Notes from IRS Stakeholder Meeting in May - Preparer Compliance, Form 8109
Sharon Sanders welcomed the practitioners present on behalf of the Area Manager, Joyce Peneau.
Practitioner Overview Update
Dan Breece presented an update on the status of Return Preparer Initiative. A vendor has been identified and selected for the IRS to work with in setting up the on-line registration. Accenture National Security Services, LLC, is the vendor that will establish a system for on-line registration of paid tax return preparers. The system will support the first phase of increased IRS oversight of federal tax return preparers, as outlined in the Return Preparer Review issued on January 4, 2010.
The vendor will develop and maintain the registration application system and address related questions. The IRS will maintain full oversight of the registration process and registered preparers. As the process continues, further announcements and updates will be provided.
September 1, 2010 is the current target date for the on-line registration system. An official system launch date will be one of the initial determinations made in the weeks ahead as the IRS and Accenture National Security Services, LLC, begin working together on development of the system.
The following questions were raised in regards to the Return Preparer Compliance visits:
- Why visit the practitioners that are doing things right?
- Why visit them during the tax season?
- Can the practitioners get the compliance check information to present at chapter meetings?
- Can we develop a check sheet for practitioners to refer to?
- Will there be any exceptions to the e-filing mandate?
Affordable Health Care & The HIRE Act Credits
Sharon Sanders discussed the Affordable Health Care Act and the New HIRE Act. There were some questions regarding how the HIRE credit could be claimed in 2011 when the 52 week retention requirement did not start until after March 17, 2010? Answer: The credit will be claimed on the employer’s 2011 income tax return. It is not known at this time where on the 2011 return the credit will be claimed.
Another question: will the business credit be limited or reduced in any way? Answer: The business credit is the lesser of $1,000 or 6.2% of the wages paid (for purposes of income tax withholding) to the qualified employee during the 52 consecutive week period. For more information regarding the new HIRE Act, check here: HIRE Act: Questions and Answers for Employers.
For the Affordable Health Care Act, a question was asked about whether the amount of the credit affects the employer’s deduction for health insurance premiums? Answer: Yes it does. In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit. Check here for more information regarding the Small Business Health Care Act, and here for Frequently Asked Questions addressing Small Business Health Care credit.
Additional questions raised:
- What effect does the credit have on AMT computations?
- Is the credit mandatory when computing EIC?
Modernized E-File Updates For The Filing Season
Keith discussed the legacy e-file processing platform versus the Modernized e-file processing platform. There will be a transition period as more types of returns are brought on the Modernized e-file program. For returns processed this year, there were very few software providers that were able to offer processing utilizing the modernized e-file platform. This was likely due to the limited number of returns being offered as available for processing under modernized e-filing. One of the major benefits of Modernized E-file is the almost immediate notice that the return has been received. E-file statistics show a continued growth and increased each year for the preferred method of filing returns. The number one error reported related to the Earned Income Credit.
Potential New Issues & Status Updates
Issue Management Resolution System (IMRS) Status Update
Regina Lauridsen addressed a carryover issue from the last meeting regarding the verification of credentials with a Power-of-Attorney request received. She confirmed this was addressed via IMRS, and that there is a process in place for certifying and verifying the credentials of someone claiming to be a CPA, EA, etc. Regina also gave an overview on IMRS that included the three categories issues primarily captured: Hot Topics; Industry and the Monthly Overview. The Monthly Overview includes updates on new, closed or elevated issues.
Regina noted that there are two phone forums approaching, one of June 09, 2010 on the new preparer guidelines, and another on June 23, 2010 for other POA issues.
Notices to College Students - Apparently notices went out to college students, which included individuals who were employed full-time, giving the impression that as students, they were exempt from withholding. It is not clear where the notices originated; it does not appear that they stemmed from IRS.
Several practitioners reported that they had clients with this experience. This could result in an issue for next year when people have mistakenly claimed exempt. There was a question as to what extent the FTB was addressing these questionable W-4’s, since the IRS monitoring is done after the return has been filed.
Form 8109, Federal Tax Deposit Coupon Proposed Phase Out - The group wanted to know if the 8109 Federal Tax Deposit Coupon was being completely phased out and if so, was the mailing address location going to still be available for mailing deposit payments?
The Treasury Goes Green, Saves, Green press release was issued on April 19, 2010 addressing the proposed phase-out of F-8109. The only exception to not using the EFTPS would be if the tax liability is less than $2,500, allowing the business owner to submit the payment with the return. Businesses that have a deposit requirement will be required to pay electronically using the Electronic Federal Tax Payment System, EFTPS, starting in 2011. At this time, the mailing address for federal tax deposits remains the same, as listed on
Roundtable & Comments
The roundtable discussion included the downturn in the number of taxpayers using a paid preparer this past filing season. Several CPA’s and EA’s acknowledged that their business was off by an average of 10-15% from 2009, most likely due to the economic downturn. They felt many clients self-prepared their returns using software like TurboTax.
Also discussed was the change in the FIT withholding tax tables for last year as a result of the Making Work Pay Tax Credit. The change resulted in many taxpayers being upset with practitioners about having a balance due on their filed returns, or getting less of a refund than anticipated. The general discussion was that the IRS could have done a better job of educating the public on the impact of the lowered withholding tables, and the possibility of not enough taxes being withheld.
The practitioners believed that there should have been more outreach and education to the general public regarding the availability of the IRS Withholding Calculator to ensure that enough FIT was being withheld. With the Making Work Pay Tax Credit available again this year, concern was expressed that taxpayers could once more be adversely affected by being under-withheld at the end of this year. The practitioners implored IRS to do a better outreach job with notices to employers, taxpayers, and to practitioners.
Meeting Survey forms were distributed and collected after completion.
Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.