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IRS Budget Sliced 13% as U.S. House Constrains Tax Agency



IRS Budget Sliced 13% as U.S. House Constrains Tax Agency

 The US House of Representatives voted to cut the Internal Revenue Service’s budget by $1.14 billion in an effort to rein in unnecessary audits and enforcement actions the Congress deems inappropriate.

 The vote came Wednesday in a pair of amendments offered by Republicans Paul Gosar of Arizona and Bill Huizenga of Michigan. Both proposals were passed by voice vote.  The changes would leave the IRS with a budget of $9.8 billion for the fiscal year that starts Oct. 1 — 13 percent below the current year  funding level and 21 percent below the level the administration has requested.

 Adoption Credit

 Huizenga’s amendment targeted the frequent audits of people claiming a credit for adoption of children.

The National Taxpayer Advocate found that 69 percent of people claiming the credit were audited in 2012 and more than half of those audits ended with the government getting no additional money.

 Enforcement Budget

 Gosar’s amendment reduces $353 million and Huizenga’s proposal cuts an additional $788 million, both from the IRS’s enforcement budget.

 Administration officials have said that additional enforcement spending yields a return of as much as $6 for every dollar spent. The Obama administration has said the president would veto the measure if it were passed.

 The IRS has been under a series of congressional reviews for more than a year since it said it had given extra attention to small-government groups seeking tax-exempt status.  That revelation started a criminal inquiry, prompted congressional investigations and led to the departure of several of the agency’s senior leaders.

 The bill is H.R. 5016.

 A Senate appropriations subcommittee wrote a bill providing a 2 percent increase for the IRS. The full appropriations panel hasn’t voted because of a dispute over amendments, and the IRS issue is likely to become a point of contention as Congress tries to complete its funding bills. The next fiscal year starts Oct. 1.

 

 

Sources:  US House of Representatives at https://www.govtrack.us/congress/bills/113/hr5016; Bloomberg News at http://www.bloomberg.com/news/2014-07-15/irs-budget-sliced-13-as-house-seeks-to-rein-in-agency.html

 

 

 

National Taxpayer Advocate Identifies Priority Areas and Challenges in Mid-Year Report to Congress



National Taxpayer Advocate Identifies Priority Areas and Challenges in Mid-Year Report to Congress

 WASHINGTON — National Taxpayer Advocate Nina E. Olson has released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year. The report emphasizes the importance of taking concrete steps to give meaning to the recently adopted Taxpayer Bill of Rights, issuing refunds to victims of return preparer fraud, continuing to make improvements in the Exempt Organizations area and expanding the recently announced voluntary return preparer certification program to include competency testing. 

 The report praises the IRS for implementing the Advocate’s longstanding recommendation to adopt a Taxpayer Bill of Rights. In addition, “the IRS ran a generally successful filing season (although taxpayer services were sub-optimal largely due to staffing limitations), instituted a more equitable approach to its Offshore Voluntary Disclosure initiative, and introduced a voluntary system for educating unenrolled return preparers,” Olson wrote in a preface to the report. “All this is generally good news. But as we note in the report, the good news also raises additional questions and concerns.”

 Taxpayer Bill of Rights

 On June 10, 2014, the IRS adopted a Taxpayer Bill of Rights (TBOR), a list of 10 rights that the National Taxpayer Advocate has long recommended to help taxpayers and IRS employees alike gain a better understanding of the dozens of discrete taxpayer rights scattered throughout the multi-million word Internal Revenue Code.

 IRS Treatment of Victims of Return Preparer Fraud

 At the same time that hundreds of thousands of taxpayers have become victims of tax-related identify theft, a much smaller number of taxpayers have been victimized by unscrupulous preparers who have stolen their refunds by fraudulently altering information on their returns. The IRS has been working hard to issue refunds to identity-theft victims quickly. By contrast, it has generally declined to issue refunds to victims of preparer fraud at all.

 “As I discuss in the Area of Focus, Return Preparer Fraud: A Sad Story,” Olson writes, “the IRS has consistently dragged its heels, making one excuse after another, because providing relief to these victims just is not a high enough priority, or more disturbingly, because the IRS simply does not want to provide relief.”

