IRS #FAILs at Online Services Spell Problems for Professionals

Unintended consequences: Pushing low-end taxpayer-clients to tax professionals.

By Rick Telberg
CPA Trendlines

Online accounts at the IRS are a good idea, but maybe not as good as the IRS would like to think – certainly not as good as a qualified tax preparer.

SPECIAL REPORT – Fixing the IRS: IRS #FAILs at Online Services Spell Problems for Professionals | Tax Accountants Fill the Breach of a Failing IRS | Beware the EZ Way Out | Can the IRS Improve Its Phone Service? | When Clients Face ‘Unreal’ IRS Audits | IRS Warns about Private Debt Collectors for Tax Season 2018  | Underfunded IRS Swamped with Problems | IRS in Retreat from Communities | Military Personnel Face New Battles at Home: The IRS | As New Economy Surges, IRS Falls Further Behind | Is the IRS Winning the Battle Against Identity Theft? | IRS Mulls Raising Fees to Cover Budget Shortfalls  |

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The Taxpayer Advocacy Service has long called for online accounts. In 2016 they became a reality. Unfortunately, for many, it has been a painful reality.

The migration toward online assistance – ideally automated online assistance – is a product of the severe budget cuts the IRS has suffered. The Service can’t afford personnel to man the phones or keep Taxpayer Assistance Centers open.

But the budget cuts did not mandate a cut in the Taxpayer Bill of Rights. Taxpayers still have a legal right to quality service, confidentiality and a fair, just tax system.

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Can the IRS Improve Its Phone Service?

By Rick Telberg
CPA Trendlines

When the Internal Revenue Service launched its “Future State Initiative” in 2016, it promised a new and admirable level of service. From then on, taxpayers could expect the same level of service when dealing with the IRS as they get from a financial institution or a retailer. Or, so it seemed.

SPECIAL REPORT – Fixing the IRS: IRS #FAILs at Online Services Spell Problems for Professionals | Tax Accountants Fill the Breach of a Failing IRS | Beware the EZ Way Out | Can the IRS Improve Its Phone Service? | When Clients Face ‘Unreal’ IRS Audits | IRS Warns about Private Debt Collectors for Tax Season 2018  | Underfunded IRS Swamped with Problems | IRS in Retreat from Communities | Military Personnel Face New Battles at Home: The IRS | As New Economy Surges, IRS Falls Further Behind | Is the IRS Winning the Battle Against Identity Theft? | IRS Mulls Raising Fees to Cover Budget Shortfalls  |

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Such brave words for a brave new world of tax collection! Alas, the promise of better service has not combined well with congressional cuts to the IRS budget. The brunt of those cuts is felt at the interface of frustrated taxpayers and stretched-thin IRS agents.

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When Clients Face ‘Unreal’ IRS Audits

IRS adopts confusing, misleading terminology. But it's all very real.

By Rick Telberg
CPA Trendlines

Tax professionals and accounting firms need to be aware that their clients may face two kinds of Internal Revenue audits: Real and Unreal.

Really.

SPECIAL REPORT – Fixing the IRS: IRS #FAILs at Online Services Spell Problems for Professionals | Tax Accountants Fill the Breach of a Failing IRS | Beware the EZ Way Out | Can the IRS Improve Its Phone Service? | When Clients Face ‘Unreal’ IRS Audits | IRS Warns about Private Debt Collectors for Tax Season 2018  | Underfunded IRS Swamped with Problems | IRS in Retreat from Communities | Military Personnel Face New Battles at Home: The IRS | As New Economy Surges, IRS Falls Further Behind | Is the IRS Winning the Battle Against Identity Theft? | IRS Mulls Raising Fees to Cover Budget Shortfalls  |

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And it’s the “unreal” audits that are going to become more common. READ MORE →

IRS Warns about Private Debt Collectors for Tax Season 2018

What accountants can do to help. And 20 other problems.

By Rick Telberg
CPA Trendlines

The Internal Revenue Tax Code requires the National Tax Advocate to prepare an annual report to Congress that summarizes at least 20 of the most serious problems encountered by taxpayers.

SPECIAL REPORT – Fixing the IRS: IRS #FAILs at Online Services Spell Problems for Professionals | Tax Accountants Fill the Breach of a Failing IRS | Beware the EZ Way Out | Can the IRS Improve Its Phone Service? | When Clients Face ‘Unreal’ IRS Audits | IRS Warns about Private Debt Collectors for Tax Season 2018  | Underfunded IRS Swamped with Problems | IRS in Retreat from Communities | Military Personnel Face New Battles at Home: The IRS | As New Economy Surges, IRS Falls Further Behind | Is the IRS Winning the Battle Against Identity Theft? | IRS Mulls Raising Fees to Cover Budget Shortfalls  |

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The IRS watchdog solved that problem by going thematically. This year it picked five themes and focused on problems relating to them. The themes for the 2017 Annual Report to Congress are:

  1. Tax Administration
  2. The Right to Quality Service
  3. Special Taxpayer Populations
  4. Independent Administration Appeal
  5. Revenue Protection

Twenty, it turned out, wasn’t enough. The advocate couldn’t resist going for 21. It ranked them as best it could under such criteria as

  1. impact on taxpayer rights,
  2. number of taxpayers affected,
  3. interest, sensitivity and visibility,
  4. barriers these problems present to compliance,
  5. revenue impact and
  6. trends picked up by the NTA management information system.

