The Taxpayer First Act (TFA) of 2019 requires the IRS to provide digital signature options for Form 2848, Power of Attorney, and Form 8821, Tax Information Authorization.

These improvements will help individual taxpayers, business taxpayers, and the tax professionals who serve them. These authorization forms are critical for tax professionals to either represent clients before the IRS or to prepare prior year tax returns. By signing the forms, taxpayers are giving tax professionals or other third parties permission to access or view their tax information.

Currently, submitting and processing these authorization forms is a paper operation. Tax professionals typically complete the forms and taxpayers sign them with a pen. The forms are mailed or faxed to the IRS. The faxed forms are printed or distributed electronically to the staff in the Centralized Authorization File (CAF) Unit. These teams review the forms for accuracy and fraud before adding the information to the CAF database.

Even before COVID-19, the IRS was working on CAF improvements and making the TFA requirements a reality. Here’s an important look at what’s ahead:

• In January, the IRS plans to launch a new IRS.gov secure submission platform and a new page, “Submit Forms 2848 and 8821 Online,” that will allow tax professionals to upload third-party authorization forms electronically.
• Tax professionals will enter their Secure Access username and password or complete a Secure Access registration to authenticate their identities.
• Taxpayers and tax professionals can sign the forms electronically or with ink, and then upload the image of the form to the IRS.

This new online submission process will not eliminate the reviewing and processing time by the CAF staff. But it gives tax professionals and taxpayers a safe option to electronically sign and upload these critical documents without an in-person meeting. Especially in these uncertain times, keeping taxpayers and tax professionals safe is a top IRS priority.

Just as tax professionals are required to do for every electronically filed tax return, they’ll need to verify the taxpayer’s identity if there’s an electronic signature and the client is unknown to them. The IRS is planning on using a similar process as outlined by Publication 1345, Handbook for Authorized IRS e-File Providers PDF. This verification process should be familiar to tax professionals.

This New IRS.gov Third-Party Authorization Submission Process Will Not Be The Only Electronic Option For
Forms 2848 And 8821.

Next summer, the IRS plan on launching a platform called the Tax Pro Account. At launch, the Tax Pro Account will serve as the point of entry for tax professionals to electronically initiate and sign an online third-party authorization form.

That third-party authorization form will electronically transfer into the client’s IRS online account. Clients can access their personal IRS account and electronically sign the document. The document goes directly to the CAF, posting immediately. There’s no wait time, no backlog. The Tax Pro Account is an electronic operation from beginning to end.

When they’ve completed these projects next year, tax professionals will have four submission options: 

1. upload on IRS.gov, 
2. initiate electronically via Tax Pro Account, 
3. mail to IRS and 
4. fax to IRS. Because of the risk of fraud, we cannot accept electronic signatures on mailed or faxed authorization forms.

This electronic signature process is part of a larger effort underway at the IRS following the Taxpayer First Act.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

Before TCJA, individual taxpayers generally could deduct all state and local taxes (SALT) as itemized deductions. TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025. Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit. 

• IRS Has Approved a SALT Workaround for Pass-Through Entity (Notice 2020-75; IR-2020-252)
   
• Before TCJA, individual taxpayers normally could deduct all state and local taxes (SALT) as itemized deductions
   
• TCJA limited the individual SALT deduction to $10,000 for taxable years 2018 through 2025
   
• Some states have been looking for a workaround to enable their resident taxpayers to avoid the $10,000 deduction limit

• The IRS has approved the availability and functionality of this workaround in Notice 2020-75

Watch for legislation in your own state authorizing a PTE election for state taxes to be paid on behalf of the owner by the entity.

Read more at: Tax Times blog

According to Procedurally Taxing, an Innocent Spouse Request does not stop a Levy during the 21-day period after the Levy, when the bank was holding the funds in the joint account after receipt of the levy. 

The case of Landers v. United States, 3:20-cv-00455-G (N.D. Tex. 2020) raises the issue of the timing of the injunction against collection vis a vis the completion of a bank levy.  

This case appears to break ground not previously broken, as Ms. Landers seeks to undo the levy because she filed her innocent spouse request during the 21-day period the bank was holding the funds in the joint account after receipt of the levy.  

The court decides that the language stopping collection resulting from the filing of an innocent spouse request does not stop the bank levy during the 21-day period.  

The opinion goes through an analysis of the Anti-Injunction Act to get there.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

The Internal Revenue Service Advisory Council (IRSAC) conveys the public's perception of IRS's activities and plays a significant role as external evaluator regarding the reorganization and its implementation. The Council advises the IRS regarding tax administration policy, programs, and initiatives, and they sees a danger in chronic underfunding of the agency.

IRSAC made the point in its annual report, which also highlighted the importance of the Taxpayer First Act and opportunities to expand the e-filing and online application process.

The 2020 Public Report includes recommendations on 26 issues, which cover a broad range of topics, including:

• Funding of the IRS
• The Taxpayer First Act
• Expansion of e-File
• Proposal for an early exam program for Large Business
• Telephone response times for the Practitioner Priority Service
• Resources for Native American taxpayers and federally recognized tribes
• Taxpayer Digital Communications

Inadequate IRS funding is a fundamental risk to tax administration. “A tax system rooted in voluntary compliance requires appropriate levels of customer service and enforcement, both of which depend upon adequate and consistent funding,” the report said. “Congressional appropriations provide the vast share of operating funds for the IRS to administer the nation’s tax system, and collect over $3.1 trillion in net revenue.”

In Fiscal Year 2019, More Than 80 Percent of Federal Government Spending Was Funded By
Federal Taxes Collected By The IRS.

Yet “Overall Funding For The IRS Has Decreased Roughly 20 % On An Inflation-Adjusted Basis Since FY2010,”
Added Charles Read, CEO Of GetPayroll In Lewisville, Texas.

“The result of these budget reductions since FY 2010 is a 22 percent decline in the number of employees at the agency and a 30 percent decline in the number of employees working in enforcement roles.”

Among IRSAC’s recommendations are advocacy for funding at a level no lower than the FY2010 benchmark adjusted for inflation, or $14.3 billion, or at minimum a level that will provide for a net increase in staffing on a sustained yearly basis; and advocating for consistent or multi-year funding for long-term initiatives, including the customer service strategy, training strategy and business modernization plan.

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog