April 28, 2022
In my 2021 Annual Report to Congress, I identified the ten most serious problems (MSPs) facing taxpayers. One of the MSPs I would like to highlight is the IRS’s inadequate online accounts for taxpayers, businesses and tax professionals.
In today’s digital environment, consumers have come to expect the convenience of completing actions on their accounts without the need for face-to-face or telephone assistance. Every day, consumers use their computers or mobile devices to access their accounts with service providers. They pay bills, make changes to their account information, add/cancel services, purchase/return products, conduct banking or investment transactions, review credit card statements, order food deliveries, meet virtually with family members or friends, make inquiries, and even chat with a business customer service representative (CSR). Surprisingly, similar options are not yet available for taxpayers, businesses or tax professionals wishing to engage online with the IRS.
"NTA" stands for "National Taxpayer Advocate," who heads a Treasury agency that describes itself as "your voice at the IRS."
While the IRS has created some digital self-service options (e.g., IRS2Go app, Where’s My Refund? and Where’s My Amended Return? online tools, and Taxpayer Digital Communications), many of these are standalone applications that are not readily accessible in one central location or capable of providing a holistic experience to taxpayers and tax professionals. Furthermore, business taxpayers currently do not have the ability to access a business online account to even retrieve a transcript or review payments, and tax professionals lack the ability to access their clients’ data within Tax Pro Account. Tax professionals play a key role in tax administration. Providing them convenient access to their clients’ data and allowing them the ability to electronically communicate with the IRS and take actions authorized by the taxpayer would be invaluable in helping tax professionals better assist taxpayers.
The Taxpayer Advocate post has some suggestions:
The IRS should provide individual and business taxpayers and their representatives the ability to log into one portal with the functionality to:
-Send and receive messages;
-Upload or download documents or data;
-Electronically chat with an IRS representative;
-Receive emails of pending action items:
-Electronically access notices or correspondence together with the ability to upload responses;
-Obtain filing or payment reminders and regular billing statements;
-Check the status of an original or amended tax return;
-Receive notification of delays and instructions on how to clarify an issue; or
-Communicate with an IRS revenue agent, revenue officer, or appeals officer.
Those would be nice things.
IRS Aiming to Roll Out ID.me Alternative by Year-End - Jonathan Curry, Tax Notes ($):
The IRS anticipates that Login.gov, a federal government-run online portal providing access to a variety of government services, will be able to accommodate IRS users by November or December, a Government Accountability Office report has revealed.
The GAO noted that the IRS quickly rolled out — and then just as quickly began rolling back — identity verification services through ID.me, a third-party biometric authentication tool. The IRS announced in November 2021 that taxpayers would soon need to set up an ID.me account to gain access to several online IRS services, but the agency soon faced a backlash from lawmakers and other external critics over concerns about security, privacy, and equal access.
It would be nice to be able to look at your tax information online as easily as your bank account.
IRS takes another step toward digitizing its tax return process - Gabriella Cruz-Martinez, Yahoo!money.
After fulfilling a 180-day, $200,000 first phase of IRS Pilot challenge – Ripcord, a robotic digitization company, has signed a $750,000, six-month contract with the IRS to securely digitize tax Form 709, which reports transfers of assets that may be subject to federal gift tax and certain generation-skipping transfer taxes.
Implementing these technological solutions could help address the severe paper backlog the IRS is currently facing and save thousands of dollars by eliminating paper storage facilities. According to the National Taxpayer Advocate (NTA), as of March 18, the IRS faces 15 million tax returns backlogged from the 2020 and 2021 filing seasons.
Obtaining Business Transcripts From IRS Could Get a Lot Easier - Jonathan Curry, Tax Notes ($):
A much faster way of obtaining transcripts from the IRS’s business master file is in the works, according to a member of the Internal Revenue Service Advisory Council (IRSAC).
Currently, tax professionals have to call the IRS to get connected to an IRS agent who can download the requested information, after which that information has to be compiled and e-faxed to the requester, [IRSAC member Phillip] Poirier said. The whole process “takes a tremendous amount of time and is very costly, so this particular application or approach would significantly improve that,” he added
No, tax pros don't have a secret backdoor to IRS systems.
Democrats Launch Attempt to Rescue Biden’s Economic Agenda - Andrew Duehren, Wall Street Journal ($).
