MW Attorneys brings taxpayers the latest and most important tax news coming from the IRS. Stay up to date with all our IRS related posts.

Taxpayer Burden Reduction

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Today I was pondering the burdens placed on taxpayers and wondering, “what if there was a convenient way for taxpayers to voice their concerns and offer their opinions to the IRS about the burdens of filing & paying taxes?” Then I came across Form 13285A and the Office of Taxpayer Burden Reduction. That’s right, tax relief from those who are handing out the tax bills?

For all I know this  “office” is down in the basement of an IRS office building in Lanham, MD manned by a single IRS employee who can be seen clutching his favorite red stapler from time to time. But the form looks legit. You just need to provide (1) your contact information, (2) a description of the problem, (3) a description of who the problem affects, and (4) your proposed solution to the problem.

You may submit the form anonymously, but the instructions to the form state that the IRS may need to get in contact with you to obtain more details regarding the problem and/or solution and that “[n]ot providing any or all of the contact information may delay or impede the IRS review process if there is inadequate information to analyze the issue.”

The IRS will do a cost-benefit analysis in determining which ideas it will implement. But if your suggestion is that the tax laws should be changed, don’t bother with this form; the IRS can’t do anything about that. You would need to reach out to the legislators if your gripe is with the underlying tax laws.

IRS Tax Liens up 74 Percent

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The IRS is addicted to filing liens — even in an era when the American people need tax reliefthe most. The use of tax liens has increased an astounding 74% since 2006. A report released this week by the Treasury Inspector General for Tax Administration (TIGTA) shows that the use of all available IRS collection tools are on the rise. But when it comes to liens, the IRS clings to them like a chain smoker does to his pack of Camels.

Both obviously do more harm than good. Liens have been shown to destroy one’s credit and ability to earn a living, thereby making it even more difficult to pay back what is owed. I’m not sure why lien filings have increased. Perhaps it is an old habit for the IRS who sees it as an easy way to do something on an account where other options are not apparent. Whatever it is, the IRS needs to get a little more creative.

Although none are as impressive as the statistic on lien filings, the TIGTA report cites the following additional statistics:

  • 4% increase in number of levies and seizures in 2010
  • 4% increase in number of IRS employees between 2006 and 2010 (103,811 employees in 2006 compared to 107,622 employees in 2010, with a huge spike during fiscal year 2010)
  • 19% increase in number of Collection & Exam function Enforcement personnel (not including management)

IRS Wants Quantity More Than Quality

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The Taxpayer Advocate Service (TPS) reports that IRS employee performance measures focus too much on “cycle time.” In other words, the IRS performance rules encourage employees to take actions and close cases quickly, even at the expense of quality work. This results in IRS employees setting unrealistic deadlines for taxpayers who face audits or IRS collection activity.

Unrealistic deadlines. This is certainly a problem that any practitioner could confirm, but for me it doesn’t hold the #1 position on my list of IRS problems. If the IRS is setting unrealistic deadlines, then at least they’re being responsive. The situation where the IRS employee responds too slowly can be just as frustrating as one where the employee is acting too quickly. However, even worse than that is the lack of discretion given to IRS employees. Most of them do not have authority to deviate from their rules, even in situations where it makes no sense to follow them. Of course, I understand that additional discretion can only be given to employees who, by their exceptional training, education, and experience, are responsible enough to not abuse that discretion. I guess the quality vs. quantity problem really begins at the employment interview.

IRS Promotes its Spanish Language Website

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The Spanish language section of the IRS website is slowly becoming more robust, but it still offers a very limited amount of information compared to the massive amount of content on the main website. Today the IRS highlighted 9 key features to be enjoyed by Spanish speakers on irs.gov/espanol:

1. Its a website, so its always accessible, 24/7

2. You can get tax forms and publications in Spanish

3. E-file is available with Spanish instructions

4. You can check the status of your refund

5. The Spanish site includes an Earned Income Tax Credit eligibility tool

6. There is information about assistance for those who are unemployed or who are otherwise suffering a hardship

7. Tax law updates are available in Spanish

8. The Multimedia Center has video and audio content in both English and Spanish

9. Twitter @IRSenEspanol

This seems like a healthy list of features, but this is pretty much everything the site has to offer. Even the “More Topics” link in the “Espanol Topics” menu just takes you to the same topics in the menu itself. Kind of goofy if you ask me, but its getting there.