 The report states that IRS Commissioner John A. Koskinen decided on March 14 that the IRS will issue refunds to victims of preparer fraud who have filed police reports with the appropriate law enforcement agencies and met certain other substantiation requirements. To date, the IRS has not implemented the decision, saying it must first resolve certain accounting issues and declining to provide a date certain by which it will issue the refunds.

 Exempt Organization Issues

 The report contains a detailed discussion of several issues relating to Exempt Organizations (EOs). 

 In 2013, the National Taxpayer Advocate delivered her mid-year Objectives Report to Congress the month after the disclosure that the EO unit was using questionable criteria to screen applicants for tax-exempt status. The Advocate’s report contained a separate volume, Special Report: Political Activity and the Rights of Applicants for Tax-Exempt Status, that took a broad look at factors that contributed to the use of the questionable screening criteria and associated processing delays and offered 16 recommendations to address them.

 The report provides a status update on those recommendations. 

 Minimum Standards for Tax-Return Preparers

 In 2002, the National Taxpayer Advocate began recommending that Congress authorize the IRS to establish minimum standards for tax return preparers. In the absence of congressional action, the IRS in 2010 began to implement preparer standards on its own. Earlier this year, the U.S. Court of Appeals for the District of Columbia affirmed a lower court decision concluding that the IRS exceeded its rulemaking authority in acting without a statutory grant of authority. Last month, the IRS announced that lacking the authority to continue its mandatory credentialing program, it will implement a voluntary program for the upcoming 2015 filing season.

 The report argues that minimum standards for return preparers are important to protect taxpayers from incompetent or unscrupulous preparers. More than 140 million individual taxpayers each year file tax returns, and well over half use return preparers. Yet there are currently no standards for hanging out a shingle and preparing returns, and there is considerable evidence that many preparers lack the knowledge and ability to prepare accurate tax returns.

 Other Issues Covered in Report

The National Taxpayer Advocate’s FY 2015 Objectives Report to Congress also identifies 10 other areas of focus for the upcoming year, reviews the 2014 filing season, describes TAS’s efforts to improve its advocacy for and service to taxpayers, summarizes pending TAS research initiatives and provides an update on TAS’s efforts to implement an integrated technology system.

Volume 2 of the report contains the IRS’s responses to the administrative recommendations the National Taxpayer Advocate made in her 2013 annual report to Congress, along with additional TAS comments. Overall, the report made 113 administrative recommendations. The IRS says it has implemented, is implementing, or will implement 69 of the recommendations, although its agreement to do so is contingent on resources in some cases.

 *         *         *         *         *         *         *

 The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is due on June 30 of each year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the 10 tax issues most frequently litigated in the courts and make administrative and legislative recommendations to resolve taxpayer problems.

 ABOUT THE TAXPAYER ADVOCATE SERVICE

The Taxpayer Advocate Service is an independent organization within the IRS. TAS employees help taxpayers who are experiencing financial difficulties, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and taxpayers who believe an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, call 1-877–777–4778 (toll-free). For more information, go to TaxpayerAdvocate.irs.gov or irs.gov/advocate. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.

 

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Source:  Internal Revenue Service at http://www.taxpayeradvocate.irs.gov/2015-Objectives-Report

 

AICPA Sues IRS Over “Voluntary” Program For Preparers



AICPA Sues IRS Over “Voluntary” Program For Preparers 

The American Institute of CPAs (AICPA) has filed suit against the Internal Revenue Service and John A. Koskinen, in his capacity as Commissioner of the IRS, seeking declarative and injunctive relief from the IRS’s recently issued rule entitled the “Annual Filing Season Program” (“AFS rule”).  [Read more...]

Treasury Inspector General: IRS Could Lose Billions on Amended Returns



Treasury Inspector General:  IRS Could Lose Billions on Amended Returns

The Internal Revenue Service (IRS) should revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns, according to a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).

Taxpayers currently file Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed income tax returns. Claims filed on an amended tax return can relate to any item of income, loss, exclusion, deduction, or credit and may result in a tax refund. The IRS received more than four million amended tax returns in Fiscal Year (FY) 2012. [Read more...]

