Category Archives: Tax Professionals

Tax Pros: Help Your Client Understand the Options

The most common resolution for a taxpayer facing an unpaid tax liability with the Internal Revenue Service (IRS) is an installment agreement.  And yet despite the fact that it is the most widely used resolution, the installment agreement is still often mired in a debate between fact and fiction. Let’s get to the bottom of some of the IRS installment agreement options so we can guide taxpayers on the road to success.

Before getting into the details of IRS installment agreements, let’s make an important distinction about tax types. Individual income tax has the most flexibility when dealing with the IRS. Unpaid employment taxes, on the other hand, are heavily scrutinized by the IRS and more often have resolutions based on strict expense standards and a determination of ability to pay. In this discussion let’s focus on the individual and more standard opportunities.

As I just noted some IRS installment agreements are based on ability to pay. Other, more routine agreements, are often referred to as streamlined because of the ease of processing involved in setting them up. These can be based strictly on the amount owed and set up over a defined period of time. Routine agreements are great considerations for taxpayers that are in compliance, have few complications and can afford to pay the predetermined amount.

Having the knowledge of the various types of basic IRS agreements is a great starting point for resolving a taxpayer’s unpaid liability. But, it’s just that, a starting point. The agreements should not be misconstrued as the taxpayers only alternative, rather a possible path of least resistance. And as straight forward as these agreements are, a practitioner eyeing the long term success of the agreement needs to consider much more. There are many considerations that should come in to play when thinking about whether to enter into a repayment plan with the IRS. Here are just a few thoughts to consider:

  1. Has a Notice of Federal Tax Lien already been filed against the taxpayer? This is typically done fairly early on the collection process. If it has not been done there is a good chance that the lien can be deferred by entering into a streamlined agreement.
  2. Can the taxpayer afford the amount that will be required by the agreement? If not, entering into a streamlined agreement will result in a default.
  3. Is an installment agreement the appropriate strategy based on the circumstances? Absent any pressure from the IRS, the taxpayer may be better served by going through other channels especially if there is a doubt as to whether the tax is really owed.
  4. Is the timing right? Imagine a scenario in which the taxpayer owes for 2014-2016. Before entering into an agreement for those years one must consider the implications of 2017 and 2018.

In the end, the mere existence and availability of these streamlined agreements does not mean they are the appropriate resolution to the tax liability. Although the IRS might prefer that a taxpayer simply walk in to one of the easy offerings it is important for a tax practitioner to evaluate the totality of the taxpayer’s circumstances to properly put together an effective, winning strategy.

Unenrolled Return Preparers Win Again

Tax practitioners with unlimited representation rights before the Department of Treasury, such as Enrolled Agents, CPAs and Attorneys, are clearly engaging in “practice before the Internal Revenue Service” in the course of their work. As such, they are regulated by Circular 230, which is in turn enforced by the Office of Professional Responsibility. For unenrolled return preparers, however, the definition of “practice before the IRS” is a lot less clear.

IRS Red Light_smallFor nearly a decade, the IRS has worked to take a stronger role in the oversight of tax practitioners, specifically looking to bring unenrolled tax preparers under its authority. In 2017 the IRS suffered yet another blow in this effort when the courts decided a three-year old case.  On September 8, 2014, plaintiffs Adam Steele, Brittany Montrois, “and a Class of More Than 700,000 Similarly Situated Individuals and Businesses” filed a class action suit against the federal government seeking to recover allegedly unlawful license fees paid to the Internal Revenue Service (IRS)(Erbs, Forbes, 6.5.17).

The 2017 decision in Steele et al. v. US by Judge Lamberth upheld the IRS’ right to use the PTIN system to register and track tax return preparers.  However, Judge Lamberth stated that the IRS could not charge a fee for the issuing PTINS because the PTIN system did not constitute a “service or thing of value.” In fact, the Court argued that the opposite may be true: the real benefit of the PTIN “inures to the IRS, who, through the use of PTINs, may better identify and keep track of tax return preparers and the returns that they have prepared.” (Erbs, Forbes, 6.5.17).

Not only was the decision the latest example of fallout from the highly publicized Loving decision of 2014, which struck down the IRS’ attempt to regulate tax preparation, it comes at a steep cost. The decision states that the IRS must provide a full refund for PTIN fees paid to each class member. Estimates indicate the amount to be as high as $175,000,000.

Despite defeat the IRS seems committed to bringing more oversight to the tax preparation industry. On IRS.gov the IRS continues to emphasize the Annual Filing Season Program (AFSR), an initiative that aims to recognize the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. Moreover, beginning Jan. 1, 2016, there were changes to the representation rights of return preparers.

The IRS goes on to make the point that attorneys, CPAs, and enrolled agents will continue to be the only tax professionals with unlimited representation rights, meaning they can represent their clients on any matters including audits, payment/collection issues, and appeals.

So while the unenrolled tax preparer community continues to prevail in court, when it comes to tax preparation clearer lines are being drawn on what roles these tax pros can play in the system. Unenrolled tax preparers with clients that have audit, collection or appeal issues should help those taxpayers find a competent tax professional with unlimited representation rights.

What’s Your Process? How to Work a Collection Case

When it comes to the world of tax resolution, why do you take a particular action while working a case? Is it because your client asked you to? Maybe it’s because you know it’s the ‘right’ thing to do? Or, perhaps because this is always your professional recommendation? No matter what your answer might be these are not mutually exclusive options according to 20/20 Tax Resolution’s vice president, David Miles, EA. When practicing collection representation, one needs to hone in on the balance between what gets done in every case, regardless of the circumstances, and what happens only because it’s necessary given the situation.

This foundation helped shape his most recent EA Journal article (June-August 2016 edition), What’s Your Process? How to Work a Collection Case. For the sixth year in a row, Miles has been published in The National Association of Enrolled Agents (NAEA) bi-monthly publication — this prestigious journal allows members of the NAEA to stay up-to-date on any industry trends, tax updates and association news. 

When asked to discuss the overarching theme of his piece, Miles explains, “Ultimately, a practitioner needs to be able to advise a taxpayer on what could happen and also what is most likely to happen in the course of a collection case. The practitioner then must take the taxpayer’s specific situation into account to develop a strategy that allows decisions on where and when action is necessary. An efficient tax resolution practice provides tangible results that are interpreted as success by the taxpayer.”

This article also served as a synopsis to a graduate level National Tax Practice Institute® (NTPI™) course that he presented during the National Association of Enrolled Agents annual conference held in Las Vegas Aug. 1-3. “I encourage those in practice to consider approaching every case, from the easiest to the more complex and the ones engaged at the first sign of a liability to those who engage you much later on, in a way that ensures the taxpayer’s interests are protected and advanced in the most capable manner possible. This session covered the process for handling a collection case from start to resolution through the aid of a specific workflow. It is my goal that each practitioner will infuse their own personality, professionalism and style into a system after having a chance to take this course,” says Miles.

Want to read the full EA Journal article? No problem, click here.

20/20 to Provide Expertise at 2016 NAEA Conference

David Miles, EA, vice president of 20/20 Tax Resolution, will present two National Tax Practice Institute® (NTPI™) courses at this year’s annual conference of the National Association of Enrolled Agents in Las Vegas Aug. 1-3.

The highest credential awarded by the Internal Revenue Service, an enrolled agent (EA) is a federally authorized tax practitioner empowered by the U.S. Department of the Treasury to represent taxpayers before the IRS. Miles will be leading two courses, including:

  • Introduction to Collections – Monday, Aug. 1 This introductory course to IRS Collections explores the fundamentals of the IRS collection system, as well as the skill set needed by those practitioners just beginning to represent clients before Collections.
  • Case Evolution with a Flowchart Approach – Wednesday, Aug. 3 This session covers the process for handling a collection case from start to resolution through the aid of a specific workflow.

“At 20/20, we’re very proud that every one of our tax professionals serving clients nationwide are credentialed enrolled agents or attorneys – and many of our agents hold both of these titles,” said Brian Biffle, president of 20/20 Tax Resolution. “Constant change is the nature of the tax business, and David’s expertise will help NAEA attendees refine and enhance the skills they take back to their clients.”

NTPI is a three-level program developed to sharpen the skills of enrolled agents at all stages of their careers. With each level of this program, participants expand their knowledge and skills, and gain the confidence needed to guide their clients successfully through the challenging maze tax regulations and agency structure.

Dilemma Posed by Tax Extenders

Every year tax professionals around the country hold their proverbial breath waiting for Congress to take action on the tax code.  And almost as sure as the sun coming up, Congress avoids permanent tax policy discussions by agreeing on and passing a series of tax extenders.  Tax extenders are the common term for what are a set of temporary corporate and individual tax breaks. The extenders are usually passed with the goal of assisting taxpayers and stimulating the economy.

The dilemma posed by tax extenders often centers on tax planning. With most extenders lasting one or two year, consistent and proactive tax planning advice can be difficult to give. For example, quite a few of the current extenders up for debate expired in 2013 but were reinstated for 2014 in December of 2014 (Russell, Accounting Today). The idea that that if a tax law goes into effect two weeks before the end of the year should be inconceivabBlank Notebookle. And yet, Congress puts American through it almost every year.

As is stands, tax professionals have no choice but to offer planning advice on what Congress will “probably” do based on past years of doing the same.  Is that good planning or educated guessing?

Perhaps you have a client who could use our assistance, or have questions that we can help you answer. Click here to get in touch with one of tax experts, today.