IRS’ Tips are Self-Serving this Time

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Installment #14 in the IRS’ Summertime Tax Tips series is for people who owe money to the IRS.

Here is what the IRS recommends:

1. Get a loan and/or pay what is owed with a credit card. Fair enough. If the interest rate on the loan or the card is better than what will accrue in interest and penalties, sometimes it is best to just pay it off.

2. Request additional time to pay. Ok, but the most you will get is probably 90 days.

3. Pay it back in installments, pay it back through Electronic Funds Transfer, or pay it back online. Great tips IF you can afford to pay, but a lot of people owe the IRS because they can’t afford to pay.

4. Set up an installment agreement by mail (balances under $25k), or complete a Form 433F (balances over $25k).

5. Save money on the installment agreement processing fee allowing the IRS to automatically deduct payments from your bank account.

6. Change your withholdings so you don’t owe again.

Are you seeing a theme here? Almost all of these “tips” involve paying the IRS back in full, in one form or another. What is lacking from this set of tips is any guidance for taxpayers who really can’t pay what they owe. But I also understand that the IRS doesn’t want to advertise the other options; that would not be in their best interest.

Whats New with Circular 230?

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The IRS made revisions to Circular 230 recently. Circular 230 is the Treasury Department’s collection of regulations governing tax practitioners. Apparently it now includes information relating to the new return preparer oversight program. It also includes “other changes.” Might have been nice if the IRS had highlighted the changes. Do I need to hire an intern to go line by line comparing the old version with the new one?

IRS Art Appraisal Process

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Nobody at the IRS knows a fine piece of art when they see it. Okay, that’s harsh and I’m perpetuating a stereotype that every IRS employee is robotic, boring, and unimaginative. There are thousands of IRS representatives and certainly a huge variety of backgrounds, interests, and personalities.

But its true what I say about their collective knowledge of art. The IRS outsources its art appraisal to an unpaid panel of 25 experts known as the Art Advisory Panel. If you’re hoping for some tax relief in the form of a low appraisal, you better think twice. These guys know their stuff; most of them are experts from renowned museums and galleries in New York.

According to the IRS, the Panel assists the IRS by reviewing and evaluating property appraisals submitted by taxpayers in support of the fair market value claimed in works of art involved in Federal income, estate and gift tax cases in accordance with the Internal Revenue Code. The IRS turns to its panel during an audit involving a piece of art with a claimed value of $50,000 or more. Or maybe the threshold is $20,000. According to the 2010 Annual Summary Report (which I looked through in its entirety and unfortunately did not see one single picture), its $20,000. Of all IRS publications, one would think at least this one should have some artwork, but no. Just words.

TAS Takes Credit for Changes to Innocent Spouse Rule

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The National Taxpayer Advocate, Nina Olson, took a bow yesterday as the IRS announced removal of the two-year statute of limitations under the Innocent Spouse program. According to Olson, she and her staff have been advocating for this change for some time now because an “innocent spouse” is often unaware of the shenanigans of his/her spouse until after the two-year period has passed from the IRS’ first collection activity, and it is really not fair to hold them to a limitations period. To read Ms. Olson’s complete statement, click here.

IRS Throws out 2-Year Statute of Limitations for Certain Innocent Spouse Claims

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Today the IRS announced that it is removing the two-year limitations period for Innocent Spouse relief sought under the equitable provisions of Revenue Code section 6015(f). This change is effective immediately and also applies to pending cases and apparently even claims that were denied solely on the grounds that the statute of limitations period had expired. The standard requirements of an Innocent Spouse claim are found in section 6015(b)-(c). But if those provisions do not apply and it would be inequitable to deny Innocent Spouse relief given all the facts and circumstances, the petitioner may be granted relief under subsection (f). Prior to today’s announcement, a petitioner seeking relief under subsection (f) had two years to do it just like is required under 6015(b)-(c). This change should expand the availability of Innocent Spouse relief which is granted to taxpayers who can show that they did not know, and did not have reason to know that their spouse had either underpaid the joint taxes or had understated the income reported on the joint return.