New IRS Filing Season Program Unveiled for Tax Return Preparers Voluntary Program to Focus on Continuing Education for Unenrolled Preparers



The Internal Revenue Service has announced that guidance will soon be issued outlining a new voluntary program designed to encourage education and filing season readiness for paid tax return preparers. The program will be in place to help taxpayers during the 2015 filing season.

The Annual Filing Season Program will allow unenrolled return preparers to obtain a record of completion when they voluntarily complete a required amount of continuing education (CE), including a course in basic tax filing issues and updates, ethics and other federal tax law courses.

“This voluntary program will be a step to help protect taxpayers during the 2015 filing season,” said IRS Commissioner John Koskinen. “About 60 percent of tax return preparers operate without any type of oversight or education requirements. Our program will give unenrolled return preparers a way to stay to up-to-date on tax laws and changes, which we believe will improve service to taxpayers.”

Tax return preparers who elect to participate in the program and receive a record of completion from the IRS will be included in a database on IRS.gov that will be available by January 2015 to help taxpayers determine return preparer qualifications.

The database will also contain information about practitioners with recognized credentials and higher levels of qualification and practice rights. These include attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents (ERPAs) and enrolled actuaries who are registered with the IRS.

“It’s also important to note this program is not to replace the important tax work done by certified public accountants, enrolled agents and attorneys,” Koskinen said. “Tax professionals with recognized credentials will be publicly listed on IRS.gov, and we plan to help inform taxpayers about the professional options available.”

Anyone who prepares all, or substantially all, of any federal tax return or refund claim for compensation is required to obtain a preparer tax identification number (PTIN). The pending guidance will also explain that tax return preparers with a valid PTIN who do not obtain a record of completion as part of the Annual Filing Season Program, or are not an attorney, CPA, enrolled agent, ERPA or enrolled actuary, may still prepare tax returns, but will not be included in the public directory.

 In 2011, the Treasury Department and the IRS issued regulations that mandated testing and CE for paid tax return preparers and created a Registered Tax Return Preparer (RTRP) credential. The RTRP designation was for preparers with valid PTINs, who passed an IRS competency test and completed 15 hours of CE.

Earlier this year, the Court of Appeals for the D.C. Circuit upheld the lower court’s determination that the IRS regulations from 2011 mandating competency testing and CE for paid tax return preparers were invalid. The IRS continues to believe regulation of paid tax return preparers is important for the proper functioning of the U.S. tax system. To that end, the Administration’s Fiscal Year 2015 Budget includes a proposal to explicitly authorize the IRS to regulate all paid tax return preparers.

Prior to the 2013 court decision, over 62,000 return preparers passed an IRS-administered competency test and completed the requirements to become Registered Tax Return Preparers. The Annual Filing Season Program will exempt RTRPs and others who have successfully completed certain recognized national or state tests from the filing season refresher course that will be required for other participants.

The Annual Filing Season Program will be an interim step to help taxpayers and encourage education for unenrolled tax return preparers. The IRS will assess the feasibility of administering a uniform voluntary examination in future years in order to ensure basic return preparer competency.

 

Annual Filing Season Program — Record of Completion Requirements

 

In general, non-exempt return preparers with a valid PTIN for the program year will need to complete 18 hours of CE annually from IRS-approved CE providers to obtain an IRS record of completion. The hours will need to include:

  • 6 hours of federal tax filing season refresher course (with a required comprehension test at completion)
  • 10 hours of federal tax law topics
  • 2 hours of ethics

For the first year, a transition rule will apply to prorate the required hours. For a return preparer to obtain a record of completion for the 2015 filing season, a total of 11 hours will need to be earned in 2014, including the six hour refresher course, three hours of other federal tax law topics and two hours of ethics.

Once the official guidance is issued, IRS-approved CE providers will begin to offer qualifying federal tax filing season refresher courses. A list of all IRS-approved CE providers is available and includes a new column to indicate which providers are planning to offer the qualifying courses. The list is updated daily. For 2015, qualifying courses will be offered through Dec. 31, 2014.

The IRS will begin issuing records of completion to those who have met the requirements in mid-October 2014 after the 2015 PTIN renewal season starts.

