Friday, August 31, 2007


This week I attended the annual IRS Nationwide Tax Forum at the New York Hilton. Each year since 1990 the IRS Nationwide Tax Forums are be held in six cities across the nation during July, August and September. The Forums offer three full days of seminars with the latest word from the IRS leadership and experts in the fields of tax law, compliance and ethics. Attendees can earn up to 18 continuing professional education (CPE) credits, learn about the latest IRS e-Services products and schedule a visit to the Practitioner Case Resolution Room. The forums also feature a two-day expo with representatives from the IRS, business, finance and tax software companies offering their products, services and expertise. The theme of the 2007 Tax Forums was “A Partnership That Works”.

The New York Forum is always well-attended. The keynote speaker, IRS Chief Counsel Donald L. Korb, mentioned that there were 2000 tax professionals attending this year from all 50 states – including one from Switzerland.

The bulk of the questions and comments addressed to Mr. Korb expressed tax professionals’ frustrations with getting proper cost basis information from clients to correctly report capital gains, the new preparer penalties (under IRC section 6694) passed in the Small Business and Work Opportunity Act of 2007, and having to explain to clients the new strict rules for claiming deductions of cash contributions. While I “feel their pain”, these questions and comments were misdirected. They should be addressed to Congress and not the IRS. The IRS does not make tax law – Congress does. Regarding the new guidelines for tax preparer reporting standards – this was sprung on the IRS the same time it was sprung upon the preparer community, after the bill was passed. Neither the IRS nor the general public was asked for input before passage of the bill.

I had attended the IRS Forum (for the first time) at the Hilton two years ago and, while I had at the time promised to never again attend in NYC if the location remained the same, I decided to give it another try this year.
Nothing has changed. I truly hate the New York Hilton as a location. While there is nothing wrong with the actual Hilton facilities, I do not want to have to schlep from 40th Street and Eighth Ave to 53rd and Ave of the Americas for three days. Luckily this time the weather was a bit more pleasant - it is not just the heat but the actual schlep.

I would very much prefer the Marriot Marquis or another hotel in the lower 40s, a better location for those of us who commute from NJ into NYC via the Port Authority Bus Terminal. What would be even “more better” would be returning to Atlantic City, where the Forum has been held three years ago, as the Northeast US location. However it apparently is not to be. The locations for the 2008 Tax Forums have been announced, and the Northeast US location is once again the New York Hilton.

And location is not the only problem. Another is that the Forum’s format of 50-minute sessions do not provide for more than a very general cursory review of the topic, with no real depth. One can barely touch the surface of topics like “Tax Issues on Distributions from Retirement Plans”, “Tax Rules Relating to Home Ownership”, and especially “Depreciation from Start to Finish” (you can barely cover the start) in only 50 minutes.

You must know by now that I do not file returns using software or electronically (I do all 350-400 by hand). While many tax professionals would be interested in new developments in this area I am not. I do not do client representation, unless absolutely necessary, and do not have any currently pending cases worthy of bringing to Case Resolution, although I do agree that this is a very important and welcome component of the Forum for many other preparers.

As I am sure you are aware, the IRS Tax Forum is not my only source of continuing education. As you well know I attend the local and national conferences and seminars of the National Association of Tax Professionals and the National Society of Tax Professionals each year. The Forum is only a supplement, something I sign up for because the registration fee is extremely reasonable. The education provided by the Forums is really not sufficient to be one’s only source of updates and refreshers. Its main value is to provide current information on IRS services and resources and the IRS prospective on tax issues.

I get the most value from the Forum if I can pair it with an already existing NATP or NSTP conference, like I did last year with the NSTP regional conference in Chicago. Next year I plan to attend the Forum in Atlanta, as both the NSTP and NATP will be having there annual conferences there around the same time. I look forward to returning to Atlanta for, this time, an extended stay.

One thing I was happy about with this year’s Forum – the “stuff” provided to participants upon registration did not include a totally useless IRS T-Shirt as it had the past two years - although there was still no free coffee which I had recommended as a substitute. The IRS Forum is the only educational conference I have ever attended that did not provide participants with at least free coffee – most also include a free continental breakfast each day!

So much for my general comments on the Forums. Let me address some of the topics discussed in the too-short educational sessions.

· Unless Congress gets off its duff and acts in time the dreaded Alternative Minimum Tax (AMT) exemption amounts will revert to what they were “pre-George W”! This means the AMT will claim 25 Million victims for tax year 2007 – up from the approximately 3.8 Million victims for tax year 2006! The IRS expects Congress to extend the AMT “fix” for another year – as do most tax professionals - and hopes it does so before it has to “go to press” with the forms and instructions.

· Speaking of the dreaded AMT, it has been determined that 93% of all AMT is the result of three add-back items – personal exemptions and the standard deduction (21.6%), taxes deducted on Schedule A (51.1%) and miscellaneous job-related expenses in excess of 2% of AGI (20.3%). Much of the 51.1% created by the second item is from highly-taxed residents of states like New Jersey and New York.

· The IRS website is the 3rd most “hit” website on the internet – behind two porn sites.

· Approximately $41-44 Billion in Earned Income Credits are issued each year. The IRS EITC “department” feels that EIC claims have a 23-28% error rate – ranging from inadvertent errors to out and out fraud. 70% of EITC claims are submitted on returns prepared by paid tax professionals, so it seems we are the ones getting it right.

· Tax preparers have a more detailed requirement for “due diligence” when it comes to claiming the Earned Income Credit than for most other tax reporting, and are subject to more strict fines in this area. {The Earned Income Credit is perhaps the biggest federal welfare program in existence today. As tax professionals we have enough to worry about just getting all the necessary information from our clients without the added burden of having to determine if a person qualifies for federal welfare. – RDF}

· There is a new IRS form for claiming the above-the-line deduction for tuition and fees, which did not even have a line on the 2006 Form 1040. It is Form 8917. The IRS believes that some taxpayers are “double-dipping” by claiming both a deduction and a credit for the same student and wants the name and Social Security number of the student for whom the deduction is claimed placed on the record. The IRS has also created a new Form 8919 (Uncollected Social Security and Medicare Tax on Wages) for employees improperly classified by employers as independent contractors and issued a Form 1099-MISC instead of a W-2 – I believe I mentioned this form in an earlier posting. The Form 1120-A (US Corporation Short-Form Income Tax Return) is no more. All “C” corporations must use the Form 1120 for 2007. I have no idea why this form was killed – I used if for my remaining corporate clients. More work for tax preparers!

· The courts will use a “duck test” to try to pierce the “corporate veil” and allow for personal liability by one-man corporation shareholders. If it does not “walk like a corporation” or “quack like a corporation” – especially in terms of minutes of shareholder meetings and similar record keeping requirements – it will not be considered a corporation for liability purposes. This is not the case with an LLC.

· I never had, and probably never will have (remember - no new clients), a client who had a plumbing business. If I did I would tell him/her to adopt the slogan that NSTP Executive Director Beanna Whitlock used in her LLC presentation – “Joe’s Plumbing Service – The Best Place to Take a Leak”.

There was one strange occurrence during my visit to the Forum. When I went out for lunch on Tuesday it was snowing soap suds on 54th Street!


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