not supervised by an attorney, certified public accountant, or ‘enrolled preparer' (i.e., enrolled agent, enrolled retirement plan agent, or enrolled actuary authorized to practice before the IRS under Circular 230).”

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Lee Reams II

Lee Reams II

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