The Internal Revenue Service enjoys ample room for improvement on a number of issues, according to tax practitioners asked about the agency’s biggest challenges.
Beyond headline debate over the possible impeachment of Commissioner John Koskinen, preparers say that the IRS faces a range of problems that stem from illegal and sophisticated use of technology to basic attitudes about serving the taxpayer public and preparer profession.
“A few things,” said Jeffrey Schneider, an Enrolled Agent in Port St. Lucie, Florida. “One is the negativity surrounding the increase in the special enrollment exam fees, which as of now they can’t, or refuse to, justify. Second, oversight in light of the loss in the Loving case. Congress needs to give the IRS authority over all tax preparers.”
“Third,” Schneider added, “budget constraints imposed by Congress, as they reduce their budgets year after year.”
“Dueling with Congress,” said Terri Ryman, an EA at Southwest Tax & Accounting, in Elkhart, Kansas. “If Congress doesn’t pull their heads out and fund the IRS, non-compliance will soar. I understand that the IRS returns $4 for every budget dollar they get. The solution to getting the budget back under control would be to fund the IRS.”
“The IRS especially needs to start doing more audits of self-prepared returns,” Ryman added. “The ones I see are usually egregious in the deductions that they claim.”
The Government Accountability Office recently reported that the IRS must update the risk assessment for its Taxpayer Protection Program to account for the ever-changing methods of identity thieves. The IRS uses the TPP to authenticate the identities of suspicious filers.
But even the agency admits that of the 1.6 million returns chosen for the program, the IRS may have paid $30 million to fraudsters who filed approximately 7,200 returns that passed through the TPP authentication process during the 2015 filing season.
“Identity theft,” said Karen Durda, an EA and president of Century Accounting and Tax Services, in Wilmington, N.C., “a major issue for all businesses. And as a credentialed professional, I must have in place a way to protect my clients’ Social Security numbers and other information. When the IRS has anything go amiss with identity issues, they stop the access we professionals have to represent our clients.”
Said EA Richard Ogg of The Master’s Tax & Financial Services in Santa Rosa, Calif., “The biggest challenge is to reduce theft from the American citizens through identity theft fraud and yet deliver refunds in a timely fashion. Congress has stacked the cards against us. With the requirement that refunds be issued before validating documents … are submitted, it’s only a guessing game.”
“That suggests the solution is for Congress to shift the filing season from, say, March to June,” Ogg added. “At the same time, require all information documents to be submitted by January 31. This would permit document matching and enable various programs to restrict illegal access to the U.S. coffers.”
“Customer service!” said EA Steven Weil, president of RMS Accounting in Fort Lauderdale, Fla. “Spending over an hour on hold for the practitioner priority line and then being limited to dealing with only one client’s issues means the expense of assisting a client to deal with a tax problem has to increase. Written correspondence takes the IRS forever to answer, and then additional time is wasted with letters that say that they got our correspondence but need more time. Worse yet, taxpayers can no longer drop in at IRS drop-in offices.”
Added Twila Midwood, an EA at Advanced Tax Centre in Rockledge, Fla., “With the budget cuts and reduction in various services and personnel, it’s hard for IRS to ensure compliance and provide customer service to taxpayers. They’re putting more demands on the tax professional community to do that job. That in turn creates more stress on Circ. 230 tax professionals.”
Customer service and caseload management is the biggest struggle, said Laurie Ziegler, an EA at Sass Accounting in Saukville, Wis. “If or when taxpayer and tax professional full online access becomes available, that will go a long way to lighten the load on the IRS phone lines.”
‘Time to follow up’
Preparers can at least stay a little prepared for IRS troubles by participating as much as possible in spotting agency troubles and learning about possible solutions. EA Eva Rosenberg, blogger and author of Small Business Taxes Made Easy and Deduct Everything!, recently attended an IRS Stakeholder Liaison meeting.
“One of the biggest issues they are facing is payroll tax deposit defaults,” she said. “Apparently over half (68 percent) of the money they collect comes from payroll taxes. Since there are many delinquencies, they’ve set their computers to alert them when a large employer is only a few days late with its deposits. They’re now taking the time to follow up and inquire about the problem to see if they can help or if there’s a big problem that needs to be addressed quickly.”
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