Thursday, February 7, 2019
Over 100 New Tax Law Updates for 2018 Tax Season
New Tax Laws for 2018 taxes includes approximately 119 tax law updates, according the IRS. TaxesWillTravel.com Here you can find access to the new tax laws and updates which will effect individual tax payers and Schedule C filers.
Saturday, July 1, 2017
What to Do With Form 5498-SA
The correct answer is nothing. You do nothing with Form 5498-SA. Form 5498-SA is a statement of contributions. The amount shown on 5498-SA should have already been on your W2 so there's no need to enter it on your Federal tax return. Form 5498-SA is for informational information only.
The Form is confusing because it looks just like a 1099-MISC. But not to worry. No need to enter onto the tax return.
The Form is confusing because it looks just like a 1099-MISC. But not to worry. No need to enter onto the tax return.
Friday, April 28, 2017
The IRS Explains How Offer in Compromise Works
Before you read "exactly" what the IRS tells you about the OIC or Offer in Compromise program, understand a few things the IRS doesn't say.
- If you read and follow the instructions you can prepare and file a successful OIC. This doesn't mean that the IRS won't reject your first or even second submission. Just follow the instructions and stay committed.
- When completing your expenses and income form (Form 656, Form 656-A, Form 656-B) ALWAYS remember that private school and your cable bill are NOT qualified expenses. This also applies to additional luxury items that you may be financially responsible for.
- If you have the finances, it's best to consult with an Enrolled Agent to help you file your OIC, especially if you have assets that you'd like to protect.
- Know that the IRS is governed by a book called "The Tax Codes." In most cases, their response to you is not personal, but legal. Yes, an IRS agent can make decisions which can make your life easier, and that is why you always want, to be honest, and professional when speaking with an IRS agent. It is a felony to lie to a federal agent.
Now let's read what the IRS has to say on the matter:
Taxpayers who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise.
Before applying for an Offer in Compromise, here are some things to know:
- In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility. Visit IRS.gov for information on Payment Plans – Installment Agreements.
- A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
- The IRS has an Offer in Compromise Pre-Qualifier tool on IRS.gov. Taxpayers can find out if they meet the basic qualifying requirements. The tool also provides an estimate of an acceptable offer amount. The IRS makes a final decision on whether to accept the offer based on the submitted application.
- Taxpayers wishing to file for an Offer in Compromise should visit IRS website’s Offer in Compromise page for more information. There taxpayers can find step-by-step instructions as well as the required forms. Taxpayers can download forms anytime at www.irs.gov/forms or call 800-TAX-FORM (800-829-3676) and ask for Form 656-B, Offer in Compromise booklet.
Friday, April 7, 2017
Deadline to File 2016 Taxes is April 18th, 2017
IRS Reminder: Use IRS.gov for Fast Answers as April 18
WASHINGTON — With the tax deadline fast approaching, the Internal Revenue Service today reminded taxpayers that they can use IRS.gov to find fast answers to tax questions, use free online tools and find key tax forms and publications. With millions of people just now seeking help to complete their taxes, the IRS expects high call volumes between now and the April 18 tax filing deadline. This makes IRS.gov even more invaluable to taxpayers seeking quick answers. Answers to the most common questions taxpayers have this time of year are on IRS.gov.A
Wednesday, April 5, 2017
Research Credit Available for Small Business Startups
Special Note: Businesess who have already filed may still use this option for the 2016 tax season.
WASHINGTON –The Internal Revenue Service today issued interim guidance explaining how eligible small businesses can take advantage of a new option enabling them to apply part or all of their research credit against their payroll tax liability, instead of their income tax liability. Before 2016, taxpayers could only take the research credit against their income tax liability.
Notice 2017-23, posted today on IRS.gov, provides guidance on a new provision included in the Protecting Americans From Tax Hikes (PATH) Act enacted in December 2015. This new option will be available for the first time to any eligible small business filing its 2016 federal income tax return this tax season. Those who already filed still have time to choose this option.
The option to elect the new payroll tax credit may especially benefit any eligible startup that has little or no income tax liability. To qualify for the new option for the current tax-year, a business must have gross receipts of less than $5 million and could not have had gross receipts prior to 2012.
An eligible small business with qualifying research expenses can choose to apply up to $250,000 of its research credit against its payroll tax liability. An eligible small business chooses this option by filling out Form 6765, Credit for Increasing Research Activities, and attaching it to a timely-filed business income tax return. But under a special rule for tax-year 2016, a small business that failed to choose this option and still wishes to do so, can still make the election by filing an amended return by Dec. 31, 2017. See the notice for further details.
After choosing this option, a small business claims the payroll tax credit by filling out Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. This form must be attached to its payroll tax return, for example Form 941, Employer’s Quarterly Federal Tax Return. Further details on how and when to claim the credit are in the notice.
The notice provides interim guidance on controlled groups, the definition of gross receipts, and other issues. The notice also requests public comment on various payroll tax credit issues to be addressed in future guidance. See the notice for details on how and when to submit comments. For more information on the research credit itself, see the instructions to Form 6765.
Monday, January 23, 2017
From the IRS: Seven Reasons Taxpayers Should E-file Their Taxes in 2017
Taxpayers who still file paper returns may find now is the best time to switch to e-file. Last year over 85 percent of taxpayers filed their taxes electronically. E-file is the fastest and safest way to file.
