Friday, May 16, 2014


Here is one reason how I know I live in “the country” – the What to Do column in the local newspaper tells me there will be a “Manure Management Workshop” this week-end.  And it has nothing to do with political public relations issues.

* Check out my latest article at MAINSTREET.COM - “Now That the Tax-Filing Season Is Over, Be Sure Of This Checklist”.

The issue has come to its final conclusion when the IRS “declined to file a petition seeking review from the U.S. Supreme Court. The lapse of the deadline marks the conclusion of a two-year battle over whether the IRS had the authority under the ‘Horse Act’ of 1884—a statute passed to govern compensation claims for dead horses brought on behalf of Civil War veterans—to impose a nationwide licensing scheme on tax preparers.”

The release quotes my twitter buddy Dan Alban, lead attorney for the plaintiffs in Loving v IRS -

This brings finality to a major victory for independent tax preparers—and taxpayers—nationwide.  Four federal judges sitting on two different courts have all agreed that Congress never gave the IRS the power to license tax preparers, and an agency cannot just give itself such licensing authority. By not filing a petition for certiorari, the IRS has wisely chosen not to ride this horse law any further.

This doesn’t mean the IRS has given up.  It has asked Congress to give it the authority to license tax preparers.  But I doubt it will succeed in this attempt either.

The new Commissioner had talked about creating a voluntary RTRP program, which I suggested in a letter to him on his confirmation, but has done nothing to move this idea along.

* In her article on this subject for the SAN FRANCISCO CHRONICLE, titled “IRS Misses Deadline to Appeal Tax Preparer Rules Rejection”, Kathleen Pender mentions the possibility of a voluntary RTRP program and quotes Bob Kerr, senior director of government relations with the National Association of Enrolled Agents (NAEA) - 

The enrolled agents association would oppose it, Kerr said. ‘The public will be confused and think that ... is some sort of assurance that folks know what they are doing. We don't think that's the case.’"

As Dan Alban, lawyer for the Institute for Justice, tweeted – “Huh?”. 

If a tax preparer is required to pass a competency test and maintain annual CPE in taxation then this is an “assurance that the folks know what they are doing” (NAEA supports a mandatory RTRP licensing scheme).  But if a tax preparer voluntarily chooses to pass the same competency test and maintain the same annual CPE in taxation this is not an “assurance that the folks know what they are doing”???

The NAEA is worried that a voluntary RTRP program will “dilute” the value of the EA designation in the eyes of the taxpayer public.  Perhaps.  But if the IRS structured it as a two-tiered designation program in conjunction with the existing EA program (with a better name for the EA), as I have proposed (see “What the IRS Should Do About the RTRP”) this would not happen.

* The title of this item from TAX PRO TODAY should come as no surprise, at least to me – “IRS Made Improper EITC Payments of $13.3-$15.6 Billion”.  I actually expect the number is higher.

We are told –

The Internal Revenue Service allowed an estimated $13.3 billion to $15.6 billion to be paid in improper claims for the Earned Income Tax Credit last fiscal year, or about 22 to 26 percent of all EITC payments, according to a new government report, which found the IRS continuing to be noncompliant with a 2010 law that sought to limit improper payments.

The IRS continues to make little progress in reducing improper EITC payments, according to the report, which was publicly released Tuesday by the Treasury Inspector General for Tax Administration.”

Refundable credits are a magnet for tax fraud and do not belong on the Form 1040!
* Jason Dinesen begins what appears to be a series of posts at DINESEN TAX TIMES on “Things Tax Preparers Say” on the subject of “S-Corporation Compensation”. 

It is very true that “the topic of S-corporations and the salary that needs drawn by the owner(s) of the S-corp” is indeed a controversial one, and many so-called tax professionals give bad, or flawed, advice on the topic – as the CPA did in this example.

You will, of course, notice that the false information was provided by a CPA.

When it comes to tax advice, individual, partnership, trust and estate or corporate, when you have a choice of listening to a CPA or an EA you should pick the EA every time.

* Jim Blankenship, the “go-to” blogger when it comes to Social Security issues, discusses “Social Security Spousal Benefits After a Divorce” at GETTING YOUR FINANCIAL DUCKS IN A ROW.

* National Taxpayer Advocate Nina Olsen joins me in my opposition to the use of outside collection agencies by the IRS.  She lists her concerns with the Private Debt Collection (PDC) program in a letter to the Senate Finance Committee.  Click here to download. 

Her concerns include -

·   The government’s objective of maximizing long-term compliance without causing financial hardship for taxpayers is fundamentally different from the profit-maximizing objective of a private collection agency.”

·   The Internal Revenue Code contains strict confidentiality rules to ensure that taxpayer data is shielded from disclosure. Providing taxpayer identifying information to private companies creates risks that this data will be misused.”

·   Congress has imposed strict penalties on IRS collection employees who are abusive to taxpayers, but these penalties do not apply to PCA employees who are abusive to taxpayers.”

·   IRS employees are instructed to be straightforward in dealing with taxpayers and the IRS publishes its instructions to staff in the Internal Revenue Manual. By contrast, the PCAs instructed their employees to use “psychological” techniques to pressure taxpayers to agree to payments and attempted to shield those instructions from disclosure.”

Let us hope the idiots in Congress listens to Nina on this issue.

* Professor Annette Nellen celebrated the “7th Anniversary of 21st Century Taxation Blog”.  Happy Anniversary!

* An important reminder from MISSOURI TAXGUY Bruce MacFarland –NO! The IRS Did Not Call You First”.

Just as the IRS will never initiate contact with a taxpayer via email, Bruce correctly tells us (highlight is his) –

The IRS will never initiate an audit contact by phone. Never – Ever.


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