[IMGCAP(1)]Members of NCCPAP, the National Conference of CPA Practitioners, made their views known to congressional staff and IRS officials during meetings in Washington D.C. last week.
The members spoke with members of both the Senate Finance Committee and the House Ways and Means Committee.
“Our top three agenda items were received very well,” said NCCPAP member and PR chair Robert Brown. “Members of Congress take our ideas very seriously because we are on the ground working with taxpayers and carrying out the policy that Congress implements at the top.”
Carol Markman, a past national president of NCCPAP, agreed. “Our leaders listen when we have an idea that simplifies the tax code, especially when it costs the government nothing,” she said.
Markman testified in March at the Senate Finance Committee hearing on ”Tax Complexity, Compliance, and Administration: The Merits of Simplification in Tax Reform.”
Markman referred to the rule requiring a taxpayer to withdraw a required minimum distribution, or RMD, after reaching age 70 1/2. “Everyone knows when their birthday is, but very few know when their half birthday is,” she observed.
“You have until April 1 of the year following the year you turn 70 1/2 to take the RMD,” she said. “But if you wait until then you have to take two distributions that year. The second RMD must be taken by December 31 in the year after reaching age 70 ½. This is very confusing to some taxpayers and creates problems for them by increasing the amount of their Social Security benefits that may be subject to tax, and issues related to the amount of certain itemized deductions that can be claimed. The penalty is 50 percent of the amount you should have taken, which is quite significant.”
The solution is simple, Markman indicated. “Change the beginning date for RMDs to age 71 so that taxpayers need only take on RMD each year.”
A second concern, also regarding RMDs, has to do with the fact that taxpayers are required to withdraw an RMD from each type of retirement account, according to Stephen Mankowski, chair of NCCPAP’s National Tax Policy Committee. “Once the IRA owner calculates the RMD for each IRA that he or she owns, the IRA owner can withdraw the total amount from one or more of the IRAs,” he said.
“However, RMDs from types of retirement plans, such as 401(k) and 457(b) plans, have to be taken separately from each of those types of plan accounts based on the balance in the account on December 31 of each year,” Markman noted. “People have to keep track of their various balances and deal with this every year. While the brokerage houses will provide the information, it would be better to permit the taxpayer to take his or her entire distribution from any of the retirement accounts from which the taxpayer must take an RMD. This change creates simplification with no reduction in tax revenue.”
A third concern, presented to the IRS, involves identity theft and tax refund fraud.
“Currently, the IRS uses the ACH [automated clearing house] system to direct refund deposits,” Mankowski said. “For it to work, the deposit has to have a valid routing number, and once at that bank the account number needs to be for an account that exists within that institution. That’s all that is required.”
“We recommend that additional fields be included to ensure that the refund is being applied to the correct account,” he added. “This would include the name and the last four digits of the account holder’s Social Security number, which was verified when the account was opened. That extra verification can cut down on much of the fraudulent refunds.”
NCCPAP also urged the IRS be given full funding and the authority to regulate tax return preparers.
“Every $1 spent by the IRS brings in approximately $6,” Mankowski said. “To cut the funding of the collection arm of the federal government, the agency that brings in the revenue so that the government may operate, is both foolish and short-sighted.”
“It is imperative that the IRS be given the proper amount of funding in which they may properly do their job as directed by Congress,” he added. “This includes funding to modernize operations, hire and train employees, and provide service to the taxpayer so that their tax issues may be promptly resolved.”
“With the exception of CPAs, EAs and attorneys, all tax preparers should pass a one-time competency exam and then complete 15 hours annually of CPE with a focus on federal taxation,” he continued. “We urge Congress to enact legislation immediately to allow the IRS to regulate tax preparers.”
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