Even as Democrats broadly support the goal of raising taxes, they have had important disagreements over how to do so. Mr. Manchin again this week said Democrats should raise the corporate rate to 25% from 21% and the top capital-gains rate to 28% from 23.8%.
While the majority of Democrats support those steps, another critical centrist, Sen. Kyrsten Sinema (D., Ariz.) has opposed them, forcing the party to rejigger the tax plans in talks last year. The party settled on a series of alternatives, such as a corporate minimum tax, to raise revenue, but Mr. Manchin has sought to change Ms. Sinema’s mind about the tax plans—so far unsuccessfully.
“Any new, narrow proposal—including deficit reduction—already has enough tax reform options to pay for it,” a spokeswoman for Ms. Sinema said.
Mississippi Allows Passthrough Entity SALT Cap Workaround - Paul Jones, Tax Notes:
Mississippi Gov. Tate Reeves (R) has approved a SALT cap workaround for passthrough entities, joining numerous other states that have adopted the policy.
H.B. 1691, signed into law in mid-April, allows members of partnerships, S corporations, and other passthrough entities to elect to have the Mississippi income tax due on their passthrough income paid by the entity, starting in calendar year 2022. Those owners who opt to use the workaround will receive state income tax credits equal to their pro rata or distributive share of the Mississippi income tax paid at the entity level for that tax year to avoid double taxation. The workaround allows passthroughs to skirt the Tax Cuts and Jobs Act's $10,000 cap on the state and local tax deduction, which applies only to taxes paid as an individual.
Related: Working Around the SALT Deduction Cap.
Pennsylvania House Advances Corporate Tax Cut Bill - Benjamin Valdez, Tax Notes:
H.B. 1960, which passed the House April 26 on a vote of 195 to 8, would lower the corporate net income tax rate from 9.99 percent to 8.99 percent starting January 1, 2023, and lower it by an additional 0.5 percentage point annually for the following two years if the state maintains a budget surplus of more than $500 million. The bill would take effect immediately.
Pennsylvania has one of the highest corporation tax rates. The bill now advances to the GOP-controlled Pennsylvania Senate. Pennsylvania's Governor is a Democrat, so enactment will require bipartisan agreement.
Minnesota Tax Court Says Surcharge Not Exempt From Sales Tax - Andrea Muse, Tax Notes ($). "A surcharge to cover a vacation rental operator’s credit card processing fees is not excluded from the rental’s sales price and is subject to the state’s sales tax, the Minnesota Tax Court has held."
Tax Filing Season: Options for Improvement - Alex Muresianu and Erica York, Tax Policy Blog:
Several factors contributed to the IRS’s difficulties. Some, such as reduced in-person service, were a direct consequence of the COVID-19 pandemic. But others stemmed from the long-term trend of legislators expanding the IRS’s responsibilities as a benefits administration agency while not simultaneously expanding its capacity to handle them.
Improving the taxpayer experience could be accomplished with a few changes. The most direct is improvements to the nuts and bolts of tax filing, starting with the IRS’s operations. The solution to the incredibly low call response rate is to hire more employees to handle increased taxpayer demands. Similarly, new investments in information technology to quickly digitize returns submitted on paper, among more general updates and improved fraud detection software, would also help.
But efforts to improve the taxpayer experience should also include structural improvements to the tax code.
In a better world, the tax law would be simple enough to comply with by April 15. That's not a world we have lived in for a long time, and it's not coming back soon. The 1040 deadline should be moved to October, no extension needed, to reflect the world as it is.
Proposed Estate Tax Rules Would Protect Against Decrease in Estate Tax Exemption - Roger McEowen, Agricultural Law and Taxation Blog. "The Treasury has proposed regulations that would prevent certain decedents’ estate from being subject to federal estate tax if the federal estate and gift tax applicable exclusion amount drops to $5 million (adjusted for inflation) for deaths after 2025 as it is set to do so under current law. The Tax Cuts and Jobs Act enacted in late 2017 set the applicable exclusion amount at $10 million for deaths occurring and taxable gifts made after 2017 (adjusted for inflation). I.R.C. §2010(c)(3). The amount, for 2022, is $12.06 million per person/estate."