Here are the top seven reasons a taxpayer should file electronically in 2017:
- Accurate and Easy. IRS e-file is the best way to file an accurate tax return. The tax software helps taxpayers avoid mistakes by doing the math for them. It guides users through each section of a tax return. E-file is easier than doing taxes by hand and mailing paper tax forms.
- Safe and Secure. IRS e-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS continues to work with states and tax industry leaders to protect tax returns from refund fraud. This new effort has put more safeguards in place to make tax filing safer than ever before. The IRS has processed more than one billion e-filed returns safely and securely.
- Convenient and Often Free. Taxpayers can e-file for free through IRS Free File. Free File is only available on IRS.gov. Taxpayers may qualify to have their taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance offers free tax preparation for those earning $54,000 or less. Tax Counseling for the Elderly generally helps people who are age 60 or older. Taxpayers can buy commercial tax software or ask their tax preparer to e-file their tax return. Most paid preparers have to file their clients’ returns electronically.
- Faster Refunds. In most cases, e-file prevents mistakes and helps people get their refund faster. The quickest way to get a refund is to combine e-file with direct deposit into a bank account. The IRS issues more than nine out of 10 refunds in less than 21 days – however, some returns need further review and take longer.
- Prior-Year Tax Return. Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
- Health Care Coverage Reporting. IRS e-file can help with tax provisions of the health care law. The software will walk users through each line on the tax form that relate to the Affordable Care Act.
- Payment Options. If taxpayers owe taxes, they can e-file early and set up an automatic payment on any day until the April 18 deadline. They can pay electronically from their bank account with IRS Direct Pay. Other payment options include electronic funds withdrawal and payment by debit or credit card. Visit IRS.gov/payments for details.
Thursday, November 3, 2016
What is a Tax Levy?
The good news is the IRS will send you a series of tax notices before this happens..
The bad news is; When and if you don't respond to their mail, the IRS will levy your bank account and attach your wages, legally, without having to go to court.
If you are receiving notices because of unfilled taxes, the way to avoid a tax levy is to:
- First, file your OWN tax return. Do not rely on the IRS's Substitute Return (a return the IRS prepared for you)
- More than likely you'll owe less money. However the penalties and interest can increase the amount back up. In fact we've had clients who ended up getting a refund.
It is best to get your tax information directly from the IRS, that way your unfilled return will correspond with what the IRS has on file and your chances of being audited will decrease. Anytime the IRS contacts you concerning unfilled tax returns, you become a person of interest. The best way to get them off your back is to file a return which includes the same figures the IRS has in your tax file/records. Yes, your bank and your employers has already sent information to the IRS - This is how they know you should have filed and didn't.
The IRS won't go away. They don't know how. They will get your attention one way or another. Visit me on the eBay platform, which is safe and easy, and get the IRS off your back. .
Okay You Prepare Taxes Online, Past Due Returns and Unfiled Taxes, How Does That Work?
Easy.
We depend on the safety and security of a "fax"
You fax your info to our secure fax line, which we have the password and security information to access.
We send your pdf tax return black under a fake "subject"
You print out your return, delete the email and act like nothing happened.
We delete our attachment files once you receive your tax return. .
Easy. Fax info to secure line
Receive taxes in PDF format
Print Out. Sign, Date and Mail or take to the IRS.
We delete the attachment.
Okay, how do I get my tax information to fax to you? I lost my W2s and all tax information for the year(s) the IRS is bugging me about.
Easy. We explain in detail how to get your tax information from the IRS
If you'd rather NOT talk to the IRS, we all explain a way to get your information without speaking to the IRS.
The IRS prepared a "Substitute Tax Return" for me, now they say I owe them money. Should I just pay them? What about a payment plan?
NO. Before you make payments, you should file your OWN tax return, which we can do for you. We will still need your tax information and once you receive this information from the IRS we can have your return ready within 48 hours.
The IRS is not aware of your legal tax deductions or write-offs. When we prepare a "real" return, more than likely you'll less, maybe even a lot less.
YES. We can help you with an Installment Agreement. We complete the Installment Agreement Request Form and usually the IRS will grant the Installment Agreement if you don't already have a payment plan in place and sometimes, even if you do.
Go here follow the instructions at the bottom of the page. We use eBay. As you know eBay will ensure you receive the services you pay for. We have an excellent rating. You will receive information where to fax your information after you've completed the transaction on eBay
Who the hell are you, and why should I trust you?
I am the lead tax accountant. Retired part-time. Registered with the IRS every year since 1999. Basic tax instructor in the San Francisco Bay Area. Since retirement, I travel often, write children's books and books on how to save on taxes. By law I must and will provide to you, my ID# from the Department of Treasury.
Click here to learn more
We depend on the safety and security of a "fax"
You fax your info to our secure fax line, which we have the password and security information to access.
We send your pdf tax return black under a fake "subject"
You print out your return, delete the email and act like nothing happened.
We delete our attachment files once you receive your tax return. .
Easy. Fax info to secure line
Receive taxes in PDF format
Print Out. Sign, Date and Mail or take to the IRS.
We delete the attachment.
Okay, how do I get my tax information to fax to you? I lost my W2s and all tax information for the year(s) the IRS is bugging me about.
Easy. We explain in detail how to get your tax information from the IRS
If you'd rather NOT talk to the IRS, we all explain a way to get your information without speaking to the IRS.
The IRS prepared a "Substitute Tax Return" for me, now they say I owe them money. Should I just pay them? What about a payment plan?
NO. Before you make payments, you should file your OWN tax return, which we can do for you. We will still need your tax information and once you receive this information from the IRS we can have your return ready within 48 hours.