#1 Top Problem

Accountants, CPAs and tax practitioners should be aware of what bobbed up to the top of the ranking under this year’s themes: private debt collection.

In 2015, Congress required the IRS to start outsourcing its “inactive tax receivables.” And look what happened: In 2017, the IRS spent $20 million administering the outsourcing program but collected only $6.7 million in receivables. Private collection agencies recouped only 1 percent of the $920 million of inactive debt receivables assigned to them. The IRS collected 40 percent as much as the debt collectors simply by sending out a letter informing taxpayers that their debts had been assigned to a collection agency.

That may be a rotten deal for the IRS and taxpayers, but there’s good news for the collection agencies. They get their commission whether the taxes were paid due to their own action or that of the IRS. PCAs can get a commission of up to 25 percent. And the IRS (rather than the national treasury) gets to keep another 25 percent.

As predicted by the NTA back in 2015, the program fell most heavily on taxpayers suffering economic hardship. Of the 4,100 taxpayers who made payments after their debt was outsourced,

  1. Median income was about $41,000;
  2. Over 1,100 taxpayers – 28 percent – had incomes below $20,000;
  3. 19 percent had incomes below the federal poverty level;
  4. 44 percent had incomes below 250 percent of the federal poverty level;
  5. Five percent were receiving Social Security income and had a median income of $14,365 (and, by law, being Social Security recipients, should not have been turned over to collection agencies); and
  6. Of the 1,700 taxpayers who entered installment agreements, 45 percent had income below their allowable living expenses. In other words, they promised more than they could afford

The National Taxpayer Advocate recommended seven corrective actions the IRS should take. As for CPA firms and tax preparers, any clients being turned over to a PCA should be made aware that either the IRS or a PCA may be abusing their taxpayer rights. This is a great opportunity for CPAs and preparers to put their knowledge to good use.

Underfunded IRS Swamped with Problems

Olson talking budget cuts on C-Span

Not a good way to start Tax Season 2018.

By Rick Telberg
CPA Trendlines

An angry and frustrated National Taxpayer Advocate Nina E. Olson has slammed Congress hard in the Taxpayer Advocate Service 2017 Annual Report to Congress. After a series of IRS budget cuts over the last several years, Olson says she sees the daily consequences of reduced funding and the choices made by the agency in the face of funding constraints.

SPECIAL REPORT – Fixing the IRS: IRS #FAILs at Online Services Spell Problems for Professionals | Tax Accountants Fill the Breach of a Failing IRS | Beware the EZ Way Out | Can the IRS Improve Its Phone Service? | When Clients Face ‘Unreal’ IRS Audits | IRS Warns about Private Debt Collectors for Tax Season 2018  | Underfunded IRS Swamped with Problems | IRS in Retreat from Communities | Military Personnel Face New Battles at Home: The IRS | As New Economy Surges, IRS Falls Further Behind | Is the IRS Winning the Battle Against Identity Theft? | IRS Mulls Raising Fees to Cover Budget Shortfalls  |

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“Funding cuts have rendered the IRS unable to provide acceptable levels of taxpayer service, unable to upgrade its technology … and unable to maintain compliance programs that both promote and protect taxpayer rights,” Olson says in her preface to the annual report.

“‘Shortcuts’ have become the norm, and ‘shortcuts’ are incompatible with high-quality tax administration,” says Olson, describing her agency as swamped with problems and inadequacies.

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The Myth of the Staff Shortage

NEW GRADUATES HIRED BY US CPA FIRMS 1971-2016
New graduates hired by U.S. CPA firms, 1971-2016. (AICPA)

 

Demand for new hires softens as college talent pipeline sets record.

By Rick Telberg
CPA Trendlines

The next generation of accountants in the collegiate pipeline set a record last year and remains at that level this year, even as firms appear to be backing off on expanding headcounts with new graduates, according to new research.

MORE in STAFFING & RECRUITING: Marketing Is Not Just for Partners Anymore  |   A Simple Way to Dissolve the Generational Gap | Accounting Profession Shows Steady Growth | Growing and Developing Future Leaders Is a Two-Way Street |   How Accountingfly Is Revolutionizing the Way CPAs Are Hired | The 7 Experiences Millennials Want from Your Firm | The Culture of Continuous Improvement |   The 12 Reasons Your Staff Hates Your Firm | What Commitment Means Now | How Good Is Your Network?

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