Many Unhappy Returns: How to Deal With a Bad Tax Relationship - Kelly Phillips Erb, Bloomberg. "Frazzled taxpayers can often feel blind-sided by a return delivered later than promised or more tax due than expected. If there are reasons to explain an unhappy result, tax professionals should share those with the taxpayer, such as 'You didn’t get me your records by the due date,' instead of ignoring complaints."
Protesting an exorbitant home value appraisal could lower your property tax bill - Kay Bell, Don't Mess With Taxes. "Here in Texas, as in many other places across the United States, home values have skyrocketed. We learned just how much when we got our latest notice a couple of weeks ago from the Travis County tax appraiser."
Amounts Paid as Management Fees by C Corporation Not Deductible - Ed Zollars, Current Federal Tax Developments. "The IRS examined the corporation’s returns and denied the deduction for management fees, finding that the corporation had failed to establish that it had incurred or paid these fees for ordinary and necessary business purposes as required by IRC §162. Rather the IRS found that these payments represented disguised distributions being paid to the corporation’s shareholders."
The Doctrine of Constructive Receipt - Jason Freeman, Freeman Law. "Under the doctrine of constructive receipt, a cash-basis taxpayer who has an unrestricted right to receive income is treated as though they actually received the income–even if they did not. Thus, even when a taxpayer has not received possession of the income, the taxpayer is generally subject to tax as though they received possession of the income when the income is set apart of the taxpayer, credited to the taxpayer’s account, or made available to the taxpayer."
Biden’s Scary Death & Wealth Tax Plans - Robert Wood, Forbes. "A betting person might say that neither of these ambitious tax proposals are likely to pass in their current form, at least not anytime soon. But this is not the first time that either a wealth tax or step up in basis repeal has been taken on by the current administration. And every time this kind of sea change is proposed, the enormous impact is more normalized and it gets a little easier to discuss."
Oops… Made a Mistake on an FBAR? - Virginia LaTorre Jeker, Virginia - US Tax Talk. "When someone has previously filed an FBAR but mistakenly provided incomplete or inaccurate information on the form, an amended FBAR can be filed."
Biden’s “Undertaxed Profit Rule” Would Complete US Adoption of BEPS Pillar 2 - Thornton Matheson, TaxVox. "The UTPR denies deductions to US affiliates of large foreign multinationals that have offshore affiliates paying a less than 15 percent effective tax rate. For example, if a foreign affiliate of a US company has $100 million in net profits and pays no foreign income tax, the UTPR denies deduction of the US company until they yield $15 million in US tax liability"
Examining the Ukrainian Tax Implications of Russia’s Invasion - David Stewart, Sara Paez, and Valaria Tarasenko, Tax Notes Opinions. "Starting from April 1 Parliament adopted the law which reduced 18 percent corporate income tax and the 20 percent VAT to only a single 2 percent tax, which is calculated based on the revenue the company had in the previous quarter. So, only one tax is left, it's a 2 percent revenue tax, which is obviously very low."
Priest Absolved of Three Counts but Not Forgiven for Tax Fraud - Mary Katherine Browne, Tax Notes ($). The priest "was working as a Catholic priest in South Dakota when he was caught on camera stealing cash that had been collected during Sunday masses in 2018." The Eighth Circuit Court of Appeals upheld the defendant's tax fraud conviction yesterday. From the appeals court opinion (defendant name removed):
During that time, Defendant would enter the parishes during the night and steal cash that had been collected during Mass. As suspicions rose, the bookkeeper at St. Therese the Little Flower Catholic Church started using tamper-proof bags in early March 2018 and immediately noticed that the bags' serial numbers changed without explanation after Sunday Masses, indicating that they had been replaced by someone. The bookkeeper and pastor installed security cameras, and on April 23, Defendant was caught on video entering the parish between 1:00 a.m. and 1:30 a.m. and stealing cash. Defendant brought tamper-proof bags with him, pocketed some of the offerings, and sealed the rest into the new tamper-proof bags so that it appeared as if nothing had been changed. Defendant then would write information on the new bags to match the handwriting that appeared on the originals.
A jury convicted the defendant after hearing evidence of a lifestyle not supportable by his modest priest salary.
Related: How to Prevent Fraud in Your Nonprofit.
While they hold down your desk, you can run out to the playground. Today is Take our Kids to Work Day. "It can be an experience of a lifetime for your child." I did that, and for what it's worth, my kids did not choose accounting careers.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.