The IRS is not aware of your legal tax deductions or write-offs. When we prepare a "real" return, more than likely you'll less, maybe even a lot less.
YES. We can help you with an Installment Agreement. We complete the Installment Agreement Request Form and usually the IRS will grant the Installment Agreement if you don't already have a payment plan in place and sometimes, even if you do.
Go here follow the instructions at the bottom of the page. We use eBay. As you know eBay will ensure you receive the services you pay for. We have an excellent rating. You will receive information where to fax your information after you've completed the transaction on eBay
Who the hell are you, and why should I trust you?
I am the lead tax accountant. Retired part-time. Registered with the IRS every year since 1999. Basic tax instructor in the San Francisco Bay Area. Since retirement, I travel often, write children's books and books on how to save on taxes. By law I must and will provide to you, my ID# from the Department of Treasury.
Click here to learn more
Tax Loopholes for the Little Guy
Tax Loopholes do exist for the middle income taxpayer. Everything from deducting a percentage of the cost of your cell phone bill when your mobile phone is used for business and your employer does NOT reimburse you to deducting the cost of security provided by security dogs who remain on your business property overnight.You can download the book on Amazon and read on any mobile device. 100 Tax Loopholes and Tax Write-Offs for Home Based Businesses
Wednesday, April 9, 2014
Senate Committee Mulls Regulation of Tax Preparers
The Senate Finance Committee held a hearing
Tuesday on the subject of incompetent and unethical tax preparers and
heard testimony on how the Internal Revenue Service should deal with
them.
The committee heard testimony from IRS commissioner John Koskinen, National Taxpayer Advocate Nina Olson, an official with the Government Accountability Office, tax preparers and advocates from across the country, as well as the attorney who represented the tax preparers whose lawsuit ended the IRS’s tax preparer regulatory program.
“Taxpayers today face a double burden: crooked or incompetent tax preparers, along with an overgrown and complicated tax code. We should put an end to both,” said Senate Finance Committee chairman Ron Wyden, D-Ore. “I’m proud to say my state gets this issue right. While Oregon and a few other states are already leading in this area, we need to restore federal standards to protect all American taxpayers.”
Wyden said that unlike many other industries, paid tax preparers don’t have to meet any standards for competence in order to prepare someone else’s return.
“In some egregious cases, preparers calculate a taxpayer’s refund in person and skip the line that shows who did the work,” said Wyden. “Then after the taxpayer leaves, the preparer falsifies the math to boost the refund, files the return and pockets the difference. And worst of all, unless the taxpayer can prove what happened, they’re on the hook for the money when the IRS finds out.”
At the hearing, the GAO released the results of a new investigation involving undercover site visits in which 17 of 19 randomly selected, paid tax preparers failed to complete a tax return accurately, either due to significant mistakes or willful negligence. The new GAO investigation reported findings similar to those of a 2006 GAO investigation that identified preparer mistakes in 19 of 19 uncover visits.
Tax refund errors in the site visits varied from giving the taxpayer $52 less to $3,718 more than the correct refund amount. Only two out of 19 preparers calculated the correct refund amount. The full report can be found here.
GAO director of tax issues James R. McTigue Jr., told the Senate committee that tax returns prepared by a paid preparer showed a higher estimated error rate of 60 percent, compared to an error rate of 50 percent for tax returns that were self-prepared by the taxpayer.
Voluntary Certification
IRS commissioner John Koskinen told the senators that the tax preparer community is a key ally in the agency’s efforts to fulfill its dual mission of providing taxpayer service and ensuring tax compliance. “We view our relationship with tax professionals as a partnership, one that has enabled a system that interacts with hundreds of millions of taxpayers to nimbly adjust to new tax laws, speed the average time for refunds, and encourage the voluntary compliance of taxpayers,” he said. “Return preparers are a vital link between the IRS and taxpayers, especially given that the vast majority of people seek help in doing their taxes.”
Koskinen noted that each year, paid preparers are called upon by taxpayers to complete about 80 million returns, or about 56 percent of the total individual income tax returns filed, while another 34 percent of taxpayers use tax preparation software, for a total of 90 percent who seek some form of assistance.
“Competent preparers make our job easier by helping their clients properly report their taxes and pay what they owe,” said Koskinen. “Given the crucial role that return preparers play in our tax system, the IRS believes it is critical to ensure a basic competency level for tax return preparers and to focus our enforcement efforts on identifying and stopping unscrupulous preparers.”
Last year, he noted, the U.S. District Court for the District of Columbia issued an injunction last year in the case of Loving v. IRS that prevented the IRS from enforcing the regulatory requirements it had tried to impose for competency testing and continuing education, and the decision was upheld by a federal appeals court this year. “The IRS is continuing to assess the scope and impact of the court’s decision while consideration is given to options for appeal,” he added.
Koskinen noted that the Obama administration’s fiscal 2015 budget includes a proposal to explicitly authorize the IRS to regulate all paid tax preparers. He asked Congress to provide that authorization and said the IRS might offer a voluntary form of certification to tax preparers in the meantime.
“Following the court decision, the IRS remains concerned about protecting taxpayers and ensuring they receive quality assistance in preparing their tax returns,” said Koskinen. “While we urge Congress to quickly enact the proposal described in the President’s Budget, we are taking a close look at the possibility of an interim step involving a program of voluntary continuing education.
