2013 IRSAC Report

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The Internal Revenue Service Advisory Council (IRSAC) released its annual report today, which included recommendations for improving efficiency at the IRS.  Here are some of the points that stood out to me:

1. Expand awareness of OPA

Online Payment Agreement (OPA) is a tool that some taxpayers may use to enter into installment agreements if they meet certain criteria.  IRSAC says that the IRS should be doing more to encourage taxpayers to use OPA rather than call and waste their time on the phone.

 Of the more than 3.1 million total installment agreements created in FY 2012, less than 3 percent (92,519) used the OPA to enter into an installment agreement.

The reason I don’t use OPA is I have found that getting a live body on the phone normally results in a better deal.   Plus, the other day I was playing around with it and it wasn’t even working.

2. Reduce processing time for Form 2848, Power of Attorney

3.4 million Power of Attorney forms were filed in fiscal year 2012, but less than 10 percent were filed electronically.  The IRS subsequently discontinued electronic filing a few months ago.  IRSAC recommends going back to electronic filing and making changes to the form in order to reduce errors that cause them to be returned.  I use e-fax to file my Power of Attorney forms.  It is quick, inexpensive, and paperless — as close to electronic filing as you can get.  In my experience, the processing time has been relatively quick: around 5-7 days usually.

One of the other problems that IRSAC addressed is duplicate filing, which happens when a practitioner files a 2848 and then doesn’t have the patience to wait a week.  If that practitioner then calls the IRS and tries to gain access to the account before the POA has been processed, the IRS representative will have him/her fax the POA while waiting on the phone.  Sometimes the IRS rep will forward that POA on to the CAF Unit without first checking with the practitioner to see if it has already been filed.

3. Update the transcript request policy on the PPS Line

The Practitioner Priority Service (PPS) phone line is for tax attorneys, accountants, enrolled agents, and such.  If you have ever dealt with the IRS by phone then you know how ridiculous the hold times can get.  The IRS call center employees should be answering unique questions, taking financial information, and resolving tax accounts; they shouldn’t have to do something that a practitioner can easily do him/herself.  Some firms have a habit of calling in and tying up phone lines for simple transcript requests when transcripts can more efficiently be ordered electronically via the IRS website or through the automated phone system.

IRSAC 2012 Report, Part II

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image via networkeducator.com

Identity theft is another prevalent issue for the IRS and another topic that the IRSAC has attempted to address in its report.  But I don’t think their recommendation for curbing identity theft would be popular with most taxpayers who (mistakenly) see their April refund check as the ultimate form of tax relief:

The IRS should strongly consider delaying refunds until after verification of the taxpayer’s identity. For taxpayers that rely on an early refund in January, the IRS should consider a process under which 25 percent of the refund is issued prior to verification, and the remaining 75 percent issued after verification.

Everything the IRS has done up until now has been aimed at speeding up the refund process and shifting over to a “real-time” tax system.  See IRS Real Time Tax Initiative.  But with the onslaught of fraudulent refunds obtained by using stolen identities, the IRS may have to backpedal somewhat.  The thought of having to wait a little longer will be very frustrating to the average taxpayer.  I imagine it would be somewhat like having to go back to a dial-up internet connection after being accustomed to DSL.  Of course, from a tax attorney perspective, the solution is to adjust your withholdings so you don’t end up with a huge refund in the first place.

IRS Advisory Committee Recommends Big Change to Installment Agreement Guidelines

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The IRSAC (Internal Revenue Service Advisory Committee) released its annual report today. IRSAC is composed of 28 non-IRS members divided into four subgroups. Two of the subgroups (Wage & Investment and Small Business / Self-Employed) recommended changes to the Streamlined Installment Agreement Program.

An installment agreement is normally available to taxpayers who are unable to pay their tax debt in full. A Streamlined Installment Agreement (SIA) is available to taxpayers with aggregate unpaid balances of $25,000 or less, so long as the monthly installment will pay off the entire balance within 60 months. The SIA is granted without managerial approval, without the need to divulge financial information to the IRS, and in many cases, without the need to file a Federal Tax Lien. The $25,000 threshold has been in place since 1998.

The IRSAC Wage & Investment and Small Business / Self-Employed subgroups identified “repeater” balance due taxpayers as a major problem. To alleviate this problem, they recommended increasing the SIA dollar threshold to $50,000 and pushing more taxpayers to set up their installment payments through direct debit arrangements with their bank.

I think it is wise to increase the SIA dollar threshold because it will open up additional options to taxpayers who cannot pay their back taxes in full. However, I’m not sure this will have any meaningful impact on the “repeater” problem. Taxpayers unintentionally stack liabilities year after year when they do not have the means to pay their current-year taxes and their prior-year taxes simultaneously. According to IRS installment agreement guidelines, a $50,000 debt would require a payment of $1,000/month (for 60 months), taking into account the daily accruals of interest on the account. Increasing the SIA threshold to $50,000 would do more to alleviate this problem if the agency also agreed to increase the IRS installment agreement length beyond 60 months.