Beware the EZ Way Out

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IRS mulls new 1023-EZ rules for 501(c)(3)'s.

By Rick Telberg
CPA Trendlines

It’s safe to say that CPA firms tend to love IRS Form 1023-EZ, the simplified form for application for 501(c)(3) tax exempt status. Introduced in 2014, the form was EZ on the nascent, smallish not-for-profit and on the CPA trying to help them get started.

MORE TAX SEASON:  IRS #FAILs at Online Services Spell Problems for Professionals | Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready   |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions  |  Bowman Webinar: Inside the IRS Financial Analysis Handbook  |  Average Fees Set for 7% Increases

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This easier version of Form 1023 was a good and necessary idea. The IRS was way backed up on approvals of the original application. Approval was taking an average of 315 days. To the delight of do-gooders, wanna-be do-gooders, and outright frauds, virtually all 1023-EZs are approved in short order. Approvals were and still are passed down in just a couple of weeks.

Trouble is, a lot of those expedited approvals were for organizations that didn’t qualify for 501(c)(3) status.

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IRS #FAILs at Online Services Spell Problems for Professionals

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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.

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.

MORE TAX SEASON:  Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready   |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions  |  Bowman Webinar: Inside the IRS Financial Analysis Handbook  |  Average Fees Set for 7% Increases

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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?

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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.

MORE TAX SEASON:  Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready   |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions  |  Bowman Webinar: Inside the IRS Financial Analysis Handbook  |  Average Fees Set for 7% Increases

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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.

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How will the new tax law affect busy season?

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.

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

MORE TAX SEASON:  IRS Warns about Private Debt Collectors for Tax Season 2018 |  Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready  |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions |  Average Fees Set for 7% Increases

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Over IRS objections, the Tax Advocacy Service is using the term “unreal” audits in its 2017 Annual Report to Congress. The IRS called the terms “inaccurate, misleading and a mischaracterization of IRS interactions with taxpayers” because the so-called “unreal” audits do not, in the IRS opinion, qualify as audits, which, in its tax code, involve inspections of books and records.

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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.

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MORE TAX SEASON:  Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready  |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions  |  Bowman Webinar: Inside the IRS Financial Analysis Handbook  |  Average Fees Set for 7% Increases

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But not necessarily the top 20. Because discussing the top 20 each year could get repetitious when the problems aren’t solved, and other problems would never get their day in the sun.

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Underfunded IRS Swamped with Problems

Olson talking budget cuts on C-Span

Not a good way to start Tax Season 2018.

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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.

MORE TAX SEASON:  Underfunded IRS Swamped with Problems  |  2018 Tax Filing Season Begins Jan. 29  |  2018 Tax Season: The Race to Be Ready   |  The IRS Tip 10 List for Choosing a Tax Pro   |  New eBook: Maximizing Sec. 199A Deductions  |  Bowman Webinar: Inside the IRS Financial Analysis Handbook  |  Average Fees Set for 7% Increases

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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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