The idea of a voluntary program is under consideration because we believe it is important to maintain the momentum for regulation and oversight of unregulated preparers that has built up over the last five years, and to lessen the risks to taxpayers resulting from the lack of federal education requirements. Before moving forward on this idea, however, we will solicit feedback from a wide range of external stakeholders as to whether such an interim step would be useful and appropriate.”
Taxpayer Advocate
National Taxpayer Advocate Nina Olson reiterated her support for requiring competency exams for tax preparers, pointing out that she had been an unenrolled tax preparer at one time. “Shortly after I graduated from college in the mid-1970s, I hung out a shingle and held myself out as a return preparer,” she said. “I had been a Fine Arts major, so to say the least, I was not a tax expert. But in that period, tax software was not yet widely available, so an individual wanting to prepare tax returns had to learn the basics. I took this endeavor seriously, and ultimately, I believe I did a good job for my clients. Even then, however, taxpayers would have been better served if return preparers were required to demonstrate basic competency in tax return preparation.”
However, Olson noted that tax prep software makes it easy for anyone to claim they are tax preparers. “With the advent of tax preparation software and the Q&A format, a person can hold himself out as a return preparer with almost no knowledge or skill by simply sitting with a taxpayer and working through the software’s prompts,” she said. “As many undercover ‘shopping visits’ to return preparers have found, preparing returns with software and little knowledge typically does not produce accurate results.”
She pointed out that unscrupulous tax preparers are able to take advantage of clients and charge high fees for services such as pay-stub loans and refund anticipation checks, which have largely replaced refund anticipation loans in recent years.
“In tax year 2012, 56 percent of 142 million individual taxpayers paid preparers to complete their returns for them,” said Olson. “Very simply, the absence of minimum competency standards for return preparers leaves these taxpayers vulnerable to inadvertent errors that could cause them to overpay their tax or to underpay their tax and face IRS collection action. It also leaves some taxpayers open to unscrupulous preparers, many of whom would be weeded out if the return preparation industry were professionalized. At present, we require volunteers who help prepare returns for elderly, disabled, and low-income taxpayers through the VITA and TCE programs to pass a competency test. Yet we ask nothing of hundreds of thousands of persons who make their living off tax preparation. That makes little sense to me.”
H&R Block president and CEO William Cobb told the senators about his company’s support for tax preparer regulation. “H&R Block employs more than 70,000 highly trained tax professionals across the country and 80,000 professionals worldwide,” he said. “A typical client is served by an H&R Block tax professional with more than a decade of experience and hundreds of hours of training. Our tax professionals progress through a 14-level certification program, culminating in master tax adviser status. To be re-hired, H&R tax professionals must complete at least 15 hours of continuing education annually. H&R Block’s tax professionals are trained on systems, policies and procedures that require an additional 35 hours of education annually.”
State Licensing
Wyden touted Oregon’s tax preparer licensing standards and pointed out that a 2008 study by the GAO found that tax returns from Oregon were 72 percent more likely to be accurate than returns from the rest of the country.
The committee heard testimony from IRS commissioner John Koskinen, National Taxpayer Advocate Nina Olson, an official with the Government Accountability Office, tax preparers and advocates from across the country, as well as the attorney who represented the tax preparers whose lawsuit ended the IRS’s tax preparer regulatory program.
“Taxpayers today face a double burden: crooked or incompetent tax preparers, along with an overgrown and complicated tax code. We should put an end to both,” said Senate Finance Committee chairman Ron Wyden, D-Ore. “I’m proud to say my state gets this issue right. While Oregon and a few other states are already leading in this area, we need to restore federal standards to protect all American taxpayers.”
Wyden said that unlike many other industries, paid tax preparers don’t have to meet any standards for competence in order to prepare someone else’s return.
“In some egregious cases, preparers calculate a taxpayer’s refund in person and skip the line that shows who did the work,” said Wyden. “Then after the taxpayer leaves, the preparer falsifies the math to boost the refund, files the return and pockets the difference. And worst of all, unless the taxpayer can prove what happened, they’re on the hook for the money when the IRS finds out.”
At the hearing, the GAO released the results of a new investigation involving undercover site visits in which 17 of 19 randomly selected, paid tax preparers failed to complete a tax return accurately, either due to significant mistakes or willful negligence. The new GAO investigation reported findings similar to those of a 2006 GAO investigation that identified preparer mistakes in 19 of 19 uncover visits.
Tax refund errors in the site visits varied from giving the taxpayer $52 less to $3,718 more than the correct refund amount. Only two out of 19 preparers calculated the correct refund amount. The full report can be found here.
GAO director of tax issues James R. McTigue Jr., told the Senate committee that tax returns prepared by a paid preparer showed a higher estimated error rate of 60 percent, compared to an error rate of 50 percent for tax returns that were self-prepared by the taxpayer.
Voluntary Certification
IRS commissioner John Koskinen told the senators that the tax preparer community is a key ally in the agency’s efforts to fulfill its dual mission of providing taxpayer service and ensuring tax compliance. “We view our relationship with tax professionals as a partnership, one that has enabled a system that interacts with hundreds of millions of taxpayers to nimbly adjust to new tax laws, speed the average time for refunds, and encourage the voluntary compliance of taxpayers,” he said. “Return preparers are a vital link between the IRS and taxpayers, especially given that the vast majority of people seek help in doing their taxes.”
Koskinen noted that each year, paid preparers are called upon by taxpayers to complete about 80 million returns, or about 56 percent of the total individual income tax returns filed, while another 34 percent of taxpayers use tax preparation software, for a total of 90 percent who seek some form of assistance.