 

Consent to Circular 230 restrictions

As a prerequisite to receiving a record of completion, an individual will be required to consent to the duties and restrictions relating to practice before the IRS in subpart B and section 10.51 of Treasury Department Circular No. 230.

 

Modification to limited practice permissions

The pending guidance will also announce that effective for tax returns and claims for refunds prepared or signed after Dec. 31, 2015, only unenrolled tax return preparers who have a record of completion under the Annual Filing Season Program for the calendar year of preparation and the calendar year of representation will be permitted to represent taxpayers before the IRS during an examination of a return that they signed or prepared. 

 

Attorneys, CPAs and enrolled agents will continue to have unlimited representation rights and can represent clients before any office of the IRS.

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Source:  Internal Revenue Service at http://www.irs.gov/uac/Newsroom/New-IRS-Filing-Season-Program-Unveiled-for-Tax-Return-Preparers

IRS’s Annual Filing Season Program



IRS’s Annual Filing Season Program

What is the Annual Filing Season Program?

The IRS’s recently announced Annual Filing Season Program provides a means by which unenrolled return preparers can obtain a ”record of completion” and get included in the IRS’s public directory of credentialed tax professionals when they voluntarily complete a required amount of continuing education. To earn a “record of completion” for the 2015 filing season, preparers must do the following:
– Complete a filing season refresher course*
– Earn specified continuing education (CE) credits (prorated for the 2015 filing season)
– Have an active PTIN by December 31, 2014 [Read more...]

New IRS Filing Season Program Unveiled for Tax Return Preparers



New IRS Filing Season Program Unveiled for Tax Return Preparers

Voluntary program to focus on continuing education for unenrolled preparers

WASHINGTON —  The Internal Revenue Service announced today that guidance will soon be issued outlining a new voluntary program designed to encourage education and filing season readiness for paid tax return preparers. The program will be in place to help taxpayers during the 2015 filing season.

The Annual Filing Season Program will allow unenrolled return preparers to obtain a record of completion when they voluntarily complete a required amount of continuing education (CE), including a course in basic tax filing issues and updates, ethics, and other federal tax law courses.

“This voluntary program will be a step to help protect taxpayers during the 2015 filing season,” said IRS Commissioner John Koskinen. “About 60 percent of tax return preparers operate without any type of oversight or education requirements. Our program will give unenrolled return preparers a way to stay to up-to-date on tax laws and changes, which we believe will improve service to taxpayers.” [Read more...]

IRS Nationwide Tax Forums are Right Around the Corner



IRS Nationwide Tax Forums are Right Around the Corner

Summertime is here, so the IRS Nationwide Tax Forums are right around the corner.  For many tax professionals, the Forums are an affordable way to stay up-to-date on tax law changes and earn continuing education credits.  Here’s a summary of what to expect and a few tips to help you get the most out of your Forum experience.
There are five Forums this year, starting in Chicago (July 1-3) and ending in Orlando (August 26-28).  Stops in between are San Diego (July 15-17), New Orleans (July 22-24) and Washington, DC (August 19-21). 

The main draw for most participants is continuing education, and those attending every session over the three day period can earn 18 credits.  There is also a keynote address and a plenary session, usually featuring a high-ranking IRS official.  Currently, new IRS commissioner John Koskinen is scheduled to give the keynote speech at the Chicago Forum. 
[Read more...]

Prepare for Hurricanes, Natural Disasters by Safeguarding Tax Records



Prepare for Hurricanes, Natural Disasters by Safeguarding Tax Records

 With the start of hurricane season this week, the Internal Revenue Service encourages individuals and businesses to safeguard their records against natural disasters by taking a few simple steps. 

Create a Backup Set of Records Electronically 

Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set. 
[Read more...]

IRS Adopts “Taxpayer Bill of Rights;” 10 Provisions to be Highlighted on IRS.gov, in Publication 1



IRS Adopts “Taxpayer Bill of Rights;” 10 Provisions to be Highlighted on IRS.gov, in Publication 1

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IR-2014-72, June 10, 2014

WASHINGTON ― The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.

[Read more...]