Revenue enhancement: Preparers’ suggestions for IRS reform
On the heels of the largest tax reform in a generation has come a second proposal: reform the IRS. Those in the front lines of dealing with the agency have no shortage of opinions on what to change.
“I’d like it to become easier for us to assist taxpayers,” said Laurie Ziegler, an Enrolled Agent and managing member at Sass Accounting, Saukville, Wis. “This is a no-brainer: It would be far simpler for the IRS to deal with tax professionals than the taxpayers themselves.”
Morris Armstrong, an EA and registered investment advisor with Armstrong Financial Strategies in Cheshire, Conn., would also like to see greater ease for professionals to work with the IRS and individual clients in both preparation and representation. “The IRS has a taxpayer’s Bill of Rights and it seems to contain hollow words,” he said. “Considering the amount of money that the IRS collects for our government, I wish that they were better funded and subject to less partisan BS.”
The IRS revamp, a long-term bipartisan effort in Congress billed as creating a “taxpayer-first” agency, looks at a full menu of upgrades, including establishing an appeals office; requiring the IRS to submit to Congress a plan to improve customer service and efficiency; maintaining Free File; and ensuring that taxpayers have access to the same information as the IRS during dispute resolution, among others.
The redesign, say practitioners, presents a good chance to tune specific aspects of interaction with the IRS. “Health care is a pain point for me,” said Becky Neilson of Neilson Bookkeeping & Tax Services in Sheridan, Calif. “So many clients had issues getting 1095s timely. We had some clients’ returns on hold because the IRS was requesting copies of 1095s that clients never received and evidently IRS had still not received by filing deadline. The waiving/extension of deadlines for timely filing of W-2s, 1099s and other forms required to be filed and sent by employers is a joke.”
“Why set deadlines,” she added, “if they keep changing the requirements every year?”
Armstrong would like to see “the individual being held responsible and subject to harsher penalties when fraud is committed. Incorrect filing status, bogus deductions and phony dependents are often used to get large, undeserved refunds,” he said. “Effectively, these people are stealing from all of us.”
“Let’s take baby steps,” said EA John Dundon, president of Taxpayer Advocacy Services in Englewood, Colo. “I’ll be happy with an actual commissioner.”
IRS reform was dropped as part of the TCJA. But to some, reform of the federal tax agency and reform of federal tax remain connected; some practitioners want new rules changed.
“My two items relate to uncertainty of business meal deductibility under the new law, as well as finding a way to increase the $10,000 deduction limitation on SALT – it’s a concern around here,” said CPA Brian Stoner, in Burbank, Calif., referring to the high property taxes of his state.
“Unfortunately, from what I have heard, even though the business meal rules are not really what Congress intended, the cost to revenue of a technical correction may not be in the cards at this time. The cost to increase the state tax deductions has the same problems,” Stoner said
CPA Daniel Morris, a senior partner at Morris + D’Angelo in San Jose, Calif., thinks true reform will come when all members of Congress and the executive branch “must file their returns, self-prepared, without software, without advisors, on or before April 15.”
Morris would like to see a territorial tax system to protect “unrepresented ex-pats” that FACTA locks out of family accounts, dropping the corporate rate to 15 percent, capping of Social Security taxable income at 50 percent, removal of all itemized deductions and granting of a $20,000 per person exemption, and regionalization of rates (if you keep itemized deductions) based on a cost-of-living adjustment for economic parity, among others.
Perhaps one change involves inserting what wasn’t used in passing the TCJA: time. “Force all tax legislation to have a two-fiscal year cooling-off period before implementation,” Morris added, “to allow study, rules, regulations and planning.”