“Competent preparers make our job easier by helping their clients properly report their taxes and pay what they owe,” said Koskinen. “Given the crucial role that return preparers play in our tax system, the IRS believes it is critical to ensure a basic competency level for tax return preparers and to focus our enforcement efforts on identifying and stopping unscrupulous preparers.”
Last year, he noted, the U.S. District Court for the District of Columbia issued an injunction last year in the case of Loving v. IRS that prevented the IRS from enforcing the regulatory requirements it had tried to impose for competency testing and continuing education, and the decision was upheld by a federal appeals court this year. “The IRS is continuing to assess the scope and impact of the court’s decision while consideration is given to options for appeal,” he added.
Koskinen noted that the Obama administration’s fiscal 2015 budget includes a proposal to explicitly authorize the IRS to regulate all paid tax preparers. He asked Congress to provide that authorization and said the IRS might offer a voluntary form of certification to tax preparers in the meantime.
“Following the court decision, the IRS remains concerned about protecting taxpayers and ensuring they receive quality assistance in preparing their tax returns,” said Koskinen. “While we urge Congress to quickly enact the proposal described in the President’s Budget, we are taking a close look at the possibility of an interim step involving a program of voluntary continuing education.
The idea of a voluntary program is under consideration because we believe it is important to maintain the momentum for regulation and oversight of unregulated preparers that has built up over the last five years, and to lessen the risks to taxpayers resulting from the lack of federal education requirements. Before moving forward on this idea, however, we will solicit feedback from a wide range of external stakeholders as to whether such an interim step would be useful and appropriate.”
Taxpayer Advocate
National Taxpayer Advocate Nina Olson reiterated her support for requiring competency exams for tax preparers, pointing out that she had been an unenrolled tax preparer at one time. “Shortly after I graduated from college in the mid-1970s, I hung out a shingle and held myself out as a return preparer,” she said. “I had been a Fine Arts major, so to say the least, I was not a tax expert. But in that period, tax software was not yet widely available, so an individual wanting to prepare tax returns had to learn the basics. I took this endeavor seriously, and ultimately, I believe I did a good job for my clients. Even then, however, taxpayers would have been better served if return preparers were required to demonstrate basic competency in tax return preparation.”
However, Olson noted that tax prep software makes it easy for anyone to claim they are tax preparers. “With the advent of tax preparation software and the Q&A format, a person can hold himself out as a return preparer with almost no knowledge or skill by simply sitting with a taxpayer and working through the software’s prompts,” she said. “As many undercover ‘shopping visits’ to return preparers have found, preparing returns with software and little knowledge typically does not produce accurate results.”
She pointed out that unscrupulous tax preparers are able to take advantage of clients and charge high fees for services such as pay-stub loans and refund anticipation checks, which have largely replaced refund anticipation loans in recent years.
“In tax year 2012, 56 percent of 142 million individual taxpayers paid preparers to complete their returns for them,” said Olson. “Very simply, the absence of minimum competency standards for return preparers leaves these taxpayers vulnerable to inadvertent errors that could cause them to overpay their tax or to underpay their tax and face IRS collection action. It also leaves some taxpayers open to unscrupulous preparers, many of whom would be weeded out if the return preparation industry were professionalized. At present, we require volunteers who help prepare returns for elderly, disabled, and low-income taxpayers through the VITA and TCE programs to pass a competency test. Yet we ask nothing of hundreds of thousands of persons who make their living off tax preparation. That makes little sense to me.”
H&R Block president and CEO William Cobb told the senators about his company’s support for tax preparer regulation. “H&R Block employs more than 70,000 highly trained tax professionals across the country and 80,000 professionals worldwide,” he said. “A typical client is served by an H&R Block tax professional with more than a decade of experience and hundreds of hours of training. Our tax professionals progress through a 14-level certification program, culminating in master tax adviser status. To be re-hired, H&R tax professionals must complete at least 15 hours of continuing education annually. H&R Block’s tax professionals are trained on systems, policies and procedures that require an additional 35 hours of education annually.”
State Licensing
Wyden touted Oregon’s tax preparer licensing standards and pointed out that a 2008 study by the GAO found that tax returns from Oregon were 72 percent more likely to be accurate than returns from the rest of the country.
Wednesday, March 12, 2014
Wednesday, February 12, 2014
Tax Preparers Defeat IRS in Appeals Court Ruling on Licensing, Not Everyone is Happy
The D.C. Circuit Court of Appeals ruled Tuesday that the IRS had no
legal authority to impose a nationwide licensing scheme on tax return
preparers that would have required testing and continuing education as
Registered Tax Return Preparers. continue below:
Learn how thousands of wealthy U.S. taxpayers have duped the IRS out of paying taxes on over $120 billion dollars. Learn what the IRS and Justice Department is doing about it, and why hundreds of wealthy Americans could be facing prison. A true and documented story, that reads like a criminal mystery. Gab a copy in the Kindle Store today, Offshore Transparency, IRS & Offshore Banking
The decision affirms a January 2013 ruling by U.S. District Court Judge James E. Boasberg, which struck down the IRS’s new regulations as unlawful (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). In the case, known as Loving v. IRS, both courts rejected the IRS’s claim that tax-preparer licensure was authorized by an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses.
“This is a major victory for tax preparers—and taxpayers—nationwide,” said Dan Alban of the Institute for Justice, the lead attorney for the three independent tax preparers who filed the suit. “The court found that Congress never gave the IRS the power to license tax preparers, and the IRS cannot give itself that authority.”
The appeals court held, “If we were to accept the IRS’s interpretation of [the statute], the IRS would be empowered for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-preparation industry. Yet nothing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority.”
More than 350,000 tax-return preparers would have been subject to the regulations. The attorneys for the preparers argued that the regulations would have put tens of thousands of mom-and-pop preparers out of business and increased the cost of tax-return preparation for millions of taxpayers.
“My customers—not the IRS—should be the ones who get to choose who prepares their taxes,” said Sabina Loving, an independent tax preparer from Chicago and the lead plaintiff in the case. “I have a right to earn an honest living without getting permission from the IRS.”
The court ruled that “[t]he IRS may not unilaterally expand its authority through such an expansive, atextual,
and a historical reading of [the statute].”
“We think it’s a major victory for both independent tax preparers and taxpayers,” Institute for Justice senior attorney Scott Bullock said in an interview. “The three-judge panel unanimously affirmed all the fundamental points of the District Court’s opinion and held that the IRS does not have the authority to regulate tax preparers under the statute and under the legislative history of the law. The IRS simply cannot assume that authority to license tax preparers. They need to go to Congress to get that authority. That's what the D.C. Circuit held. They gave six separate reasons for affirming the District Court opinion and just really affirmed it across the board.”
Bullock hopes the IRS decides not to pursue further appeals in the case. “It has now been rejected by four judges, both the District Court and by three D.C. Circuit judges,” he said. "They do have the right to petition the entire D.C. Circuit. I believe they have 45 days to do so. The federal government has a little bit longer than most folks. Then the court will decide that relatively quickly. Then, after that, the next step for them would be to go before the Supreme Court and they would have 90 days. If they decide not to petition the entire D.C. Circuit, it would be 90 days from today. If they do decide to petition the entire D.C. Circuit and they reject that, it would be 90 days from whenever that order rejecting the en banc petition came though.”
When Judge Boasberg clarified his original decision last year, he ruled that the IRS can continue to require tax preparers to register for Preparer Tax Identification Numbers, or PTINs, and the latest ruling should not affect that. However, it should also bring some relief to tax professionals.
“It was a big relief to many of the independent tax preparers when the decision was first handed down,” said Bullock. “Hopefully this will end the matter once and for all and they would not be subjected these new licensing requirements, but it’s up to the IRS if they decide to continue to appeal.”
The IRS was noncommittal on whether it plans future appeals. “The IRS is currently reviewing the decision,” the IRS said in a statement. “The IRS continues to believe that it’s critical for taxpayers to be able to rely on quality work from tax preparers.”
Bullock believes the IRS should provide refunds to tax preparers who paid to take the tests and continuing education courses before the RTRP regime was invalidated by the courts.
“I believe they would probably be required to do that, and they [the tax preparers] would have the right if they so choose not to be subjected to these licensing requirements.”
“Administrative agency overreach threatens the economic liberty rights of entrepreneurs,” said Institute president and general counsel William Mellor in a statement. “This precedent ensures that agencies must follow the law and cannot exceed the power given to them by Congress.” As the Court noted, “‘fox-in-the-henhouse syndrome is to be avoided . . . by taking seriously, and applying rigorously, in all cases, statutory limits on agencies’ authority.’”
IRS Commissioner John Koskinen has indicated he would be open to offering the certification on a voluntary basis to tax preparers if the IRS loses the appeal. “If you can’t require it, offer it, and if you complete the information, you get a certificate that says, ‘I have completed the IRS preparer course.’ I think that could be over time very valuable to preparers, and consumers could ask preparers, ‘Have you gone through the IRS training?’” said Koskinen during a press conference last month after he was sworn in as commissioner (see IRS’s New Commissioner Favors Voluntary Tax Preparer Certification). “Whatever happens with the court case, we ought to be able to move forward on that and provide taxpayers with as much assurance as we can that the preparers they are dealing with have met some kind of minimum standards.”
Bullock indicated the Institute for Justice would have no problem with a voluntary certification scheme. “We made that very clear in our statements because they [the IRS] had asked the D.C. Circuit to stay the ruling, and they had stated they had no power to even do this on a voluntary basis,” said Bullock. “And we had said, ‘That’s not true. You can offer this, but you can’t require licensure. But if you want to do this on a voluntary basis, you’re free to do so.’ And the district court judge made it clear that the IRS was free to do this on a voluntary basis, but they could not legally require it, it. If they did that, that of course would end the legal dispute.”
H&R Block Slams Decision
H&R Block, which was one of the main proponents of the RTRP tax preparer regulation regime, reacted with dismay to the Appeals Court decision.
Block said that in a country where all 50 states regulate hair dressers, the tax prep chain found it “stunning” that tax preparers, with extensive access to the personal financial history and identities of their clients, are not required to meet minimum competency standards.
“It is outrageous that all consumers don’t enjoy basic protections with such a significant financial transaction as tax preparation,” said H&R Block president and CEO Bill Cobb in a statement. “Something is out of whack when you are better protected when getting your haircut than when sitting across the desk from a tax preparer. All consumers should have access to the protection that our clients receive when working with our highly trained tax professionals.”
H&R Block noted that it has long supported efforts to better serve and protect consumers through minimum standards for, and oversight of all tax return preparers. Block pointed out that it already trains and has continuing education requirements for all of its tax preparers and added that it looks forward to working with Congress and the Treasury Department on “any legislation that may be necessary to implement minimum tax preparer standards as a formidable tool in the fight against fraud.”
One tax attorney pointed out that the IRS will still be able to check up on errant tax preparers, even after the latest ruling. “The IRS’s ability to require previously unregistered tax preparers to meet certain education and testing requirements, while perhaps now temporarily set back a step, will inevitably come to pass because of the important role preparers play in tax system administration,” said G. Michelle Ferreira, tax attorney and managing shareholder of the San Francisco office of international law firm Greenberg Traurig. “I believe law makers will recognize the need to make explicit that the IRS should be able to set basic standards for individuals who prepare tax returns so that we can be sure such returns are correct and in compliance.”
Because the Loving decision does not disturb the rules requiring all paid preparers to obtain a PTIN, those individuals must still register with the IRS, Ferreira said, “which still gives the IRS the ability to check up on preparers where evidence points to problems.”
CPA Reactions
While attorneys and CPAs would have been exempt from the proposed rules, several CPAs from the New York State Society of CPAs reacted strongly to the news of the court’s decision Tuesday.
“The potential impact is that the storefront tax preparer will thrive on the ignorant and the fraud will continue,” said Vincent Cosenza, CPA and tax manager at Shanolt, Glassman, Klein and Kramer PC in New York City.
“Much of what the IRS was looking for is already being done by most CPA firms,” said David Young, CPA, owner of Young & Company CPAs LLC in Rochester, N.Y. “Having a strong system of quality control for tax return preparation and continuing professional education is in part what differentiates a CPA firm from H&R Block and other non-CPA firms. The taxpayer is ultimately responsible for what is on his or her income tax return.
“When choosing a tax preparer, the taxpayer should consider the possible negative ramifications of choosing an unregulated and unlicensed tax return preparer,” Young advised. “It would be wise for the taxpayer to ask about the tax preparer’s qualifications, continuing professional education, and the firm’s quality control as it relates to tax returns.”
“I am a little upset that unlicensed tax preparers don’t have to deal with taking CPE and keeping themselves up to date with new legislation, as CPA are required to do annually,” said Johnpaul Crocenzi, CPA, a tax manager at Raich Ende Malter & Co. LLP in New York. “Having the IRS regulate tax preparers will actually protect the consumer from having a tax return done by someone that doesn’t know or understand the Tax Code.”
Although the IRS proposed regulation of tax return preparers did not directly affect CPAs, there is always a concern about regulations that can creep into other areas, according to Kevin McCoy, CPA, director of Marvin and Company near Albany, N.Y. But “until the IRS is granted the authority by Congress, it appears the unlicensed tax return preparers are free to continue to operate as before,” he said.
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The decision affirms a January 2013 ruling by U.S. District Court Judge James E. Boasberg, which struck down the IRS’s new regulations as unlawful (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). In the case, known as Loving v. IRS, both courts rejected the IRS’s claim that tax-preparer licensure was authorized by an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses.
“This is a major victory for tax preparers—and taxpayers—nationwide,” said Dan Alban of the Institute for Justice, the lead attorney for the three independent tax preparers who filed the suit. “The court found that Congress never gave the IRS the power to license tax preparers, and the IRS cannot give itself that authority.”
The appeals court held, “If we were to accept the IRS’s interpretation of [the statute], the IRS would be empowered for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-preparation industry. Yet nothing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority.”
More than 350,000 tax-return preparers would have been subject to the regulations. The attorneys for the preparers argued that the regulations would have put tens of thousands of mom-and-pop preparers out of business and increased the cost of tax-return preparation for millions of taxpayers.
“My customers—not the IRS—should be the ones who get to choose who prepares their taxes,” said Sabina Loving, an independent tax preparer from Chicago and the lead plaintiff in the case. “I have a right to earn an honest living without getting permission from the IRS.”
The court ruled that “[t]he IRS may not unilaterally expand its authority through such an expansive, atextual,
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“We think it’s a major victory for both independent tax preparers and taxpayers,” Institute for Justice senior attorney Scott Bullock said in an interview. “The three-judge panel unanimously affirmed all the fundamental points of the District Court’s opinion and held that the IRS does not have the authority to regulate tax preparers under the statute and under the legislative history of the law. The IRS simply cannot assume that authority to license tax preparers. They need to go to Congress to get that authority. That's what the D.C. Circuit held. They gave six separate reasons for affirming the District Court opinion and just really affirmed it across the board.”
Bullock hopes the IRS decides not to pursue further appeals in the case. “It has now been rejected by four judges, both the District Court and by three D.C. Circuit judges,” he said. "They do have the right to petition the entire D.C. Circuit. I believe they have 45 days to do so. The federal government has a little bit longer than most folks. Then the court will decide that relatively quickly. Then, after that, the next step for them would be to go before the Supreme Court and they would have 90 days. If they decide not to petition the entire D.C. Circuit, it would be 90 days from today. If they do decide to petition the entire D.C. Circuit and they reject that, it would be 90 days from whenever that order rejecting the en banc petition came though.”
When Judge Boasberg clarified his original decision last year, he ruled that the IRS can continue to require tax preparers to register for Preparer Tax Identification Numbers, or PTINs, and the latest ruling should not affect that. However, it should also bring some relief to tax professionals.
“It was a big relief to many of the independent tax preparers when the decision was first handed down,” said Bullock. “Hopefully this will end the matter once and for all and they would not be subjected these new licensing requirements, but it’s up to the IRS if they decide to continue to appeal.”
The IRS was noncommittal on whether it plans future appeals. “The IRS is currently reviewing the decision,” the IRS said in a statement. “The IRS continues to believe that it’s critical for taxpayers to be able to rely on quality work from tax preparers.”
Bullock believes the IRS should provide refunds to tax preparers who paid to take the tests and continuing education courses before the RTRP regime was invalidated by the courts.
“I believe they would probably be required to do that, and they [the tax preparers] would have the right if they so choose not to be subjected to these licensing requirements.”
“Administrative agency overreach threatens the economic liberty rights of entrepreneurs,” said Institute president and general counsel William Mellor in a statement. “This precedent ensures that agencies must follow the law and cannot exceed the power given to them by Congress.” As the Court noted, “‘fox-in-the-henhouse syndrome is to be avoided . . . by taking seriously, and applying rigorously, in all cases, statutory limits on agencies’ authority.’”
IRS Commissioner John Koskinen has indicated he would be open to offering the certification on a voluntary basis to tax preparers if the IRS loses the appeal. “If you can’t require it, offer it, and if you complete the information, you get a certificate that says, ‘I have completed the IRS preparer course.’ I think that could be over time very valuable to preparers, and consumers could ask preparers, ‘Have you gone through the IRS training?’” said Koskinen during a press conference last month after he was sworn in as commissioner (see IRS’s New Commissioner Favors Voluntary Tax Preparer Certification). “Whatever happens with the court case, we ought to be able to move forward on that and provide taxpayers with as much assurance as we can that the preparers they are dealing with have met some kind of minimum standards.”
Bullock indicated the Institute for Justice would have no problem with a voluntary certification scheme. “We made that very clear in our statements because they [the IRS] had asked the D.C. Circuit to stay the ruling, and they had stated they had no power to even do this on a voluntary basis,” said Bullock. “And we had said, ‘That’s not true. You can offer this, but you can’t require licensure. But if you want to do this on a voluntary basis, you’re free to do so.’ And the district court judge made it clear that the IRS was free to do this on a voluntary basis, but they could not legally require it, it. If they did that, that of course would end the legal dispute.”
H&R Block Slams Decision
H&R Block, which was one of the main proponents of the RTRP tax preparer regulation regime, reacted with dismay to the Appeals Court decision.
Block said that in a country where all 50 states regulate hair dressers, the tax prep chain found it “stunning” that tax preparers, with extensive access to the personal financial history and identities of their clients, are not required to meet minimum competency standards.
“It is outrageous that all consumers don’t enjoy basic protections with such a significant financial transaction as tax preparation,” said H&R Block president and CEO Bill Cobb in a statement. “Something is out of whack when you are better protected when getting your haircut than when sitting across the desk from a tax preparer. All consumers should have access to the protection that our clients receive when working with our highly trained tax professionals.”
H&R Block noted that it has long supported efforts to better serve and protect consumers through minimum standards for, and oversight of all tax return preparers. Block pointed out that it already trains and has continuing education requirements for all of its tax preparers and added that it looks forward to working with Congress and the Treasury Department on “any legislation that may be necessary to implement minimum tax preparer standards as a formidable tool in the fight against fraud.”
One tax attorney pointed out that the IRS will still be able to check up on errant tax preparers, even after the latest ruling. “The IRS’s ability to require previously unregistered tax preparers to meet certain education and testing requirements, while perhaps now temporarily set back a step, will inevitably come to pass because of the important role preparers play in tax system administration,” said G. Michelle Ferreira, tax attorney and managing shareholder of the San Francisco office of international law firm Greenberg Traurig. “I believe law makers will recognize the need to make explicit that the IRS should be able to set basic standards for individuals who prepare tax returns so that we can be sure such returns are correct and in compliance.”
Because the Loving decision does not disturb the rules requiring all paid preparers to obtain a PTIN, those individuals must still register with the IRS, Ferreira said, “which still gives the IRS the ability to check up on preparers where evidence points to problems.”
CPA Reactions
While attorneys and CPAs would have been exempt from the proposed rules, several CPAs from the New York State Society of CPAs reacted strongly to the news of the court’s decision Tuesday.
“The potential impact is that the storefront tax preparer will thrive on the ignorant and the fraud will continue,” said Vincent Cosenza, CPA and tax manager at Shanolt, Glassman, Klein and Kramer PC in New York City.
“Much of what the IRS was looking for is already being done by most CPA firms,” said David Young, CPA, owner of Young & Company CPAs LLC in Rochester, N.Y. “Having a strong system of quality control for tax return preparation and continuing professional education is in part what differentiates a CPA firm from H&R Block and other non-CPA firms. The taxpayer is ultimately responsible for what is on his or her income tax return.
“When choosing a tax preparer, the taxpayer should consider the possible negative ramifications of choosing an unregulated and unlicensed tax return preparer,” Young advised. “It would be wise for the taxpayer to ask about the tax preparer’s qualifications, continuing professional education, and the firm’s quality control as it relates to tax returns.”
“I am a little upset that unlicensed tax preparers don’t have to deal with taking CPE and keeping themselves up to date with new legislation, as CPA are required to do annually,” said Johnpaul Crocenzi, CPA, a tax manager at Raich Ende Malter & Co. LLP in New York. “Having the IRS regulate tax preparers will actually protect the consumer from having a tax return done by someone that doesn’t know or understand the Tax Code.”
Although the IRS proposed regulation of tax return preparers did not directly affect CPAs, there is always a concern about regulations that can creep into other areas, according to Kevin McCoy, CPA, director of Marvin and Company near Albany, N.Y. But “until the IRS is granted the authority by Congress, it appears the unlicensed tax return preparers are free to continue to operate as before,” he said.
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